Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10
PETITIONER:
MYURDHWAJ COOPERATIVE GROUP, HOUSING SOCIETY LTD.
Vs.
RESPONDENT:
THE PRESIDING OFFICER, DELHI COOPERATIVE TRIBUNAL & ORS.
DATE OF JUDGMENT: 14/07/1998
BENCH:
G.B. PATTANAIK, A.P. MISRA
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
Misra, J.
The short question raised in this appeal is, "whether
in the allotment of flats to its members by the Cooperative
Housing Society (hereinafter referred to as ’the society’)
the criteria is seniority irrespective of default in the
payment of dues or whether it is payment- cum seniority?"
The appellant is a registered Housing Cooperative Society,
registered in the Office of Registrar, Cooperative
Societies, Delhi, under the Delhi Cooperative Societies Act,
1972 (hereinafter referred to as "the Act") and the Delhi
Cooperative Societies Rules 1973 (hereinafter referred to as
"the Rules"). It was constituted for the purpose of
allotment of flats to its members. At the relevant time 460
members were in roll. This society applied for allotment of
land to the Delhi Development Authority (hereinafter
referred to as "DDA") for the purpose of construction of
flats for its members. This Society was allotted only 5
acres of land in Patparganj which was not sufficient for the
construction of flats for the aforesaid members. However,
later on, in view of relaxation to the ceiling limit DDA
decided to make additional allotment as per actual
requirement, that is to say, to the extent of 7.666 acres of
land instead of 5 acres. The society was also directed to
deposit a sum of Rs. 11, 87, 190.80p. towards the cost of
additional land. In 1988, the Society raised demand for the
construction of first phase of flats on the said 5 acres and
also sent remainder notice to all its members through
registered post including the main contesting Respondent
No.3 Mrs. Veena Kumar vide notice dated 26th April, 1989(
the receipt of the notice was denied by Respondent No.3) As
per the said notice the cost of construction of flat of each
of its member was said to be Rs. 2,75,213/- approximately.
The mode of payment as per the first notice was, to pay
initially Rs. 2,21,705/- by each of such allottee but since
only Rs. 85,100/- was paid hence through the aforesaid
notice it was directed to pay the balance amount of Rs.
1,36,705/- within thirty days. Further it resolved those
defaulting shall be expelled from the Society. A general
body meeting was convened by the Society on 6th January,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10
1990. In this meeting the general body took a softer view,
inspite of the said notice dated 6th April, 1989. It
resolved, all its members who were allotted HIG(L) and
HIG(S) category and had paid Rs. Two laks and Rs. 1,75,000/-
respectively, their allotments have provisionally confirmed
and all those members who have been provisionally confirmed
and all those members who have paid the minimum credit
balance of Rs. 1,32,221.50p. were accommodated at Plot No.
60, Patparganj, Delhi Subject to their qualifying
requirement for being a member in the society and subject to
their making payment of the balance amount, but those who
failed to pay even Rs. 1,32,221.50p. would only be
accommodated on the flats to be constructed on the
additional land which were to come in phase II construction.
Phase I construction is on the said 5 acres of land.
Respondent No. 3 filed a claim petition under Section
b60 of the Act on the ground that the decision taken by the
General Body on the 6th January, 1990 was illegal, malafide,
discriminiatory and without jurisdiction. The matter was
referred to the Arbitrator under Section 61 of the Act. The
Arbitrator gave the award in favour of the appellant-Society
on the basis of a decision in Civil Writ Petition No. 955 of
1989 titled A.V. Ashokan & Others Vs. Registrar, Cooperative
Societies and Others decided on 30th April, 1992. On appeal
filled by Respondent No. 3 under Section 76 of the Act the
Appellate Authority (Respondent No.1) set aside the said
award by its order dated 299.92. It held that in a matter of
allotment of flats in a Cooperative Society, seniority has
to be the prime criteria notwithstanding the default made by
a particular member. It also recorded so far as lapse of
payment, it could be dealt with under separate provisions by
charging interest including penal interest or by taking
steps for expulsion of concerned member.
After coming to know of this order, the appellant filed
review, which was dismissed. Thereafter the appellant filed
a Writ petition which was also dismissed by the High Court.
The main contention raised now by the appellant which was
also raised before the High Court, viz., the Respondent No.1
wrongly held principle of seniority as the only criteria in
the matter of allotment. It is urged, in view of the
decision taken by the High Court in the case of A.V. Ashokan
(Supra) and in Civil Writ Petition No. 1484 of 1991 titled
S.C. Verma Vs. Lawyers Cooperative Group Housing Society
Limited, dated 22.8.91, the decision of the Tribunal is
liable to be set aside. These decisions hold that the
allotment of flats should be on the principle of a payment-
cum-seniority. The submission of the appellant is, High
Court did not appreciate these decisions, hence committed
grave illegality in dismissing the writ petition. The Case
of A.V. Ashokan (supra) pertains to the allotment of flats
by Saraswati Kunj Cooperative Society Ltd. with reference to
category ’C’ flats at Patparganj could not be accommodated
hence they were shifted to another land where further flats
were being constructed. The Court recorded:
" While some members contended that
the list should be prepared
according to the date of enrollment
as a member, others submitted that
the list should be prepared
according to the date of payment of
the amounts due. We may also note
that the General Body had, in a
meeting in March, 1987, decided
that a list should be prepared of
those members who had paid Rs.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10
1,50,000/- by 15th December, 1986
and thereafter the list should be
prepared according to the date of
payment........ It is not possible
to ignore seniority of members
while. at the, same time, we cannot
ignore the fact that some members
may have paid the amounts claimed
from them while more senior members
may not have met the payment
schedule and they cannot take undue
advantage of other members who have
paid full amount....... Therefore,
if, after considerable difficulty,
payments have been made by the
members it will be unfair to
disregard the dates of payment
completely. In our opinion,
therefore, the most fair and
equitable method of drawing up the
list of eligible members for
allotment of remaining 38 flats of
category C could be to draw up the
list according to the date of
payment of the full call money by
the members concerned... "
Thereafter an application was made for clarification of
this order which is reported in 1992 Vol. 47 Delhi Law Times
page 92 in which B.N. Kirpal, J. as he then was, held:
" We find that persons who paid the
full amount after 15th December,
1986 really fall in a single
category and it will not be fair to
treat them separately. Furthermore,
we find that some regard has also
to be given to the seniority of the
members.... In drawing up the list
of members who made the payment
after 15th December, 1986 we find
that most of the money has been
paid by the members within a period
of two or three months. Merely
because persons who is at serial
No. 1, for example has paid money
one week after a person who became
a member many years thereafter
should not be a reason for giving
higher weightage to the date of
payment. All members who paid money
after 15th December, 1986 are
defaulters. Therefore, the list of
defaulters can be prepared on
either of the two basis (1)
according to the overall seniority
(2) according (2) according to the
date of the payment.... "
In the case of S.C. Verma (supra), it was a case of the
Lawyers Cooperative Group Housing society Limited. In this
case also, the dispute pertained to the allotment of flats
in category ’C’. Here again was the same problem, the number
of applicants were larger than the number of flats to be
allotted . In this case also cut off date to make payment
was fixed as 15th May, 1987. All members who paid the entire
due as on this date, were to be included in the list. The
amount required to be paid by this date was Rs. 1,11.000/-.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10
26 members paid this amount by this date. Here also number
of flats were 30 for its 65 members. It was held:
" ... The society had to lay down a
reasonable criteria for finalising
the list of members. The criteria
which the society adopted was that
all payments having been made in
accordance with the demand which
has been raised and by keeping the
options and the seniority into
consideration, the list was
prepared as on the cut-off date of
15th May, 1987. We cannot find any
infirmity in the principle so
adopted. It is essential for the
Cooperative Society to decide as to
what is the principle which it
should follow in determining or
finalising the list of the members
to whom flats are to be allotted.
Unless and until the principles
laid down by the society are found
to be arbitrary or irrational or
unfair, the Court will not
interfere with the same. We do not
find any such infirmity in the
procedure which has been adopted or
established viz. to prepare a list
of members as on 15th May, 1987 who
had not committed any default... "
In this case the payment of the demand was regarded as
an essential criteria for preparing the list of members.
However, the said case also held:
".. Therefore, where the number of
defaults committed being equal it
is the seniority which must
prevail.... "
Hence seniority was also given place in the matter of
consideration for allotment.
Learned senior Counsel Mr. K.T.S. Tulsi appearing for
the appellant submitted that the High Court did not properly
apply its mind to the aforesaid decisions when it held
contrary to the said decisions that it did not lay down any
proposition as submitted by the appellant. It is urged, High
Court relied upon few lines from paragraph 2 of the
aforesaid clarificatory judgment in A.V. Ashokan (supra)
without reference to the succeeding lines hence wrongly held
that it supported the view taken by the Cooperative Tribunal
(Respondent No.1). The submission made is, in this very
paragraph, the Court categorised and graded how allotment is
to be made, which is not purely in terms of seniority but
payment-cum-seniority with due weightage of seniority. it
clearly held that list of defaulters can be prepared on
either of the two basis (1) according to the overall
seniority; () according to the date of payment. In other
words, it is left on the discretion of a Society depending
on the facts and circumstances of each case.
On the other hand learned senior Counsel appearing for
respondent No. Mr. Ashok Kumar Srivastava supported by
interveners’ counsel submitted that there is no provision
except Rule 36 under which the society could have dealt with
the present case and under this when a member defaults he
could only be expelled following the procedure laid down
therein. Thus the general body resolution, directing those
who were defaulters to be accommodated in phase II is
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10
illegal as it is based on no sanction conferred under the
rules. In other words, Society is left with no other option
but to expel such a member. However, where Society wants to
confer benefit to its members the only criteria which it
could adopt it to allot the accommodation according to their
seniority, irrespective of their default. On facts, it is
submitted that Respondent No.3 initially deposited a sum of
Rs. 85,000 /-, thereafter sent a sum of Rs. 1, 83,000/-
through cheque dated 8th November, 1990 making the total
contribution to Rs. 2,68,000/- and gave an undertaking that
she would pay all the reasonable amounts towards the
interest for the defaulted period, if any. According to her,
she came to know only on 3rd November, 1990 that she has
been relegated from first phase to second phase by the
General Body. She claims, she is one of the original members
of the society and sent a letter dated 8th November, 1990 to
the Society requesting for the restoration of her status as
member of the first phase. However, the Society through
reply dated 19.11.90 returned the said cheque and informed
that through a registered notice dated 26.4.89, a demand was
sent earlier for the payment of Rs. 1,36, 705/- and since
the said amount was not paid till 6.1.90 thus as per the
said resolution of the General Body, she was relegated to
the second phase. The learned counsel for the respondent on
the other hand further submits that neither additional land
has been allotted nor there is any second phase of
construction. To this, learned senior counsel for the
appellant, Mr. Tulsi submits, Society has already made total
payment for the additional land for the second phase and the
possession of this additional land allotted is likely to be
delivered shortly.
Returning to Rule 36, submission for the respondent is,
when a statute provides a thing to be done in a manner it
has to be done in that manner alone and not in any other
manner. Other modes are excluded. The Counsel for the
respondent referred the cases in A. K. Roy and Others Vs.
State of Punjab (1986 (4) Scc 326 prs. 10-11) and State of
Mizoram Vs. Baikchawane (1995 (2) SCC 156 prs. 7, 8 & 9).
This proposition has not been disputed by learned counsel
for the appellant. The question is, when a member is in
default then is it that power of a Society is concretised
within this Rule to expel such defaulting member or can it
within its peripheral jurisdiction resolve to take recourse
to any other policy decision, to enable such defaulting
member to deposit the balance amount either by extending
time or giving any such incentive as it deem fit and proper
or to take recourse to such consequential measures as it
deem fit and proper., The present case is similar to the
cases which arose in the Delhi High Court. The question, is
in the matter of allotment of flats, can a Society not lay
down its own policy as to how instalments are to be paid,
within what time and in doing so can it not place certain
conditions under it? In other words, can or can it not
resolve that members must pay the stipulated amount by
fixing any cut off date. If in spited of that if any member
defaults can it not cancel the allotment. Similarly, can it
not decide instead of cancelling the allotment to give him
an offer to get the flat in the next phased construction
clearing ways for non-defaulters. The question is, can it be
said, Society have no option except to allot strictly by
seniority rule in spite of such members defaulting in making
the payment If power could be said to be limited then it
means let seniors default let juniors wait as long as
seniors do not pay but in no case cancel or even modify
preferences in their allotment. In our considered opinion,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10
such an interpretation would be squeezing the power of the
general body of a Society within the limits of Rule 36
belying all the objectives of the cooperative spirits of the
Act. Thus by this, if this be so, either bear with the
defaults of such members at the cost of non-defaulting
members or expel them from membership. Such an
interpretation would be too harsh even on senior members if
only recourse could be the later. Even a senior member may
have financial stresses resulting into default of not able
to pay for a flat even the minimum fixed amount within the
stipulated time, then will it be fair to expel him? The
option has to left with the society to deal with different
situations as may arise from time to time. Taking away this
discretion and binding it to exercise powers under Rule 36
would be interpreting against the very objective of the Act,
leaving no option with the Cooperative Society. The
Cooperative Society is formed with laudable objective to
inculcate spirit to work in a group freely for rendering
benefit to its members through the cooperative
contributions. This is only possible by conferring wide
range of discretion to a society, not restricting its
discretions by interpreting a law otherwise. This has to be
for furthering the cause of cooperative movement. That is
why various rigours of laws including taxes and fees are
diluted for enhancing the spirit of the cooperative
movement. We have no hesitation to hold, the power of
Society cannot be circumvented within Rule 36 in a case of
default by its member of any of his dues. Such an
interpretation would be contradictory to the very
cooperative spirit or objectives of the creation of
Cooperative Societies. rule 36 is quoted hereunder:
" 36. Procedure for Expulsion of
Members.
(1) Notwithstanding anything
contained in the bye-laws, any
member who has been persistently
defaulting in payment of his dues
or the payment of claims made by a
housing society for raising funds
to fulfil its objects, has been
failing to comply with the
provisions of the bye-laws
regarding sales of his produce
through the society or, other
matter in connection with his
dealings with the society or who,
in the opinion of the committee,
has brought disrepute to the
society or he has done other acts
detrimental to the interest or
proper working of the Society, the
society may, by a resolution passed
by a majority of not less than
three-fourth of the members
entitled to vote who are present at
a general meeting, held for the
purpose, expel a member from the
society.
Provided that no resolution
shall be valid, unless the member
concerned has been given an
opportunity of representing his
case to the general body an no
resolution shall be effective,
unless it is approved by the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10
Registrar.
(2) Where any member of a
cooperative society proposes to
bring a resolution for expulsion of
any other member, he shall give a
written notice thereof to the
president of the Society. On
receipt of such notice or when the
committee itself decides to bring
in such resolution, the
consideration of such resolution
shall be included in the agenda for
the next general meeting and a
notice thereof shall be given to
the member against whom such
resolution is proposed to be
brought calling upon him to be
present at the general meeting, to
be held not earlier then a period
of one month from the date of such
notice and to show cause against
expulsion to the general body of
members. After hearing the member,
if present, or after taking into
consideration any written
representation which he might have
sent, the general body shall
proceed to consider the resolution.
(3) When a resolution passed in
accordance with sub-rule (1) or (2)
is sent to the Registrar or
otherwise brought to his notice,
the Registrar may consider the
resolution and after making such
enquiry as to whether full and
final opportunity has been given
under sub-rule (1) or (2) give his
approval and communicate the same
to the society and the member
concerned within a period of 6
months. The resolution shall be
effective from the date of
approval.
(3) Expulsion from membership may
involve forfeiture of shares held
by the member. The share shall be
forfeited with the prior permission
of the Registrar. In that event,
the value of the share forfeited
shall be credited to the reserve
fund of the society.
(5) No member of a cooperative
society who has been expelled under
the foregoing sub-rules shall be
eligible for re-admission as a
member of that society or for
admission as a member of any other
society or for admission as a
member of any other society of the
same class for a period of three
years from the date of such
expulsion:
Provided that the Registrar
may, on an application either by
the society or the member expelled
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10
and in special circumstances,
sanction the re-admission or
admission, within the said period,
of any such member as a member of
the said society or of any other
society of the same class, as the
case may be. Before giving such
sanction for re-admission or
admission by the Registrar, an
opportunity of hearing may be given
to both the society and member
concerned."
This Rule deals with the procedure for the expulsion of
members. In case Society decides to expel its member who is
persistently defaulting in making the payment of his dues
the procedure to be followed could only be what is provided
under this rule and no other. The principle referred earlier
that if a thing is required to be done in a manner as
provided under the law has to be done in that manner alone
and no other manner will apply with equal force under rule
36, when a society decides to expel its member. In case of
expulsion of procedure provided under it and the expulsion
has to be only under the mode provided therein and no other
which is mandatory in nature. But this is only after
decision is made to expel its member. This rule does not
take away discretion of the Society to expel a member or not
which is preceding the exercise of power under Rule 36. For
this there is nothing under this Rule which either
circumscribes or webs this discretion. Since this Rule is
for the expulsion of its members, it is stringent in its
application. Even after giving opportunity and even after
general body passes such a resolution, it requires approval
of the Registrar. Outside this, there is nothing which
restricts a Society to act freely and to lay down its own
policies. It is always open to it to decide on a fact to
expel him or not. Its discretion to act is curtailed only by
a statutory provision or any order having force of law. A
policy may depend on various factors, its planning, projects
undertaking including its financial capacity etc. One
Society may be in a sound position and other in limping
position thus may give to its member larger or lesser
benefits as the case may be. Thus it is always open to a
Society to lay down its own principle for making such
allotments. So consideration of prompt payment in shaping
its policy which helps it to complete its project to confer
to its member its fruits at the earliest may be justified
exercise of its discretion. To what extent a default is
going to effect a Society will depend on facts and
circumstances of each case which has to be left at the
discretion of each Society. It is not proper even for the
courts to interfere with such a discretion, except when it
is arbitrary, irrational, mala fide, against any statutory
provisions or against orders having force of law. This will
not be possible if strict principle of seniority is
followed. However it is open for a Society to give weightage
to seniority depending on facts of each case. Within
permissible limits it is always open to lay down its
principle which is just, fair and proper. When a Society
could decide the manner of allotment by instalments or other
modes, there is no inhibition to it to modify it in case
conditions are not complied by its members Thus it is not
possible to uphold that Society has no option but to proceed
under Rule 36 to expel its member. Hence once a society has
a discretion, it cannot be said its power is restricted to
allot only under strict rule of seniority.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10
We find Section 28 of the Act vests final authority in
the general body of a Cooperative Society. it has wide
powers including residuary power except those not delegated
to any other authority under the Act, the Rules and its bye-
laws. In other words, its power, if any, is only restricted
by the Act, the Rules, the bye-laws and any order having
force of law. This exercise of power by the general body
which is in issue cannot be said to be excluded by Rule 36.
Rule 36 does not deal with every default for one to
come under it. In fact, mere default itself is not covered
under this Rule. Default has to be persistent. Even in a
case of persistent, a society may or may not take recourse
under it. Apart from this Rule there are other rules dealing
with default. Under sub-rule (1) of Rule 39 a disability is
provided for a defaulting member being in arrears exceeding
three months in respect of loan taken for being appointed to
represent the Society in any other cooperative Society. Sub-
rule (2) similarly provides disability of defaulting member
who is in arrears to the Society for the aforesaid period to
represent the Society. Rule 59 also refers to a
disqualification of such defaulting member who has defaulted
to any Society of any sum due even in respect of any
interest in any contract to which Society is a party etc.
Then under Rule 60 a member ceases to be on the committee or
to hold any office in case he continues to be in default in
respect of any sum due. So there are rules laying down how
to deal with defaulting member. one of them is, if society
desires to expel one then it has to bring him under Rule 36.
This itself shows defaulters can be dealt with in various
ways and what is not provided, not covered by these rules,
the field is open for the general body to exercise its
discretion.
Reverting back to the facts of the present case, it
cannot be said when respondent No. 3 or such other member,
who defaulted by not even paying the minimum as resolved
could claim as a right for allotment on the principle of
seniority alone or that the resolution of the general body
dated 6.1.90 could in anyway be said to be unfair, unjust,
arbitrary, mala fide or irrational liable to be struck down.
It may be where a very senior defaulting member paid the
balance amount only one week after very junior member paid
the full amount, it is open for a Society to resolve as it
deem fit and proper by giving weightage to the seniority. It
is within the permissible discretionary field of such
Society.
So far giving notice to respondent No. 3 we find there
is specific averment by the appellant that a registered
notice dated 26th April, 1986 was sent to her, a copy of
which has been filed in this appeal. The respondent’s case
is, she has not received any notice from the Society either
of the default or laying down cut off date for the payment,
including notice dated 26th April, 1986, further the
decision of the general body dated 6.1.90 of relegating her
or other such person to phase II was not on agenda. To this
last argument we do not find any merit. A general body can
always with the approval of the house in the meeting of its
members take up any other matter not covered by the agenda
and on that account no illegality could be held.
So far question of notice to respondent No. 3 whether
given or not, is a question not adverted to or decided by
Respondent No. 1 viz., Delhi Cooperative Tribunal or the
High Court. Before treating any person to have defaulted, it
is necessary to record that a notice proceeding such
impugned decision is actually served on such member or there
is deemed service under some applicable Rule depending on
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10
the facts. We feel this question of notice to Respondent No.
3 has not been adverted to by any of the said authority or
Court which requires consideration. For this we send back
this case to the Tribunal for deciding this sole question
whether there was notice to the respondent No. 3 or not as
aforesaid. In case the Tribunal find she had notice she
would not be entitled for any relief but in case she had no
notice her claim for phase I flats cannot be defeated.
Accordingly, we hold that a principle of seniority
alone cannot be said to be the correct criteria and the
criteria resolved by the General Body being just, proper and
fair does not call for any inference by this court.
Accordingly, we quash the impugned judgment of the High
Court dated 10.11.1995 and the ex-parte order dated 29.9.95
passed by the Delhi Cooperative Tribunal. The case is
remanded back to Respondent No. 1, the Tribunal to decide on
the limited question as aforesaid. This appeal is allowed in
terms as aforesaid. Cost on the parties.