JUDGMENT
M.S. Shah, J.
1. The Gujarat State Co-operative Bank Ltd., the apex Cooperative Bank in the State has filed this petition under Articles 226 and 227 of the Constitution challenging the order dated 26-3-1992 passed by the State Government in the Agriculture, Co-operation and Rural Development Department dismissing the petitioner-Bank’s appeal and confirming the order dated 2-7-1991 passed by the Registrar, Co-operative Societies, Gujarat State (hereinafter referred to as ‘the Registrar’) refusing to grant permission for amendment of the petitioner-Society’s bye-laws.
2. The petitioner is a Co-operative Society registered under the Gujarat Co-operative Societies Act, 1961 (hereinafter referred to as ‘the Act’). The petitioner is an apex Co-operative Society in the State of Gujarat dispensing agricultural and non-agricultural credit/loans to its members. The petitioner is also a financing institution to the district level Co-operative Banks. All the members of the petitioner-Society are Co-operative Societies.
The General Body of the petitioner-Society passed a Resolution at its annual general meeting held on 30th September, 1990 for amending bye-laws Nos. 34(2) and 43(3)(a). The original bye-laws read as under :
“34. Without prejudice to the general powers conferred by these bye-laws the following powers and authorin’es are expressly given to and conferred upon the Board.
(1) *****
(2) To authorise the Managing Director, General Manager, Manager and other officers, for the time-being, of the Bank to exercise and perform all or any of the powers, authorities and duties conferred or imposed upon by the Board by these presents, subject to such restrictions and conditions as the Board may think proper to impose and from time to time to appoint and to remove the Managing Director, the General Manager, the Manager, agent or other officers and clerks for the management of the business of the Bank and to fix their remuneration. The appointment and the removal of the Managing Director, the General Manager and the Manager will be subject to the approval of the State Government.
Bye-Law No. 42 (iii) (a) :
42. Subject to such resolution as the Board or the Executive Committee may, from time to time, pass in this behalf, the several officers of the Bank shall have the powers mentioned below :
(i) *****
(ii) *****
(iii) Appointment of Managing Director
Managing Director :-
(a) The Board of Directors may appoint a Managing Director who shall be an ex-officio Director of the Board and the general management of the Bank shall, subject to the control of the Board of Directors and the Executive Committee, be vested in him. The Managing Director so appointed shall hold office tor a period not exceeding five years on such terms and the remuneration as may be fixed by the Board of Directors and approved by the State Government and shall be eligible for reappointment. The Managing Director shall perform such duties and functions as the Board may entrust or delegate to him.”
Rule 6 of the Gujarat Co-operative Societies Rules, 1965 (hereinafter referred to as ‘the Rules’) prescribes the procedure for passing the Resolution of amendment of the bye-laws and for forwarding the proposal for amendment with the Resolution to the Registrar. There is no controversy about compliance with the requirements of the Rule.
The underlined words in the aforesaid bye-laws were resolved to be deleted by the amendment. The said resolution for amending the bye-laws was duly passed and was sent for registration to the Registrar of Co-operative Societies, under Section 13 of the Act read with Rule 6 of the Rules. By order dated 2-7-1991, the Registrar rejected the said application for amendment and refused to register the amendment.
Being aggrieved by the aforesaid order, the petitioner preferred an appeal under Section 153 of the Act being Appeal No. 179 of 1991. After hearing the petitioner, the State Government dismissed the appeal by order dated 26-3-1992 (Annexure-B). It is the said order which is under challenge in this petition.
3. Mr. K. G. Vakharia learned senior Counsel with Mr. Tushar Mehta, for the petitioner-Bank have raised the following contentions :
(i) Upon insertion of Section 76A in the Act by Gujarat Act No. 23 of 1982, the State Government had assumed the control over appointment and removal of Managing Director or Chief Executive Officer of a notified Society in which category the petitioner-Society’s case falls. The constitutional validity of the said provision was challenged before this Court. A Division Bench of this Court by its judgment rendered in Amreli District Co-operative Bank Ltd. v. State of Gujarat, 1984 (2) GLR 1244 struck down the provisions of Section 76A as violative of Articles 19(1)(c) and 19(1)(g) of the Constitution.
In view of the said judgment, there is no statutory provision requiring the petitioner-Society to obtain the approval of the State Government in the matter of appointment or removal of the Managing Director/Chief Executive Officer/General Manager/Manager. The reasoning contained in the said judgment would squarely apply in the matter of amendment of the bye-laws also, and therefore, the Registrar could not have refused to grant sanction for amendment of the bye-laws.
(ii) Even otherwise, the matter of amendment of bye-laws and sanction thereof is governed by me provisions of Section 13 of the Act read with Section 4 of the Act. The Registrar could not have refused to register the amendment when the amendment was not found to be contrary to the Act or the Rules.
(iii) While considering the question of registering amendment of the bye-laws, the Registrar cannot go beyond the considerations mentioned in the proviso to Section 4 of the Act. Hence, registration of the amendment could not have been refused unless there was a finding to the effect that the amendment would lead to economic unsoundness of the Society or the amendment would have an adverse effect upon any other Society or that the amendment was opposed to or its working was likely to be in contravention of the public policy.
(iv) Adequate safeguards for protection of public interest are available in Section 80 of the Act. Hence, the Registrar was not justified in invoking public interest for rejecting the prayer for amendment.
4. On the other hand, Mr. P. R. Abichandani, learned Assistant Government Pleader, has opposed the petition and submitted that the Registrar has a
discretionary power under Section 13 of the Act for accepting or rejecting the request for registration of the amendment. Sub-section (2) of Section 13 provides that if the Registrar is satisfied that the amendment is not contrary to the Act or the Rules, he may register the amendment. It is, therefore, submitted that the Registrar is not bound to register the amendment only on the ground that it is not contrary to the Act or the Rules.
The petitioner-Society is not an ordinary Co-operative Society. It is the apex Co-operative Society in the State and is the Bankers’ Bank. Hence, the Government control over the appointment and removal of the Managing Director/ Chief Executive Officer of the petitioner-Bank and its General Manager and Manager is necessary and the exercise of discretion by the Registrar in refusing to grant the amendment is to be looked at in the context of the aforesaid facts and not merely on the basis that the petitioner is a Co-operative Society to which only the considerations mentioned in Paragraph 77 of the judgment of the Division Bench would apply.
5. Before dealing with the rival submissions, it will be useful to set out the provisions of Sees. 4 and 13 of the Act relied upon by Mr. Vakharia.
“4. Societies which may be registered :- A society, which has as its object the promotion of the economic interests or general welfare of its members or of the public, in accordance with co-operative principles or a society established with the object of facilitating the operations of any such society, may be registered under this Act:
Provided that it shall not be registered, if in the opinion of the Registrar, it is economically unsound, or its registration may have an adverse effect upon any other society, or it is opposed to, or its working is likely to be in contravention of public policy.
13. Amendment of bye-laws of societies. –
(1) No amendment of the bye-laws of a society shall be valid until registered under this Act. For the purpose of registration of an amendment of the bye-laws, a copy of the amendment passed, in the manner prescribed, at a general meeting of the society, shall be forwarded to the Registrar.
(2) If the Registrar is satisfied that the amendment so forwarded is not contrary to this Act or the rules, he may register the amendment :
Provided that no order refusing to register the amendment shall be passed except after giving the society an opportunity of being heard.
(3) When the Registrar registers an amendment of the bye-laws of a society, he shall issue to the society a copy of the amendment certified by him, which shall be conclusive evidence of its registration.
(4) Where the Registrar refuses to register an amendment of the bye-laws of a society, he shall communicate the order of refusal, together with his reasons therefore, to the society.”
6. Having heard the learned Counsel for the parties, it appears to the Court that in view of the decision of the Division Bench of this Court, the provisions of Section 76A as inserted by the Gujarat Act No. 23 of 1982 are non-existent, and therefore, the State Government may not have any statutory power of
controlling the appointment and removal of the Managing Director/Chief Executive Officer of a Co-operative Society in general. However, when the bye-laws of the petitioner-Bank themselves provide for this control in the matter of appointment and removal of Managing Director/Chief Executive Officer/ General Manager/Manager of the apex Co-operative Bank in the State and the said bye-laws have been holding the field since 1961, looking to the relevant factors taken into consideration by the Registrar the discretion exercised by the Registrar in refusing to grant the amendment cannot be said to be arbitrary or perverse so as to call for interference by this Court under Article 226 of the Constitution.
7. The Registrar has noted in the impugned order that apart from the fact that while establishing the petitioner-Bank, the State Government had contributed share capital of Rs. 2.56 crores and had also given financial assistance of Rs. 7 crores and Rs. 3 crores to the primary co-operative Societies through the petitioner-Bank; the State Government has also given guarantees to other financial institutions for enabling the petitioner-Bank to obtain loans of Rs. 342.60 crores. The Registrar has also noted that several District Co-operative Banks and other Co-operative Banks were required to deposit the stipulated banking reserves under the provisions of the Banking Regulation Act, 1950 with the petitioner-Bank in its capacity as the apex Co-operative Bank in the State. Moreover, several Co-operative Societies obtain their loans from N.A.B.A.R.D. upon recommendations of the petitioner-Bank.
Thus, the petitioner-Bank holds a very important position in the entire Cooperative sector in the State, and therefore, the Managing Director/Chief Executive Officer and General Manager/Managers who are appointed without the approval of the State Government may only look at the interest of those who are on the Board of Directors of the petitioner-Bank and may not look after the short term as well as the long term public interest and interest of depositors which are themselves co-operative banks. Moreover, Managing Director/Chief Executive Officer, General Manager and Managers who are carrying out the objectives underlying the provisions of the Act may be removed by the Board of Directors, and therefore, it is necessary for the State Government to have its control in the matter of removal of Managing Director/Chief Executive Officer, General Manager and Manager.
8. It is true that Mr. Vakharia has vehemently contended that if the State
Government wants to retain the control over the petitioner-Bank in public interest,
then the provisions of Section 80 provide sufficient safeguards and the State
Government can appoint its nominees on the Board of Directors of the petitioner-Bank.
This safeguard would not, however, take care of the day-to-day administration of the Bank. By now, it is well-known that formulation of policy and execution of policy are not to be treated as falling in two watertight compartments. The rigid dichotomy between policy and administration was given up more than half a century ago. In his “Policy and Administration” (1949) Applely Paul H. propounded the thesis that policy and adminislration are inseparable twins.
Administration has to be responsive to public interest. The process of formulating a policy does not take place in the vacuum. It is on the basis of the data furnished by the administrators at the middle level management, and some times after taking into consideration their experiences, perceptions and suggestions (where made available) that the top level administrators like Managing Director/ Chief Executive Officer and the General Manager submit recommendations before the Board of Directors for formulating certain policies. The drafts of such policies are also ordinarily prepared by the Managing Director and General Manager with the assistance of Managers. In the process of execution of the policy also, the administrators can bring it to the notice of the policy makers the impediments in implementation of the policy, and therefore, the need to modify or reformulate the policy. Even otherwise, in the process of implementation of policy the administrators exercise considerable discretion in practice by having various options in interpreting the policy embodied in a particular rule and the scope of the policy may be marginally enlarged or narrowed down depending on the interpretation which may be placed on a rule in the process of implementing the rule and enforcing it. Hence, the appointment of Government nominees on the policy making body like the Board of Directors (which is ordinarily not concerned with the day-to-day administration of the Bank) would not be a sufficient safeguard for taking care of the public interest which the petitioner-Bank has to serve as the Bankers’ Bank i.e. the apex Co-operative Bank occupying the most important position in the entire Co-operative banking sector in the State. As already stated above, a large number of district Co-operative banks and other Co-operative banks are required to deposit their banking reserves with the petitioner-Bank. Hence, it is not unreasonable or arbitrary on the part of the State Government to hold that the existing bye-laws requiring approval of the State Government for appointment of the Managing Director/Chief Executive Officer, General Manager and Managers in the petitioner-Bank do not require to be amended.
9. As regards the contention of Mr. Vakharia that the Registrar has no discretion to refuse to register the amendment, if the amendment is not contrary to the Act or the Rules, the contention proceeds on the footing that the expression “may” must be read as “shall”. The contention cannot be accepted because as per the settled rules of interpretation, the expression “may” confers discretion on the repository of the power. Of course in a given case for compelling reasons the expression “may” may have to be construed as “shall”. However, there are no such compelling reasons why the ordinary meaning of the expression “may” should not be given to that expression in the instant case. If at all the intention of the legislature were as canvassed by the learned Counsel for the petitioner, then the legislature would have provided as under :-
“The Registrar shall not refuse to register the amendment, if the Registrar is satisfied that the amendment so forwarded is not contrary to the Act or the Rules.”
However, the legislature, which is not unfamiliar with the negative language as would be found in so many provisions of various legislations, has conferred the power on the Registrar in the positive terms that the Registrar “may ” register
the amendment if he is satisfied that the amendment is not contrary to the Act
or the Rules. Hence, what the legislature has provided is that the amendment
being not contrary to the Act or to the Rules is the condition precedent or
the first requirement before the Registrar can exercise his discretion for
registering the amendment. The discretion to register or not to register the
amendment of a bye-law would involve weighing the pros and cons of several
relevant facts. The only limiting factor on his power would be that the
considerations to be weighed by the Registrar shall not be inconsistent with
the Act or the Rules. Since the considerations which have weighed with the
Registrar in refusing to approve the amendment in question are very much
consistent with the underlying object of the Gujarat Co-operative Societies Act,
1961 and the Gujarat Co-operative Societies Rules, 1965, the exercise of
discretion by the Registrar, as confirmed by the State Government, in the context
of the refusal to amend the bye-laws Nos, 34(2) and 43(3) of the apex Co
operative Bank of the State cannot be said to be arbitrary or unreasonable.
10. The petition is therefore devoid of merit. The petition is accordingly
dismissed. Rule is discharged with no order as to costs.