c? IN THE HIGH COURT OF JUDICATURE AT BILASPUR, (CHHATTISGARHI WMT PETITION N0. k.2-^- OF 2004. ^ PETITIONER K ^p^ <"'^ ..^. .^' y '?• BAUNATH CHANDRAKAR, S/0 LATE SHRP BHUWANLAL CHANDRAKAR, AGED ABOUT 58 YEARS, CHAIRMAN, DISTRICT CENTRAL CO-OPERATrVE BAN, BILASPUR, TAHSIL AND DISTRICT BILASPUR, (C.G.). .B PS^ RESPONDENTS VERSUS 1. 2. 3. STATE OF CHHATTISGARH, THROUGH: THE SECRETARY, COOPERATION, MANTRALAYA, .D.K.S. BHAWAN, RAIPUR, (C.G.). THE REGISTRAR CUM COMMISSIONER, CO- OPERATrVE SOCIETIES, RAIPUR, (C.G.). THE COLLECTOR, BILASPSUR, DISTRICT BILASPUR, (C.G.) IVMT PETITION UNDER^RTICLE 226 OF THE CONSTITUTION OF INDIAJ.950 OR ISSUANCE OF WRIT IN THE NATURE OF CERTIORARI MANDAMUS ETC. ND FOR OTHER APPROPRIATE WRIT OR WMTS. ORDER OR ORDERS, llIRECTION OR DIRECTIONS. .n'y!' bSMi^s^ V;. HIGH COURT OF CHHAmSGARH, BILASPUR WRFT PETmON N0. 624/2004 BAIJNATH CHANDRAKAR VERSUS STATE OF CHHATTISGARH AND ANOTHER WRIT PETITION N0. 628/2004 DOMENDRA BHEDIYA VERSUS STATE OF CHHATTISGARH AND OTHERS WRFT PETITION N0. 637/2004 VINODTIWARI VERSUS STATE OF CHHATTISGARH AND OTHERS WRFT PETITION N0. 666/2004 SMT. SANTOSHI SAHU VERSUS STATE OP CHHATTISGARH AND OTHERS Petitioners by : S/Shri M.D. Sharma, P. Diwakar, Mantndra Shrivastava, Sanjay K. Agrawal aad C.D. Sharma. Respondents by: S/Shri Ravish Agrawal, Adv. General, Pramod Verma, Addl. Advocate General and N.K. Agrawal, Dy. Advocate General. ORDER These writ petitions bearing W.P. No. 624/2004 (Baijnafh Chandrakar -v- State of Chhattisgarh and another), W.P. No. 628./2004 (Domendra Bhediya -v- State of Chhattisgarh and others, W.P. No. 637/2004 (Vmod Tiwari -v- State of Chhattisgarh and ofhers) and W.P. No. 666/2004 (Smt. Santoshi Sahu -v- State of Chhattisgarh and others) tnvolve identical facts and questions oflaw fherefore, fhey are being decided by a coramon order. 2. Challenge tn aU these writ petitions is to fhe order dated 17th Feb.2004 Annexure R-l in aU the petitions passed by the State of Chhattisgarh/ respondent no. 1. The petitioners were holdmg fhe office of the Chatrman, District Co-operative Central Banks. They are registered iinder Cooperative Societies Act, 1960 (For short hereinafter referred to as the Act). The order unpugned has been passed under Section 52(4) ofthe Act, by which the State Goverament has directed that the CoUector is nomuiated as Chatrman of fhe Bank and to perfonn such duties in the co-operative society. 3. It is stated m Annexure P-1, filed in W.P. No. 624/2004 that in fhe scrutiny of the Balance Sheets for the year 2002- 2003 as on 31-3-2003 ofDistrict Co-operative Central Bank, BUaspur, it has been foiind that total shai'e capital of the Bank is Rs. 953.53 lacs and other assets are 5453.04 lacs. Total assets and capital are Rs. 6406.57 lacs. The loss of the Bank is of Rs. 4248.34 lacs. The State Govermnent has invested in fhe share capital Rs. 90.72 lacs and as on 31-3- 2003, Ctie Bank has suffered loss of 66.31%. 4. It is stated m Aimexure P-1, ffled in W.P. No. 628/2004 fhat in the scrutiny of the Balance Sheets for the year 2002- 2003 as on 31-3-2003 ofDistrict Co-operative Central Baak, Di-irg, it has been foiind that total share capital of fhe Bank is Rs. 923.98 lacs and other assets are 1723.40 lacs. Total assets and capital are Rs. 2647.38 lacs. The loss ofthe Bank is of Rs. 849.56 lacs. The State Goverrunent has tnvested in the share capital Rs. 67.70 lacs and as on 31-3-2003, the Bank has suffered loss of 32.09%. 5. It is stated in Annexure P-1, filed in W.P. No. 637/2004 that in the scrutiny of tfae Balance Sheets for the year 2002- 2003 as on 31-3-2003 of District Co-operative Central Baak, Rajnandgaon, it has been foLuid that total share capital of the Bank is Rs. 658.21 lacs and other assets are 1944.38 lacs. Total assets and capital are Rs. 2602.59 lacs. The loss ofthe Baak is of Rs. 1542.98 lacs. The State Governiaent has mvested in fhe share capital Rs. 101.00 lacs and as on 31-3- 2003, the Bank has suffered loss of 59.29%. 6. It is stated in Annexiire P-1, ffled in W.P. No.666/2004 that in the scrutiny of the Balance Sheets for'the year 2002- 2003 as on 31-3-2003 of District Co-operative Central Bank, Aiubikapur, it has been found that total share capital of the Bank is Rs. 299.59 lacs and other assets are 2304.45 lacs. Total assets and capital are Rs. 2604.04 lacs. The loss offfae Bank is of Rs. 2740.38 lacs. The State Govemment has invested in the share capital Rs. 80.19 lacs and as on 31-3- 2003, the Bank has suffered loss of 105.23%. 7. tt is contended m W.P. No. 624/2004 that the petitioner was elected as representative for the Board of Directors, Distt. Central Cooperative Bank, Bilaspur. There were 25 elected directors of Distr-ict Co-operative Central Bank who elected the petitioner as Chairman. The CoUector Bilaspur, Dy. Registrar, Cooperative Societies and Dy. Director Agriculture are also ex-officio members. It is contended that the petitioner requested the Registrar for holding new election but the Registrar did not comply his legal obUgations under the Act. The Registrar wanted to dissolve the Board of Directors of fhe District Co-operative Central Baak, Bilaspur for the purpose of controlling the co-operative moveiaent by fhe present ruling party by attempting to initiate the proceedings under Section 53(1) of the Co-operative Societies Act, 1960. It is further contended that hovvever realising that it would be impermissible under the law, the State Govemment has not restored to action under sub-section 4 of Section 52 of the aforesald Act. It is contended that under Section 53 of the Act, it is required that such action can only be taken after giving reasonable opportunity of showing cause against such proposed action and such action can only be taken if uiformation before 45 davs has been sent to the Reserve Bank of India. It is further contended fhat since the Registrar refused to com.ply with the order of the State Governnient to remove office bearers of all the Co-operative Banks of the State being Ulegal and contrary to law, it was decided to initiate the proceedings under Section 53(A) of the Act but because of the legal hi-irdles, now the recoiirse has been taken to the provision ixnder Section 52(4) of the Act, which is a colourable exercise of power. The petitioner in the this petition has submitted that he is entitled to function tUl 8th July 2005 or till fhe elections are validly conducted and his term, he has taken aQ. steps for conduction of election. It is further stated that there has been no fault on the part of the Chainnan and at no point of tune, nothing has been pointed out agatnst the Chairman or the Board of Directors. It is contended in para 5.15 of the petition that the Bank had to face a big hardship because of Section 37 (A) of fhe Act .wherein the societies cannot recover the amount of the prtncipal loans to fhe borrowers more thaa double of the amount but the societies and the Bank had not been given the benefit of such facility and they are being burdened wifh such loss amountuig to Rs. 240.70 lacs. It is submitted that because of fhe policy of the Qovemiaent, the bank had to suffer and the State Goverrtinent is bound to make the payment of this amount as compensation. It is submitted that loss if any is because of the policy of the Government and for that the Chaimian cannot be held responsible. 8. Couiisel for the petitioners contended that the petitioners are Chairman of the Bank and each of them have been elected by the Directors for a period of 5 years. They are holding the offlce of Chairmaii and they have a right to continue tn the office for fhe remainuig period or tUl the elections are held under the -provisions of the Act as contemplated in Section 49(7A) ofthe Act. It is submitted that he has not been removed from fhe office by any legalorder. It is further submitted that without removal of the petitioner from the of&ce, any person cannot be nominated as Chairman. It is further contended fhat the nomination of Collector as Chatrman of the Bank wiU have an affect of removal of petitioner from fhe office of Chairman. It is furfher ,submitted that the State Govemment has not passed any I.-L' y^ order of removal of the petitioner from the office ofChairman but has nominated the Collected as Chairman, effect ofwhich is removal of petitioner from fhe office. It is further contended that there is specific procedure envisaged under Section 53-B of the Act for the removal of the chainnan and the State cannot reniove the petitioner in fhe garb of the order under Section 52(4) of the Act. It is submitted that the unpugned order is a politically niotivated order. It is further contended that there is no allegation against the committee or the Chairman of the Bank. It is submitted that ^here is no vacancy of the office of chairman and section 52(4) of the Act may be invoked only where there is a vacancy and in absence of vacancy of offlce of chairman, the CoUector cannot be nominated as Chatrman. It is further contended by the petitioners that Section 52 of the Act is not applicable. It is further contended that the respondent/State has not issued any show cause notice or provided any opportunity of hearing before passing such an order. It is fLirther submitted that the pnnciples of natural justice have not been foUowed and the order is vitiated on this ground. It is further contended that the State is claiming absolute power under Section 52(4) of the Act. It is contended that absolute power is not vested. It is a cooperative movement and the absolute power to remove '^ V: the elected representatives demolishes fhe cooperative m.oveiaent itsetf. 9. Leamed State counsel on the other hand submitted that fhe State Goveminent, in exercise of powers under section 52(4) of the Act has nominated one of its nominee as Chairman of the Bank. It is further submitted that the said power has been exercised after due consideration of aU the facts and cu-czimstances and after satisfying itself about the requirement of section 52(4) of the Act. It is submitted that the aibresaid provision is meant for unproveinent of the financial condition of' the Bank concemed. It is furfher submitted that section 52(4) of fhe Act has overridtng effect and it has naturally resulted in discontmuance of the petitioner as Chatrman pf the Bank. Leamed counsel vehemently contended that the unpugned order does not cast any stigma and is simply a result of the exercise of power under Section 52(4) ofthe Act. It is submitted fhat the action of the Government in appointmg its nominee as Chairman of the Bank is not at all actuated by malice but the object behind taking the action is to unprove the financial condition ofthe Barik. State counsel further contended that vires of the provisions contained in section 52(4) ofthe Act have not been • challenged by the petitioner. In the return while replying to fhe elected representatives deniolishes the cooperative movement itself. 9.f^ Leamed State counsel on fhe other hand subniitted that fhe State Govemment, in exercise of powers under section 52(4) of the Act has nominated one of its nominee as Chairman of the Bank. It is furfUer submitted fhat the said power has been exercised after due consideration of all the facts and circuiustances and after satisfying itself about the requirement of section 52(4) of the Act. It is submitted that fhe aforesaid provision is meant for improveuient of the financial condition of the Bank concerned. It is further submitted that section 52(4) of the Act has overriding effect and it has naturally resulted in discontinuance of the petitioner as Chairman of the Bank. Learned counsel vehemently contended that the impugned order does not cast any stigma and is simply a result of the exercise of power under Section 52(4) of the Act. It is submitted that the action of the Govemraent in appotnting its nominee as Chaircaan of fhe Bank is not at all actuated by malice but the object behtnd taking the action is to miprove the financial condition of the Bank. State counsel further contended that vires of the provisions contained ui section 52(4) ofthe Act have not been challenged by the petitioner. In the retum while replying to the paras 5.17 to 5.19, it is submitted that in fact the loss occurred to the Bank is due to their mismanagement, fault and unperfection resulted not only loss to fheir own capital but also loss to other individual depositors as well and loss to constituent societies. It is further submitted that audit report Annexiire R-6 would show that the Bank is continuouslv running in loss and which is increasing day by day and that cannot be attributed to the situation of drought ui any manner. 10. It is contended by the State CoLmsel that fhe power has been exercised in public interest. It is also contended that Section 52(4) of the Act starts with non-obstante clause and it has overriding effect. It is also contended tliat power has been exercised in the larger pubUc interest and as the conditions existed were suf&cient for exercising power as enumerated iinder Section 52(4) of the Act. 11. The petitioners have filed rejoinder. It is contended that Section 52(4) of the Act does not authorize fhe State Govemment for passing any order ofremoval ofthe Chatrmaii from the Bank and, therefore, such order is Ulegal and without jurisdiction. It is submitted that it is only Section .53(B) of the Act, which provides the power to remove an office of the Societv'. The offlcer has been defined under Section 2(T-i) of the Act, includmg the Chatrman and that too power of removal is vested with the Society and if, the society does not proceed with ftie removal then only thereafter the Registrar may exercise such power. It is submitted fhat in the present case, no such provision has been complied with and therefore there is no removal at all. It is denied by the petitioners fhat the bank has incurred the losses to ffae extent of 25% or more than its own capital. The petitioner has referred to a meetmg of all the District Co-operative Central Bank of Chhattisgarh, presided over by the Chief Secretaiy of the Chhattisgarh on 30-1-2003 m which it was dissolved that the District Co-operative Central Banks should be redressed by the dtfferent departments of the State goverament on different items. 12. The matter has been heard on many dates and Shri Ravlsh Agrawal, learned Advocate General, Shri Praniod Verma, Addl. Advocate General, Shri N.K. Agrawal, Dy. Advocate General have also addressed the Court on behatf of fhe respondent/State. 13. In view of the rival contentions of the counsel for the parties, Section 52 and 53-B ofC.G. Cooperative Societies Act are relevant and quoted below:- 11 /•"•- .f "52. Power to appotnt Govemment norainees.- (1) Where fhe State Government (a)has subscribed to the share capital of a society; or (b)has assisted tndirecfty in the fonnation or augmentation of the share capital of a society as provided in Section 45; or (c) has guaranteed the repayment of principal and payment of interest on debentures issued by a society; or (d)has guaranteed the repayment of principal and payment of interest on loans and advances to a society; the State Government or any authority specified by the State Govemment in this behalf shall have the right to nominate such number of persons not exceeding (foiir) as it raay deem lit on any or all of fhe comniittees of such society. (2) A person nominated on the committee of a society under sub-section (1) shall hold office for such period and on such conditions, as may be prescribed. (3) Notwithstanding aaything contained in thls Act, every person nomuiated on the comm.ittee of a society undersub-section (1) shall have one vote in such committee: Provided that nomuiated person shall not be entitled to vote in any election of the office bearers of fhe comnuttee of the society. (4) When the Government has subscribed to the share capital of, or has guaranteed the repayment or principal and payment of uiterest on loans and advances to a society to the extent of rupees three lakhs or more and the society has incurred loss to the extent of twenty-Iive per cent or more of its owned capital, the State Govemment may, notwithstanding anything contauied in this Act, the ri-des made thereunder or byelaws of fhe society, nominate one of the raembers nominated by it under sub-section (1) as Chairman of the Committee of the Society and further appoint one of the nominated 12 niembers as Managing Director/General Manager/Manager ofthe society." "53-B. Power of the Re^strar to remove an Officer of a society in certain circumstances.-fl) If m the opmion of the Regista-ar, any ofiicer of the Co-operative society has been grossly negligent tn the discharge of his duties unposed on hun by or under this Act the rules raade ffaereunder or byelaws or has, by a fraudulent act, caused financial loss to fhe society the Registrar may without prejudice to any ofher action that may or can be taken against him., caU upon fhe society to remove wifhin a spectfied period such offlcer froin the office held by hun and where necessary also to disquaUIy hrm from holding any offlce under that society for a period not exceeding three years, whereupon the society shall,' affordin^ opportunity to the officer concerned of beinj heard, pass such orders as it deems fit. (2) On failure of the society to take action under sub-section (1), the Registrar may after affordmg opportunity to the offlcer of bemg heard and for reasons to be recorded, and communicated to fhe officer and the society concemed, remove or remove and disqualtfy for a period not exceedui^ three years, fhe officer froni holding any offlce under that society for the period specified in fhe order. (3) An offlcer removed under the sub- section (1) or sub-section (2) shall with effect from the date of communication ofthe order, cease to hold fhat office and if disqualified shall not be eligible to hold any office under that society for the period spectfied m the order. 14, The main question for consideration is whether the petitioner has been removed from the office of Chairman or he has been bypassed or kept tn curtain for the time betng till 13 s.: the unpugned order remains in force, and the entire function wUl be managed by the new chairman and whether such coiiTse is available, has to be considered. The sunilar question arose in the case of Deepak Saxena -v- State of M.P. and others (2004(11) MPJR 205). Paras 12 and 13 of thejudgment are relevant and quoted below:- "12. Now the important question whefher by the impugned order petitioner has been removed from the office of Chairman or he has been bypassed or kept in curtain for the tiine being, till the impugned order reiaains in force, may be seen. As the learned Advocate General during the courts of arguments explatned that the petitioners shall reraain as Chairman, but for the time being they will remain behlnd the curtain and the entire function of the Barik shaU be managed by the nominated Chau*raan. Whether such course is available under sub-section (4) of the Act that, without removal of elected Chairaian another Chairnian raay be nominated and the existing Chairman shall reniain behind fhe ciirtain or vacancy of the office of Chairman is necessar^' for fhe nomination of Chairman under sub-section (4). 13. To appreciate this question, it is necessary to look into the incorporation of sub-section (4) of Section 52 in the statute book. By 1976 amendment, section 52 was amended by inserting sub-section (4). Another amendment in the Act is incorporation of Section 53-B empowering the Registrar to rem.ove an officer of the society in certain circumstances. Section 53-B provides a complete procedure in itself, empowering Registrar to remove an office bearer of the society whlch includes Chairman of fhe society. .For the first tiiae these two provisions were incorporated ui the Act. Section 53-B as quoted heremabove provides that, if in the opinlon of the Registrar any officer of Co-operative society has been grossly negligent in the discharge of his duties imposed on htm by or 14 under this Act; the riiles made thereunder or byelaws or has, by a fraudulent act, caused financial loss to the society fhe Registrar may without prejudice to any other action that raay or can be taken agatnst him, caU upon the society to reiaove withui a spectfied periodsuch officer from the office held by hioi and where necessary also to disqualijy htm from holding any office under that society for a period not exceeding three years. On receiving thls direction the society shall after affording opportunity to the officer concerned of being heard, pass such orders as it deem.s fit. If the society does not take any action under sub- section (1), fhe Registrar may after affordin^ opportunity to the officer of beuig heard and for reasons to be recorded, any coDimunlcated to the officer and the society concerned, remove or remove and disqualtfy the officer for a period not exceeding three years. This provision was incorporated for the first time on 15th March, 1976. Before this, the powers were exercisable under Section 53 of the Act. Section 53-B though provides for removal, but does not provide any power for fUling-up of vacaricy so occurred by removal. It appears that in peculiar cu'cumstances, -the power under sub-section (4) of Section 52 was envisaged in respect of special category of societies by nominatemg Chairmari of the society. But the fact rematns that until and unless any office is vacant, whether any other person may be nomtnated as Chairman? Though this question has been tried to be explained by leamed Advocate General, but unsatisfactorily. How the State Govemment may nominate a Chainnan for the society, whereas anofher elected person is already functioning and that too without his removal? Section 52 is silent in respect of removal of existing/elected Chairman. Then a harmonlous consideration is to be given to the provision. Until and unless said office is vacant, the power under section 52(4) cannot be invoked. The State Govemment to take care the situation, when the office is vacant or new election cannot be held forthwith, may nominate any person, so nominated .under sub-section (1) of section 52 as Chairman of the society, so that the society may continue to 15 function. But in no case, when a Chairman is functioning or holding the office, without his removal from the office, another person can be nom.inated. It cannot be said that the said person shall go behind the curtain and nominated Chairman shall work and discharge the function. AU this cannot be done, untU fhere is specilic provision in fhis regard. Therefore, the argument of the learned Advocate General has no legs to stand. Even for the moment if it is assumed that the State Qoverninent has power to nominate a person iinder sub-section 4 of Section 52 and by uivoking of aforesaid provision shaU have effect of removal of elected Chairman, then in a democratic process the elected person who is holdtng fhe ofSce by virtue of election under the statute requires one opportunity of hearing, or even of show cause before his removal. Elected person of any statutory body cannot be thrown in fhe Uke manner. He must get opportunity to explatn the circumstances agatnst him before his removal. He enjoys a elected office of reputation with responsibility. He holds the office after election from the members of the society, may be shareholders and/or borrowing members. But when fhe members of fhe society or general body of members, in whom. the final aufhority in fhe society is vested, has shown its confidence in a member by electing him Chairman of the society,