Haokholien Guite and Others vs The Registrar of Co-operative Societies and Others

A.K. Patnaik, J.—In this writ petition, the Petitioners who were members of the Board of Directors of the Manipur State Co-operative Society have prayed for quashing the impugned order dated 14.6.94 of the Registrar, Co-operative Societies, Manipur, (Respondent No. 1) declaring the said Board of Directors to be automatically disqualified u/s 78(6) of the Manipur Co-operative Societies Act 1976.

The brief facts relevant for the purpose of this writ petition are that the Manipur State Co-operative Bank is a Co-operative Society in the State of Manipur carrying on the business of banking. The Board of Directors of the said bank was elected on 15.2.1992 and it took charge on 26.2.92. A show cause notice dated 28.4.1994 was issued by the Registrar of Co-operative Societies, Manipur to the members of the said Board of Directors wherein it was stated that the percentage of over due to demand of the bank stood at 85% as on 31.3.93 and 86.79% as on 28.2.94 respectively for a continuous period of two years and the Board of Directors had failed to scale down the percentage of overdue below 60% for two years consecutively. By the said notice, the members of the Board of Directors of the Bank were asked to show cause as to why they should not stand automatically disqualified u/s 78(6) Of the Manipur Co-operative Societies Act, 1976.

The Petitioners submitted a reply dated 12.5.94 to the said show cause notice stating inter-alia that Section 78(6) of the Manipur Co-operative Societies Act, 1976 was applicable to Central Co-operative Bank at the district level and not to Manipur State Co-operative Bank which was not a Central Co-operative Bank at the district level but was a Bank at the apex level of the State of Manipur and that during the period 1991-92, the percentage of overdue to demand of the bank stood at 88.12% and when the Petitioners started functioning as Directors of the Bank, the said percentage had decreased to 80.67% as on 31.3.1993 and that it was not possible to scale clown the said percentage of overdue to demand to the minimum level due to vario is reasons detailed in the said reply. Thereafter by an order dated 14.6.94 (Annexure - A/I) the Registrar, Co-opertive Societies, Manipur rejected the contentions of the Petitioners in the said reply and in pursuance of the Section 78(6) of the Manipur Societies Act 1976 declared the Board of Directors of the Manipur State Co-operative Bank Ltd. to be automatically disqualified with immediate effect. Aggrieved by the said order dated 14.6.94 (Annexure - A/1), the Petitioners have moved this writ petition on the grounds inter alia that the Registrar of Co-operative Societies, Manipur has misconstrued the provision of Section 78(6) of the Manipur Co-operative Societies Act 1.976 while passing the impugned order.

An affidavit-in-opposition has been filed on behalf of the Respondents therein it has been stated that the Manipur State Co-operative Bank was a Central Co-operative Bank and that the elected Board of Directors of the Bank have been indiscriminately giving loans and advances without any regard to the finance and fund position of the bank there by creating serious financial problems which may lead to liquidation of the bank and that during the year 1993-94 while it recovered an amount of Rs. 248.97 lakhs, only a sum of Rs. 54.16 lakhs was repaid to the National Bank of Rural Development (NABARD), and as per the provisions of Section 78(6) of the Manipur Co-operative Societies Act 1976, the entire Board of Directors of the bank had to be held responsible for the default in excess of the stipulated 60% of overdue to demand and declared disqualified to function as the Board of Directors of the Bank by the impugned order.

In reply to the affidavit-in-opposition, a rejoinder affidavit has been filed on behalf of the Petitioners denying that the Manipur State Co-operative Bank is a Central Co-operative Bank against the Petitioners and further alleging that the Respondents have been making attempts to suspend or dissolve the Board of Directors of the bank by hook or by crook.

At the hearing of the writ petition, Mr. N. Surjamani, learned Counsel for the Petitioners, submitted that u/s 78(6) of the Manipur Co-operative Societies Act 1976 only the Board of Directors of a "Central Co-operative Bank" stands automatically disqualified if the amount of default or the total number of defaulters exceeds 60% of the total demand and/or the total number of the societies/members, but the Manipur State Co-operative'' Bank is not a Central Co-operative Bank as defined by Section 2(d) of the National Bank for Agriculture Rural Development Act, 1981 (for short ''the NABARD Act, 1981''). Section 2(d) of the NABARD Act 1981 defines a "Central Co-operative Bank" to mean the Principal Co-operative Society in a district in a State, the primary object of which is the financing of the other Co-operative Societies in that district. The proviso to the said Section 2(d) of the NABARD Act 1981, however, stipulates that in addition to such principal society in a district, or where there is no such principal society in a district, the State Government may declare any one or more Co-operative societies carrying on the business of financing other Co-operative Societies in that district to be also or to be a Central Co-operative Bank. Mr. Surjamani submitted that since the Manipur State Co-operative Bank is not a Co-operative Society of a district but a Co-operative Society of the entire State of Manipur, and the State Government had also not declared the said Board as a "Central Co-operative Bank" under the proviso to Section 2(d) of the NABARD Act 1981. it was not a Central Co-operative bank and Section 78(6) of the Manipur Co-operative Societies Act 1976 was not applicable to the said Bank and the impugned order is misconceived and is without jurisdiction and is liable to be quashed.

Mr. Th. Priyananda Singh, learned Counsel for the Respondents, on the other hand, referred to the report of the All India Rural Credit Review Committee and submitted that the Co-operative Credits Structure in Manipur is a two tier one with the Manipur State Co-operative Bank at the apex and primary agricultual societies at the base unlike in other bigger States in which the Co-operative Credits Structure is a three tier one with the State Co-operative Bank at the apex level, the district Central Co-operative Banks at the intermediary level and the primary credit societies at the base. Hence the reference to the "Central Co-operative Bank" in Section 78(6) of the Manipur Co-operative Societies Act 1976 can only be to the Manipur State Co-operative Bank, there being no Central Co-operative Bank at the district level. Mr. Priyananda Singh also brought to my notice that in Section 2(6) of the Manipur Co-operative Societies Act, 1976 "Central Bank" has been defined to mean a Co-operative Bank, the objects of which arc to provide loan to oilier societies and submitted that since the object of the Manipur State Co-operative Bank includes loans to other societies, the Manipur State Co-operative Bank is a Central Co-operative Bank to which Section 78(6) of the Manipur Co-operative Societies Act 1976 squarely applies and the impugned order was valid in law.

In my opinion, the aforesaid submission of Mr. Priyananda has a lot of force and it is difficult to accept has (sic), the contention of Mr. Surjamani, learned Counsel for the Petitioners, that the expression "Central Co-operative Bank" in Section 78(6) of the Manipur Co-operative Societies Act 1976 will have the same meaning as in the NABARD Act 1981. In the case of S. Mohan Lal Vs. R. Kondiah, Chinnappa Reddy, J. cautioned:

It is not a sound principle of construction to interpret expressions used in one Act with reference to their use in Anr. Act; more so if the two Acts in which the same word is used are not cognate Acts. Neither the meaning, nor the definition of the term in one statute affords a guide to the construction at the same term in Anr. statute and the sense in which the term has been understood in the several statutes does not necessarily throw any light on the manner in which term should be understood generally. On the other hand it is a sound, and, indeed, a wellknown principle of construction that meaning of words and expressions used in an Act must take their colour from the context in which they appear.

Thus the definition of Central Co-operative Bank" in Section 2(d) of the NABARD Act. 1981 is for the purpose of the NABARD Act, 1981 and it is not permissible to interpret the expression "Central Co-operative Bank" occuring in Sections 78(6) of the Manipur Co-operative Societies Act 1976 by referring to the meaning of the said expression occuring in Section 78(6) of the Manipur Co-operative Societies Act 1976 has to be construed in the context in which it has been used in the said Act of 1976.

Sections 2(6) and 78(6) of the Manipur Co-operative Societies Act 1976 are quoted herein below:

2(6) "Central Bank" means a co-operative bank, the objects of which include the creation of funds to be loaned to other societies;

78(6) Board of management-automatic disqualification - The entire Board of Directors of a central co-operative bank, urban co-operative bank and primary land development bank and primary agricultual credit co-operative society shall stand automatically disqualified if the amount of default or the total number of defaulters exceeds 60% of the total demand and/or the total number of indebted societies/members in the case of central co-operative bank, urban co-operative bank and 70% of the total demand/or the total number of indebted member in the case of primary agricultual credit co-operative societies for a continuous period of two years.

The aforesaid Section 2(6) defines the expression "Central Bank" as a co-operative bank, the object of which includes creation of funds to be loaned to other societies. Thus for the purpose of the Manipur State Co-operative Act, 1976, every Central Bank is a co-operative Bank and the expressions "Central Bank" and "Central Cooperatives" would have the same meaning and can not have two different meanings as submitted by Mr. Surjamani. Since the Manipur State Cooperative Bank creates funds to be loaned to other Societies such as the primary agricultural credit societies, it is a Central Bank within the meaning of Section 2(6) of the Manipur Co-operative Societies Act 1976 and is a Central Co-operative Bank for the purpose of Section 78(6) of the Manipur State Co-operative Act 1976. This interpretation finds support from the object of Section 78(6) of the Manipur Co-operative Societies Act 1976 which is to make a special provision with regard to the disqualification of the Board of Directors of banking institutions in the Co-operative sector namely Central Co-operative Bank, Urban Co-operative Bank, Primary Land Development Bank and Primary Agricultural Credit Co-operative Societies, so as to ensure that the percentage of the total default to the total demand does not exceed a certain statutory limit, and there is no good reason as to why the Manipur State Co-operative Bank which is also a banking institution in the Co-operative Sector, should be excluded from the purview of the said provision and only Central Co-operative Banks at the district level should be covered by the said provision. In my opinion, therefore, the expression "Central Co-operative Bank" in Section 78(6) of the Manipur Co-operative Societies Act, 1976 would cover every case of Co-operative Bank which creates funds to be loaned to other Societies and would take within its meaning the Manipur State Co-operative Bank which creates funds to be loaned to primary agricultural co-operative societies in the State of Manipur.

Thus, Section 78(6) of the Manipur Co-operative Societies Act 1976 is applicable to the Manipur State Co-operative Society and since in the reply dated 12.5.94 of the Petitioners to the show cause notice it has been admitted that the percentage of overdue to demand is in excess of limits stipulated in the said provision and the disqualification of the Petitioner as Directors of the said Bank is automatic as per said provision and the impugned order dated 14.6.94 (Annexure - A 1) merely declares such disqualification of the Petitioners in accordance with the said Section 78(6) of the Act, there is no infirmity in the impugned order. The writ petition accordingly has no merit and is dismissed, but there shall be no order as to costs.