Case: Md. Mounuddin &amp; Others Vs. Commnr. Of Co-op. and Regr. &amp; Co-op. Soc. &amp; Others

the Registrar has disclosed that as many as 34 members who sought such membership after 25-9-1996, have invested sums ranging from Rs.1500/- to Rs.2,40,000/-, in all a sum of Rs.17,48,569/-. For the said sum the break-up of the expenses has also been disclosed in the annexure. De hors the question whether such investments made and the expenses incurred is to be scrutinized and the veracity of such expenses incurred by the society are to be accepted or not the fact emerges that the founder members, as well as those who subsequently came to be admitted as members, have invested large sums by way of deposits into the society. The question for consideration, therefore, is how to treat those sums, once it was brought into the funds of the society.35. In this context, Bye-Law No.17 assumes significance. It will have to be stated that whatever maybe the intention of the members of the society, while making various deposits into the accounts of the society, since, the funds of the society can be regulated only as per the Bye-Laws of the society whatever sum invested by the members of the society, can be either towards the share capital, which cannot exceed 5000 shares of Rs.100 each or by way of deposits by the members as provided under Bye-Law No.17. Since, the membership has been confirmed based on the shares acquired by each of the individuals, whatever other sum brought into the accounts of the society, can only be taken as the deposits of the members. Therefore, the amount deposited by the individual members of the society can be utilized only to meet the cost of the land originally purchased nearly 1 acre and 14 guntas in Survey No.233 of Thokatta Village or for any future investment to be made in any other lands to be purchased or to be used for advancing any loan for the purpose of construction of building by the members. In other words, the individual members cannot seek to claim that because the purchase of land in Survey No.233 was from and out of the amount advanced by them to the society, the land so purchased should be held to exclusively belong to those members. Such a claim of individual members cannot be accepted. In fact, such a claim would run counter to the cooperative principles, which is the object of the society when it came to be formed.36. Once the land in Survey No.233 in an extent of 1 acre and 14 guntas in Thokatta Village was purchased by the society, the property vests in the society. Therefore, it is for the society to consider how to deal with the said land in accordance with the cooperative principles and the objects with which the society was formed as mentioned in the Bye-Laws. It is not for the individual members to claim in what manner the land should be dealt with for the purpose of distribution amongst its members. At the risk of repetition, it will have to be stated that the members, who contributed their funds to the society, have no exclusive right to claim any share in the property on the ground that they made the investments for the purchase of the land. The said claim of the members both founder members and those who came to be subsequently admitted in the society, therefore, stands rejected.37. Therefore, to put it in clear and unambiguous terms, all those investments made either by the founder members or by the subsequent members other than those relating to the share capital, can only be taken as their deposits forming part of the funds of the society. The society is, therefore, bound to account for such deposits made by the members from the relevant dates and whatever prevailing interest in the market should accrue to such deposits and depending upon the volition of the member, it is for the society to take a decision either for refund of the sum so deposited after a fixed period or for using the same to meet the cost of the land in the event of its ultimate distribution to its various members. 38. In this context, it will be appropriate to note the order of the learned Single Judge dated 14-12-2006, passed in W.P. No.701 of 2003, wherein the learned Judge held as under: “It is an admitted fact that the resolution was passed without there being an approved layout, as required under the byelaws. If that be so, there was no necessity for convening the Meeting and passing a resolution allotting certain plots in favour of the petitioners herein. In view of this, the question as to whether there was a valid committee or not for passing the resolution need not be gone into. Therefore, I am of the considered opinion that the appellate tribunal has not committed any error in passing the impugned orders warranting interference of this Court under Article 226 of the Constitution of India.The Writ Petition is devoid of merits and it is accordingly dismissed.However, this order will not preclude the general body, after the layout is sanctioned from considering the allotments of plots in favour of the members of the society by taking into consideration their seniority as per the bye–laws concerning allotment of plots.” (Underlining is ours) 39. We find that such a conclusion and direction made by the learned Single Judge in the said order in Writ Petition No.701 of 2003, is not only the only course but the appropriate course to be followed by the society. In our considered view, any other attempt to deal with the land already purchased by the society, will not only run counter to the cooperative principles but will only create further complications and result in utter chaos and confusion. Therefore, neither the founder members nor those who were subsequently inducted/admitted as members, can claim any preference or right of allotment in any particular manner, other than the manner in which the learned Judge has directed in the said order.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]25. While the purchase of the land came to be made, as above, by the society and the process of providing housing facility was being examined and was pending till the year 1996, the issue relating to the admission of 37 persons as members of the society cropped up. Therefore, before arriving at any definite conclusion as to how the housing facility in respect of the land already purchased, namely, 1 acre and 14 guntas in Thokatta Village is to be dealt with, we will have to steer clear of the membership of the society, in particular about the claim of the 37 persons as having become members of the society, who also claim their right to have a share in the land already purchased by the society for distribution in the form of housing accommodation.26. Insofar as the said claim of the 37 members is concerned, the first document is the letter dated 25-9-1996 of the Deputy Registrar of Cooperative Society, addressed to the society by which the society was requested to admit them as members and intimate the same to the Deputy Registrar. Pursuant to the said letter, the minutes of the Executive Committee Meeting of the Society dated 3-10-1996, disclose that as per the agenda dated 18-9-1996, the matter relating to admission of 37 applicants was thoroughly discussed and unanimously decided to admit them as members. The minutes of the said Meeting, however, stated that their claim for a share in the land already purchased, cannot be considered as such a claim would be considered in a different venture. Confirming the admission of those 37 members, a communication was also sent to the Deputy Registrar by the society on 4-10-1996. That apart, there was a General Body Meeting held on 4-4-1997, which discloses that the admission of the 37 members to the society was also ratified by the General Body, though their claim in respect to the land purchased in the Thokatta Village was not acceded to in the General Body.27. From the above proceedings, it must be stated that the admission of the 37 members to the society was a concluded issue as on the date of the General Body, namely, 4-4-1997. However, the offices of the Cooperative Department took a sudden u-turn in the year 1998, when the Deputy Registrar issued a communication to the society on 1-12-1998, stating that the instructions issued by it in its letter dated 25-9-1996 was to be treated as withdrawn based on the proceedings of the Registrar of Cooperative Societies dated 17-4-1997. It will have to be stated that the said stand of the Deputy Registrar Cooperative Societies is not permissible in law and we do not find any support for such a stand either based on any Statutory Provision or any other rule or regulation. That apart, when based on the said communication dated 1-12-1998, the society wanted to withdraw the membership of the 37 persons, the issue went before the High Court by way of Writ Petition No.3720 of 1999, which was rejected by the learned Singh Judge in Writ Appeal No.1056 of 1999, the proceedings of the society dated 20-7-1999, withdrawing the membership, was set aside with the observation that it is open to the society to decide one way or the other with respect to the membership of one of the 37 members. The said conclusion was followed in respect of 25 other persons among the 37 members when their Writ Petition in W.P. No.18294 of 1999 was decided by order dated 1-9-1999, wherein the conclusion in Writ Appeal No.1056 of 1999 was followed.28. Though, the society wanted to initiate proceedings by issuing show cause notice on 6-10-1999, the fact remains that the said show cause notice was not pursued. On the other hand, in Writ Petition No.11268 of 2011 by order dated 18-11-2000, the High Court virtually declared that the 37 members, including the writ petitioners, had become valid members as on the date of the order as society not having divested of such membership in any formal proceedings in due conformity with the law. It was stated in the said order that any alleged deficiencies in the electoral roll cannot be a relevant ground to interdict the democratic process of elections to a cooperative society and the contention that the 37 new members cannot form part of the Electoral College was rejected. It must be pointed out that the said order of the learned Single Judge dated 18-11-2000 passed in W.P. No.11268 of 2011 was not varied at any point of time in any subsequent proceedings, either in an appeal or by any other valid order passed by the society. In fact, subsequently, while dealing with an issue relating to the prosecution of the members for alleged misappropriation when the State Government passed an order on 29-3-2004, it was innocuously stated that the disputed membership of 37 persons cannot be accepted, as their membership was not valid. The said order was challenged in a separate writ petition in W.P. No.7794 of 2004 and the said part of the order was also set aside by the High Court in the order dated 15-12-2006. Here again it must be stated that the said order in W.P. No.7794 of 2004 has become final and conclusive as the same was not challenged in the manner known to law. The said writ petition was filed by the society itself. The net result was that by virtue of the orders passed in W.P. No.11268 of 2000 dated 18-11-2000 and the order dated 15-12-2006 in W.P. No.7794 of 2004, the validity of membership of these 37 persons was beyond the pale of controversy.29. One other factor which has also to be noted is that belatedly, an attempt was made by the department in a proceeding dated 2-4-2004, to deal with the validity of membership of these 37 person by directing one of its officers, namely, the Sub-Divisional Cooperative Officer to call for a General Body Meeting of the society and decide the issue relating to the membership. Pursuant to the said proceeding, though a General Body Meeting was called for by the said officer and a date was also fixed as 22-5-2005, the said Meeting was not convened, since the proceedings of the Deputy Registrar dated 04.06.2005 made it clear the that the Sub-Divisional Cooperative Officer who convened the General Body Meeting, explained to the members on 22.05.2005 and made it clear that there would not be any discussion on the agenda, namely, about the validity of the admission of the 37 members and that there was no General Body Meeting as proposed to be convened. Therefore, as pointed out by us earlier, the admission of the 37 members based on the Meeting dated 03.10.1996, can no longer be in controversy as it was a concluded issue.30. Even while holding so, it must be noted that if at all the membership of the 37 persons were to be cancelled, the same could have been done by applying any of the relevant provisions in the Bye-Law, namely, on the ground of eligibility as provided under By-Law No.5 or by way of disqualification as provided under Bye-Law No.8 or by withdrawal of share capital as provided under Bye-Law No.12 or by way of an expulsion as stipulated in Bye-Law No.16. As far as the eligibility criteria is concerned, it was not pointed out before us that any of the 37 members lacked such eligibility as stipulated in Bye-Law No.5. It was also not pointed out before us in the form of any acceptable material that any of the 37 members suffered disqualification as provided under Bye-Law No.8. As far as application of Bye-Law No.12 is concerned, it must be stated that out of 37 members, 10 have accepted their refund of share capital and as on date, only 27 out of the 37 remain, who returned the cheques issued by the society during the year 1999, along with proceeding dated 20-7-1999.Keeping the above factors in mind, relating to the 37 members, now 27, the only other question which remains to be considered is as to the entitlement of the members of the society for a housing accommodation in the land admeasuring 1 acre 14 guntas in Survey No. 233 of Thokatta Village. When we consider the said issue, the claim of the so-called 11 founder members is that the entire value of the land was borne by them and, therefore, they are exclusively entitled to the distribution of the land amongst themselves. Such a claim was distinctly mentioned in the General Body Meeting of the society held on 4-4-1997. In fact, there was a serious deliberation and discussion in the said Meeting relating to the said issue and the minutes of the General Body Meeting states aswas explained that since new members did not join in the venture, the then existing 11 members, who have decided to continue in the venture, contributed all the extra amounts to refund the amounts to the members, who resigned from the land advance on their own accord. Thus the following 11 (eleven)1. V. Sivarama Krishna2. M. Balakrishnan3. K. Sivarama Raju4. P.S. Sastry5. K. Bhaktavatsalam6. N. Suryaprakash Rao7. T.N. Shankar8. T.S. Banerjee9. C. Viswam10. U. Talapathi11. K.G.K. Murthyare the only members who have right to the existing land venture in S. No.233 of Thokatta village and it is not possible to admit any further members after lapse of so many years in the existing venture. However, the chair expressed that interested members can explore the possibility of any new venture and all assistance will be given for the same.Though, such a stand was expressed by the Chair in the General Body Meeting, no definite conclusion to that effect was arrived at in the General Body Meeting. Besides such a claim made by the so called 11 founder members, it must be stated that such a claim will have to be tested on the anvil of the provisions contained in the Bye-Laws. For this purpose, when we examine the provisions in the Bye-Laws, the object clause in Bye-Law No.2 states that the object of the society is to carry on for the benefit of its members, the trade of building and of buying, selling, hiring, letting and developing land in accordance with the cooperative principles, apart from giving loans to members for construction of new dwelling houses. Therefore, the object is very explicit to the effect that it is for the benefit of the members and it should be in accordance with the cooperative principles. Bye-Law No.4 prescribes the total share capital to be made up to 5000 shares of Rs.100 each, the other source of fund can be as prescribed in Bye-Law No.17. Bye-Law No.17 under the headstates that the society will ordinarily obtain funds from 10 sources, namely, share capital from the members, loan from the Government, deposits from members, entrance and other fees, AP Cooperative HousingFederation Ltd., Scheduled and Nationalised Banks, BDA, LIC, Hadco and Voltas Ltd. There is no information as to whether any fund was gathered from any other source, except the share capital from the members and the funds invested by such of those members who initially formed the society and by those members who subsequently joined the society. In fact, pursuant to a direction of this Court in the order dated 4-9-2012, to one of the queries, which was directed to be answered by the Registrar, it has come to light that the contribution for the sale deed was Rs.48,000/- though as per cash book the consideration paid was shown as Rs.2,60,000/-. That apart, a list was annexed along with the answer to another query by way of Annexure 2, which disclose that the contribution in a sum of Rs.3,06,795/- came to be made by 34 members of the society, on different dates between 24.08.1982 and 30-4-1982.34. To yet another query made by this Court by way of Annexure 4, it is disclosed that contributions were also made after 30-4-1982, i.e. between 11-10-1982 and 30-11-1989, in different sums ranging from Rs.5000/- to Rs.39,000/-, though many of the members got back their investments by way of refund, while some of the members continue to retain such investments. To yet another query by way of Annexure 6, the Registrar has disclosed that as many as 34 members who sought such membership after 25-9-1996, have invested sums ranging from Rs.1500/- to Rs.2,40,000/-, in all a sum of Rs.17,48,569/-. For the said sum the break-up of the expenses has also been disclosed in the annexure. De hors the question whether such investments made and the expenses incurred is to be scrutinized and the veracity of such expenses incurred by the society are to be accepted or not the fact emerges that the founder members, as well as those who subsequently came to be admitted as members, have invested large sums by way of deposits into the society. The question for consideration, therefore, is how to treat those sums, once it was brought into the funds of the society.35. In this context, Bye-Law No.17 assumes significance. It will have to be stated that whatever maybe the intention of the members of the society, while making various deposits into the accounts of the society, since, the funds of the society can be regulated only as per the Bye-Laws of the society whatever sum invested by the members of the society, can be either towards the share capital, which cannot exceed 5000 shares of Rs.100 each or by way of deposits by the members as provided under Bye-Law No.17. Since, the membership has been confirmed based on the shares acquired by each of the individuals, whatever other sum brought into the accounts of the society, can only be taken as the deposits of the members. Therefore, the amount deposited by the individual members of the society can be utilized only to meet the cost of the land originally purchased nearly 1 acre and 14 guntas in Survey No.233 of Thokatta Village or for any future investment to be made in any other lands to be purchased or to be used for advancing any loan for the purpose of construction of building by the members. In other words, the individual members cannot seek to claim that because the purchase of land in Survey No.233 was from and out of the amount advanced by them to the society, the land so purchased should be held to exclusively belong to those members. Such a claim of individual members cannot be accepted. In fact, such a claim would run counter to the cooperative principles, which is the object of the society when it came to be formed.36. Once the land in Survey No.233 in an extent of 1 acre and 14 guntas in Thokatta Village was purchased by the society, the property vests in the society. Therefore, it is for the society to consider how to deal with the said land in accordance with the cooperative principles and the objects with which the society was formed as mentioned in the Bye-Laws. It is not for the individual members to claim in what manner the land should be dealt with for the purpose of distribution amongst its members. At the risk of repetition, it will have to be stated that the members, who contributed their funds to the society, have no exclusive right to claim any share in the property on the ground that they made the investments for the purchase of the land. The said claim of the members both founder members and those who came to be subsequently admitted in the society, therefore, stands rejected.37. Therefore, to put it in clear and unambiguous terms, all those investments made either by the founder members or by the subsequent members other than those relating to the share capital, can only be taken as their deposits forming part of the funds of the society. The society is, therefore, bound to account for such deposits made by the members from the relevant dates and whatever prevailing interest in the market should accrue to such deposits and depending upon the volition of the member, it is for the society to take a decision either for refund of the sum so deposited after a fixed period or for using the same to meet the cost of the land in the event of its ultimate distribution to its various members.We find that such a conclusion and direction made by the learned Single Judge in the said order in Writ Petition No.701 of 2003, is not only the only course but the appropriate course to be followed by the society. In our considered view, any other attempt to deal with the land already purchased by the society, will not only run counter to the cooperative principles but will only create further complications and result in utter chaos and confusion. Therefore, neither the founder members nor those who were subsequently inducted/admitted as members, can claim any preference or right of allotment in any particular manner, other than the manner in which the learned Judge has directed in the said