Supreme Court of India
PRALHAD & ORS.versusDEORAO & ORS.
- Citation
- 2009 INSC 797
- Decided
- 12 May 2009
- Disposal
- Dismissed
- Bench
- S B SINHA
Holding
The order issued under Section 157 was not in accordance with law as the required hearing was not afforded, and therefore the High Court’s decision to quash it and direct elections stands.
Summary
The Maharashtra government appointed an Administrative Board for the Rokdeshwar Sahakari Soot Girni Ltd. under Section 157 of the Maharashtra Co-operative Societies Act, 1960, extending its term to 19 June 2009. The board was appointed while a writ petition seeking election of the society’s Board of Directors was pending. The High Court quashed the government order and directed that elections be held. On appeal, the Supreme Court examined whether the State’s use of its power under Section 157 complied with the statutory proviso requiring a hearing and whether the order was made in an exceptional situation. Finding no evidence that the society was given an opportunity to be heard and that the order was not justified as an exceptional measure, the Court held the order was not in accordance with law. Consequently, the High Court’s judgment was affirmed and the appeal dismissed.
Issues considered
- Whether the State Government’s order appointing an Administrative Board under Section 157 of the Maharashtra Co-operative Societies Act, 1960, complied with the proviso requiring a hearing.
- Whether the State’s exercise of power under Section 157 during pendency of a writ petition was valid.
- Whether the High Court was justified in quashing the order and directing elections of the Board of Directors.
Legislation cited
- Maharashtra Co-operative Societies Act, 1960s. 157, s. 73, s. 73(1A), s. 78(1)(a)(ii)
Subjects
cooperative societySection 157administrative boardelection of directorsdelegated legislationhearing requirementexceptional circumstancesconstitutional lawArticle 162Article 39
Judgment
[2009] 8 S.C.R. 777
PRALHAD & ORS. A
v.
DEORAO & ORS.
(Civil Appeal No. 3493 of 2009)
MAY 12, 2009
B
[S.B. SINHA AND CYRIAC JOSEPH, JJ.)
Maharashtra Co-operative Societies Act, 1960 - s. 157
- Co-operative society registered under the Act - Writ petition
for direction to conduct election of Board of Directors of C
Society and for quashing the order passed by State uls. 157
appointing nominated Board of Administrators of the Society
- High Court quashing the order, directing that election of the
Society be held - Interference with - Held: Not called for -
Purported order passed by State u/s. 157 was not in D
accordance with law.
Respondent No. 3-Co-operative society was
registered under the Maharashtra Cooperative Societies
Act, 1960 in year 1991. The Sate Government had a share E
capital. The affairs of the society were not managed and
no meeting was held. The State appointed a committee
- to manage the affairs of the society for of three years but
it took no steps. The term of the Committee was extended
and an administrator was appointed. Since 1994 no
election was held. In 2004, a Special General Meeting was F·
convened and request was made to the State to grant
financial assistance and also to appoint an Administrative
Board. It was also resolved that no election be held
unless respondent no. 3 becomes functional. First
Respondent filed writ petition for a direction upon the G
respondent no.5 to conduct election of the Board of
Directors of the Society within a fixed time frame, and that
the order dated 29.6.2007 passed by the respondent no.
6 appointing a nominated Board of Administrators of the
777 H
778 SUPREME COURT REPORTS {2009] 8 S.C.R.
A Society till 19.6.2009 be quashed. The said order was
passed during pendency of the writ petition but was not
produced before the High Court. By the said order ,the
Administrative Board appointed by the State Government
was dissolved, and in exercise of powers u/s 157 of the
B Act, the State Government appointed Administrative
Boar:! of new persons who were eligible for appointment
as Administrator, for a period of 2 years i.e. till 19.06.2009.
High Court quashed the said order directing the
appellants to hold the election of the Society. Hence the
c present appeal.
Dismissing the appeal, the Court
HELD:1.1. Section 157 of the Maharashtra Co-
operative Societies Act, 1960 empowers the State by
D general or special order to exempt any society or class
of societies other than co-operative credit structure entity •
from any of the provisions of Act, or of the rules made
thereunder, and/or to direct that such provisions would
apply to such society or class of societies other than co-
E operative credit structure entity with such modifications
not affecting the substance thereof as may be specified
therein. The proviso appended thereto, however, -
F
provide~; that no order to the prejudice of any society
shall be passed, without an opportunity being given to
such society to represent its case. The Act was evidently
-
,.....
enacted for the purpose of giving effect to the cooperative
movement. It is based on a constitutional policy. [Paras
13 and 14) [787-F-H; 788-A]
1.2. The preamble of the Act clearly shows that the
G same was enacted with a view to give effect to the
provisions contained in Part IV of the Constitution of
India. The State is empowered onder the Act to issue a . ~
general or special order directing exemption from
application of the provisions of the Act. It must, however,
H
PRALHAD & ORS. v. DEORAO & ORS. 779
be done in an exceptional situation. An order by the State A
providing for a power of delegated legislation must be
exercised in the manner laid down therein. An order in
·' terms of section 157 of the Act must be issued in terms
of the provisions contained in Article 162 of the
Constitution of India. [Para 14] [788-F-H] B
1.3. The State of Maharashtra before the High Court
as also before this Court did not bring on record any
·" material to show as to under what circumstances the said
power was exercised. The necessity to exercise the said
power has not been disclosed. However, exercise of
c
such power is a conditional one. The proviso appended
to Section 157 mandates an opportunity of being heard..
There is nothing on record to show that such an
opportunity was provided. It cannot be understood as to
why the copy of the Government Order as such is not D
available. In whose name the Government Order was
issued is not known. Such a power is not to be exercised
only for the purpose of continuation of the Administrator
for a period longer than the one specified under the Act.
If the intention and purpose of the State was merely to E
keep the affairs of the society under its control, it could
have done so only for the maximum period specified
under the Act. It was bound to hold election within the
maximum period provided for therein. It in the name of
•
exercising a special power could not have sought to F
achieve indirectly what it could not have done directly.
There is no reason as to why such a drastic power had
to be taken recourse to during pendency of the Writ
Petition. Had before the High Court the said order been
produced, the first respondent could have even G
questioned the validity thereof on any ground other than
> ~
.~
the one urged before the High Court. In view of the fact
the purported order passed by the State under section
157 of the Act was not in accordance with law, no case
has been made out for interference with the impugned H
780 SUPREME COURT REPORTS [2009] 8 S.C.R.
A judgment. [Para 16 and 17] [790-A-G]
The Registrar of Co-operative Societies, Trivandrum and
Anr. v. K. Kunjabmu and Ors. (1980) 1 SCC 340, referred to. '"·
Case Law Reference:
B
(1980) 1 sec 340 Referred to. Para 15
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3493 of 2009.
c From the Judgment & Order dated 6.5.2008 of the High
Court of Judicature of Bombay, Bench at Aurangabad in Writ
Petition No. 1056 of 2006.
WITH
D C.A. No. 3494 of 2009.
,
Shekhar Naphade, Shivaji M. Jadhav, Lenin S. Hijam,
Chintaman Deshmukh and Sanjay V. Kharde (for Asha Gopalan
Nair) for the Appellants.
E
Dr. R.R. Deshpande (for Anjani Kumar Jha) and Jitendra
Kumar for the Respondent.
The Judgment of the Court was delivered by
F S.B. SINHA, J. 1. Leave granted. '
2. These appeals are directed against a judgment and
order dated 6.5.2008 passed by a Division Bench of the High
Court ()f Judicature at Bombay bench at Aurangabad in Writ
Petition No. 1056 of 2006 whereby and whereunder the Writ
G Petition filed by the first respondent herein was allowed.
3. Respondent No. 3 is a society registered under the , ~
Maharashtra Cooperative Societies Act, 1960 (for short, "the
Act"). It was registered on or about 4.12.1991. The State of
H
PRALHAD & ORS. v. DEORAO & ORS .. 781
[S.B. SINHA, J.]
Maharashtra is said to have been holding share capital of A
Rs.26 lakhs therein. Its contribution is said to be running into
several crores of rupees. No effort, however, was made for
running and managing its affairs for a long time. As no action
had been taken for the said purpose, no share was collected
and no meeting was held. B
,.·
4. On or about 6.6.1995, the State of Maharashtra
appointed a first Committee to manage the affairs of the
society consisting of 13 persons for a period of three years.
The said Committee is also said to have taken no step for
effective functioning of the said cooperative society. No plant
c
and machinery was acquired nor any other step was taken for
erection of the mill. The term of the said Committee was
extended by an order dated 6.7.1998 upto 3.6.2000. It was
continued till 2002.
D
5. The Assistant Registrar, Cooperative Society, Vasamat
was thereafter appointed as an Administrator. It is stated that
some plants and machinery had been purchased in the year
2000 but they had been lying idle. Theft of articles belonging
to the society had also taken place on several occasions. E
Indisputably, since 1994 no election was held. It is stated that
on or about 23.12.2004, a Special General Meeting was
,,
convened wherein a request was made to the State to grant
financial ass!stance. A request was also made to appoint an
Administrative Board~ It was furthermore resolved that no F
election be held unless the respondent No. 3 - cooperative
society becomes functional. Pursuant thereto, a proposal was
forwarded to the Director of Handloom, Nagpur which in tum
was sent to the Department of Textile of the State of
Maharashtra on or about 18.1.2005. G
" ~
6. The State Government sanctioned a sum of Rs.544
lakhs towards erection of the spinning mill as the Government
share capital.
7. First Respondent filed a Writ Petition before the High H
782 SUPREME COURT REPORTS (2009] 8 S.C.R.
•
A Court, which was marked as Writ Petition No. 1056 of 2006,
inter alia, for a direction upon the respondent No.5 herein to •
conduct election of the Board of Directors of the Society within
a fixed time frame. The said writ petition was subsequently
amended and a further prayer was added for quashing and
B setting aside an order dated 29.6.2007 passed by the
respondent No. 6 herein appointing a nominated Board of
Administrators of the Society till 19.6.2009.
8. Indisputably, the State of Maharashtra during pendency
of the said Writ Petition issued a Government Order dated
C 27.06.2007, which was not produced before the High Court.
However, after the judgment was reserved, the State had
produced before us a copy of the said order dated 27.6.2007
issued by the Desk Officer, Cooperation Marketing & Textile
Department, Government of Maharashtra, which is to the
D following effect:
"No. :Spinning Mill 1407/PK69/Tex.1 fl/) Mantralaya,
Mumbai - 32, Dt. 27.06.2007
Sub: Appointment of Administrative Board f6' the
E
Rokdeshwar Sahakari Soot Girni Ltd.
Basamathnagar.
Ref.: Your letter No. Desk-6(4)A/Soot Giri/7641/2007
dated 11th May 2007.
F
The Administrative Board appointed by the State
Government vide order dated 04.10.2005 to the
Rokdeshwar Sahakari Soot Girni Ltd., Basantnagar is
hereby dissolved, and in exercise of powers u/s 157 of the
G Maharashtra Cooperative Societies Act, 1960 the State
Government has appointed Administrative Board of
following persons, who are eligible for appointment as
Administrator, for a period of 2 years i.e. till 19.06.2009.
H
PRALHAD & ORS. v. DEORAO & ORS. 783
• [S.B. SINHA, J.]
"Sr.No. Name Addre~s A
1. Shri Prahlad Ramrao Rakhude Rio Aral Tai.
Basmat District
Hingoli.
B
2. Shri Chandrakant @ Rajendra Rio Vabhulgaon,
Ramakant Navghere Tai. Basmat, Dist.
Hingoli.
3. Shri Rajesh @ Raju Niranjan Rio Kurunda, Tai.
Ingole. Basmat Dist. c
Hingoli.
4. Shri Kaluram Devji Kurunde Rio Sirli, Tai.
Basmat Dist.
Hingoli D
5. Shri Chandramuni Namdev Rio Chikhli, Tai.
Mhaske. Basmat Dist.
Hingoli"
--;...
2: An amount of Rs.1.50 Lakhs was given to soot Girni by E
Puma Sahakari Sakhar Karkhana for purchase of shares .
of Soot Girni however, the said amount was taken back ·
~
.. by members of puma S.S.K. Ltd. Now it is the
responsibility of new Administrative Board to see that the
said amount of Rs.1.50 lakhs is transferred back to soot F
Gimi."
The Director of Textiles, Government of Maharashtra,
respondent No. 6 herein, thereafter issued an order on or about
29.6.2007, which reads as under:
,i • G
"In exercise of powers under Section 78(1)(a)(ii) of the
Maharashtra Coop. Societies Act, 1960 and in exercise
of powers under Maharashtra Government, Agriculture and
Cooperation Department, Mumbai, Govt. Resolution No.
H
784 SUPREME COURT REPORTS (2009] 8 S.C.R.
A CSG/1071/C3 dated 22.3.1972 and in exercise of powers
under Government Resolution No. CSL-1493/1162/CR-47/
15-C dated 7.8.1993 of Government of Maharashtra
Cooperation and Textile Department and in accordance
with Government order dated 27.6.2007, I, Vijay Kavare,
B Director Textile and Addi. Registrar Coop. Societies,
Maharashtra State, Nagpur, hereby appoint an
Administrative Board of five members in supersession of
earlier Board of Directors appointed to the Rokadeshwar,
Sahakari Soot Girni Maryadit, Vasmatnagar, Hingoli as per
c Government order dated 4.10.2005 and order dated
5.6.2006 of the Directorate. In accordance with the order
dated 27.6.2007 of the State Government in exercise of
powers under Section 157 of the Maharashtra Coop.
Societies Act, 1960 the term of the Administrative Board
•
shall be till 19.6.2009.
D
"Sr. No. Name Address
1. Shri Prahlad Ramrao Rakhude Rio Aral Tai.
Basmat District
E Hingoli.
2. Shri Chandrakant @ Rajendra Rio Vabhulgaon,
Ramakant Navghere Tai. Basmat, Dist. ..,.
Hingoli.
F 3. Shri Rajesh @ Raju Niranjan Rio Kurunda, Tai.
Ingole. Basmat Dist.
Hingoli.
4. Shri Kaluram Devji Kurunde Rio Sirki, Tai.
G Basmat Dist.
Hingoli ' \.
5. Shri Chandramuni Namdev Rio Chikhli, Tai.
Mhaske. Basmat Dist.
Hingoli"
H
PRALHAD & ORS. v. DEORAO & ORS. 785
(S.B. SINHA, J.]
Administrative Board shall exercise all the powers of the A
Board of Directors as per the by-laws of the Spinning Mill
and they shall discharge their duties under the supervision
of Directorate. It is the responsibility of the newly appointed
administrative board to persuade the members of the
Puma Coop. Sugar Factory to secure redeposit Rs.150.00 B
lacs amount, which was withdrawn, by the said members
~
of Puma Sakhar Karkhana from the Spinning Mill."
9. By reason of the impugned judgment, the High Court
quashed the said order dated 29.6.2007 directing the
appellants herein to hold the election of the said Society.
c
10. Appellants are, thus, before us.
11. Mr. Shekhar Naphade, learned Senior Counsel
appearing on behalf of appellants would contend that the High D
Court committed a serious error in passing the impugned
judgment insofar it failed to take into consideration that as in
terms of Section 157 of the Act, the State Government has the
legislative power to exempt societies from the provisions·
thereof, the question of applicability of Section 73 (1A) (b)
E
thereof does not arise. It was urged that the power conferred
... by Section 157 being a power of delegated legislation, the
State of Maharashtra was entitled to exercise the same at any
point of time and unless and until the same was declared to
"' be ultra vires, the directions to hold elections could not have
F
been issued.
12. Dr R.R. Deshpande, learned counsel appearing or.
behalf of the respondents, however, supported the impugned
judgment.
-. 13. The Act was enacted to consolidate and amend the
law relating to cooperative societies in the State of
Maharashtra. It was enacted with a view to providing for the
G
orderly development of the co-operative movement in the State
of Maharashtra in accordance with the relevant directive
H
786 SUPREME COURT REPORTS [2009] 8 S.C.R.
A principles of State policy enunciated in the Constitution of India.
Chapter VI of the Act provides for property and fund of
Societies. Chapter VII thereof provides for management of
Societies. Section 72 mandates that the final authority of every
society shall vest in the general body of members in general
B meeting, summoned in such a manner as may be specified in
the by-laws. Section 73 of the Act provides that the
management of every society shall vest in a committee,
constituted in accordance with the Act, the rules and by-laws,
which shall exercise such powers and perform such duties as
c may be conferred or imposed respectively by the Act, the rules
and the by-laws framed thereunder. Section 73 (1AB) makes
the members of the Committee jointly and severally responsible
for all the decisions taken by the committee during its term
relating to the business of the society. Sub-Section (1A) of
Section 73 of the Act, however, provides for a non-obstante
0
clause. It reads as under.-
•
"(1A) Notwithstanding anything contained in this Act, the
rules made thereunder or in the bye-laws of any society
or class of societies,-
E
(a) the first general meeting of a society shall be
convened within three months from the date of its
registration to appoint a provisional committee and to
transact other business as may be prescribed. The term
F of the members of such provisional committee shall be for
a period of one year from the date on which it has been
first appointed or till the date on which a regular committee
is duly constituted in accordance with the provisions of the
rules or bye-laws made under this Act, whichever is earlier;
and all the members of such provisional committee shall
G
vacate office on the date of expiry of such period or such
constitution of the committee.
(b) notwithstanding anything contained in clause (a),
the provisional committees for the Co-operative Sugar
H Factories and Co-operative Spinning Mills and such other
PRALHAD & ORS. v. DEORAO & ORS. 787
[S.B. SINHA, J.]
'
class of societies, as the State Government may, by A
special or general order, in the Official Gazette, specify in
this behalf, shall be appointed by the State Government;
and the members thereof shall hold office for a period of
three years, which period may be extended by one year,
at a time, so however that, the total period shall not exceed 8
five years, in the aggregate:
•
Provided that, the State Government shall have the
power to change or reconstitute such committee or, any
or all members thereof at its discretion even before the
expiry of the period for which a member or members were
c
nominated thereon:
Provided further that, the member or members
• assuming office on such change or reconstitution of the
committee shall hold office for the period for which the D
provisional committee has been appointed under this
clause.
(c) pending the first constitution of the committee of
a society, the provisional committee of the society shall
_, E
exercise the powers and perform the duties of the
committee of such society as provided in this Act, the rules
and bye-laws and make necessary arrangements for
holding election of the committee, before the expiry of its
term."
F
Section 157 of the Act. however, empowers the State by
general or special order to exempt any society or class of
societies other than co-operative credit structure entity from any
....
.......
of the provisions of Act, or of the rules made thereunder, and/
or to direct that such provisions would apply to such society or G
class of societies other than co-operative credit structure entity
with such modifications not affecting the substance thereof as
' may be specified therein. The proviso appended thereto,
however, provides that no order to the prejudice of any society
shall be passed, without an opportunity being given to such · H
788 SUPREME COURT REPORTS [2009] 8 S.C.R.
A society to represent its case.
14. The Act was evidently enacted for the purpose of giving
effect to the cooperative movement. It based on a constitutional
policy.
B Clauses (b) and (c) of Article 39 of the Constitution of India
read as under:
"39. Certain principles of policy to be followed by the
State.-The State shall, in particular, direct its policy
c towards securing-
(a)
(b) that the ownership and control of the material
resources of the community are so distributed as
D best to subserve the common good;
(c) that the operation of the economic system does not
result in the concentration of wealth and means of
production to the common detriment;"
E The preamble of the Act clearlY. shows that the same was
enacted with a view to give effect to the provisions contained
in Part IV of the Constitution of India. Indisputably, the State is
empowered under the Act to issue a general or special order
directing exemption from application of the provisions of the
F Act. It must, however, be done in an exceptional situation. An
order by the State providing for a power of delegated legislation
must be exercised in the manner laid down therein. An order
in terms of Section 157 of the Act must be issued in terms of
the provisions contained in Article 162 of the Constitution of
G India.
15. Mr. Naphade submitted that while considering a similar
provision, a Division Bench of this Court in The Registrar of
Co-operative Societies, Trivandrum & Anr. vs. K. Kunjabmu
H & Ors. [(1980) 1 SCC 340], held as under:
PRALHAD & ORS. v. DEORAO & ORS. 789
[S.B. SINHA, J.]
"12. The policy of the Act is there and so are the A
guidelines. Why the legislation? "To facilitate the formation
and working of Cooperative Societies." Cooperative
Societies, for what purpose? "For the promotion of thrift,
self-help and mutual aid." Amongst whom? "Amongst
agriculturists and other persons with common economic B
needs." To what end? "To bring about better living, better
business and better methods of production." The
-f • objectives are clear, the guidelines are there. There are
numerous provisions of the Act dealing with registration of
societies, rights and liabilities of members, duties of c
registered societies, privileges of registered societies,
property and funds of registered societies, inquiry and
inspection, supersession of committee of societies,
dissolution of societies, surcharge and attachment,
arbitration, etc. We refrain from referring to the details of D
the provisions except to say that they are generally
designed to further the objectives set out in the preamble.
But, numerous as the provisions are, they are not capable
of meeting the extensive demands of the complex
situations which may arise in the course of the working of
E
the Act and the formation and the functioning of the
societies. In fact, the too rigorous applications of some of
the provisions of the Act may itself occasionally result in
frustrating the very objects of the Act instead of advancing
.. them. It is to provide for such situations that the
Government is invested by Section 60 with a power to relax F
the occasional rigour of the provisions of the Act and to
advance the objects of the Act. Section 60 empowers the
State Government to exempt a registered society from any
of the provisions of the Act or to direct that such provision
shall apply to such society with specified modifications. G
The power given to the government under Section 60 of
~
the Act is to be exercised so as to advance the policy and
objects of the Act, according to the guidelines as may be
gleaned from the preamble and other provisions which we
H
790 SUPREME COURT REPORTS [2009] 8 S.C.R.
A have already pointed out, are clear."
16. The State of Maharashtra before the High Court as also
before us did not bring on record any material to show as to
under what circumstances the saiq power was exercised. The
necessity to exercise the said power has not been disclosed.
8
Exercise of such power, however, indisputably is a conditional
one. The proviso appended to Section 157 mandates an
opportunity of being heard. There is nothing on record to show
that such an opportunity was provided. We fail to understand
as to why the copy of the Government Order as such is not
C available. In whose name the Government Order was issued
is not known. Such a power is not to be exercised only for the
purpose of continuation of the Administrator for a period longer
than the one specified under the Act. If the intention and
purpose of the State was merely to keep the affairs of the
D society under its control, it could have done so only for the
maximum period specified under the Act. It was bound to hold
election within the maximum period provided for therein. It in
the name of exercising a special power could not have sought
to achieve indirectly what it could not have done directly. We
E do not see any reason as to why such a drastic power had to
be taken recourse to during pendency of the Writ Petition. Had
before the High Court the said order been produced, the first
respondent herein could have even questioned the validity
thereof on any ground other than the one urged before the High
F court.
17. In view of the fact that we are satisfied that the purported
order passed by the State under Section 157 of the Act was
not in accordance with law, in our opinion, no case has been
G made out for interference with the impugned judgment. These
appeals are dismissed accordingly with costs. Counsel fee in
each case assessed at Rs.50,000/-.
N.J. Appeals dismissed.
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