Sanjeev Kumar v. Rayabhagi v Additional Registrar of Co-Opertive Societies

Karnataka HC23 Oct 2019WP/49716/2019

Case brief

AI extract

What is this about?

The High Court of Karnataka quashed orders disqualifying cooperative society directors for violation of the Karnataka Cooperative Societies Act. The quashing was based on violations of natural justice, including the denial of opportunity to file objections and the consideration of grounds not notified in the show cause notice.

What did the court decide?

Writ petitions allowed; orders dated 24.09.2019 and 24.06.2019 quashed; second respondent at liberty to appoint permanent Secretary or appoint Special Officer under Section 31(1).

Sanjeev Kumar v Rayabhagi Vs Additional Registrar of… — Property and Title | Karnataka HC (2019)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 23^RD DAY OF OCTOBER, 2019

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BEFORE

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THE HON’BLE MR. JUSTICE ARAVIND KUMAR

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W.P. NOs.49716-49725/2019 (CS-RES)

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BETWEEN:

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1 . SANJEEV KUMAR V RAYABHAGI S/O VENKUSA G RAIBAGH AGED ABOUT 51 YEARS.

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2 . KUMAR SELVAN P S/O M. POOSWAMY AGED ABOUT 52 YEARS.

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3 . GOPINATH B.S S/O SUNDARAMURTHY A.M AGED ABOUT 50 YEARS.

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4 . AMRUTHRAJ K.M S/O LATE K. MUNISWAMY AGED ABOUT 51 YEARS.

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5 . YELLAPPA DYAMANNAVAR S/O DEVENDRAPPA DAYAMANAVAR AGED ABOUT 38 YEARS.

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6 . ANITHA R ALVA D/O Y.A. SHETTY AGED ABOUT 63 YEARS.

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7 . BYREGOWDA B S/O PAPANNA AGED ABOUT 74 YEARS.

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8 . SRI. ARAVINDA M.A S/O ANNAJI GOWDA AGED ABOUT 37 YEARS.

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9 . SRI. RAGHU M N S/O. NARAYANAPPA, AGED ABOUT 36 YEARS.

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10 . SMT. GEETHA Y R W/O. LOKESH V R AGED ABOUT 36 YEARS.

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ALL ARE DIRECTORS OF BHARATH ELECTRONICS HOUSE BUILDING CO-OPERATIVE SOCIETY LTD, 1^ST FLOOR B E CO-COOPERATIVE SOCIETY LTD JALAHALLI, BENGALURU – 560 013.

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...PETITIONERS

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(BY SRI. DEVI PRASAD SHETTY, ADVOCATE)

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AND:

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1 . ADDITIONAL REGISTRAR OF CO-OPERATIVE SOCIETIES ALI ASKAR ROAD BENGALURU – 560 001.

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2 . THE JOINT REGISTRAR OF CO-OPEATIVE SOCIETIES BENGALURU RANGE SAHAKARA SOWDHA NO.146, 3^RD FLOOR 3^RD MAIN ROAD, 8^TH CROSS MARGOSA ROAD, MALLESHWARAM BENGALURLU – 560 003.

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3 . BHARATH ELECTRONICS HOUSE BUILDING CO-OPERATIVE SOCIETY LTD, 1^ST FLOOR B E CO-OPERATIVE SOCIETY LTD JALAHALLI, BENGALURU – 560 013 BY ITS SECRETARY.

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ANNADORAI K S/O LATE KUPPUSWAMY

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AGED MAJOR R/O NO.16, AKSHAYA NILAYA NEAR GANGAMMA TEMPLE RAMACHANDRAPURA BENGALURU – 560 013.

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…RESPONDENTS

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(BY SMT. H.C. KAVITHA, HCGP FOR R-1 TO R-3; SRI. M.V. VEERABHADRAIAH, ADVOCATE FOR R-4)

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THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED:24.09.2019 VIDE ANNEXURE-N PASSED BY THE R-1 AND QUASH THE ORDES PASSED BY THE R-2 VIDE ANNEXURE-H1, TO H-10 DATED:24.06.2019.

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THESE PETITIONS COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:

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O R D E R

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Petitioners have called in question orders dated 29.04.2019 (Annexure-N) passed by first respondent whereunder appeals filed by petitioners challenging the orders dated 24.06.2019 (Annexures-H-1 to H-10) passed by second respondent under Section 29C of the Karnataka Cooperative Societies Act, 1959 (for short ‘Act’) disqualifying them from continuing as members of the Board of third respondent – society came to be dismissed.

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2. Petitioners are all employees of Bharat

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Electronics Limited (for short ‘BEL’) and employees of BEL have established a society by name “Bharat Electronics House Building Co-operative Society Limited” (for short ‘society’) for the benefit of employees of BEL. Petitioners came to be elected as Directors of said society in the elections held on 01.09.2018, which has been arrayed as third respondent in these proceedings. One

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Sri.K.R.Srikanth, who had been nominated by the Management of BEL was appointed as Secretary of third respondent – society and he continued as Secretary till 03.10.2018 as his services came to be withdrawn by management of BEL. On account of post of Secretary of third respondent – society having become vacant, Managing Committee of society comprising of petitioners are said to have made arrangements by passing a resolution on 03.10.2018 whereunder it was resolved to appoint sixth petitioner to function as incharge Secretary. Third respondent

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– Society is said to have taken steps to appoint a permanent Secretary and in its meeting held on 02.01.2019 it has been resolved to call for applications from eligible candidates by publishing the said notice in “Vijaya Karnataka”, a Kannada Daily newspaper vide Annexure-B.

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In the meanwhile, third respondent-

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Society has appointed one Sri. Anil Kumar Kinhal working as engineer in third respondent –Society as incharge Secretary till permanent Secretary is appointed vide appointment letter dated 21.06.2019Annexure-C. Society is also said to have requisitioned Joint Registrar of Co-operative Societies to nominate an official of the Department for selection of permanent Secretary vide communication dated 17.05.2019 - Annexure-D. When this process was on, a complaint dated 23.03.2019 - Annexure-E came to be filed by one of the member of the society viz., fourth respondent herein before Chief Minister, Minister for Co-operation, Secretary, Department of

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Co-operation and copy was marked to second respondent alleging thereunder that one of the elected members of Board of Directors of third respondent – society i.e., sixth petitioner had been appointed as Secretary of the society contrary to Section 29G of the Act and alleging that elected body of third respondent – society had acted illegally and contrary to bye-laws and the Act. Hence, fourth respondent sought for initiating proceedings against petitioners under Section 29C of the Act. Acting on said complaint, second respondent issued show cause notice dated 22.04.2019 (Annexure-E1) to the petitioners. Second respondent passed orders on 24.06.2019 (Annexures-H1 to H10) disqualifying petitioners under Section 29-C(8)(b)(c) and holding that they would not be entitled to contest for elections to third respondent - society as well as to any other co-operative society for a period of three years. An appeal came to be preferred by petitioners before first respondent and on rejection of application for grant

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of interim stay, petitioners had approached this Court in W.P.Nos.31906-912/2019 which came to be allowed by order dated 13.08.2019 (Annexure-K1) with a direction to first respondent to consider the application for stay filed by petitioners afresh. Thereafter, first respondent passed an order of stay of execution and operation of orders dated 24.06.2019 (Annexures-H1 to H10). First respondent – appellate authority, by order dated 24.09.2019 (Annexure-N) has dismissed the appeal and confirmed the orders passed by second respondent. Hence, petitioners are before this court.

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4 I have heard the arguments of Sri Jayakumar S Patil, learned Senior counsel appearing for petitioners, Smt H.C.Kavitha, learned HCGP appearing for respondents-1 to 3 and Sri Veerabhadraiah, learned Advocate appearing for respondent-4.

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It is the contention of Sri Jayakumar S Patil, learned senior counsel appearing for petitioners

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that impugned orders passed by second respondent on 24.06.2019 (Annexures-H1 to H10) are liable to be quashed since they are in gross violation of principles of natural justice since no opportunity was given to petitioners. He would submit that petitioners had engaged an advocate to conduct the proceedings and matter had been listed on 07.06.2019 for filing objections and on the said date, there were other cases also posted and case relating to petitioners which was at Sl.No.9 had been taken out of turn and posted the matter for orders though other matters came to be adjourned. He contends that all other cases which came to be adjourned to 07.06.2019 was on account of second respondent being engaged on some other urgent work and as such, entire proceedings came to be concluded on said date by 11.05 a.m. He contends that intentionally case of the petitioners had been taken out of turn and inspite of Advocate of petitioners making a mention at 11.05 a.m. on same day i.e., 07.06.2019, said prayer was

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not considered. Hence, interlocutory applications came to be filed by petitioners on 10.06.2019 for recalling the order dated 07.06.2019 with permission to file statement of objections and also to prepone the said case. He would further contend that said application were neither considered nor rejected and yet impugned orders have been passed without affording petitioners any opportunity and without even considering the statement of objections filed to the notices issued to petitioners. He would further contend that grounds on which show cause notice came to be issued was for alleged act of the society being contrary to Section 29-G, whereas, impugned order is on a different set of ground namely, on the ground that Managing Committee had withdrawn the agreement executed in favour of Srimaya Builders and Developers and same having been assigned to Byraveshwara Enterprises, Bangalore, which was never an issue raised in show cause notice and that too, without even providing any opportunity to the

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petitioners, impugned order dated 24.06.2019 came to be passed.

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He would further contend that even otherwise, for the collective act of the Board, proceedings under Section 29-C of the Act cannot be initiated against petitioners and Registrar would be at liberty to take steps in accordance with law against the society if the board has passed a resolution either contrary to Act and Rules or bye-laws of the society. Hence, he prays for impugned orders are liable to be quashed.

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He would submit that society had already taken steps to appoint regular Secretary to the society which fact was fully within the knowledge of second respondent and same has not been taken note of by the authorities before passing the impugned orders. It is also contended that if second respondent had appointed the nominee for selection of Chief Executive to third respondent – society by this time, process for appointment of society to third respondent – society could have been complicated..

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6. Smt.H.C.Kavitha, learned HCGP

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appearing for respondent-State would support the impugned orders. She would also contend that ingredients of Section 29-C of the Act is clearly attracted in the instant case as petitioners had passed a resolution contrary to Sections 17 and 17A of the Act and as such, petitioners have been rightly disqualified and there is no error committed by respondents in passing the impugned orders. Hence, she prays for dismissal of the writ petitions.

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Sri Veerabhadraiah, learned Advocate appearing for respondent-4 would contend that proceedings have been initiated against petitioners on the strength of complaint/petition filed by fourth respondent dated 21.03.2019 and 23.03.2019 whereunder it was specifically alleged that 6^th petitioner had been appointed as Secretary of third respondent – society and she being a Director of society, her appointment was contrary to Section 29G

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of the Act and thereby resolution passed by Board of third respondent – society being contrary to Act and Rules would attract the provisions of disqualification. He would elaborate his submission by contending that third respondent – society represented by its Directors had entered into transaction with the contractor to form a layout by causing financial loss to the society and as such, impugned orders have been passed which would not call for interference. He would also submit that sufficient opportunity had been given by second respondent to petitioners and as such, their contention that reasonable opportunity was not extended to them to defend the proceedings for disqualification initiated against them would not hold water. He would also support the impugned orders and pray for dismissal of writ petitions by reiterating contents of applications filed under Order 1 Rule 10(2) CPC and requesting this Court to treat contents of it as statement of objections to writ petitions.

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Having heard learned Advocates

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appearing for parties and on perusal of records, it would clearly emerge therefrom that impugned orders dated 24.06.2019 (Annexures-H1 to H10) passed by second respondent is in clear violation of principles of natural justice for the reasons set forth herein below:

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(i) Proceedings for disqualification of

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petitioners came to be initiated under Section 29C(8)(b) & (c) of the Act by issuance of show cause notice dated 22.04.2019 (Annexure-E1). Perusal of same would indicate petitioners had been called upon to show cause as to why they should not be disqualified under Section 29C of the Act for having acted contrary to Act and bye-law No.56 namely, having appointed 6^th petitioner as Secretary to third respondent – society by fixing the date of hearing as 30.04.2019. Thereafter proceedings have been adjourned to 03.05.2019, 10.05.2019, 14.05.2019 & 21.05.2019. In fact, three Directors namely, Sriyuths Ameen Reddy, Girish B.E and Mahadevaiah filed

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their objections to the show cause issued by second respondent which have been produced by fourth respondent at Annexures-R8 to R-10 respectively. As rightly contended by Sri Veerabhadraiah, learned Advocate appearing for respondent-4, fifth petitioner alone had filed an application under Section 151 CPC vide Annexure-F and G for advancing the case and he had sought for permission of second respondent to file statement of objections to the show cause notice, with further prayer to recall the order dated 07.06.2019. Thus, it was incumbent upon second respondent to have passed orders on the said application by either allowing said application or rejecting the same. However, no such exercise was undertaken by second respondent. By keeping said application on file, impugned orders dated 24.06.2019 came to be passed after 14 days. In other words, petitioners herein did not get an opportunity to file statement of objections to the show cause notices. No doubt, matter had been listed on five

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occasions and as such, petitioners cannot be heard to contend that they would be at liberty to file objections at any time they choose or objections filed by them are required to be received by second respondent – authority whenever it was filed. However, when proceedings for disqualification is initiated and sought to be proceeded, which would visit them with civil consequences, principles of natural justice is required to be followed without any infraction. Though partially, second respondent has complied by granting opportunity to petitioners to file statement of objections, yet, fact remains statement of objections or reply to show cause notice was not filed. In fact, fifth petitioner had filed an application for permission to file objections in the proceedings as per the Interlocutory Applications – Annexures-F & G respectively on 10.06.2019. Admittedly, on the said date, no orders came to be passed adjudicating the show cause notice dated 22.04.2019. As such, it was incumbent upon second respondent to consider said

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application before proceeding to pass orders adjudicating the show cause notices. Facts obtained in the instant case clearly indicate that applications filed by fifth petitioner on 10.06.2019 (Annexures-F & G) having not been disposed of by second respondent,

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it would lead to an irresistible conclusion that opportunity sought for by fifth petitioner had not been granted. On this score itself, impugned orders dated 24.06.2019 (Annexures-H1 to H10) passed by second respondent are liable to be quashed as principles of natural justice has not been complied.

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Impugned orders would disclose the reason for disqualifying petitioners is not only on the ground indicated in the show cause notice but also on the ground that incharge Secretary has entered into contract with a developer for development of layout and the Board of Directors represented by Secretary had made heavy payment to the developer and as such, it had resulted in financial loss to the third respondent - society. However, this was not the

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fact indicated in the show cause notice or in other words, disqualification proceedings was not initiated on this ground.

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As could be seen from the impugned orders dated 26.04.2019 (Annexures-H1 to H10), statements or objections of three persons namely, Sriyuths Mahadevaiah, Ameen Reddy and Girish B.E

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as well as statement of the complainant have been taken into consideration to arrive at a conclusion that there has been financial irregularity committed by the Board of Directors of third respondent- society. In fact, this issue was never raised in the show cause notice dated 22.04.2019 (Annexure-E) issued by second respondent for initiating proceedings for disqualification under Section 29-C against petitioners. To put it differently, in the show cause notice, what has been alleged against petitioners is that fourth respondent had complained that one of the Director of third respondent – society namely,Smt.Anita R Alva (6^th petitioner herein) had

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been appointed as Secretary and an enquiry was conducted by second respondent on 16.04.2019 in this regard and 6^th petitioner had admitted about she having been appointed as incharge Secretary and thereby, Board of Directors had earned the disqualification prescribed under Section 29C(8)(b)(c) of the Act read with bye-law No.56 of the society. Hence, they had been called upon to reply to the show cause notice. Adjudication of the show cause notice ought to have been limited to the allegation made in the show cause notice and second respondent ought not to have travelled beyond adjudicating said show cause notice. In other words, facts or grounds which were never the subject mater of show cause notice could not have been subject matter of adjudication by second respondent and thereby impugned order passed under the guise of adjudicating show cause notice is without foundational facts. In fact, complaint lodged by fourth respondent herein before respondent –

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authorities on 21.03.2019 as well as before other authorities on 23.03.2019 (Annexures-R1 and R2) is limited or restricted to the illegal appointment of 6^th petitioner as Secretary to third respondent - society whereunder it was alleged appointment of 6^th petitioner as Secretary of third respondent – society was contrary to Section 29-G of the Act and clause 56 of the Bye-laws of the third respondent – society. On account of above said procedure having been adopted namely, adjudication of show cause notice, it would definitely violate right of the petitioners, inasmuch as, said ground was never raised in the show cause notice or notified to the petitioners in the show cause notice dated 22.04.2019 (Annexure-E1) and had they been notified, they would have definitely had an opportunity to reply to it.

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At this juncture, it would be apt and appropriate to note the judgment of Hon’ble Apex Court in the case of NAGARJUNA CONSTRUCTIONS COMPANY LIMITED vs GOVERNMENT OF ANDHRA

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PRADESH reported in (2008)16 SCC 276

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whereunder Apex Court while considering the effect of order passed by the High Court by making reference to the report/inspection notes which were not even referred to by State Government while exercising revisional powers, had held that High Court observed that since the appellant had not demanded inspection notes during hearing of the revision, there was no question of any prejudice. It has been held said approach was clearly wrong. At no point of time, not even at the time of hearing, revision petition or in the revisional order is there any reference to the so called inspection notes and conclusion regarding absence of prejudice, is, therefore not sustainable. It came to be further held that added to that, High Court did not consider the effect of stand taken by the Government earlier. In the instant case, as noticed herein supra, impugned show cause notice dated 22.04.2019 (Annexure-E1) which came to be issued to petitioners was based on

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the complaints dated 21.03.2019 and 23.03.2019 (Annexures-R1 and R2) lodged by fourth respondent which was for the limited purpose of examining as to whether act of petitioners would amount to violating Section 29-G of the Act and for attracting Section 29C and the mere statement made by three persons referred to herein supra, which has also gone into decision making process by second respondent – authority is beyond the jurisdiction or in other words, it was outside the scope of adjudication of show cause notice in question. As such, impugned orders cannot be sustained.

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Though learned Advocates appearing for parties have argued extensively with regard to merits of the case, this court would not embark upon examining the same inasmuch as, on the ground of violation of principles of natural justice, impugned orders dated 24.06.2019 (Annexures-H1 to H10) are being quashed by reserving liberty to second respondent to adjudicate the show cause notice

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afresh by extending opportunity to the petitioners to reply to the show cause notice and to allay any apprehension of respondents that petitioners are likely to protract the proceedings, a time frame can be fixed for disposal of proceedings by second respondent.

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13. Appellate authority before whom grounds

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have been urged has also not looked into the same and as such, said order is also not sustainable in law.

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For reasons aforestated, impugned orders cannot be sustained and as such, I proceed to pass the following:

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ORDER

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(i) Writ petitions are allowed. (ii) Order dated 24.09.2019 passed by first respondent in Appeal

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No.ANI(H&O) D2/DAP/01/2019-20 (Annexure-N) as well as orders dated

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24.06.2019 passed by second respondent in Dispute Nos.JRB/DISPUTE/29-C/02/201920, JRB/DISPUTE/29-C/02/201920(4), JRB/DISPUTE/29-C/02/ 2019-20(5), JRB/DISPUTE/29C/02/2019-20(6), JRB/DISPUTE/ 29-C/02/2019-20(7), JRB/ DISPUTE/29-C/02/2019-20(9), JRB/DISPUTE/29-C/02/201920(10), JRB/DISPUTE/29-C/02/ 2019-20(11), JRB/DISPUTE/29C/02/2019-20(12), JRB/DISPUTE/ 29-C/02/2019-20(3) – AnnexuresH1 to H10 are quashed.

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(iii) Second respondent is at liberty to adjudicate show cause notice already issued against petitioners in accordance with law or in the alternate, would be at liberty to

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issue fresh show cause notice in the event of second respondent deeming fit to initiate fresh proceedings against petitioners.

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(iv) In the light of writ petitions having been allowed on two grounds as stated herein above in body of the order, no opinion is expressed with regard to other contentions and it is kept open.

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(v) Question of considering prayer (c) does not arise since Special Officer under Section 31(1) of the Act has been appointed to third respondent – society and it is for the said authority to take steps in accordance with law.

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SD/JUDGE

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*sp

Sanjeev Kumar v. Rayabhagi v Additional Registrar of Co-Opertive Societies

Case brief

What is this about?

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Sanjeev Kumar v. Rayabhagi v Additional Registrar of Co-Opertive Societies

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