The requirement of consultation with the financing institution under Section 27(5) of the Punjab Co-operative Societies Act, 1961, is not a mere formality and must be carried out in a meaningful manner, with the financing institution being provided with all relevant information and an opportunity to express its views.

Shamsher Bahadur, J.

1. The Registrar, Co-operative Societies, issued a notice under Section 27 of the Punjab Co-operative Societies Act, 1961 (hereinafter called the Act) on 19th of September, 1963, to the President of the Ferozepur Central Co-operative Bank Ltd., to show cause why its directors should not be removed. The reply of the directors was sent through the President on 25th of October, 1963. The Registrar, Co-operative Societies, on November 20, 1963, made an order that the directors should be removed under Section 27(1)(b) of the Act. Ten, out of the fourteen, directors, who had been so removed, have moved this Court under Article 226 of the Constitution of India to challenge the validity of the order of removal.

2. According to the petitioners, Mohinder Singh, respondent 4, having been removed from the position of the President of the Central Co-operative Bank, Ferozepur, has been instrumental in getting the show cause notice issued and their eventual removal from the Board. According to the petitioners, Mohinder Singh is a relation of a Member of Parliament (Shri Iqbal Singh) and through his influence the Registrar has been persuaded to issue this notice. Apart from a bare assertion nothing has been made out to show any mala fides on the part of Mohinder Singh and there is no material to reach the conclusion that the Registrar had been actuated to issue the notice through his influence.

3. The second objection which has been raised by the petitioners relates to the legality of the notice issued under Section 27. Sub-section (1) of Section 27 is to this effect :

"If, in the opinion of the Registrar, the Committee of any co-operative society persistently makes default or is negligent in the performance of the duty imposed on it by this Act or the rule the by-laws, or commits any act which is prejudicial to the interest of the society, or its members the Registrar may, after giving the committee an opportunity to state its objections, if any, by order in writing remove the committee; and

(a) order fresh election of the committee, or

(b) appoint one or more administrators who need not be members of the society, to manage the affairs of the society for a period not exceeding one year. * * *

Sub-section (5) of Section 27 enjoins on the Registrar the duty of consultation and may be reproduced :-

"Before taking any action under sub-section (1) in respect of a co-operative society, the registrar shall consult the financing institutions to which it is indebted."

It is not disputed that the Punjab State Co-operative Bank, Chandigarh, is the principal creditor of the Bank of which the petitioners have been the board of directors. A letter was sent from the office of the Registrar, Co-operative Societies to the President of the Punjab State Co-operative Bank, Chandigarh, on 19th of September, 1963, in which it was stated that the Ferozepur Central Co-operative Bank had been persistently making defaults was negligent in the performance of its duties and had been acting in a way which was prejudicial to the interests of the Bank. It was further mentioned in this letter that the Registrar intended to remove the Managing Committee and a copy of the show cause notice of the 19th of September, 1963, was enclosed with this letter in which formal consultation of the Punjab State Co-operative Societies Act.

4. Mr. Jagan Nath Kaushal, the learned counsel for the petitioners, has urged that the consultation which is the statutory duty of the Registrar has been reduced to a farce in the present case as the reply which was sent by the petitioners was never sent to the Punjab State Co-operative Bank Chandigarh. The resolution passed by the Board of the Directors of the Punjab State Co-operative Bank on 31st of October, 1963, consisted only of the words "no objection". It cannot be said that the cryptic form of the resolution conveyed the approval of the State Co-operative Bank to the eventual removal of the directors. It might well