Holding

The Supreme Court held that the director remained a defaulter until repayment, his seat was deemed vacant under section 73FF(2), and the removal order issued under section 78(1) was lawful and not infirm.

Summary

Pundalik was elected Director of the District Central Co‑operative Bank, Chandrapur on 18 August 1986 while he was in arrears on a loan from the bank. The Maharashtra Co‑operative Societies Act, 1960 (section 73FF) disqualifies a defaulter from being elected or continuing as a committee member, and the Act came into force on 12 May 1986. Although he repaid the loan on 21 October 1986, the default persisted from the date of election until repayment, rendering him disqualified under section 73FF(1) and causing his seat to be deemed vacant under section 73FF(2). The District Deputy Registrar issued a notice under section 78(1) and removed him from the Board, an order affirmed by the High Court. On appeal, the Supreme Court held that the removal order was valid, the special disqualification provision did not conflict with the general removal power, and the seat was vacant without the need for a separate order. Consequently, the appeal was dismissed.

Issues considered

The validity of removal of a director under section 78(1) when the election was not challenged under the specific election‑petition procedure of the Act.
Whether a default that existed before the commencement of section 73FF can trigger disqualification under that provision.
Whether repayment of the loan before the notice under section 78(1) extinguishes the disqualification.
Whether the special provision of section 73FF overrides the general power of removal in section 78(1).
Whether the vacancy of the director’s seat arises automatically under section 73FF(2) or requires a separate removal order.

Legislation cited

Maharashtra Co-operative Societies Act, 1960s. 144E, s. 144T, s. 154, s. 73FF, s. 78(1)

Subjects

defaultdisqualificationcooperative societiesremoval of directorsection 73FFsection 78loan arrearsvacancy of seat

Judgment

PUNDALIK
A
v.
DISTRICT DEPUTY REGISTRAR, CO-OPERATIVE
SOCIETIES, CHANDRAPUR AND ORS.

FEBRUARY 22, 1991
B
[K.N. SAIKIA AND MADAN MOHAN PUNCHHI, JJ.]

Maharashtra Co-operative Societies Act, 1960: Section 78( 1) and
73FF-Powe~ of removal of members/committees-Defaul~ in repay-
ment of loan instalments Disqualifications for being member of a
committee.
c
The appellant was elected on 18.8.1986 as one of the Directors of
the District Central Co-operative Bank, Chandrapur, Maharashtra
from the_ Brebmapuri Agtjcultm;al Sales and Purchase Society. On
8.1.1987 the District Deputy Registrar of the Co~operative Societies,
Chandrapur issued a notice to him under section 78(1) of the Act to D
show cause as to why he should not be removed from the Board of
Directors of the Bank and from the Executive Committees of other
Co-operative Societies in the Distict for having remained in arrears of'
the loan instalments due from him on the date of filing of nomination
papers for election to the post of Director of the Bank and thereafter till
...-. >-..-2i.10.i986 when he actu8Iiy repaid the dues thereby incurring the dis- E
.· ·qualification as contemplated by section 73FF of the Act. The appellant
showed cause and by additional reply took the stand that he had not
committed any de~ault after the amended sect.ion 73FF came into exis-

- tence. This was rejected and by Order dated 7.12.1987 passed by the
Assistant Registrar Co-operative Societies, Chandrapur he was re-
moved from the post of Director holding him to be a defaulter under F
section 73FF of the Act. Appeal against that order was dismissed by the
~ District Joint Registrar and bis revision therefrom made 0nder section
154 of the Act too met the same fate at the hands of the Cooperative &
Textile Department, State_ of Maharashtra, Bombay. Dismiss~ his
Writ Petition fded thereafter, the High Court of Bombay held that when
the appellant contested the election he was a defaulter 311d even though. G
he had paid all the debts on 21.10.1986 yet he could not be absolved of
the disqualification on the day he contested the election.

In the appeal before this Court it was argued on behalf of the
appellant that the impugned order of the Assistant Registrar removing
him from the Board of Directors was without jurisdiction in as-much-as H

675
676 SUPREME COURT REPORTS [199ll 1 S.C.R.

the Act prescribes separate procedure for calling in question the elec•·--r----
A tion and that procedure .having not been followed the Assistant
Registrar could not have acted under section 78(1) of the Act; that the
entire loan having been repaid before the issue of notice under section
78(1) he was not a defaulter in presenti and lastly even assuming that
the disqualification on the ground of default is common both for elec~
B tion and for continuation as Director in the Committee, the spedal
provision for calling in question an election must prevail over section ~
78. Rejecting the contentions and dismissing the appeal, the Court. r -

HELD: If the impugned order is found to have been passed by
way of settin._g aside the election of the appellant, it would be bad as bis
election had not been called in question in accordance with the proce- ~
c dure prescribed by the Act. However, the notice has ex facie been issued
under section 78 of the Act. No doubt there is reference to his having
been a defaulter and disCJ,ualified for being elected but it has been y---
addressed to him as Director on the Board of Dir!!ctors. It also refers to ·
his being disqualified "to be elected or to continue as Director or Execu-
D tive Committee member of the Executive Committee" under section
7~:FF of the Act and about ceasing to be a Director by committing
default. From the above contents, there is no room for holding that the
appellant's election bas been set aside by the impugned order. On the
other band, the emphasis is on his being disqualified to continue as ·
Director or ceasing to be Director on account of bis having committed... ~
E default. [682F-683A]

The day an instalment falls due on its due :date, failure to pay
results in default and this default continues day after day until jt is
repaid. The appellant can be said to have made default on the first day
of bis directorship and on every subsequent day till instalments were
--
F paid~ The appellant was a defaulter immediately on the coming into -
.force· of section 73FF a11d_so long that default continued be must be~
taken to have made default until repayment. [683G-684A]

Submsection (2) of Section 73FF says that a member who bas
incurred any disqualification under sub-section (1) shall cei11se to be a
G member of the committee and bis seat shall thereupon be deemed to be
.'Vacant. Therefore, the moment the appellant after election continued to.~ _,
be in default and must be taken to have made default, stood disqualified X _,
and thereby ceased to be a member of the Committee and bis seat
deemed to have fallen vacant. In this view of the matter the notice of the
Deputy Registrar was in effect to say that the appellant had already
.H ceased to be a director and his seat already fell vacant. In Keshaorao
PUNDALIK v. CO-OPERATIVE SOCIETIES [SAIKIA, J.] 677

~--Narayanrao Patil v. District Deputy Registrar, reported in 1987
Maharashtra Law Journal 709, Bombay High Court held that section A
73l'F(2) did not operate automatically and that passing of an order of
removal was necessary. This has to be interpreted in the context of the
provisions in the section. [684B-D]

Hundraj Kanayalal Sajnani v. Union of India, A.I.R. 1990 S.C. B
__ _,-.l 1106 at 1121; Zaverbhai Amaidas v. The State of Bombay, [1955] 1
-- · S.C.R. 799; Maharashtra State Board of Education v. Paritosh Sheth,
' . ./ [1985] 1 S.C.R. 29, distinguished.
j

Keshaorao Narayanrao Patil v. District Deputy Registrar, [1987]
Maharashtra Law Journal 709, approved.
c
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4974
_,___y of 1990. -

From the Judgment and Order dated 20.6.1990 of the Bombay
High Court in W.P. 2403 of 1989. D

G.L. Sanghi, Mrs. Jayshree Wad, Dhruv Mehta and Ms. Tamali
Das Gupta for the Appelant
f-r S.V. Deshpande, V.N. Patil and A.S. Bhasme (NP), for the
Respondents. E

- The Judgment of the Court was delivered by

K.N. SAIKIA, J. Pursuant to the Notification issued in June
1986 the elections of Directors to the District Central Cooperative
~ Bank, Chandrapur, hereinafter referred to as 'the Bank' the appellant F
filed his nomination papers in July 1986, and he was elected on
18. 8. 1986 as one of the Directors of the Bank from the Brahmapuri
Agricultural Sales and Purchase Society. His election was not called in
question according to the procedure prescribed by the Maharashtra
Cooperative Societies Act, 1960, hereinafter referred to as 'the Act'.
G
,,..__..¥ On 8.1.1987, the District Deputy Registrar of the Cooperative
Societies, Chandrapur, hereinafter referred to as 'the Deputy
Registrar', issued a notice to the appellant under section 78(1) of the
Act to show cause within 15 days as to why he should not be removed
from the Board of Directors of the Bank as per the provisions of
s~ction 73FF, and directed him to remain present on 2.2.1987 at 11 H
678 SUPREME COURT REPORTS [1991] 1 S.C.R.

A.M. in the Deputy Director's office. The notice stated that the appel~
A lant had borrowed a loan of total Rs.10,000 (Rs.7,000 as debt and
Rs.3,000 subsidy) from the Bank and he kept the loan constanty in
e;irrears till 21.10.1986, and being elected as Director of the Bank on
18.8.1986, till then he was workillg a~ the Director of the Bank. The
notice further said:
B
"Because you have remained in .arrars of the loan instal- ~~- '
ments as referred above to the Maharashtra State Coopera~
tive Land Development Bank, under Section 73FF(i)(b) of
the Maharashtra State Cooperative Societies Act, 1960,
you are disqualified to be elected or to continue as Director ~
or Executive Committee Member of the Executive Com-
c mittee of a Cooperative Society and u/s 73FF(2) of
Maharashtra State Cooperative Societies Act, 1960 a l-
person committing defaults c~ased to be the Executive
Committee (member) or Director.
y r

D From the information above given because the loan instal-
ments of Maharashtra State Cooperative Land Develop-
ment Bank remained due from you on the date of filing
nomination papers for the election of post of Director of
Chandrapur District Central Cooperative Bank and also on ___.. .(
the date of your election and thereafter, you are disqua"
E lified-t-o contest the election to the post of Director of
Chandrapur District Central Cooperative Bank as also to
be elected and to continue as Director.

And therefore under powers given to me by Section 78(1)
of Maharashtra State Cooperativ:e Societies Act, 1960 and
F order No. CSL/1481/24982/15-C(87) dated 1.7.81 of Agri- ·_
culture and Cooperation Department of Maharashtra State_,-.>.
Government. I, K.M. Deshpande, District Dy. Registrar,
Cooperative Societies, chand~_!lpur _hereb_y ask you to .show
cause in writing as to why you should not be removed from
the Board of Directors of Chandrapur Disrict Central
G Cooperative Bank and from the Executive Committees of
the other cooperative societies in the District. Your expla-__ ,-_
nation in writing should be submitted to this office within ~
15 days from the receipt of this notice."

The appellant showed cause and also f!led an additional reply on
H 10.11.87- statin_g that he "had not committed any default afterthe
PUNDALIK v. CO-OPERATIVE SOCIETIES [SAIKIA, J.] 679

~~amended section 73FF came into existence."

The Assistant Register, Cooperative Societies, Chandrapur by
his order dated 7 .12.1987 removed the appellant from the Committee
of Directors of the Bank holding that the appellant was defaulter on
31.1.1986, on 31.3.1986 and he became defaulter under the provisions
of section 73FF(l) of the Act, and rejected the appellant's contention B
__..lthat section 73FF became applicable from 6.8.1986 as per the Govern-
-. ment Notification issued on 18.4.1986 and that as he had accepted
that he paid the dues on 21.10.1986, on 18.8.1986 when he was elected
as Director, he was defaulter under section 73FF( 1) of the Act.

The order of the Assistant Registrar dated 7 .12.1987 was served
on the appelllant on 8.12.87. The appellant's appeal against that order c
was dismissed by the Divisional Joint Registrar of the Cooperative
-'""'"YSocieties, Nagpur on 15.2.1988, holding,inter alia, that section 73FF of
the Act came into force on 12.5.1986 and the appellant could be
treated as a defaulter under that section; and the mere making of
payment on 21.10.86 did not mean that the disqualification on account D
of his being defaulter which continued from 18.8.1986 to 21.10.1986
was extinguished and hence the appellant was not at all eligible to
contest the election. The appellant's revision petition therefrom under
section 154 of the Act was dismissed on 30.8.89 by the Cooperation
. ~·and textile Department, State of Maharashtra, Bombay holding that
the appellant was defaulter under section 73FF of the said Act on E
18.8.1986 i.e. the date when he was declared elected as Director.

The appellant's writ petition in the High Court filed on 1.9.1989
challenging the above order dated 30.8.89 was dismissed by the

- impugned Judgment and Order dated 20.6.90, holding that the dues
-.J.. calculated on 31.1.86 became recurring dues every following day and
r '-\:)n 12.5.1986 when section 73FF came into force the outstanding dues
cotinued even on 18.8.1986 when the appellant contested the election;
and that the question of giving retrospective effect to the section did
F

not arise because the appellant was a defaulter when he contsted the
election and though he paid all the debts on 21.10.1986 yet he could
not be "absolved of the disqualification on the day he contested the G
_ ~election". Hence this appeal by special leave. I

Mr. G .L. Sanghi, the learned counsel for the appellant submits,
inter alia, that the impugned order of the Assistant Registrar removing
the appellant from the Committee of the Directors is without jurisdic-
tion inasmuch as the Act prescribes a separate procedure for calling in H
680 SUPREME COURT REPORTS [1991] 1 S.C.R.

A question the appellant's election as a Director of the Bank and that,~
procedure having not been followed the Assistant Registrar could not
have acted under section 78(1) of the Act which did not envisage the
setting aside of an elecion as has been done by the impugned order;
that the appellant having repaid the entire loan before the impugned
B notice under section 78(1) of the Act was issued, he was surely not a
defaulter in presenti on the date of the notice andthe provisions of
section 78( 1) were not attracted; and that even assuming .that the ·
disqualification on the ground of default is common both for election -~-
and for continuation as a Director in the Committee, the special provi-

..
sion for setting aside an election must prevail over section 78 as there
would be apparent conflict between the two and the maxim genera/ia
c specialibus non derogant gene_ral words do not deroga.te from special,_
would apply.

Mr. V.N. Patil, the learned counsel for the State of Maharashtra, .:,~
submits that the disqualification as defaulter continued after the elec- ',
tion of the appellant and section 78 envisaged such a default and the ·
D
appellant having continued to be a defaulter was lawfully removed and
the fact that he repaid the loan before the notice was issued would not
be material for the purpose of taking action under section 78. ·

Chapter XI-A of the Act deals with election of committees and ..,...
officers of ('.ertain societies. Admittedly this Chapter applies to the ~
Bank. Section 144E deals with disqualification for membership.
Under sub-section (1) thereof a person shall be disqualified for being
elected as, and for being a member, of the committee of any specified
society, ......... (e) if he is so disqualified by or under any other
provision of this Act. Section 144T deals with desputes relating. to
election and provides i.n sub-section (1) that notwithstanding anything
-
F
cont~ined in section_ 91 or any other provisions of this A~t,_ any dispute ~
relatmg to an elect10n shall be referred to the Comm1ss1oner of the~
Division in which such election is held or to an officer not below the
rank of Additional Commissioner of a division authorised by the State
Government in this behelf. The procedure for an election petition is
prescribed by the subsequent sections of that Chapter.Admittedly the
G
appellant's election was not called in question under the above provi-
sions. Section J44E, as we have noted, over and above the other .
specified disqualifications in sub-section (e) included disqualifications'>l·-
by or under any other provisions of the Act. Section 78( 1) which deals
with powers of removal of committees or member thereof provides as
follows: ·
H
PUNDALIK v. CO-OPERATIVE SOCIETIES [SAIKIA, J.) 681

"78( 1) If, in the opinion of the Registrar, the committee of
A
any society or any member of such committee makes
default, or is negligent in the performance of the duties
imposed on it or him by this Act or the rules or the bye-
laws, or commits any act which is prejudicial to the
interests of the society or its members, or wilfully disobeys
directions issued by the State Government, or -by the B
Registrar for the purposes of securing proper implementa-
tion of cooperative policy and development programme
approved or undertaken by the State Government or is
otherwise not discharging its or his functions properly and
diligently and the business .of the society has or is likely to
come to a standstill, or where any member of such commit-
tee stands disqualified by or under this Act for being a c
member, the Registrar may, after giving the committee or
the member, as the case may be, an opportunity of stating
its or his objections, if any, within 15 days from the date of
receipt of notice, and after consultation with the federal
society to which the society is affiliated, by order- D

(a) (i) remove the committee, and

(ii) appoint a committee consisting of three or more
members (who shall not be the members of the committee
so removed) of the society in its place, or appoint one or E
more Administrators who need not be the members of the
society, but who shall not be the members of the committee
so removed, to manage the affairs of the society for a
period not exceeding six months, which 'period, at the dis-
cretion of the Registrar, be extended by a further period
not exceeding three months so, however, that the total F
~ .. period does not exceed nine months in the aggregate:

Provided that, the Registrar shall have the power to change
the committee or any member thereof or the Administrator
or Administrators appointed under paragraph (ii) at his
discretion even before the expiry of the period secified in G
the order made under this sub-section;

(b) xxx xxx xxx"

Section 78(1) empowers the Registrar to remove a member of a com-
mittee who "makes default" or where any member of such committee H
682 SUPREME COURT REPORTS [1991] 1 s.t.R.
--
"stands disqalified by or under this Act for being a member". Section~~-
.
A 73FF deals with disqualification for membership of committee. Sub- '
section (1) provides:

"Without prejudice to the other provisions of this Act or
the rules made thereunder in relation to the disqualifica-
B tion of being a member of a committee, no person shall be
eligible for being appointed, nominated, elected, co-opted
or, for being a member of a committee, if he- A~-

(i) is a defaulter of any society;

Explanation-For the purposes of this clause, the term
c "defaulter" includes.:._

(a) in the case of a primary agricultural credit society, a ~. ~
member who defaults the repayment of the crop loan on · r
the due date;
D
(b) in the case of term lending society, a member who
defaults the payment of any instalment of the loan granted ...
to nim;

xxx xxx xxx xxx xxx xxx" :~
E
Sub-section (2) says: "A member who has incurred any disqualifica-
tion under sub-section (1), shall cease to be a member of the commit-
tee and his seat shall thereupon be deemed to be vacant."

This section was inserted by Maharashtra Act, XX of 1986 with
F effect from 12.5.86. If the impugned order is found to have been '
passed by way of setting aside the election of the appella.nt the ordet )J-
would be bad as the appellant's election had not been called in ques-
tion in accordance with the procedure prescribed by the Act. How- ·
ever, the notice has ex facie been issued under section 78 of the Act.
No doubt there is reference to the appellant's having been a defaulter
G and disqualified for being elected but it has been addressed to the
appellant as Director of the Bank and also stated: "You have been
elected as Director on the Board of Directors of Chandrapur District >-/7
Central Cooperative Bank on 18.8.1986 and today on this date you are
working as the Director of the said Bank." It also refers to the appel-
lant's being disqualified "to be elected or to continue as Director or
H Executive Committee member of the Executive Committee' under
PUNDALIK v. CO-OPERATIVE SOCIETIES [SAIKIA, J.I 683

. section 73FF of the Act and about ceasing to be a Director by commit-
iing default. From the above contents, there is no room for holding A
that the appellant's election has been set aside by the impugned order;
on the other hand, the emphasis is on the appellant's being disqualified
to continue as Director or creasing to be Director on account of his
having committed default. The question of generalibus specialia
derogant-special things take from g~neral or generalia specialibus B
non derogant general words do not derogate from special, therefore,
does not arise. What was stated in para 36 of the report in Hundraj
Kanayalal Sajnani v. Union of India, AIR 1990 SC 1106 at 1121 will
not be relevant. The question of repugnancy involved in Zaverbhai
Amaidas. v. The State of Bombay, [1955] 1 SCR 799 does not arise in
this case. The decision in Maharashtra State Board of Education v.
Paritosh Sheth, [1985] 1 SCR 29 is also not apposite. The provisions c
relating to election have to be interpreted harmoniously with other
provisions of the Act such as in section 78(1). Interpretare et con-
cordare leges legibus est optimus interpretendimodus. To interpret and
in such a way as to harmonize laws with laws is the best mode of
interpretation. D

Mr. Sanghi does not dispute that the appellant was in arrear in
respect of instalments on the date of his election and till 21.10.1986 i.e.
both prior and posterior to his election on 18.8.1986. Admittedly the
instalment was not paid on due date. There was of course some dispute
as to the amount of interest payable and appropriation of the amount E
paid against interest instead of capital but all this would not exonerate

- the appellant from being in default on non-payment of instalment on
due date.

Mr. Sanghi, however, submits that the expression "makes de-
fault" or "stands disqualified" being in presenti the default must have p
been committed after the coming into force of section 73FF and that
his default even, if any, was prior to that date and not after that date.
We are unable to persuade ourselves to accept this submission. The
day an instalment falls due on its due date failure to pay results in
default and that default continues from day to day until' it is repaid.
Every day thereafter until payment results in making of default and, G
therefore, it could not be said that default could be on the due date
only and thereafter no default but only liability. Considered by this
principle the appellant can be said to have made default on the first
day of his directorship and on every subsequent day till the instalment
or instalments were paid. The submission, has, therefore, to be
~~~ H
684 SUPREME COURT REPORTS (1991] 1 S.C.R.

A Similarly the submission that the default must have been one
committed after the Act came into force has also to be rejected on the
same ground that immediately on the Act coming into force the appel-
lant was a defaulter and so long that default continued he must be
taken to have made default until repayment.
B What then would be the consequence of such a default. Sub-
section (2) of section 73FF says that a member who has incurred any .
disqualification under sub-section ( 1) shall cease to be a member of the
Committee and his seat shall thereupon be deemed to be vacant.
Therefore, the moment tlae appellant after election continued to be in

c
default, and, therefore, must be taken to have made default, stood
disqualified and thereby ceased to be a member of the committee and
his seat deemed to have fallen vacant. In tbis view of the matter the
notice of the Deputy Registrar was in effect to say that the appellant
had already ceased to be a Director and his seat already fell vacant. In ·
-
Keshaorao Narayanrao Patil v. District Deputy Registrar reported in
1987 Maharashtra Law Journal 709 Bombay High Court held that
D s. 73FF(2) did not operate automatically and that passing of an order ·
of removal was necessary. This has to be interpreted in the context of
the provisions in the section.

In this view of the matter there could not be any infirmity either
in the notice or in the impugned order of removal.
E

-
The result is that this appeal fails and is dismissed. The interim
orders, if any, stand vacated. No costs. · ·

R.N.J. Appeal dismissed.