Seva Sahakari Bank Ltd. vs State of Karnataka and Others

K. Bhakthavatsala, J.—The petitioner has prayed for quashing the order dated 22.2.2001 passed in No. CMW 61 CNS 2001 (Annexure-C) on the file of Respondent No. 1.

The Respondent Nos. 1 and 2 are represented by the High Court Government Pleader, Sri Keshav Reddy. Inspite of service of notice on Respondent Nos. 3 to 5, they are un-represented.

The brief facts of the case of the Petitioner-Society may be stated as under:-

The 1st Respondent, on three to four occasions, contributed share capital to the Petitioner-Society in all amounting to Rs. 1,00,000/-. Since the Petitioner-Society is an assisted Co-operative Bank, the 1st Respondent nominated 3 representatives on the committee of the Petitioner-Society. On 31.3.1999, the Petitioner-Society returned the entire share capital of Rs. 1,00,000/- by crediting the same under the head of account No. 3005 with the Government Treasury. Thereafter, the Petitioner intimated the same to the 1st Respondent. Therefore, it is contended that the 1st Respondent has no power to nominate any representative to the Committee of Management of the Petitioner-Society u/s 29(1) of the Karnataka co-operative Societies Act. Thereafter, a memorandum was sent to the Respondent No. 1 to withdraw the nomination of the Respondent Nos. 3 to 5 as it has no power to do so. Inspite of that the 2nd Respondent served a letter on the Petitioner-Society on 17.5.2001 threatening that he will take action against the Petitioner-Society. Therefore, the Petitioner-Society resolved to file this Writ Petition challenging the act of Respondent No. 1 in nominating the Respondent Nos. 3 to 5 to the Committee of the Management of the Petitioner-Society.

The learned Government Pleader has filed statement of objections on behalf of Respondent Nos. 1 and 2. It is contended that share capital of Rs. 10,000/- Rs. 5,000/-, Rs. 20,000/- Rs. 35,000/- and Rs. 30,000/-, respectively was contributed by Respondent No. 1 towards the share capital of the Petitioner-Society on 31.3.1971, 31.3.1979, 3.3.1981, 29.3.1996 and 29.3.1996, respectively, and therefore the Petitioners - Society was an assisted Society, and hence the Respondent No. 1 was empowered to nominate Respondent Nos. 3 to 5 u/s 29(1) of the Act. It is also contended that return of the share capital by the Petitioner-Society on its own does not take away the power of the Government to make nominations u/s 29(1) of the Act. Therefore, prayed for disposal of the Writ Petition.

Heard arguments of the learned Counsel for the parties.

During the course of argument, the learned Counsel, Sri S.R. Hegde Hudlamane, cited a decision reported in Ganapathy Seetharam Bhat Vs. State of Karnataka, on the point that the State Government has no right in nominating the members even after it ceased to be a share holder.

On the other hand, the learned Government Pleader cited the following un-reported decisions on the point that the share capital amount deposited by the assisted Society under a Treasury challan without the knowledge of the Government was illegal and un-authorised, and therefore the State Government never ceased to be a share-holder of the assisted Society:-

(i) MAHANTAPPA BASALINGAPPA AND ORS. v. STATE OF KARNATAKA AND ORS., WP No. 8085/1991, DD: 16.8.1991

(ii) MAHANTHAPPA BASALINGAPPA AND ORS. v. STATE OF KARNATAKA AND ORS., WA No. 2293/1991, DD: 6.9.1991

In the facts and circumstances of the case on record, it is necessary to refer to Section 2(a-1) with regard to definition of "Assisted Society" and Section 29 relating to nominees of Government on the Committee of an Assisted Co-operative Society of the Co operative Societies Act, 1959 (in short, ''the Act''). The definition of "Assisted Society" means a Co-operative society, which has received the government assistance in the form of share capital from the Government. Section 29 of the Act empowers the State Government to nominate not more than 3 persons as its representatives on Committee of any Assisted Society. Admittedly, in the instant case, the State Government had invested in all amounting to Rs. 1,00,000/- towards share capital with the Petitioner-Society. Therefore, there is no impediment to hold that as on 31.3.1999 the petitioner- society was an Assisted Society. But on 22.2.2001 by Government notification (Annexure-C) issued u/s 29(1) of the Act nominated Respondent Nos. 3 to 5 to the Committee of Management of the Petitioner-Society. Thereafter, the Petitioner-Society made a representation to the Respondent No. 1 to withdraw the said notification on the ground that as on 22.2.2001, the Society was not an Assisted society. The decision (Ganapathy''s case ) relied upon by the learned Counsel for the petitioner is directly on the point and applicable on all the fours to the case on hand. The Division Bench of this Court in the above-said Ganapathy Seetharam Bhat''s case has held as under:-

"7 The State Government ceased to be a shareholder because the subscription made to the share capital has been returned. It cannot be considered that the State Government continues to be a member or it can be deemed to be a member only because at some time past the State Government has subscribed to the share capital "

On the other hand, the learned Single Judge, while dealing with Mahantappa Basalingappa Navadgi''s case, on 16.8.1991 had an occasion to consider the identical issue and held that "the Government never asked for the return of the share capital invested by it in the respondent-2 Society, but the Board of the Respondent-2 Society unilaterally decided to return the contribution of the State Government towards its share capital. Therefore, the procedure adopted by the Board and the Respondent No. 2 - Society is a procedure unknown to law, because there is no provision under the Karnataka Co-operative Societies Act, authorizing the Board of any Society to return to a member or the Government, the contribution made by such member or the Government to the share capital of the Society. The decision rendered by the learned Single Judge was challenged in WA No. 2293/ 1991 before the Division Bench of this Court. In para-3 of the Division Bench decision, it has observed as under:-

"3 In our opinion, it was unnecessary, as far as this case is concerned to decide as to whether the Government does not lose power u/s 29 of the Act even after the Co-operative Society concerned has returned the share capital, for the reason that in the present case the nomination was made on 12.3.1991 and admittedly the amount was remitted to the treasury only on 22.3.1991. The question as to what would be the legal position if a Society concerned has returned the share capital even before the Government exercised the power u/s 29 of the Act, is left open to be considered in an appropriate case."

(emphasis supplied)

From the above, it is crystal clear that the Division Bench of this Court left open the question as to what would be the legal position, if the Society concerned has returned share capital even before the Government exercised the power u/s 29 of the Act. Subsequently, the Division Bench of this Court in the above-said Ganapathy Seetharam Bhat''s case on 8.11.1993, had an occasion to deal with such a question, which was left open in the above-said Mahantappa Basalingappa Navadgi''s case, and held that "the State Government ceased to be a share holder because the subscription made to the share capital has been returned and it cannot be considered that the State Government continues to be a member or it cannot be deemed to be a member only because at some time past, the State Government had subscribed to the share capital". Therefore, there is no impediment to hold that the decision rendered by Division Bench of this Court in Ganapathy Seetharam Bhat''s case is applicable to the case on hand on all the fours. Hence, it is a fit case to quash the impugned notification dated 22.2.2001 (Annexure-C) in so far as the case of Petitioner-Society (vide Sl.No. 2) on the ground that as on the date of notification, the Government ceased to be a share holder and hence the exercise of power by the Government u/s 29 to nominate to the Managing Committee of the Petitioner-Co-operative Society is illegal.

Hence, I pass the following order:-

The Writ Petition is allowed and the impugned notification at Annexure-C bearing No. CMW 61 CNS 2001 dated 22.2.2001, in so far as the case of the Petitioner-Society is concerned on the file of Respondent No. 1 is quashed. No costs.

The learned High Court Government Pleader is permitted to file memo of appearance within three weeks.