A. Subba Rao vs Secretary, Andhra Co-operative Central Land Mortgage Bank and Another

Viswanatha Sastir, J.—This is an application by a member of the Andhra Co-operative Land Mortgage; Bank Ltd., for a writ of certiorari- quashing the resolution of the Executive Committee of the Bank dated 10th July, 1955, allotting shares to persons who had no residence or registered address within the area of the Bank''s operations. In view of the arguments addressed to us it is necessary to refer to the constitution of Bank and its by-laws.

The Madras Co-operative Central Land Mortgage Bank, Ltd., (hereinafter referred to for the sake of brevity as "the Madras Bank") was established in 1929 under the Madras Co-operative Societies Act, 1920, with its registered office at Madras primarily for the purpose of financing mortgage banks operating in the area comprised in the old composite State or Madras. Shortly before the formation of the State of Andhra, Madras Ordinance II of 1953 was passed authorising the establishment of the Andhra Co-operative Central Land Mortgage Bank (hereinafter referred to as "the Andhra Bank") for financing the mortgage banks operating in the area comprised in the State of Andhra.

The Registrars of Co-operative Societies, Madras and the Madras Bank wore authorised to taka the necessary steps for. the formation and registration of the Andhra Banlc. The Registrar was empowered to place proposals before the General Body of the Madras Bank'' for the purocse of reconstituting that Bank and forming the Andhra Bank, The Madras Bank had for its share-holders individuals resident within the composite State of Madras as well as mortgage banks operating in that area. At the annual general meeting of the share-holders -of the Madras Bank held on 5th September, 195''n, at Madras certain proposals submitted by the Registrar of Co-operative Societies for the bifurcation of the Bank The proposal of the Registrar with respect to the membership of the Andhra Bank placed before the General Body was as follows:

IV The re-constituted Mad Central Land Mortgage Briary land mortgage bank''s in Miin Clause (1) (b). All the ''individual the existing Madras Co-op Mortgage Bank will court it as re-constituted Madras Co Mortgage Bank. And the newt constituted to the new Bank.clers. however, as are wimingio surrender all their shares in the Bank eligibly for admission in the Andhra Co-operative Central Land Mortgage Bank.

This proposal was accepted by the General. Body in Resolution No. 4 subject to the following modification namely:

IV (i) The individual share-holders of the composite Central Land Mortgage Bank on 31st August, 1953, whose registered addresses show them as resident in the area of operations of the new Andhra Central Land. Mortgage Bank shall stand transferred to the new Bank.

The Registrar having accepted the modification of the resolution, it became landing on the shareholders of the re-constituted Madras Bank and the newly constituted Andhra Bank.

On 5th September, 1953, the position was that only 67 individual members or share-holders of the Madras Bank whose residence and addresses were within the area now comprised in the State of Andhra stood transferred as share-holders of the Andhra Bank by virtue of the aforesaid Resolution of the Shane holders of the Madras Bank. According to the Petitioner, it is a necessary reciuisite for individual membership of the Andhra Bank that, on the date of admission of a member, his residence and registered address should be within the area of operations of the Andhra Bank,, just as residence and registered address within the area of its operations were necessary for individual membership of the Madras Bank before the-bifurcation.

The complaint of the Petitioner is that shareholders of the Madras Bank who did not possess these basic qualifications of residence and registered address within the Andhra State were allowed to surrender their shares in the Madras Bank and admitted as members of the Andhra Bank with a, corresponding share capital in the latter by the Executive Committee of the Bank in July, 1955 and that this course was resorted to in order to secure a weight age of votes for certain candidates standing for election to the Board of Directors of the Andhra Bank, of whom two have to be elected by individual share-holders.

The Andhra Ban was registered under the Madras Co-operative Societies Act (VI of 1932). There is no provision in that Act prohibiting the issue or allotment of shares of a Co-operative Bank to persons not resident within the area of operations of the Bank. We were referred to the preamble to the Act and its supposed j general intendment but we are unable to find/any-j thing in the Act confining membership of a Co-j operative Society to members resident within the J particular area in which the society operates. The! membership of a Co-operative Society has, there-, fore, to be regulated by its own Rules and By-j laws. It was argued for the Petitioner that thej effect of the Resolution of the meeting of the general body of share holders of the Madras Bank held on 5-9-1953, was to supersede the proposal of the Registrar of Co-operative Societies and substitute in its place the Resolution numbered "IV (1)" extracted above.

The Resolution only regulates the initial membership of the Andhra Bank as its formation by providing for an automatic transfer of the share-holders of the Madras Bank to the Andhra Bank if their residence and registered address on 31st August, 1953, were within the area of the Andhra State. It docs not purport to deal with the admission of members to the Andhra Bank in future. The proposal of the Registrar placed before the meeting of the general body was general one and it permitted the admission to membership of the Andhra Bank of such of the individual share-holders of -the old Madras Bank as were willing to surrender all their shares ii the latter. No restriction on membership bases on residence in the area of the Andhra State was proposed by the Registrar.

The proposal of the Registrar applied h future membership also but on this point the Resolution of the meeting of the general body o 6hare-holders was silent. The resolution of the general body purported to embody only a "mod: flatiron" of the proposal of the Registrar and no its "supersession" nor a "substitution" therefore The Resolution made a limited provision only ft the initial membership of the Andhra Bank by a automatic transfer of resident share-holders from the Madras Bank to the Andhra Bank. In the? circumstances, it is not possible to accept the contention of the Petitioner''s learned Advocate the the Resolution of the meeting of the general hoc of share-holders of the Madras Bank banned the admission in future of persons not having a permanent residence and address within the area of the Andhra State to the membership of the Andhra Bank. This point is, however, of no great Importance in view of the by-laws passed by the Andhra Bank,

The Andhra Bank was registered under and is governed by the Madras Co-operative Societies Act (VI of 1932). Under S, 2 (d) of the Act member includes a person admitted to the membership of a society after its registration in accordance with by-laws. Now by-law No. 5 (a) of the Andhra Bank provides.as follows:

Every mortgage bank in the State (of Andhra) shall be eligible for admission as a member. Any person over 18 years of age, who is competent to contract, shall also be admitted provided he is already a membsr of the Madras Cooperative Central Land Mortgage Bank, Ltd., and has surrendered his shares in that Bank." It could not be, and indeed waa nut, contended that the by-law is repugnant to the general law of the land or to the provisions of Madras Act (VI of 1932) under which the Andhra Bank WJS registered. Nor could it be said that tho by-law is so obviously unreasonable as to be condemned or declared ultra vires. While by-law No. 22 (a) requires that persons elected to the Board of Directors of the Andhra Bank by individual share-holders should be "in the Aridhra State", whatever thst might mean, there is no such limitation on the admission to membership of tho Bank in By-law No. 5 (a) which applies to tho casFlpn hand.

If, might be that the draftsman of the by law, which is wide and general m its terms, had not thought of the particular situation that has now arisen by reason of the sudden influx of a large number of non-resident share-holders of the Madras Bank into the Andhra Ban!; for the purpose of influencing the elections to the Board of Directors. If might also be (/bet it is desirable in the interests of the smooth and proper working of the Bank to confine the membership of the Andhra Bank to person-, having permanent residence in the State of Andhra and to prevent the intrusion of non-resident strangers and their interference with the management of the Bank. Questions of policy like these are not matters which the Court can take into consideration in interpreting a Rule whose language lever no room for doubt. Nor can we refuse to give- effect to the plain language of the by-law because its propriety and wisdom arc challenged by a shareholder. The remedy, if one is called for. must be left to others to devise and not sought in Courts.

For these reasons, we are of the opinion that the Resolution of the Executive Committee of the Andhra Bank allotting shares to non-residents who held share in the Madras Bank and Bin-rendered those shares, is authorised by By-law No. 5 (a) and cannot be quashed.

The petition is, therefore dismissed with costs of the first Respondent, Advocate''s fee Rs. 100.