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SCA/1712/2010 2/ 14 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 1712 of 2010
With
SPECIAL
CIVIL APPLICATION No. 1713 of 2010
For
Approval and Signature:
HONOURABLE
MR.JUSTICE JAYANT PATEL
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
JAGDISHBHAI
NARSINHBHAI MADHVANI, CHAIRMAN - Petitioner(s)
Versus
STATE
OF GUJARAT & 6 - Respondent(s)
=========================================================
Appearance :
MR
AJ YAGNIK for
Petitioner(s) : 1,
MR.HH PARIKH, AGP for Respondent(s) : 1, 3 &
4 IN SCA 1712 OF 2010 & MR.HIMANSU PATEL, AGP for Respondent(s):
1, 3 & 4 IN SCA 1713 OF 2010
PARTY-IN-PERSON for Respondent(s)
: 2,
None for Respondent(s) : 3 -
7.
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE JAYANT PATEL
Date
: 23/02/2010
ORAL
JUDGMENT
1. As
the facts of both the petitions are inter connected they are being
considered by this common judgment.
2. Rule.
Mr. H.H.Parikh, learned Assistant Government Pleader waives notice
for respondent Nos. 1,3 and 4, Mr. V.K.Shah waives notice for
respondent No.2 and Mr. Umang Vyas waives notice for respondent Nos.
6 & 7 in Special Civil Application No. 1712 of 2010. Mr. Himansu
Patel, learned A.G.P. waives notice for respondent Nos. 1,2 and 4,
Mr. V.K.Shah waives notice for respondent No.2 and Mr. R.S.Oza waives
notice for respondent Nos. 6 & 7 in Special Civil Application No.
1713 of 2010.
3. The
present petitions are directed against the orders passed by the
District Registrar and confirmation thereof by the State Government
whereby the petitioners have been disqualified and removed under
Section 76-B of the Gujarat Cooperative Societies Act (hereinafter
referred to as ‘the Act’).
4. The
petitioner of Special Civil Application No. 1712 of 2010 was the
Chairman of Savarkundla Nagarik Sahakari Bank Ltd. (hereinafter
referred to as ‘the Bank’) and the petitioner of Special Civil
Application No. 1713 of 2010 was the elected Managing Director of the
said Bank. It appears that while working
as the elected Managing Director of the Bank the petitioner of
Special Civil Application No. 1713 of 2010 performed well and in the
Annual General Meeting of the society it was decided that he be
appointed on token honorarium of Rs. 2/- as the Managing Director
subject to the approval of the District Registrar. The District
Registrar in response to the said resolution, observed that the
powers vest to the Managing Committee. Thereafter the Managing
Committee instead of acting as per the resolution of the General
Board, converted the post for the salary of Rs. 10,000/- per month
and without giving any advertisement or without making any effort for
giving opportunity to any other eligible or qualified persons,
appointed the petitioner of S.C.A. No. 1713 of 2010. The said
resolution was moved in the Managing Committee by the petitioner of
S.C.A. No. 1712 of 2010 as a Chairman and the pertinent aspect is
that at the relevant point of time Shri Vadera who was to be
appointed as the Managing Director being paid employee had not
resigned. Powers for the resignation and appointment were assigned to
Shri Madhvani who is petitioner of S.C.A. No. 1712 of 2010. The
aforesaid action was made as a basis for initiation of the action
under Section 76-B of the Act by the District Registrar. The District
Registrar ultimately passed the order in exercise of the powers under
Section 76B of the Act and both the petitioners are removed from
their respective post of the Chairman and the Managing Director, as
the case may be, and further
disqualified for a period of four years, though in the show cause
notice such period was provided for two years. The matter was carried
in appeal before the Additional Registrar (Appeals) by the respective
petitioners and the Appellate Authority had allowed the appeal and
remanded the matter to the District Registrar. The original
complainant and other party who was interested, carried the matter in
revision before the State Government and ultimately the State
Government vide impugned order, maintained the order of removal under
Section 76B(1) and also disqualification under Section 76B(2). It is
under these circumstances, the present petitions before this Court.
5. Heard
Mr. Yagnik, learned counsel appearing for the petitioners in both the
petitions, Mr. H.H.Parikh, learned Assistant Government Pleader for
respondent Nos. 1,3 and 4, Mr. V.K.Shah for respondent No.2 and Mr.
Umang Vyas for respondent Nos. 6 & 7 in Special Civil Application
No. 1712 of 2010 and Mr. R.S.Oza for respondent Nos. 6 & 7 in
Special Civil Application No. 1713 of 2010.
6. The
contention raised on behalf of the petitioners is that as per the
Gujarat Cooperative Societies Rules, there is power with the Managing
Committee for appointing any staff of the Bank, therefore if the
powers are exercised, it would not attract
the provisions of Section 76B of the Act since the exercise of the
powers cannot be said to be prejudicial to the interest of the bank.
It was also contended that the concerned
petitioners are already removed pursuant to the impugned order.
Therefore, if the punishment is further continued of disqualification
for a period of four years or even for two years, such would be very
harsh and the same cannot be maintained in view of the facts and
circumstances of the case.
7. Whereas,
the learned counsel for the respondents supported the order. But, the
pertinent aspect is that none of the learned counsel appearing for
the respondents has been able to support the order for disqualifying
the petitioners concerned for a period of four years though show
cause notice was only for two years.
8. It
is an admitted position that the petitioners were holding capacity as
the elected representative of a Cooperative Bank, one was the
Chairman of the Bank and another was the Managing Director. This
Court had an occasion to consider the issue of status of an elected
representative in a Cooperative Society in case of V.J.Patel,
Chairman & Ors. v. Registrar of Cooperative Societies & Ors.
in Special Civil Application No. 12548 of 2009 in the matter where
the powers were to be exercised by the members of the Managing
Committee of the society or the office bearers in the field of
employment or appointment of the staff. This Court had observed in
para 13 to 17 as under:
13. It
may be recorded that this Court had an occasion to consider the
question of status of an elected representative of a specified
Cooperative Society, i.e. Khedut Sahakari Khand Udhyog Mandali, and
the faith reposed upon such elected representatives and nature of
power whether could be said with public duty or not and the
accountability thereof, while considering the question of fastening
the financial liabilities under section 93 of the Gujarat Cooperative
Societies Act, in the decision in the case of Ishwarbhai
Narottambhai Patel Vs. K.H.Trivedi, reported at 2003(1) GLR 537. In
the said decision, it was inter alia observed at para 15, the
relevant of which is as under:
15. Further the earning of profits out of the utilisation of the machinery is always the purpose of investment of the money by the society. The society had placed the order
with a view to see that the machinery can be used and
profit can be earned therefrom. If the supplier had
supplied a genuine and good quality machine and if the
society had earned profit by utilising the said
machinery, the supplier would be entitled to the
legitimate price of the machinery as per the terms and
conditions of the purchase agreement. At this stage it
would be worthwhile to refer to some of the observations
made by this Court in the case of “Varvabhai Nathabhai
Rabari Vs State of Gujarat” as per the judgement dated
28-1-2002 in LPA No.8/2002 of the Division Bench. In a
matter of supersession of the Market Committee, while
dealing with the contentions of the elected body that
when two views are possible, it cannot be said that
default is committed in performance of duties. While
testing the said submission it was observed by the Division Bench at para 9 as under:
” The status of the elected members of the market
committee is more or less like the status of
other elected members holding the office under
the local authorities or statutory authorities.
It is true that the market committee has been
given power to purchase and sell its property,
but its power to purchase and sell the properties
are coupled with the duty to ensure that such
powers are used for enforcement of the objects of
the At, rules and bye-laws. These powers are
coupled with the public duty and such powers are
not like powers of individual persons managing
their own affairs but there is something more
about the accountability. It is needless to
point out that when any representative is elected
by the voters, some faith is reposed on such
elected representative by the voters that the so
elected representative would exercise his powers
under statutes for the larger interested of the
institution or the local body by acting as a wise
person keeping in view the pros and consequences
of the action to be taken and keeping in view the
interest of institution or the body.”
I am of the view that the observations made by the
Division Bench were pertaining to the elected body of a
market committee in a matter of supersession of a market
committee which is a statutory body. I find that the
status of the elected members of the society is more or
less at par with the elected representative of such
market committee or any other elected representative.
Perusal of the scheme of the Gujarat Cooperative
Societies Act also shows that the principles of
accountability is maintained even in the affairs of the
administration of cooperative societies. In that view of
the matter, I find that there is no reason why such
principles should not be applied to the elected
representative of the cooperative society also. In the
present case, there was absolutely no justification for
condoning the amount because the test would be whether
any prudent person would allow an amount of
Rs.1,45,000/to let go merely because the supplier had
supplied a machinery of good quality or merely because he
has earned good profit out of it. The normal conduct of
any office bearers of the society or even a normal
prudent person would insist that the excess payment which
is made must be refunded because the price of the
machinery which was fixed was for supplying genuine and
good quality machinery and investment was with a view to
make profit and, therefore, there can be hardly any
justification for condoning such amount.
(Emphasis supplied)
Therefore,
it appears to the Court that when it is a matter pertaining to
recruitment of number of posts in a specified society in whom the
power vests, such power is required to be exercised with public duty
to observe minimum basic principles of fairness, which is one of the
foundation of common law.
14. Even
if this Court is to proceed on the basis that the autonomy of the
District Union as a specified Society is to be maintained by
accepting the power with the District Union itself to make
appointment of its own staff for regulating its business, then also,
it can hardly be said that such powers can be exercised by the office
bearers of the District Union or the person concerned in charge of
the District Union as per their own sweet will or as per their whims
and caprice nor can it be said that merely because such powers are
available to appoint, such powers can be exercised in an unfair
manner on any ground whatsoever. It is true that the Act does
provide for enabling power with the State Government under Section 76
read with Section 168 of the Act to provide for the qualification for
appointment of the manager, secretary, accountant, or any other
officer or employee of the Society, but merely because the State
Government in exercise of its power to frame Rules under Section 168
of the Act has not framed Rules for the power under Section 76 of the
Act, it cannot be said that the same would make room for the Society
concerned to exercise power in an unfair manner or that without
observing the basic principles of fairness and transparency in the
process of recruitment to be undertaken by the Society. The same
would more be required if such Society is a specified Society whose
functioning involves huge public interest. Therefore, even if such
powers are read and retained by the office bearers of the Society to
undertake recruitment and to make appointment of its staffs for the
functioning of the District Union, basic principles of fairness would
be required to be followed.
15. It
may be recorded that it is a fact that the office bearers of such
society are to act in the interest of the society as against or in
isolation to their individual interest. The post held is at par with
the position of any person holding post in fiduciary capacity. The
person holding fiduciary capacity should always be conscious of the
fact that he or she has to act for betterment of the interest of the
beneficiary. No consideration of his/her private interest should
prevail as against betterment of interest of the beneficiary. None
can discharge the duty in fiduciary capacity properly unless he
keeps his individual or personal interest away from the interest of
the beneficiary for whom he has to work. Therefore, the basic
principles of fairness will have the role to play while functioning
in fiduciary capacity by the office bearers of the society and more
particularly the specified society whose functioning involves huge
public importance.
16. Such
basic principles of fairness can broadly be classified into 5
categories:
1. The
set-up of the staff. Such
would be dependent upon its financial condition and to meet with the
quantum of work.
It is
difficult to accept that irrespective of its financial condition or
quantum of work, the District Union can have the set up of its staffs
as per the whims and desire of the office bearers of such District
union or a specified Society.
2. The
minimum qualification required keeping in view the nature of the work
to be discharged by the person concerned.
It is not
possible to accept that the minimum qualification for the post
concerned would have no relevance at all if the principles of basic
fairness is to be observed. Such principles of basic fairness would
require that the related qualification may be atleast to the minimum
extent, must be in existence for the post for which the recruitment
process is undertaken.
3. The
third would be the public advertisement not only for giving
opportunity to the eligible persons to apply for the post, but also
to enable the specified Society to chose more meritorious and
appropriate persons for the post in question.
It is not
possible to accept that if the public advertisement is not given, it
will leave room for offering appointment by the office bearers of
such Society by private negotiations which would not only be against
the basic principles of fairness, but would also leave room for large
number of malpractices. In any case bonafide attempt to find out
meritorious and appropriate person would require the consideration
of eligible persons which will not be over unless properly advertised
or made known to the eligible persons or public at large generally.
4. The
fourth is the mode of selection through the proper selection
committee with a view to see that the meritorious candidates are
inducted without any bias or favour.
If less
meritorious person is appointed, it would be against the interest of
the Society itself and the basic principles of fairness would be
frustrated if a person having bias is to participate at the selection
process or the person participating in the selection holds no
capability at all to judge the merit of any candidate.
5. The
fifth and the last would be reasonable transparency to be maintained
in all the above referred four steps before finalization of the
recruitment process.
17. It
appears to the Court that if the above referred principles of basic
fairness are not observed in the matter of recruitment to be
undertaken by a specified Society, it would not only result into
large number of chaotic situation, but would also leave room for
large number of manipulations and malpractices resulting into
ultimate damage to the interest of the Society and its members and
consequently, damage to the public interest in the field of
employment as well as in the field of operation of such Society
involving huge public interest and such would be in contravention of
public duty to be discharged by the office bearers of the society
by non observance of the basis or foundation of common law.
9. The
aforesaid shows that the status of the elected representative was at
par with the person holding fiduciary capacity. Therefore, while
exercising the powers, it was required for the person concerned to
keep in mind the basic principles of common law while exercising the
powers by maintaining the status as that of the trustee of the
properties of the society, which is bank in the present case. If the
action is tested in light of the aforesaid observations made by this
Court, the action could not be sustained. One who is an elected
representative, cannot convert the post unto himself nor such post
can be filled up without following the basic principles referred to
herein above in the aforesaid decision for filling up of the post of
Managing Director which is a top most position in the bank. Acting in
contravention thereto could be said to be prejudicial to the interest
of the bank inasmuch as acting in contravention thereto would not
only run counter to the basic principles of common law to be observed
by the person in fiduciary capacity but would also be prejudicial to
the interest of the bank inasmuch as no effort has been made to see
that the more meritorious person is offered the post by giving
opportunity to the other eligible persons.
10. Apart
from the above, the fact remains that the powers have been exercised
not in conformity with the resolution of the General Board but have
been exercised in contravention to the resolution of the General
Board inasmuch as the General Board has resolved for token honorarium
of Rs. 2/-, whereas by the resolution of the Managing Committee,
wherein one of the petitioners was the Chairman, the post is
converted for Rs. 10,000/- per month on regular basis.
11. It
is true that the lower authorities have not considered the matter
keeping in view the aforesaid aspects. However, the fact that the
elected representatives have converted the post unto themselves
could, per se, be said to be a misuse of the powers and prejudicial
to the interest of the Bank. Apart from the above such conduct on the
part of the office bearers would shake the basic confidence of the
voters or the share holders of the society who have reposed into the
office bearers the holy hope for exercise of the powers in bonafide
manner and in the larger interest of the society.
12. Under
these circumstances, it cannot be said that the District Registrar or
the State Government has committed error for removal under Section
76B(1) of the Act.
13. However,
the contention that the disqualification under Section 76B(2) of the
Act is beyond the show cause notice deserves consideration. The
learned counsel for the respondents have not been able to show any
other show cause notice whereby the petitioner was given opportunity
for the contemplated disqualification for a period of four years.
Under these circumstances, if it is an admitted position that the
show cause notice was for disqualification under Section 76B(2) of
the Act for two years while passing the final order, the petitioners
could not have been disqualified for the period of exceeding two
years, which, in the present case has been four years. Therefore, the
impugned order, to that extent, for disqualifying the petitioners
under Section 76B(2) of the Act for a period exceeding two years
cannot be sustained.
14. In
view of the aforesaid, the impugned orders passed by the District
Registrar and confirmation thereof by the State Government for
removal of the concerned petitioners under Section 76B(1) of the Act
do not deserve to be interfered with. However, for the further
disqualification under Section 76B(2) of the Act, the order for
disqualifying exceeding two years is quashed and set aside.
Consequently such disqualification under Section 76B(2) of the Act
would remain for the period of two years only.
15. Petitions
are partly allowed to the aforesaid extent. Rule made absolute
accordingly.
[JAYANT
PATEL, J.]
jani
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