Judgement

RAY, C.J.:- This is an appeal by special leave from the judgment dated 1 June, 1973 on the High Court of Mysore.

2. The respondent Karibasappa was the President of the Bellary District Co-operative Central Bank Limited Hospet. He challenged two notification dated 11 August, 1972 issed by the State Government. The notifications were issued in exercise of the powers conferred by Sections 54 and 121 of the Mysore Co-operative Societies Act, 1959 hereinafter referred to as the Act.

3. The management and administration of the Bank was conducted by the Committee consisting of the President, the Vice-President, and then elected members from various constituencies and certain nominees of the State Government. At no time the Government nominated more than three persons as its representatives.

4. The Bank had a share capital of Rs.75 lakhs. The State Government contributed Rs.23.8 lakhs. The Reserve Bank of India advanced a loan of Rs.135 lakhs. The Apex Bank also gave a loan of Rs.200 lakhs. The State Government guaranteed the repayment of loans to the Reserve Bank of India.

5. The Reserve Bank of India from time to time inspected the Bank. There was an inspection on 14 October, 1971. The report referred to many irregularities and stated that the financial resources of the Bank had improved slightly.

6. The Joint Registrar on 3 August, 1972 forwarded the report to the Registrar of Co-operative Societies and suggested action under Section 54 of the Act. In this background the Government issued the impugned notifications on 11 August, 1972.

7. Broadly stated the notifications recited that the State had given Rs.23.8 lakhs to the Bank and it was necessary in public interest to take powers to exercise control over the conduct of the business of the Bank to safeguard the public funds. The State Government in exercise of the powers conferred by Section 54 of the Act should have the right to nominate as its representatives fifteen persons on the Board of Management and to appoint one among them as the President, one as the Vice-President under the notification should exercise powers and discharge their functions subject to the supervision direction and control of the State Government. The notification further stated that Section 29 which conferred power on the State Government subject to any notification under Section 54 or Section 121 to have "the right to nominate as its representatives not more than three persons or one-third of the total number of members of the Committee of the Co-operative Society, whichever is less" would be modified by substituting the words "have the right to nominate as its representatives 15 persons of the Committee of the Co-operative Society of whom one shall be appointed as Managing Director". The notification conferred power on the Managing Director subject to the policy decision of the Board, the right to conduct the business of the Bank and to sanction expenditure on establishment and certain other powers.

8. The second notification nominated fifteen persons to form the Board of Direcctors of the Bank. The Deputy Commissioner Bellary was appointed the President of the Bank.

9. The Bank challenged the notification on three grounds. First the action of the Government was ultra vires the Act; second, the action was bad in violation of principles of natural justice; third the action was taken because of political rivalry with an evil eye to remove the President from the office.

10. The High Court upheld the first two contentions and set aside the order.

11. Section 54 of the Act provides that where State aid amounting to not less than two lakhs of rupees is given to any co-operative society the State Government, if it is satisfied that it is necessary in public interest so to do, may by notification in the official gazette take power to exercise such control over the conduct of business of such society as shall suffice in the opinion of the State Government to safeguard the interest of the State.

12. Section 121 en