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PETITIONER: BEED DISTRICT CENTRAL CO-OP BANK LTD. AND ANR

       Vs.

RESPONDENT: JAGANNATH S. SHAHANE AND ORS.

DATE OF JUDGMENT13/03/1992

BENCH: KASLIWAL, N.M. (J) BENCH: KASLIWAL, N.M. (J) YOGESHWAR DAYAL (J)

CITATION:  1992 AIR 1249            1992 SCR  (2) 296  1992 SCC  (2) 604        JT 1992 (2)   367  1992 SCALE  (1)716

ACT:           Maharashtra  Co-operative Societies  Act,  1960  : Section 73 (2) (As inserted by Maharashtra Amendment Act  XX of 1986).               Specified Society-Co-operative  Bank-Board  of Directors-Election-Provision requiring Registrar to describe the maximum number of members on the Society held directory- Purpose of Section 73 (2) Explained.      Section 27 (3)-Proviso-Deletion of Proviso-Effect of.

HEADNOTE:          Election to the Board of Directors of the  appellant Bank,   a   specified   co-operative   Society   under   the Maharashtra  Co-operative  Societies Act, 1960, were  to  be held  as provided under Section 73 (G) of the Act read  with Maharashtra Specified  Co-operative Societies (Elections  to Committees)  Rules, 1971. By the Maharashtra Act No. XLV  of 1983 the Maharashtra  Co-operative Societies Act was amended and  a proviso was added to sub-section (3) of  Section  27. This  amendment was challenged and the High  Court  declared the  proviso  to sub-section (3) of Section 27 as  void  and inoperative.   Thereafter respondent.  No. 1 and 2  filed  a writ  petition  in  the  High Court  which  was  allowed  by directing  that all steps taken on the basis of  proviso  to section  27(3)  were null and void.  The  parties  aggrieved against  the  aforesaid decision filed appeals  before  this Court.  During the pendency of the appeals Section 73 of the Maharashtra Co-operative Societies Act was amended and  sub- section  (2) was added to it. Further by Act No. X  of  1988 Ist  proviso  to  Section  27(3)  was  deleted.   After  the aforesaid changes in the 1960 Act, this Court, by its  order dated March 13, 1989, disposed of the appeals directing that elections  to  the  Co-operative Societies may  be  held  in accordance  with the amended law.  Thereafter the  Collector declared the election programme of the appellant bank  under which  last date for filing nominations was 23.10.1991  last date  for scrutiny was 25.10.1991, last date for  withdrawal was  11.11.1991  and  the  date  of  polling  was  fixed  on 27.11.1991.   By a notification dated 27th December,                                                        297 1991 the State of Maharashtra postponed elections upto  15th

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April, 1992.      Respondents  No. 1 and 2 filed a writ petition  in  the Bombay  High Court challenging the election  programme.   By its judgment dated November 19, 1991 the High Court  allowed the  petition  holding  that (i) in view  of  the  mandatory provision of section 73(2) it was incumbent on the Registrar of Co-operative Societies to prescribe the maximum number of members on the Committee of the appellant bank by publishing an  order in the official gazette; (ii) since no such  order was  published, the election process fixed by the  Collector was illegal and invalid; and (iii) the election process  was in  violation  of this Court’s order dated March  15,  1989. Against the decision of the High Court the Co-operative Bank filed an appeal in this Court.      On  behalf of the appellant bank it was contended  that (i)  with the deletion of proviso to section 27(3),  section 73(2)  has  become redundant; (ii) that the  word  ‘may’  in section  73(2)  clearly  meant  that  it  was  an   enabling provision and the said sub-section does not cast any duty on the  Registrar to exercise the power of prescribing  maximum number  in  every  case  but  only  confers  upon  him   the discretion  to  make  such an  order  if  the  circumstances enumerated  in the said provision necessitated the  exercise of  such  power; and (iii) since bye-law No.28 of  the  Bank already  prescribed  the maximum number of  members  in  the Committee to 21 members and as such there was no question of passing any order under section 73(2).      For  the respondents it was contended that  unless  the Registrar applied his mind in the light of Section 73(2)  no elections could have been declared by the Collector. It  was necessary for the Registrar to apply his mind as to  whether the  maximum number prescribed in the bye-laws of a  society was  justified or not and thereafter issue an order  and  to publish the same in the official gazette.      Allowing the appeal, this Court,      HELD:  1.  The main purpose of introducing  proviso  to sub-section  (3)  of Section 27 was to widen  and  make  the scope of voters as broad based while electing members to the Committees of a federal society.  It was laid down that  all the members elected as well as co-opted shall have the right to vote on behalf of such society while electing the members to  the Committee of a federal society.  The  provision  was declared invalid by the High                                                        298 Court  and thereafter it was also deleted by  a  Legislative fiat  by Maharashtra Act No. (X) of 1988.  The  position  as now stands is that in case of an election to the members  of the  Committee  of  a federal society, any  member  of  such society shall not have more than one vote.  [305 C-E]      The purpose of inserting sub-section (2) of Section  73 of  the  Act was that there was a necessity to  control  the large  number, if any, of the elected and  co-opted  members getting  a right of vote allowed under the proviso  to  sub- section  (3)  of section 27 of the Act.  However,  when  the proviso to sub-section (3) of Section 27 was struck down  by the  High Court and also deleted by the legislature  itself, the  purpose  of introducing sub-section(2) in  Section  73, lost  its thrust and relevance and even if it  continued  in the  Statute,  it would be considered as directory  and  not mandatory.  [305 E-F]      1.1  It is no doubt that sub-section (2) of Section  73 of the Maharashtra Co-operative Societies Act starts with  a non obstante clause overriding anything contained in any bye laws  of a society, but at the same time the discretion  has been  left to the Registrar to prescribe the maximum  number

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of  members  of  Committee  of  the  society  or  class   of societies.  This provision does not compel the Registrar nor makes  it obligatory to prescribe maximum number  even  when the  Registrar  may  be satisfied with  the  maximum  number already   prescribed  in  the  bye-laws  of  such   society. [305 F-G]      2.  The  order dated 27th December 1991 issued  by  the Government  postponing the elections upto 15th  April,  1992 would not apply to such co-operative societies in whose case the  election  process from the stage of 1991.  In  view  of this,  the  notification dated 27th  December,  1991  cannot apply in the case of the appellant Beed District Central Co- operative Bank as the election process of filing nominations was  fixed for 23.10.1991 and even the date of  polling  was 27.11.1991 i.e. much before 26th December, 1991. [306 B-C]      3. The Collector District Beed shall complete the  left out  stage  for election to the Board of  Directors  of  the appellant Bank. [306-D]

JUDGMENT:     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1111 of 1992.                                                        299      From  the  Judgment  and Order dated  19.11.91  of  the Bombay High Court in W.P. No. 3398 of 1991.      Soli   J.   Sorabjee  and  A.M.  Khanwilkar   for   the Appellants.      U.R.  Lalit,  V.N. Ganpule and K. Madhava  Reddy,  V.B. Joshi, S.M. Jadhav and A.S Bhasme for the Respondents.      S.K.  Dholakia, R.B. Masodkar and K.L. Taneja  for  the Intervenors.      The Judgment of the Court was delivered by      KASLIWAL, J.   Special leave granted.      This  appeal  is directed against th Judgment  of  High Court  of Judicature of Bombay at Aurangabad dated  November 19,  1991.  Brief facts of the case are  that  elections  to the  Board of Directors of the Beed District Central  Co-op. Bank  Limited  a specified co-operative  society  under  the Maharashtra  Co-operative Societies Act,  1960  (hereinafter referred to as ‘the Principal Act’) were to be held for  the years  1991-1996.  The elections are held as provided  under the  provisions  of  Section  73(G) of  the  Act  read  with Maharashtra  specified Co-operative Societies (Elections  to Committees)  Rules,  1971 (hereinafter referred to  as  ‘the Rules of 1971’).  The Constitution of the Board of Directors of the Beed District Central Co-op. Bank Ltd.,  (hereinafter referred  to as ‘the Beed Co-op. Bank.  The elections of the Board  of Directors for the years 1991-96 had become due  in November, 1990. With a view to conduct the elections, voters lists  were initially  finalised on 28.2.1990 but  the  same were   postponed  on  account  of   Government   directions, Eventually the Collector declared the elections of the  Beed Co-op. Bank under Rule 16 of the Rules of 1971 on 8.10.1991. According  to  the election programme last date  for  filing nominations  was  23.10.1991,  last  date  for  scrutiny  on 25.10.1991,  last date for withdrawal 11.11.91 and the  date of polling was fixed on 27.11.91, Jagannath, respondent  No. 1  and  individual  member  of  the  Beed  Co-op.  Bank  and Ramkirshana  Maroti being member of Agriculture Service  Co- operative Society, Bhayala and delegate of the said  society in  the Beed Co-op. Bank filed writ petition in  the  Bombay High  Court  challenging the aforesaid election.   The  High Court  took  the  view that the election  process  had  been

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started in derogation and violation of Section 73(2) of  the Act and as such                                                        300 the  same  was  declared is illegal and  invalid  .  It  was directed that it will be open to the authorities to start  a new election programme adhering to the mandatory requirement of  Section 73(2) of the Act taking every step in  a  proper and  careful manner.  The Beed Co-op. Bank and its  Chairman have come in appeal before this Court challenging the  order of the High Court.      In  order  to  appreciate the controversy  we  find  it necessary  to  mention the background of the  litigation  as well as the various changes brought from time to time in the relevant provisions of law.  The Maharashtra Legislature  by the  Maharshtra  Act  No.  (XLV)  of  1983  sought   several amendments  in the Maharashtra Co-operative  Societies  Act, 1960.   The  relevant  amendment  for  our  purpose  is  the following  proviso added to sub-sec. (3) of Sec. 27  of  the Act:           "Provided that, notwithstanding anything contained           in this Act or in the rules made thereunder or  in           any  bye-laws  of any society,  where  such  other           society  is a federal society belonging to any  of           the categories specified in Section 73-G, then all           the members elected to , and the members, if  any,           co-opted  or appointed under Section 73-B  on  the           committee  of  such first society shall  have  the           right to vote on its behalf in the affairs of such           other society;      Provided  further  that,  where the election  is  to  a reserved seat under Section 73-B, no person shall have  more than one vote".      The  aforesaid amendment was challenged by filing  writ petitions Nos. 2170  and 2054 of 1984 and the High Court  by its  order dated 8.1.1985 declared the aforesaid proviso  to sub-section  (3)  of  Section 27 as  void  and  inoperative. After the said decision a writ petition No. 787 of 1984  was filed   by   four  petitioners   including   Jagannath   and Ramakrishan,   the present respondents Nos. 1 and 2 and  the High  Court  following its earlier decision  dated  8.1.1985 rendered in Writ petition Nos. 2170 and 2054 of 1984, by  an order  dated 15.1.1985 allowed the writ petition and gave  a declaration that all steps taken by the Beed Central  co-op. Bank  Ltd.,  for holding elections of the Bank and  all  the steps taken on the basis of Proviso to sub-s.(3) of  Section 27  were null and void.  The parties aggrieved  against  the aforesaid decision filed Special Leave Petition before  this Court.   This  Court granted Special  Leave  and  registered Civil  Appeals  Nos.  1907 and 1908  of  1989.   Before  the aforesaid  appeals came up for final hearing by                                                        301 this   Court   the  Maharashtra  Legislature   brought   the Maharashtra Act No. (XX) of 1986 an Act further to amend the Maharashtra  Co-operative  Societies  Act,  1960.  By   this amendment   Act,  Section  73  of  the  Principal  Act   was renumbered  as sub-s.(1) thereof; and after sub-s.(1) as  so renumbered, the following; sub-s.(2) inserted:           "(2)  Notwithstanding  anything contained  in  any           bye-laws  of a society or class of societies,  the           Registrar  may,  having  regard  to  the  area  of           operation, subscribed share capital or turnover of           a  society  or class of societies, by  general  or           special  order,  published  in  Official  Gazette, prescribe   the   maximum   number   of   members   on   the committee   of   such  society  or   class   of   societies,

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as may be specified in such order".      The   Maharashtra   Legislature  further   brought   an amendment  by Maharashtra Act No. (X) of 1988 to  amend  the Maharashtra  Co-operative  Societies Act, 1960 and  the  Ist proviso  to sub-s.(3) of section 27 was deleted.  After  the aforesaid changes in the principal Act, this Court by  order dated March 13, 1989 disposed of the Civil Appeal Nos.  1907 and 1908 of 1989.  This Court passed the following order:-           "It  is  brought  to our  notice  by  the  learned           counsel  for both the parties that  subsequent  to the   Judgment  of  the  High  Court  Section  73   of   the Maharashtra    Co-operative   Societies   Act    has    been amended   by   addition  of  sub-section  (2)   of   Section 73   of   the   Act  in  1986.   In  view   of   the   above amendment   it   is  submitted  by   learned   counsel   for both   the   parties   that  the  elections   to   the   co- operative   societies  in  question  have  to  be  held   in accordance   with   the   amended   law.    We   accordingly make   an  order  in  substitution  of  the  order  of   the High    Court   that   elections   to    the    co-operative societies    may   be   held   in   accordance   with    the amended   law  as  early  as  possible.   The  appeals   are disposed of accordingly."      Thereafter   the  Collector  fixed  the  programme   of election  mentioned above and the respondents Jagannath  and Ramakrishna   filed  the  writ  petition   challenging   the programme  of election and the writ petition filed  by  them was  allowed by order dated November 19, 1991 which  is  now the subject matter of challenge before us.                                                        302      We have heard learned counsel for the parties and  have thoroughly perused the record.  The short controversy raised before  us is regarding sub-s. (2) of Section 73 of the  Act inserted  in the Act by  Maharashtra Amendment Act  (XX)  of 1986,  to  be mandatory or directory.  The  High  Court  has taken the view that the above provision is mandatory and  it was incumbent on the Registrar of the co-operative societies to prescribe the maximum number of members of the  Committee of  the Beed Co-operative Bank by issuing a  specific  order and to publish such order in the Official Gazette.  The High Court  further  held that in the absence of  such  order  in respect   of   the  Beed  Co-operative  Bank   followed   by publication  in the official Gazette, the  election  process fixed by the Collector was liable to be declared illegal and invalid.  The High Court also took the view that this  Court also  in  its  order dated 15.3.1989  had  clearly  given  a direction  to  comply with the provisions of sub-s.  (2)  of Section  73 and as such the programme of election  fixed  by the  Collector was in violation of the order of  this  Court also.      Shri Soli J Sorabji, Learned Senior Counsel,  appearing on  behalf  of the appellants submitted that sub-s.  (2)  of Section  73  was inserted only with a view  to  curtail  the unequal  voting  rights  conferred on  the  members  of  the society circumstanced on account of insertion of proviso  to sub-s. (3) of Section 27 of the Act.  It was contended  that admittedly the aforesaid porviso to sub-s. (3) of Section 27 was  deleted on 22.4.1988 by Maharashtra Act No.X  of  1988. With the deletion of the above proviso sub-s. (2) of Sec. 73 became  redundant.  It was contended that the  insertion  of sub-s. (2) of Section 73 was necessitated for validating the proviso to sub-s. (3) of Section 27 as both these provisions were  complimentary  to each other.  It was  contended  that prior  to  the insertion of sub-s. (2) of  Section  73,  the constitution of the Committee of the Beed Co-operative  Bank

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was dependent on its own bye laws which were dully  approved by the Registrar of the co-operative societies.  The bye law No. 28 of the Beed Co-operative Bank already prescribed  the maximum number of members in the committee to 21 members and as  such  there was no question of passing any  order  under sub-s.  (2) of Section 73.  It was submitted that  the  word ‘may’  in  sub-s. (2) of Section 73 clearly meant  that  the said  provision was an enabling provision and not  mandatory as  held by the High Court.  The said sub-section  does  not cast  any  duty on the Registrar to exercise  the  power  of prescribing  maximum number in every case but  only  confers upon  him  the  discretion  to make such  an  order  if  the circumstances enumerated in the                                                        303 said provision necessitated the exercise of such power.   It was also contended that such power could alone be  exercised by the Registrar where either the maximum number of  members on  the Committee fixed in the bye laws was required  to  be changed in the opinion of the Registrar or where the the bye laws  of a society may not have fixed the maximum number  at all.  In that kind of case, if any , order was passed by the Registrar  then such order was required to be  published  in the official Gazette.      It was also contended that if this provision is held to be   mandatory,   it  would  result  in   invalidating   the constitution  of  numerous managing Committees  of  the  co- operative  societies  in the State of Maharashtra  and  this could never have been the intention of the Legislature.      On  the  other  hand Sh.  U.R.  Lalit,  Learned  Senior counsel  for  the respondents Nos. 1 and 2  Sh.  Dholakia  , Learned Senior Counsel for one of the Intervenors  supported the  impugned Judgment of the High Court.  It was  contended that  unless the Registrar applied his mind in the light  of the  provisions  contained  in sub-s.(2) of  Section  73  no elections could have been declared by the Collector.  It was necessary for the Registrar to apply his mind as to  whether the  maximum number prescribed in the bye laws of a  society was  justified or not and thereafter issue an order  and  to publish   the  same  in  the  official  Gazette.    In   the alternative  it  was  submitted that in the  event  of  this Hon’ble Court taking a different view from that of the  High Court, it was necessary to issue a fresh election  programme in view of the fact that all the contesting candidates  were informed that the election programme fixed by the  Collector had been set aside by the High Court.  It was also submitted that the State of Maharashtra has now issued a  Notification on  27th December, 1991 postponing such elections upto  15th April, 1992.      It  is  worthwhile to note that the stand taken  by the State of Maharashtra before us is that proviso to sub-s. (3) of  Section 27 was inserted in order to make the  electorate broad based and more representative in character, where  the other  society was federal society belonging to any  of  the category  mentioned in sub-s. (3) of Section 27 of the  Act, it was proposed to provide that the right to vote on  behalf of  the  members of society should be conferred on  all  the elected  members  and  co-opted  members  appointed  on  the committee under Section 73 instead of single  representative exercising such right of vote.  The said provision was                                                   304 declared  invalid  by  the  High  Court  of  Bombay  by  its Judgmentde  dated 8.1.1985 and the said proviso was  deleted by  Act  No.  (X) of 1988.  As the  said  proviso  has  been deleted, the sub- s.(2) of Section 73 has lost its relevance now  and  it  has remained only  as  an  enabling  provision

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instead of a mandatory one.      We shall have to consider the question of sub-s. (2) of Section 73 being mandatory or directory in the background of changes made from time to time in the Principal Act and  the effect  of the directions given by this Court in  its  order dated  13.3.1989.   The Beed District  Central  Co-operative Bank  is a specified Co-operative Society  having a  federal character.  The elections to the Board of Directors have  to be held according to the provisions of the Rules of 1971  in conformity  with the provisions of the Act and the bye  laws made  by it.  The constitution of the Board of Directors  is provided  in  bye law No.28 which clearly  states  that  the management of business  and  affairs of the  bank  shall  be entrusted  to a Board of Directors which shall  hold  office for five years consisting of not more than 21 members.  Thus the bye-laws clearly specify that the maximum number of  the Board of Directors would be 21.  The bye laws have been made with  the approval of the Registrar Co-operative  Societies. Proviso  to  Sub-s.(3)  of Section 27 was  inserted  by  Act No.(XLV)  of 1983.  Section 27 dealt with voting  powers  of members.   After deletion, of the proviso to Sub-s.  (3)  of Section  27, by Maharashtra Act (XX) of 1988, Sub-s. (3)  of Section reads as under : (p.103) (Annexure-D)        S. 27 Members and their Rights and Liabilities :                Voting  powers  of  members  1[(1)  Save   as           otherwise  provided  in sub-sections (2)  to  (7),           both  inclusive,  no member of any  society  shall           have more than one vote in its affairs; and  every           right  to vote shall be exercised personally   and           not be proxy :                Provided  that,  in the case of  equality  of           votes of the Chairman shall have a casting vote;]                (2)  Where  a  share of  a  society  is  held           jointly  by  more than one person  2  [the  person           whose names stands first in the share certificate,           if present, shall have the right to vote.  But  in           his  absence the person whose name stands  second,           and in the                                                   305                    absence  of both, the person  whose  name          stands  next, and likewise, in the absence  of  the          preceding persons the person whose name is next  on          the  share certificate, who is present and  who  is          not, minor, shall have the right to vote.]                (3) A society which has invested any part  of           its  funds in the shares of another  society,  may           appoint one of its members; to vote on its  behalf           in   the  affairs  of  that  other  society;   and           accordingly  such member shall have the  right  to           vote on behalf of first society;      The main purpose of introducing proviso to sub-s.(3) of Section  27  was to widen and make the scope  of  voters  as broad  based  while electing members to the committee  of  a federal  society.   It was laid down that  all  the  members elected as well as co-opted shall have the right to vote  on behalf  of  such society while electing the members  to  the Committee of a federal society.  The provision was  declared invalid by the High Court and thereafter it was also deleted by  a  Legislative fiat by Maharashtra Act No.(X)  of  1988. The position as now stands is that in case of an election to the  members  of  the committee of a  federal  society,  any member  of such society shall not have more than  one  vote. The purpose of inserting sub-s. (2) of Section 73 of the Act was that there was a necessity to control the large  number, if any, of the elected and co-opted members getting a  right

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of vote allowed  under the proviso to sub-s. (3) of  Section 27  of the Act.  However, when the proviso to sub-s. (3)  of Section  27  was  struck down by the  High  Court  and  also deleted   by   the  Legislature  itself,  the   purpose   of introducing  sub-s.(2)  in Section 73, lost its  thrust  and relevance  and  in  our view even if  it  continued  in  the Statute,  it  would  be  considered  as  directory  and  not mandatory.  It  is no doubt that sub-s. (2)  of  Section  73 starts  with  a  non  obstante  clause  overriding  anything contained in any bye laws of a society, but at the same time the  discretion has been left to the Registrar to  prescribe the  maximum  number  of members of  the  Committee  of  the society  or class of societies.  In our view this  provision does  not  compel the Registrar nor makes it  obligatory  to prescribe  maximum  number even when the  Registrar  may  be satisfied with the maximum number already prescribed in  the bye  laws of such society.  As already mentioned  above  the State  of  Maharashtra  has also taken the  stand  in  their written submissions placed before us that after the deletion of the proviso to sub-s. (3) of Section 27 the provision  of sub-s. (2) of Section 73 has lost its relevance                                                   306 and it has remained only as an enabling provision instead  a mandatory one.      Thus we find force in the submissions made on behalf of the Beed Co-operative Bank, the appellant before us that the provision of section 73(2) are directory and not mandatory.      As  regards the order dated 27th December, 1991  issued by the Government postponing the elections upto 15th  April, 1992  and  placed on the record of the case suffice  to  say that the same would not apply to such co-operative societies in whose case the election process from the stage of  making nominations   has  already  commenced  on  or  before   26th December,  1991.  In view of this,  the  notification  dated 27th   December,  1991  cannot  apply in  the  case  of  the appellant  Beed  District Central Co-operative Bank  as  the election  process  of  filing  nominations  was  fixed   for 23.10.91  and even the date of polling was  27.11.1991  i.e. much   before  26th  December,  1991.   In  view  of   these circumstances  we allow this appeal, set aside the  Judgment of the High Court and dismiss the Writ petition filed by the respondents  Nos. 1 and 2.  In the facts and   circumstances of  the case we pass no order as to costs.  As a  result  of the  above order the Collector District Beed shall  complete the left out stage for election to the Board of Directors of the Beed District Central Co-operative Bank limited. T.N.A.                                       Appeal allowed.                                                   307