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Judgment
R. N. Ray, J.—Heard the learned counsel for the Parties. All these 4 petitions are taken up for hearing together by more less common question of law and facts are involved in these cases.
The senior learned counsel for the petitioners, Sri R. G. Padia contended that these petitions have been filed to quash the arbitrary advertisement in the newspaper dated 2271994 published in the daily (Times of India) calling for tenders for the sale of the disputed Cooperative Sugar Mills, namely, Kisan Sahkari Chini Mills, Samity, Sathiaon, Azamgarh and also for quashing the notice issued by the Registrar, respondent No. 1 on 1871994. A copy of which is filed as (Annexure ''12'' and ''13'' to the petition) and notice was issued to Principal Manager, Kisan Sahkari Chini Mills, Sathiaon, Azamgarh and to the District Magistrate, U. P. Cooperative Federation at Lucknow and also to some of the members of the Cooperative Society.
The case of the petitioners is that the petitioners are ordinary members of the society in question duly registered under the provisions of the U. P. Cooperative Societies Act. All the petitioners hold their share to the extent of Rs. 200 each in the said society. The society in question namely, Kisan Cooperative Sugar Mill Society, Sathiaon, Azamgarh owns a Sugar Mill at Azamgarh and the said Mill is operated through the society in question. All these cane growers are also shareholders in the said sugar mill. It is submitted that there are about 32 Cooperative Societies which are also the members of the society in question and the State Government is also a member of the society and in fact the bulk of share capital to the extent of more than 90% is of the State Government. The said society was constituted in the year 1972 with 11 founder members and the sugar mill started functioning in the year 197576 and under the ByeLaws a provisional/at/ hoc Managing Committee was constituted and it worked upto 1978. Thereafter an order was passed by the Registrar, Cooperative Sugar Mills, U. P. dated 2171978 suspending the management and appointing an authorised controller. A copy of the order dated 2171978 is filed as (Annexure ''2'' to the petition). Thereafter a fresh order was passed to constitute the Board by duly elected delegates and thereafter there could be no election/nominations by the State Government and as such there shall be no election of the nominees of the State Government and thereafter another order was passed on 9121981 appointing the collector as the Administrator. A copy of the order dated 9121981 is filed and marked (as Annexure ''3'' to the petition). That vide order dated 541994, the respondent No. 1 issued a press notification, inviting applications for the purpose of election, including the petitioner. In that order it was stated that the election of the representative of the society will be held upto 1551994 and 1561994 was fixed for holding the election for electing the members of the Committee of Management. A copy of the order dated 541994 is filed and marked as Annexure ''4'' to the petition. Thereafter vide order dated 2461994 the Deputy Cane Commissioner made an enquiry in respect of the sugar mill society including the petitioners society about the extent of completion of election programme. A copy of the order dated 2461994 is filed and marked as Annexure ''5'' to the petition). The Secretary of the society in question by his letter dated 2561994 submitted necessary information and the name of the petitioner society was shown at serial No. 1. A copy of the said letter dated 2561994 is filed (as Annexure ''6'' to the petition). That on 951994 it was directed to stop further proceedings pertaining to elections and by a fresh order dated 1571994 of the respondent No. 1, the dates for election were refixed and delegates were elected upto 1481994 and the Managing Committee was constituted upto 1591994 and similar elections in respect of respondent No. 2, that is, U. P. Cooperative Sugar Factories Federation Ltd., Lucknow will be held upto 15101994. A copy of the letter dated 1571994 is filed and marked (as annexure ''7'' to the petition). A fresh election programme was also issued in the daily newspaper ''Dainik Deobrat'' dated 2071994 in respect of the society in question. A true copy of the same is filed herewith and is marked (as Annexure ''8'' to the petition). It has been asserted by the learned counsel for the petitioner that the present society of the petitioners is huge profitable society. In the financial year 199394, it earned a net profit of Rs. 19,33,467 and gross profit of Rs. 29,36,824. A copy of the said certificate is filed and marked (as Annexure ''10'' to the petition). The balancesheet of the society as on 3131994 duly certified by the Chartered Accountant which shows the net profit of the society in respect of financial year 199394 as Rs. 19,33,467 and the gross profit was Rs. 29,36,824. A copy of the balancesheet is filed and marked (as Annexure ''11''to the petition). According to the petitioners a notice was issued by the respondent No. 1 on 1871994 asking the society as to why it should not be wound up in accordance with the provisions of Section 72(2)(d) of the U. P. Cooperative Societies Act, 1965. A copy of the notice dated 1871994 is filed and marked (as annexure ''12'' to the petition). In this petition the petitioners have prayed for quashing the same. It is the case of the petitioners that under the provisions of Section 72(2) of the Act, the Registrar may of his own motion and after giving such notice as may be prescribed pass an order directing the winding up of a cooperative society.
Section 72(d) runs as follows :
''(d) Where the Cooperative Society id no longer fulfiling its objects or complying with the requirements of clause (d) of subsection (1) of Section 7.
Clause (d) of Subclause (1) of Section 7 of U. P. Cooperative Societies Act, 1965 runs as follows :
"(d) that the proposed society complies with the requirements of rules in regard to the existence of any conditions in general or for the class of societies to which the particular society belongs and with the requirements of sound business and has reasonable chances of success."
It has been further contended by the learned counsel for the petitioners that for winding up a letter was issued in respect of the society at Budaun run by the same cooperative society. However, an order was thereafter passed not to wind up the said society in Budaun in view of the fact that in the financial year 199394 the said sugar Milll at Budaun made a profit to the extent of Rs. 17.30 lakhs and the gross profit being to the extent of Rs. 27.41 lakhs which is inclusive of depreciation. It has been conten ded that the impugned notice dated 1871994 (Annexure ''12'' to the petition), is motivated and mala fide and it has been contended that there are 10 more sugar Mills which are incurring loss every year including the financial year of 199394. According to the petitioner those are not made the target for the winding up by the Registrar under the U. P. Cooperative Societies Act. It has been further submitted that the impugned notice dated 1871994 was on the dictation and illegal pressure and inference by respondent No. 2. It has been submitted that the respondent No. 1 issued notice on the dictation of respondent No. 2 which will be revealed in the impugned notice itself i. e. from the reference of letter dated 16694 as appeared in that notice. The respondent No. 1 is to function as the statutory authority but he failed to apply his own mind on being pressurized by respondent No. 2 and as such the notice should be quashed. It has been further submitted that the notice was bad because it suffers from vagueness. It is submitted that in notice it was alleged that the society had totally failed to fulfill the objects and aims of the society for which the society was established but the notice did not contain any specific reference as to which may and to what manner objects remained unfulfilled for which respondent No. 1 felt it necessary to wind up the society under the purported exercise of subsection (2) of Section 72 of that Act.
It has been contended that on a perusal of that letter dated 18794, it will appear that respondent No. 1 was directed by respondent No. 2 to issue such notice without giving any scope for him to apply his own mind as required under the provisions of Section 72 (2) of that Act. The representations of the petitioners are marked as Annexures ''14'' and ''15'' to the petition which are of 15394 and 22794. The respondent No. 2 issued fresh notice inviting tenders for the sale of petitioner''s sugar Mills as published in the newspaper ''Dainik Deobrat'' published on 20794. It has been contended that respondent No. 1 could not apply his own independent mind at the time of issuance of the impugned notice (Annexure ''12''to the petition) which, the respondent No. 1, has described as an order instead of notice. It is not the mere mistake in nomenclature but that reveals mental strain of the respondent No. 1 in which he was in at the time of issuance of the impugned notice (Annexure ''12'' to the petition). This contention will be further supported from the fact that notice suffers from vagueness as he did not specify as to which of the objects got totally frustrated. It has been further contended that fresh advertisement was made promptly after the issuance of the impugned notice. In this way the learned counsel for the petitioners tried to impress upon the court that the respondent No. 2 knew it fully that under their pressure what respondent No. 1 was going to do and as such before the issuance of notice the respondent No. 2 could indulge himself in making advertisement inviting tenders for the sale of sugar owned by the petitioners and after revoking its tender notice promptly secured advertisement. In support of the contentions made by the learned counsel for the petitioners they referred following rulings regarding the maintainability of the writ petition reported in AIR 1981 SC 344. No direction can be issued by other higher authority, AIR 1970 SC 1986 ; allegations made in the notice should be specified and not vague ; AIR 1971 SC 752 ; AIR 1986 SC 995 ; and 1983 UPLBEC 67. The validity of an order must be judged only by reading the order itself and not by taking recourse to any other matter, AIR 1978 SC 851.
It has been contended that the court should not assess the correctness of the notice by referring to other documents of facts but the court should base its decision upon itself examining the notice. In this regard the learned counsel for the petitioners has referred a decision as reported in AIR 1978 SC 851. The contention of the petitioners are more or less the same in all. In one of writ petitions it was argued that the election process was still in progress.
The learned counsel for the respondents further contended that it was pertinent to point out that Kisan Sahkari Chini Mills, Ltd., Sathiaon, is a sugar Mill having its crushing capacity of 1250 TCD. The Central Government constituted the committee and it has, after elaborate enquiry and consideration of cost and expenditure, given its recommendation that, with the change of time over the years a sugar Mill with crushing capacity of 1250 TCD is no longer a vailable unit. It is further submitted that area where the Mill is situated is also short of supply of cane and this has been the continuous features for the last 18 years. It is further submitted that in this regard that the Mill society, for its optimum utilisation is requirable to crush 22.50 lakhs quintals of cane per season of 180 days at the rate of 1250 TCD. However, the review over the past 18 years it was found that optimum quantity of cane was not available in the area. In this connection, learned counsel for the respondents drew my attention to Annexure ''3'' to the counteraffidavit and submitted that a bare reading of the same and could reveal that average cane crushing over last 18 years is only 10.0 lakhs quintals of sugarcane per season which show that the mill society had continuously failed to fulfil its very object for which the mill was established and in spite of huge Government funding and protection over the past years ; there is no chance of Its improvement and the Government had already contributed more than the amount of Rs 1898 crores approximately for the off season repairs of Sathiaon Sugar Factory as well as cane development projects, etc., but in spite of the best efforts in the past it failed and the society has completely failed to fulfil its objects. A copy of the chart showing the investment made by the State Government for the repairs of the said sugar mill with effect from 199192 is being filed herewith and marked (as Annexure ''4'' to the counteraffidavit). It is further submitted that the case of Budaun society cannot be equated with Sathiaon society inasmuch as the petitioners have made false and incorrect statements of profit of Sathiaon mill society in the year 199394, whereas during 199394 the Sathiaon mill society had run into losses. The position of the Ghosi mill society absolutely different since they are in process to expand their crushing capacity from 1250 TCD to 2500 TCD and the mill society is also running a Distillary in order to achieve its objectives and, therefore, their overall financial condition is much better and they are fulfilling their objectives for which they are established. Similarlarly, Kayamganj society is not only running the mill but is also running the distillary and, therefore, stands all together on different footing than the Sathiaon mill society. According to respondent No. 2, the Registrar has issued notice strictly in the exercise of powers vested in law under Section 72 (2) (d) of the U. P. Cooperative Societies Act, 1965 and it has been submitted that the letter dated 16694 issued by the respondent No. 2 to respondent No. 1 was purely a communication and respondent No. 2 duly issued the letter because it was the duty of the respondent No. 2 to state regarding financial condition and to suggest that necessary steps for due consideration. It has been contended that the petitioners are mere share holders and cannot have the locus standi to file this writ petitions because the number of shareholders are Rs. 10,000 and only a very insignificant number of shareholders have come up with writ petition praying for quashing the tender notice and also for quashing the notice to show cause. It has been further contended by the respondent that, by this tender notice, the respondent No. 2/Government or any authority under the control of the Government are not going to sell this sugar mill so the notice inviting tenders for the sale of the sugar mill may be quashed on the submissions of the learned counsel for the respondents but the learned counsel for the respondent No. 2 further con tended that the impugned showcause notice is Annexure ''12'' to the writ petition was perfectly valid and it was issued under the full authority as enjoyed by respondent No. 1 after applying his mind as required. The respondent No. 1 submitted regarding the letter issued by the respondent No. 2 that respondent No. 2 was thoroughly convinced relating to continuous loss incurred by the cooperative society and it was felt necessary by the respondent No. 1 to wind up the society to avoid further loss for the best interest of all concerned. It is true that if the factory is closed the workers employed therein will automatically be terminated and if it is found palpable on the face of the record before the Court that the society has been running loss all, through since its inception, certainly that per se will justify the issuance of the notice issued by the respondent No. 1 that is Annexure 12 to the writ petition. It has been further contended that if the society was formed definitely for the purpose to make profit and in case of failure the Registrar should seriously consider for winding up of the society if the society is running at loss for considerable period without showing any improvement. In this regard learned counsel for the respondents drew my attention to Section 7 (1) clause (d) of the Act.
The learned counsel for the respondent No. 2 submitted that respondent No. 2 is an apex society which would reveal from Section 2(a4). It has been contended that from the byelaws of the U. P. Cooperative Sugar Factories Federation Ltd,, Lucknow, it would appear from paragraph 5(h) that it is the duty of the respondent No 2 to supervise and guide the working of member factories generally and as may be necessary under Section 123 and advice regarding their work.
Learned counsel for the respondent also drew my attention to the proviso to Rule 6(i) and also to the proviso to Rule 7 of the said byelaws. Learned counsel for the respondents also drew my attention to the aforesaid provisions of the U. P. Cooperative Societies Act, 1965. It may be noted in this connection that in the counteraffidavit it has been categorically stated that the respondent No. 1 is not going to sell the said society immediately. Learned counsel for the respondent submitted that the said notice was issued by the Registrar under the provisions of Section 72(2)(d) read with Rule 270(a) of the U. P. Cooperative Societies Act, 1965 and its rule thereof and since the petitioners have got an alternative remedy available in accordance with law and if the respondent No. 1 not satisfied with the show cause, if given, then the petitioners have ample opportunity to file writ petition before this Hon''ble Court seeking remedies thereon, but the present petition is wholly misconceived and these petitions are premature. The petitioners are in a position to file show cause and if they are so advised, they may file an appeal for which there is a clear provision as embodied in Sections 97 and 98 of the U. P. Cooperative Societies Act, 1965.
It has been further contended that there is no origin for the petitioners to come up before this Court at this stage. It has been further submitted that the petitioners knew to their heart that the said sugar mills were continuously facing huge loss every year and as such they cannot possibly make out any good case in the show cause to stop the proposed winding up of the sugar mill by the Registrar under the provisions of U. P. Cooperative Society Act, 1965 and as such they should not have come with this writ petitions, possibly at the instance of some political parties they have created unnecessary complications in this way. Learned counsel for the respondent No. 2 submitted that this writ petition may be partly allowed by quashing the impugned notice inviting tenders for the sale of the sugar Mill as per submissions of the learned counsel for the respondents and further be pleased to dismiss the prayer regarding the quashing of the impugned notice (Annexure 12 to the writ petition) as issued by the respondent No. 1 under his full authority in exercise of his power under Section 72(2)(d) of the U. P. Cooperative Societies Act, 1965 read with Rule 270(a) of the rules thereof.
Learned counsel for the respondents has referred to the following rulings for dismissing the writ petition. AIR 1960 SC 415 (paras 8,12), A[R 1965 SC 1767 (para 5), AIR 1977 SC 965 (para 13), AIR 1968 SC 850 (para 11). AIR 1951 SC 41 (paras 7 and 43) and AIR 1965 SC 973 (para 11).
Duly considered the submissions of both sides and carefully perused the record including the affidavits, counter affidavits and rejoinderaffidavits. From the rejoinderaffidavit filed by the petitioners, I find that about 7500 shareholders authorised the petitioners by the resolution to take legal proceedings and as such the contention of the respondents that a handful shareholders cannot file this petition and this petition cannot be sustained as such is overruled. Moreover, the shareholders are expected to part in the interest of the society and as such I hold that this petition is maintainable. I also find support from" the decisions of the Supreme Court as cited by the learned counsel for the petitioners.
Since the respondents contended in their affidavits and also during the course of arguments before me that respondent No. 2 or the respondent No. 1 are not going to sell the sugar mill in pursuant to the notice inviting tenders from the proposed buyers and as such those notices are liable to be quashed. Now only one point remains for my consideration as to whether the impugned notice to show cause as given by the respondent No. 1 (Annexure 12 to the writ petition) that is the notice given by respondent No. 1 under the purported exercise of his power conferred upon him under the provisions of Section 72(2)(d) of the U. P. Cooperative Societies Act, 1965 read with Rule 270 (a) thereof is valid. In that notice there is a reference of letter issued by the respondent No. 2 to respondent No. 1 for taking appropriate measures to wind up the sugar factory, by invoking the provisions under Section 72(2)(d) to be followed by the subsequent actions on the ground that the said sugar mills were running at loss and failed to achieve the aims and objects for which the societies were formed.
The mill in question from the very inception was running at a loss. As per Annexure ''11'' to the writ petition No. 25918 at page 109, I find that the net loss on 3131994 was Rs. 24,57,73,720 while the net loss on 3131993 was Rs. 24,02,14,109, so apparently it appeared that the said sugar mill was running at loss.
Learned counsel for the petitioners drew my attention to the report submitted by Sri K. K. Nigam and Co., Chartered Accountant as per Annexure ''11'' at page 108 that the contingent liability as stood on 3131994 was Rs. 38,99,05,990 while that of 3131993 was Rs. 39,22,92,386. However, the net loss carried on the balancesheet including the depreciation amounted to Rs. 24,57,720 as stood on 3131994, while the net loss as stood on 3131993 was Rs. 24,02,14,109. So the net loss accrued more after the financial year 1993. The contention of the petitioners is that the mill has started running, profit and at this juncture the Registrar is going to wind up the mill by providing with opportunity to respondent No. 2 to sell the mill, cannot be sustained on the face of their own Annexure. I find as per records that the said sugar mill has been running at loss all through since its inception. Now let me consider as to whether the notice suffers from vagueness and thereby rendering the same as invalid notice. It was clearly mentioned in that impugned notice that the said Cooperative Society failed to fulfil the aims and objects totally but it is not categorically said as to in which respect it failed but there is definite mention that it was running at loss. Simply mentioning that it is running at loss does not ipso facto imply that it has failed to achieve its objects in totality. Some more particulars are to be given in the notice to receivers relating to the allegations of running at loss and if it is alleged to have been failed in fulfilling the aims, there should be specific mention in nut shell in the notice so that the notice receivers may be in a better position to show cause as ordered by the respondent No. 1 by the impugned notice dated 1871994 (Annexure ''12'' to the writ petition). The contention of the learned counsel for the respondents that in the contest and the back ground of the affairs of the said sugar mill that has been running at loss that notice was sufficient to recipients of the notice to understand and what was to be explained to the show cause petition and as such it cannot be said that notice suffers from vagueness. The said notice dated 1871994 might appear vague to the outside but to recipients of the notice it is clear as to against what documents and under what circumstance the notice was issued by respondent No. 1 calling upon the recipients of the notice to show cause to the notice as given under Section 72(2)(d). Duly considered the submission. I am agree to the submissions of the learned counsel for respondent No. 2 because I think that some more particulars are needed so that the recipients may be in a better position to answer them categorically. Consequent to a notice under Section 72(2)(d) of the Act, a very vital question relating to life of society crops up and the said society should be provided an ample opportunity to explain in the show cause petition if they want to contend that cooperative society should not be wound up. So I hold that notice dated 1871994 (Annexure ''12'' to the petition), suffers from much vagueness and as such is liable to be quashed. In this connection, it is observed that the letter issued by respondent No. 2 to the respondent No. 1, was not unjustified and was within full competence of respondent No. 2, to issue such a letter because it was the duty of the respondent No. 2 in view of the provisions of Section 7(1 )(d) of the U. P. Cooperative Societies Act, 1965 read with Rule 5(h) of the ByeLaws of the U. P. Cooperative Sugar Factories Federation Ltd., Lucknow and also in this connection the provisions of Rule 7 (proviso of the said ByeLaws), may be gone into. The respondent No. 2 should be considered an ''apex society'' ''apex level Society'' or ''State level cooperative society'' in view of the provisions of Section 2 (a4), (7) so it was the duty of the respondent No. 2 to advice respondent No. 1 or the authority concerned, if they found it appropriate to bring to the notice to the authority concerned with a advice for taking the necessary actions. The said letter should be considered in that perspective and it cannot be held as a direction to the respondent No. 1 as it was an advice m full sense of the term as it appears from that letter which was subsequently been marked as Annexure T to the supplementaryaffidavit filed by the respondent No. 2.
The contention of the learned counsel for the petitioners that the respondent No. 1 under pressure failed to apply its independent mind while issuing the said notice under the purported exercise of power under Section 72(2)(d) and read with Section 270(a) is being taken up for my consideration and decision. The nomenclature of the notice which has been described as an order, though in ordinary course, should not be much meaningful but in the contest of documents of the entire facts, it should be considered as to how the things were taking place and what was the mental condition of respondent No. 1 while issuing the said notice dated 1871994 that is to say as to whether the respondent No. 1 was under the mental strain in view of the letter given by the respondent No. 2 to respondent No. 1 �for issuance of notice under Section 72(2)(d). I have held above that the letter was nothing but a mere advice to the respondent No. 1 and as such I do not think that respondent No. 1 was under the mental strain and pressure and he failed to apply his independent mind which is required while discharging the statutory duties as conferred upon respondent No. 1 under the provisions of Section 72(2)(d) of the U. P. Cooperative Societies Act, 1965. Since as per contentions of the learned counsel for the respondent and also as per facts on records on oath made out in the counteraffidavit that they are not going to sell the sugar mills in pursuance to the tender notice inviting tenders for selling the said sugar mill and the order has already been passed above for quashing the said tender notice, I do not want to discuss any further on that score. However, in view of the discussions made above, I hold that notice given by respondent No. 1 on 1871994 under the purported exercise of Section 72(2)(d) of the U. P. Cooperative Societies Act, 1965, stands quashed for holding the same as invalid for not fulfilling the requirements as required thereto. It is observed that it would be open for respondent No. 1 to further issue notice after complying the necessary formalities required for the same also on due applying independent mind as required under the provisions of Section 72(2)(d) of the U. P. Cooperative Societies Act, 1965. I do not order as to costs. Thus all the writ petitions are disposed of by this judgment as all these writ petitions have been heard in analogous way.