1977 Supreme(Bom) 216

IN THE HIGH COURT OF BOMBAY
V.S. Deshpande B.C. Gadgil, JJ.
P.K. Patil others.... Appellants.
Versus
J.G. Kanga others.... Respondents.
Special Civil Revision Application No. 827 of 1977, decided on 3-11-1977.
Advocates appeared :
M.V. Paranjape with P.M. Pradhan, for petitioner.
C.J. Sawant with S.G. Deshmukh, for respondents 1, 5 6.
Y.R. Naik, for respondent No. 5.
R.S. More, for respondent No. 2.
S.B. Patil, for respondent No. 7.
B.R. Naik, for respondent No. 5.
K.S. Bhadti, for respondent No. 3.

The Managing Committee of a Co-operative Society can be held negligent for committing themselves to the sugarcane growers merely on the promise of the supplying concern to supply the machinery by the end of January without taking into account the probable contingencies and mishaps due to which the possibility of machinery not being installed ought to have been foreseen by them.

Headnote:

CO-OPERATIVE SOCIETIES - Multi-Unit Co-operative Societies Act, 1942 (Central Act) - Section 78 - Negligence of the Managing Committee - Superseding the Committee and entrusting the Management to an Administrator - Circumstances attracting the Penal provision of section 78 - Error of judgment and negligence - Distinction - Delegation of powers of the Central Registrar to the Registrar of the Co-operative Societies of the State - Notification dated 30th January, 1976.

Fact of the Case:

The Satpuda Tapi Parlsar Sahakari Sakhar Karkhana Ltd., Purshottam Nagar (Karkhana) was registered as a Multi-Unit Co-operative Society under the Multi-Unit Co-operative Societies Act, 1942 (Central Act). The Karkhana was established for the production of sugar. The Managing Committee of the Karkhana decided to expand the crushing capacity from 1,250 TCD to 2,500 TCD and also to set up a distillery for the manufacture of alcohol, country liquor, and Moha liquor out of the molasses. This expansion necessitated the installation of machinery and purchase of the necessary building and sheds. The Managing Committee expected to meet the capital financial requirements by increasing the subscribed capital, subsidies from the Government, and long-term loans for capital investment from the Industrial Finance Corporation of India and other Banking Institutions. However, the delay in the grant of license prevented the Industrial Finance Corporation and other Banking Institutions from advancing the long-term loans. Due to the shortage of power and other difficulties, the Calcutta machinery suppliers also could not install the machinery till the month of June, 1974. This resulted in prolonging the crushing period from September, 1973 to July, 1974, instead of from November, 1973 to May, 1974, necessitating the crushing of the immature and dry sugarcane. Consequently, the quantity of sugar that could have been produced with the same quantity of sugarcane fell, resulting in a loss of several lakhs of bags of sugar. The failure to get the long-term loans from the Banking Institutions drove the Karkhana to utilize the short-term loans available for the recurring expenses and to obtain them at a higher rate of interest at 11 percent per annum. This also resulted in preventing the Karkhana from making payments to the growers of sugarcane who had grown sugarcane in compliance with their commitment to the Karkhana, which in turn discouraged them from growing sugarcane in the coming years, viz., 1974-75 and 1975-76. The sugarcane growing area stood reduced to 7000 acres in 1976-77 from the total average of 21,500 in the beginning of 1973-74 and 16,214 in 1974-75 and 10,500 in 1975-76.

Finding of the Court:

The Court held that the Managing Committee of the Karkhana was negligent in committing themselves to the sugarcane growers merely on the promise of the supplying concern to supply the machinery by the end of January without taking into account the probable contingencies and mishaps due to which the possibility of machinery not being installed ought to have been foreseen by them. The Court also found that the Managing Committee was negligent in proceeding with the projects without ensuring the availability of the finances before entering the adventures. The Court further held that the Registrar of Co-operative Societies, Maharashtra, had jurisdiction to take action under section 78 of the Maharashtra Co-operative Societies Act, as the powers of the Central Registrar were delegated to him under section 5-B of the Central Act.

Issues: 1. Whether the Registrar of Co-operative Societies, Maharashtra, had jurisdiction to take action under section 78 of the Maharashtra Co-operative Societies Act against the Karkhana, which was registered under the Central Act? 2. Whether the Managing Committee of the Karkhana was negligent in committing themselves to the sugarcane growers merely on the promise of the supplying concern to supply the machinery by the end of January without taking into account the probable contingencies and mishaps? 3. Whether the Managing Committee was negligent in proceeding with the projects without ensuring the availability of the finances before entering the adventures?

Ratio Decidendi: 1. The Court held that the Registrar of Co-operative Societies, Maharashtra, had jurisdiction to take action under section 78 of the Maharashtra Co-operative Societies Act against the Karkhana, which was registered under the Central Act, as the powers of the Central Registrar were delegated to him under section 5-B of the Central Act. 2. The Court held that the Managing Committee of the Karkhana was negligent in committing themselves to the sugarcane growers merely on the promise of the supplying concern to supply the machinery by the end of January without taking into account the probable contingencies and mishaps due to which the possibility of machinery not being installed ought to have been foreseen by them. 3. The Court held that the Managing Committee was negligent in proceeding with the projects without ensuring the availability of the finances before entering the adventures.

Final Decision: The Court dismissed the petition filed by the petitioners, challenging the orders of the Registrar of Co-operative Societies, Maharashtra, and the State Government superseding the Managing Committee of the Karkhana and entrusting the management thereof to an Administrator.