IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 11098 of 2001 with Special Civil Application No 3821 of 2001 For Approval and Signature: Hon'ble MR.JUSTICE A.M.KAPADIA ============================================================ 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 Civil Judge? : NO -------------------------------------------------------------- JAGDISHBHAI MAFATLAL PATEL Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 11098 of 2001 MR ND NANAVATI SR. ADVOCATE WITH MR PUSHPADATTA VYAS for Petitioners MR KAMAL TRIVEDI ADDL. ADVOCATE GENERAL WITH MR. PREMAL JOSHI AGP for Respondent Nos. 1-2 MR KG VAKHARIA SR. ADVOCATE WITH MR TUSHAR MEHTA for Respondent Nos. 4-15 2. Special Civil Application No. 3821 of 2001 MR BS PATEL for petitioners MR KAMAL TRIVEDI ADDL. ADVOCATE GENERAL WITH MR. PREMAL JOSHI AGP for respondent Nos.1-2 MR KG VAKHARIA SR. ADVOCATE WITH MR TUSHAR MEHTA for respondent Nos.4-15 -------------------------------------------------------------- CORAM : MR.JUSTICE A.M.KAPADIA Date of decision: 27/12/2001 COMMON C.A.V. JUDGEMENT 1. What is challenged in these two petitions which are filed under Article 226 of the Constitution of India, are two orders, both dated November 23, 2001 and issued by the Director (Sugar), Gujarat State, Gandhinagar, removing the petitioners as Directors of the Vadodara District Co-operative Sugarcane Growers Union Limited and Sardar Cooperative Sugar Industries Limited ('the Societies' for short) and appointing respondent Nos.4 to 15 as Directors of the Societies as per bye-laws No.21 (2) (A) and 8 (B) (1) of both the respective Societies. 2. As both these petitions involve determination of common questions of facts and law, by the consent of the learned advocates appearing for the parties, the matters are taken up for final hearing and I propose to dispose them of by this common judgment. 3. In order to appreciate the controversy between the parties, it would be advantageous to refer to the facts stated in Special Civil Application No. 11098 of 2001. 4. The averments made and the grounds set out in the petition manifest that the petitioners were the Board of Directors of the Society which is registered on January 6, 1990 under the provisions of the Gujarat Cooperative Societies Act, 1961 ('the Act' for short). As per bye-law No.21 of the Society the Board of Directors is required to be formed by 25 members including the Managing Director of the Society. In the byelaw No.21 (2) (A), it has been specified that whatever is written in the byelaws, respondent No.2 with the consent of respondent No.1 shall appoint the First Board of Directors for a period of five years which can be extended by respondent No.2 with the consent of respondent No.1 but for a period not more than five years from the date of first crushing of sugarcane. In view of the provisions of proviso to Section 74 (C) of the Act and byelaws, respondent No.2 with the approval of respondent No.1 exercised powers and nominated the First Board of Directors of the Society appointing petitioner No.1 as Chairman. 5. Because of several constraints the factory could not start the crushing of sugarcane. Therefore, respondent No.2 vide order dated February 10, 1999, with the consent of respondent No.1 extended the term of Board of Directors for a further period of five years from the date of commencement of crushing of sugarcane or till further orders. The Society started its crushing on November 1, 1999 and hence the term of Board of Directors had been extended for a period of five years upto October 31, 2004. It is averred by the petitioners that though the Society started functioning and was on the path of progress the petitioners apprehending that in view of change in political power there can be a political evasion against the society, passed a resolution for holding election of Board of Directors of the Society under Chapter XI-A of the Act. As per section 74-C of the Act, only the First Board of Directors is to be nominated and subsequent Board has got to be elected and therefore the society addressed a letter to the Collector, Vadodara and to respondent No.2 for holding election under Section 74-C of the Act. It is further averred that the Collector, Vadodara informed the society by a letter dated August 7, 2001 that as the tenure of the present Board of Directors has not expired, the election cannot be held, specifically mentioning that the first Government nominated Board of the Society is still managing the affairs of the society and so before the expiry of that term, no election can be held. Respondent No.2 also gave a similar reply by his letter dated August 23, 2001. It is specifically averred by the petitioners that the petitioners, more particularly petitioner Nos.1, 4 and 10 are actively connected with number of institutions and had held high positions in Cooperative Societies in the past. Respondent No.4 is a prominent worker of BJP and has just joined the party and others have been appointed on the basis of their own political attachment with the present party in power and many of them are even not sugarcane growers and are not even members. 6. It is specifically averred that on November 23, 2001, respondent No.2 passed an order replacing the existing Board of Directors by appointing respondent Nos.4 to 15 arbitrarily without giving any opportunity of being heard to the petitioners. It is further averred that this order is out of a political malafide which can be seen by the actions of respondent No.4 who had rushed with the order which had been passed by respondent No.1 on November 23, 2001 and on the same day the order has been passed by respondent No.2 and respondent No.4 with his associates and the District Registrar (Sugar) Cooperative Societies, Surat reached in the evening hours in the factory of the society and persuaded the Managing Director to hand over the charge. It is this order dated November 23, 2001 replacing the existing Board of Directors by appointing respondent Nos.4 to 15 which has given rise to the present petitions. 7. The petitions are hotly contested by respondent Nos.1 and 2 by filing affidavit in reply which is sworn by B.R. Katara, Director of Sugar, Gujarat State, Gandhinagar, wherein, inter alia, it is stated that the State of Gujarat has subscribed to the share capital of the said society to the extent of Rs.13.11 crores. Besides this, the State Government has guaranteed payment of term loan of 60% of project cost which comes to Rs.25.64 crores. It is further stated that as per bye-law 21 (2) (A) of the Society, Director of Sugar has the right/power to nominate the First Managing Committee with the consent of the State Government. In the present case the First Board i.e., the Managing Committee was nominated by the Director on December 14, 1990 and same term was extended by order dated February 10, 1999. Thus, no fixed minimum term of office for the members of the First Managing Committee was stipulated. Therefore, the First Managing Committee is functioning with a new composition and that the said Managing Committee cannot be said to have been nominated for the second time as alleged by the petitioners. It is further stated that the said right and/or power to nominate would also include the power to change the composition of the committee. It is further stated therein that State Government has subscribed to the share capital of the society and guarantee has also been given and hence State has a large and direct financial stake and/or interest in the society and the competent authority viz., respondent No.2 apart from being empowered to change the composition, is also vitally interested in proper and harmonious functioning of the said society, that therefore, it has got all the rights to see that there is a smooth, effective and harmonious functioning of the said board/Managing Committee with the State Authorities so that there is no discord between the Government and the Managing Committee of the society and that the functioning thereof is effective and harmonious. In view of this there need not be any judicial resistance to reading in to the provisions of the Act and bye-laws, a pleasure doctrine. The petitioners were nominated vide order dated December 14, 1990 and they were so nominated with the pleasure of the Government at the relevant time. This was neither an appointment nor an employment under the State Government. It is true that vide order dated November 23, 2001, the composition of the first committee is changed by nomination of other members but that development cannot by any stretch of imagination, be dubbed as nomination of the board/managing committee for the second time. It is stated that as required in the bye-laws, the State Government's consent is necessary and the State Government granted its consent vide order dated April 23, 2001 and with the said consent, the impugned order is passed. Lastly, the malafide alleged in the petition is denied by respondent No.2. 8. The petitions are hotly contested by respondent Nos.4 to 15 also by filing reply affidavit which is sworn by Jaykantbhai Ambalalbhai Patel, respondent No.4 herein, wherein all the allegations made in the petitions against the replying respondents have been categorically denied. The malafide alleged is also denied. It is further inter alia stated the newly nominated managing committee has already taken over the charge and has started functioning as managing committee discharging their day-to-day functions and its first meeting dated November 26, 2001 is already held. It is further stated that bye-law No.21 (2) (A) empowers the Director (Sugar) to nominate the members of the managing committee. The said power of nomination is capable of being exercised from time to time and the persons nominated under the said power holds the office as members of the committee during the pleasure of the authority appointing them and during the tenure stipulated under the bye-laws, the composition of the First Committee can be altered and it would function as first committee only. Changing the composition of the first committee does not and cannot be treated as appointment of a second committee. The statutory authority empowered to nominate the members can always change the composition of the said nominated committee and "doctrine of pleasure" would apply while the authority exercises the said powers. It is also stated that the petitioners were appointed by order dated December 14, 1990 and they were appointed purely on political considerations as they belonged to the party supporting the Government at the relevant point of time and the period was for five years or till the next order is passed by the competent authority at its pleasure in exercise of its powers to change the composition of the committee. The term was further extended for a further period of five years but in view of the fact that respondent No.2 is empowered to change the composition of the committee, doctrine of pleasure would apply and by exercising such powers respondent No.2 has passed the order changing the composition of the committee by which the petitioners came to be replaced by nominating respondent Nos.4 to 15. It is averred that when allegations of malafides are made out to be a ground for challenging the exercise of statutory powers, the petitioners must point out detailed facts for the purpose of alleging malafides. Some vague allegations of malafides would not vitiate an order passed bonafide in exercise of the powers conferred upon the authority exercising the powers. It is further averred that the petitioners have not at all pleaded malafide and the allegations are made only to make out a ground of challenge. It is averred that the newly nominated managing committee has already taken over the charge and has started functioning as managing committee discharging their day-to-day functions. The newly nominated managing committee has held its first meeting on November 26, 2001 and it has started functioning. It is further averred that after the newly nominated committee took over the management on November 24, 2001 and after its taking over the charge, the society has started progress rapidly and everyday there is an increase in sugar cane crushing to an extent of 200 MT and more. It is also averred that the sugarcane crushed as on November 23, 2001 was 2760 MT and as on November 26, 2001 it has reached to 2990 MT because of the effective steps taken by the newly nominated committee and this fact demonstrates that the decision taken by the State Government to nominate the new committee and the selection of the members in the new committee is proved to be in the advantage of the society concerned. It is also averred that the persons nominated by the order impugned in the petition have experience and have the majority support of the members of the said society and it is denied that their appointment is only because of their political affiliation as alleged or otherwise. It is further averred that the order is passed by the State Government in the larger interest of the members of the said society and ultimately it is prayed that the petitions may be dismissed with exemplary cost. 9. Mr. Nanavati, learned Senior Advocate who appears for the petitioners of Special Civil Application No. 11098 of 2001 contended that the order impugned is passed in an unholy haste which can be reflected the way and the manner in which it was served on the petitioners with the help of newly nominated Chairman, i.e., respondent No.4 who came personally with the order. This very fact reflects that the respondents wanted to upset the existing First Committee of management. Not only that, they also wanted to see that if any opportunity is given, then the outgoing body would obtain stay order from Court and their purpose and ill-design may get frustrated. What is emphasized by the learned counsel is that the order is passed at the behest of the State Government and, therefore, it was passed at the dictation and command of the State Government and, therefore, it is arbitrary, malafide and the powers vested in him by the statute are not exercised by him bonafide. He submitted that on the aforesaid two grounds the impugned order deserves to be quashed and set aside. Mr. Nanavati, learned counsel has also relied upon Sections 74C, 80 and 80A of the Act. What is stressed by the learned counsel is that if bye-laws of the society so provide then only the State Government acquire powers to appoint the First Committee but if the bye-laws do not so provide then the State Government has no authority even to nominate the First Committee. The learned counsel further contended that Director of Sugar is not the State Government and as there is no delegation of powers in his favour, the power exercised by him is beyond his authority and jurisdiction. It is pointed out by the learned counsel that the First Committee means the First Committee which cannot be substituted by second committee. By the impugned order, the respondents have substituted the second committee and, therefore, the impugned order is passed in clear violation of the law and contrary to the provisions of the Act as well as bye-laws of the society. It is emphatically contended by the learned counsel that bye-law 21 (2) (A) of the Society is inconsistent with the provisions of the Act and, therefore, Director of Sugar has no power to appoint the First Committee though bye-law 21 (2) (A) of the Society may so provide and to that extent the bye-law is ultra vires Section 74C of the Act. The learned counsel has also invited the attention of this Court to Sections 9 and 13 of the Act. He has also drawn the attention of this Court that the first appointment was made by order dated December 14, 1990 and again the term was extended in the year 1999 for a further period of five years. Therefore, this action on the part of the respondent authorities is inconsistent with the provisions of section 80A of the Act as the term not exceeding two years in aggregate came to an end in the year 1997 and, therefore, the learned counsel urged that after the year 1997 election should have been held in view of the provisions of Section 80A (b) of the Act as on the expiry of the aforesaid period, no extension could be granted. In the alternative, he has urged that a Custodian may be appointed for a further period of two years or election should be held. It was pointed out by the learned counsel that the petitioners have approached the Director of Sugar and the District Collector in this behalf requesting them to hold election. So far as the invocation of the pleasure doctrine is concerned, the learned counsel contended that on the facts and in the circumstances of the case it cannot be invoked as there are statutory provisions of the Act and bye-laws of the society which unequivocally suggest that the Government can nominate the First Committee for a period of five years. By referring to the averments made in the reply affidavit filed on behalf of the State Government wherein it is averred that the State Government has invested huge amount and stood as a guarantor, the learned counsel contended that they are hardly relevant factors to be considered for appointment of the First Committee. He submitted that even if the State Government has not made any investment, bye-laws of the Society provide that they cannot change the entire committee and, therefore, the impugned order requires to be quashed and set aside. On the aforesaid premises, the learned counsel contended that the impugned order passed by the respondent authority is a colourable exercise of power, arbitrary and malafide and, therefore, deserves to be quashed and set aside. In the alternative he urged that appropriate orders may be passed for holding election of the Committee of Management in the interest of justice. In support of the aforesaid contentions, the learned counsel has relied upon the following judgments: (i) Tarlochan Dev Sharma v. State of Punjab and others, (2001) 6 SCC 260. (ii) Anirudhsinhji Karansinhji Jadeja v. State of Gujarat, (1995) 5 SCC 302. (iii) Ambalal Manilal Makwana v. Khambhat Taluka Sahakari Kharid Vechan Sangh Ltd., XVI GLR 382. (iv) Interim order dated September 26, 1995 rendered by Division Bench of this Court (Coram: R.A. Mehta, Actg. C.J. & H.L. Gokhale, J.) in Special Civil Application No. 6960 of 1995. 10. Mr. Bharat S. Patel, learned advocate who appears for petitioners of Special Civil Application No. 3821 of 2001 has adopted all the contentions advanced by Mr. Nanavati. Besides those contentions, he contended that the First Committee in respect of this petition was appointed on November 10, 1997, the term of which would expire on November 9, 2002 and before expiry of the said term the respondent authorities ought not to have passed the impugned order as period of five years is not over. He further contended that the respondent authorities have two options after the expiry of the period of five years i.e., extend the term of the first committee or to hold the elections. The powers either to extend or to hold election shall not constitute the power to change the committee. By referring to the impugned order he contended that the impugned order does not state that the powers are exercised under the statutory provisions but it is stated therein that the order is passed in exercise of the powers under the bye-laws of the society itself. Therefore, according to Mr. Patel, the impugned order is passed in colourable exercise of powers, arbitrary and malafide and cannot be sustained in the eyes of law. He, therefore, urged that the impugned order may be quashed and set aside. 11. Mr. Kamal Trivedi, learned Additional Advocate General who appears for respondent Nos.1 and 2, contended that the impugned order passed by the Government is in exercise of the powers vested in the authority as per the statutory provisions of the Act as well as bye-laws of the society. According to him, when the society goes for registration, bye-laws are required to be got approved by the authority and at the time of approval of the bye-laws, it would be scrutinised by the Registrar. He contended that the procedure for registration of the society and the procedure for approval of the bye-laws of the society has been undergone and the society is registered and the bye-laws are approved by the Registrar. In this connection, the learned Additional Advocate General has referred to Sections 8 and 9 of the Act and contended that if the contention propounded by Mr. Nanavati, learned Senior Advocate for the petitioners of Special Civil Application No.11098 of 2001 with regard to the formation of the First Committee as illegal, is accepted, then the order by which the First Committee is appointed is also illegal. If that is so, the petition filed by the petitioners is not maintainable. On this ground alone the petition deserves to be rejected. According to him, it is a prerogative of the Director of Sugar with the consent of the Government to nominate the Chairman and Vice Chairman of the First Committee of Management. The term of this committee is five years, i.e., five years from the date of commencement of crushing. In the instant case, the crushing commenced in the month of November 1999. Therefore, the outer limit of the tenure of the committee is 2004 in both the cases and till the outer limit expires the committee has the right to continue. If the outer limit expires, elections are to be held. The sum and substance of the submissions made by the learned Additional Advocate General is that the bye-laws of the society permitted nomination of the members of the committee or Board for the maximum outer limit of five years from the commencement of crushing and admittedly the crushing commenced on November 1, 1999. It is stressed by the learned Additional Advocate General that if one reads Section 80 of the Act it gives sweeping discretion to the State Government and the cumulative reading of the approved bye-laws, Section 74C (3) (b) and Section 80 of the Act empowers the Director of Sugar, respondent No.2 to effect nomination of the members in the Managing Committee or the Board with the consent of the State Government. It is emphatically contended by him that so far as nomination of three members is concerned, pleasure doctrine can be invoked. It is further contended by him that so far as the bye-laws are concerned, they start with non-obstinate clause, meaning thereby, right to nomination by the Director of Sugar with the approval of the State Government is very much established and, therefore, it cannot be disputed that nomination can be extended from time to time and similarly it cannot be recalled by appointing new Directors which is purely in the realm and discretion of respondent No.2 with the approval of respondent No.1 - State Government. According to him, the bye-laws are consistent with the provisions of the Act and, therefore, the petitions are not maintainable. The learned Additional Advocate General has also relied upon Section 80A of the Act which empowers the Government to extend the term of nominated committee or appointment of custodian. The said Section provides that the term can be extended for such period not exceeding two years in the aggregate or until a new committee of management is elected, whichever is earlier. It is further contended by him