2007 Supreme(SC) 320

2007(3) Supreme 513
SUPREME COURT OF INDIA
(From Gujarat High Court)
S.B. Sinha and Markandey Katju, JJ.
Anilbhai M. Patel & Ors. — Appellants
versus
Suryapur Bank Agent D.B.H. Samiti & Ors. — Respondents
Civil Appeal No. 1210 of 2007
(Arising out of S.L.P. (C) No. 17465 of 2004)
With
Civil Appeal No. 1211/2007 @ S.L.P. (C) Nos. 18362-18363 of 2004
Civil Appeal No. 1212/2007 @ S.L.P. (C) Nos. 19602-19603 of 2004
Decided on 8-3-2007
Counsel for the Parties :
For the Appellants : Soli J. Sorabjee, C.A. Sundaram Nirupam Nanavati, Sr. Advocates, Huzefa Ahmadi, Tushar Mehta, Omkar Dave, Ejaz Maqbool, Nakul Dewan Vikash Singh, Ms. Taruna Singh Advocates.
For the Respondents : R.N. Trivedi, Sr. Advocate, H.S. Parihar, Kuldeep Parihar, Ms. Hemantika Wahi, Ms. Sunita Hazarika, Ms. Pinky Behera, Dr. Nafis A. Siddiqui, Advocates.

IMPORTANT POINT
A Cooperative Society should ordinarily be allowed to function through its elected representatives.

Headnote:Banking Regulation Act, 1949 — Section 35(A) — Gujarat Cooperative Societies Act, 1961 — Sections 81, 86 and 115A — Mismanagement of affairs of a Cooperative Bank — Financial irregularities — One Bank Agent, respondent 1 without approaching the Registrar, for ventilating its grievances in regard to the purported mismanagement of the affairs of the said Bank, filed a writ petition in the High Court — No prayer was made for appointment of an Administrator — However, Single Judge of the High Court directed appointment of an Administrator considering report filed by Reserve Bank of India in this regard — Division Bench upheld the order of the Single Judge — However, copy of report of RBI not served upon the Cooperative Bank and/its Directors on plea that the same was a confidential document — Registrar of Cooperative Societies could not initiate any enquiry in the matter as a stay order was operating — Division Bench should have considered the matter itself particularly when the effect of such an order was grave as appellants were displaced from their posts of Directors of the Cooperative Bank to which they were otherwise entitled to — Appeals disposed of with directions.

       Held : It is not in dispute that the writ petitioners had not approached the Registrar for inquiring into the alleged mismanagement of the affairs of the Bank and/or members of the Committee. They did not say so even before the High Court. Mr Trivedi submitted that the RBI had drawn the attention of the Registrar by its letters in regard to financial irregularities of the disputes of the society but the said letters are not before us. It is, thus, not clear that as to whether the RBI had called upon the Registrar to inquire into the affairs of the Bank or cause such an inquiry to be made by a competent authority. It is true that an inspection had been made by the authorities of the RBI but it is not clear as to whether copy of its report have been served upon the Cooperative Bank and/its Directors or not. (Para 13)

       Indisputably, no prayer was made in the writ petition for appointment of an Administrator. Ordinarily, a Court would allow a statutory functionary to perform its statutory function. We have noticed hereinbefore that the Registrar of the Cooperative Societies in no uncertain terms had stated before the High Court that it could not earlier initiate any inquiry in the matter as a stay order was operating and as the said order of stay was vacated, an inquiry would be instituted by it. (Para 14)

       A Cooperative Society should ordinarily be allowed to function through its elected representatives. This although does not mean that the members of the Committee have a right to mismanage the affairs of the Cooperative Society but there cannot be any doubt whatsoever that allegations in relation to the mismanagement and commission/omission of illegalities, or irregularities or other acts of omission and commission, the remedies as contemplated under the statute should ordinarily be resorted to. (Para 16)

       Only in case of inaction on their part and in rare and exceptional cases, the Court can exercise its jurisdiction in such cases. This is not a case where the Registrar of the Cooperative Societies refused or neglected to take any action. It could not do so in view of an interim order passed against it. The interest of the Bank could have been safeguarded by passing other orders; even the Registrar should have permitted to look into the matter and pass an appropriate order. The manner in which the impugned order had been passed by the learned Single Judge betrays fairness. It not only directed appointment of an Administrator but he was asked to take over the affairs of the Cooperative Bank on the same day. (Para 19)

       In the above facts and circumstances of this case, we are therefore of the opinion that interest of justice would be subserved if these appeals are disposed of with the following directions:-

        1. The Administrator would continue to hold office as an officer of the Court.

        2. The Administrator must, however, get the election of the Committee Members held, as expeditiously as possible, and preferably within a period of three months from the date of communication of this order.

        3. The inquiry initiated by the Registrar pursuant to the order of the learned Single Judge shall continue as if the same had been initiated by the Registrar on his own motion and not on the basis of the order passed by the High Court.

        4. The RBI would be entitled to take such action (s) as it may deem fit and proper under the provisions of Section 115 A of the Act or under any other Statute and as may be permissible in law if it so desires, including one under the Deposit Insurance Act. (Para 21)