B V MALLA REDDY vs STATE OF KARNATAKA

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 13TH DAY OF SEPTEMBER, 2019

:PRESENT: THE HON’BLE MR. JUSTICE L.NARAYANA SWAMY

AND

THE HON’BLE MR. JUSTICE R.DEVDAS

WRIT APPEAL NOs.849 - 850 OF 2015 (CS-RES)

BETWEEN

B. V. MALLA REDDY S/O SRI VENUGOPALA REDDY, AGED 59 YEARS R/AT "SHRUSTI", NO.490/578 8TH MAIN, 11TH CROSS, 2ND PHASE, GIRINAGAR, BANGALORE-560 085. (... APPELLANT IN W.A.No.849/2015)

D. R. GOPINATH S/O LATE RAMAKRISHNA REDDY, AGED 54 YEARS R/AT NO.442, 10TH CROSS, 2ND PHASE, GIRINAGAR, BANGALORE-560 085. (... APPELLANT IN W.A.No.850/2015)

(BY SRI B V MALLA REDDY, PARTY-IN-PERSON, APPELLANT IN W.A.No.849/2015; SRI KRISHNA MURTHY, SENIOR COUNSEL FOR SRI B K CHANDRASHEKAR, ADVOCATE FOR APPELLANT IN W.A.No.850/2015)

AND

STATE OF KARNATAKA REPTD. BY ITS CHIEF SECRETARY,

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VIDHANA SOUDHA, BANGALORE-560 001.

SREENIDHI SOUHARDA SAHAKARA

BANK NIYAMITHA BEING A REGISTERED CO-OPERATIVE BANK REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT 1997, HAVING ITS REGISTERED OFFICE AT NO.132/1, R.V. ROAD, V. V. PURAM, BANGALORE-560 004 AND REPTD.BY ITS CEO.

THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (URD DISPUTE) KSCUBF, NO.132, K.H. ROAD, BANGALORE-560 027.

(... COMMON RESPONDENTS)

(BY SRI V SREENIDHI, AGA FOR R1 & R3; SRI N S SANJAY GOWDA, ADVOCATE FOR R2)

THESE WRIT APPEALS ARE FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED IN THE WRIT PETITION 26771/2012 & 26773/2012, DATED 12/01/2015.

THESE WRIT APPEALS HAVING BEEN HEARD AND RESERVED ON 22.07.2019 AND COMING ON FOR PRONOUNCEMENT OF ORDERS, THIS DAY, DEVDAS J., DELIVERED THE FOLLOWING:

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JUDGMENT

These appeals arise out of a common order passed by the learned Single Judge in W.P.No.29029/2012 and connected matters, which were disposed of on 12.01.2015. 2. The appellants are founder members/ promoters of the 2nd respondent Co-operative Bank, which was established in the year 1998. The Bank was initially registered under the provisions of Karnataka Co-operative Societies Act, 1959 and subsequently registered under the Karnataka Souharda Sahakari Act, 1997 (hereinafter referred as the ‘Souharda Act’). The appellants were taken to the Board of the Bank, unanimously as special invitees. Subsequently, on being elected, the appellants were holding the post of Directors. The 1st appellant was also elected thrice, continuously as the President of the Bank. After resigning to the post of Director and President, respectively, the appellants continued as ordinary members of the Bank. On 30.12.2010, the Board of the Bank, by passing a resolution, removed the appellants

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from the membership of the Bank. Being aggrieved, the appellants raised a dispute before the Joint Registrar of Co-operative Societies (hereinafter referred to as ‘JRCS’ for short) under Section 39 of the Souharda Act.

On consideration of the preliminary objections raised by the Bank that a dispute under Section 39 was not maintainable against an order of cancellation of membership, the JRCS, upheld the objections and dismissed the dispute, on 10.03.2011. The appellants preferred W.P.Nos.9627 and 9628/2011, challenging the validity of section 21 of the Souharda Act. Section 21 provides for an appeal before the General Body of the Co-operative Society/Bank, on an order of cancellation of membership. Simultaneously, appeals were preferred before the Karnataka Appellate Tribunal, calling in question the order passed by the JRCS. 4. In the writ petitions, when interim relief was not granted, appeals in Writ Appeals No.1901 and 1902/2011 were preferred before this Court. By order dated 16.03.2011, this Court disposed of the writ appeals directing the appellants to avail appellate

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remedy as provided under Section 21 of the Act. An SLP preferred by the appellants in SLP No.15184/2011, was also dismissed by order dated 05.07.2011. Review Petition in R.P.No.343/2011 was also dismissed on 03.11.2011. 5. In the meanwhile, the appellants approached the General Body, as provided under Section 21. The General Body, having met on 17.04.2011, reiterated the decision of canceling the membership of the appellants. The appeal before the Tribunal also came to be dismissed on 09.03.2012. Challenging the order of the General Body, W.P.No.26773/2012 was filed by the second appellant herein. The vires of Section 21 of the Souharda Act was also called in question. The supporters of the appellants also preferred writ petitions, including the first appellant herein, in W.P.No.26771/2012. However, it is relevant to notice that by Amendment Act, 2012, Section 21 of the Souharda Act was deleted with effect from 11.02.2013. 6. By order dated 12.01.2015, the learned Single Judge disposed of all the writ petitions by a common

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order, directing the respondent-Bank to prepare a list of voters who are eligible as on the date of the order and those who have not completed 18 months from the date of admission of their membership were not allowed to participate in the General Body meeting which would decide the consideration of the appeal filed by the appellants herein, challenging the resolution dated 31.12.2010, by which the appellants were removed from primary membership of the respondent-Bank. 7. Though the instant writ appeals were filed on 02.03.2015, challenging the order of the learned Single Judge, the General Body of the respondent-Bank met on 29.03.2015 to reconsider the appeal preferred by the appellants herein and once again affirmed the resolution dated 31.12.2010. Some of the appeals preferred by the supporters of the appellants herein, in W.A.Nos.851 to 854/2015 and W.ANos.2267 to 2270/2015 were dismissed by order dated 22.09.2015, recording the submission of the learned Counsel for the respondent-Bank that in the General Body meeting held on 29.03.2015, members who had not completed 18

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months from the date of admission of their membership were not allowed to vote, in terms of the directions issued by the learned Single Judge and the appeal preferred before the General Body was rejected. Review Petitions in R.P.Nos.788/2015 and 217-223/2016 were also rejected by order dated 16.03.2017. 8. It is in this background that these appeals are heard. Sri B.V.Malla Reddy, appeared as party-in- person, while Sri G.Krishna Murthy, learned Senior Counsel represented the other appellant. 9. It was submitted that though Section 21 of the Act stands deleted, the Amendment Act is silent on the matters pending consideration. Drawing the attention of this Court to Section 39 of the Act, it was submitted that Section 39 begins with a non-obstante clause and therefore, the JRCS could not have rejected the dispute raised by the appellants, calling in question the cancellation of membership. Further, drawing the attention of this Court to the objects of the Amendment Act, 2012, it was submitted that the legislature was of a clear opinion that the provisions of Section 21 were

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gravely misused by the Board of Directors of Co- operative societies/Banks. It is therefore submitted that the stand of the appellants stood vindicated that the Board of Directors have acted with vengeance against the appellants who were the founder members and promoters of the respondent-Bank. 10. The learned Senior Counsel submits that since the Amendment Act, 2012, is silent on the pending matters, Section 6 of the Karnataka General Clauses Act, would become applicable. In this regard, the learned Senior Counsel places reliance on the following judgments: 1. Sushila N. Rungta (D) Through LRs Vs. Tax Recovery Officer 16(2) and Others (2018 (14) Scale 739); 2. M/s. General Finance Co. and Another Vs. Assistant Commissioner of Income Tax, Punjab (AIR 2002 SC 3126) and 3. The Commissioner of Income-Tax and Another Vs. M/s.G.E.Thermometrics India Pvt. Ltd., an unreported decision of this Court in ITA No.876/2008 and connected matter decided on 25.11.2014.

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11.

On facts, it was pointed out that the charge leveled against the appellants was vague, like, “acting detrimental to the interest of the co-operative”, which are the very same words used in Section 21 of the Act. That precisely was the reason for the appellants to challenge Section 21. 12. On the other hand, Sri N.S.Sanjay Gowda, learned Counsel appearing for the respondent-Bank submits that the challenge raised to Section 21 of the Souharda Act, does not survive for consideration, in view of the provision being deleted from the statute book with effect from 11.02.2013. Moreover, it is submitted that on two occasions the General Body of the respondent-Bank has considered the appeal preferred by the appellants under Section 21 of the Souharda Act and on both occasions, the resolution passed by the Board of Directors, removing the appellants from primary membership of the respondent-Bank has been reaffirmed. Therefore, the question of considering the validity of Section 21 does not arise.

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13.

Heard Sri B.V.Malla Reddy, appellant/party- in-person, Sri G.Krishna Murthy, learned Senior Counsel for second appellant and Sri N.S.Sanjay Gowda, learned Counsel for the respondent-Bank. 14. Having regard to the fact that the General Body of the respondent-Bank has considered the appeal preferred by the appellants under Section 21 of the Souharda Act, which since stands deleted from the statute book, this Court is of the considered opinion that the Constitutional validity of Section 21 raised by the appellants will only be of academic interest. On the other hand, the averments made by the appellants who were the writ petitioners, that the provision is misused by the majority of the Directors to remove their detractors, acting against the spirit of co-operative movement and the General Body being at the mercy of the Board of Directors even for assembling the special General Body, no useful purpose would be served by providing an appeal to the General Body, seems to be justified having regard to the manner in which the

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appeal filed by the appellants was considered by the General Body. 15. We have gone through the Articles of charges issued against the appellants. The allegations are general and vague in nature. There is no specific charge giving any particulars of financial irregularity. On going through the detailed report of the Special General Body meeting which was held on 17.04.2011, we find that the General Body was not in a position to discuss the issue threadbare. Since the meeting was disrupted, by vote of hands, the appeal was decided 90:10, where the majority supported the decision of the Board. The appellants are therefore justified when they averred that the appeal provided to the General Body, under Section 21 of the Souharda Act, is hardly an effective and efficacious remedy. 16. It is also relevant to notice that subsequent to the filing of these appeals, at the behest of the direction issued by the learned Single Judge in the writ petition, the General body seems to have passed another order on 29.03.2015, rejecting the appeal filed by the

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appellants herein. The appellants have preferred not to challenge the same, either by way of challenging the same in the instant writ appeal, seeking leave of this Court or by taking recourse to the provisions of the Souharda Act. 17. Nevertheless, we find from the bye-law of the second respondent-Bank, more particularly Clause- 12(2)(c) that a member who was removed from the membership shall not be eligible to be reconsidered for membership for a period of one year from the date of removal. Therefore, the said period of one year having long elapsed, this Court is of the considered opinion that the Board of Directors of the respondent-Bank may consider re-inducting the appellants as members of the respondent-Bank. 18. These appeals therefore stand disposed of, with a direction to the respondent-Bank to consider re- inducting the appellants herein as members of the respondent-Bank, within a period of two months from the date of receipt of a certified copy of this order.

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19.

In view of the above, I.A.No.1/2015 and I.A.No.2/2015 filed for stay do not survive for consideration.

SD/- JUDGE

DL/JT

B V MALLA REDDY vs. STATE OF KARNATAKA