Sri. M.A. Nagendra vs Deputy Registrar of Co-Operative Societies, The Assistant Registrar of Co-Operative Socieities and The Primary Agriculture Credit Co-Operative

B.S. Patil, J.—In this writ petition, petitioner is challenging the order dated 10.12.2012 passed by the Assistant Registrar of Cooperative Societies, Mandya Sub-Division, Mandya, as per Annexure-D thereby declaring that the petitioner stood disqualified to continue as a Director of the 3rd respondent-Society in terms of Section 29-C of the Karnataka Co-operative Societies Act, 1959 (for short, the Act'') as he had committed default in not discharging the loan amount due and payable by his deceased father. This order passed by the Assistant Registrar of Co-operative Societies was challenged before the Deputy Registrar of Co-operative Societies, Mandya, by filing an appeal u/s 106 of the Act. The said appeal has also been dismissed confirming the order passed by the Assistant Registrar. Hence, the petitioner has challenged the appellate order as well. It is not in dispute that the father of the petitioner herein one M.K. Appugowda had borrowed loan in a sum of Rs. 35,000/- on 10.07.2007 and Rs. 25,000/- on 03.10.2007 from the 3rd respondent-Society. He did not discharge the amount due to the Society. He died on 03.02.2009. The 3rd respondent-Society instituted the proceedings in Case No. 128/2011-12 for recovery of a total sum of Rs. 52,173/- along with interest at 14% p.a. An award was passed by the Arbitrator on 12.04.2012 holding that all the four sons of deceased M.K. Appugowda who were arrayed as respondents 1 to 4 to the proceedings, including the petitioner herein, were liable to discharge the loan amount along with interest failing which their movable and immovable properties would be brought for sale for recovering the said amount. Though this award passed by the Arbitrator is not part of the writ papers, counsel for the petitioner has made available a certified copy of the award for perusal of the Court. It is not in dispute that all the four brothers were parties to the dispute before the Arbitrator and they have suffered an award for recovery of the amount which was advanced as loan to their deceased father.

It appears that one of the brothers of the petitioner has submitted a representation to the Assistant Registrar of Cooperative Societies to recover the amount from the petitioner herein and to disqualify him from continuing as Director of the 3rd respondent-Society for not discharging the loan. Based on such representation, proceedings were initiated u/s 29-C(1)(a) of the Act for disqualification of the petitioner.

Petitioner contested the proceedings. However, the Assistant Registrar of Co-operative Societies, Mandya Sub-Division, Mandya, has passed the impugned order dated 10.12.2012 declaring the petitioner as having incurred disqualification being a defaulter at the time when he was elected as a Director. It is also ordered that he has been disqualified for continuing as a Director for a further period of two years from the date of the impugned order. The Appellate Authority has confirmed this order.

The main contention of the learned counsel for the petitioner is that the loan was not availed by the petitioner and it was not the petitioner who was the defaulter, as the loan had been availed by his father. It is his next contention that all the four sons of deceased M.K. Appugowda were liable to discharge the loan even in terms of the award passed by the Arbitrator, therefore, it was absolutely incorrect on the part of the respondent-authorities to hold that the petitioner was liable to discharge the loan.

Learned counsel for the petitioner further submits without prejudice to his contention that the disqualification to continue as a Director is not attracted to the case on hand, insofar as the petitioner is concerned, the petitioner is willing to discharge his liability to the Society. He has filed an application in this regard seeking permission to deposit a sum of Rs. 15,000/- out of Rs. 60,000/- in the interest of justice.

Learned Additional Government Advocate supports the impugned order.

Having heard the learned counsel for both parties, it is clear that in order to attract disqualification u/s 29-C of the Act and ineligibility to continue as a Member of the Managing Committee or Board of Management, it should be shown that the concerned person was in default to the Society in respect of any dues from him as a borrower. In the instant case, both the authorities have not examined the scope of Section 29-C(1)(a) of the Act in the background of the fact that the loan had been indeed availed by the father of the petitioner and it was the father of the petitioner who was the defaulter and not the petitioner. The liability of the petitioner to discharge the dues payable by his father is one thing and the ineligibility to continue as a Director or incurring disqualification to get elected as a Director is another thing. Merely because the son is under an obligation to discharge the liability of his father and has, therefore, suffered an award, it may not be open to contend that even in such cases, the son will incur the disqualification. However, I do not propose to express any opinion on this aspect finally and conclusively because this aspect has not been considered by both the authorities below.

It is also not necessary in this case to remand this matter to consider this aspect in view of the facts and circumstances of the case and the willingness expressed by the petitioner to discharge the loan along with interest proportionate to his obligation as per the award passed by the Arbitrator on 12.04.2012. Suffice to observe, action to disqualify a member from continuing as a Director of the Society is a serious issue and any provision providing for such disqualification has to be strictly interpreted. The provision not only unseats the person concerned, but has the effect of debarring him from continuing as such for further period. Keeping in mind such consequences, the provision of law is required to be interpreted in an appropriate case. In the result and for the foregoing reasons, since the petitioner is willing to discharge his part of the liability, the Writ Petition is allowed. The impugned orders are set aside. The petitioner is directed to pay 1/4th of the amount due along with interest to the extent of his share in terms of the award dated 12.04.2012 passed in Case No. 128/2011-12 by the Arbitrator within a period of two weeks from the date of receipt of a copy of this order. The said amount shall be paid to the 3rd respondent-Society. It is made clear that on payment of such amount, the petitioner will be entitled to continue as a Director of the 3rd respondent Society with all facility. It is also open to the petitioner to pay the amount at the earliest.