Allowed

The Koovappally Service Co-Operative v. the State of Kerala

Kerala HC11 Mar 2022WP(C)/14874/2011

Case brief

AI extract

What is this about?

High Court held that while a committee resolution was technically invalid due to missing signatures, the High Court refused to quash it under writ jurisdiction due to excessive delay and adverse impact on third-party rights resulting from implementation.

What did the court decide?

The Goa P3 order of the Government rescinding the committee resolution was set aside due to delay and implementation, maintaining the status quo.

The Koovappally Service Co-Operative Vs the State of… — Cooperative Societies | Kerala HC (2022)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT

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THE HONOURABLE MR.JUSTICE VIJU ABRAHAM FRIDAY, THE 11TH DAY OF MARCH 2022 / 20TH PHALGUNA, 1943 WP(C) NO. 14874 OF 2011

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PETITIONER:

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THE KOOVAPPALLY SERVICE CO-OPERATIVE BANK LTD. 3949, KOOVAPPALLY.P.O., KANJIRAPPALLY TALUK, KOTTAYAM REP.BY ITS SECRETARY.

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BY ADVS. SRI.S.ANANTHAKRISHNAN SRI.N.K.SUBRAMANIAN

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RESPONDENTS:

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1 STATE OF KERALA CO-OPERATION (C)DEPARTMENT, REPRESENTED BY ITS DEPUTY SECRETARY, SECRETARIAT, TRIVANDRUM-695001.

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2 THE JOINT REGISTRAR (GENERAL) CO-OPERATIVE SOCIETIES,KOTTAYAM-686001.

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3 LILLYKUTTY STEPHEN, VANTHIYIL HOUSE, KOOVAPALLY.P.O., KANJIRAPALLY, KOTTAYAM-686001.

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R3 BY ADV SRI.LIJI.J.VADAKEDOM

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R1 &R2 BY G.P. SRI.JOSHI

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11.03.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.P.(C) No.14871 of 2011 2

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VIJU ABRAHAM, J.

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..................................................

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W.P.(C) No.14874 of 2011

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..................................................

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Dated this the 11^th day of March, 2022

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JUDGMENT

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The above writ petition is filed by the petitioner, a Cooperative Bank aggrieved by Exhibit P3 order dated 28.02.2011 passed by the 1^st respondent Government.

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Brief facts necessary for the disposal of the above writ petition are as follows: Petitioner is a Co-operative Society registered under the Kerala Co-operative Societies Act, 1969 (hereinafter referred to as the ‘Act’). The committee of the society consists of 11 members. In a meeting of the committee held on 29.12.2008, though 9 members of the committee participated and they signed the attendance register and in the minutes book and attended the meeting till the end, by an inadvertent omission 5 members failed to sign the minutes after recording the resolutions in the minutes book. The 3^rd respondent herein filed Exhibit P1 complaint dated 18.03.2009 before the 2^nd respondent for rescinding the resolution passed on 29.12.2008 by the managing committee of the petitioner’s society alleging that there was no compliance with the provisions of Co-operative Societies Act and Rules in as much as there was no quorum for the meeting. The 2^nd

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W.P.(C) No.14871 of 2011 3

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respondent conducted an enquiry into the allegations and rejected Exhibit P1 complaint as per Exhibit P2 order dated 16.06.2020. Aggrieved by Exhibit P2 order, the 3^rd respondent preferred an appeal before the 1^st respondent and by Exhibit P3 order dated 28.02.2011 the same was allowed holding that resolution passed by the committee of the petitioner bank held on 29.12.2008 is to be considered as illegal for want of sufficient quorum for the meeting. It is aggrieved by the said decision of the Government that the present writ petition is filed.

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The 1^st respondent filed a detailed counter affidavit maintaining the stand that Exhibit P3 order is perfectly legal and valid in as much as there was no sufficient quorum for the meeting and the decision taken by the committee of the bank on 29.12.2008 is in violation of the rules and therefore illegal. The counsel appearing for the 3^rd respondent also supported the said stand and contended that going by Clause 40 of the Bye-Law of the bank, it is mandatory that all decisions taken in the committee meeting must be entered in the minutes and then signed by the President, Secretary and also by all the directors present in the meeting.

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I have heard Shri S. Ananthakrishnan, learned counsel appearing for the petitioner, Shri Joshi, learned Government Pleader appearing for respondents 1 and 2 and also Shri Liji J Vadakedom, learned counsel appearing for the 3^rd respondent.

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W.P.(C) No.14871 of 2011 4

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Before getting into the merits of the matter, it is profitable to consider the procedure for the conduct of a meeting and about the quorum for the meeting as provided in the Kerala Co-operative Societies Act, 1969 and the Rules as well as the bye-law of the petitioner Cooperative Society. Section 28 (5) of the Act deals with the quorum for a meeting of a committee which provides as follows:

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“ 28. Appointment of committee .-

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xxxx xxxx

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(5) The quorum for a meeting of a committee shall be such number of members just above fifty per cent of the total number of members of that committee.”

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A copy of the bye-law of the petitioner society was made

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available for the perusal of this court by the counsel for the 3^rd respondent. Clause 37 (b) of the said bye-law mandates that any decision could be taken in the committee meeting in which at least more than half of the number of directors is present. Further, as per Clause 40 of the bye-law, every decision on each item that is discussed and decided in the committee meeting should be entered in the minute's book and the President and the Secretary and also the directors present in the meeting should affix their signatures. A combined reading of Section 28 (5) of the Act along with the provisions in the bye-law makes it explicitly clear that there should be quorum during the meeting and also at the time of passing the resolution. The question of law in this regard is well settled by the decision of this Court in Suresh Kumar

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W.P.(C) No.14871 of 2011 5

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v. Joint Registrar, 1999 (3) KLT 80 . In the said case, the court was considering Section 28 (5) of the Act and the provisions of the bye-law regarding quorum, which is almost similar to the provisions of the byelaw of the petitioner society, and held thus :

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“4. xxxx xxxx A reading of the above bye-law shows that at the time of deciding a subject 50 % of the members of the Director Board should be present. It gives an indication that at the time of deciding each resolution there should be quorum for the meeting.

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“6. xxxx xxxx Here, the wording of Bye-law is very clear. The bye-law clearly states that at the time when a subject is decided there should be quorum. Hence, there is no doubt that at the time of deciding the matter there should be quorum. A different conclusion cannot be taken by interpretation of S.28(5) also. S.28(5) of the Act insists for a quorum in the meeting. It is not stated that quorum is enough at the time of beginning of the meeting. Considering the Parliamentary practice and discussion of various decisions quoted at the Bar, I am of the opinion that quorum is necessary at the time of division (voting) on the resolution.”

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7 . This court on an earlier occasion while considering the validity of the decision of the Registrar that the challenge to a resolution on the ground of lack of quorum does not fall within the preview of Rule 176 of the Kerala Co-operative Societies Rules, 1969 in Gregory v.

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Secretary Manimala Service Co-op. Bank Ltd., 1990 (1) KLT

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374 held in paragraph 9 of judgment as follows:

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“9. This is sufficient to entail dismissal of the original petition. However, I must refer to the very curious reasoning adopted by the Joint Registrar in his order Ext.P8. He says that R.176 does not enable him to scrutinise the validity of a resolution, assailed on the ground that the meeting in which it was passed had no proper quorum, or that it had not been properly convened. I am afraid that

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W.P.(C) No.14871 of 2011 6

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there is no warrant for such a constricted view of R.176. R.176 reads:

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“Registrar's power to rescind resolution- Notwithstanding anything contained in the bye laws of a registered society, it shall be competent for the Registrar to rescind any resolution of any meeting of any socieity or of the committee of any society, if it appears to him that such resolution is ultravires of the objects of the society, or is against the provisions of the Act, Rules, Bye-laws or of any direction or instructions issued by the Department, or calculated to disturb society.”

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Inter alia, it enables the Registrar to rescind a resolution if it is against the provisions of the Act, Rules or Bye-laws. The rule is intended to subserve a definite purpose, to provide effective control and supervision by the department over the functioning of cooperative societies, a power which finds statutory expression in S.66 of the Act. R.176 subserves the provisions of S.66, by providing a machinery for effectuating that power. If the narrow view taken by the Joint Registrar be correct, the Registrar will be rendered a helpless onlooker against illegal resolutions, passed at meetings, not properly convened or held. Take for instance an extreme case where a meeting is held without quorum. Is the Registrar bound to fold his hands in stoic silence for the alleged inability of R.176 to reach such situation? The reasonable reading of R.176 should be that it posits not merely invalidity by reason of the resolution being plainly contrary to the Act, Rules or Byelaws, but also invalidity caused by illegalities in the very convening or the conduct of the meeting at which it was passed. A resolution to be valid has to pass a dual test. It should not be contrary to the Act, Rules or Bye-laws. It should also be passed at meeting convened and held in accordance with law. The Act, the Rules or the Bye-laws contemplate only resolutions passed at meetings properly convened and held. Such a meeting is the very sine qua non for a valid resolution. Any material illegality in convening or conducting a meeting will vitiate the resolution itself and render it contrary to the provisions of the Act, Rules or Bye-laws. The resolution can be said to be in accordance with the provisions of the Act, Rules or the Bye-laws only if it is one passed at a meeting convened or held in accordance with the statutory provisions or the provisions of the Bye-laws, and not otherwise. Therefore, a resolution passed at a meeting convened or held illegally is equally within the ambit of recession under R.176 and subject to scrutiny in exercise of the powers thereunder."

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(underline supplied)

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Therefore, the issue as regards the validity of resolution in a

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committee meeting without having a quorum has been well settled by

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W.P.(C) No.14871 of 2011 7

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this court in the decisions reported in Suresh Kumar’s case supra and Gregory’s case supra and therefore the decisions taken in the committee meeting of the petitioner society on 29.12.2008 cannot be treated as valid in as much as 5 members failed to sign the minutes book after the resolutions were recorded.

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Therefore, the question now to be decided is as to whether the resolutions in committee meeting No. 20 of the petitioner society in the meeting held on 29.12.2008 should be invalidated on the basis of Exhibit P1 complaint submitted by the 3^rd respondent. To decide on the said issue it is profitable to refer to Rule 176 of the Kerala Co-operative Societies Rules, 1969 which reads as follows:

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“ 176. Registrar's power to rescind resolution: Notwithstanding anything contained in the bye- laws of a registered society, it shall be competent for the Registrar to rescind any resolution of any meeting of any socieity or the committee of any society, if it appears to him that such resolution is ultra vires of the objects of the society, or is against the provisions of the Act, Rules, Bye-laws or of any direction or instructions issued by the Department, or calculated to disturb the peaceful and orderly working of the society or is contrary to the better interest of the society.”

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The said Rules deals with three contingencies where the Registrar could interfere with the decision of the committee of the society, i.e., when the resolution is ultra vires of the objects of the society, when the resolution is against the provisions of the Act, Rules, Bye-laws or of any direction or instruction issued by the Department, and when such resolution is calculated to disturb the peaceful and

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W.P.(C) No.14871 of 2011 8

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orderly working of the society or is contrary to the best interest of the society. In the present case, the resolution under challenge can be found fault only for the reason that it violates the second limb of Rule 176, i.e, the passing of the resolution is against the provisions of the Act, and Bye-laws in as much there was an omission on the part of five members of the committee to sign the minutes after recording the resolution in the minutes. The issue was considered by the 2nd respondent, Joint Registrar on the basis of Exhibit P1 complaint submitted by the 3rd respondent and was decided in favour of the petitioner. In appeal, the 1st respondent Government reversed the said finding and found that the resolution of the committee of the society held on 29.12.2008 is illegal. It is pertinent to note that the above writ petition challenging the said decision of the Government was admitted to file and this Court was pleased to pass an interim order on 08.06.2011 staying the operation of Exhibit P3 order of the Government. While admitting the writ petition this Court has called for the original minutes book maintained by the petitioner society during the period from 16..9.2008 to 28.07.2009. I have perused the said minutes book and it is found that the decisions taken on 29.12.2008 are all routine decisions in furtherance of the normal business activities of the petitioner society and there are no special resolutions or decisions which are ultra vires to the objects of the society or against the provisions of the Act, Bye-law or Rules or contrary

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to the best interest of the society, except that the five members of the committee did not sign the minutes after recording the resolution in the minutes book. The contention of the petitioner is that in fact in the meeting conducted on 29.12.2008, nine members of the committee participated and they have signed the attendance register and the minutes, but due to an inadvertent omission, 5 members omitted to sign the minutes after recording the same in the minutes book. It is also the case of the petitioner that the true factual position was spoken to by those members themselves before the authorities by way of a notarized affidavit confirming their presence in the meeting. It is also relevant to note that the committee meeting of the petitioner society held on 30.03.2010 has resolved as per decision No.369, which is produced as Exhibit P4 in this writ petition, authorising the secretary to see that signatures are affixed by the committee members who omitted to sign the minutes after recording the resolutions on 29.12.2008. Thus it could be seen that though the passing of the minutes on 29.12.2008 was in violation of the provisions of the Act and the Rules, the members who omitted to sign the minutes book has stated as per a notarized affidavit that they were in fact present in the meeting but due to an inadvertent omission, failed to sign the minutes after recording the decision and further that the committee itself as per Exhibit P4 resolved in the meeting held on 30.03.2010 to rectify the said mistake that has

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W.P.(C) No.14871 of 2011 10

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happened in the meeting held on 29.12.2008. It is to be noted that there is no complaint even for the 3^rd respondent or any members of the committee of the society that the decisions that were taken on 29.12.2008 were in any way detrimental to the interest of the society and its members except that there was omission in compliance with the provisions of the Act and the Bye-law as regard recording of the minutes.

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As stated earlier the decisions taken in the meeting are all routine decisions as part of the day-to-day affairs of the society and in all probabilities, those decisions have been implemented and further action was taken by the petitioner pursuant to the same. It is also to be noted that many of such decisions are involving third-party rights also. It is in the said background the delay in submitting Exhibit P1 complaint has to be looked into. Exhibit P1 was filed almost 3 months after the date of the alleged resolution on 29.12.2008. It is also pertinent to note that there is no specific allegation that any of the decisions taken were ultra vires to the objects of the society or in any way contrary to the best interest of the society except that all the members present in the meeting did not sign the minutes book after the decisions were recorded. It is submitted by the petitioner that the decision taken 29.12.2008, which are routine decisions in connection with day-to-day affairs of the petitioner society, has in fact been

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W.P.(C) No.14871 of 2011 11

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implemented even before Exhibit P1 complaint was submitted by the 3^rd respondent almost after 3 months after the said decision was taken.

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Shackleton on the law and Practice of Meetings,

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11th Edition, published by Sweet and Maxwell in paragraph 6-01 of chapter 6 at page 55 discussed the validity of a challenge against the proceedings of a meeting on the ground of absence of a quorum and opined that the same should be challenged within a reasonable time since the decisions arrived at the meeting are acted upon and treated as valid by all concerned. The relevant portion of the same reads as follows:

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“If the validity of proceedings at a meeting is to be challenged because of the absence of a quorum, appropriate action must be taken within a reasonable time. If a meeting has reached decisions which are acted upon and treated as valid by all concerned, it is not within the competence of a person not concerned at the time to seek to invalidate the proceedings because of the lack of a quorum”

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Moreover, in the decision in Suresh Kumar 's case

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(supra), relied on by the 3rd respondent, even though this court held that at the time of deciding each resolution there should be a quorum for the meeting at the starting of the meeting and also while passing the resolution, declined to interfere with the said decision for the reason that there is delay in submitting the complaint as against the resolution which is allegedly decided without a quorum. Paragraph 8 of the said judgment reads as follows:

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W.P.(C) No.14871 of 2011 12

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“8. Petitioners filed Exts.P1 and P3 representations only on 15.5.1999 and 19.5.1999 respectively. The resolution was passed on 30.3.1999. If the petitioners were not in favour of the resolution for conducting the election, petitioners should have raised objection immediately. Being a Board member second petitioner should have verified with the Registrar to ascertain what were the minutes recorded in the above meeting if he had left the meeting on the ground of objection and should have taken immediate action. Here, petitioners filed objection only after Ext.P1 election notification was published. On that ground of delay alone, I am not in a position to accept the contention of the petitioners without further evidence on disputed questions. 2^nd petitioner was not able to prove conclusively before me that he was not present when the resolution was moved especially in view of Ext.R4(b).”

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It is well settled by a catena of decisions of the Apex Court that the delay in approaching the court, coupled with the creation of third party rights in the meanwhile, is an important factor which always weighs with the Court in deciding whether or not to exercise jurisdiction to grant relief. The Apex Court in State of M.P. v. Nandlal Jaiswal , (1986) 4 SCC 566, in paragraph 24 held as follows :

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“24. Now, it is well settled that the power of the High Court to issue an appropriate writ under Article 226 of the Constitution is discretionary and the High Court in the exercise of its discretion does not ordinarily assist the tardy and the indolent or the acquiescent and the lethargic. If there is inordinate delay on the part of the petitioner in filing a writ petition and such delay is not satisfactorily explained, the High Court may decline to intervene and grant relief in the exercise of its writ jurisdiction. The evolution of this rule of laches or delay is premised upon a number of factors. The High Court does not ordinarily permit a belated resort to the extraordinary remedy under the writ jurisdiction because it is likely to cause confusion and public inconvenience and bring in its train new injustices. The

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W.P.(C) No.14871 of 2011 13

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rights of third parties may intervene and if the writ jurisdiction is exercised on a writ petition filed after unreasonable delay, it may have the effect of inflicting not only hardship and inconvenience but also injustice on third parties. When the writ jurisdiction of the High Court is invoked, unexplained delay coupled with the creation of third party rights in the meanwhile is an important factor which always weighs with the High Court in deciding whether or not to exercise such jurisdiction. We do not think it necessary to burden this judgment with reference to various decisions of this Court where it has been emphasised time and again that where there is inordinate and unexplained delay and third party rights are created in the intervening period, the High Court would decline to interfere, even if the State action complained of is unconstitutional or illegal. We may only mention in the passing two decisions of this Court one in Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489 : AIR 1979 SC 1628 : (1979) 3 SCR 1014] and the other in Ashok Kumar Mishra v. Collector [(1980) 1 SCC 180 : AIR 1980 SC 112 : (1980) 1 SCR 491] . We may point out that in R.D. Shetty case, even though the State action was held to be unconstitutional as being violative of Article 14 of the Constitution, this Court refused to grant relief to the petitioner on the ground that the writ petition had been filed by the petitioner more than five months after the acceptance of the tender of the fourth respondent and during that period, the fourth respondent had incurred considerable expenditure, aggregating to about Rs 1.25 lakhs, in making arrangements for putting up the restaurant and the snack bar. Of course, this rule of laches or delay is not a rigid rule which can be cast in a strait jacket formula, for there may be cases where despite delay and creation of third party rights the High Court may still in the exercise of its discretion interfere and grant relief to the petitioner. But, such cases where the demand of justice is so compelling that the High Court would be inclined to interfere in spite of delay or creation of third party rights would by their very nature be few and far between. Ultimately it would be a matter within the discretion of the court; ex hypothesi every discretion must be exercised fairly and justly so as to promote justice and not to defeat it.”

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(underline supplied)

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Though the said judgment was considering the exercise of discretionary jurisdiction of the courts when there is delay and laches and thereby

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W.P.(C) No.14871 of 2011 14

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creating third party rights, the dictum laid down by the Court could be safely applied in the facts of this case in as much as there was considerable delay in submitting Exhibit P1 complaint by the 3rd respondent and has resulted in the implementation of the decisions taken in the meeting held on 29.12.2008, whereby creating third party rights also.

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The resolution under challenge is one taken on 29.12.2008 and the decisions, as submitted by the petitioner, have been implemented even before the submission of Exhibit P1 complaint. All throughout the proceedings pending before this court from 2011 onwards the stay granted as against Exhibit P3 was in force. In view of the above, I feel that the resultant damage that will be caused in rescinding the resolution at this length of time, after the decisions taken in the said meeting has already been implemented and given effect to, creating third party rights, will be substantial and it will not be in the best interest of the petitioner society as well as its members. Therefore, in the peculiar facts and circumstances of this case, while maintaining the legal position that the decision taken by the committee of the society on 29.12.2008 is in violation of the provisions of the Act and the Byelaw for the reason that 5 members failed to sign the minutes after recording the resolution in the minutes book, I set aside Exhibit P3 order of the Government, considering the delay in submitting Exhibit P1

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W.P.(C) No.14871 of 2011 15

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complaint by 3rd respondent, and on a considered opinion that it will not be in the best interest of the society and its members to interfere with the resolutions passed by the committee as early as on 29.12.2008.

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The above writ petition is disposed of as above.

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Sd/-

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VIJU ABRAHAM, JUDGE

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W.P.(C) No.14871 of 2011 16

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APPENDIX IN WP(C) NO.14874 OF 2011

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PETITIONER'S EXHIBITS

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EXT.P1 TRUE COPY OF COMPLAINT DATED 18.3.09 EXT.P2 TRUE COPY OF ORDER DATED 16.6.10 OF 2ND RESPONDENT EXT.P3 TRUE COPY OF ORDER DATED 28.2.11 OF 1ST RESPONDENT EXT.P4 TRUE COPY OF RESOLUTION DATED 30.03.10

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RESPONDENTS' EXHIBITS: NIL

The Koovappally Service Co-Operative v. the State of Kerala

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The Koovappally Service Co-Operative v. the State of Kerala

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