IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 6706 of 1991 with CIVIL APPLICATION NO.14817 OF 1999 with SPECIAL CIVIL APPLICATION No 1584, 2693, 3161 of 1992 and SPECIAl CIVIL APPLICATION NO.3576 OF 1993 For Approval and Signature: Hon'ble MR.JUSTICE JAYANT PATEL ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? @ ARUN CO-OP.HSG.SOC. LTD. Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 6706 of 1991 MR BHARAT J SHELAT for Petitioner No. 1 MR DC DAVE for Petitioner No. 1 Ms.Harsha Devani, AGP for Respondent No. 1-2 MR MIHIR H JOSHI for Respondent No. 3-5 2. Special Civil Application No. 1584 of 1992 MR Anjaria for Petitioner No. 1 Ms.Harsha Devani, AGP for Respondent No. 1 3. Special Civil Application No.2693 of 1992 Mr.Nilesh A.Pandya with Mr.A.N.Parmar for petitioner No.1 Ms.Harsha Devani, AGP for respondent Nos 1-3 4. Special Civil Application Nos.3161/92 & 3576/93 Mr.A.K.Clerk for petitioner Nlo.1 Ms.Harsha Devani, AGP for respondent Nos 1-2 5. Civil Application No.14817/99 in SCA 6706/91 Mr.Harin Raval for applicant Ms.Harsha Devani, AGP for opponent Nos 2 & 3 Mr.M.H.Joshi for opponents -------------------------------------------------------------- CORAM : MR.JUSTICE JAYANT PATEL Date of decision: 19/08/2002 C.A.V.JUDGEMENT In all these matters, common questions are involved and, therefore, they are being dealt with together by this common judgment. 2. The petitioners are the Coop.Housing Societies duly registered under the provisions of Gujarat Cooperative Societies Act (hereinafter referred to as "the Act"). When the petitioner-societies were registered, the bye-laws were framed by the concerned petitioner-society which, interalia, provided for the purpose of payment of transfer fees as and when the house constructed over the plot which was allotted by the society is sold by the allottee-member to the new-coming member. There were different bye-laws in respect of different petitinoer-society providing separate quantum of transfer fee which shall be referred to hereinafter. 3. However, on 11.1.1988, the Additional Registrar,Cooperative Societies, Gujarat State issued a circular to all the District Registrars, Cooperative Societies, ASst.Dist.Registrars etc intimating that the existing cooperative societies have normally framed the bye-laws as per the leaflet "U" and since the transfer fee is to be recovered on the basis of difference of the cost to be calculated as per the provisions of bye-laws and the amount realised from the shares there is no uniformity in the said amount. It is also reported that in certain cases huge amounts of transfer fee are being demanded which is causing great difficulty to the seller and purchaser of the house of Housing Society and therefore with a view to have uniformity of the same standards, it is decided by the State Govt after detailed consideration that "the Coop.Housing Society may fix the transfer fee on ad-hoc basis from Rs.500/- to Rs.10,000/keeping in view their own circumstances." It is intimated in the said circular that when the new societies are registered, it may be ensured that the bye-laws for transfer fee are as per the instructions of the circular. Further it is also communicated by the said circular that keeping in view the provisions of Section 14(1) of the Act read with Rule 7 of the Gujarat Coop.Societies Rules (hereinafter referred to as "the Rules") within a period of three months, the proposal may be called for and the same may be sanctioned as per the instructions contained in the circular for the amendment in the bye-laws. If any society does not forward the proposal or refuses to amend the bye-laws, list of the same may be prepared and be forwarded and so that the matter can be placed before the State Cooperative Council for appropriate decision for amendment in the bye-laws. It is also mentioned in the said circular that the Auditor of the societies may be instructed to verify with the office-bearers that the societies are collecting transfer fee as per the Govt instructions mentioned in this circular. 4. Thereafter, it appears that on 13.2.91 another circular has been issued by the Registrar, Coop.Societies, Gujarat State wherein it has been mentioned that after the circular, dated 11.1.1988 certain Coop.Housing Societies have made the amendment in the bye-laws whereas the majority of the Cooperative Housing Societies have not amended the bye-laws. Therefore, in this regard, representations made by the Cooperative Housing Societies were placed on 17.1.1991 before the State Cooperative Council and the said State Cooperative Council has, after considering all the details, resolved vide resolution No.9 for making provision for uniform transfer fee. In the said circular it has been communicated that the uniform transfer fee should at the rate of 10% of the difference of amount received from shares and the amount invested with interest at the rate of 10% subject to minimum of Rs.500/- and maximum of Rs.50,000/-. Such amount should not be used for the administration of the society but should be credited in the development fund of the society and thereafter be used for the common facilities. It is further communicated that if any amount is fixed by the annual general body or the Managing Committee by lumpsum the same shall not be treated as in operation. In the very circular, it has been also communicated that the bye-laws as per the resolution of the State Cooperative Council should be amended within a period of three months by the existing Coop.Housing Societies keeping in view the provisions of section 14(1) of the Act read with Rule 7 of the Rules, and the society be communicated with the same for forwarding the proposal. If specified societies fail to make the amendment, since the prior approval has been granted by the Cooperative Council, the amendment in the bye-laws be registered and the copy be forwarded as per section 14(2) of the Act so as to bind all the members of the Coop.Housing Societies as per the amended bye-laws. It is also mentioned that while registering the new Coop.Housing Societies, it may be ensured that the bye-laws are registered as per the instructions of the circular and even the Auditors may be instructed to verify that the transfer fee is collected by the office bearers of the societies accordingly. These aforesaid two circulars, dated 11/1/1988 and 13/2/1991 are the main basis of challenge and cause of these petitions. SPECIAL CIVIL APPLICATION NO.6706 OF 1991: 5. The petitioner-Arun Coop.Housing Society Ltd had the existing Bye-law No.6-A of Form B of Leaflet "U" which reads as under: "6-A. On every permitted disposition or devolution of or dealing with the said plot and buildings or any part thereof under or by virtue of these regulations the member shall pay to the society half the premium received by him from the purchaser member in respect of the said plot and shall also pay to the society in case of the said plot and building half of the amount received by him over and above the capital cost with interest at 4 and 1/2% p.a. upto a limit of one third of the capital cost and such payments received by the society shall belong to the society absolutely and carry to reserve fund." The society in its meeting, dated 27.2.90 resolved for amendment of bye-law No.6-A as under: "It is resolved that the existing rule (bye-law) 6A of Form B of Leaflet "U" of the bye-laws of the society is hereby deleted and read, in its place, as under: "On every permitted disposition or devolution of or dealing with the said plot and/or buildings or any part thereof and/or any interest therein,under or by virtue of these regulations and a member on communicating the sale price to the society and the society accepting the same, the member shall pay to the society 10% (ten percent) of the sale price receivable by him in respect of the said plot and/or buildings or any part thereof and/or any interest therein and such payments received by the society shall belong to the society absolutely and carry to reserve fund." 6. The case of the petitioner is that on 17.3.90 the application for amendment in the bye-laws was submitted by the petitioner to the District Registrar and the same has been rejected as per the decision, dated 24.5.90 whereby the deletion of existing bye-laws is permitted but the amendment in the bye-laws is not permitted. The petitioner society carried the matter before the appellate authority being the Additional Registrar (Appeals) whereby the appeal is partly allowed by rejecting the proposal for deletion and amendment in the byelaws and therefore as a result thereof the earlier bye-laws prior to the amendment was restored, but the appellate authority observed that "when the State Coop.Council has resolved in the larger interest of the cooperative activities the amendment suggested by the society for substitution of bye-laws in its meeting dated 27.2.90 can not be accepted and therefore the amendment in the bye-laws is not permitted." It appears that the matter was carried before the State Govt by way of revision by the petitioner society and on 5.6.91 the State Govt has confirmed the order of the appellate authority by rejecting the revision. It appears that, in the meantime, on 23.4.91 a notice is issued by the Dist.Registrar, Coop.Societies, Ahmedabad City to the petitioner society for amendment in the bye-laws. It is true that in the said notice there is no reference to the circular dated 13.2.1991. However, the amendment suggested is as per the said circular which is issued in addition to the resolution of the State Coop.Council. The society has replied to the said notice as per letter dated 17.6.91 contending, interalia, that such amendment in the existing bye-laws is not in the interest of the society. On 6.7.91 the District Registrar, once again, addressed a letter instructing the society to call the annual general meeting for the purpose of proposed amendment in the bye-laws. The society thereafter insisted for the supply of circular on the basis of which the notice was issued but ultimately on 29.7.91 the order has been passed by the Dist.Registrar, Coop.Societies, Ahmedabad city that the by-law No.6-A of the society shall stand amended as per section 14(2) of the Act. Under the circumstances, the petitioner has challenged the order rejecting the amendment in the bye-laws by the District Registrar and its confirmation by the appellate authority. SPECIAL CIVIL APPLICATION NO.1584 OF 1992: 7. The petitioner-Adarsh Coop.Housing Society Ltd registered on 30.9.1949 was having Bye-law No.6A as that of the petitioner-society of Special Civil Application No.6706/91, i.e. Arun Coop.Housing Society Ltd. It appears that on the basis of circular dated 11.1.1988 the District Registrar, Surat forwarded a circular dated 23.2.1988 to the petitioner-society calling upon the proposal for amendment, however, the society forwarded proposal for amendment for collecting "Salami" and therefore when said proposal for amendment was not sanctioned by the District Registrar, the society was communicated regarding the same as per letter dated 22.1.1990. Thereafter, again on the basis of circular, dated 13.2.1991 the District Registrar addressed letter dated 1.1.1992 to the petitioner society and communicated that as required by the earlier circular dated 8.3.91 the society was also communicated for forwarding the proposal for amendment in the bye-laws in conformity with the circular, dated 13.2.1991 but no proposal is forwarded and therefore in exercise with the powers under section 14(2) of the Act the society is communicated that the By-law 20-D shall stand amended as per the circular dated 13.2.1991 for charging the transfer fee of minimum Rs.500/- to maximum Rs.50,000/-. Under those circumstances, the petitioner society has preferred this petition challenging the legality and validity of the order dated 1.1.1992. SPECIAL CIVIL APPLICATION NO.2693 of 1992: 8. The petitioner-Shreejeebaug Coop.Housing Society Ltd which is registered on 31.8.1966 in its meeting dated 28.9.86 vide resolution No.9 resolved for charging Rs.7,000/- as the transfer fee to be collected from the outgoing member. It appears that on the basis of circular dated 13.2.1991 the District Registrar, Ahmedabad issued notice dated 10.5.91 for forwarding the amendment in the bye-laws so as to bring in conformity with the aforesaid circular. The society in its general body meeting dated 30.6.91 considered the matter and out of 13 members present, 12 opposed the resolution and one person remained neutral and therefore the resolution was not passed. Thereafter, on 23.8.91 the District Registrar under section 14(2) of the Act passed an order that the bye-law shall stand amended for the purpose of charging the transfer fee as per circular dated 13.2.1991, namely, difference of 10% subject to minimum of Rs.500/- and maximum of Rs.50,000/-. SPECIAL CIVIL APPLICATION NO.3161 of 1992: 9. The petitioner-New Brahmakshatriya Coop.Housing Society Ltd which came to be registered under the provisions of the then Bombay Cooperative Societies Act, 1925, after Gujarat Cooperative Societies Act, 1961 came into force, adopted bye-law No.6A of leaflet "U" and the said bye-laws interalia provided for transfer fees. The society in its meeting dated 22.1.1986 resolved for amendment in the bye-law No.6A which reads as under: "On every permitted disposition or devolution of or dealing with the said plot and buildings or any part thereof under or by virtue of these regulations the member shall pay to the society one-eighth the premium received by him from the purchaser member in respect of the said plot and shall also pay to the society in case of the said plot and building one-eighth of the amount received by him over and above the capital cost with interest at 5 and 1/2% p.a. upto a limit of one third of the capital cost and such payments received by the society shall belong to the society absolutely. "Provided however when a member submits plans for construction of a building of ownership flats, the member shall agree to pay to the society, the premium as above, calculated on the basis of fair and reasonable market value of the plot, or the plot and building standing thereon. as the case may be, as of the date on which the plans are submitted to the society and the said premium shall be paid by the member, before the completion certificate is obtained from the Municipal Corporation with consent of the society and provided further that the amount of premium shall be a change on the plot until it is paid." The said amendment came to be granted on 5.1.1988. However, thereafter, on 14.3.88 the District Registrar, Ahmedabad communicated to the society that in response to the proposal dated 6.5.88 of the society for amendment in the bye-laws since instructions are issued by the Registrar, Cooperative Societies, Gujarat State for fixing the transfer fee of Rs.500/- to Rs.10,000/- the proposal for amendment be forwarded accordingly. The society as per its letter dated 6.4.88 made a detailed representation and submitted that it is not possible for the society to make amendment in the bye-laws and communicated for reconsideration of the proposal dated 6.5.87. In any event, the contention of the petitioner-society is that in respect of the said circular dated 11.1.1988 on 12.1.1989 the petitioner was communicated for amendment in the bye-laws as per its meeting dated 5.4.1987 and the bye-law which is sanctioned reads as under: "On every permitted disposition or devolution of or dealing with the said plot and buildings or any part thereof under or by virtue of these regulations the member shall pay to the society one-eighth the premium received by him from the purchaser member in respect of the said plot and shall also pay to the society in case of the said plot and building one-eighth of the amount received by him over and above the capital cost with compound interest at 6% (six percent) per annum with yearly rests and such payments received by the society shall belong to the society absolutely. "Provided however when a member submits plans for construction of a building of ownership flats, the member shall agree to pay to the society, the premium as above, calculated on the basis of fair and reasonable market value of the plot, or the plot and building standing thereon. as the case may be, as of the date on which the plans are submitted to the society and the said premium shall be paid by the member, before the completion certificate is obtained from the Municipal Corporation with consent of the society and provided further that the amount of premium shall be a change on the plot until it is paid." It is the case of the petitioner society that after the aforesid sanction was communicated on 4.10.1990 the District Registrar intimated by notice to the society that inspite of earlier communication the society has not amended the bye-laws for charging the transfer fee of Rs.500/- to Rs.10,000/- and therefore the instructions are defied and an opportunity was given to the society to submit explanation within 15 days failing which the proposal shall be forwarded for appropriate decision to the Gujarat State Cooperative Council. On 6.12.1990, the society made a representation stating that the sanction as per the proposed bye-laws is already granted on 17.9.81 and therefore now there is no question of amending the same as per circular dated 4.10.1990. Thereafter, the District Registrar once again addressed a letter on 28.4.1991 intimating to the society to amend the bye-laws as per circular dated 13.2.1991 for charging the transfer fee at the rate of 10% of difference subject to Rs.500/- and maximum of Rs.50,000/- etc. The society, once again, addressed letter dated 13.5.91 to the District Registrar making detailed representation and submitted that the society is not bound to amend the byelaws as required by the District Registrar. Thereafter, there were various correspondences between the society and the District Registrar, Ahmedabad, and ultimately, the District Registrar passed the order on 23.8.91 under section 14(2) of the Act whereby he has ordered that the bye-law shall stand amended. Under the circumstances, the said society has preferred the petition challenging the legality and validity of the aforesaid order of the District Registrar. SPECIAL CIVIL APPLICATION NO.3576 OF 1993: 10. The petitioner-Hindu Colony Coop.Housing Society Ltd came to be registered under the then Bombay Cooperative Societies Act also adopted mainly the bye-law No.6A of Leaflet "U" but it provided subsequently for the charging of transfer fee at the rate of Rs.50/- per Sa.Yard. Said amendment in the byelaw came to be sanctioned on 15.1.1983. Thereafter, on 18.8.92 the District Registrar communicated to the society for amendment in the bye-laws providing for charging of transfer fee at the rate of 10% of difference subject to minimum of Rs.500/- and maximum of Rs.50,000/- so as to bring in conformity with the aforesaid circular of the District Registrar. It appears that the society did not forward the proposal for amendment in the bye-laws and therefore on 29.6.92 the District Registrar passed the order under section 14(2) of the Act intimating that the bye-law shall stand amended as mentioned in the said order which is in conformity with the circular dated 13.2.1991. Under the circumstances, the petitioner has approached this court challenging the legality and validity of the order dated 26.6.92 under section 14(2) of the Act. 11. Mr.D.C.Dave for the petitioner in Special C.A.No.6706/91 has mainly contended that the power under section 13(2) of the Act provides that it is obligatory for the Registrar to sanction the amendment in the bye-laws if it is not in conformity with the provisions of the Act or the Rules and, therefore, he submitted that the word "may" as provided under section 13(2) of the Act should be read as "shall". He also contended that as per the scheme of Section 13(2) of the Act the Registrar has to form an opinion regarding the desirability or necessity of bye-laws in the interest of the society and while forming the opinion, in his submission, the Registrar can not take into consideration anyother item except those which are provided under Rule 5 of the Rules and, therefore, he submitted that the Rule 5 does not provide for making provision for charging the transfer fee and therefore in his contention the power has been exercised beyond the scope and ambit of Section 14 of the Act. Mr.Dave also submitted that what is desirable or necessary in the interest of the society can only be decided by the general body of the society and the District Registrar can not decide the said aspect and, in any case, in his submission when the general body of the society resolved for not to amend the bye-laws since it was found by the general body that it is not necessary in the interest of the society, the District Registrar can not super-impose his decision that it is in the interest of the society by passing order under section 14(2) of the Act. Mr.Dave has relied upon the judgment of the Apex Court in the matter of The State of Maharashtra vs Karvanagar Sahakari Griha Rachana Sanstha Maryadit reported in 2000(3) GLH 191 and also the judgment of the Division Bench of this court in the matter of Jagdishbhai Bhimrao Setalvad vs New Brahma Kshatriya Coop.Housing Society Ltd reported in 2001(3) GLH 326 for supporting his submission that what is in the interest of the society can only be decided by the general body of the society which is the final authority. Mr.Dave has also submitted that in any case before exercising powers under sections 13 & 14 for directing the amendment in the byelaws, it is obligatory for the Registrar to give opportunity of hearing to the concerned society since such opportunity of hearing has not been given the decision is vitiated. Mr.Dave also relied on the judgment of the Division Bench of the Bombay High Court in the matter of The Telangkhedi Coop.Dairy Society Ltd, Nagpur vs The Dy.Registrar, Coop.Societies, Nagpur reported in AIR 1958 Bom.330. 12. Mr.Anjaria, learned counsel appearing for the petitioner in Special Civil Application No.1584/92 mainly contended that the opportunity in any case is required to be given before passing the order under section 14(2) of the Act and he submitted that no opportunity of hearing has been given to his clients. He also contended that the general approval of the State Gooperative Council in respect of the Cooperative Housing Societies of Gujarat State is not contemplated as per the scheme of Section 14(2) of the Act. He submitted that subsection (2) of Section 14 provides for prior approval and even when such approval is granted the Registrar has to independently apply his mind and then take decision as to whether the order should be passed for amendment in the byelaws or not. Mr.Anjaria also submitted that there is no rational for amendment in the byelaws since such amendment in the byelaws is not in the interest of the members of the Cooperative Housing Society. He submitted that there is no logic in putting the restriction upon the power of the society to charge transfer fee and in his submission the consideration or deprivation which is mentioned in the circulars which are under challenge are irrelevant for the purpose of exercising of power under section 14(2) of the Act. Mr.Anjaria adopted the submissions made by Mr.Dave for the purpose of contending that what could be in the interest of the society. However, he submitted that in a cooperative housing society there is doctrine of mutuality and the existence of the bye-law can not be decided from the stand point of individual member but since there is no element of profit making there is no logic in putting the restriction and Mr.Anjaria also relied on the judgment of this court in the matter of Commissioner of