High Court · 2008

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 27.11.2008CORAM:THE HONOURABLE MR.JUSTICE K.CHANDRUW.P.Nos.36624 and 45520 of 2002Southern Railway Employees'Co-operative Credit Society Ltd.Tiruchirappalli, rep.by its Chief Executive, Tiruchirappalli-620 001. ... Petitioner in W.P. No.36624 of 2002L.ArputharajD.Anandam ...Petitioners in W.P. No.45520 of 2002 Vs1. The Central Registrar/Joint Secretary to Government of India, Ministry of Agriculture, Department of Agriculture and Co-operation, Krishi Bhawan, New Delhi – 110 001.2. The Registrar of Co-operative Societies, Tamil Nadu, Kilpauk, Chennai-600 010.3. The Joint Registrar of Co-operative Societies, Tiruchirappalli Region, Gaja Malai, Tiruchirappalli-620 021.4. The Co-operative Sub-Registrar Special Investigation Squad, Office of the Registrar of Co-operative Societies, Kilpauk, Chennai-600 010. ... Respondents in WP.36624 of 20021. The Registrar, Central Co-operative Credit Society, Krishi Bhawan, New Delhi. https://hcservices.ecourts.gov.in/hcservices/

2. Union of India, rep.by Secretary to Government, Ministry of Agriculture & Co-operative, Krishi Bhawan, New Delhi.3. The Director, CBI, New Delhi.4. The Chairman, Southern Railway Employees' Co-operative Credit Society Limited, ''Rail Co-operative Mansion" Dindigul Road, Trichy – 620 001. ... Respondents in WP.45520 of 2002PRAYER in WP.36624 of 2002:- Petition filed under Article 226 of theConstitution of India for the issuance of a Writ of Certioraricalling for the proceedings of the second respondent made inRef.RC.71654/2002/SIS, dated 06.6.2002 and the third respondent'sproceedings dated 24.5.2000 in Ref.No.8169 of 1999 UB andconsequential proceedings of the fourth respondent made in Ref.Nildated 16.9.2002 and quash the said proceedings.PRAYER in WP.45520 of 2002:- Petition filed under Article 226 of theConstitution of India for the issuance of a Writ of mandamusdirecting the first respondent and or the third respondent toconduct enquiry into the functioning of S.Ry.Employees Co-operativeCredit Society Limited, ''Rail Co-operative Mansion", Dindigul Road,Trichy – 620 001, on the basis of the complaint dated 05.4.2002preferred by the petitioners and take suitable necessary action inthis regard.WP.36624 of 2002:For petitioner : Mr.Muthukumarasamy, SC for Mr.Jenasenan For R1 : Mr.P.Wilson For R2 and R3 : Mrs.C.K.Vishnu Priya, AGP WP.45520 of 2002:For petitioner : Mr.S.J.Jegadev For R1 to R3 : No appearance For R4 : No appearance***** https://hcservices.ecourts.gov.in/hcservices/ O R D E R Heard both sides. In the first writ petition, the petitioneris a Co-operative Society registered under the Multi-State Co-operative Societies Act, 1984 (for short '1984 Act'). The challengein this writ petition is to the enquiry ordered under Section 69 ofthe 1984 Act regarding the working and the financial condition ofthe petitioner society. The Joint Registrar of Co-operativeSocieties, Tiruchirappalli Region was appointed as the EnquiryOfficer. Subsequently, by a further order dated 06.6.2002, the Co-operative Sub-Registrar was authorised to conduct an enquiry. Onceagain the Co-operative Sub-Registrar informed the petitioner societyto produce the books of accounts in terms of his summons dated14.6.2002. It is these proceedings, which are under challenge in thefirst writ petition.2. Pending the writ petition, this Court granted an interimstay on condition that the petitioner produces the books of accountsin terms of the notice dated 16.9.2002. A detailed counter affidavitdated ''nil'' has been filed on behalf of respondents 2 to 4.3. In the second writ petition, viz., W.P.No.45520 of 2002, thewrit petition is filed by the two Directors of the Southern RailwayEmployees' Co-operative and Credit Society Limited seeking for adirection to the Registrar, Central Co-operative Credit Society,New Delhi and the third respondent CBI, New Delhi to conduct aninquiry into the functioning of the society on the basis of acomplaint dated 05.2.2002 preferred by them. That writ petition wasadmitted on 28.1.2003. It was also directed to be posted along withthe earlier writ petition. 4. According to the Co-operative Society, after coming intoforce of the Multi-State Co-operative Societies Act, 2002 (CentralAct 39 of 2002) (for short '2002 Act'), the power of the Registrarunder Section 69 of the 1984 Act to initiate action and ordering anenquiry is inconsistent with the provisions of the 2002 Act and suchpower has been virtually taken away by the 2002 Act. It was arguedby the learned Senior Counsel for the Co-operative Society that the2002 Act, which received the assent of the President on 03.7.2002 byvirtue of Section 126(4) saves such appointments, orders andnotification issued under the repealed Act, which are notinconsistent with the provisions of the 2002 Act. Under the 2002Act, Section 78 which deals with enquiry referable to Section 69 ofthe 1984 Act had done away with the powers of the Central Registrarto order an enquiry on his own motion. Under the present Act, onlyif one-third of the members of the Board of Directors or one-fifth https://hcservices.ecourts.gov.in/hcservices/ of the total members of the society makes a request, an enquiry canbe ordered. 5. Since the Central Registrar had stayed the proceedings ofthe second and third respondents, directing an enquiry will nolonger be valid in terms of the 1984 Act. It is no doubt true thatunder Section 69 of the 1984 Act, the Central Registrar had a powerto order a suo motu enquiry apart from similar power provided underSection 78 of the 2002 Act. Though such a power had been taken away,it does not help the case of the petitioners. Under Section 126,while the 1984 Act is repealed, it saves certain class ofproceedings. In the present case, a reference to Section 126(4) isinappropriate and reference has to be made only to Section 126 (6)of the Act, which reads as follows:-''126(6). Save as otherwise provided in this Act, anylegal proceeding pending in any Court or before theCentral Registrar or any other authority at thecommencement of this Act shall be continued to be in thatCourt or before the Central Registrar or that authorityas if this Act had not been passed." (Emphasis Added)6. According to Mr.R.Muthukumarasamy, learned Senior Counsel,the proceeding initiated against the petitioner society cannot besaid to be a ''legal proceeding". The said term can only meanproceedings such as appeal, revision, review etc. The learned SeniorCounsel in this context referred to Section 22(1) of the SickIndustrial Companies (Special Provisions) Act, 1985 and also thepronouncement of the Supreme Court interpreting the term''proceedings" found therein in the case relating to MaharashtraTubes Limited -vs- State Industrial & Investment Corporation ofMaharashtra Limited and another reported in (1993) 2 SCC 144. Thelearned counsel referred to paragraphs 11 and 12 of the saiddecision, which reads as follows:-''Para 11. : Mr Rao, however, invited our attention tothe definition of the expression ‘legal proceedings’ asfound in Black’s Law Dictionary (Fourth Edition) whichreads as under:“Any proceedings in court of justice ... bywhich property of debtor is seized and divertedfrom his general creditors .... This termincludes all proceedings authorised orsanctioned by law, and brought or instituted ina court of justice or legal tribunal, for theacquiring of a right or the enforcement of aremedy.” https://hcservices.ecourts.gov.in/hcservices/ Even this definition does not militate against the viewwe are inclined to take. In the first place action underSection 29 of the 1951 Act is to seize the property ofthe defaulting industrial concern and to appropriate itfor satisfying the debt. It gets diverted from thegeneral body of creditors. The Corporation is fullyempowered to dispose it of to a third party and pass aclear marketable title. All this can be done by theCorporation without the need to go to a court or tribunalor any other recovery agency. The Corporation is itselfpermitted to play that role. In substance the Corporationis playing the same role. From the point of view ofquality and character the remedy is the same as inexecution or distress proceedings. Therefore, even if onegoes by the said meaning and understands the term‘proceedings’ in the light of the object and purpose ofSection 22(1) of the 1985 Act, no difficulty isexperienced in taking the view that it must be widelyconstrued.Para 12. : Reliance was placed on decisions of two HighCourts in support of the contentions urged on behalf ofthe appellant-company. We shall deal with them briefly.In Testeels Ltd. v. Radhaben Ranchhodlal Charitable Trust(AIR 1988 Guj 213) the short point for decision waswhether a winding up proceeding already commenced againstan industrial company ought to be dismissed or stayedduring the pendency of the reference under Section 15 ofthe 1985 Act. The High Court held that the words ‘beproceeded with further’ in Section 22 cannot beinterpreted to mean that the proceedings should be keptin abeyance but the various provisions of the enactmentmust be construed to put an end to both the contemplatedand pending winding up proceedings. The High Court heldthat if the winding up proceedings are kept pending itmay be difficult to effectively administer the schemesunder Section 18 or grant financial assistance underSection 19 of the 1985 Act. The High Court held that theprovision must be broadly construed keeping in mind thescheme of the law so that the ultimate objective isachieved and not defeated. In the other case ofIndustrial Finance Corporation of India v. MaharashtraSteel Ltd (AIR 1988 All 170) the view taken was thatpending inquiry by the BIFR the exercise of power underSection 30 of the 1951 Act would not be proper in view ofSection 22(1) of the 1985 Act. Section 30 empowers theFinancial Corporation to require an industrial concern bynotice to discharge its liabilities before the agreed https://hcservices.ecourts.gov.in/hcservices/ date. Even though no legal proceedings are contemplatedunder that provision, the High Court did not permit suchan action during the pendency of proceedings under the1985 Act. These two cases reinforce the view that theprovision of Section 22(1) of the 1985 Act should receivea broad construction. These cases, therefore, support theview that the expression ‘proceedings’ in Section 22(1)need not be limited to ‘legal proceedings’ understood inthe narrow sense notwithstanding the use of thatexpression in the marginal note." 7. In the light of the above, he submits that in the 2002 Act,the term ''proceedings" was not used but the term ''legalproceedings" alone was used. Therefore, it should have only arestricted meaning. But the learned counsel fails to see that theterm ''legal proceedings" found in Section 126(6) of the 2002 Actdoes not confine only to legal proceedings pending before a Courtbut also includes proceedings before a Central Registrar or anyother authority at the commencement of this Act. Admittedly, anenquiry ordered by the Central Registrar under Section 69 of the1984 Act is a legal proceeding pending before the Central Registrar.Therefore, there was no necessity restrictively to read the term''legal proceedings" found in section 126(6). But, on the contrary,it should have the meaning assigned under the Act. 8. Though Section 126 is a repeal and saving clause provisionfound in 2002 Act (popularly referred to as the ''sunset clause"),it has to be construed strictly. In the present case, the savingclause expressly retains all the proceedings pending not only beforea Court and the Central Registrar, but even before any otherauthority.9. Under Section 3(c) of the 1984 Act, the term ''CentralRegistrar" means Central Registrar of the Co-operative Societiesappointed under Section 4(1) of the Act and includes any officerempowered to exercise power of the Central Registrar in terms ofSection 4(2) of the said Act. Section 4 of the 1984 Act reads asfollows:-''4. Central Registrar. - (1) The Central Government mayappoint a person to be the Central Registrar of Co-operative Societies and may appoint such other persons asit may think fit to assist the Central Registrar.(2) The Central Government may, by notification,directthat any power exercisable by the Central Registrar underthis Act (other than the power of registration of a multi-State co-operative society) shall in relation to suchsociety, and such matters as may be specified in the https://hcservices.ecourts.gov.in/hcservices/ notification be exercisable also by any other officer ofthe Central Government or of a State Government as may beauthorised by the Central Government subject to suchconditions as may be specified therein:Provided that no officer of a State Government shallbe empowered to exercise such power in relation to anational co-operative society;Provided further that no officer of a StateGovernment below the rank of the Registrar of Co-operativeSocieties shall be empowered to exercise any powerexercisable by the Central Registrar under section 87." (Emphasis Added)10. Therefore, when a power is delegated to the StateGovernment, by the notification of the Government of India, Ministryof Agriculture vide their letter dated 06.9.1985 to the JointRegistrar of Co-operative Society, Tiruchy Region, no exception canbe taken. Such an authority, namely, the Joint Registrar of Co-operative Societies is virtually the Central Registrar and has allthe powers except the power to register a Multi-State Co-operativeSociety. The communications received from the office of the CentralRegistrar, cannot take away the power of the third respondent fromproceeding with a statutory enquiry initiated by the thirdrespondent.11. In the light of the same, the impugned notice issued by thethird and fourth respondents does not suffer from any legalinfirmity. They are entitled to proceed with the enquirycontemplated under the Act and their enquiry does not get eclipsedby virtue of the repealing of the 1984 Act and are saved by Section126 of the 2002 Act. Hence, W.P.No.36624 of 2002 will standdismissed.12. W.P.No.45520 of 2002 is filed only for the purpose offacilitating the enquiry initiated by the respondents. Therefore,in the light of the order passed in W.P.No.36624 of 2002, there isno necessity to grant the relief sought for by the petitioner inW.P.No.45520 of 2002. Hence, that writ petition will also standdismissed. However, there will be no order as to costs.JsSd/Asst.Registrar/true copy/ Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ To1. The Central Registrar/Joint Secretary to Government of India, Ministry of Agriculture, Department of Agriculture and Co-operation, Krishi Bhawan, New Delhi – 110 001.2. The Registrar of Co-operative Societies, Tamil Nadu, Kilpauk, Chennai-600 010.3. The Joint Registrar of Co-operative Societies, Tiruchirappalli Region, Gaja Malai, Tiruchirappalli-620 021.4. The Co-operative Sub-Registrar Special Investigation Squad, Office of the Registrar of Co-operative Societies, Kilpauk, Chennai-600 010.5. The Registrar, Central Co-operative Credit Society, Krishi Bhawan, New Delhi.6. The Secretary to Government, Ministry of Agriculture & Co-operative, Krishi Bhawan, New Delhi.7. The Director, CBI, New Delhi.8. The Chairman, Southern Railway Employees' Co-operative Credit Society Limited, ''Rail Co-operative Mansion" Dindigul Road, Trichy – 620 001.+ 2 ccs to Mr. A. Jenasenan, Advocate SR No. 66546, 66547W.P.Nos.36624 and 45520 of 2002TS(CO)SR/4.12.2008