Case: Joint Registrar Of Co-Operative Societies, Madras &amp; Ors Vs. P. S. Rajagopal Naidu And Ors

1. These appeals from a judgment of the Madras High Court involve the true ambit, scope and content of Section 72 of the Madras Co-operative Societies Act, 1961 (hereinafter called the Act).      2. The facts may be briefly stated. On 4th January, 1969 the Joint Registrar of Co-operative Societies issued a Notice u/s 72 of the Act to the Committee of the North Arcot District Co-operative Supply and Marketing Society Ltd. It was stated in the notice that the Committee had not been functioning properly for some time past. Charges were mentioned in detail and the Committee was called upon to make a representation against the proposal to dissolve it in view of the defects and irregularities mentioned in the notice. After examining the representation which was quite length y and detailed, the joint Registrar recorded an Order on 11th April, 1969 dealing with each charge and holding that the Committee had not been functioning properly and had failed to perform its duties and discharge its responsibilities as required under the Act. The Committee was ordered to be suspended for a period of one year from 12th April, 1969 to 11th April, 1970. The Deputy Registrar of Co-operative Societies was appointed to work as a Special Officer and to manage its affairs for that period. The matter was taken in appeal to the Registrar by the Committee. The Registrar affirmed the Order of the Joint Registrar. Thereafter the President and the Director of the Co-operative Society moved the High Court under Article 226 of the Constitution. A number of points were taken in the writ petition but the main emphasis was laid on the proper procedure not having been followed under sections 64, 65 and 66 of the Act before taking action u/s 72.      3. The learned single Judge of the High Court allowed the writ petition which had been filed by the President and the Director of the Co-operative Society. The Learned Judge was not satisfied that there was any justification for the action taken by the Joint Registrar in the matter of supersession of the Committee. On appeals having been taken before a Division Bench under Clause 15 of the Letters Patent the case was referred to a Full Bench.The Full Bench based its decision largely on the view that the procedure laid down in Sections 64, 65 and 66 must be followed before any order could be made by the Joint Registrar or the Registrar u/s. 72. We may refer to the following portion of the judgment:"Sections 64, 65 and 66, which are the statutory procedural stems which interdict the apparently arbitrary course of action which a Registrar could undertake to interfere with the affairs of a society, its members or officers, provide a sufficient help to tighten up such indiscriminate and unguided exercise of the powers by the Registrar, when it becomes necessary. In each of those sections it is incumbent on the Registrar to given an opportunity to the member concerned, officer concerned or the Society to rectify the defects""In our view and under the scheme of the Act, the condition precedent to the exercise of jurisdiction by the Registrar under one or the other of the sections considered above and in particular Section 72 is to secure an audit memorandum or a report of inspection or inquiry, so that the may be provided with the necessary material to act thereon. Unless such a fact finding authority has provided the Registrar wit the hypothesis to act and ultimately supersede an elected body, the impugned order of supersession will undoubtedly be tainted wit the absence of a jurisdictional basis. Whether such a basis exists, is subject to review by this Court in exercise of its jurisdiction under Article 226 of the Constitution of India."4. The Full Bench affirmed the decision of the Learned single Judge.

Reasoning:
8. It is significant that Section 72 (1) does not contain any mention of Sections 64 to 67 which appear in Sec. 70 (1) and of Sections 65, 66 and 67 which are expressly mentioned in Section 85 (1). If the intention of the Legislature was that the supersession of the Committee under Section 72 can be ordered by the Registrar only after recourse to Sections 64, 65, 66 and 67, there is no reason why language analogous to Section 70 (1) or Sections 85 (1) containing an express mention of the aforesaid sections, should not have been employed. An audit under Section 64 has to be done every year in view of the mandatory form of the language of that Section 64.But as regards Sections 65 and 66 the Registrar has been given the discretionary powers to make an inquiry or an inspection in accordance with those sections,there is no duty or obligation cast on him for doing so before he proceeds to take action u/s 72. All that is required by Section 72 (1) (a) is that the Registrar should form an opinion that the Committee of any Registered society is not functioning properly or has wilfully disobeyed or failed to comply with any lawful order or direction issued by him. So far as the question of the society not functioning properly is concerned, that may depend on what the Registrar discovers after a proper audit, enquiry and inspection. But he can form that opinion even on material aliunde and the language of the section does not warrant by necessary implication the taking of the view that he is bound to form that opinion after following the entire procedure prescribed by the other sections under discussion. At any rate it is not possible to read a requirement while taking action u/s 72 of satisfying the provisions in the aforesaid sections by making a direction in the first instance to remedy the defects disclosed as a result of the audit, inquiry or inspection. The functioning of the society may be so irregular and the defects disclosed so blatant and prejudicial to the society that no question can arise of any direction being made in the first instance for their being remedied by the persons or officers concerned. It may be that when the Registrar acts under the second limb of Section 72 (1) (a) and proposes to supersede the committee for wilful disobedience or wilful failure to comply with any lawful order or direction issued by the Registrar under the Act or the rule that the provisions contained in Sections 64, 64 and 66 may become relevant. But that does not and cannot mean that the Registrar must as a condition precedent give a direction under those sections for the defects or the irregularities to be remedied and should take action only under the second limb i.e. when there is a wilful disobedience or wilful failure to comply with those orders or directions.It may be that the opinion which the Registrar has to form must be based on some objective facts but those objective facts in the absence of any clear indications u/s 72 cannot be confined to what may be disclosed after the Registrar has exercised powers in the matter of audit, inquiry and inspection under the provisions of Sections 64, 65 and 66. Thus even though the opinion may be a purely subjective process, there must be cogent material on which the Registrar has to form his opinion that the society is not functioning properly in order to sustain the issuance of a notice u/s 72 (1) (a) and subsequent supersession of the Committee after considering its representation on that ground.The requisite opinion has indisputably to be formed honestly and after applying his mind by the Registrar to the relevant materials before him the only condition precedent for taking action u/s 72 (1) is that the Registrar must consult the financing bank to which the society is indebted (vide sub-section (6)).There is no other requirement or condition precedent laid down by the Legislature which the Registrar must fulfil before he acts in the matter of supersession of the Committee.We are unable to concur in the view of the High Court that an action taken u/s 72 without giving an opportunity to the member, officer or the society to rectify the defects found after an audit, inquiry or inspection held under Sections 64, 65 and 66 would constitute an exercise of power without jurisdiction9. The single Judge laid a great deal of emphasis on the Committee being an elected body and the prejudice that would be caused to its members if they are visited with the consequences of supersession on account of irregularities and improper functioning of the previous members of the Committee. What was argued before the High Court was that one-third members of the Committee have to retire every year and fresh members have to be elected. If certain grave irregularities are committed, say in the years 1964, 1965, it would be unfair to the new members who have been elected to supersede the Committee in 1968. We do not consider that that would be the correct approach in construing Section 72 which is meant for superseding the Committee as a whole when its working discloses such irregularities or improprieties as would justify its supersession. Normally it would be expected that only that Committee would be superseded whose functioning has been found to be highly defective. The object of supersession apparently is to appoint a Special Officer or a managing committee in order to set the working of the society right. It is not difficult to envisage a situation where mal-administration by a committee has so adversely affected the functioning of the society that it is essential in the interests of the society itself to give temporarily the control of its affairs to a neutral authority. At any rate if the operation of Section 72 in certain circumstances is likely to operate harshly so far as certain members of the committee are concerned, it is not possible to read into it other provisions of the Act which are not incorporated in the section expressly or by necessary implication10. We have been taken through the material parts of the orders of the Registrar and the Joint Registrar and we do not find any such infirmities in them which would justify interference by the High Court under Article 226 of the Constitution. The High Court could not act as an appellate Court and reappraise and re-examine the relevant facts and circumstances which led to the making of the orders of supersession as if the matter before it had been brought by way of appeal. The limits of the jurisdiction of the High Court under Art. 226 when a writ in the nature of certiorari is to be issued are well known and well settled by now and it is pointless to restate the grounds on which any such writ or direction can be issued. We are satisfied that there was no justification whatsoever for quashing the orders of the Joint Registrar and that of the Registrar in appeal.