Holding

The appeal is allowed; the High Court’s findings of undervaluation and fraud are set aside as the valuation shows the price was fair and no complaint was filed by other societies.

Summary

The Supreme Court heard an appeal by Sumangalam Co‑operative Housing Society Ltd against a suo moto writ filed by the Gujarat High Court that alleged irregularities, undervaluation and fraud in the allotment of land by the Ahmedabad Urban Development Authority (AUDA). The High Court had held that the society obtained land at a price far below market value and that Respondent No. 4 had impersonated Respondent No. 2 to secure the allotment. On appeal, the Court examined the valuation prepared by Dr. Roshan H. Namavati, an approved valuer with five decades of experience, who concluded that the price paid was in line with market rates. The Court also noted that no other cooperative societies had lodged any complaint against the appellant, undermining the High Court's basis for finding fraud. Relying on the valuation and the lack of any complaint, the Court set aside the High Court’s findings, deleted the observations against officials, and allowed the appeal. Consequently, the alleged irregularities and allegations of impersonation were dismissed.

Issues considered

The adequacy and correctness of the valuation of the land allotted to the society.
Whether the land allotment was made at an undervalued price constituting fraud.
Whether the High Court had jurisdiction to suo moto entertain the writ and the basis of its findings.
The applicability of Sections 17, 20, 23, 24 and 30 of the Gujarat Co‑operative Societies Act, 1961 to the dispute.
Whether the absence of a complaint by other societies defeats the High Court's conclusions.

Legislation cited

Gujarat Co-operative Societies Act, 1961s. 17, s. 20, s. 23, s. 24, s. 30

Subjects

land allotmentcooperative societyvaluationfraudimpersonationsuo moto jurisdictionGujarat Co-operative Societies Actopen membershiptransfer restrictionsappellate jurisdiction

Judgment

- >< SUMANGALAM CO-OP. HOUSING SOCIETY LTD.
v.
SUO MOTU, HIGH COURT OF GUJARAT & ORS.
A

JANUARY 3, 2007

[DR. ARIJIT PASAYAT AND LOKESHWAR SINGH PANTA, JJ.] B

Gujarat Co-operative Societies Act, 1961; ss. 17, 20, 23, 24 and 30:
Allegations of irregularities and illegalities against Ahmedabad Urban
Development Authority in allotting lands to a Society-On Suo Motu
cognizance, High Court holding that illegalities and irregularities c
committed by Authority in allotment of land in question, to the Society at
!ower price and found its officers guilty-On appeal, Held: No complaint
against appellant-Society filed by other societies for committing fraud-
Valuation done by the valuers demolishes the basis of conclusion by High
Court that land in question sold at under-valued price-Hence observations
made against various officials uncalled for and treated as deleted-
D
Appeals allowed

The question which arose for consideration in these appeals relates
to irregularities and illegalities committed in the allotment of land to
appellant-Society by Ahmedabad Urban Development Authority. E

The stand of the appellant-Society is that they have purchased the land
in question from the Authority at a price which is in no way less than the
market price. Therefore, mode by which the High Court has made the
valuation and arrived at its findings has practically no basis.
F
Allowing the appeals, the Court

HELD: 1.1. The credentials of the valuer are quiet impressive. He is
an approved valuer for more than five decades and is an author of several
books on valuation. [Para 8] [7-B-C] G

Zoroastrian Cooperative Housing Society Ltd. and Another v. District
y Registrar, Cooperative Societies (Urban) and Others, [2005) S SCC 632,
relied on.
H
•,

,2 SUPREME COURT REPORTS (2007] 1 S.C.R.

A 1.2. No member of respondents 2, 3 societies has made any complaint
against appellant-Society. That has significant impact on the controversy.
The valuation done by the approved Vttluer demolishes the basis of the
}<

-
conclusion by the High Court regarding undervaluation. The observations
made against various officials are uncalled for and have to be treated as
deleted. [Paras 9-10) (12-B-C)
B
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3986 of 2004.

From the final Judgment and Order dated 26.4.2002 of the High Court ,,
of Gujarat at Ahmedabad in S.C.A. No. 10640 of2000.
c
Altaf Ahmad (A.C.), Harish N. Salve, R.P. Bhatt, Romy Chacko, Anil
K. Mishra, Vikarant Yadav, Sashidhar, Sanjay R. Hegde, Bhargava V. Desai,
Rahul Gupta,T;muja Sheel,Mahima C. Shroff; ChiragM. Shroff, Janak Shah,
Rajiv Mehta, Dhruv Mehta, Jayashree Wad, Neer<'j Kumar, Ashish Wad,
Chirag Dave (for M/,s~ J.S. Wad & Co.), Hemantika Wahi, Pinky Behera,
D Maninder Singh, Pratibha M. Singh and Gaurav Sharma for the appearing
, parties.

The Judgment of the Court was delivered by

E DR ARIJIT PASAYAT, J.: 1. Challenge in these appeals is to the
judgment rendered by a Division Bench of the Gujarat High Court which suo
motu registered a writ petition on the basis of the copies of documents
purported to have been received from one Piyush Soni. It was alleged that
there were several irregularities .and illegalities in connection with the
allotment of land to Sumangalam Co-operative Housing Society Ltd. The
F
High Court entertained several other civil applications and passed the
impugned judgment inter alia holding that there were several irregularities
and illegalities committed in the allotment ofland. The judgment of the High
Court in SCA No. 10640 of 2000 is the subject matter of challenge in these
appeals. Shri Altaf Ahmad; learned Senior counsel was appointed as Amicus
G Curiae.

2. We have heard learned counsel for the parties at length. It is
relevant to. note that since valuation of the property allotted was one of the y
major grounds which weighed with the High Court while dealing with the
H matter, therefore, on the suggestion of counsel for the parties, Dr. Roshan
)

SUMANGALAM CO-OP. HOUSING SOCIETY LTD. v. SUO MOTU. HIGH COURT OF GUJARAT [PASAYAT, J.) 3

H. Namavati, an approved valuer was asked to determine the market value A
-"' of the properties in question as on the date of allotment i.e. on 1.3.1990. It
appears that High Court found that one Mr. H.K. Khan has disposed of a
plot for Rs.22,00,000. According to the High Court same was the market
price at which the plot in question could have been transferred by
Ahmedabad Urban Development Authority (in short the 'AUDA') by
applying the principle of l 0% appreciation in market value. Calculated on
B
that basis the High Court came to the conclusion that on the basis of the
price of land allotted to Mr. H.K. Khan the allotment was made at an
/. unreasonable rate.

3. Dr. Roshan H. Namavati has valued that property in question as C
follows:

"SUMMARY AND CONCLUSION:

The results obtained by me based on my inspection of properties D
under valuation as well as instances, the fair market value of F.P. No. 694,
695, 696 as on 1-3-1990 will be:

Based on H.K. Khans' (F.P. 695/17) sale of a = Rs. 575 p.s.mt. ..
developed small commercial plot.
E
Based on instances of 3 residential plots in the = Rs. 540 p.s.mt.
the Bodakdev Scheme.

Based on instances of F.P. 109 of Thaltej = Rs. 480 p.s.mt.
T.P. Scheme which is diagonally opposite to
F
F.P. 694, 695 and 696.

In the light of the above, I am of the opinion that fair market value of
F.P. 694, 695 and 696 in an undeveloped stage, with encroachment, having
residential as also commercial potential requiring infra:strucfilre, earth file as
on 1.3.1990 will be 20,494 x Rs.540 P.s.mt. = Rs.1,10,66,760" G

4. The stand of the appellants is unanimous to the extent that they
have all highlighted that the value at which transfer has been made .is in no
way less than the market price. Mode by which the High Court has made
the valuation has practically no basis. H
4 SUPREME COURT REPORTS [2007] 1 S.C.R.

A 5. Broadly the issues addressed by the High Court in the impugned
judgment are: (the parties are described as per their.position in the High "-
Court)

I. Mix-up of identities between Respondent No. 2 and Respondent
No.4.
B
2. Impersonation by the office bearers of Respondent No. 2 as those
of Respondent No. 4.

Suppression before the High Court in Special Civil Application Nos.
C 3082 and 3781of1991 culminating in the judgment dated 24.09.1991 of the
fact that two other societies being Respondent Nos. 2 and 3 existed and the
land had been allotted by Ahmedabad Urban Development Authority
(AUDA) to Respondent No. 2 and not Respondent No. 4.

It may be noted that Respondent No. 2 was called Sumangalam
D Cooperative Housing Society, Gandhi Nagar bearing registration No. 9675
which was cancelle.d on 9.12.1996.

Respondent No. 3 was called New ·Sumangal Cooperative Housing
Society Ltd. Taluka Daskroy bearing registration No. 13338 which also
E cancelled on 9.12.1996.

Respondent No. 4 is called Sumangalam Cooperative Housing Society,
Bodakdev and bears registration No. 1492.

F Background facts vis-a-vis Respondent No. 2 are relevant:

On 16.07 .1987 Respondent No. 2 made an application for allotment of
land admeasuring6651 sq. mtrs. from F.P. No.707 TPS Bodakdev; 12514 sq.
mtrs. land from F.P. No. 695 TPS Bodakdev; 8693 sq. mtrs. of land from
Survey No. 189 and 190 from TPS Vastrapur, and 9208 sq. mtrs. from survey
G No. 199 TPS Vastrapur. It was also requested to fix the rate of the land at
Rs. 300 per sq. mtrs.

On 21.07.1987 Respondent No. 2 made a modified application for
allotment of land stating that "eventually about 150 Govt. employees of y
H various q.tegories would be members of the Society".
SUMANGALAM CO-OP. HOUSING SOCIETY LTD. v. SUO MOTU, HIGH COURT OF GUJARAT [PASAYAT, J.] 5

On 24. 11.1987 Respondent No.2 indicated that T.P. Plot 695 is designated A
•"' for neighbourhood garden, play ground, library, etc. and further requested
that they may be granted 4000 sq. mts. of this land on condition that part
of this land will be used for purposes within the meaning of"neighbourhood
centre" and assured AUDA that Respondent No.2 was prepared to purchase
land bearing survey Nos. 189 and 190 (Part) and survey Nos.19911, 2, 3 of
Vastrapur at the price indicated by AUDA.
B

On 09.12.1987 resolution was adopted by AUDA to allot lands to
/ Respondent No. 2 bearing Survey No. 189, 190 Paiki ofVastrapur admeasuring
8693 sq. mtr., S11rvey Nos.199/1/2/3 of Vastrapur admeasuring 9208 sq. mtr.
And Bodakdev Final Plot No. 694 admeasuring 2739 sq. mtr., F.P. No. 695 c
admeasuring 12516 sq. mtr. And F. P. No. 696 admeasuring 5239 sq. mtr. on
lease for 90 years. The land was to be allotted subject to certain terms and
conditions, and the price was to be determined by the Chief Town Planner.
The decision was communicated to the President of Respondent No. 2
Society vi de letter No. EstateNashi/2267 /16836 dated 10 .12.1987.
.. D
On 16.07 .1988 Respondent No. 2 requested for the review of the price
charged.

On 16.07.1989 Respondent No. 2 paid Rs.6,65,000.
E
On 07.10. 1989, by resolution No. 50 (89-90), AUDA resolved to refund
the amount deposited by the Respondent No. 2 and to dispose of the lands
by public auction.

On 21.12.1989 Respondent No. 2 claimed right to land. Respondent No.
,, F
2 Society, mentioning its registration No. 9675/86 made an application on
21.12.1989 signed by S. Jagadeesan requesting to reconsider the price and
allot the land in response to cancellation of allotment. It is further stated in
the said letter that the Society bearing registration No. 9675/86 has paid the
amount of more than Rs.6 lakhs and, therefore, they have preferential right
over the land. G

On 19.01.1990 vide resolution No. 63 AUDA reconsidered its earlier
decision and decided to allot Plot Nos. 694, 695 and 696 Bodakdev TP
Scheme No. 1/B, a<lmeasuring 16,571 sq. mtr. Land fo Respondent No. 2
Society. H
6 SUPREME COURT REPORTS [2007] 1 S.C.R.

A On 13.05.1990 Respondent No. 2 paid Rs. 1,03,85,000 to AUDA by
Cheque No. 1426322 of State Bank of Saurashtra and-AUDA issued its
receipt No. 44414 dated 30.5.1990.

On 01.06.1990 Respondent No. 2 took the possession of the land.

B 6. Similarly position vis-a-vis Respondent No. 4 are relevant: On
05.07.1990 Respondent No. 4 came into being under Registration No. 14292.

On 26.02.1991 AUDA passed a resolution in its 123rd meeting allotting
3923 sq. mtrs of land possession whereof was taken by Respondent No. 4
c after payment of price ofRs.26,70,600.

Respondent No. 4 also took possession of 16571 sq. mtrs of land,
possession of which had been given to Respondent No. 2 and price of
Rs.6,65,000 and Rs. 1,03,85,000 had been paid by Respondent No. 2 on
16.06.1989 and 30.05.1990 respectively.
D
From the above events the High Court in its impugned judgment has
concluded that Respondent No. 4 and its officers are guilty of having
practiced fraud on AUDA as well as the High Court because -

E (a) Respondent No. 4 has impersonated as Respondent No. 2

(b) Respondent No. 4 has obtained possession of land on the. basis
of such impersonation from AUDA and for the price which had been paid
by Respondent No. 2 at the price prevailing the year 1987 much before
F Respondent No. 4 was born.

(c) Respondent No. 4 suppressed this fact in earlier proceedings before
the High Court resulting in the judgment dated 24.09.1991 and thus secured
the judgment by practising fraud on the court.

G 7. The High Court held that by impersonation office bearers of
Respondent No. 4 brought about the following consequences:

(1) Respondent No. 4 secured allotment ofland at the price determined
in 1987 while it actually came into existence on 5th July 1990.
H
SUMANGALAM CO-OP. HOUSING SOCIETY LTD. v. SUO MOTU, HIGH COURT OF GUJARAT [PASAYAT, J.) 7

(2) Out of 54 members who were allotted plots by Respondent No. 4, A
42 persons had also been allotted plots by Government at Gandhi Nagar.

(3) Respondent No. 4 had taken possession of the land on the oasis
that it had 77 members while it had distributed plots only amongst 54
persons.
B
8. The credentials of the valuer Dr. Roshan H. Namavati are quiet
impressive. He is an approved valuer for more than five decades and is an
/ author of several books on valuation. A few provisions of Gujarat Co-
operative Societies Act, I 96 I (in short the 'Act') were succinctly stated in
Zoroastrian Cooperative Housing Society Ltd and Another v. District C
Registrar, Cooperative Societies (Urban) and Others, [2005] 5 SCC 632
more particularly in paragraphs I I to 13 and 15. They read as follows:

"11. Section 23 deals with removal of a member in certain
circumstances. Section 24 speaks of open membership. Sub-Section
(1) thereof, which is of immediate relevance, reads as follows:-
D

"24. Open membership. (1) No society shall, without sufficient
cause, refuse admission to membership to any person duly
qualified therefor under the provisions of this Act, the rules
and bye-laws of such society." E

Be it noted that admission to membership could not be refused only
to a person who was duly qualified therefor under the Act, the
Rules and the bye-laws of such Society. In other words, the bye-
laws are not given the go-by in spite of the introduction of the F
concept of open membership as indicated by the heading of the
Section. Section 29 of the Act restricted the right of a member other
than the State Government or a society to hold more than one fifth
of the total share capital of the society. Section 30 places restriction
on transfer of share or interest. It reads :-
G
"30. Restrictions on transfer ofshare or interest.- (1) Subject
to the provisions of section 29 and sub-section (2) a transfer
of, or charge on, the share or interest of a member in the
capital of a society shall be subject to such conditions as may
be prescribed. H
.~.

8 SUPREME COURT REPORTS [2007] l S.C.R.

A (2) A member shall not transfer any:share held by him, or his
interest in the capital or property of any society, or any part )(

thereof, unless.-

(a) he has held such share or interest for not less than one
year;
B
(b) the transfer or charge is made to the Society, or to a
member of the Society, or to a person whose application for
membership has been accepted by the Society; and

(c) the committee has approved such transfer."
c
It can be seen that a restriction is placed on the right of a member
to transfer his share by sub-section (2) of Section 30 and the
transfer could be only in favour of the. society or to a member of
the society or to a person whose application for membership has
been accepted by the society and the committee has approved
D such transfer. Section 31 provides for transfer of interest on death
of a member. Even an heir or a legal representative, had to seek and
obtain a membership in the society, before the rights could be
transferred to him. The section also leaves a right to the heir or
legal representative to require the society to pay him the value of
the share or interest of the deceased member, ascertained as
E
prescribed. Section 32 of the Act provides that the share or interest
of a member in the capital of a Cooperative Society is not liable to ·~ .
attachment. Under Section 36 of the Act, the society even has the
power to expel a member and unless otherwise ordered in special
circumstances by the Registrar, such expelled member does not
F have a right of re-admission to membership. Sections 44 to 46 place
restrictions on transactions with non-members and the said
trans~ctions were to be subject to such restrictions as may be
prescribed. Under Chapter V of the Act, any society duly registered
.:~
under the Act would be entitled to State aid. Under Section 73 of
the Act, the final authority of the society is to vest in the general
G body of the society, subject to it being delegated in terms of the
bye-laws of the society. The powers and functions of the Committee
in which the management of every society vested, are dealt with in
Section 74 of the Act.

H 12. The Gujarat Co-operative Societies Rules, 1965 was framed in
SUMANGALAM CO-OP. HOUSING SOCIETY LTD. v. SUO MOTU, HIGH COURT OF GUJARAT [PASAYAT, J.] 9

terms of the Act. Rule 12(2) provides that no Co-operative Housing A
Society shall, without sufficient cause, refuse admission to its
membership, to any person duly qualified therefor under the
provisions of the Act and its bye-laws, to whom an existing member
of such society wants to sell or transfer his land or house and no
such society shall, without sufficient cause, refuse to give permission
to any existing member to sell or transfer his plot of land or house
B
to another person who is duly qualified to become a member of that
society.

13. A peep into the history of the legislation brought in to govern
the co-operative movement in the country seems justified. The real C
first legislation touching the co-operative movement was the Co-
operative Credit Societies Act, 1904. When that Act came into
being, there was no other Act in force under which an association
or a society could be formed for the purpose of promoting the
economic interests of its members in accordance with the well
D
recognized co-operative principles, though a co-operative society
could be organized under the Indian Companies Act, 1882. Lacuna
.J._ was found in the working of that Act especially in the development
of rural credit. To remove the same, the Cooperative Societies Act,
1912 was enacted. Under Section 4 of that Act, a society which had
as its object, the promotion of economic interests of its members E
in accordance with economic principles, could be registered under
the Act. Under Section 6, no society could be registered which did
not consist of at least 10 persons above the age of 18 years and
where the object of the society was the creation of funds to be lent
to its members unless such persons either resided in the same town F
or village or in the same group of villages or they were members
of the same tribe, class, caste or occupation unless otherwise
directed by the Registrar of Co-operative societies. Section 14
placed restrictions on the transfer of share or interest by a member
and the transfer could be made only to the society or to a member
of the society. What is relevant for our purpose is to notice that G
normally, the membership in a society created with the object of
creation of funds to be lent to its members, was to be confined to
members of the same tribe, class, caste or occupation. The Co-
operative Societies Act, 1912 continued in force until the concerned
States enacted laws for themselves. It was, thus, that the Bombay H
10 SUPREME COURT REPORTS [2007] 1 S.C.R

A Co-operative Societies Act, 1925 was enacted. We have earlier
)C
noticed some of the relevant provisions of the Act and it is not
necessary to repeat them here. Under Section 72 of the Act, a
society registered either under the Co-operative Credit Societies
Act, 1904 or the Co-oper~tive Societies Act, 1912 was to be deemed
to be registered under the Act. What is required to be noticed is
B that in this Act also, when the object of the society was the
creation of funds to be lent to its members, the membership had to
be confined to persons belonging to the same town or village or
same group of villages or they had to be members of the same tribe,
class (originally it was caste) or occupation unless the Registrar
c ordered otherwise. It was this Act, under which the present appellant
Society got itself registered, though it later came to be governed
by the Gujarat Co-operative Societies Act which was subsequently
enacted. We have already adverted to the general provisions
thereof but it may be relevant to notice here that under Section 6,
no society other than a federal society, could be registered unless
D
it consisted of at least I 0 persons belonging to different families
and who resided in the area of operation of the society and no
society with unlimited liability could be registered unless all persons
forming the society, resided in the same town or village or in the
group of villages. Section 24 of the Act put restrictions in respect
E of membership. Section 30 restricted the right of transfer and
Section 31 the right of inheritance. Thus, running right through the
relevant enactments, is the concept of restricted membership in a
co-operative society. The concept of open membership referred to
in Section 24 of the Act has, therefore, to be understood in this
F background, especially when we bear in mind that it only placed an
embargo on refusal of admission to membership to any person duly
qualified therefor under the provisions of the Act, the Rules and
the bye-laws of the society.

15. The cooperative movement, by its very nature, is a form of
G voluntary association where individuals unite for mutual benefit in
the production and distribution of wealth upon principles of equity,
reason and common good. No doubt, when it gets registered under
the Cooperative Societies Act, it is governed by the provisions of
the Cooperative Societies Act and the Rules framed thereunder. In
H Smt. Damyanti Naranga v. The Union of India and Ors., [1971] l
SUMANGALAM CO-OP. HOUSING ,liOCIETY LTD. v. SUO MOTU, HIGH COURT OF GUJARAT (PASAYAT, J] 11

SCC 678, this Court, discussing the scope of the right to form an A
association guaranteed by Article 19( 1)(c) of the Constitution of
India, stated that the right to form an association necessarily
implies that the persons forming the association have also the right
to continue to be associated with only those whom they voluntarily
admit in the association. Any law, by which members are introduced
in the voluntary Association without any option being given to the B
members to keep them out, or any law which takes away the
membership of those who have voluntarily joined it, will be a law
..... violating the right to form an association. Based on this decision,
it is contended on behalf of the Society that its members have the
right to be associated only with those whom they consider eligible
to be admitted and the right to deny admission to those with whom
c
they do not want to associate, cannot be interfered with by the
Registrar by imposing on them a member who according to them
was not eligible to be admitted. The argument on this basis is
sought to be met on behalf of the respondents by reference to
another decision of this Court in Daman Singh and Ors. v. State D
ofPunjab and Ors,, [1985] 2 SCC 670. Therein, their Lordships, after
referring to Damyanti 's case (supra), held that that decision had no
application to the si~ation before them. The position was explained
in the following words:-

"That case has no application whatever to the situation E
before us. It was a case where an unregistered society was by
statute converted into a registered society which bore no
resemblance whatever to the original society. New members
could be admitted in large numbers so as to reduce the
original members to an insignificant minority. The composition F
of the society itself was transformed by the Act and the
voluntary nature of the association of the members who
formed the original society was totally destroyed. The Act
was, therefore, struck down by the Court as contravening the
fundamental right guaranteed by Art. 19(1)(f). In the cases
before us we are concerned with co-oper~tive societies which G
from the inception are governed by statute. They are created
by statute, they are controlled by statute and so, there can be
,, no objection to statutory interference with their composition
on the ground of contravention of the individual right of
freedom of association." H
12 SUPREME COURT REPORTS [2007] I S.C.R.

A The history and nature of co-operative movement have been projected
in very clear terms in the judgment.

9. For the purpose of the present case, Sections 17, (Amalgamation,
transfer, division or conversion of Societies), 20 (Cancellation of registration),
23 (Removal from membership in certain circumstances), 24 (open membership
B are relevant. Additionally, no member of respondent Nos.2 and 3 societies
has made any complaint against respondent No. 4 or its office bearers. That
has significant impact on the controversy. The valuation done by Dr.
Roshan H. Namavati demolishes the basis of the conclusion by the High
Court regarding undervaluation.
c
I 0. The appeals are, therefore, allowed. The observations made against
various officials are uncalled for and have to be treat~d to have been
deleted.

11. The appeals are accordingly allowed with no orders as to cost. We
D
record our appreciation for the fair and able assistance rendered by Mr. Altaf
Ahmad, learned Amicus Curiae.

S.K.S Appeals allowed.

r