SCA/9702/2008 1/14 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 9702 of 2008 For Approval and Signature: HONOURABLE MS. JUSTICE R.M.DOSHIT HONOURABLE MR.JUSTICE SHARAD D.DAVE ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= RAMESHBHAI AMBALAL PATEL & 7 - Petitioner(s) Versus STATE OF GUJARAT & 7 - Respondent(s) ========================================================= Appearance : MR MIHIR JOSHI, SR.ADVOCATE with MR VIMAL M PATEL for Petitioners. MR KAMAL TRIVEDI, ADV.GENERAL with MS SANGEETA VISHEN, AGP for Respondent(s) : 1 - 3, Respondent(s) : 6 SERVED, MR NIRUPAM NANAVATY, SR.ADVOCATE with MR DILIP B RANA for Respondent(s) : 4 - 5. MR NILESH A PANDYA for Respondent(s) : 7 - 8, ========================================================= CORAM : HONOURABLE MS. JUSTICE R.M.DOSHIT and HONOURABLE MR.JUSTICE SHARAD D.DAVE Date : 01/09/2008 SCA/9702/2008 2/14 JUDGMENT ORAL JUDGMENT (Per : HONOURABLE MS. JUSTICE R.M.DOSHIT) Rule returnable today. Learned advocates Mr.Rana, Mr.Pandya and Ms.Vishen waive service of rule on behalf of the respective respondents. With the consent of the learned advocates, the petition is heard and disposed of today. The petitioners in the present petition preferred under Article 226 of the Constitution of India are the elected members of the Board of Directors of the Baroda District Central Cooperative Bank Limited (hereinafter referred to as, “the Bank”), a specified society within the meaning of Section 145-B(c) read with Section 74- C of the Gujarat Cooperative Societies Act, 1961 (hereinafter referred to as, “the Act”). In the elections held on 14th June, 2008 the petitioners have been elected as the directors of the Bank. Feeling aggrieved by the action of the respondents – State Government and the Registrar SCA/9702/2008 3/14 JUDGMENT of Cooperative Societies in nominating one member each and by appointment of a Professional director by the Administrative Committee and by the action of the Administrative Committee in permitting the incharge Manager to vote at the election of the office bearers, the Chairman and the Vice Chairman of the Board of Directors, the petitioners have preferred the present petition. Pending this petition, the election has taken place on 4th August, 2008. The vote cast by the aforesaid nominees, the Professional director and the incharge Manager are kept in sealed cover. Mr.Joshi has submitted that sub-section (1) of Section 81 of the Act empowers the State Government or the Registrar, as the case may be, to supersede a committee and to appoint an administrator. The said sub-section further provides that the total period of such committee shall not exceed four years in the aggregate. In exercise of the said power, an Administrative SCA/9702/2008 4/14 JUDGMENT Committee (hereinafter referred to as, “the Committee”) had been appointed for the Bank in the year 2002. Its term has expired in the year 2006. After the expiry of its term, the Committee has no right or authority to function as such. Mr.Joshi has submitted that in view of the amendment made to the Act by Gujarat Act No.1 of 2008 particularly the amendment to Section 74 of the Act, the Bank is required to have atleast two Professional directors having the qualifications specified by the Reserve Bank of India. One of the elected Directors does possess specified qualification. In absence of the second Professional director, the Board of Directors was required to appoint one Professional director. The Registrar of Cooperative Societies (hereinafter referred to as, “the Registrar”), under his communication dated 15th July, 2008, called upon the Committee to appoint one Professional director within three days thereof. Pursuant to the said direction the Committee in SCA/9702/2008 5/14 JUDGMENT its meeting held on 17th July, 2008 appointed the respondent no.5 as Professional director. Mr.Joshi has assailed the appointment of the respondent no.5. He has submitted that once the petitioners were elected as the Directors of the Bank, it is the Board of Directors alone which has power to appoint Professional director. The term of the Committee had already expired. The Committee could not have been called upon to appoint the Professional director. Nevertheless, the Committee has continued to function as such. The Registrar called upon the Committee to appoint a Professional director and the Committee did appoint the respondent no.5. He has submitted that the action of the Registrar in directing the Committee to appoint a Professional director and the decision of the Committee to appoint the respondent no.5 as Professional director both are without the authority of law, bad and illegal. He has next submitted that the State Government has, under the powers conferred by SCA/9702/2008 6/14 JUDGMENT Section 80(1) of the Act, appointed the respondent no.6 as its nominee. He has submitted that within days of election of the petitioners, the State Government has appointed the respondent no.6 as its nominee with a malafide intention and ulterior motive to tilt the balance at the forthcoming election of the office bearers of the Board of Directors. In the submission of Mr.Joshi, Section 80(1) confers a discretion upon the State Government to appoint its nominee. The State Government has not given out any justification for making the appointment of respondent no.6. Mr.Joshi has also challenged the appointment of respondent no.3 made by the Registrar as his nominee. He has submitted that the bye-laws of the Bank provides for appointment of a nominee by the Registrar. He has submitted that the Registrar is the officer of the State Government. Any nomination made by the Registrar is the nomination made by the State Government. The SCA/9702/2008 7/14 JUDGMENT State Government having appointed respondent no.6 as its nominee, the Registrar could not have appointed the respondent no.3 as his nominee. Respondent no.7 was then incharge Manager of the Bank. In absence of the respondent no.7, the respondent no.8 was appointed to be the incharge Manager of the Bank. It is submitted that under the bye-laws, the Manager of the Bank has a right to vote. However, the said right cannot be extended to an incharge Manager. The incharge Manager has wrongly been allowed to vote at the election of the office bearers of the Board of Directors of the Bank. Learned Advocate General Mr.Trivedi has appeared for the State. Mr.Trivedi has denied that the Committee was appointed in exercise of powers conferred by Section 81(1) of the Act. He has submitted that the Committee was appointed under Section 115A of the Act. Its term would not expire on completion of a total period of four years. He has also submitted that the appointment SCA/9702/2008 8/14 JUDGMENT of the respondent no.6 has been made under Section 80(3) of the Act. Reference to Section 80(1) made in the order is erroneous. Under the aforesaid Gujarat Act No.1 of 2008, certain changes have been brought about in the Act. Sub-section (2) has been added to Section 74 of the Act. Under the said sub-section (2), a central cooperative bank is required to have atleast two directors having qualification prescribed by the Reserve Bank of India. In Section 80 of the Act sub-section (3) has been added. The said sub-section (3) provides for appointment of not more than one nominee of the State Government in the Committee of the State Cooperative Bank or the Central Cooperative Bank. It reads as under: “Notwithstanding anything contained in this Act or the rules or in the bye-laws, there shall be only one nominee of the State Government in the committee of the State Co- SCA/9702/2008 9/14 JUDGMENT operative Bank or the Central Co-operative Banks where the State Government has subscribed to the share capital of such co- operative banks and no such nomination shall be made where the State Government has not subscribed to the share capital of such co- operative banks and no such nomination shall be made on the committee of a Primary Agricultural Credit Co-operative Society irrespective of whether the State Government has subscribed to the share capital of a society or not.” In our view, the above sub-section (3), read with sub-section (1) of Section 80 of the Act, enjoins the State Government to appoint one nominee on the Board of Directors of the Bank. The appointment of the respondent no.6 by the State Government as its nominee is in consonance with the powers conferred upon the State Government by Section 80(3) of the Act. No exception is required to be made in respect of the appointment SCA/9702/2008 10/14 JUDGMENT of the respondent no.6. Section 115A of the Act specifically applies to the insured cooperative banks. Sub-section (3) thereof provides for supersession of a committee and the appointment of an administrator. It reads as under: “if so required by the Reserve Bank of India in the public interest or for preventing the affairs of the bank being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of the bank, an order shall be made by the Registrar for super session of the committee and the appointment of an administrator in place thereof for such period or periods, not exceeding five years in the aggregate, as may from time to time be specified by the Reserve Bank of India, and the administrator so appointed shall, after the expiry of his term of office, continue in office until the day immediately preceding the date of the first meeting of the new SCA/9702/2008 11/14 JUDGMENT committee of such bank;” It is apparent that unlike the administrator appointed under Section 81(1) of the Act, the administrator appointed under Section 115A of the Act would, after the expiry of his term of office, continue in office until the day immediately preceding the date of the first meeting of the new committee. Hence, in the present case, though the term of the Committee may have expired it remains functional until the Board of Directors holds the first meeting. It is indisputable that till the date the first meeting of the Board of Directors has not been held. The action of the Registrar in calling upon the Committee to appoint a Professional director and the action of the Committee in appointing the respondent no.5 as a Director are within the powers conferred by the Act. The bye-laws of the Bank, particularly bye- law No.32, provides for constitution of the Board of Directors. Clause (f) thereof specifically SCA/9702/2008 12/14 JUDGMENT refers to a nominee of the Registrar. The argument that the Registrar is the employee of the Government and his nominee is the nominee of the State Government is not acceptable. Under the prevailing bye-laws, the Registrar is empowered to appoint his nominee on the Board of Directors. The appointment of the respondent no.3 as the nominee of the Registrar, therefore, cannot be questioned. Clause (h) of the said bye-law no.32(1) refers to 'manager' to mean “Chief Executive, General Manager or Managing Director”. The said clause also confers power to vote upon the manager. We are unable to agree that anybody who is incharge Manager also is a manager for the purpose of the said bye-law. The respondents nos.7 and 8 who, at the relevant time, were incharge Manager cannot have a right to vote at the elections of the office bearers of the Board of Directors. Though it is alleged that the appointment of the respondents nos.3,5 and 6 are made with an SCA/9702/2008 13/14 JUDGMENT ulterior intention to tilt the balance at the election of the office bearers, we do not find any justification for such allegation. In absence of any material on record, we are unable to accept that the said appointments have been made with malafide intention, as alleged. In above view of the matter, we partly allow this petition. The challenge to the appointment of the respondent no.3 as nominee of the Registrar, the appointment of the respondent no.5 as the Professional director and the appointment of the respondent no.6 as nominee of the State Government fails. We, however, declare that the incharge Manager had no right to vote at the election of the office bearers of the Board of Directors. Rule is made absolute in the above terms. The result of the elections held on 4th August, 2008 be declared without considering the vote cast by the incharge Manager, the respondent no.7 or respondent no.8 as the case may be. The parties will bear their own cost. SCA/9702/2008 14/14 JUDGMENT Mr.Joshi requests that the declaration of the result of the election be stayed for a period of three weeks from today. The request is rejected. (Sharad D.Dave, J.) (Ms.R.M.Doshit, J.) /moin