Full Judgment Text
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PETITIONER:
BEED DISTRICT CENTRAL CO-OP BANK LTD. AND ANR
Vs.
RESPONDENT:
JAGANNATH S. SHAHANE AND ORS.
DATE OF JUDGMENT13/03/1992
BENCH:
KASLIWAL, N.M. (J)
BENCH:
KASLIWAL, N.M. (J)
YOGESHWAR DAYAL (J)
CITATION:
1992 AIR 1249 1992 SCR (2) 296
1992 SCC (2) 604 JT 1992 (2) 367
1992 SCALE (1)716
ACT:
Maharashtra Co-operative Societies Act, 1960 :
Section 73 (2) (As inserted by Maharashtra Amendment Act XX
of 1986).
Specified Society-Co-operative Bank-Board of
Directors-Election-Provision requiring Registrar to describe
the maximum number of members on the Society held directory-
Purpose of Section 73 (2) Explained.
Section 27 (3)-Proviso-Deletion of Proviso-Effect of.
HEADNOTE:
Election to the Board of Directors of the appellant
Bank, a specified co-operative Society under the
Maharashtra Co-operative Societies Act, 1960, were to be
held as provided under Section 73 (G) of the Act read with
Maharashtra Specified Co-operative Societies (Elections to
Committees) Rules, 1971. By the Maharashtra Act No. XLV of
1983 the Maharashtra Co-operative Societies Act was amended
and a proviso was added to sub-section (3) of Section 27.
This amendment was challenged and the High Court declared
the proviso to sub-section (3) of Section 27 as void and
inoperative. Thereafter respondent. No. 1 and 2 filed a
writ petition in the High Court which was allowed by
directing that all steps taken on the basis of proviso to
section 27(3) were null and void. The parties aggrieved
against the aforesaid decision filed appeals before this
Court. During the pendency of the appeals Section 73 of the
Maharashtra Co-operative Societies Act was amended and sub-
section (2) was added to it. Further by Act No. X of 1988
Ist proviso to Section 27(3) was deleted. After the
aforesaid changes in the 1960 Act, this Court, by its order
dated March 13, 1989, disposed of the appeals directing that
elections to the Co-operative Societies may be held in
accordance with the amended law. Thereafter the Collector
declared the election programme of the appellant bank under
which last date for filing nominations was 23.10.1991 last
date for scrutiny was 25.10.1991, last date for withdrawal
was 11.11.1991 and the date of polling was fixed on
27.11.1991. By a notification dated 27th December,
297
1991 the State of Maharashtra postponed elections upto 15th
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April, 1992.
Respondents No. 1 and 2 filed a writ petition in the
Bombay High Court challenging the election programme. By
its judgment dated November 19, 1991 the High Court allowed
the petition holding that (i) in view of the mandatory
provision of section 73(2) it was incumbent on the Registrar
of Co-operative Societies to prescribe the maximum number of
members on the Committee of the appellant bank by publishing
an order in the official gazette; (ii) since no such order
was published, the election process fixed by the Collector
was illegal and invalid; and (iii) the election process was
in violation of this Court’s order dated March 15, 1989.
Against the decision of the High Court the Co-operative Bank
filed an appeal in this Court.
On behalf of the appellant bank it was contended that
(i) with the deletion of proviso to section 27(3), section
73(2) has become redundant; (ii) that the word ‘may’ in
section 73(2) clearly meant that it was an enabling
provision and the said sub-section does not cast any duty on
the Registrar to exercise the power of prescribing maximum
number in every case but only confers upon him the
discretion to make such an order if the circumstances
enumerated in the said provision necessitated the exercise
of such power; and (iii) since bye-law No.28 of the Bank
already prescribed the maximum number of members in the
Committee to 21 members and as such there was no question of
passing any order under section 73(2).
For the respondents it was contended that unless the
Registrar applied his mind in the light of Section 73(2) no
elections could have been declared by the Collector. It was
necessary for the Registrar to apply his mind as to whether
the maximum number prescribed in the bye-laws of a society
was justified or not and thereafter issue an order and to
publish the same in the official gazette.
Allowing the appeal, this Court,
HELD: 1. The main purpose of introducing proviso to
sub-section (3) of Section 27 was to widen and make the
scope of voters as broad based while electing members to the
Committees of a federal society. It was laid down that all
the members elected as well as co-opted shall have the right
to vote on behalf of such society while electing the members
to the Committee of a federal society. The provision was
declared invalid by the High
298
Court and thereafter it was also deleted by a Legislative
fiat by Maharashtra Act No. (X) of 1988. The position as
now stands is that in case of an election to the members of
the Committee of a federal society, any member of such
society shall not have more than one vote. [305 C-E]
The purpose of inserting sub-section (2) of Section 73
of the Act was that there was a necessity to control the
large number, if any, of the elected and co-opted members
getting a right of vote allowed under the proviso to sub-
section (3) of section 27 of the Act. However, when the
proviso to sub-section (3) of Section 27 was struck down by
the High Court and also deleted by the legislature itself,
the purpose of introducing sub-section(2) in Section 73,
lost its thrust and relevance and even if it continued in
the Statute, it would be considered as directory and not
mandatory. [305 E-F]
1.1 It is no doubt that sub-section (2) of Section 73
of the Maharashtra Co-operative Societies Act starts with a
non obstante clause overriding anything contained in any bye
laws of a society, but at the same time the discretion has
been left to the Registrar to prescribe the maximum number
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of members of Committee of the society or class of
societies. This provision does not compel the Registrar nor
makes it obligatory to prescribe maximum number even when
the Registrar may be satisfied with the maximum number
already prescribed in the bye-laws of such society.
[305 F-G]
2. The order dated 27th December 1991 issued by the
Government postponing the elections upto 15th April, 1992
would not apply to such co-operative societies in whose case
the election process from the stage of 1991. In view of
this, the notification dated 27th December, 1991 cannot
apply in the case of the appellant Beed District Central Co-
operative Bank as the election process of filing nominations
was fixed for 23.10.1991 and even the date of polling was
27.11.1991 i.e. much before 26th December, 1991. [306 B-C]
3. The Collector District Beed shall complete the left
out stage for election to the Board of Directors of the
appellant Bank. [306-D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1111 of
1992.
299
From the Judgment and Order dated 19.11.91 of the
Bombay High Court in W.P. No. 3398 of 1991.
Soli J. Sorabjee and A.M. Khanwilkar for the
Appellants.
U.R. Lalit, V.N. Ganpule and K. Madhava Reddy, V.B.
Joshi, S.M. Jadhav and A.S Bhasme for the Respondents.
S.K. Dholakia, R.B. Masodkar and K.L. Taneja for the
Intervenors.
The Judgment of the Court was delivered by
KASLIWAL, J. Special leave granted.
This appeal is directed against th Judgment of High
Court of Judicature of Bombay at Aurangabad dated November
19, 1991. Brief facts of the case are that elections to
the Board of Directors of the Beed District Central Co-op.
Bank Limited a specified co-operative society under the
Maharashtra Co-operative Societies Act, 1960 (hereinafter
referred to as ‘the Principal Act’) were to be held for the
years 1991-1996. The elections are held as provided under
the provisions of Section 73(G) of the Act read with
Maharashtra specified Co-operative Societies (Elections to
Committees) Rules, 1971 (hereinafter referred to as ‘the
Rules of 1971’). The Constitution of the Board of Directors
of the Beed District Central Co-op. Bank Ltd., (hereinafter
referred to as ‘the Beed Co-op. Bank. The elections of the
Board of Directors for the years 1991-96 had become due in
November, 1990. With a view to conduct the elections, voters
lists were initially finalised on 28.2.1990 but the same
were postponed on account of Government directions,
Eventually the Collector declared the elections of the Beed
Co-op. Bank under Rule 16 of the Rules of 1971 on 8.10.1991.
According to the election programme last date for filing
nominations was 23.10.1991, last date for scrutiny on
25.10.1991, last date for withdrawal 11.11.91 and the date
of polling was fixed on 27.11.91, Jagannath, respondent No.
1 and individual member of the Beed Co-op. Bank and
Ramkirshana Maroti being member of Agriculture Service Co-
operative Society, Bhayala and delegate of the said society
in the Beed Co-op. Bank filed writ petition in the Bombay
High Court challenging the aforesaid election. The High
Court took the view that the election process had been
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started in derogation and violation of Section 73(2) of the
Act and as such
300
the same was declared is illegal and invalid . It was
directed that it will be open to the authorities to start a
new election programme adhering to the mandatory requirement
of Section 73(2) of the Act taking every step in a proper
and careful manner. The Beed Co-op. Bank and its Chairman
have come in appeal before this Court challenging the order
of the High Court.
In order to appreciate the controversy we find it
necessary to mention the background of the litigation as
well as the various changes brought from time to time in the
relevant provisions of law. The Maharashtra Legislature by
the Maharshtra Act No. (XLV) of 1983 sought several
amendments in the Maharashtra Co-operative Societies Act,
1960. The relevant amendment for our purpose is the
following proviso added to sub-sec. (3) of Sec. 27 of the
Act:
"Provided that, notwithstanding anything contained
in this Act or in the rules made thereunder or in
any bye-laws of any society, where such other
society is a federal society belonging to any of
the categories specified in Section 73-G, then all
the members elected to , and the members, if any,
co-opted or appointed under Section 73-B on the
committee of such first society shall have the
right to vote on its behalf in the affairs of such
other society;
Provided further that, where the election is to a
reserved seat under Section 73-B, no person shall have more
than one vote".
The aforesaid amendment was challenged by filing writ
petitions Nos. 2170 and 2054 of 1984 and the High Court by
its order dated 8.1.1985 declared the aforesaid proviso to
sub-section (3) of Section 27 as void and inoperative.
After the said decision a writ petition No. 787 of 1984 was
filed by four petitioners including Jagannath and
Ramakrishan, the present respondents Nos. 1 and 2 and the
High Court following its earlier decision dated 8.1.1985
rendered in Writ petition Nos. 2170 and 2054 of 1984, by an
order dated 15.1.1985 allowed the writ petition and gave a
declaration that all steps taken by the Beed Central co-op.
Bank Ltd., for holding elections of the Bank and all the
steps taken on the basis of Proviso to sub-s.(3) of Section
27 were null and void. The parties aggrieved against the
aforesaid decision filed Special Leave Petition before this
Court. This Court granted Special Leave and registered
Civil Appeals Nos. 1907 and 1908 of 1989. Before the
aforesaid appeals came up for final hearing by
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this Court the Maharashtra Legislature brought the
Maharashtra Act No. (XX) of 1986 an Act further to amend the
Maharashtra Co-operative Societies Act, 1960. By this
amendment Act, Section 73 of the Principal Act was
renumbered as sub-s.(1) thereof; and after sub-s.(1) as so
renumbered, the following; sub-s.(2) inserted:
"(2) Notwithstanding anything contained in any
bye-laws of a society or class of societies, the
Registrar may, having regard to the area of
operation, subscribed share capital or turnover of
a society or class of societies, by general or
special order, published in Official Gazette,
prescribe the maximum number of members on the
committee of such society or class of societies,
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as may be specified in such order".
The Maharashtra Legislature further brought an
amendment by Maharashtra Act No. (X) of 1988 to amend the
Maharashtra Co-operative Societies Act, 1960 and the Ist
proviso to sub-s.(3) of section 27 was deleted. After the
aforesaid changes in the principal Act, this Court by order
dated March 13, 1989 disposed of the Civil Appeal Nos. 1907
and 1908 of 1989. This Court passed the following order:-
"It is brought to our notice by the learned
counsel for both the parties that subsequent to
the Judgment of the High Court Section 73 of the
Maharashtra Co-operative Societies Act has been
amended by addition of sub-section (2) of Section
73 of the Act in 1986. In view of the above
amendment it is submitted by learned counsel for
both the parties that the elections to the co-
operative societies in question have to be held in
accordance with the amended law. We accordingly
make an order in substitution of the order of the
High Court that elections to the co-operative
societies may be held in accordance with the
amended law as early as possible. The appeals are
disposed of accordingly."
Thereafter the Collector fixed the programme of
election mentioned above and the respondents Jagannath and
Ramakrishna filed the writ petition challenging the
programme of election and the writ petition filed by them
was allowed by order dated November 19, 1991 which is now
the subject matter of challenge before us.
302
We have heard learned counsel for the parties and have
thoroughly perused the record. The short controversy raised
before us is regarding sub-s. (2) of Section 73 of the Act
inserted in the Act by Maharashtra Amendment Act (XX) of
1986, to be mandatory or directory. The High Court has
taken the view that the above provision is mandatory and it
was incumbent on the Registrar of the co-operative societies
to prescribe the maximum number of members of the Committee
of the Beed Co-operative Bank by issuing a specific order
and to publish such order in the Official Gazette. The High
Court further held that in the absence of such order in
respect of the Beed Co-operative Bank followed by
publication in the official Gazette, the election process
fixed by the Collector was liable to be declared illegal and
invalid. The High Court also took the view that this Court
also in its order dated 15.3.1989 had clearly given a
direction to comply with the provisions of sub-s. (2) of
Section 73 and as such the programme of election fixed by
the Collector was in violation of the order of this Court
also.
Shri Soli J Sorabji, Learned Senior Counsel, appearing
on behalf of the appellants submitted that sub-s. (2) of
Section 73 was inserted only with a view to curtail the
unequal voting rights conferred on the members of the
society circumstanced on account of insertion of proviso to
sub-s. (3) of Section 27 of the Act. It was contended that
admittedly the aforesaid porviso to sub-s. (3) of Section 27
was deleted on 22.4.1988 by Maharashtra Act No.X of 1988.
With the deletion of the above proviso sub-s. (2) of Sec. 73
became redundant. It was contended that the insertion of
sub-s. (2) of Section 73 was necessitated for validating the
proviso to sub-s. (3) of Section 27 as both these provisions
were complimentary to each other. It was contended that
prior to the insertion of sub-s. (2) of Section 73, the
constitution of the Committee of the Beed Co-operative Bank
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was dependent on its own bye laws which were dully approved
by the Registrar of the co-operative societies. The bye law
No. 28 of the Beed Co-operative Bank already prescribed the
maximum number of members in the committee to 21 members and
as such there was no question of passing any order under
sub-s. (2) of Section 73. It was submitted that the word
‘may’ in sub-s. (2) of Section 73 clearly meant that the
said provision was an enabling provision and not mandatory
as held by the High Court. The said sub-section does not
cast any duty on the Registrar to exercise the power of
prescribing maximum number in every case but only confers
upon him the discretion to make such an order if the
circumstances enumerated in the
303
said provision necessitated the exercise of such power. It
was also contended that such power could alone be exercised
by the Registrar where either the maximum number of members
on the Committee fixed in the bye laws was required to be
changed in the opinion of the Registrar or where the the bye
laws of a society may not have fixed the maximum number at
all. In that kind of case, if any , order was passed by the
Registrar then such order was required to be published in
the official Gazette.
It was also contended that if this provision is held to
be mandatory, it would result in invalidating the
constitution of numerous managing Committees of the co-
operative societies in the State of Maharashtra and this
could never have been the intention of the Legislature.
On the other hand Sh. U.R. Lalit, Learned Senior
counsel for the respondents Nos. 1 and 2 Sh. Dholakia ,
Learned Senior Counsel for one of the Intervenors supported
the impugned Judgment of the High Court. It was contended
that unless the Registrar applied his mind in the light of
the provisions contained in sub-s.(2) of Section 73 no
elections could have been declared by the Collector. It was
necessary for the Registrar to apply his mind as to whether
the maximum number prescribed in the bye laws of a society
was justified or not and thereafter issue an order and to
publish the same in the official Gazette. In the
alternative it was submitted that in the event of this
Hon’ble Court taking a different view from that of the High
Court, it was necessary to issue a fresh election programme
in view of the fact that all the contesting candidates were
informed that the election programme fixed by the Collector
had been set aside by the High Court. It was also submitted
that the State of Maharashtra has now issued a Notification
on 27th December, 1991 postponing such elections upto 15th
April, 1992.
It is worthwhile to note that the stand taken by the
State of Maharashtra before us is that proviso to sub-s. (3)
of Section 27 was inserted in order to make the electorate
broad based and more representative in character, where the
other society was federal society belonging to any of the
category mentioned in sub-s. (3) of Section 27 of the Act,
it was proposed to provide that the right to vote on behalf
of the members of society should be conferred on all the
elected members and co-opted members appointed on the
committee under Section 73 instead of single representative
exercising such right of vote. The said provision was
304
declared invalid by the High Court of Bombay by its
Judgmentde dated 8.1.1985 and the said proviso was deleted
by Act No. (X) of 1988. As the said proviso has been
deleted, the sub- s.(2) of Section 73 has lost its relevance
now and it has remained only as an enabling provision
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instead of a mandatory one.
We shall have to consider the question of sub-s. (2) of
Section 73 being mandatory or directory in the background of
changes made from time to time in the Principal Act and the
effect of the directions given by this Court in its order
dated 13.3.1989. The Beed District Central Co-operative
Bank is a specified Co-operative Society having a federal
character. The elections to the Board of Directors have to
be held according to the provisions of the Rules of 1971 in
conformity with the provisions of the Act and the bye laws
made by it. The constitution of the Board of Directors is
provided in bye law No.28 which clearly states that the
management of business and affairs of the bank shall be
entrusted to a Board of Directors which shall hold office
for five years consisting of not more than 21 members. Thus
the bye-laws clearly specify that the maximum number of the
Board of Directors would be 21. The bye laws have been made
with the approval of the Registrar Co-operative Societies.
Proviso to Sub-s.(3) of Section 27 was inserted by Act
No.(XLV) of 1983. Section 27 dealt with voting powers of
members. After deletion, of the proviso to Sub-s. (3) of
Section 27, by Maharashtra Act (XX) of 1988, Sub-s. (3) of
Section reads as under : (p.103) (Annexure-D)
S. 27 Members and their Rights and Liabilities :
Voting powers of members 1[(1) Save as
otherwise provided in sub-sections (2) to (7),
both inclusive, no member of any society shall
have more than one vote in its affairs; and every
right to vote shall be exercised personally and
not be proxy :
Provided that, in the case of equality of
votes of the Chairman shall have a casting vote;]
(2) Where a share of a society is held
jointly by more than one person 2 [the person
whose names stands first in the share certificate,
if present, shall have the right to vote. But in
his absence the person whose name stands second,
and in the
305
absence of both, the person whose name
stands next, and likewise, in the absence of the
preceding persons the person whose name is next on
the share certificate, who is present and who is
not, minor, shall have the right to vote.]
(3) A society which has invested any part of
its funds in the shares of another society, may
appoint one of its members; to vote on its behalf
in the affairs of that other society; and
accordingly such member shall have the right to
vote on behalf of first society;
The main purpose of introducing proviso to sub-s.(3) of
Section 27 was to widen and make the scope of voters as
broad based while electing members to the committee of a
federal society. It was laid down that all the members
elected as well as co-opted shall have the right to vote on
behalf of such society while electing the members to the
Committee of a federal society. The provision was declared
invalid by the High Court and thereafter it was also deleted
by a Legislative fiat by Maharashtra Act No.(X) of 1988.
The position as now stands is that in case of an election to
the members of the committee of a federal society, any
member of such society shall not have more than one vote.
The purpose of inserting sub-s. (2) of Section 73 of the Act
was that there was a necessity to control the large number,
if any, of the elected and co-opted members getting a right
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of vote allowed under the proviso to sub-s. (3) of Section
27 of the Act. However, when the proviso to sub-s. (3) of
Section 27 was struck down by the High Court and also
deleted by the Legislature itself, the purpose of
introducing sub-s.(2) in Section 73, lost its thrust and
relevance and in our view even if it continued in the
Statute, it would be considered as directory and not
mandatory. It is no doubt that sub-s. (2) of Section 73
starts with a non obstante clause overriding anything
contained in any bye laws of a society, but at the same time
the discretion has been left to the Registrar to prescribe
the maximum number of members of the Committee of the
society or class of societies. In our view this provision
does not compel the Registrar nor makes it obligatory to
prescribe maximum number even when the Registrar may be
satisfied with the maximum number already prescribed in the
bye laws of such society. As already mentioned above the
State of Maharashtra has also taken the stand in their
written submissions placed before us that after the deletion
of the proviso to sub-s. (3) of Section 27 the provision of
sub-s. (2) of Section 73 has lost its relevance
306
and it has remained only as an enabling provision instead a
mandatory one.
Thus we find force in the submissions made on behalf of
the Beed Co-operative Bank, the appellant before us that the
provision of section 73(2) are directory and not mandatory.
As regards the order dated 27th December, 1991 issued
by the Government postponing the elections upto 15th April,
1992 and placed on the record of the case suffice to say
that the same would not apply to such co-operative societies
in whose case the election process from the stage of making
nominations has already commenced on or before 26th
December, 1991. In view of this, the notification dated
27th December, 1991 cannot apply in the case of the
appellant Beed District Central Co-operative Bank as the
election process of filing nominations was fixed for
23.10.91 and even the date of polling was 27.11.1991 i.e.
much before 26th December, 1991. In view of these
circumstances we allow this appeal, set aside the Judgment
of the High Court and dismiss the Writ petition filed by the
respondents Nos. 1 and 2. In the facts and circumstances
of the case we pass no order as to costs. As a result of
the above order the Collector District Beed shall complete
the left out stage for election to the Board of Directors of
the Beed District Central Co-operative Bank limited.
T.N.A. Appeal allowed.
307