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Judgment
Rule. Rule made returnable forthwith. With consent of parties, matter is taken up for final hearing at admission stage.
Present Petition takes exception to order dated 5 ᵗʰOctober 2023 passed by Deputy Commissioner of Co-operation/ respondent no. 4, whereby appeal filed by petitioner no. 1 under Section 86(3) of Multi-State Cooperative Societies Act, 2002 (for short “MSCS Act, 2002”)has been declined.
Daulat Shetkari Sahakari Sakhar Karkhana, respondent no. 2, is a sugar factory which was subjected to proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for recovery of loan at instance of District Central Co-operative Bank Limited. Accordingly, possession of property belonging to respondent no. 2 was taken under Section 13(4) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Thereafter, bank permitted M/s. Nutrients Agro Fruit Private Limited to run sugar factory on lease basis. Subsequently, leave and licence agreement was executed by bank in favour of Atharv Intertrade Private Limited for running business. Said company has been running sugar factory and distillery since 7 ᵗʰMay 2019.
Thereafter, Central Registrar of Co-operative Societies, respondent no. 1, appointed liquidator under Section 89(1) of MSCS Act, 2002 to take necessary steps under provisions of MSCS Act, 2002. However, till date custody and control of properties of respondent no. 2–society have not been taken over by respondent no. 3–liquidator.
Petitioner moved an application under Section 86 (3) of MSCS Act, 2002 invoking powers under Sub Section (3) of Section 86 of MSCS Act, 2002 to cancel order of winding up of a Multi-State Co-operative Society on ground that subsequent events would depict that society can continue to exist. However, Respondent No.4 disposed of appeal by impugned order observing that it will not be feasible to consider appeal and directed liquidator to continue liquidation proceeding.
Mr. Surel Shah, Senior Advocate appearing for petitioner, submits that impugned order has been passed without considering subsequent events after appointment of liquidator. He points out that Deputy Commissioner, Kolhapur has already communicated to respondent no.1 that bank handed over assets of factory to M/s. Atharv Intertrade Private Limited on 2 ⁿᵈFebruary 2019, who agreed to pay dues towards leave and licence fees to tune of Rs.67,27,56,000/-. Existing liabilities of factory are to tune of Rs.16,247.28 lakh. Said company is running factory by crushing sugarcane. Accordingly, he submits that order dated 16 ᵗʰOctober 2017 appointing liquidator ought to be withdrawn, as it would not serve purpose contemplated under Section 86 of Multi-State Cooperative Societies Act, 2002.
He further points out that it was brought to notice of respondent no.1 that sugar factory is paying its dues to sugarcane growers, government departments and banks and is also paying salary and wages of employees of respondent no.2–society. As such, grounds on which order of winding up and liquidation dated 16 ᵗʰOctober 2017 was passed no longer exist. Society is able to continue to exist. He invited attention of this Court to vital developments after passing of order dated 16 ᵗʰOctober 2017. He points out that liability of loan of about Rs.92.21 crores has now been reduced to about Rs.40 crores and, therefore, there is no erosion of assets of society. However, aforesaid aspects have not been considered while passing impugned order.
Mr. Killedar, learned Advocate appearing for respondent nos. 1 and 4, supports impugned orders. He submits that there are liabilities of several creditors, growers and employees of sugar factory. Liquidator was appointed and winding-up process was initiated after considering assets and liabilities of sugar factory. Winding up of sugar factory is necessary in interest of stakeholders. Respondent no. 1 has applied his mind and has formed a conscious opinion that no grounds exist to cancel order of winding up of society.
Having considered submissions advanced by learned Advocates appearing for respective parties and upon perusal of impugned order, it can be observed that society was brought under liquidation pursuant to order dated 16 ᵗʰOctober 2017. Apparently, said order was passed without hearing society. At that time, society was not functioning and authorities formed opinion that assets of society would lead to erosion and increase of liabilities. Hence, order of liquidation was considered necessary.
Sub-section (3) of Section 86 of Multi-State Cooperative Societies Act, 2002 empowers Central Registrar to cancel order of winding up of Multi-State Cooperative Society, if he forms opinion that society should continue to exist. Apparently, Central Registrar, on consideration of supervening events after appointment of liquidator, can review order of winding up of Multi-State Cooperative Society. Petitioner had made application/appeal to respondent no.1 on basis of supervening events which may warrant revival of society instead of continuation of winding-up proceedings. However, impugned order nowhere suggests that supervening events brought to notice of respondent no.1 were considered or appreciated in tune with object of Section 86(3) of Multi-State Cooperative Societies Act, 2002.
In that view of matter, following order is passed:
ORDER
Writ Petition is allowed.
Impugned order dated 5 ᵗʰOctober 2023 is hereby quashed and set aside.
Application/appeal filed by petitioner is remanded back to respondent no.1 for reconsideration.
Petitioner and stakeholders shall appear before respondent no.1 on 29 ᵗʰJanuary 2026 and file on record material in support of their contentions.
Respondent no.1, shall after considering material tendered before him and after granting opportunity of hearing to all stakeholders, pass fresh order in light of object and spirit of sub-section (3) of Section 86 of MSCS Act, 2002.
Aforesaid exercise shall be completed within a period of four months from date of appearance of parties.
Pending decision of respondent no.1, status quo shall be maintained as regards affairs of society. (viii) Rule is made absolute in above terms.