ORDER
1. The first petitioner is the president of Primary Agricultural Co-op. Credit Society, D. Polavaram and petitioners 2 to 12 are the members of the Managing Committee. Aggrieved by the proceedings in Rc.No. 954 of 1999 dated 3-7-1999 issued by the 3rd respondent, they have approached this Court praying for a writ of mandamus declaring the action of the 3rd respondent as illegal. By the impugned order purporting to be under Section 34(1) of the A.P. Co-op. Societies Act, 1964 (hereafter called ‘the Act’), the 3rd respondent passed orders superseding the Managing Committee and the President of the Society with effect from 3-7-1999 and appointing one P. Nageswara Rao, Circle Supervisor of the District Co-op. Central Bank-Branch, Tuni as a Special Officer for a period of three months.
2. The facts in this case are not seriously disputed. That the petitioners were elected on 20-7-1995, that they were in charge of the affairs of the Society for the last 4 1/2 years, that there were no adverse remarks against the committee, that a notice is issued to them on 17-5-1999 giving 3 days’ time to show cause as to why action should not be taken against them under Section 34(1) of the Act for allegedly appointing one daily wage worker and paying an amount of Rs. 60,000/- to the employees of the Society towards arrears of DA, etc., and that on 3-7-1999 the impugned order came to be passed are not disputed. The serious contentious issue is that the petitioners have not chosen to file any reply to the show cause notice which is denied by the petitioners saying that when only 3 days’ time was granted for giving explanation, on 8-6-1999 the first petitioner field an application before the 3rd respondent seeking extension of time for filing proper reply. Be that as it may, the impugned order came to be passed by the third
respondent for alleged wilful disobedience of the orders of the authorities while the society took action in respect of two others referred to herein above.
3. The learned Counsel for the petitioners, Mr. M. Adinarayana Raju has made three submissions. It is contended by him that the facts in this case do not call for exercise of power under Section 34(1) of the Act. Secondly there is no adequate opportunity to the petitioners as required under the said provision before passing the impugned order and therefore the same is avoided. Lastly it is submitted that under Section 34(6) of the Act, the 3rd respondent is bound to consult the financing back and that being a condition precedent for exercise of power under Section 34(1) of the Act, the impugned order is illegal.
4. The learned AGP for Co-operation, Mr. Madhav Reddy, submits that these grounds are not available to the petitioners for the simple reason that inspite of the show cause notice dated 17-5-1999 they have not produced material nor they filed proper reply and therefore they cannot be heard to say anything before this Court. He further submits that there is an effective alternative remedy to the petitioners under Section 76(1) of the Act to the Registrar of Co-op. Societies against the orders of the third respondent and, therefore, this writ petition is not maintainable.
5. I have heard the learned Counsel for the petitioners and the learned AGP for Co-operation and the matter is being disposed of at the admission stage with the consent of the learned Counsel.
6. The learned AGP is correct that ordinarily this Court shall not exercise its jurisdiction when there is an effective alternative remedy. As has been held
repeatedly this rule of prudence has three exceptions. One such exception being that availability of alternative remedy is not a bar for approaching this Court when the order is passed contrary to the provisions of the Act. In the present case, admittedly before passing an order on 3-7-1999, the 3rd respondent has not consulted the financing back as required under Section 34(6) of the Act. As per Section 2(f) of the Act, ‘a financing bank’ means the main objects of which is to assist any affiliated or other society by loans or financing money and includes a scheduled bank as defined in the Reserve Bank of India Act, 1934 and such other body corporate or financial institution as may be notified by the Government from time to time. Admittedly, the District Co-op.Central Bank, East Godavari is the financing bank in respect of the petitioners’ Society and it is fairly submitted by the learned AGP that before passing the impugned order, the 3rd respondent has not consulted the financing bank.
7. The point that arises for consideration is whether the consultation with the financing bank by the Registrar of Co-op, societies under Section 34(6) of the Act is a condition precedent and for violation thereof, the order under Section 34(1) is rendered illegal.
8. The question that falls for consideration is no more res-integra. In Joint Registrar of Co-op. Societies, Madras v. P.S. Rajagopal Naidu, , the Supreme Court dealt with the admit, scope and content of Section 72 of the Madras Co-op. Societies Act, 1961 (hereafter called the ‘Madras Act’). It may be noticed that Section 72(1) and 72(6) of the Madras Act are ipsissima verba with Section 34(1) and 34(6) of the A.P. Co-operative Societies Act, 1964. A comparative statement of the provisions of the Madras Co-op. Act and the A.P.Co-op. Societies Act, is as follows:
MADRAS ACT
A.P. ACT
Section 72(1) (a)
Section 34(1)
If in the opinion of the
Registrar, the Committee of any registered society is nor functioning properly
or wilfully disobeys or wilfully fails to comply with any lawful order or direction issued
by the Registrar under this Act or the Rules, he may, after giving the
committee an opportunity of making its representations, by order in writing, dissolve
the committee and appoint either a person (hereinafter referred to as the Spl. Officer) or a
committee of two or more persons (hereinafter called the Managing Committee) to
manage the affairs of the Society for a specified period not exceeding two
years.
If in the opinion of the
Registrar, the committee is not functioning properly or wilfully disobeys or
fails to comply with any lawful order or direction issued by the Registrar under
this Act or the Rules, he may, after giving the committee, an opportunity of
making its representation, by order supercede the committee from a specified date,
and appoint either a person (hereinafter referred to as Spl. Officer) or a
committee of two or more persons (hereinafter referred to as the managing committee)
to manage the affairs of the Society for a period not exceeding two years,
specified in the order, which period, may at the discreation of the
Registrar be extended from time to time, so however, that the aggregate
period shall
not exceed three years.
Section 72(6)
Section 34(6)
Before
taking any action under sub-section(l) in respect of any registered society, the
Registrar shall
consult the financing bank to which the society is indebted.
Where a society indebted
to any financing bank, the Registrar shall before taking any action under sub-section (1) in respect of that
society, consult the financing bank.
Interpreting Section 72(1) and Section 72(6) of the Madras Act, the Supreme Court in Rajagopal’s case (supra) laid down as follows:
“…It may be that the opinion which the Registrar has to form must be based on some objective facts but those objective facts in the absence of any clear indication under Section 72 cannot be confined to what may be disclosed after the Registrar has exercised powers in the matter of audit, inquiry and inspection under the provisions of Sections 64, 65 and 66. Thus even though the opinion may be a purely subjective process, there must be cogent material on which the Registrar has to form his opinion that the society is
not functioning properly in order to sustain the issuance of a notice under Section 72(1)(a) and subsequent supersession of the Committee after considering its representation on that ground. The requisite opinion has indisputably to be formed honestly and after applying his mind by the Registrar to the relevant materials before him the only condition precedent for taking action under Section 72(1) is that the Registrar must consult the financing bank to which the society is indebted (vide sub-section (6). There is no other requirement or condition precedent laid down by the Legislature which the Registrar must fulfil before he acts in the matter of supersession of the Committee.”
In P.M.V. Co-op. Agrl. Credit Society v. Joint Registrar, , a learned single Judge of Madras High Court considered the very same question. Following the dicta of the Hon’ble Supreme Court the Madras High Court held as follows:
“… I am therefore of the view that the statutory requirement as to consultation under Section 72(6) of the Act has not been done in the instant case. It is only, in the show causs notice given to the petitioner, that the first respondent; for the first time, stated that there was a resolution of the financing bank recommending dissolution of the society and that he was also inclined to act upon it. This attitude of the 1st respondent cannot be said to be quite in consonance with the requirements of law and particularly, the mandate enunicated in Section 72(6) of the Act…”
The third respondent passed the impugned order dated 3-7-1999 without referring or without consulting the financing bank. Therefore, the mandatory requirement of consultation with the financing bank before taking action under Section 34(1) of the Act is absent and, therefore, the impugned order is illegal, and it is liable to be set aside.
9. The writ petition is accordingly allowed and the impugned order dated 3-7-1999 passed by the 3rd respondent is set aside. However, this does not preclude the competent authority to take necessary action as per the provisions of Section 34 of the Act. The Special Officer appointed shall hand over the Management to the petitioners forthwith. No costs.