TaxTMI 
TaxTMI 
2018 (10) TMI 2040
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....tion 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 why he should not be removed for having committed various acts of omissions and commissions. Also ....
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....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 Also it stands explained that on account of technical defects, notice dated 06.04.2018 was withdrawn, whereafter only fresh notice was issued.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 petitioner, argues that the action is politically motivated; malafide; ultra vires the provisions of the Statu....
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....mited 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 Kumar Agrawal (supra)}. 11. The distinction stands appropriately discussed by the Supreme Court of India in Smt....
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....d 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 probable cause, and not necessarily an act done from ill feeling and spite. It is a deliberate act in disregard of the rights of others". (See Words and Phrases Legally Defined, 3rd Edn., Lond....
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....ctors/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 irregularities and illegalities committed by the Board, continuously over a period of time. Also prior to the issuance of the said show cause notice, the authority examined the statutory inspection reports of NABARD, statutory audit r....
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....8-09 : 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 not gone into the correctness of contents of the show cause notice, but prima facie, are of the considered view that there was material before the authority to have formed an opinion of initiating action under Section 37 of the Act. 21. Now this takes us to larger issues,....
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....hich 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) persistently makes default or is negligent in the performance of duties imposed under the Act, Rules etc. or (d) commits any act (e) which is prejudicial to the interest of the Society and its Members (f) he may, (g) after giving such Committee or Member an opportunity to state its objections (h) by order in writing remove the Committee (i) and take resultant consequential action for proper management of the affairs of the Society. ....
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....uch 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 receiving the objections or suggestions, the central government or Legislature is free to evolve its policy decision, make appropriate legislation with necessary additions or modification or omit the proposed one in draft bill or rules. The revised draft bill or rules, amendments or additions in the altered or modified form need not again be communicated to all the concerned State governments nor have prior fresh consultation. Rules or Regulations being legislative in character, would t....
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....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 construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enactment of the whole statute or series of statutes relating to the subject-matter. {M. Pantiah and others v. Muddala Veeramallappa and others, AIR 1961 SC 1107 (Five Judges)}. The principle for such construction is ex visceribus actus {Newspapers Ltd. v. State Industrial Tribunal, U.P. & others, AIR 1957 SC 532 (Three Judges)}. 33. It is also a settled principle of law that the same word....
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.... 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 implied a degree of discretion and choice, the Court would adopt particularly in areas such as constitutional adjudication dealing with social and (sic) rights. Courts are therefore, held as "finishers, refiners, and polishers of legislatures which gives them in a state requiring varying degrees of further processing". (See Corocraft Ltd. v. Pan American Airways, (1968) 3 WLR 714 at page 732; State of Haryana v. Sampuran Singh, (1975) 2 SCC 810 at page 1957. If a language used is capable of bearing more than one construct....
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.... 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 suspended where it is deemed necessary in the interest of the Society to do so, till such time proceedings under Sub-section (1) are completed. 41. It may well occur, is not the power exercised by the Registrar, draconian in nature, inasmuch as a duly elected Member or a Committee is obstructed from discharging and performing constitutional obligations and statutory duties? Well the answer to the same lies in the proviso to the said Sub-Section, wherein it is categorically provided that in the event of non removal of the Committee or M....
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....ith 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 committee of management have not commenced. The proceeding can commence only when the necessary step to commence it is taken. The interim suspension of the committee of management under Section 35 (2) of the Act is made when in the opinion of the Registrar the suspension of the committee of management during the period of proceedings is necessary in the interest of the society. As no proceedings have been set in motion in accordance with the provisions of the statute, the interim suspension of the committee of management is bad. An appointment of administrator is spec....
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....tter 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 would follow thereafter. 47. Further Section 37 and Section 67 of the Act are not in conflict with each other. Section 37 which provides for supersession of committee, is part of Chapter-IV of the Act, which deals with Management of Cooperative Societies. On the other hand, Section 67 which casts duty on the Registrar to hold an inquiry, finds mention in Chapter-VIII of the Act, which Chapter deals with Audit, Inquiry, Inspection and Surcharge etc. Thus, it is apparent that both these Sections operate in totally different and distinct spheres. Section 67 of the Act conf....