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Judgment
The petitioner-society is aggrieved by the order of the first respondent dated 11-6-1971, in and by which the first respondent dissolved the
petitioner-society u/s 72(1)(a) of the Tamil Nadu Co-operative Societies Act 1961 and appointed a special officer to manage the affairs of the
society. In or about October 1969, the second respondent, feeling doubtful about the proper administration of the petitioner-society, directed an
inquiry u/s 65 of the Act whereby the working and financial condition of the petitioner-Society was sought to be investigated. Further processing of
the enquiry which was started in October 1970, was cancelled and instead an Inspector was appointed u/s 66 authorizing him to inspect the books
of the petitioner-society and report as to the financial condition of the society and its working. It is common ground that the Inspector submitted
such a report u/s 66 of the Act only on 3-5-1971. The financing bank of the petitioner-society is the Kanyakumari District Co-operative Central
Bank Ltd., Nagarcoil. They have been brought on record since their presence was felt necessary for a proper adjudication of the main issue that
has cropped up in the instant case. Learned counsel for the financing bank says that the financing bank, independently and on its own volition,
appointed an officer of its own to go into the working of the society which was indebted to the bank and, after obtaining a detailed report from
their officer who was specially appointed for the purpose of investigating into the affairs of the petitioner-society, the financing bank resolved on
29-4-1971, that the affairs of the petitioner-society were not satisfactory and a request was made to the Registrar to dissolve the petitioner-
society. A copy of this resolution was forwarded to the second respondent. It was on this that the second respondent started a further action u/s
72 of the Act. What the first respondent did was that on the basis of the resolution of the financing Bank and without any more consultation with it,
passed the challenged order superseding the society and appointed a special officer to manage the affairs of the society. It is as against this action
that the present writ petition has been filed.
The contention of Mr. Chidambaram, learned counsel for the petitioner is that the proceeding u/s 72 of the Act being of a peculiar nature and
indeed being one reflecting upon the integrity and working of a registered Society under the Act, every limb of the sub-section should be satisfied
before a final order u/s 72(1) of the Act could be made. Developing this contention it is said that there was no consultation made by the first
respondent when he took action under sub-section(1) of Section 72, as there does not appear on record that the Registrar consulted the financing
bank to which the society was indebted. What is said is that the Registrar took it for granted that the report in the nature of resolution, forwarded
by the financing bank if by itself a substitute for the process of consultation which he should independently make u/s 72(6) of the Act. Such an
assumption it is said is not a thing expected of the statutory authority functioning u/s 72, which authority would ultimately issue an order of
supersession against the society complained of. Learned counsel for the financing bank, however, would state that, though there was no
consultation as such by the Registrar after he mooted action u/s 72(1)(a) yet the communication of the resolution passed by the financing Bank on
29-4-1971, would serve as sufficient hypothesis on which the Registrar could lay his hand to act finally u/s 72(1) to supersede a registered
Society. Learned Government Pleader says that from the records it is not clear whether the first respondent before he took action u/s 72(1) of the
Act, consulted the financing Bank. But what appears instead is that the first respondent was satisfied, from the resolution of the financing Bank, that
the affairs of the society were unsatisfactory. It is, therefore, said that there was sufficient material for the first respondent to act and pass the
challenged order.
The formalities laid down in Section 72(1) of the Act are not empty requirements. They are not only statutory mandates but they serve a
particular purpose. The Supreme Court in Jt. Registrar of Co-operative Societies Madras and Others Vs. P.S. Rajagopal Naidu and Others, , has
made it clear that, if the Registrar acting u/s 72 is of the opinion that the administration and working of a registered Society is not satisfactory and if
he entertains such a subjective satisfaction on objective materials noticed by him, then he has power to initiate action u/s 72(1). But the Court laid
down, more or less as a pre-requisite for the exercise of such power, that the statutory authority acting u/s 72(1) should consult the financing bank
before final orders are passed. What consultation is contemplated under sub-section(6) of Section 72 does not evade analysis. Obviously, such
consultation begins after the Registrar is subjectively satisfied on objective materials placed before him that a prima facie case has been made out
for the purpose of superseding the co-operative society. It is only at that point of time that the necessity for consulting the financing bank arises.
This has been held to be a mandatory requirement by the highest Court of the land. Such a consultation, therefore, cannot be avoided. Though
consultation is not equivalent to concurrence yet there must be material on record to show that after the Registrar entertained an opinion about the
unsatisfactory working of a registered society, he should consult the financing bank to whom the society is indebted, before he finally passes an
order of supersession u/s 72 of the Act. In the instant case the Registrar was apparently of the view that the communication, sent by the financing
Bank to the effect that it has resolved to advise the Registrar to dissolve the society, is by itself sufficient information for him to dispense with the
necessary mandate regarding consultation envisaged in Section 72(6) of the Act. I do not think that the first respondent could dispense with such a
pre-requisite for the exercise of power by assuming that the resolution of the financing Bank by itself is sufficient and that he could dispense with
consultation in the matter with the financing bank though he was aware that it was a compulsory requisite in law. It is not difficult to perceive of
cases where the financing Bank, day in and day out, complains to the Registrar about the unsatisfactory working of a registered society and might
even indicate its mind through a resolution, which also serves the same purpose. These resolutions which are letters of complaint forwarded by the
financing Bank to the Registrar as statutory authority under the Act, subserve no purpose other than putting into the mind of the Registrar that
circumstances have arisen for the Registrar to act and form an opinion as to the necessity to continue the society as a body cognizable under the
provisions of the Act or to supersede by appointing a special officer to administer the affairs of the society. The resolution of the financing bank as
in the instant case and such other information which the financing Bank may give to the Registrar serve the same purpose of providing information
to the Registrar to form an opinion as to that particular accused society. As a matter of fact, the Registrar himself in the instant case, called for such
a report from his Inspector by taking action u/s 66. The report came to him only on 3-5-1971. He had not, therefore, on his file any data for him to
form an unbiased opinion about the working of the society. In those circumstances it cannot be said that the resolution passed by the financing
bank prior to the date of submission of the report by the Inspector acting u/s 66 could be a substitute for the consultation which the Registrar is
expected have by way of a legal necessity before he could take action u/s 72(1) of the Act. I am, therefore of the view that the statutory
requirement as to consultation u/s 72(6) of the Act has not been done in the instant case. It is only in the show cause notice given to the petitioner
that the first respondent, for the first time, stated that there was a resolution of the financing Bank recommending dissolution of the society and that
he was also inclined to act upon it. This attitude of the first respondent cannot be said to be quite in consonance with the requirements of law and
particularly, the mandate enunciated in Section 72(6) of the Act. The Supreme Court in Jt. Registrar of Co-operative Societies Madras and Others
Vs. P.S. Rajagopal Naidu and Others, observed as follows--
The requisite opinion has indisputably to be formed honestly and after applying his mind to the relevant materials before him; the only condition
precedent for taking action under Sec. 72(1) is that the Registrar must consult the financing bank to which the society is indebted.
There has not been a consultation in at all in the instant case. But, on the other hand the information forwarded by the financing Bank and the
resolution which it passed on a report which it obtained from its employee were held to be sufficient to dispense with the requirement of
consultation contemplated u/s 72(6).
As there is, therefore, an error apparent in the order challenged the writ petition is allowed. There will be no order as to costs. But it is open to
the first respondent to take further action, if he so chooses after consulting the financing Bank in a manner known to law.
Petition allowed.