TaxTMI 
TaxTMI 
2015 (8) TMI 1109
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....dhya Pradesh, Jabalpur Bench. Learned single Judge of the High Court disposed of the writ petition directing the parties to avail of the alternative remedy provided under Section 78 of the Act. But on appeal, the Division Bench of the High Court set aside the order of supersession dated 30.9.2011 on the ground of non- compliance of the second proviso to section 53(1) of the Act. Aggrieved by the same, the State of M.P., through its Principal Secretary, Department of Co-operation, the Commissioner Cum Registrar, Co-operative Societies, Bhopal and the Joint Registrar, Co-operative Societies, Sagar, have come up with Civil Appeal No. ......... of 2013 [arising out of SLP No. 6860 of 2012] and a private party filed Civil Appeal No. ........... of 2013 [arising out of SLP No. 13125 of 2012] challenging the judgment of the High Court dated 13.2.2012, followed by lot of intervening applications. 3. As the question of laws involved in both the above mentioned appeals are common, we are disposing of both the appeals by a common judgment. Facts and Arguments 4. The Board of Directors of the Bank was elected to Office on 16.10.2007 and while in office they were served with a show-cau....
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....ed against the Board of Directors were of serious nature and the order of supersession was passed bona fide and in public interest and the Division Bench of the High Court was not justified in interfering with the order of supersession. 6. Shri V. K. Bali, learned senior counsel appearing for the appellants in Civil Appeal No. ........... of 2013 [arising out of SLP No. 13125 of 2012], also submitted that the charges levelled against the Board of Directors were of serious nature and there was sufficient materials to establish those charges and the Joint Registrar has rightly passed the order of supersession and appointed the Collector, Panna as an Administrator of the Bank. Learned senior counsel also pointed out that the Joint Registrar had forwarded the show-cause-notice as well as the connected materials to RBI and RBI had failed to respond to the show-cause- notice within 30 days of the receipt of the same and, therefore, it would be presumed that RBI had agreed to the proposed action and the Joint Registrar had rightly passed the order of supersession. Shri Mahavir Singh, learned senior counsel appearing for the Interveners also submitted that the High Court has committed a....
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..... However, the legality of the order has to be tested. Before that we feel it appropriate to place the entire material before the Reserve Bank of India (for short, 'RBI') (Respondent NO. 7) for its opinion as per Section 53 of the Act. The RBI will take a final decision on that within a period of two months and forward the opinion to the Secretary General of this Court, who will place it before the Court." RBI submitted its detailed report on 18.12.2012, in pursuance to the order passed by this Court. RBI, referring to the second proviso to Section 53(1) of the Act, took the view that the so-called consultation made by the Joint Registrar cannot be treated as previous consultation, as per law. RBI, after examining all the documents made available by the Joint Registrar including the show-cause-notice, reply filed by the Board of Directors opined as follows: i) The JRCS has alleged that Panna DCCB has not deducted tax on the interest paid to the depositors. In terms of the CBDT circular No. 9/2002 dated 11-9-2002 tax is deductible at source from any payment of income by way of interest other than income by way of interest on securities. Clause (v) of sub-section (3) of sect....
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....teps were taken after 15.02.2002 to lodge FIR in the matter. Even the present Board of Directors apparently has not taken any effective steps after it took over during the end of 2007. vi) In terms of Audit para 23 of Audit Report for the FY ended 2000- 01, reconciliation of entries in the books of accounts of DCCB Panna was pending and it has not been resolved. Non-reconciliation of books by DCCB Panna is an operational risk which has also been pointed out by NABARD in its inspection reports for the FY 2008-2009 and 2010-2011. Therefore, the compliance submitted by the bank does not appear to be satisfactory. vii) In terms of Audit para 13 of Audit Report for the FY ended 2003- 04, fraud in respect of 37 Managers to the tune of Rs. 43.34 lakh was mentioned and the cases are still pending. 27 Employees have been terminated from the services. Case against only one employee has been registered with police and the bank has not registered the cases against 27 employees. From the records made available to us, we do not observe any monitoring by JRCS, on the issue during the intervening period. It is evident that this matter was being discussed in the Board meetings of the pr....
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....ties also a legislation with wider scope and object, that is Cooperative Societies Act 1912, was passed which was applicable to the whole of British India, which was a Central Act. Later, after independence different States enacted separate Acts of which we are in this case concerned with the 1960 Act in force in the State of Madhya Pradesh. 11. We find, until the year 1965, the Cooperative Banks were not being regulated by the RBI but it was felt necessary to bring the cooperative societies carrying on the business of banking within the purview of the Regulation Act. Since, large number of cooperative societies were carrying on the banking business, and also to ensure the growth of cooperative banking on sound banking principles, the Parliament enacted the Act 23 of 1965, called the Banking Law (Application to Cooperative Societies) Act, 1965 and Part IV was introduced into the Regulation Act w.e.f. 1.3.1966. Section 55 of Part V provides for the application of the Regulation Act to Cooperative Banks. Any existing co- operative bank at the time of the commencement of the Act 23 of 1965 was required to apply grant of license within a period of three months from the date of the c....
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....n 53(1) of the Act, in the light of the above discussion. Section 53 relevant to our purpose is given below: "53. Supersession of Board of Directors- (1) If in the opinion of the Registrar the Board of Directors of any society-(a) is negligent in the performance of the duties imposed on it by or under this Act or byelaws of the society or by any lawful order passed by the Registrar or is unwilling to perform such duties; or (b) commits acts which are prejudicial to the interests of the society or its members; or (c) violates the provisions of this Act or the rules made thereunder or byelaws of the society or any order passed by the Registrar. The Registrar may, by order in writing remove the Board of Directors and appoint a person or persons to manage the affairs of the society for a specified period not exceeding two years in the first instance: Provided that if in opinion of the Registrar, the Board of Directors of any Primary Agriculture Credit Co-operative Society- i) incurs losses for three consecutive years; or ii) commits serious financial irregularities or fraud is identified; or iii) there is perpetual lack of quorum in the meetings of the Board of Dir....
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....resumed that the Madhya Pradesh State Co-operative Bank Limited or the financing bank, as the case may be, agreed with the proposed action." Section 53 (1) confers powers on the Registrar to pass an order to remove the Board of Directors and to appoint a person to manage the affairs of the society, subject to certain conditions, of which, we are primarily concerned with the applicability of the second proviso to Section 53(1), which specifically states that in the case of a Co-operative Bank, the order of supersession shall not be passed without previous consultation with the RBI. The third proviso to Section 53 states that if no communication containing the views of the RBI on the action proposed is received within thirty days of the receipt by that bank of the request soliciting consultation, it shall be presumed that the RBI agreed with the proposed action and the Registrar shall be free to pass such order, as he may deem fit. Sub-section (2) to Section 53 of the Act specifically states that no order under Sub-section (1) (order of supersession) shall be passed unless a list of allegations, documents and witnesses in support of charges levelled against it has been provided and t....
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....s (SCS) Association, U.P. v. Union of India 1993 Supp (1) SCC 730, has laid down six propositions while examining the meaning of the expression 'consultation'. We may add one more proposition that when the outcome of the proposed action is to oust a democratically elected body and the expression used is "shall not be passed without previous consultation", it is to be construed as mandatory. Reference may also be made to the judgments of this Court in Reserve Bank of India v. Peerless Company (1987) 2 SCR 1, State of Jammu and Kashmir v. A.R. Zakki and Others 1992 Supp (1) SCC 548, Gauhati High Court and Another v. Kuladhar Phkan and Another (2002) 4 SCC 524, Andhra Bank v. Andhra Bank Officers and Another (2008) 7 SCC 203. Discussion 18. District Cooperative Bank, Panna (for short 'Panna DCB"), a Bank registered under the Act, was issued a license to conduct the banking services in India by RBI on 3.6.2010 under Section 22 of the Regulation Act. Panna DCB is a Central Co-operative Bank as defined under Sub-section 2(d) of NABARD Act. NABARD had conducted an inspection of the Panna DCB under Section 35 of the Regulation Act, with reference to the financial position as on 31.3.....
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....uld be free to pass orders as might be deemed fit. It was further stated that in the case of District Co-operative Bank, the powers under Section 53(2) of the Act are vested with the Regional Joint Registrar and notice issued by the Joint Registrar was not sent for the opinion of the State Government. Further, it was also pointed out that the Bank had submitted its reply on 8.5.2009 and internal decision would be taken as per the legal provisions and RBI would be informed accordingly. Yet, another letter dated 24.12.2009 was also received by the RBI, wherein it was stated that the hearing was going on and the RBI would be informed of the final decision. Later, without informing the RBI of the proposed action and also without forwarding the reply submitted by Panna DCB to the show-cause-notice to RBI, the order of supersession dated 30.9.2011 was passed by the Joint Registrar. 21. We find seven charges levelled against the Board of Directors were relating to the period of the previous Committee, for which the first respondent Board of Directors could not be held responsible. Further, even though the Board had taken charge in October 2007, the audit report was submitted before the....
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....ded in computing the period of the term aforesaid." 25. The Board of Directors, in the instant case, took charge on 16.10.2007, therefore, they could continue in office till 15.10.2012. The Board of Directors was, however, superseded illegally on 30.9.2011 and, by virtue of the judgment of the Division Bench of the High Court dated 13.2.2012, the Board should have been put back in office on 13.2.2012, but an Administrator was appointed. Going by the proviso referred to above, the period during which the Board of Directors remained under supersession be excluded in computing the period of five years. In the facts and circumstances of this case, we are of the considered opinion that the duly elected Board of Directors should get the benefit of that proviso, which is statutory in nature. 26. In such circumstances, we direct the Joint Registrar, Co-operative Societies, Sagar to put the Board of Directors back in office so as to complete the period during which they were out of office. 27. The High Court, in our view, has therefore rightly exercised its jurisdiction under Article 226 of the Constitution and the alternative remedy of appeal is not bar in exercising that jurisdic....
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....corners of the Statute. In our view, the impugned order will not fall in that category. Judicial Precedents 31. Registrar/Joint Registrar is bound to follow the Judicial Precedents. Ratio decidendi has the force of law and is binding on all statutory authorities when they deal with similar issues. The Madhya Pradesh High Court in several judgments has explained the scope of the second proviso to Section 53(1) of the Act. Reference may be made to the judgments in Radheshyam Sharma v. Govt. of M.P. through C.K. Jaiswal and Ors. 1972 MPLJ 796, Board of Directors of Shri Ganesh Sahakari Vipnan (Marketing) Sanstha Maryadit and Another v. Deputy Registrar, Co-operative Societies, Khargone and Others1982 MPLJ 46 and Sitaram v. Registrar of Co-operative Societies and another 1986 MPLJ 567. 32. We fail to see why the Joint Registrar has overlooked those binding judicial precedents and the ratio decidendi. Judicial rulings and the principles are meant to be followed by the statutory authorities while deciding similar issues based on the legal principles settled by judicial rulings. Joint Registrar, while passing the impugned order, has overlooked those binding judicial precede....