An expert director without voting rights cannot be held liable for damages under Section 88 of the Maharashtra Cooperative Societies Act due to lack of involvement in management decisions.

JUDGEMENT :

(PER G. S. KULKARNI, J.)

1. This Letters Patent Appeal is directed against the judgment and order dated 28 July, 2006 passed by the learned Single Judge whereby Writ Petition No. 6911 of 2004 filed by the appellant/petitioner came to be dismissed. The impugned order was rendered on a batch of writ petitions. The appellant’s writ petition was one of such petitions. The Writ Petitions before the learned Single Judge impugned a common order dated 3 February 2003 passed by respondent no. 1-Authorized Officer and Assistant Registrar, Cooperative Societies under Section 88 (1)[ . Power of Registrar to assess damages against delinquent promoters, etc.] of the Maharashtra Cooperative Societies Act, 1960 (for short “MCS Act) as confirmed by the appellate/revisional authorities, whereby an individual liability was fixed on each of the writ petitioners, who (except the appellant) were elected directors of the managing committee of respondent no. 2- Society, directing them to pay an amount of Rs.21 lakhs each to respondent no.2- Society as damages/ losses suffered by respondent no.2 on account of their irregularities/illegalities.

2. Briefly the facts are : Respondent no. 2-Hindustan Aeronautics Limited (Nashik Division) Employees Credit Society (for short “Society”) is a Cooperative Society registered under the provisions of the MCS Act. It was formed by the employees of Hindustan Aeronautics Ltd., Nashik, which is an undertaking of the Government of India. The writ petitioners were employees of Hindustan Aeronautics Ltd. At the relevant time, they were elected as the Managing Committee members. In all, there were 13 members of the Managing Committee and one expert director, namely, the appellant/petitioner (since deceased) who was co-opted by the Managing Committee, having the total strength of directors to 14. Allegedly, there were two groups in the Managing Committee.

3. The entire controversy for an action to be taken under the provisions of Section 88 of the MCS Act (supra), revolves around a circulation resolution of the managing committee dated 8 December, 2000 (for short the “said resolution”) under the signature of the Vice-Chairman proposing to transfer “fixed deposits” maintained by Respondent No.2 with the State Bank of India, to Cooperative Banks, namely, The Nashik District Central Cooperative Bank, Nashik Merchants Cooperative Bank, Janlaxmi Cooperative Bank, Business Cooperative Bank and Jawahar Cooperative Urban Bank Ltd. Such proposal was moved mainly on the ground that as per the decision of the Supreme Court, the interest earned on the fixed deposits with the Nationalized Bank was taxable, whereas if such fixed deposit was maintained with a Cooperative Bank, the interest amounts were not taxable. Such resolution was signed by seven members of the Managing Committee representing one group whereas six Managing Committee members representing the other group did not sign the said resolution. Such resolution was also not a subject matter of confirmation or placed for discussion in the ensuing meeting of the managing committee held on 8 December, 2000. Accordingly, between the period 11 December 2000 to 4 April, 2001, an amount of Rs.2.20 crores was invested in a Cooperative Bank, namely, the ‘Jawahar Cooperative Urban Bank Ltd.’ at Hyderabad, in a fixed deposit, purportedly on the basis of the said resolution dated 8 December, 2000. Such deposit was revealed to be in violation of the circular is