Supreme Court of India
J.N. CHAUDHARY & ORS. ETC.versusSTATE OF HARYANA & ORS.
- Citation
- 2014 INSC 321
- Decided
- 24 April 2014
- Disposal
- Dismissed
- Bench
- GYAN SUDHA MISRA
Holding
The Supreme Court held that the auction sale, authorized by a valid General Body resolution, cannot be set aside on speculative allegations by a minority, and the High Court’s judgment upholding the sale stands.
Summary
The Mount Everest Co‑operative Society, formed in 1994, purchased land and later, after discovering financial irregularities, its General Body resolved on 2 June 2002 to auction the land. The auction was conducted in 2003 under the supervision of a Board of Administrators and a Sales Committee, fetching a price above the market rate. A handful of members (10 out of 288) later challenged the sale in writ petitions, alleging mala‑fide intent, undervaluation and procedural irregularities, despite the resolution being passed by the majority and the sale being approved by the Registrar. The High Court, after detailed scrutiny, upheld the auction, and the Supreme Court affirmed that a decision of a duly elected General Body cannot be overturned by a minority on speculative grounds, especially when the society has become defunct. The Court also held that the writ jurisdiction was inappropriate for factual disputes that should be litigated in a civil court. Consequently, the appeals were dismissed.
Issues considered
- The validity of the auction sale conducted under the General Body resolution of the co‑operative society.
- Whether the writ jurisdiction of the High Court was appropriate for adjudicating alleged undervaluation and fraud in the auction.
- Whether the minority members could set aside a majority decision on the basis of alleged mala‑fide conduct without strict proof.
- Whether the suspension and removal of the managing committee affected the legality of the sale.
Legislation cited
- Haryana Co-operative Societies Act, 1984s. 114, s. 34(1), s. 34(2)
Subjects
co‑operative societyauction salewrit jurisdictionmajority decisionmala‑fide allegationvaluation of landdefunct societycivil vs writ remedyboard of administratorsgeneral body resolution
Judgment
[2014] 6 S.C.R. 589
J.N. CHAUDHARY & ORS. ETC. A
V.
STATE OF HARYAl\JA & ORS.
(Civil Appeal Nos. 4854-55 of 201-4'"tftt.)
APRIL 24, 2014
B
[GYAN SUDHA MISRA AND
PINAKI CHANDRA GHOSE, JJ.]
Go-operative Society:
c
Auction sale of land conducted in pursuance to the
resolution passed by the General Body of the Co-operative
Society and by duly following the procedure - Sale based on
the price prevalent on the date of auction sale could not be
faulted on the ground of a/legations leveled on the basis of 0
assumption and speculation of 10 members of the Society
who had assailed the same by invoking writ jurisdiction -
Challenge made 11 years after the sale, during which the
appellant Society practically ceased to exist and all members .
except 10 out of 288 left - There was no illegality or infirmity E
in the impugned judgments passed by the courts below
concurrently refusing to set aside the auction sale held 11
years ago at the instance of a Co-operative Society which was
practically rendered defunct and ceased to exist.
Auction sale of land conducted in pursuance to the F
resolution P.assed by the General Body of the Co-operative
Society - Challenged by handful of members - Held: In
judging the functioning of a Co-operative Society or any other
statutory body where the democratic process of election is
adopted in pursuance to the Rule and a collective decision G
is taken by majority of the members of the entire body
expressed in terms of a resolution passed by the General
Body, then the same should not be ignored and bye-passed
on _challenge by a handful of members on the allegation of
589 H
590 SUPREME COURT REPORTS [2014] 6 S.C.R.
A ma/a fide unless the alleged malicious action is· writ large on
the alleged decision and is challenged by majority of the
members - If a decision is taken by majority of the members
of a Cooperative Society or any other body under a statute
in terms of the Rule, it cannot be over-ruled by minority on
B the ground of ma/a fide or fraud -unless it has passed through
a strict proof of evidence - It is a well known dictum that ma/a
fide is always easy to allege but difficult to prove as the same
cannot be held as proved relying on assumption, speculation
and. suspicion.
c Writ jurisdiction: Scope of - Writ petition by members of
Co-operative Society challenging auction sale 11 years later
- Held: Members of the Co-operative Society opted a wrong
forum by filing a writ petition in the High Court - They should
have approached the civil court of competent jurisdiction
D where it would have had the opportunity to adduce evidence
and prove all the allegations of under valuation and the
alleged fraud challenging the auction sale - High Court under
its writ jurisdiction ought not to have entertained the factual
dispute which was of a civil nature but in the interest of justice
E and fairness as also equity and good conscience, the High
Court entertained the dispute and to a great extent took care
to scrutinize all aspects of the matter and then reached to a
conclusion considering entire conspectus of the matter which
cannot be held to be arbitrary, illegal or unjust in any manner.
F
On 04.03.1994, a Cooperative Society was formed
wherein 288 persons became members upto 1995-96 and
contributed a sum of Rs. 7.50 crores towards the funds
of the society which were to be utilized for purchase of
G th~ land. In 1~96, the society purchased 10 acres of land
with the funds contributed by the members for achieving
its objects. At the time of formation of the society, a
Managing Committee was constituted with one 'RPG' as
Secretary but the same was suspended on 23.10.1996 by
the then Asstt. Registrar, Cooperative Societies on the
H
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 591
HARYANA & ORS.
allegation of financial irregularities and a Board of A
Administrator was appointed. However, the Deputy
Registrar reinstated the Managing Committee on
30.08.1999. Subsequently, on 28.05.2000, a General Body
Meeting of the Society took place in which fresh election
was held and a n.ew Managing Committee was B
constituted wherein 'AKM' was elected as member of the
new Managing Committee and entrusted with the work
of Honorary Secretary of the Society in place of the
previous Secretary 'RPG'. The new Managing Committee
upon inspection of records found gross irregularities by c
the previous Managing Committee in the purchase of
land and utilization of members funds. An FIR was lodged
against previous Managing Committee. On 02.06.2002 to
discuss affairs of the society, a meeting was held and
members were apprised that large scales and glaring
0
misappropriation of funds took place between 1994 and
2000 and it was resolved that the only option left before
the Society was to sell the land at the best possible
market price so as to refund the contrfbutions made by
the members. For the purpose of ascertaining the correct
market rate of the land, 'AKM' himself wrote to the E
Tehsildar who quoted the market rate to Rs. 40 lakhs per
acre. 'AKM' wrote a letter to the Registrar, Cooperative
Societies seeking permission to dispose of the land at the
earliest for Rs. 4.2 crores. However, the Registrar before
wttom a dispute was raised_regarding removal of the F
office bearers of the Cooperative Society suspended the
new Managing Co.mmittee on account of gross
irregularities as a result of which a Board of
Administrators was appointed. Thereafter, on 14.01.2003,
the Registrar granted permission to the Board of G
Administrators to dispose of the society land and a sale
committee was formed for this purpose.
Meanwhile, 'AKM' and others filed a writ petition
challenging th~ order of suspension of the new Managing H
592 SUPREME COURT REPORTS [2014] 6 S.C.R.
A Committee as well as the order granting permission to
sell the land. During pendency of the said writ petition,
Assistant Registrar on 05.09.2003 removed the new
Managing Committee on account of its failure to perform
B
.
its duties as per Rules. and Bye-laws.
Pursuant to the orders of Registrar dated 14.01.2003
granting permission to dispose of the society land, a
public notice was duly published. On an application
se'ek~ng an order of injunction filed by the suspended
C Mana'Qing Committee, a stay of the sale of land was
granted and auction was po~tponed. Thereafter, stay was
vacated and fresh date of auction was fixed. The auction
was held and the land was sold to respondent no. 7 for
Rs. 4.94 crores against the estimated market rate of about
Rs. 4.20 crores. After the auction of the land in favour of
D respondent no. 7 was complete, the writ petition which
was filed chC1llenging the suspension of the members of
the Managing Committee wherein 'AKM' and 'AS' were
elected as Secretary and Treasurer was withdrawn and
an appeal was filed under Section 114 of the
E Cooperatives Act. The appeal was dismissed. The Single
Judge dismissed the writ petition. 'AKM' along with 37
members filed LPA. The Division Bench of the High Court
upheld the decision of the single judge. The instant
appeals were filed challenging the order of the High
F · Court by the society and 10 members of the society. AKM
withdrew from the .SLPs.
Dismissing the appeals, the Court
HELD: 1. It was under the secretaryship of 'AKM' that
G a General Body Meeting was convened and a resolution
was passed by the General Body to auction sale the land
recording specific reasons in the Minutes of the General
Body Meeting whereby the Honorary Secretary/'AKM'
brought out, the options to the notice of the General
:
1
Body. One of the options was to construct flats on the
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 593
HARYANA & ORS.
land for which tender was floated and it was noted that A
one out of the two parties who responded to the tenders
had shown interest. The second option was sale of the
land which were in possession of the society free from
litigation. It was in view of this decision that follow up
actions were taken by the Board of Administrators under s
the Sales Committee, inviting proposals for the sale of the
land as the Managing Committee under 'AKM' and
.Treasurer 'AS' was under suspension due to the alleged
illegalities and irregularities. The single judge as also the
Division Bench of the High Court took note of the fact c
that although 10.69 acres of land was claimed by the
society, 14.50 were in dispute/litigation. The clear land
without any dispute with the society was only around
1.69 acres. The records further indicated that 3.5 acres
of land was never purchased by the society as per the
0
then Secretary 'RPG'. The single judge also took note of
the fact that this was under litigation as it was purchased
by another society whose registration was in progress.
Thus, if 3.5 acres were to be deducted out of 4.5 acres,
only 1.1 acre was left to the society. The single Judge
E
further noted that the land in question had been surveyed
by the Government along with other vacant land with a
view to clear it and the acquisition process had been set
in motion. The land belonging to the society had been
encircled/ surrounded by another society. Therefore, the
future course of action left to the society was to dispose F
of the land of the society. [Paras 25 and 26] [623-D-E; 624-
E; 625-D-H; 626-A]
2. ·The dispute regarding suspension of the
Managing Committee under 'AKM' Mahindra in view of the G
alleged irregularities of the previous managing committee
started only on 13.12.2002 and all the disputes in regard
to removal and induction of the society under 'AKM'
admittedly took place between 13.12.2002 and 24.11.2003.
But the resolution was passed by the General Body in its
H
594 SUPREME COURT REPORTS [2014] 6 S.C.R.
A Meeting for sale of the land on 2.6.2002 when the
Managing Committee constituted under 'AKM" was duly
in place and no member of the society had raised any
grievance agafnst the said decision that it was erroneous
or tainted in any manner and the society was duly
B represented by the Secretary and all members of the
society. The case of the Managing Committee and its
members that the Assistant Registrar illegally suspended
the Managing Committee under 'AKM' based on the
alleged irregularities of the previous Managing
c Committee under 'RPG' first of all took place on
13.12.2002 from which it is clear that when the General
Body Meeting was conducted and resolution was
pa~sed on 2.6.2002, the Secretary of the Managing
Committee 'AKM' was duly and legal.ly in place as
Secretary and was removed by the Registrar of Society
D only at a later stage on 05.09.2003 after which the Board
of Administrators was appointed by the Registrar and a
Sales Committee was also set up under whose
supervision the auctionsale was decided to be held
under supervision of the Sales Committee. The proposed
E auction was also challenged, as an application for
injunction restraining the auction sale was filed before
the District Court where an order of injunction restraining
the auction sale was also granted by the District Court
but the said injunction was later vacated against which
F no appeal was preferred by any member of the society.
It is no doubt true and it has been contended that as no
Managing Committee was in existence at that point of
time, no appeal could be preferred against the order
vacating the injunction. However, this contention is
G clearly without substance for if the members in their
individual capacity ~ould assail the auction sale by filing
a separate writ petition, it cannot be accepted that'they
were precluded in any manner from challenging the
auction sale in case they were aggrieved and the
H subsequent challenge after seven years in 2010 clearly
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 595
HARYANA & ORS.
appears to be an after thought at the instance of a A
miniscule number of members who decided to assail the
auction sale clearly as a matter of gamble. [Para 27) [626·
C-H; 627-A-D)
3. The resolution by the General Body of the Society
to auction sale the land was taken way back on 2.6.2002 B
by the resolution passed in the General B9dy when there
was dispute existing regarding the functioning of the
Managing Committee and it is only after more than one
year that the Secretary 'AKM' was removed by the
Registrar, Co-oper~tive Societies and since he was C
removed, he challenged his removal as also the decision
of the General Body to auction sale the land which
resolution during his tenure as Secretary was passed. In
fact as long as he was the Secretary he had not merely
approved the decision of the. General Body to auction D
sale, but also the existing market price of the land. [Para
28) [627 -D-F)
4. The then Secretary 'AKM' although t,iad challenged
his removal as Secretary of the Society, he never thought
it appropriate to file any appeal against the order vacating E
the order of injunction against auction sale which he
could have done as the ex-secretary if he was genuinely
concerned. The matter regarding the dispute challenging
the auction sale had been filed in a court of competent
jurisdiction where initially an order of injunction was also F
passed but the same was finally vacated against which
no appeal was preferred either by any member of the
society or the Secretary. The order of injunction against
auction sale was finally vacated but no member was
conscious or vigilant to challenge the same. On the G
contrary, large number of members gradually withdrew
the amount and walked out of the society. It is clear that
for the first time in the year 2010 when a new managing
committee was elected on 13.9.2010 that a decision was
taken to challenge the auction sale by which time the H
596 SUPREME COURT REPORTS [2014] 6 S.C.R.
A existence of the society withered away when the majority
of the members out of 288 left and only 38 members
remained clearly implying that for all practical purposes
the Society ceased to retain its legal entity as the land of
the society for which contribution had been made was by
B all the 288 members and not merely 38 members. Even
out of this 38 members, only 10 members preferred LPA
before the High Court although the General Body
resolution was passed by the majority and cannot be
allowed to be overruled by 10 members only. [Para 29)
C [628-A-F]
5. The circle rate of the land at the relevant time was
Rs.12 lacs per acre and the market rate was Rs.40 lacs
per acre and as per the auction held, the price fetched in
the auction ultimately worked out to Rs.46 lacs per acre.
D The appellants had not furnished any material before any
court as to what was the market price of the undeveloped
land in the year 2003 when the auction sale was held in
pursuance to the General Body Resolution of the Co-
operative Society. In any case, this question at this stage
E · is not of much relevance when the High Court has
increased the price of the land at Rs.70 lakhs per acre and
members of the society have been held entitled to refund
of their contribution amount along with 6% interest in
view of which undervaluation of the cost of the land no
F longer subsisted. It has no where been urged that at the
relevant point of time in the year 2003 when the land was
auctioned/sold, its valuation was much more than Rs.70
lakhs per acre so as to treat it prejudicial and detrimental
to the interest of the members of the society who had
G contributed for purchase of the land. [Para 30] [628-H;
629-A-C]
6. If the members of the Society by virtue of a
General Body resolution had decided to auction sale the
land during the tenure of a duly elected Secretary of the
H Society 'AKM' and for more than one year no member of
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 597
HARYANA & ORS.
the society had any reason to challenge the same after A
which the Board of Administrator was appointed and the
price of the land on the date of auction could not be more
than Rs.70 lakhs per acre, it would be unfair and unjust
to interfere with the auction sale after 11 years of its.
holding on the plea that the price fetched in the auction B
suffered from undervaluation as the same cannot be
compared with the present day valuation which obviously
must have grown over the years as compared to the year
2003 when the auction sale was held. The Secretary
'AKM' as also Patwari had also given out in writing and c
is on record which indicated that the value of the land at
the relevant time which was not a developed land at the
relevant time when the land was put to auction sale was
not more than Rs. 40,000 per acre which cannot be
doubted in absence of any material to the contrary
specially when the circle rate of the land was Rs.12 lacs D
per acre only and the land was auction sold at Rs.46 lacs
per acre approximately in the year 2003. In any case, the
price of the land was already increased to Rs.70 lakhs per
acre by the High Court and was ordered to be paid ·
alongwith 6% interest and thus the Society has not been · E
put to monetary loss on account of the sale conducted
in pursuance to the resolution of the General Body which
was passed during the tenure of a duly constituted
Managing Committee under 'AKM'. Further, only a handful
of members of the co-operative society who are now only F
10 out of 288 have not withdrawn from the society by
withdrawing their amount. [Para 31) [629-D-H; 630-A-B]
7. From the background, facts and circumstance of
the matter, it is further clear that the members of the co- G
operative society had clearly opted a wrong forum by
filing a writ petition in the High Court for if they expected
the court to appreciate evidence and record a finding on
the said disputes for setting aside the auction sale, they
should have approached the civil court of competent H
598 SUPREME COURT REPORTS [2014] 6 S.C.R.
A jurisdiction where it would have had the opportunity to
adduce evidence and prove all the allegations of under
valuation and the alleged fraud challenging the auction
sale. In fact, the writ petition for assailing a factual dispute
ought not to have been entertained by the High Court
8 under its writ jurisdiction but in the interest of justice and
fairness as also equity and good conscience, the High
Court entertained a dispute which purely was of a civil
nature since all contentions which have been raised
would have required appreciation of evidence. Yet the
C High Court to a great extent has taken care to scrutinize
all aspects of the matter in regarq to the writ petition filed
by the co-operative society members who sought to
assail the auction sale clearly alleging disputed questions
of fact alleging fraud in conducting auction sale as also
valuation of the land in question which required adducing
0 of evidence and the same could not have been
entertained by the High Court under Articles 226 and 227
of the Constitution except to the extent of considering
whether the order passed by the Registrar, Co-operative
Societies rejecting the challenge of removal of the
E managing committee was sustainable or not. Yet the High
Court has entered into all aspects and has then reached
to a conclusion considering entire conspectus of the
matter which cannot be held to be arbitrary, illegal or
unjust in any manner. [Para 32) [631-F-H; 632-A-C]
F
8. There is yet another feature of the matter which
emerged from the fact that when the removal of 'AKM' as
a Secretary of the society was set aside, then all activities
including passing of the General Body resolution in the
G meeting that ·were conducted during his tenure as
Secretary of the Managing Committee cannot be held to
be illegal in any manner.Thus when the General Body
resolution was passed during the tenure of a validly
elected managing committee under Capt. 'AKM' as the
H Secretary and the resolution to auction sale the land was
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 599
HARYANA & ORS.
passed during his secretaryship whereby the value of the A
land was also assessed and approved by Capt. 'AKM'
himself and no allegation was levelled by any member
against 'AKM' as all allegations were confined to 'AS',
then the resolution of the General Body obviously could
not have been faulted with specially when no appeal B
against the order of the Civil Court vacating the order of
injunction against the auction sale was filed by any
member of the society specially the appellants. The
appellant-society and a handful of members now
restricted to 10, have levelled allegations but mere c
allegation cannot be treated as a proof and if the
members were in a position to assail the same which
clearly would have required strict proof by way of
evidence, they ought to have gone in for a civil suit and
the writ jurisdiction was clearly not the appropriate
0
remedy to establish and prove questions of fact. Yet
when the single judge as also the Division Benett have
meticulously examined all aspect of the matter and the
same did not indicate any perversity in the conclusions
drawn, it would be unfair and unjust to interfere with the E
same by indulging into a roving enquiry merely
accepting the contentions of some of the members of the
Society which are clearly based on speculation,
conjecture and apprehension. The Courts, therefore, in
a circumstance of this nature cannot be expected to
decide such an issue on suspicion hunch or even F
intuition which clearly would be abstract in nature and
has no place in the eye of law even before a court of fact
and much less before a court under writ jurisdiction. [Para
33] [632-D-H; 633-A-D]
G
9. The cumulative effect of the entire analysis based
on th~ facts and circumstance in the light of the
reasonings assigned by the Single Bench of the High
Court as also the Division Bench, it would not be just and
proper to interfere with the judgments and orders passed H
600 SUPREME COURT REPORTS [2014] 6 S.C.R.
A by the single Judge as also the Division Bench of the
High Court holding concurrently that the auction sale
which was in pursuan"ce to the resolution passed by the
General Body of the Co-operative Society based on the
price prevalent on the date of auction sale could be
B faulted on the ground of allegations leveled on the basis
of assumption and speculation of 10 members of the
society who had assailed the same by invoking writ
jurisdiction. [Para 34] [633-E-F]
'
10. In judging the functioning of a co-operative
C society or any other statutory body where the democratic
process of election is adopted in pursuance to the Rule
and a collective decision is taken by majority of the
memb~rs of the entire body expressed in terms of a
resolution passed by the General Body, then the plea that
D the same should be ignored and bye-passed even if the
same has been challenged by a handful of members on
speculative allegation and assumption contrary to the
reasons recorded in the Minutes Books on the plea of
mala fide, without any evidence, would be illegal and
E arbitrary to accept being contrary to the rule unless the
alleged malicious action is writ large on the alleged
decision and is challenged by majority of the members.
If a decision is taken by majority of the members of a
Cooperative Society or any other body under a statute
F in terms of the Rule, it cannot be over-ruled by minority
on the ground of mala fide or fraud unless it has passed
through a strict proof of evidence. It is a well known
dictum that mala fide is always easy to allege but difficult
to prove as the same cannot be held as proved relying
G on assumption, speculation and suspicion. [Para 35]
[633-G-H; 634-A-C]
11. In the instant matter existing 10 members of the
society have practically reduced the Co-operative
Society to a defunct society as all members except 10 out
H of 278 have finally withdrawn. Hence, the auction sale at
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 601
HARYANA & ORS.
their instance, although the said auction sale had taken A
place in view of the majority support of the General Body
resolution which was conducted under the supervision
of the Board of Administrators appointed by the
Registrar, Co-operative Society and the Sales Committee
is difficult to scrap it as illegal in spite of the B
overwhelming material relied upon by the High Court
which has upheld the auction sale. Thus, in a matter
where the decision has been taken collectively by the
General Body reflected in the form of a resolution passed
by the General Body, it would be unjust and inappropriate C
to nurture a lurking doubt and keep suspecting the
· decision by entertaining the version of a handful who
, might be disgruntled or might be genuine but would be
difficult to be gauged by any court so as to over-rule the
General Body resolution and accept the view of the
D
minority based on no evidence except assumption and
speculation. If the instant matter is viewed meticulously,
it is clearly obvious that the appellants have expected the
court of writ jurisdiction to enter into the correctness and
validity of the auction sale essentially by expecting the
Court to draw inference without evidence that the auction E
sale was not bona fide as it did not fetch the desired
value of the land contrary to the materials available on
. recqrd. Plethora of circumstances have been related to
establish the same which clearly are in the realm of
conjecture and speculation, yet the Single Judge and the F
Division Bench have both scrutinized and considered the
same and have recorded a finding against the appellants
which cannot be held to suffering from perversity being
contrary to the existing materials before the Court which
have been relied upon. Thus, the validity and correctness G
of the General Body resolution in view of which the land
was put to auction sale cannot be allowed to be assailed
specially when the price/alleged under valuation of the
land in the auction sale no longer survives as the High
Court has allowed the value of the land to be increased
602 SUPREME COURT REPORTS [2014] 6 S.C.R.
A by increasing it from Rs. 40 lakhs to Rs.70 lakhs per acre
which has been ordered to be paid along with 6 %
interest. The appellants have not furnished any material
as noted by the High Court that the cost of the land in
the year of the date of auction which is 2003 was more
· 8 than Rs.70 lakhs per acre so as to offer a cause to
interfere even if it were to be interfered in the interest of
equity, justice and fair pla}l.specLally wbefl the circle rate
of the land il'l the year 2003 when ·file auction was held
was Rs.12 lacs per acre onl11 Hence, the endeavour of
C the appellants that the auction sale should be set aside
and the land be revived to the society cannot be
. entertained in absence of proof of mala fide contrary to
.- ' . ..
ttie existing materials on record on the basis of
speculation, assumption and inference urged by the
appellants~ [Paras 36 and 37] (634-D-H; 635-A-G]
0
12. Assuming for a while although not conceding that
i the land were to be reverted to the co-operative society
· for any reason whatsoever at this stage after 11 years of
the sale during which the appellant Society has practically
E ceased to ~ist where all members except ten out of 288
are left, it is obvious that the land cannot be reverted to
the original members who have taken their refund. In that
event, the appellant-society through a handful of
members numbering ten is bound to indulge in trading
F of the land by inducting new members quoting new rates
at their instance clearly sacrificing the very spirit of a co-
operative sodety as the land cannot be marketed even ·
by the defunct Co-operative Society at the old rate which
land had been purchased out of the contribution made
G by the erstwhile 288 members out of which only 10 are
now left into the fray who had nev~r even objected to the
General Body Resolution approving sale of the land nor
challenged the auction sale in the year 2003 when the
auction was held. There is no illegality or infirmity in the
H impugned. judgments and orders passed by the sir.igle
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 603
HARYANA & ORS.
Bench as also the Division Bench concurrently refusing A
to set aside the auction sale held 11 years ago in the year
2003 at the instance of a Co-operative Society which has
practically been rendered defunct and thus ceased to
exist apart from the other weighty reasons, [Paras 38 and
39] [635-G-H; 636-A-E] B
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
4854-4855 of 2014.
From the Judgment and Order dated 27.08.2010 of the.
High Court of Punjab & Haryana at Chandigarh in LP.A. Nos. C
215 and 216 of 2007.
WITH
C.A. Nos. 4856-4857 of 2014
D
P. S.'Patwali, C. A. Sundaram, Narender Hpoda, AAG,
Ashok K. Mahajan, Rajan Mukherjee, Ashbk K. Mahajan
(Petitioner-In-Person), Jaladhar Das, Rashmi Virmani, Bina
Gupta, Mukta Dutta, Shreyansh Mardia, Rakhi Ray, Naresh
Bakshi, Dr. Monika Gusain for the Appearing Parties. E
The Judgment of the Court was delivered by
GYAN SUDHA MISRA, J. 1. Delay in SLP (civil) 4758-
59/2011 condoned.
F
2. Leave granted in both sets of special leave petitions.
3. These appeals by special leave have been preferred
against the judgment and order dated 27.08.2010 passed by
the High Court of Punjab and Haryana at Chandigarh in Letters G
Patent Appeal Nos.215 and 216 of 2007 (O&M) whereby the
Division Bench of the High Court dismissed both the letters
patent appeals by a common judgment and order which is
under challenge herein.
4. The letters patent appeals which stood dismissed arose H
604 SUPREME COURT REPORTS [2014] 6 S.C.R.
A out of two writ petitions filed in the High Court before the learned
Single Judge bearing writ petition Nos.6491/2005 and 7742/
2005 which were filed challenging the orders dated 13.12.2002,
05.09.2003 and 19.11.2004 in the High Court at Chandigarh
which were the Suspension Order, Removal Order of the
B erstwhile Committee and 9rder of the Dy. Registrar who
dismissed the appeal against removal. The facts stated therein
disclosed that on 04.03.1994, a co-operative society in the
name of Mount Everest Co-operative Group Housing Society
was formed and constituted under the Haryana Co-operative
C Societies Act, 1984 wherein 288 persons became members
of the Society upto 1995-96 and contributed a total sum of
approximately Rs.7.5 crores towards the funds of the Society
which were to be utilised for purchase of the land. In the year
1996, the Society purchased approximately 10 acres 4 kanals
14 marlas of land in Village Wazirabad as well as Hyderpur
D Vi ran with the funds contributed by the members of the Society
for achieving its objects. At the time of formation of the Society,
a Managing Committee had also been constituted with Mr. R.P.
Gupta as Secretary but the same was· suspended on
23.10.1996 by the then Assistant Registrar Co-operative
E Societies, Gurgaon on the allegations of financial irregularities
and a Board of Administrator was appointed. However, the
Deputy Registrar reinstated the Managing Committee of the
society on 30.08.1999. Subsequently, on 28.05.2000, a
General Body Meeting of the society took place in which fresh
F election was held and a new Managing Committee was
constituted wherein the petitioner No.1 Captain Shri A.K.
Mahindra (since resigned during pendency of this appeal) was
elected as Member of the new Managing Committee and later
on was entrusted with the work of Honorary Secretary of the
G Society in place of the previous Secretary Shri R.P. Gupta.
5. It is the case of the petitioner/members of the Society
that the new Managing Committee after taking charge and upon
inspection of the records of the Society found that the earlier
H Managing Committee had indulged in large scale malpractices
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 605
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
and in order to investigate the same, aR internal committee was A
constituted to go into the land records, finances as well as other
aspects of the Society. This internal committee therefore
conducted an intensive enquiry and submitted report which
highlighted gross irregularities by the previous Managing
Committee in the purchase of land, utilisation of members fund, B
expenditure on account of day to day expenses and expenses
incurred on land and site development etc. This audit was
conducted for the period 1993 to 2001 when the Managing
Committee of the society stood suspended and the Board of
Administrators was in-charge of the affairs of the· Society. c
Finally, when the audit report was submitted in March, 2002,
the Managing Committee which had been constituted on
28.05.2000 with A.K. Mahindra as Secretary decided to lodge
an F.l.R. against the members of the earlier. Managing
Committee when R.P. Gupta was the Secretary and the F.l.R. D
finally was lodged with the Police Station DLF, Gurgaon after
which investigation was conducted and arrests were made.
After investigation, charge sheet was also submitted in the
criminal courts but as per the charge sheet, no allegation was
found against any members of tne then Managing Committee E .
except Mr. R.P. Gupta who was a member and Honorary
Secretary of the Society from its inception until the new
Honorary Secretary Captain Mahindra who was petitioner No.1
and has since resigned, took over as Secretary of the Society
in 2000.
F
6. When the new Managing Committee took over and
Captain A.K. Mahindra functioned as Honorary Secretary from
28.05.2000 along with another office bearer Mr. Ashok Sharma
as Treasurer, special general body meeting of the society was
held on 02.06.2002 in which'the affairs and conditions of the G
society were discussed. In the meeting, the members were
apprised that large scales and glaring misappropriation of funds
took place between 1994 and 2000 and it was resolved that
the only option left before the Society was to sell the land at
... ··-----
606 SUPREME COURT REPORTS [2014] 6 S.C.R.
A the best possible market price so as to refund the contributions
made by the members. The General Body of the Society
decided to sell off the land for several reasons recorded in the
minutes which are as follows:
(Reasons for General Body to decide for auction sale of
B theland)
"(i) That 10.69 acres of land bearing KhasraNos.1692,
1997, 1696, 1677, 1678 and 1679 stood
registered and mutated in the name of the Society
which were in possession of the Society. It could
c . be further noted that out of this land, around9 acres
(3.5 acres in Khasra Nos.1977, 1678 and 1679 and
5.5 acres in Khasra Nos.1692, 1696 and 1697)
were under dispute/litigation in the District Court at
Gurgaon and the clear and undisputedland with the
D society was around only 1.69 acres.
(ii) The General Body further noted that another 4.5
acres of land marked in yellow colour bearing
Khasra Nos.1677,1678, 1679, 1695, 1694, 1696,
1698,21, 20 and 27 also were under dispute/
E
litigation. It further transpiredto the General Body of
., the Society thatthe land in Khasra Nos.1977, 1678,
·1579 measuring around 3.5 acres were
neverpurchased by the co-operative societiesand
there were no dispute/litigationgoing on with the
F
Society as this landwas never the land of the
Society. Thus, out of the total land measuring 4.5
acressaid to .be in dispute only around 1.1 acres
in different Khasra Numbers was in dispute in
regard to which cases weregoing on in the District
G Courts, Gurgaon.However, the Society further noted
that 6 this land had been purchased byanother
Society namely Saraswati Kunjwhose registration
was in progress. The General Body of the Society
further_ noted that these facts were available on
H
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 607
HARYANA & ORS. [GYAN SUDHA MISRA, J.)
record after checking/verifying various records with A
the revenue department with the help of Patwari/
Tehsildar and the Advocate, all of whom met a
number of times. Consequently, the Society was
given to understand that only a few days earlier to
the General Body Meeting the land of the Society B
had been surveyed by the Government alongwith
other vacant land with a viewto acquire it i.e. the
acquisition processhad been set in motion. It was
further noted by the General Body of the Society that
in view of purchase of vaca_pt land ,round c
Saraswati Kunj theSociety of the petitioners. had
practicallybeen surrounded/ encircled" ••
7. In view of the aforesaid considerations taken note of in
the General Body meeting of the Society held on 02.06.2002, .
it was decided by the General Body to dispose of the land of
0
the Society and the Honorary Secretary of the Society Captain
A.K. Mahin.dra and Ashok Sharma, Treasurer were authorized
to initiate proceedings for disposal of the land. In pursuance to
the general body resolutions, a letter dated 02.07.2002 was
sent to the Registrar, Co-operative Societies seeking E
permission to sell the land. In the meanwhile and for the purpose
, of ascertaining the correct market rate of the land, Captain A.K.
Mahindra himself wrote a letter to the Tehsildar, Gurgaon
ascertaining the correct market rate of the land to be disposed
of. In response to the same, the Tehsildar, Gurgaon quoted the . F
market rate to Rs.40 lakhs per acre by way of Endorsement
dated 14.06.2002. The Honorary Secretary of the society/
Captain A.K. Mahindra then wrote a letter further on
02.07.2002 to the Registrar, Co-operative Societies, Haryana
seeking permission to dispose of the land at the earliest for G
an amount of Rs.4.2 crores. The contents of the aforesaid letter
dated 02.07.2002 written by Captain A.K. Mahindra are as
follows:
H
608 SUPREME COURT REPORTS (2014] 6 S.C.R.
A "To
The Asstt. Registrar,
Cooperative Societies
Gurgaon, Haryana
B
Sub: Permission for disposal/sale of society land.
Sir,
With reference to the letter No.2298 dated
c 1.7.02 received from the office of the Dy.
Registrar,Gurgaon, we are enclosing the u/m documents :
(a) Summary of the land as per registersand
jamabandi submitted is enclosed asdes.ired. As
D per this summary the total land with the society is
84 kanals 4 marlas, and
(b) Rate of land in the area where the society land is
situated is Rs.40 lakhs(Rs. Forty Lakhs) per acre
as obtainedfrom the concerned patwaris office. A
E
photo copy of this letter is enclosed. As per this the
total value of land is Rs.4.20 crores (Rs. Four
Crores Twentylakhs Only).
Kindy grant us the necessary permission to dispose off the
F land at the earliest and oblige.
Thanking you,
Sd/-A.K. Mahindra,
Hony. Secretary, Mt. Everest Coop. Group
Housing Societies Ltd."
8. However, the Registrar, Co-operative Societies before
- a dispute had been raised regarding removal of the office
.~rs of the co-operative societies passed a suspension
o, ..'.t:Jr on 13.12.2002 under Section 34 (2) of the Haryana Co·
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 609
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
operative Societies Act, 1984, suspending the new Managing A
Committee of the Society based on allegations of gross and
serious irregularities as a result of which a Board of
Administrators was appointed. Thereafter, on 14.01.2003, the
Registrar, Co-operative Societies granted permission to the
Board of Administrators to dispose of the society land and the B
Deputy Registrar, Co-operative Societies, Gurgaon formed a
Sales Committee of 5 members for selling land of the Society.
While granting permission for sale, respondent No.2/The
Registrar, Co-operative Societies appointed the following Sales
Committee of 5 members comprising inter alia of the following C
(i) Dy. Registrar, Co-operative Societies, Gurgaon,
(ii) Inspector, Co-operative Societies, Gurgaon,
D
(iii) Sub-Inspector, Co-operative Societies, Gurgaon.
9. It appears that in the meanwhile CWP No.2025 of 2003
was filed by Captain A.K. Mahindra and others challenging the
order of suspension of the new Managing Committee as well
as the order granting permission to sell the land. During E
pendency of the said writ petition, Assistant Registrar, Co-
operative Societies, Gurgaon on 05.09.2003 removed the new
Managing Committee under Section 34 (1) of the Haryana
State Co-operative Societies Act, 1984 based on the ground
that the aforesaid Managing Committee had failed to perform F
its duties as provided under the Act, Rules and Bye-Laws.
Simultaneously and in pursuance to the orders of Registrar, Co-
operative Societies dated 14.01.2003 granting permission to
dispose of the Societies land, a public notice for auction of the
land of the Society was published on 07 .08.2003 indicating that G
the auction would be held on 21.08.2003. This notice was
published in all the specified newspapers in regard to which a
'decision was taken by the General Body itself that it would.be
published in 'The Tribune' (English and Hindi), Amar Ujala
(Hindi), Dainik @haskar (Hindi) and Dainik Jagran (Hindi). H
61 O SUPREME COURT REPORTS [2014) 6 S.C.R.
A 10. The aforesaid notice for auction of the Societies land
prompted the suspended Managing Committee to file an
application in the Court of Senior Sub-Judge on 18.08.2003
which was moved seeking an order of injunction on the Society
from holding the auction on 21.08.2003. The Sub-Judge's Court
B entertained the application and a stay of the sale of land was
passed by the Sub Judge. In view of the order of stay, an
advertisement was further published in the newspapers on
20.08.2003 for postponement of the proposed auction but a
further development took place when the interim order of the
c Sub Judge granting stay of auction was vacated as a result of
which another advertisement was issued which was published
in 'The Tribune' on 07.08.2003 wherein a fresh date of auction
for sale of the land was-given for 28.02.2003 at 10 a.m. at the
Society site .•
D 11. In pursuance to the aforesaid fresh date of auction, the
auction was held on 24.11.2003 whereby the land belonging
to the Society was sold to respondent No.7 for a sum of
Rs.4,94,04, 125/-as against the estimated market rate of about
Rs.4.2 crores.
E
12. After the auction of the land belonging to the Society
in favour of respondent No.7 was complete, the writ petition
No.20252 of 2003 which had been filed challenging·ihe
suspension of the members of the Managing Committee
F wherein Captain A.K. Mahindra and Ashok Sharma had been
elected as Secretary and Treasurer was withdrawn by the
petitioners/Secretary and Treasurer therein with liberty to avail
all existing and alternative remedies available to them by filing
an appeal under Section 114 of the Co-operative Societies
G Act. The petitioners/Captain A.K. _Mahindra and Ashok·Sharma
availed of the remedy under Section 114 by filing the· appeal,
w~ich was dismissed by the Deputy Registrar on 19.11.2004,
which was challenged by filing a writ petition No.6491 of 2005,
but was dismissed by the learned single Judge inter alia
holding as follows:
H
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 611
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
(i) The suspension order dated 13.12.2002and A
removal order dated 05.09.2003 of the erstwhile
Committee whereby Captain A.K. Mahindra and
Ashok Sharma had been appointed Secretaryand
Treasurer respectively had been held did not .
subsist because new election of the Managing B
Committee was held on 05.12.2004 wherein the
appellant No.1 Captain A.K. Mahindra was once
again inducted as a memberwho earlier was
holding the post of Honorary Secretary as a result
of the election held on 28.05.2000 and the writ c
petition challenging removal of CaptainA.K.
Mahindra and Ashok Sharma who were removed
in whose place the Boardof Administrators had
been appointedwas dismissed as infructuous as in
view of induction of new Managing Committee, the
0
orders of suspension and removal of earlier
Managing Committee challenged by the writ petition
did not survive as the learnedsingle Judge was
pleased to hold that when the new Managing
Committee waselected, the dispute
regardinga.djudication of suspension of the E
officebearer of the earlier ManagingCommittee
constituted as a result of the election held in 2002
were no longer sustainable.
(ii) The learned single Judge inter alia further held that F
the petitioner A.K. Mahindra had no locus to
challenge theorder of his removal passed by the
Registrar, Co-operative Societies appointing Board
of Administrators in hisplace or the decision of the
General Body for sale of the land belonging tothe G
society did not survive as it was onlyA.K. Mahindra
the suspended member who had challenged the
sale and no other member had come up to
challengethe decision of the General Body to sellthe
land of the Society. H
612 SUPREME COURT REPOR"'fS [2014) 6 S.C.R.
A (iii) The learned single Judge h;:id further held that in the
appeal before the Registrar against removal of the
members of the Managing Committee.there was no
challenge to the order ofthe Registrar giving
permission to sell/auction was made nor the
B auctionpurchaser was impleaded as a partytherein
and hence, the appeal sufferedfrom misjoinder of
the necessary partyand non-appealing of impugned
order, debarred the suspended petitioners to
challenge the same in the writ petition.
c (iv) The learned single Judge further took note of the
fact that the decision to sell the land was of the
General BodySociety which was taken on
02.06.2002and the said decision cannot be said to
have been taken by authority constituted under the
D Co-operative Societies Act but was taken by the
members of the Society in a General Body Meeting
which had passed a resolution to dispose of the
land at reasonable price and authorised
AshokKumar and AK. Mahindra to act in the matter
E and that AK. Mahindra assessed the market value
of the land as Rs.40 lakhs per acre on the basis of
the information obtained from the concerned
Patwari as already referred tohereinbefore.
F (v) The learned single Judge was further pleased to
hold that the auction sale was conducted after due
permission granted by the Registrar 'under the
supervision of the Sales Committee already
referred to hereinbefore. and after giving
advertisement in three popular newspapers of Hindi
G
and Englishbefore fixing the minimum rate of landat
Rs.40 lakhs per acre which was themarket rate at
that time.
(vi) The learned single Judge also took noteof the fact
H that the petitioner therein didnot bring on record any
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 613
HARYANA & ORS .. [GYAN SU.DHA MISRA, J.]
document to show that the rate of land was more A
than Rs.40 lakhs per acre as the prevalent collector
rate/circle rate of that time was Rs.12 lakhs per acre
ofthe area whereas the Societies land in question
was sold at Rs.46.25 lakhs peracre i.e. more than
the market rate fixed at Rs.40 lakhs per acre. The B
learned single Judge recorded a categoricalfinding
that there was neither any fraudin conducting the
auction sale nor wasthe auction sale bad or illegal
in any manner. In so far as the allocation regarding
non publication of the auctionnotice in less c
expensive newspaper is concerned, it was held that
this decision was also taken in the General Body
Meeting of the Society itself. However, the learned
single Judge enhanced therate of land from
Rs.46.25 lakhs to Rs.70 lakhs per acre which
0
amount had himself been offered by Captain A.K.
f)llahindra who was the HonorarySecretary of the
· Society at least on the date when the resolution by
the GeneralBody was passed on 02.06.2002. The
learned single Judge after hearing thecontesting
plea of the respective partiesdisposed of the writ
E ,
petition taking intoaccount the interests of the
members of the Society holding that the amount
ofRs.70 lakhs per acre was sufficient foreligible
members.
F
(vii) The learned single Judge. further orderedthat the
difference of the amount which had come about with
the increase in the cost of the land by increasing
the ratefrom Rs.46.25 lakhs per acre to Rs.701akhs
per acre would be paid by the respondent No.7/ G
auction purchaser to the Registrar, Co-operative
Societies within 45 days from the date of the order
i.e. 24.08.2007 with interest at the rate of 6% per
annum on the amountawarded by him from the date
of auction till the payment was actually made. H
614 SUPREME COURT RERORTS [2014] 6 S.C.R.
A (viii) It was further directed by the learnedsingle Judge
that the amount so received from respondent No. 71
the auction purchaser would be disbursed forthwith
amongst the eligible membersproportionately,
except the tainted ones, by the Registrar himself or
B by anyother person authorised by him in thatregard
and the _share of the tainted persons would be kept
until the decisionof the cases against them were
adjustedagainst the recovery, if any ordered against
them. It was also made clear by the learned single
c Judge that the members who had already received
their share amount would only b~ entitled to the-
difference on account of increase of price and the
concession given by the High Court in the judgment.
13. The erstwhile Secretary of the Co-operative Society
D Captain A.K. Mahindra who had been suspen_ded by the'
Registrar, Co-operative Society along with 37 members (38 in
all) filed letters patent appeal No.215 of 2007 before the
Division Bench of the High Court wherein the auction sale
conducted by the Board of A<:lministrators under the supervision
E of the Sales Com.mittee of 5 members which included Deputy
Registrar, Co-operative Societies, Gurgaon, Inspector, Co-
operative Societies, Gurgaon, Sub-Inspector, Co-operative
Societies, Gurgaon filed letters patent appeal before the
Division Be111ch of the High Court wherein the auction sale
F conducted by the co-operative societies in pursuance to the
order of the Registrar passed by the co-operative societies
were challenged essentially on the following grounds:
(i) That the advertisement for auction of the land was
not published in newspapers which had a wide
G
ciroulation in an area. It was alleged that the said
notice was deliberately issued in. a newspaper whicli
had negligible circulation in Delhi and Gurgaon,
where most of the members ofthe Society used to
reside.
H
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 615
HARYANA & ORS. [GYAN SUDHA MISRA, J.)
(ii) The land belonging to the Society was sold for a A
song to the respondent No. 7 though it could have
fetched more saleconsideration in case the auction
after giving due advertisement, would have been
conducted.
B
(iii) There was no necessity of selling the land.
14. The learned Judges of the Division Bench who heard
the letters patent appeals rejected all the contentions of the
appellants and upheld the order passed by the learned single
Judge holding therein that the plea regarding suppression of C
notice in a newspaper lacking wide circulation could not be
sustained as the first advertisement regarding auction notice
, were published in three newspapers of wide circulation and
·when the first auction notice was cancelled, the second notice
was published announcing the new date as the said order D
against the auction had been vacated and the said notice was
published ir:t the daily newspaper 'The Tribune' which is locally
the most prominent newspaper in Punjab and Haryana. Hence,
the Division Bench was pleased to hold that the land being
situated in Haryana, the publishing of the later advertisement E
in 'The Tribune' cannot be held to cause any prejudice to the
prospective buyers as alleged by the appellant.
15. 'The Division Bench was further pleased to hold that
the plea raised by the counsel for the appellant that there was
no necessity of selling the land belonging to the Society was F
also not worth accepting when a conscious and considered
decision was taken by the General Body vide its resolution
passed on 02.06.2002, whereby a decision was taken to sell
· the land keeping in mind the plight of the members who were
initially made to understand that in case flat~ were constructed G
a flat would cost around Rs.4 lakhs but would later stipulated
that on completion of the flat, the same would cost Rs.17.50
, lakhs approximately, if construction commenced on time and
were to be completed within three years, whereas at the
· relevant point of time, flats in other adjoining societies were H
616 SUPREME COURT REPORTS [2014] 6 S.C.R.
A readily available for a lower cost at Rs.12 to 13 lakhs. The
Division Bench therefore was pleased to hold that the decision
in the General Body Meeting was taken after considering the
pros and cons of the decision to auction sale the land.
16. In so far as the plea of the appellant emphasising that
B
the land was sold at a much cheaper rate to the respondent
No.7 and thus was prejudicial to the interest of the members
of the Society is concerned, it recorded that the appellant
Captain A.K. Mahindra who was representing all the appellants
in LPA No.215/2007 had himself written a letter on 02.07.2002
c while seeking permission to sell the land to the Assistant
Registrar, Co-operative Societies stating that the rate of the
land in the area where the Society is situated is Rs.40 lakhs
per acre, as obtained from the concerned Patwari office.
Captain A.K. Mahindra had himself forwarded that letter
D alongwith a copy of the letter received from the concerned
Patwari. In that letter which has been quoted hereinbefore, he
had categorically stated that the total value of the land was
based on the above rate which amounted to Rs.4.20 crores for.
the entire land of the Society. Even the minutes of the General
E Body Meeting recorded that the members themselves had
resolved that the land prices in the area at the relevant time,
that is in the year 2092 had gone down. In view of the rate
quoted by the appellant himself in the aforementioned letter and
the decision taken by the General Body in its Meeting to sell
F the land on the ground that the land prices were going down,
no plea could be raised at that stage to say that the land was
sold at. a lower price. The Division Bench further took note of
the fact that in any case, the rate of land was enhanced from
Rs.40 lakhs to Rs.70 lakhs per acre by order of the single
G Judge. Besides this, when the General Body of the Society had
decided to abort the venture of the flat building due to germane
factors such as the pending litigation, possibility of acquisition
by the Government, irregular shape of the land and the
surrounding land having been purchased by another society
H namely Saraswati Kunj and the falling rate of land prices, it was
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 617
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
in the members interest to recover the investments made by A
them in the failed venture as quickly as possible. The appellant
No.1/suspended Honorary Secretary Captain A.K. Mahindra
had made enquiries himself from the Tehsildar about the
prevalent market price and the Tehsildar had opined that at the
relevant time while the Collector rate was Rs.12 lakhs per acre, B
the market rate was about Rs.40 lakhs per acre. In spite of this,
the learned single Judge was pleased to enhance the rate of
the land by awarding Rs.70 lakhs per acre of the land owned
and possessed by the Society. Hence, the Division Bench was
pleased to hold that when the appellant No.1 Captain A.K. c
Mahindra, the erstwhile/ suspended Honorary Secretary had
himself as an office bearer sought permission to sell the land
at Rs.40 lakhs per acre, he cannot be permitted to question
the inadequacy of Rs. 70 lakhs per acre which was awarded
by the learned single Judge. Thus, the amount which was D
actually paid for the purchase of the land on 24.11.2003
exceeded by about Rs. 70 lakhs, which was previously
estimated to be Rs.40 lacs per acre as per the market rate i.e.
Rs.4.2 crores vide letter dated 02.07.2002 which was written
by the appellant No.1/Captain A.K. Mahindra on behalf of Mount E
Everest Society to the Registrar, Co-operative Society,
Haryana. The learned Judges of the Division Bench thus were
pleased to uphold the judgment and order passed by the single
Judge relying upon the figure suggested by the appellant No.1
himself relating to the cost of land recorded hereinbefore.
Consequently, the Division Bench which examined in detail the F
price fetched for the society land, found it to be reasonable
particularly in the light of the adverse factors noticed by the
General Body Meeting which prompted the General Body to
pass a resolution to put the land to auction sale which have
been scrutinised meticulously and extensively by the single G
Bench of the High Court as also the Division Bench recorded
hereinbefore. In view of the aforesaid findings recorded by the
Division Bench, the letters patent appeals were dismissed by
the High Court and thus it was concurrently held by the single
Judge as well as the Division Bench also that the auction sale H
618 SUPREME COURT REPORTS [2014] 6 S.C.R.
A could not be held to be illegal, arbitrary or suffering from the
vice of surreptitious auction sale which could persuade the High
Court to set it aside as the High Court examined in detail the
price fetched for the society land and found it to be rea.sonable
particularly in the light of the adverse factors noticed by the
B General Body in the Meeting which prompted the General Body
to pass a resolution to put the land to auction sale.
17. Feeling aggrieved with the judgment and order passed
by the Division Bench dis~1ssing the two Letters Patent
C Ap"peals, thus upholding th~ ~~dgment and order of the single
Judge, two appeals by wp.y pt special leave had been filed by
the petitioners/appellant$ Mount Everest Co-operative House
Building Society Ltd. and by 10 members of the Co-operative
Society out of which the petitioner/appellant No.1 Capt. AK.
D Mahindra withdrew himself from the special leave petitions due
to which he now ceases to be an appellant in the appeal filed
by the members.
18. Learned senior counsels Mr. P.S. Patwalia and Mr.
C.A. Sundaram representing the appellant -members of the
E Mount Everest Co-operative Society and the Mount Everest Co-
operative Society respectively assailed the judgment and order
of the Division Bench which was pleased to uphold the
judgment and order passed by the single Judge and thus upheld
the auction sale in favour of the auction purchaser respondent
F No.7 inter -alia on the grounds which substantially are the same
which had been urged before the High Court and were rejected
concurrently by the single Judge as also the Division Bench.
However, since the counsel for the parties were heard at length
assailing the correctness of the judgment and order passed by
G the High Court it would be appropriate in the interest of justice
and fairness to the cause to recapitulate and deal with the
same.
19. The principal ground of challenge to the auction sale
thus are essentially two-fold. In the first place, it was submitted
H that the action of respondent No.3 in suspending the new
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 619
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
managing committee of the petitioner/appellant society under A
Section 34(2) of the Haryana Co-operative Societies Act, 1984
was arbitrary and illegal where no proceeding for removal of
the managing committee was pending under 34(1) of the
aforesaid Act and the same was done with an oblique motive
to put the land of the Society to auction sale. In this context, it B
was also submitted that the action of <he official respondents
and that of the sales committee appointed by the official
respondents in conducting the auction sale of the land of the
society on 24.11.2003 was sham and a fraud committed on the
members of the society and the public at large. It was therefore C
further submitted that the official respondents and the members
of the sales committee had colluded in selling the land of the
society at a throw away price in favour of respondent No.7
which according to the appellants has been established by the
records of the auction conducted on 24.11.2003. Thus, in sum
0
and substance, it was contended that the auction conducted on
24.11.2003 was a pre-determined affair, illegal and a sham
auction sale.
20. Commenting on this part of the averment, it was
submitted that it is clear from all the pleadings before the High E
Court raised on behalf of the Society that the Society was not
duly represented for want of the office-bearers of the Society
and the entire process of auction was collusive. According to
the counsel, the General Body Meeting which was called by the
society and the resolution which was passed therein should not F
have been given effect to. It was, therefore, urged that the
Division Bench of the High Court erred in dismissing the Letters
Patent Appeals filed by the respondents as the High Court
failed to appreciate that the action of the respondents from the
time i.e. suspending the Managing Committee was merely to G
grab the land of the petitioner/society.
21. Elaborating on this aspect, it was further submitted that
on 13.12.2002 Assistant Registrar, Co-operative Society
suspended the Managing Committee when A.K. Mahindra was
H
620 SUPREME COURT REPORTS [2014] 6 S.C.R.
A the Secretary on the basis of alleged irregularities of the
previous Managing Committee under Shri Gupta and not on
the ground of mal-functioning of the then existing Managing
Comrnittee under Capt. A.K. Mahindra. The Committee was
thereafter illegally removed on 5.9.2003 without even fixing the
B date of hearing. Giving the sequence of events, it was stated
that in between 13.12.2002 and 5.12.2004, there was no
committee or effective society to manage the affairs of the co-
operative society since they had been suspended or removed.
At this time, a Board of Administrators was in control with Mr.
c Ashok Sharma as one of the key administrators who acted in
collusion with the auction-purchaser. It has further been
. submitted that during the period of suspension/removal of the
managing committee and appointment of the Board of
Administrators which period was in between 13.12.2002 to
24.11.2003, the property was sought to be brought to sale
D
through a sham auction in collusion with the auction-purchaser
without any notice to the members of the society. Factual details
were further given out stating that the last elected secretary of
the managing committee with Capt. A.K. Mahindra as
Secretary and 120 others filed a writ petition on 18.12.2003
E challenging the suspension of the managing committee and the
sale to the respondent No.7. The society itself could not file any
case since the committee had been removed and was under
the control of the Board of Administrators whose collusive action
was being questioned. However, this writ petition had been
F withdrawn to challenge the removal before the Registrar but as
the Registrar rejected the petition challenging the removal,
another petition was filed on 26.4.2005. In the meantime, a
sham election was conducted on 5.12.2004 whereby Mr. Ashok
Sharma was elected and this was immediately challenged on
G 6.12.2004. The election was set aside and once again a Board
of Administrators was appointed on 26.9.2007. Elections were
thereafter again conducted on 13.9.2010 by the Registrar and
the present committee was elected on 13.9.2010. It has been
submitted that this was the true committee representing the
H members who were absent and in between the period of
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 621
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
13.12.2002 and 13.9.2010, the managing committee became. A
non-existent which was under the control of Mr. Ashok Sharma
who became the Member of the Board of Administrators and ·
is alleged to have been controlling even the Board of
Administrators. On 19.11.2010, when the new Managing
Committee took over, a resolution was passed on 27.8.2010 B
after which Letters Patent Appeals were filed before the
Division Bench which were dismissed and the same are under
challenge in these appeals by way of special leave petitions.
22. On the basis of the aforesaid facts, it was contended C
that the society and its members were not duly represented for
want of the members of the society and no General Body
Meeting was called to discuss or decide the nature of the
pleadings to be filed or the stand to be taken by the members.
The members of the society were kept entirely in the dark .
between the period 13.12.2002 and 13.9.2010 and D
immediately upon a representative committee being elected,
the society preferred the Special Leave Petitions before this
Court out of which the instant appeals arise. It was further
contended that the plea of the respondent that the majority of
the members have no grievance is completely wrong inasmuch E
as only 120 members out of 288 members had taken away, their
payment and a substantial number of those did it under protest.
The allegation, therefore, that the cause of action to pursue the
matter do not survive at the instance of a few members is fit to
be rejected. It had also been reiterated that the managing F
committee of the society was deliberately suspended to grab
its land.
23. The auction-purchaser/respondent No.7 contested the
aforesaid plea and first of all submitted that only 38 members
before the single Judge and 10 members in Letters Patent G
Appeal challenged the judgment and order of the High Court
passed by the Division Bench and has also given the detailed
sequence of events under which the managing committee of
the co-operative society was suspended and also the fact that
622 SUPREME COURT REPORTS [2014) 6 S.C.R.
A the decision was taken by the Board of Administrators and the
General Body in a bona fide manner with which the respondent
No.7 had no concern. It was further contended that the decision
to sell the land was taken by the General Body of the Society
after the society decided to sell the land and recorded specific
B reasons for this by holding a General Body Meeting on
2.6.2002. At this point of time, Capt. A.K. Mahindra was the
Secretary of the Managing Committee who had challenged the
suspension of the Managing Committee and the sale before
the Registrar, ha<;! himself taken active part in the society's
c decision to sell the land who has now discreetly withdrawn
himself from the present special leave petitions. The General
Body Meeting minutes had recorded the reasons for the
General Body to approve of the auction sale indicating that it
was agreed that the society could not develop the land due to
0 financial constraints as the land was agricultural land for which
license had been denied, certain areas were under disputes/
litigation, the land was not located close to the main road and
was not contiguous had multiple share holders and thus did not
command such land rates as other properties in the area and,
therefore, a conscious well-deliberated decision wa·s taken by
E
the General Body to sell the land as that was a viable and
beneficial alternative for the members to go into. However, the
auction purchaser-respondent No.7 was not in the picture at all
when the decisions were taken by the General Body way back
in 2002.
F
24. Learned senior counsel for the appellants Mr. Patwalia
however countered this submission and assailed it by
submitting that even if the decision by the General Body was
taken to dispose of the land by putting it to auction sale, it was
G not that the auction could be 'held and the land could be sold at
a throw away price putting the society to a great loss. It was,
therefore, urged that the basic question would be whether the
auction was conducted fairly and correctly so as to get the
maximum. price. According to the learned counsel a perusal of
H the auction notice and auction records would disclose that it was
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 623
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
1
not done so and the auction sale is a complete sham as the A
,price at which the land was sold, was highly inadequate and
.
.much below the price which
.
it ought to have fetched.
25. On a scrutiny of the sequence of events and the plea
of the contesting parties on the pivotal point as to whether the B
decision taken to auction sale the land was bona fide or
malafide, tainted with dishonest motive and whether the
suspension of the Managing Committee and appointing the
Board of Administrators was correct or not, it can clearly be
noticed that when the managing committee under Mr. Gupta as
Secretary was suspended, a ne)N managing committee after C
fresh election took over, when on 5.8.2001 Capt. A.K. Mahindra
became Secretary of the Managing Committee. It was under
his secretaryship that a General Body Meeting was convened
and a resolution was passed by the General Body to auction
sale the land recording specific reasons in the Minutes of the D
General Body Meeting whereby the Honorary Secretary/Capt.
A.K. Mahindra brought out the options to the notice of the
General Body. One of the options was to construct flats on the
land for which tender had been floated and it was noted that
out of the two parties who responded to the tenders, one namely E
Mis Antriksh Engineers and Construction & Corporation had
shown interest. Their main terms were as follows:
(a) that they will invest all money required toobtain CLU,
development charges etc. i.e. they willinvest right upto the F
stage where construction canbegin. This will entail an
expenditure of Rs.8 crores approximately.
(b) that they will refund the deposit of a limitednumber of
members after CLU permission is received.
G
I that in lieu of the money invested they will begiven 50%
of FAR and;
(iv) construction rate would be Rs.850/-sq.feet which is
deductible.
H
624 SUPREME COURT REPORTS [2Q14] 6 S.C.R.
A It was given out for information of the membersthat the
advantage would be that the Societywould be able to move
forward in achieving its aimand that limited number of
members desirous of leaving Society will get their money
back. In so far as the disadvantages were concerned, it
R was noted that it will take around 6 months to get
CLUpermission by which time Section 4 notice underthe
Land Acquisition Act may be issued for acquisition of the
land which the society possessed. It was given out that a
minimum period of .3 years will take before the
construction was announced and before completion goes
c
smoothly. In case, the project was undertaken, 1600 sq.
feet flat would cost Rs.13.60 lakhs approximately, and
assuming a member of the Society had paid Rs.4 lakhs
the flat to be constructed would cost him Rs.17.50 lakhs.
It was therefore deliberated that the flats at a lower rate
D than Rs.17 .50 lakhs were readily available in Gurgaon in
Jal Vayu Vihar and Rail Apartments atRs.12 to 13 Lakhs.
The Society therefore gave the second option tothe
General Body and the second option was saleof the land
E which were in possession of the societyfree from litigation.
The Society noted that theland prices had gone down at
the relevant timewhich was lower than t~e purchase price
in thelast few years when the Society had purchased
theland at Rs.7.5 crores. Thus, it was noted down bythe
F Society before the General Body that if theland belonging
to the Society were to sell the landit will be U!Jable to
recover the full amount which the society has earlier
invested in purchasing theland. However, a comparative
assessment of the objectives were also taken note of by
G the societywhich were as follows:
(v) Will avert the danger of the land belonging to the
society being acquired.
(vi) Will avert all the cost and uncertainties of the
H litigations being faced by the Society.
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 625
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
(vii) Membersof the Society will get backaround 70% of A
their investments.
(viii) Will pave the way to recover the balanceamount of
investments by members.
B
Thus, on a comparative assessments of the landbeing
retained by the Society and in case it wasdisposed of, the
General Body of the Societyresolved on 02.06.2002 after
taking a consciousdecision to dispose of the land of the
Society." · ·
c
26. It was in view of this decision that follow up actions were
taken by the Board of Administrators under the Sales
Committee inviting proposals for the sale of the land as the
Managing Committee under Captain Mahindra and Treasurer
Ashok Sharma was under suspension due to the alleged D
illegalities and irregularities. The learned single Judge as also
the Division Bench of the High Court has scrutinized and taken
note of the overwhelming circumstance which weighed with the
High Court. It was considered by the High Court which took note
of the fact that although 10.69 acres of land was claimed by E
the society, 9 acres i.e. 3.5 acres in Khasra Nos. 1977, 1678
and 1679 as also 5.5 acres in Khasra Nos. 1692, 1696 and
1697 were in dispute/litigation in the District Court, Gurgaon.
The clear land without any dispute with the society was only
around 1.69 acres. The records further indicated that 3.5 acres F
· of land bearing Khasra Nos. 1977, 1678 and 1679 was never
purchased by the society as.. per the then Secretary Mr. RP.
Gupta. The learned single Judge has also taken note of the fact
that this was under litigation as it was purchased by another
society -Saraswati Kunj whose registration was in progress. G
Thus, if 3.5 acres were to be deducted out of 4.5 acres, only
1.1 acre was left to the society. The learned single Judge further
noted that the land in question had been surveyed 9Y the
Government along with other vacant land with a view to clear it
H
626 SUPREME COURT REPORTS [2014] 6 S.C.R.
A and the acquisition process had been set in motion. The land
belonging to the society had been encircled/ surrol'.mded by
another society namely Saraswati Kunj. Therefore, the future
course of action left to the "society which has been recorded
hereinbefore in detail in view of the considerations made by
B the General Body, was to dispose of the land of the society.
27. Insofar as the dispute regarding suspension of the
Managing Committee under Captain A:K. Mahindra in view of
the alleged irregularities of the previous managing committee
is concerned, it had started only on 13.12.2002 and all the
C disputes in regard to removal and induction of the society under
Capt. A.K. Mahindra admittedly took place between
13.12.2002 and 24.11.2003. But it is an equally undisputed
factual position that the resolution was passed by the General
Body in its Meeting for sale of the land on 2.6.2002 when the
D managing committee constituted on 5.8.2001 under Capt. AK.
Mahindra was duly in place and no member of the society had
raised any grievance against the said decision that it was
erroneous or tainted in any manner and the society was duly
represented by the Secretary and all members of the society.
E The case of the managing committee and its members that the
Assistant Registrar illegally suspended the managing
committee under Capt. AK. Mahindra based on the alleged
irregularities of the previous managing committee under Mr.
Gupta, first of all took place on 13.12.2002 from which it is clear
F that when the General Body Meeting was conducted and
resolution was passed on 2.6.2002, the Secretary of the
Managi,,g Committee Capt. AK. Mahindra was duly and legally
in place as Secretary and was removed by the Registrar of
Society only at a later stage on 05.09.2003 after which the
G Board of Administrators was appointed by the Registrar and
a Sales Committee was also set up under whose supervision
the auction sale was decided to be held under supervision of
the Sales Committee. It may further be noted that the proposed
auction was also challenged as an application for injunction
H
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 627
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
restraining the auction sale was filed before the District Court A
where an order of injunction restraining the auction sale was
also granted by the District Court but the said injunction was
later vacated against which no appeal was preferred by any
member of the society. It is no doubt true and it has been
contended that as no Managing Committee was in existence B
at that point of time, no appeal could be preferred against the ·
order vacating the injunction. However, this contention is clearly
without substance for if the members in their individual capacity
·could assail the auction sale by filing a separate writ petition,
it cannot be accepted that they were precluded in any manner c
from challenging the auction sale in case they were aggrieved
and the subsequent challenge after seven years in 2010 clearly
appears to be an after thought at the instance of a miniscule
. number of members who decided to assail the auction sale
clearly as a matter of gamble
D
28. As already noted, the resolution by the General Body
of the Society to auction sale the land was taken way back on
2.6.2002 vide the resolution passed in the General Body when
there was dispute existing regarding the functioning of the
Managing Committee and it [s only after more than one year E
that the Secretary - Mahindra was removed by the Registrar,
Co-operative Societies and since he was removed, he
challenged his removal as also the decision of the General
Body to auction sale the land which resolution during his tenure
as Secretary was passed. In fact as long as he was the F
Secretary he had not merely approved the decision of the
General Body to auction sale, but also the existing market price
of the land and only when he was removed from the post of
Secretary, he started questioning the auction sale held under
the supervision of the Board of Administrators as also the G
decision to auction sale of the land conveniently ignoring that
the same had been approved by the General Body Resolution
during his tenure as Secretary_ when there was no dispute
regarding the Society's functioning.
H
628 SUPREME COURT REPORTS [2014] 6 S.C.R.
A 29. It may further be noted that the then Secretary Capt.
Mahindra although had challenged his removal as Secretary of
the Society, he never thought it appropriate to file any appeal
against the order vacating the order of injunction against
auction sale which he could have done as the ex-secretary if
B he was genuinely concerned. The matter regarding the dispute
challenging the auction sale had been filed in a court of
competent jurisdiction where initially an order of injunction was
also passed but the same was finally vacated against which
no appeal was preferred either by any member of the society
c or the Secretary. The order of injunction against auction sale .
was finally vacated but no member was conscious or vigilant
to challenge the same. On the contrary, large number of
members gradually withdrew the amount and walked out of the
society. It is clear that for the first time in the year 2010 when a
new managing committee was elected on 13.9.2010 that a
0
decision was taken to challenge the auction sale by which time
the existence of the society withered away when the majority
of the members out of 288 left and only 38 members remained
clearly implying that for all practical purposes the Society
E ceased to retain its legal entity as the land of the society for
which contribution had been made was by all the 288 members
and not merely 38 members. Even out of this 38 members, only
10 members preferred Letters Patent Appeal before the High
Court although the General Body resolution was passed by the
majority and cannot be allowed to be over ruled by 10 members
F only.
30. Much emphasis has been laid on the valuation of the
land as it has been alleged that the land was auctioned/sold at
a much lower price than was capable of fetching which remains
G unsubstantiated in absence of any evidence in this regard as
to what were the market price of the undeveloped land in the
surrounding areas. On the contrary, it could be noted that the
circle rate of the land at the relevant time was Rs.12 lacs per
acre and the market rate was Rs.40 lacs per acre and as per
H the auction held, the price fetched in the auction ultimately
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 629
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
worked out to Rs.46 lacs per acre. The appellants had not A
furnished any material before any court as to what was the
market price of the undeveloped land in the year 2003 when
the auction sale was held in pursuance to the General Body
Resolution of the Co-cperative Society. In any case, this
question at this stage is not of much relevance when the High B
Court has increased the price of the land at Rs.70 lakhs per
acre and members of the society have been held entitled to
refund of their contribution amount along with 6 % interest in
view of which undervaluation of the cost of the land no longer
subsists. It has no where been urged that at the relevant point c
of time in the year 2003 when the land was auctioned/sold, its
valuation was much more than Rs.70 lakhs per acre so as to
treat it prejudicial and detrimental to the interest of the members
. of the society who had contributed for purchase of the land.
31.Thus, if the members of the Society by virtue of a D
General Body resolution had decided to auction sale the land
during the tenure of a duly elected Secretary of the Society A.K.
Mahindra and for more than cine year no member of the society
had any reason to challenge the same after which the Board
of Administrator was appointed and the price of the land on the E
date of auction could not be more than Rs.70 lakhs per acre, it
would be unfair and unjust to interfere with the auction sale after
11 years of its holding on the plea that the price fetched in the
auction suffers from undervaluation as the same cannot be
compared with the present day valuation which obviously must F
have grown over the years as compared to the year 2003 when
the auction sale was held. In this context, it may also be noted
that the Secretary Capt. Mahindra as also Patwari had also
given out in writing and is on record which indicates that the
value of the land at the relevant time which was not a developed G
land at the relevant time when the land was put to auction sale
was not more than Rs. 40,000 per acre which cannot be
doubted in absence of any material to the contrary specially
when the circle rate of the land was Rs.12 lacs per acre only
an~ the land was auction sold at Rs.46 lacs per acre H
630 SUPREME COURT REPORTS [2014] 6 S.C.R.
A approximately in the year 2003. In any case, the price of the
land has already been increased to Rs. 70 lakhs per acre by
the High Court and has been ordered to be paid alongwith 6
% interest and thus the Society has not been put to monetary
loss on account of the sale conducted in pursuance to the
B resolution of the General Body which was passed during the
tenure of a duly constituted Managing Committee under Captain
Mahindra. It is further clear that only a handful of members of
the co-operative society who are now only 10 out of 288 and
have not withdrawn from the society by withdrawing their amount,
c expects that all the following aspects and circumstance of the
case should be brushed aside which are as follows :
(i) The fact that the General Body Meetingwas held on
2.6.2002 on which date there was no dispute
regarding the functioningof the managing
D committee;
(ii) Resolution of the General Body Meeting was
passed unanimously on 2.6.2002 approving the
decision to auction sale the land when the Society
E was functioningunder a duly constituted Managing
Committee and hadnot been suspended. The
suspension of the Secretary ofthe Society was
much later after more than a year in 2003 and during
this period the resolution of the GeneralBody was
F never challenged by any member.
(iii) The constitution of the Board of Administrators
should be struck down as invalid although the
members of the Co-operative Society had never
challenged theconstitution of the Board of
G Administrators;
(iv) The Sales/Supervision Commit 'e under w!1om the
auction sale was held shn ' i be !recHed as a
defunct body;
H
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 631
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
(v) The valuation of the land in the year 2003which was A
Rs.12 lacs per acre as per circlerate and Rs.40
lacs market rate should be disbelieved in spite of
any evidence to the contrary which in any case has
been increased to almost the double by theHigh
Court and has awarded 6 % interestalso which B
clearly takes care of the pricefactor as the price of
the undevelopedland could not have been more than
Rs.70 lacs per acre at the relevant time in theyear
2003 when the auction sale had beenheld;
(vi) All activities in regard to the conduct of the auction C
sale should be treated as bogus and sham although
the District Court had vacated the order of
injunctionrestraining the ~uction sale against
whichno appeal was filed;
D
(vii) Only 1Omembers out of 288 are now aggrieved
which renders the co-operativesociety into a non-
existent co-operativesociety as even the rest 28
members outof 38 who had filed the writ petition in
theHigh Court have withdrawn from the litigation. E
32. From the background, facts and circumstance of the
matter, it is further clear that the members of the co-operative
society had clearly opted a wrong forum by filing a writ petition
in the High Court for if they expected the court to appreciate
evidence and record a finding on the aforesaid disputes for F
setting aside the auction sale, it is obvious that the petitioners
should have approached the civil court of competent jurisdiction
~here it would have had the opportunity to adduce evidence
and prove all the allegations of under valuation and the alleged
fraud challenging the auction sale. In fact, the writ petition for G
assailing a factual dispute ought not to have been entertained
by the High Cpurt under its writ jurisdiction but in the interest of
justice and fairness as also equity and good conscience, the
High Court entertained a dispute which purely was of a civil
nature since all contentions which have been raised would have H
632 SUPREME COURT REPORTS [2014] 6 S.C.R.
A required appreciation of evidence. Yet the High Court to a great
extent has taken care to scrutinize all aspects of the matter in
regard to the writ petition filed by the co-operative society
members who sought to assail the auction sale clearly alleging
disputed questions of fact alleging fraud in conducting auction
B sale as also valuation of the land in question which required
adducing of evidence and the same could not have been
entertained by the High Court under Articles 226 and 227 of
the Constitution except to the extent of considering whether the
order passed by the Registrar, Co-operative Societies rejecting
c the challenge of removal of the managing committee was
sustainable or not. Yet the High Court has entered into all
aspects and has then reached to a conclusion considering
entire conspectus of the matter which in our view cannot be held
to be arbitrary, illegal or unjust in any manner.
D 33. There is yet another feature of the matter which
emerges from the fact that when the removal of Capt. AK.
Mahindra as a Secretary of the society has been set aside, then
all activities including passing of the General Body resolution
in the meeting that were conducted during his tenure as
E Secretary of the Managing Committee cannot be held to be
illegal in any manner. Thus when the General Body resolution
was passed during the tenure of a validly elected managing
committee under Capt. A.K. Mahindra as the Secretary and the
resolution to auction sale the land was passed during his
F secretaryship whereby the value of the land was also assessed
and approved by Capt. A.K. Mahindra himself and no allegation
was levelled by any member against Capt. AK. Mahindra as
all allegations were confined to Ashok Sharma, then the
resolution of the General Body obviously could not have been
G faulted with specially when no appeal against the order of the
Civil Court vacating the order of injunction against the auction
sale was filed by any member of the society specially the
appellants herein. The appellant-society and a handful of
members now restricted to 10, have levelled allegations but
H mere allegation cannot be treated as a proof and if the
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 633
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
members were in a position to assail the same which clearly A
would have required strict proof by way of evidence, they ought
to have gone in for a civil suit and the writ jurisdiction was
clearly not the appropriate remedy to establish and prove
questions of fact. Yet when the single Judge as also the
Division Bench have meticulously examined all aspect of the B
matter discussed hereinbefore and the same does not indicate
any perversity in the conclusions drawn, it would be unfair and
unjust to interfere with the same by indulging into a roving
enquiry merely accepting the contentions of some of the
members of the Society which are clearly based on c
speculation, conjecture and apprehension. The Courts therefore
in a circumstance of this nature cannot be expected to decide
such an issue on suspicion hunch or even intuition which clearly
would be abstract in natur~ and has no place in the eye of law
even before a court of fact and much less before a court under D
writ jurisdiction.
34. The cumulative effect of the entire analysis based on
the facts and .circumstance in the light of the reasonings
assigned by the Single Bench of the High Court as also the
Division Bench, it would not be just and proper to interfere with E
the judgments and orders passed by the single Judge as also
the Division Bench of the High Court holding concurrently that
the auction sale which was in pursuance to the resolution
passed by the General Body of the Co-operative Society based
on the price prevalent on the date of auction sale could be F
faulted on the ground of allegations leveled on the basis of
assumption and speculation of 10 members of the society who
had assailed the same by invoking writ jurisdiction.
35. At this juncture, it would be appropriate to observe that G
in judging the functioning of a co-operative society or any other
statutory body where the democratic process of election is
adopted in pursuance to the Rule and a collective decision is'
taken by majority of the members of the entire body expressed
in terms of a resolution passed by the General Body, then the
634 SUPREME COURT REPORTS [2014] 6 S.C.R.
A plea that the same should be ignored and bye-passed even if
the same has been challenged by a handful of members on
speculative allegation and assumption contrary to the reasons
recorded in the Minutes Books on the plea of mala fide, without
any evidence, would be illegal and arbitrary to accept being
B contrary to the rule unless the alleged malicious action is writ
large on the alleged decision and is challenged by majority of
the members. If a decision is taken by majority of the members
of a Co-operative Society or any other body under a statute in
terms of the Rule, it cannot be over-ruled by minority on the
c ground of mala fide or fraud unless it has passed through a
strict proof of evidence. It is a well known dictum that mala fide
is always easy to allege but difficult to prove as the same
cannot be held as proved relying on assumption, speculation
and suspicion.
D 36. In the instant matter existing 10 members of the society
have practically reduced the Co-operative Society to a defunct
society as all members except 10 out of 278 have finally
withdrawn. Hence, the auction sale at their instance, although
the said auction sale had taken place in view of the majority
E support of the General Body resolution which was conducted
under the supervision of the Board of Administrators appointed
by the Registrar, Co-operative Society and the Sales
Committee is difficult to scrap it as illegal .in spite of the
overwhelming material relied upon by the High Court which has
F upheld the auction sale. Thus in a matter where the decision
has been taken collectively by the General Body reflected in the
form of~ resolution passed by the General Body, it would be
unjust and inappropriate to nurture a lurking doubt and keep
suspecting the decision by ~ntertaining the version of a handful
G who might be disgruntled or might be genuine but would be
difficult to be gauged by any court so 8:S to over-rule the
General Body resolution and accept the view of the minority
based on no evidence excep.t assumption and speculation. If
the instant matter is viewed meticulously, it is clearly obvious
H that the appellants have expected the court of writ jurisdiction
J.N. CHAUDHARY & ORS. ETC. v. STATE OF 635
HARYANA & ORS. [GYAN SUDHA MISRA, J.]
to enter into the correctness and validity of the auction sale A
essentially by expecting the Court to draw inference without
evidence that the auction sale was not bona fide as it did not
fetch the desired value of the land contrary to the materials
available on record. Plethora of circumstances have been
related to establish the same which clearly are in the realm of B
conjecture and speculation, yet the Single Judge and the
Division Bench have both scrutinized and.considered the same
and have recorded a finding against the appellants which
cannot be held to suffering from perversity being contrary to the
existing materials before the Court which have been relied upon. c
Thus, the validity and correctness of the General Body
resolution in view of which the land was put to auction sale
cannot be allowed to be assailed specially when the price/
alleged under valuation of the land in the auction sale no longer
survives as the High Court has allowed the value of the land to
0
be increasetj by increasing it from Rs. 40 lakhs to Rs.70 lakhs
per acre wliich has been ordered to be paid along with 6 %
interest/the appellants have not furnished any material as noted
by the High Court that the cost of the land in the year of the date
of auction which is 2003 was more than Rs.70 lakhs per acre
. so as to offer a cause to interfere even if it were to be interfered E
. in the interest of equity, justice and fair play specially when the
circle rate of the land in the year 2003 when the auction was
held was Rs.12 lacs per acre only.
37. Hence, the endeavour of the appellants that the auction F
sale should be set'aside and the land be revived to the society
cannot be entertained in absence of proof of mala fide contrary
to the existing materials on record on the basis of speculation,
assumption and inference urged by the appellants.
G
38. Assuming for a while although not con.ceding that the
land were to be reverted to the co-operative society for any
reason whatsoever at this stage after 11 years of the sale
during which the appellant Society has practically ceased to
exist where all members except ten out of 288 are left, it is
H
636 SUPREME COURT REPORTS [2014] 6 S.C.R.
A obvious that the land cannot be reverted to the original
members who have taken their refund. In that ~vent, the
appellant -society through a handful of members numbering ten
is bound to indulge in trading of the land by inducting new
members quoting new rates at their instance clearly sacrificing
B the very spirit of a cq-operative society as the land cannot be
marketed even by the defunct Co-operative Society at the old
rate which land had been purchased out of the contribution
made by the erstwhile 288 members out of which only 10 are
now left into the fray who had never even objected to the
C General Body Resolution approving sale of the land nor
challenged the auction sale in the year 2003 when the auction
was held.
39. We, thus find no illegality or infirmity in the impugned
judgments and orders passed by the single Bench as also the
D Division Elench concurrently refusing to set aside the auction
sale held 11 years ago in the year 2003 at the instance of a
Co-operative Society which has practically been rendered
defunct and thus ceased to exist apart from the other weighty
reasons discussed hereinbefore. 9onsequently, both the
E appeals are dismissed but in the circumstance without any
order as to costs.
Devika Gujral Appeals dismissed.
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