State of M.P. v. Sanjay Nagayach, (2013) 7 SCC 25
Cooperative Societies
M.P. Cooperative Societies Act, 1960 (17 of 1961)
Ss. 53(1) proviso 2 & 53(2) and S. 49(7-A)(i) and proviso thereto - Supersession of an elected body (Board of Directors
of District Cooperative Central Bank) before completion of its term - Power of Registrar/Joint Registrar in respect of -
Proper exercise of - What is - Need for bona fide action within four corners of statute in best interest of members of
society, based on objective criteria - Previous consultation with Reserve Bank of India (RBI) before exercise of power of
supersession by Registrar/Joint Registrar - Mandatoriness of - Meaningful and effective consultation with RBI - What
amounts to - Effect of non-compliance with requirement of previous consultation - Reinstatement of elected body to
complete remaining period of term for which it was elected - Exclusion of period of illegal supersession - Held, a legally
elected Board of Directors cannot be put out of office by an illegal order - Previous consultation with RBI is mandatory
before opinion is formed by Registrar/Joint Registrar to supersede elected Board of Directors - Mere forwarding copy of
show-cause notice, issued on Board of Directors seeking their reply, to RBI does not amount to consultation -
Supersession of an elected Managing Committee/Board is an exception and is to be resorted to only in exceptional
circumstances - If Board of Directors of Bank is illegally superseded, suspended or removed, it has be reinstated to
complete its full term of five years, because electorate elected said Board for five year term - Joint Registrar of
Cooperative Societies passed order superseding Board of Directors of District Cooperative Central Bank on certain
allegations of shortcomings and illegalities, and made available show-cause notice served on Board of Directors to RBI -
Order set aside by High Court for non-compliance with S. 53(1) second proviso on ground that there was no meaningful
and effective consultation with RBI before taking decision of supersession of Board of Directors - Legality - Held,
meaningful and effective consultation with RBI under S. 53(1) second proviso means furnishing copy of reply filed by
Board of Directors of Bank to various charges and allegations levelled against them, to RBI as well as action proposed by
Joint Registrar after considering said reply submitted by Board of Directors - Views expressed by RBI thereon will be
relevant material for Registrar/Joint Registrar to decide whether elected Board be superseded or not - In instant case,
Joint Registrar merely forwarded copy of show-cause notice issued on Board of Directors to RBI, which does not amount
to consultation - Further, charges levelled against Board of Directors were relating to period of previous Committee, for
which present Board of Directors could not be held responsible - Hence, held, supersession of Board of Directors is in
violation of S. 53(1) second proviso - Also report of RBI advised that allegations raised in show-cause notice being of
general nature of deficiencies relating to systems and procedures were not grave enough to supersede democratically
elected Board of Directors - Registrar/Joint Registrar, held, while exercising powers of supersession, has to form an
opinion based on objective criteria which have nexus with final decision - They are expected to act in best interest of
society and its members and they have to act bona fide and within four corners of statute - However, in instant case,
Joint Registrar clearly acted under extraneous influence and under dictation - Hence, Board of Directors directed to be
reinstated to complete remaining term of five years, excluding period of illegal supersession - Appeal dismissed with
costs of Rs 1,00,000 payable by State for pursuing frivolous litigation and also Rs 10,000 payable by Joint Registrar who
passed said order to be realised from his salary, for having acted improperly - General directions issued in view of many
such cases emanating in various courts challenging orders of supersession of elected Boards/Committees, (2013) 7
SCC 25-A
Words and Phrases
Consultation - Meaning of - Effect of non-compliance with requirement of - Held, when outcome of proposed action is to
oust a democratically elected body and expression used is shall not be passed without previous consultation,
consultation is mandatory - Seventh proposition to meaning of consultation is added in addition to six propositions laid
down in Indian Administrative Service (S.C.S.) Assn., 1993 Supp (1) SCC 730, (2013) 7 SCC 25-B
Constitution of India
Art. 136 - Costs as punitive measure for prosecuting frivolous litigation at the expense of public exchequer and for
having acted improperly under extraneous influence - Statutory authority (Joint Registrar of Cooperative Societies), held,
acted under extraneous influence - Costs of Rs 1 lakh imposed on State and Rs 10,000 on Joint Registrar to be
recovered personally from his salary, (2013) 7 SCC 25-C
Generally
Held, cooperative philosophy rests on principles of free universal association, democratic governance and is
conditioned by equity and personal liberty - History of cooperative movement and societies - Traced, (2013) 7 SCC 25-D
Cooperative Societies
General Issues
Registrar/Joint Registrar - Functions of - Permissible and proper grounds for exercise of power - External/Extraneous
influence - Impermissibility - Held, statutory functionaries like Registrar/Joint Registrar of cooperative societies must
function independently without external/extraneous pressure - When an authority invested with power purports to act on
its own, but if in substance, said power is exercised on basis of external guidance or pressure, it amounts to non-exercise
of power - Registrar/Joint Registrar are expected to act in best interest of society and its members bona fide and within
four corners of statute, (2013) 7 SCC 25-E
Administrative Law
Administrative Action
Exercise of Power/Discretionary Power - Statutory authority - How must function - A statutory authority shall not act with
pre-conceived notions and shall not speak its masters' voice, because formation of opinion must be its own, not of
somebody else in power to achieve some ulterior motive, (2013) 7 SCC 25-F
Administrative Law
Administrative Action
Implementation of Court orders/Compliance with judicial precedents - Judicial precedents - Binding nature of, on
statutory authorities - Registrar/Joint Registrar of Cooperative Societies, held, is bound to follow judicial precedents,
while exercising their powers - Ratio decidendi has the force of law and is binding on all statutory authorities when they
deal with similar issues, (2013) 7 SCC 25-G
Constitution of India
Arts. 226 and 14 - Alternative remedy of statutory appeal - When not a bar - Arbitrary exercise of power by statutory
authority in clear violation of statute, (2013) 7 SCC 25-H
Cooperative Societies
Generally
Unnecessary litigation - Spending of public money - When not to be resorted to - Held, public money is not to be spent
by State Government or Registrar for unnecessary litigation involving disputes between various factions in cooperative
society - Taxpayers' money is not expected to be spent for settling those disputes - If found necessary, same may be
spent from funds available with Society concerned, (2013) 7 SCC 25-I
Print Page
Cooperative Societies
M.P. Cooperative Societies Act, 1960 (17 of 1961)
Ss. 53(1) proviso 2 & 53(2) and S. 49(7-A)(i) and proviso thereto - Supersession of an elected body (Board of Directors
of District Cooperative Central Bank) before completion of its term - Power of Registrar/Joint Registrar in respect of -
Proper exercise of - What is - Need for bona fide action within four corners of statute in best interest of members of
society, based on objective criteria - Previous consultation with Reserve Bank of India (RBI) before exercise of power of
supersession by Registrar/Joint Registrar - Mandatoriness of - Meaningful and effective consultation with RBI - What
amounts to - Effect of non-compliance with requirement of previous consultation - Reinstatement of elected body to
complete remaining period of term for which it was elected - Exclusion of period of illegal supersession - Held, a legally
elected Board of Directors cannot be put out of office by an illegal order - Previous consultation with RBI is mandatory
before opinion is formed by Registrar/Joint Registrar to supersede elected Board of Directors - Mere forwarding copy of
show-cause notice, issued on Board of Directors seeking their reply, to RBI does not amount to consultation -
Supersession of an elected Managing Committee/Board is an exception and is to be resorted to only in exceptional
circumstances - If Board of Directors of Bank is illegally superseded, suspended or removed, it has be reinstated to
complete its full term of five years, because electorate elected said Board for five year term - Joint Registrar of
Cooperative Societies passed order superseding Board of Directors of District Cooperative Central Bank on certain
allegations of shortcomings and illegalities, and made available show-cause notice served on Board of Directors to RBI -
Order set aside by High Court for non-compliance with S. 53(1) second proviso on ground that there was no meaningful
and effective consultation with RBI before taking decision of supersession of Board of Directors - Legality - Held,
meaningful and effective consultation with RBI under S. 53(1) second proviso means furnishing copy of reply filed by
Board of Directors of Bank to various charges and allegations levelled against them, to RBI as well as action proposed by
Joint Registrar after considering said reply submitted by Board of Directors - Views expressed by RBI thereon will be
relevant material for Registrar/Joint Registrar to decide whether elected Board be superseded or not - In instant case,
Joint Registrar merely forwarded copy of show-cause notice issued on Board of Directors to RBI, which does not amount
to consultation - Further, charges levelled against Board of Directors were relating to period of previous Committee, for
which present Board of Directors could not be held responsible - Hence, held, supersession of Board of Directors is in
violation of S. 53(1) second proviso - Also report of RBI advised that allegations raised in show-cause notice being of
general nature of deficiencies relating to systems and procedures were not grave enough to supersede democratically
elected Board of Directors - Registrar/Joint Registrar, held, while exercising powers of supersession, has to form an
opinion based on objective criteria which have nexus with final decision - They are expected to act in best interest of
society and its members and they have to act bona fide and within four corners of statute - However, in instant case,
Joint Registrar clearly acted under extraneous influence and under dictation - Hence, Board of Directors directed to be
reinstated to complete remaining term of five years, excluding period of illegal supersession - Appeal dismissed with
costs of Rs 1,00,000 payable by State for pursuing frivolous litigation and also Rs 10,000 payable by Joint Registrar who
passed said order to be realised from his salary, for having acted improperly - General directions issued in view of many
such cases emanating in various courts challenging orders of supersession of elected Boards/Committees, (2013) 7
SCC 25-A
Words and Phrases
Consultation - Meaning of - Effect of non-compliance with requirement of - Held, when outcome of proposed action is to
oust a democratically elected body and expression used is shall not be passed without previous consultation,
consultation is mandatory - Seventh proposition to meaning of consultation is added in addition to six propositions laid
down in Indian Administrative Service (S.C.S.) Assn., 1993 Supp (1) SCC 730, (2013) 7 SCC 25-B
Constitution of India
Art. 136 - Costs as punitive measure for prosecuting frivolous litigation at the expense of public exchequer and for
having acted improperly under extraneous influence - Statutory authority (Joint Registrar of Cooperative Societies), held,
acted under extraneous influence - Costs of Rs 1 lakh imposed on State and Rs 10,000 on Joint Registrar to be
recovered personally from his salary, (2013) 7 SCC 25-C
Generally
Held, cooperative philosophy rests on principles of free universal association, democratic governance and is
conditioned by equity and personal liberty - History of cooperative movement and societies - Traced, (2013) 7 SCC 25-D
Cooperative Societies
General Issues
Registrar/Joint Registrar - Functions of - Permissible and proper grounds for exercise of power - External/Extraneous
influence - Impermissibility - Held, statutory functionaries like Registrar/Joint Registrar of cooperative societies must
function independently without external/extraneous pressure - When an authority invested with power purports to act on
its own, but if in substance, said power is exercised on basis of external guidance or pressure, it amounts to non-exercise
of power - Registrar/Joint Registrar are expected to act in best interest of society and its members bona fide and within
four corners of statute, (2013) 7 SCC 25-E
Administrative Law
Administrative Action
Exercise of Power/Discretionary Power - Statutory authority - How must function - A statutory authority shall not act with
pre-conceived notions and shall not speak its masters' voice, because formation of opinion must be its own, not of
somebody else in power to achieve some ulterior motive, (2013) 7 SCC 25-F
Administrative Law
Administrative Action
Implementation of Court orders/Compliance with judicial precedents - Judicial precedents - Binding nature of, on
statutory authorities - Registrar/Joint Registrar of Cooperative Societies, held, is bound to follow judicial precedents,
while exercising their powers - Ratio decidendi has the force of law and is binding on all statutory authorities when they
deal with similar issues, (2013) 7 SCC 25-G
Constitution of India
Arts. 226 and 14 - Alternative remedy of statutory appeal - When not a bar - Arbitrary exercise of power by statutory
authority in clear violation of statute, (2013) 7 SCC 25-H
Cooperative Societies
Generally
Unnecessary litigation - Spending of public money - When not to be resorted to - Held, public money is not to be spent
by State Government or Registrar for unnecessary litigation involving disputes between various factions in cooperative
society - Taxpayers' money is not expected to be spent for settling those disputes - If found necessary, same may be
spent from funds available with Society concerned, (2013) 7 SCC 25-I
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