Page 1

1 Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   1653       OF 2016 (Arising out of S.L.P. (C) No.31265 of 2010)

Hemant Vimalnath Narichania and another ….. Appellants

Versus

Anand Darshan C.H.S. Ltd. and others …..Respondents

WITH

CIVIL APPEAL NO.    1654      OF 2016 (Arising out of S.L.P. (C) No.32678 of 2010)

J U D G M E N T

Uday Umesh Lalit, J.

1. Leave granted.   

2. These  appeals  challenge  the  common  Judgment  and  Order  dated  

02.08.2010  passed  by  the  High  Court  of  Judicature  at  Bombay  in  Writ  

Petition Nos.8194 of 2009 and 2980 of 2010.

Page 2

2 3. The subject of division of an existing Co-operative society in the State  

of  Maharashtra is dealt with by Section 18 of the Maharashtra Co-operative  

Societies Act, 1960 (hereinafter referred to as “the Act”) which Section is to  

the following effect:-

“18.  POWER  TO  DIRECT  AMALGAMATION,  DIVISION  AND  REORGANISATION  IN  PUBLIC  INTEREST, ETC:  (1) Where the Registrar is satisfied that it is essential in the  public interest, or in the interest of the cooperative movement,  or for the purpose of securing the proper management of any  society, that two or more societies should amalgamate or any  society  should  be  divided  to  form two or  more  societies  or  should be reorganised then notwithstanding anything contained  in  the  last  proceeding  section  but  public  subject  to  the  provisions of this section, the Registrar may, after consulting  such  federal  society  as  may  be  notified  by  the  State  Government by order notified in the Official Gazette, provide  for  the  amalgamation,  division  or  reorganisation  of  those  societies  into  a  single  society,  or  into  societies  with  such  constitution, property, rights, interests and authorities, and such  liabilities,  duties  and obligations,  as  may be specified in  the  order.  

(2)  No order shall be made under this section, unless—  

(a) a copy of the proposed order has been sent in draft to the  society or each of the societies concerned;  

(b) the Registrar has considered and made such modifications in  the draft order as may seem to him desirable in the light of any  suggestions  and  objections  which  may  be  received  by  him  within such period (not being less than two months from the  date on which the copy of the order as aforesaid was received  by the society) as the Registrar may fix in that behalf, either  from the  society  or  from any  member  or  class  of  members  thereof, or from any creditor or class of creditors.

Page 3

3

(3)  The order referred to in sub-section (1) may contain such  incidental, consequential and supplemental provisions as may,  in the opinion of the Registrar, be necessary to give effect to the  amalgamation, division or reorganisation.  

(4)  Every member or creditor of or other person interested  in, each of the societies to be amalgamated, divided or  reorganised,  who  has  objected  to  the  scheme  of  amalgamation,  division  or  reorganisation,  within  the  period specified, shall be entitled to receive, on the issue  of the order of amalgamation, division or reorganisation  his share or interest, if he be a member, and the amount  in satisfaction of his dues if he be a creditor.  

(5)  On  the  issue  of  an  order  under  sub-section  (1).  the  provisions in sub-sections (2), (3) and (4) of section 17 shall  apply to the societies so amalgamated, divided or reorganised  as if they were amalgamated, divided or reorganised under that  section, and to the society amalgamated, divided or reorganised.  

(6)  Nothing  contained  in  this  section  shall  apply  for  the  amalgamation  of  two or  more  co-operative  banks  or  two or  more primary agricultural credit societies.”

  The procedure in that behalf is detailed in Rule 17 of the Maharashtra  

Cooperative  Societies  Rules,  1961 (hereinafter  referred to  as  “the  Rules)  

which is as under:-

“17. Direction by Registrar for amalgamation, division and  reorganisation of societies:-  

(1)  Before issuing any order under sub-section (I) of Section  18 providing for the amalgamation, division or reorganisation  of any society or societies,  the Registrar shall prepare a draft  scheme  in  respect  of  such  amalgamation,  division  or  reorganisation stating in particular the manner in which the new  committee or committees, of the society or societies resulting

Page 4

4 from such amalgamation, conversion or reorganisation shall be  constituted  and  the  by-laws  which  such  society  or  societies  shall  follow.  The  Registrar  shall  then  consult  such  federal  society  as  may  be  notified  by  the  State  Government  in  the  Official Gazette, and after considering the suggestions, if any,  that will be made by such federal society, shall send a copy of  the draft of the order proposed to be issued by him under sub- section (1) of Section 18, to the society or each of the societies  concerned  calling  upon  it  or  them  to  invite  objections  or  suggestions from any member or class of members thereof or  from  any  creditor  or  class  of  creditors  and  to  submit  such  objections and suggestions together with its own or their own  suggestions and objections within a period of not less than two  months from the date on which the copy of the draft aforesaid  was received by it or them.  

(2) The  Registrar  shall  consider  all  such  suggestions  and  objections and make such modifications in the draft order as  may seem to him desirable in the light of those suggestions or  objections and then issue a final order under sub-section (I) of  Section 18.  

(3) Any member or creditor  of each of the societies  to be  amalgamated, divided or reorganised, who has objected to the  scheme of amalgamation, division or reorganisation within the  period specified in sub-rule (i), may apply to the Registrar for  payment of his share or interest,  if  he be a member, and the  amount  in  satisfaction  of  his  dues,  if  he be a  creditor.  Such  application shall be separate and distinct from the objection or  suggestion which he may have submitted to the society or the  Registrar under clause (b) of sub-section (2) of Section 18. It  shall be competent for the Registrar to nominate an officer not  below  the  rank  of  a  Deputy  Registrar  to  investigate  such  applications and to determine the payments required to be made  to the members or creditors, as the case may be.  

(4) Subject to the provisions of the Act, the rules and the by- laws, the Registrar may by order require the society concerned  to  meet  in  full  or  satisfy  otherwise  all  due  claims  of  the  members and creditors and thereupon the society shall be bound

Page 5

5 to  meet  in  full  or  satisfy  otherwise  all  due  claims  of  the  members and creditors within such time as may be specified by  the Registrar in the order.”   

4. The facts leading to the filing of the present appeals are as under:

(a) Respondent  No.1  herein  i.e.  Anand  Darshan Co-operative  Housing  

Society Ltd.  (registered under the provisions  of  the Act)  consists  of  two  

buildings.  The first building has one wing namely “A Wing” consisting of  

16 apartments, a bank and two garages while the second building has two  

Wings namely B and C Wings with 41 apartments and nine garages.  

(b) On  24.05.2007,  12  members  from  A  Wing  of  Respondent  No.1  

-Society  moved Application  No.1  of  2007 before  Deputy  Registrar,  “D”  

Ward, Mumbai for division of Respondent No.1 - Society by division of its  

assets and liabilities.

(c) A scheme for division as contemplated under Rule 17 was therefore  

prepared on 16.07.2007.   After setting out the areas of both the buildings, it  

was  stated that  ‘A’ Wing Building had 41.68% share and interest  in the  

property/open space of Respondent No.1 - Society while the other Building  

having ‘B’  and ‘C’  Wings had 58.32% share and that  the right/title  and  

interest in the property/land including additional FSI that might be available

Page 6

6 in future in respect of these buildings would also be in same proportion.  A  

plan  was  enclosed  detailing  proposed  division  while  certain  areas  and  

facilities were to be enjoyed in common.

(d) On  19.07.2007  the  scheme  was  forwarded  under  a  covering  letter  

from the office of Deputy Registrar, D Ward, Mumbai to Respondent No.1  

-Society  and  also  to  Maharashtra  District  Housing  Federation  Limited,  

namely, the Federal Society.

(e) A draft order was prepared on 05.09.2007 by the office of the Deputy  

Registrar  detailing  out  the  scheme  for  division  and  other  consequential  

matters.  This draft order was then sent to Respondent No.1 -Society and the  

Federal Society.  This was followed by second draft order dated 18.03.2008  

to similar effect which was marked to Respondent No.1 -Society and the  

Federal Society.

(f) On  09.05.2008  following  resolution  was  passed  by  the  Federal  

Society:

“Under the said proposal of Division, there are 3 Wings of a  single building and the division is to be made wing-wise (But)  if wing-wise division is made in one building then it is possible  that a dispute may again arise among the Members regarding  the  use  of  the  building’s  open space.   In  view thereof,  it  is  resolved that the said division cannot be recommended by the  Federation.”

Page 7

7

(g) In response to the aforesaid resolution, a detailed representation was  

made on 02.06.2008 stating inter alia that as a matter of fact three Wings of  

Respondent No.1 - Society were not located in one single building but were  

in  two different  buildings,  A Wing of  the Society being in  one separate  

building while the other two Wings – B and C in another building.  Draft  

building plans, photographs and other materials were also annexed.  This led  

to communication dated 19.07.2008 addressed by the Federal Society to the  

Deputy Registrar acknowledging the receipt of material stating that A, B, C  

Wings of the Society were not in a single building and that A Wing of the  

Society was in an independent building.  Further,  the letter requested the  

Deputy Registrar to take a decision about the division accordingly.  Around  

this time the Federal Society wrote to the proposed Society of A Wing that it  

had  by  letter  dated  19.07.2002  written  to  the  Deputy  Registrar  

recommending proposal of division.

(h) Thereafter the draft order was circulated by the Deputy Registrar on  

22.08.2008  seeking  comments  regarding  proposed  division  and  he  fixed  

15.09.2008 as the date for  hearing objections,  etc.   This  draft  order  was  

again marked to Respondent No.1 -Society.  According to the draft order,  

Respondent No.1 - Society would be divided in two societies:-

Page 8

8 (a)  The  Respondent  No.1  -Society  would,  upon  bifurcation,  

continue with only two existing Wings namely, B and C Wings  

with 41 apartments,  nine garages,  one Office Meeting Room  

and one Pump House while

(b)  New  Society  namely  New  Anand  Darshan  Cooperative  

Housing  Society  Limited  would  comprise  of  16  apartments  

from the existing A Wing with a Bank, two Garages, Security  

Office and a Meter Room.

(c)  And  certain  facilities  would  continue  to  be  enjoyed  in  

common by both these Societies.

(i) Thereafter on 03.11.2008 final order directing division of the existing  

Society i.e. Respondent No.1 – Society was passed.  The relevant portion of  

the Order reads as under:-  

“In exercise of the powers conferred on me under Section 18  (1)  of  the Maharashtra Co-operative Societies  Act,  1960 and  Rule 17 (2) thereunder I, Rajkumar Patil, Deputy Registrar, Co- operative Societies D-Ward, Mumbai, divided (the Society viz.)  the  Anand  Darshan  Co-operative  Housing  Society  Limited.,  C.S.No.744, 13-Dr. G.D. Deshmukh Marg, Mumbai – 400 026  into  two  independent  Societies  and  cancel/revoke  the  registration  of  the  Anand  Darshan  Co-op.  Housing  Society  Limited.  Regn.No.B-3126/1961  dated  28.4.1961  which  has  been divided under Section 21 and Rule 16(7) thereunder.   After the division the building having “A” Wing and “B” and  “C” Wings have to be given two (separate) registrations under

Page 9

9 Section 9(1) of the Maharashtra Co-op. Societies Act, 1960 and  the Rules  thereunder  for  the purpose  of  the  flats  in  the said  Wings  for  the  purpose  I  register  the  below-mentioned  new  societies  under  the  Registration  Numbers  mentioned  against  them.  

1 New Anand Darshan Co- operative Housing Society  Ltd., C.S.No.744, 13-Dr.  G.D. Deshmukh Marg,  Mumbai – 400 026

BOM/W.D./H sg./T.C./8874 /2008-09  dated  3.11.2008

2 .

Pedder  Road  Anand  Darshan  Co-op.  Hsg.  Society  Ltd.C.S.No.744,  13-Dr.G.D.  Deshmukh  Marg, Mumbai – 400 026

BOM/W.D./H sg./T.C./8873 /2008-09  dated  3.11.2008

Members in the building having “B” and “C” Wings are hereby  ordered to submit to this office, the Registration Case Papers in  the relevant prescribed Form to register the new Society of their  Building.  Further, as mentioned in the attached Proforma “A”  Two Independent Managing Committees are created in respect  of the Two Independent Societies…..”

(j) This order of the Deputy Registrar regarding division was challenged  

by way of Appeal No.250 of 2008 by Respondent No.1 - Society before  

Divisional  Joint  Registrar,  Cooperative  Societies,  Mumbai  Division,  

Mumbai, who dismissed this appeal by his order dated 16.04.2009.  This led  

to the filing of Revision Application No.231 of 2009 which also came to be  

dismissed by the Revisional Authority vide order dated 26.08.2009.

Page 10

10 (k) Respondent  No.1  –  Society  challenged these  orders  by  filing  Writ  

Petition No.8194 of 2009 in the High Court of Judicature at Bombay.  17  

Members of B and C Wings of Respondent  No.1 -Society also preferred  

Writ Petition No.2980 of 2010 in the High Court claiming similar reliefs.  

(l) Said writ petitions came to be allowed by the High Court by Judgment  

and Order under appeal  setting aside the concurrent  view taken by three  

authorities in the matter.  It was observed by the High court that Section  

18(2) of the Act obliges the Registrar to prepare a draft order and send the  

same to the Society inviting suggestions and objections, that after receipt of  

such suggestions  and objections  the  Registrar  was  further  duty  bound to  

consult the Federal Society and only thereafter an order under Section 18  

dividing the Society could be passed.  Since the final draft order was never  

sent to the Federal Society for obtaining its recommendations, according to  

the High Court,  there was infraction on the part of the Deputy Registrar.  

The High Court therefore allowed the said writ petitions and remanded the  

matter back to the Deputy Registrar to take fresh decision after following the  

procedure under Section 18 of the Act and under Rule 17 of the Rules.

5. In  these  appeals  arising  out  of  the  common  judgment  and  order  

passed by the High Court,  we have heard Mr. Shyam Diwan, learned Senior

Page 11

11 Advocate for the appellants and Mr. Shekhar Naphade, learned Sr. Advocate  

for Respondent No. 1 – Society and Mr. Venkata Krishna Kunduru, learned  

Advocate for the State.

6. Section 18(1) of the Act and Rule 17 of the Rules deal with, inter alia,  

division of an existing Society.  The power under Section 18(1) of the Act  

can be exercised if the Registrar is satisfied with the essential requirements  

mentioned in the said sub-section (1).   The Section, however, obliges the  

Registrar to exercise such power after consulting such Federal Society as  

may be notified in the Official Gazette.     Sub-section (2) of Section 18  

imposes two more conditions and states that (a)  no order for division be  

made unless  a  copy of  the  proposed order  has  been sent  in  draft  to  the  

concerned Society and (b) the Registrar shall consider the suggestions and  

objections, if any, either from the Society or from  any of its members and  

may make such modifications in the  draft order as may seem desirable to  

him.    Rule  17(1)  of  the  Rules  while  detailing  out  the  procedure  to  be  

followed,  lays  down  that  before  issuing  any  order  under  Section  18(1)  

providing for division of an existing Society, the Registrar shall prepare a  

draft  scheme.   The  Rule  further  lays  down that  the  Registrar  shall  then  

consult  the Federal  Society and after  considering the suggestions,  if  any,  

made by such Federal Society, shall send a copy of the draft  order proposed

Page 12

12 to be issued by him to the Society.   The Society would also be called upon  

to invite the objections or suggestions from any member or class of members  

of the Society.  Said sub-rule (2)  then states that the Registrar shall consider  

all  such suggestions and objections and make such  modifications in the  

draft order as may seem desirable to him and shall then issue a final order  

under sub-section (1)  of Section 18.

7. Thus  as  regards  division  of  an  existing  Society,  following  steps  

emerge from the reading of these provisions.

a. The Registrar shall first prepare a draft scheme.

b. He  shall  then  consult  the  Federal  Society.  As  part  of  

process of consultation, the Registrar would naturally be obliged to  

send the draft scheme to the Federal Society.

c. The  suggestions,  if  any,  made  by  the  Federal  Society  

would then be considered and the Registrar shall thereafter prepare a  

draft order, proposed to be issued by him.    This draft order shall then  

be sent to the concerned Society calling upon the said Society to invite  

objections or suggestions from any of its members.

Page 13

13 d. If  any suggestions  or  objections  are  made to  the  draft  

order, the Registrar shall consider if any modifications seem desirable  

and in the light of such suggestions or objections he shall then issue a  

final order.

8. These provisions  make it  very clear  that  the stage for  consultation  

with the Federal Society is when the draft scheme is contemplated.  After the  

stage of consultation with the Federal Society is over, the next stage arises  

for preparing draft order which is then circulated for inviting the objections  

or suggestions.  The provisions nowhere contemplate the draft order to be  

again sent  to  the Federal  Society as  part  of  process  of  consultation.  The  

assessment made by the High Court in that behalf is completely incorrect.  

In the present case, at  the stage of draft scheme the Federal Society was  

consulted in the matter and thereafter draft order was prepared in respect of  

which objections or suggestions were invited.   The High Court was not,  

therefore, justified in holding that there was infraction on part of the Deputy  

Registrar in the present matter.  In our view, the exercise of power by the  

Deputy Registrar and the procedure adopted by him were perfectly in tune  

with Section 18 of the Act and Rule 17 of the Rules.  

Page 14

14 9. We,  therefore,  allow these appeals  and set  aside  the judgment  and  

order  under  appeal.   The  order  dated  03.11.2008  passed  by  the  Deputy  

Registrar accepting the proposal for division of Respondent No.1 - Society  

as confirmed by the Appellate and Revisional Authorities is restored.  The  

matter  shall  now  be  taken  up  by  the  Deputy  Registrar  for  passing  

consequential directions, if any.   

10. The  appeals  are  allowed  in  aforementioned  terms.  No order  as  to  

costs.  

……………………………J (V.GOPALA GOWDA)

       …                     

                                                                    …………………………J (UDAY UMESH LALIT)

New Delhi February 23, 2016