-: 1 :- wp-10077/10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 10077 OF 2010 Rajendra Laxman Bhosale. ..Petitioner. Versus The Nashik District Central Co-operative Bank Ltd and others. ..Respondents. ALONG WITH WRIT PETITION NO. 285 OF 2011 Chandrakant Lumchand Gogad. ..Petitioner. Versus The State of Maharashtra & Ors. ..Respondents. Mr. Narendra Walawalkar, Senior Counsel a/w Mr. Suresh Sabrad for petitioner in W.P.No. 10077/10. Mr. Y. S. Jahagirdar, Senior counsel with Mr. Amit Borkar for the Petitioner in W.P.No. 285/11. Mr. P. K. Dhakephalkar, Senior counsel a/w Mr. A.S.Desai and Mr. R. S. Ghadge for R-1 & 2 in W.P.No.10077/10 & R-3 & 4 in W.P.No.285/11. Mr. R.M.Patne, AGP for the R-3 & 4 in W.P.No.10077/10 & for R-1 & 2 in W.P.No.285/2011. Mr. S. S. Patwardhan for R-5 in W.P.No.10077/2010. CORAM : RANJIT MORE, J. DATE OF RESERVING : 28th APRIL, 2011. DATE OF PRONOUNCEMENT : 13TH JUNE, 2011. P. C. : 1. The challenge in Writ Petition No.10077 of 2010 is to the order passed by the State Government rejecting petitioner’s appeal against the order of the Divisional Joint Registrar passed on 22/10/2010 granting sanction to the srp -: 2 :- wp-10077/10 amendment of the bye-laws of the Nashik District Central Co-operative Bank Ltd, [hereinafter for short “the said Bank”.]. Writ Petition No.285 of 2011 is filed directly challenging the above mentioned order of the Divisional Joint Registrar granting sanction to the amendment of bye-laws of the said Bank. The petitioners in both the writ petitions are members of the said bank. Since the grounds of challenge to the order of the Divisional Joint Registrar are one and the same, these two writ petitions are being disposed of by this common order. 2. The facts giving rise to the present writ petitions are as follows : . The Commissioner for Co-operation, State of Maharashtra, by his letter dated 12/12/2008, addressed to all the Divisional Joint Registrars informed that agreement is entered into between the State of Maharashtra, Central Government and NABARD, in terms of the recommendation of the Vaidyanathan Committee and thereafter the State of Maharashtra has amended the Maharashtra Co-operative Societies Act, 1960. It was further informed that the bye-laws of the District Central Co-op. Banks are amended suitably in terms of the above amendment of the Act and model bye-laws are prepared. A copy of the model bye-laws was sent alongwith the above-said letter with a direction to the Divisional Joint Registrars to do the needful so as to make applicable the model bye-laws to the District Central Co-operative Banks, within their jurisdiction. The said letter makes it clear that the central co-operative banks are at liberty to make change in any provision in respect -: 3 :- wp-10077/10 of the constitution of Board of Directors and other provisions necessitated by local conditions. . On 29/8/2009 Annual General Meeting of the said bank was held wherein certain amendments were proposed in the bye-laws, except bye-law no.33. The Divisional Joint Registrar by his letter dated 23/11/2009 refused to grant sanction to the said amendment of the bye-laws with a direction to take steps to adopt the model bye-laws. The said bank thereafter issued notice dated 17/7/2010 for holding SGM for adoption of model bye-laws. In pursuance of the said notice, SGM was held on 27/7/2010 and resolution to amend various bye-laws including the bye-law no.33 was passed. The Divisional Joint Registrar by his letter dated 22/10/2010 granted sanction under section 13 of the Maharashtra Co-operative Societies Act, 1960 [for short “the said Act.”] to the amendment of bye-laws. As stated above, this order was challenged by the petitioner [in W.P.No.10077 of 2010] in an appeal before the State Government. However, the said appeal was dismissed. The petitioner in Writ Petition No. 285 of 2011 has approached this Court directly by way of Writ petition challenging the order of the Divisional Joint Registrar. 3. Respondent no.2 in Writ Petition No.10077/2010 and respondent no.4 in Writ Petition No. 285/2011 was elected as Chairman on 9/9/2009 under the old Bye-law No.33, under which the tenure of Chairman was one year. The original bye-law no. 33(1) reads as follows: -: 4 :- wp-10077/10 “33(1) - The Chairman and Vice-Chairman shall be elected at the meeting of the Board of Directors after Annual General Meeting every year. The Chairman or in his absence the Vice-Chairman shall preside over at all the meetings of Board. In the absence of both, the other Directors shall appoint one of them to preside over at such meetings. The Presiding Officer shall have a casting vote.” This bye-law is amended by the resolution which was passed in SGM held on 27/7/2010 and thereby the tenure of Chairman and Vice-Chairman is increased to 30 months [i.e., Two and half years] from one year. The amended bye-laws was also made applicable to the existing Chairman and Vice-Chairman. 4. The petitioners challenge the order of the Divisional Joint Registrar passed under section 13 of the said Act granting sanction to the amendments of various bye-laws and especially amendment of bye-law no.33(1). The petitioners are mainly challenging the amended bye-law no.33(1) under which the tenure of Chairman and Vice-Chairman is increased to two and half years from one year. The challenge is on various grounds. Firstly, it is the submission of the petitioners that amendment is contrary to the policy directives of the Government, inasmuch as the model bye-laws, in which the tenure of Chairman and Vice-Chairman is fixed at one year were prepared in -: 5 :- wp-10077/10 pursuance of the recommendation of the Vaidynathan Committee and the agreement between the State of Maharashtra, Central Government and NABARD. It was further contended that bye-law no.33 (1) could not have been amended so as to increase the tenure of Chairman and Vice-Chairman and said amendment is repugnant to the government policy. The second ground of challenge is that respondent no.2 in Writ Petition No. 10077 of 2010 and respondent no.4 in Writ Petition No. 285 of 2011 was elected as Chairman on 9/9/2009; as per the un-amended bye-laws, his tenure is one year only. However, by amending bye-law no.33(1), the tenure is increased to two and half years with retrospective effect. In this regard, they relied upon the Division Bench judgment of Delhi High Court reported in 2004(72)DRJ 687 in the case of L.C. Gupta & Ors. v/s. Registrar, Co-operative Socities and Ors. Reported in 109(2003) DLT 491. Lastly, it is submitted that the order of the Divisional Joint Registrar as well as the order of the Appellate Authority are required to be quashed and set aside on the ground of non application of mind. In this regard, petitioners argued that similar amendment was proposed by the said Bank in earlier AGM held on 29/8/2009, however, same was rejected by the Divisional Joint Registrar by his order dated 23/11/2009. It was also pointed out that so far as the present amendment proposed in SGM held on 27/7/2010 is concerned, the Divisional Joint Registrar on 19/10/2010 had communicated to the said bank that the amendments of bye-laws sought are contrary to the model bye-laws. In spite of this, immediately within two days thereafter the Divisional Joint Registrar -: 6 :- wp-10077/10 granted sanction under section 13 of the said Act to the amendment proposed in SGM held on 27/7/2010. It was submitted that the order under which sanction to the amendment of bye-laws is granted, does not disclose any reasons whatsoever, and therefore, same deserves to be quashed and set aside. 5. The respondents, on the contrary, supported the order of the Divisional Joint Registrar granting sanction. It was submitted that by no stretch of imagination the proposed amendment can said to be contrary to the provisions of the Act, Rules or Government Policies or Directives. The respondents submitted that there is no provision in the MCS Act or Rules under which the Co-operative Society can be compelled to adopt the model bye-laws as prepared by the Registrar or Government. The respondents further submitted that general body of the society is the supreme authority and it is entitled to adopt the model bye-laws with modification which are not contrary to the Act and Rules. They invited my attention to the provision of bye-law no.73 of the model bye-laws under which the Central Bank is allowed to amend the bye-laws. As far as ground of retrospective operation of bye- law no.33(1) is concerned, it is submitted that the said bye-law is not at all intended to operate retrospectively. By the amended bye-law, tenure of the present Chairman and Vice-Chairman is increased to two and half years from one year and therefore the amended bye-law no. 33(1) is prospective in nature. It is urged that decision of the Division Bench of Delhi in L.C.Gupta -: 7 :- wp-10077/10 (supra) is not applicable in the facts and circumstances of the present case. . So far as the objection that the order of the Divisional Joint Registrar is not supported by any reasons is concerned, it is submitted that the Registrar is obliged to give reasons only in case of refusal to sanction amendment of bye-laws. 6. Having gone through the compilation of writ petitions alongwith annextures thereto and having considered submissions of the respective parties, firstly, I propose to deal with the petitioners’ argument about non application of mind by the Divisional Joint Registrar in granting approval to amendment of bye-laws and not giving reasons in support of his sanction. 7. Section 13 of the said Act and Rule 12 of the Maharashtra Co- operative Societies Rules, 1960 deal with the amendment of the bye-laws. For ready reference the Section 13 of the said Act and Rule 12 of the said Rules are re-produced hereinbelow, which respectively read as under : 13. Amendment of bye-laws of society. - (1) No amendment of the bye-laws of a society shall be valid until registered under this Act. For the purpose of registration of an amendment of the bye-laws, a copy of the amendment passed, in the manner prescribed, at a general meeting of the society, shall be forwarded to the Registrar. Every application for registration of an amendment of the bye-laws shall be disposed of -: 8 :- wp-10077/10 by the Registrar within a period of two months from the date of its receipt. Provided that, the application for registration of the amendment of bye-laws of the co-operative credit structure entity shall be disposed of, by the Registrar within a period of one month from the date of its receipt. (1A) Where there is a failure on the part of Registrar to dispose of such application within the period aforesaid, the Registrar shall, within a period of fifteen days from the date of expiration of that period refer the application to the next higher officer and where the Registrar himself is the registering officer, to the State Government, who or which, as the case may be, shall dispose of the application within two months from the date of its receipt and on the failure of such higher officer of the State Government, as the case may be, to dispose of the application within that period, the amendment of the bye-laws shall be deemed to have been registered. (1B) No amendment of the bye-laws of a society shall be registered by the Registrar under this section or in the case of the bye-laws which are deemed to have been registered shall have effect, if the amendment is repugnant to the policy directives, if any, issued by the State Government under section 4. (2) When the Register registers an amendment of the bye- laws of a society or where an amendment of the bye-laws is deemed to have been registered, he shall issue to the society a copy of the amendment certified by him, which shall be conclusive evidence that the same is duly registered. (3) Where the Registrar refused to register such amendment, of the bye-laws of a society, he shall communicate the order of refusal together with his reasons therefor, to the society.” -: 9 :- wp-10077/10 12. Amendment of bye-laws. - (1) Subject to the provisions of this rule, bye-laws of a society may be amended by passing a resolution at a general meeting of the society held for that purpose. (2) The society shall give due notice in accordance with its bye-laws to all the members for considering any amendment thereof. (3) An amendment shall be deemed to have been duly passed, if a resolution in that behalf is passed at a general meeting by not less than two thirds of the members present thereat, and voting. (4) After the resolution is passed, a copy thereof shall, within a period of two months from the date of the meeting at which the resolution was passed, be furnished to the Registrar along with, - (a) a copy of the relevant bye-laws in force with amendments proposed to be made in pursuance of the resolution, together with reasons justifying such amendments; (b) four copies of the text of the bye-laws as it would stand after amendment, signed by the officers duly authorised in this behalf by the committee of the society; (c) a copy of the notice given to the members of the society of the proposal to amend the bye-law; (d) such other information as may be required by the Registrar. (5) On receipt of a copy of the resolution and other particulars referred to in sub-rule (4), the Registrar shall examine the amendment proposed by the society and if he is satisfied that the amendment is not contrary to the Act or the Rules and is in the interest of the society and co-operative movements, he may register the amendment and issue to the society a copy of the amendment certified by him under sub-section (2) of section 13. -: 10 :- wp-10077/10 Where the Registrar is of opinion that the proposed amendment may be accepted subject to any modification, he may indicate to the society such modification after explaining in writing his reasons therefor.” 8. The reading of section 13 makes it clear that for amendment of bye- laws to be valid, same is required to be registered under the Act. For the purpose of registration of an amendment of bye-law, a copy of the amendment passed, in the manner prescribed, at general body meeting of the society, is required to be forwarded to the Registrar. The Registrar shall not register the amendment of bye-laws of a society, if the amendment is repugnant to the policy directives issued by the State Government under section 4 of the said Act. The Registrar is obliged to give reasons in case he refuses to register the amendment of bye-laws of the society. 9. Perusal of Rule 12 of the said Rules makes it clear that the bye-laws can be amended by passing a resolution at a general body meeting of the society held for that purpose and this resolution is required to be passed by not less than two thirds of the members present thereat, and voting. It is obligatory on the society to give notice in accordance with its bye-laws to all the members for considering any amendment thereof. Within the period of two months from the date of meeting at which the resolution was passed, a copy of resolution along with the particulars mentioned in clauses (a) to (d) of Rule 12(4) of the said Rules are required to be furnished to the Registrar. The provisions of sub-rule (5) are important. The Registrar is obliged to -: 11 :- wp-10077/10 examine the amendment proposed by the society and if he is satisfied that the said amendment is not contrary to the Act or the Rules and is in the interest of the society and co-operative movement, he may register the amendment. If the Registrar is of the opinion that the proposed amendment may be accepted subject to any modification, he may indicate to the society such modification after explaining in writing the reasons therefor. Thus, while sanctioning the proposal submitted by the society for amendment of the bye-laws, the Registrar is required to be satisfied that the amendment is not contrary to the Act or the Rules and same is in the interest of the society and co-operative movement. The Registrar has to record his subjective satisfaction before sanctioning the amendment. 10. Perusal of the order dated 22/10/2010 passed by the Divisional Joint Registrar, does not disclose any subjective satisfaction on the part of Registrar that the proposed amendment of bye-laws is not contrary to the Act or the Rules or the policy directives issued by the Government and same is in the interest of the society and co-operative movement. In this order, the Divisional Joint Registrar has mentioned his source of powers, namely, section 13 of the said Act and proceeded to sanction the amendment of bye- laws. In my considered view, in the teeth of Rule 12(5) of the said Rules, it was obligatory on the part of Registrar to record his subjective satisfaction that the proposed amendment is not contrary to the Act or the Rules and policy directives of the Government and same is in the interest of the society -: 12 :- wp-10077/10 and co-operative movement. This is more so important when the same Registrar had already, by his order dated 23/11/2009, rejected the similar proposal for amendment of bye-laws made by the society as per the resolution passed at the general body meeting held on 28/8/2009. 11. As stated above, the bye-laws of the society can be amended by passing a resolution in general meeting by majority of two-third members. The notice of the general meeting is required to be given to all the members in accordance with the bye-laws. Within two months from the date of the general meeting, a copy of the relevant bye-laws in force with amendments proposed to be made in pursuance of the resolution along with reasons justifying such amendments, copies of the text of the bye-laws as it would stand after amendment and a copy of the notice given to the members of the society of the proposal to amend the bye-law is required to be furnished to the Registrar. The Registrar is thus expected to verify whether : 1. a notice is given to all the individual members of the Society of the proposal to amend the bye-law; 2. the resolution is passed by two-third majority and 3. the reasons given by society are justifying the amendment to the bye- law. However, in the present case, the order sanctioning the amendment does not disclose whether the Registrar has verified the above factors. The -: 13 :- wp-10077/10 Registrar has also not given any reasons for sanctioning the amendment. The Supreme Court, recently in Kranti Associates Private Limited and Anr. Versus Masood Ahmed Khan & Ors. reported in (2010) 9 SCC 496 has considered the necessity of giving reasons by the body or authority in support of its decisions and summarised principles on the recording of reasons as follows : (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi-judicial authority must record reasons in support of its conclusions. (c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. (d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. (g) Reasons facilitate the process of judicial review by superior courts. (h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned -: 14 :- wp-10077/10 decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice. (i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system. (j) Insistence on reason is a requirement for both judicial accountability and transparency. (k) If a judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. (l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubber-stamp reasons” is not to be equated with a valid decision-making process. (m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. (o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the -: 15 :- wp-10077/10 decision is of the essence and is virtually a part of “due process”. It is also fairly settled position that lack of reason to the appealable orders cannot be supplied by way of filing affidavit in reply. Reference can be made to the Supreme Court decision in the case of Mohinder Singh Gill & Anr. Versus The Chief Election Commissioner, New Delhi & Ors. reported in (1978) 1 Supreme Court Cases 405. If the impugned order is examined on the touchstone of the aforesaid principles laid down by the Apex Court, then, the same cannot be sustained and deserves to be quashed and set-aside, on that ground alone. 12. Be that as it may, the Divisional Joint Registrar by his communication dated 19/10/2010 to the said bank informed that the amendment of the bye- laws proposed in SGM held on 27/7/2010 is contrary to the model bye-laws, and within 3 days thereafter on 22/10/2010 the same Divisional Joint Registrar sanctioned the amendment of the bye-laws. In this regard, it is submitted by the society that on 21/10/2010, the society has given reply to the Registrar’s letter dated 19/10/2010 and thereafter the Divisional Joint Registrar sanctioned the proposed amendment of bye-laws on 22/10/2010. However, it is pertinent to note that this fact is not disclosed by the society in any proceedings till filing of re-joinder to the writ petition in this Court. Inward Registrar of the Office of the Divisional Joint Registrar also does not disclose the receipt of any such reply/ explanation from the society. -: 16 :- wp-10077/10 13. The Petitioner in Writ Petition No.10077 of 2010 had also approached the appellate authority under section 152 of the said Act. However, his appeal came is dismissed and the order of the Registrar came to be confirmed. Perusal of the order passed by the appellate authority reveals that the appeal is dismissed on the ground that question whether resolution proposing amendment of the bye-laws is passed or not and whether same is in accordance with the law does not fall within the ambit of section 152. In my considered view, the order of the appellate authority cannot be sustained. The factum of resolution could not have been gone through in exercising jurisdiction under section 152 of the said Act, however, the validity