TaxTMI 
TaxTMI 
2018 (10) TMI 2040
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....adverse action be taken, is it open for the Registrar to take action for suspension of the noticee and make arrangements for proper management of the affairs of the Society? (d) As to whether action of the respondents is contrary to the mandate of law laid down by the Apex Court in State of Madhya Pradesh v. Sanjay Nagayach & others, (2013) 7 SCC 25? (e) As to whether nature of inquiry to be conducted and the power to be exercised by the Registrar under Sections 37 and 67 of the Act are different, distinct and independent of each other? (f) As to whether action of the respondents in passing the order of suspension is based on no material and without application of mind? (g) As to whether action of the respondents is malafide and ultra vires the Statute or not? Brief facts 2. Petitioner Sh. Jagdish Chand Sapehia, who had been officiating as the Chairman of the Kangra Central Cooperative Bank Limited, Dharamshala (respondent No. 3) lays challenge to the show cause notice dated 19.07.2018 (Annexure P-5), issued under Section 37 (1) (a) of the Act by the Registrar Co-operative Societies, Himachal Pradesh, calling upon him to show cause as to wh....
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.... full tenure, including the period for which the Board was kept under suspension, continuously with effect from 06.04.2018. 5. In response, respondents have filed their affidavit explaining the background in which the Registrar initiated action by issuing notice dated 06.04.2018 (Annexure P-1) and 19.07.2018 (Annexure P-5). Allegations of abuse of power; malafides; political pressure; non application of mind etc. are categorically denied. Also it stands explained that on account of technical defects, notice dated 06.04.2018 was withdrawn, whereafter only fresh notice was issued. The Registrar has explained the basis leading to the formation of his opinion, for issuing show cause notice and suspending the Board and that being the statutory inspection reports of NABARD, audit reports and statutory inquiry reports, all revealing persistent irregularities of serious nature committed in the management of the affairs of the bank, coupled with the violation of law and actions detrimental to the interest of the bank and its depositors at large. Allegation of malice in law or fact are clearly denied and disputed. 6. Assailing the action, Mr. Ajay Sharma, learned counsel for the petiti....
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.... & another (Three Judges), (2002) 4 SCC 105; Sanjay Nagayach (Two Judges) (supra); Sam Built Well Private Limited v. Deepak Builders & others (Two Judges), (2018) 2 SCC 176; Reliance Airport Developers (P) Ltd. v. Airports Authority of India & others (Two Judges), (2006) 10 SCC 1; Commercial Tax Officer & another v. Canara Bank (Three Judges), (2001) 10 SCC 638; B.C. Chaturvedi v. Union of India & others (Three Judges), (1995) 6 SCC 749; G. Jayalal v. Union of India & others (Two Judges), (2013) 7 SCC 150 & Boddula Krishnaiah & another v. State Election Commissioner, A.P. & others (Three Judges), (1996) 3 SCC 416. 9. Having considered the respective submissions and carefully gone through the relevant provisions of the Statute, we are of the considered view that action of the respondents in issuing the impugned show cause notice (Annexure P-5) cannot be said to be bad in law. 10. The distinction between 'malice in law' and 'malice in fact' stands well established. Whereas former, if established, may lead to inference that the statutory authorities had acted without jurisdiction, while exercising such jurisdiction, the latter must be pleaded and proved. {Mukesh ....
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....mistaken belief in the existence of a non-existing act or circumstance. This is so clearly unreasonable that what is done under such a mistaken belief might almost be said to have been done in bad faith; and in actual experience, and as things go, these may well be said to run into one another. 9. The influence of extraneous matters will be undoubted where the authority making the order has admitted their influence. It will therefore be a gross abuse of legal power to punish a person or destroy her service career in a manner not warranted by law by putting a rule which makes a useful provision for the premature retirement of Government servants only in the 'public interest', to a purpose wholly unwarranted by it, and to arrive at quite a contradictory result. An administrative order which is based on reasons of fact which do not exist must, therefore, be held to be infected with an abuse of power." 12. The Apex Court in G. Jayalal (supra), has held as under:- "17.. ... ... "12. ... ..... Legal malice" or "malice in law" means "something done without lawful excuse". In other words, "it is an act done wrongfully and wilfully without reasonable or....
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.... No. 2 had any personal malice against the petitioner. As such, we are not in agreement with the submissions made on behalf of the petitioner that the action is either politically motivated or is based on extraneous factors/considerations or out of malice. 15. We may notice that the impugned action stands taken against 16 persons all of whom were functioning as Members of the Board of respondent No. 3-Bank and only one of them has assailed the same. Well, it is a mere statement of fact and nothing more, for nothing would turn out thereupon, for even if one of them demonstrates the action to be bad, it would be held so. But what we would like to point out is that only the petitioner, who himself is politically affiliated and has such background, as is so evident from the petition, lays challenge to the impugned order. 16. Perusal of the impugned show cause notice reveals respondent No. 2 to have (a) issued show cause notice calling upon the petitioner to respond to the same as to why no action for removal be taken and (b) in the interregnum suspended the Board. 17. We notice that the detailed show cause notice itself is self explanatory indicating various acts of irregulari....
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....quate steps for the recoveries of money involved in fraud and review of such cases (Inspection Reports of 2015, 2016 and 2017); (e) granting commercial loans for real estate in violation of RBI guidelines contained in circular No. RPCD/109/07.38.01/2008-09 : dated 25-05-2009 (Inspection Report of 2015, 2016 and 2017); and (f) formulating wrong policies for NPA management resulting into increase in NPA during the last three years." 19. That the action is not motivated, much less on account of political reasons, we notice, is evident from the facts narrated in paragraphs 16 to 22 of the notice, for the events which took place in the month of September, October and December, 2017, prima facie reveals that loans were disbursed contrary to the settled principle of law for which ex post facto approval of NABARD was sought, which, as it appears, never came. In the month of September and October, 2017 itself, dissent amongst the Members of the Board stood recorded amplifying the illegalities continuously perpetuated in exposing the risk factor of the Bank, with the disbursement of loans in violation of settled principles and procedures. 20. We clarify that we have n....
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....f a Co-operative society, the Registrar shall consult the financing institution to which it is indebted. (6) A member who is removed under sub-section (1) may be disqualified for being elected to any committee for such period not exceeding three years as the Registrar may fix and the said period shall commence after the expiry of the term of the committees from which he is removed. ... ... ..." "67. Inquiry by the Registrar:- (1) The Registrar may, of his own motion, by himself or by a person authorized by him, by order in writing, hold an enquiry into the constitution, working and financial condition of a society. (2) An inquiry of the nature referred to in subsection (1) shall be held on the application of- (a) a society to which the society concerned is affiliated; or (b) a majority of the members of the managing committee of the society; or (c) not less than one-third of the total number of members of the society. (3) ... ... ... (4) ... ... ..." 23. Sub-Section (1) of Section 37 states that (a) if in the opinion of the Registrar (b) a Committee or any Member of any Cooperative Society (c) persi....
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....ities or person and is not bound to be accepted, the prior consultation is only directory. The authority proposing to take action should make known the general scheme or outlines of the actions proposed to be taken be put to notice of the authority or the persons to be consulted; have the views or objections, take them into consideration, and thereafter, the authority or person would be entitled or has/have authority to pass appropriate orders or take decision thereon. In such circumstances it amounts to an action "after consultation". (6 No hard and fast rule could be laid, no useful purpose would be served by formulating words or definitions nor would it be appropriate to lay down the manner in which consultation must take place. It is for the court to determine in each case in the light of its facts and circumstances whether the action is "after consultation"; "was in fact consulted" or was it a "sufficient consultation". (7 Where any action is legislative in character, the consultation envisages like one under Section 3 (1 of the Act, that the central Government is to intimate to the State governments concerned of the proposed action in general outlines and on....
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....ugar Works (Private) Ltd. v. Chief Inspector of Stamp, U.P., AIR 1968 SC 102 (Three Judges)}, and the conventional way of interpreting or construing a statute is to seek the 'intention' of its maker {RMD Chamarbaugwala v. Union of India, AIR 1957 SC 628 (Five Judges)}. 29. The Court has to look essentially to the words of the statute to discern the 'referent' aiding their effort as much as possible to the context. 30. The legal maxim mens or sententia legis {Abhiram Singh v. C.D. Commachen (Dead) by Legal Representatives & others, (2017) 2 SCC 629 (Seven Judges)}, and Generalia specialia non derogant {General Things do not derogate from special things, OSBORNS Law Dictionary}, are well settled. 31. It is also settled principle of law that the statute must be read as a whole and one provision of the Act should be construed with respect to the other provisions in the same Act, so as to make a consistent enactment of the whole statute. This, in fact, is the elementary rule of interpretation. {AG v. HRH Prince Ernest Augustus, (1957) 1 All ER 49; Philips India Ltd. v. Labour Court, (1985) 3 SCC 103 (Two Judges)}. 32. Every clause of a statute should be const....
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....t has to choose that interpretation which represents the true intention of the legislature. This task often is not an easy one and several difficulties arise on account of variety of reasons, but at the same, it must be borne in mind that it is impossible even for the most imaginative legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. It is in such a situation the Courts' duty to expound arises with a caution that the Court should not try to legislate. While examining a particular provision of a statute to find out whether the jurisdiction of a Court is ousted or not, the principle of universal application is that ordinarily the jurisdiction may not be ousted unless the very statutory provision explicitly indicates or even by inferential conclusion the Court arrives at the same when such a conclusion is the only conclusion. Notwithstanding the conventional principle that the duty of judges is to expound and not to legislate. The Courts have taken the view that the judicial art of interpretation and appraisal is imbued with creativity and realism and since interpretation always impl....
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....Committee. It is only when the Registrar deems it appropriate to remove the Committee, in our considered view, he has to necessarily consult the Financial Institution to which a Cooperative Society is indebted. In any event, no prior consultation stipulated under Sub-Section (5) is required for initiating action under Sub-Section (1-A) of such Section. Question No. (a) is answered accordingly. 39. The next issue, which arises for consideration, is as to whether Sub-Section (1-A) is subject to completion of all the actions stipulated under Sub-Section (1) or not? 40. The language of Sub-Section (1-A) is plain, simple and unambiguously clear. It uses the expression "while proceeding to take action under Sub-Section (1)" the Registrar is of the opinion that suspension of the Committee or any Member is necessary and in the interest of Society, he may take action of suspending the Committee or such Member and thereafter make proper arrangements for the management and affairs of the Society "till the proceedings are completed". So what is important is contemplation of action under Sub-Section (1) and the Registrar deciding to proceed in that direction, a Committee/any Member can be....
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....rformance of duties or is otherwise not functioning properly the Registrar may supersede the committee of management and has to give an opportunity to the society to be heard in that behalf. The Registrar has also to obtain the opinion of the general body of the society. Therefore, the opinion of the Registrar is to be followed by some definite act which will commence the proceedings for supersession. The provisions in the Act indicate that some definite step like the issue of a notice must be taken under the provisions of Section 35 (1) of the Act with a view to show that proceedings for supersession of the committee are set in motion. 14. It is therefore manifest that power exercisable under S. 35 (2) of the Act is confined to the time during the period of supersession proceedings. Unless the proceedings have started as indicated earlier the Registrar cannot call in aid the power exercisable under Section 35 (2) of the Act. 15. The second question which has to be decided is whether the Registrar could appoint an administrator in the present case. The Registrar could not appoint an administrator. The reasons are these. The proceedings for supersession of the comm....
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....which is not so done in the instant case. Hence the said decision has no bearing to the instant facts and the impugned action cannot be found to be contrary to the ratio of law laid down therein. Question No. (d) is answered accordingly. 46. This takes us to another issue and that being as to whether the provisions of Section 37 are subject to Section 67 or not? In our considered view inquiry contemplated under Section 37 is totally different and distinct than the one contemplated under Section 67, both with regard to its object, scope and purpose. Inquiry under the latter is with regard to the constitution, working and financial condition of the Society to be initiated as per procedure prescribed therein, suo motu by the Registrar himself or through an authorized person on the asking of the Society and/or its Members. This is unlike the inquiry contemplated under the former section, where the Registrar himself, after forming an opinion after issuing show cause notice has to pass an order with regard to the acts of negligence, inactions, defaults, which are prejudicial to the interest of the Society or its Members. Also the Section itself provides for resultant consequence which....
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....ower of superseding the committee, Section 67 only confers upon the Registrar the duty to hold an inquiry and thereafter submit the report in the mode and manner, as envisaged in Subsection (4) thereof. The purpose of incorporating Section 37 in the Act is totally different from the intent behind Section 67. There is neither any conflict in the Scheme of the Statute nor it can be said that the powers and duties conferred upon the Registrar under Sections 37 and 67, respectively either overlap each other or outreach the intent of each other. Question No. (e) is answered accordingly. 48. The action cannot be said to be violative of the Statute, equity or fair play only for the reason that no action, similar in nature stands taken against the Government Officers/nominees placed on the Board. Such representation by nomination can always be recalled/changed by the Government. Similarly, it cannot be argued that in the absence of any action taken against the entire Committee, the impugned action is unsustainable in law. To contend that out of seven allegations six are pursuant to various directions issued by the Court, at this stage, does not weigh with us, in the petitioners support.....