2007 Supreme(Bom) 1612

IN THE HIGH COURT OF BOMBAY
F.I. REBELLO & N.A. BRITTO, JJ.
Shri. Pramod A. Raikar - Appellant
Versus
Registrar of Co-op. Soc., Panaji-Goa & Ors. - Respondent
Writ Petition No.527 of 2007
Decided on 22nd November, 2007

Headnote:Maharashtra Co-operative Societies Act, 1960 - Section 73(1)(i)-Co-operative society -Bye-laws of-Nature of-Bye-laws not an exercise is subordinate legislation-Made for internal running of affairs of society-Binding between members and persons affected thereby-Having no force of statute or statutory character or statutory flavour.-The settled position in so far as bye-laws of a co-operative society is concerned is that the bye-laws of co-operative society are not an exercise in subordinate legislation. The issue is no longer res integra considering the law declared by the Supreme Court which has held that bye-laws of the co-operative society are like the Articles of Association of a Company incorporated under Companies Act. In other words, they are rules made for internal running of the affairs of the association and are thus binding between members and the persons affected thereby. They don’t have force of statute nor a statutory character or statutory flavour.

       Maharashtra Co-operative Societies Act, 1960 - Section 73(1)(i)(3)-Specified co- operative societies-Vote of no confidence against chairman-Motion for-Majority required for-A simple majority of total number of committee members entitled to attend and vote to any meeting of committee.-The position in law will be that the bye-laws to the extent they are in conflict with Section 71(1)(i) will have to be read down to bring it in conformity with Section 73(1)(i) and consequently to pass a motion of no confidence what is required is simple majority in terms of the said section.

       The next question considering the language of Section 73(1)(i) and Bye-law 24(B) is whether the motion has to be passed by simple majority of all members of the committee or only by the elected members. We have reproduced Section 73(1)(i). A reading thereof would indicate that majority has to be by simple majority of the total number of members who are for the time being entitled to attend and vote at any meeting of the committee. It would thus be clear that those who attend the meeting must have right to votes at the meeting. Bye-law 24(B) speaks only about elected members. Is this violative of Section 73(1)(i) as in terms of the bye-laws the motion to be passed requires two their majority of elected members. Considering the language used in Section 73(1)(i) in Court’s opinion, there is no inconsistency. These eligible to vote at the meeting to consider the motion of no confidence are only the elected members as the motion has to be passed considering the vote of only the elected members and consequently the non-elected members cannot participate in the voting. The contention urged on behalf of the petitioners that all members have the right to vote and it is simple majority of all members cannot be countenanced. The total strength of elected members was 15. Nine elected members were present and voted at the meeting. They would constitute a majority. If the argument of the petitioner was to be accepted, nine would not be a simple majority. However considering that those who can participate in the voting are only the elected members, the motion was passed by the required majority of the elected members and consequently this contention must be rejected.

       Maharashtra Co-operative Societies Act, 1960 - Section 73(1)(i)(3)-Specified co- operative societies-Vote of no confidence against chairman-Notice to non elected members-Registrar has no power to exclude issuance of notice to members representing nominee Directors-Notice of meeting not served on these Directors-Simply majority of members not present to constitute a quorum-Challenge upheld-Open for Registrar to call a fresh meeting within 3 weeks from date of judgment.-The second and third contention that we have been called upon to answer is that though respondent Nos. 16, 17 and 18 could not vote at the meeting they ought to have been given notice of the meeting and allowed to participate in the meeting and constitute the necessary quorum for the meeting. The bye-laws would show that all members can participate in the meeting and a simple majority would form a quorum, under Bye-laws 28. A meeting to consider a motion of no confidence does not cease to be a meeting of the Board. The only procedural change is that the meeting is to be called by the Registrar of Co-operative Society. The parties to at the meeting therefore must be of all members. Their right to vote at such meeting is conferred only to the elected members. Out of the eighteen members only nine participated that could not be a simple majority. Further notice of the meeting has to be given to all members. The record does not show that notice was given to those non-elected members. Similar issue had come up for consideration before the Supreme Court in Gajanan Narayan Patil (supra). In that case what was challenged was the notice to consider the motion of no confidence. The issue was whether non elected members were required to be served with the notice of requisition to enable them to participate at the special meeting. The Bench of this Court on construction of the relevant section, rules and bye-laws held that as they have no right to vote, there was no requirement of issuing notice and consequently dismissed the petition. The matter went in appeal before the Supreme Court. The Supreme Court on the consideration of the provisions by is majority judgment held that the Directors representative of the financial institutions as well as expert Director (Co-operative) had the right to participate in the meeting including the special meeting of the Board of Directors. The distinction thus has to be made between voting and the right to participate whether it be ordinary meeting of the Board of Directors or special meeting of the Board of Directors which has been summoned. On the construction of the bye-laws there is nothing which confers power of respondent No. 1 to exclude issuance of notice to the members representating the nominee Director, Government nominee and to the Chief Executive Officer. The notice issued on 11.10.2007 and what is annexed to the petition shows that no notices were served on respondent Nos. 16, 17 and 18 though in so far as respondent No. 16 is concerned in his capacity of Chief Executive Officer, the notice was forwarded for communication. An affidavit has been filed by the respondent No. 18 setting out that he was served of the notice and also present at the meeting. This statement is neither supported by the notice annexed nor from the minutes of the meeting. It would thus, be clear that considering the ratio of the judgment of the Supreme Court in Gajanan Narayan Patil and others that the meeting as convened did not conform to the requirements in as much as notice of the meeting was not served on these Directors of the Board who were not eligible to vote nor was the a simple majority of members present to constitute a quorum. The challenge to that extent will have to be accepted.

       In the light of that petition made absolute in terms of prayer clause (a). We make it clear that it is open to the Registrar to call a fresh meeting after compliance with the necessary procedure. The meeting to be called and motion to be considered at any rate not later than 3 weeks from today.

       Maharashtra Co-operative Societies Act, 1960 - Section 73(1) - Petitioner and respondents 2 to 18 being Director of Company respondent 19 - Notice by respondent No. 1 to hold meeting under Section 73(1)(3) of Act - Motion of Vote of Confidence against petitioner - Motion passed in absence of 6 elected members - Motion to be passed by simple majority - 9 members out of 18 voted - Motion passed illegal - Required quorum absent as per bye-law 28 of society - Bye-laws not being law - Removal of Chairman by 2/3 majority not illegal as per bye-law 24(B) - Bye laws are like Article of company - Bye-laws are rules for internal running of affairs of association and in binding - Bye-laws have no statutory flavour - Total elected members 15 out of which 9 voted for no-confidence motion - Direction to call fresh meeting - Petition disposed off.

       Maharashtra Co-operative Societies Act, 1960 - Section 73(1)(i)(3) - Specified co-operative societies - Vote of no confidence against chairman - Motion for - Majority required for - A simple majority of total number of committee members entitled to attend and vote to any meeting of committee. - The position in law will be that the bye-laws to the extent they are in conflict with Section 71(1)(i) will have to be read down to bring it in conformity with Section 73(1) (i) and consequently to pass a motion of no confidence what is required is simple majority in terms of the said section.

       The next question considering the language of Section 73(1)(i) and Bye-law 24(B) is whether the motion has to be passed by simple majority of all members of the committee or only by the elected members. We have reproduced Section 73(1)(i). A reading thereof would indicate that majority has to be by simple majority of the total number of members who are for the time being entitled to attend and vote at any meeting of the committee. It would thus be clear that those who attend the meeting must have right to votes at the meeting. Bye-law 24(B) speaks only about elected members. Is this violative of Section 73(1)(i) as in terms of the bye-laws the motion to be passed requires two their majority of elected members. Considering the language used in Section 73(1)(i) in Court’s opinion, there is no inconsistency. These eligible to vote at the meeting to consider the motion of no confidence are only the elected members as the motion has to be passed considering the vote of only the elected members and consequently the non-elected members cannot participate in the voting. The contention urged on behalf of the petitioners that all members have the right to vote and it is simple majority of all members cannot be countenanced. The total strength of elected members was 15. Nine elected members were present and voted at the meeting. They would constitute a majority. If the argument of the petitioner was to be accepted, nine would not be a simple majority. However considering that those who can participate in the voting are only the elected members, the motion was passed by the required majority of the elected members and consequently this contention must be rejected.

       Maharashtra Co-operative Societies Act, 1960 - Section 73(1)(i)(3) - Specified co-operative societies - Vote of no confidence against chairman - Notice to non elected members - Registrar has no power to exclude issuance of notice to members representing nominee Directors - Notice of meeting not served on these Directors - Simply majority of members not present to constitute a quorum - Challenge upheld - Open for Registrar to call a fresh meeting within 3 weeks from date of judgment. - The second and third contention that we have been called upon to answer is that though respondent Nos. 16, 17 and 18 could not vote at the meeting they ought to have been given notice of the meeting and allowed to participate in the meeting and constitute the necessary quorum for the meeting. The bye-laws would show that all members can participate in the meeting and a simple majority would form a quorum, under Bye-laws 28. A meeting to consider a motion of no confidence does not cease to be a meeting of the Board. The only procedural change is that the meeting is to be called by the Registrar of Co-operative Society. The parties to at the meeting therefore must be of all members. Their right to vote at such meeting is conferred only to the elected members. Out of the eighteen members only nine participated that could not be a simple majority. Further notice of the meeting has to be given to all members. The record does not show that notice was given to those non-elected members. Similar issue had come up for consideration before the Supreme Court in Gajanan Narayan Patil (supra). In that case what was challenged was the notice to consider the motion of no confidence. The issue was whether non elected members were required to be served with the notice of requisition to enable them to participate at the special meeting. The Bench of this Court on construction of the relevant section, rules and bye-laws held that as they have no right to vote, there was no requirement of issuing notice and consequently dismissed the petition. The matter went in appeal before the Supreme Court. The Supreme Court on the consideration of the provisions by is majority judgment held that the Directors representative of the financial institutions as well as expert Director (Co-operative) had the right to participate in the meeting including the special meeting of the Board of Directors. The distinction thus has to be made between voting and the right to participate whether it be ordinary meeting of the Board of Directors or special meeting of the Board of Directors which has been summoned. On the construction of the bye-laws there is nothing which confers power of respondent No. 1 to exclude issuance of notice to the members representating the nominee Director, Government nominee and to the Chief Executive Officer. The notice issued on 11.10.2007 and what is annexed to the petition shows that no notices were served on respondent Nos. 16, 17 and 18 though in so far as respondent No. 16 is concerned in his capacity of Chief Executive Officer, the notice was forwarded for communication. An affidavit has been filed by the respondent No. 18 setting out that he was served of the notice and also present at the meeting. This statement is neither supported by the notice annexed nor from the minutes of the meeting. It would thus, be clear that considering the ratio of the judgment of the Supreme Court in Gajanan Narayan Patil and others that the meeting as convened did not conform to the requirements in as much as notice of the meeting was not served on these Directors of the Board who were not eligible to vote nor was the a simple majority of members present to constitute a quorum. The challenge to that extent will have to be accepted.

       In the light of that petition made absolute in terms of prayer clause (a). We make it clear that it is open to the Registrar to call a fresh meeting after compliance with the necessary procedure. The meeting to be called and motion to be considered at any rate not later than 3 weeks from today.