http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8

PETITIONER:

BEED DISTRICT CENTRAL CO-OP BANK LTD. AND ANR

Vs.

RESPONDENT:

JAGANNATH S. SHAHANE AND ORS.

DATE OF JUDGMENT13/03/1992

BENCH:

KASLIWAL, N.M. (J)

BENCH:

KASLIWAL, N.M. (J)

YOGESHWAR DAYAL (J)

CITATION:

1992 AIR 1249 1992 SCR (2) 296

1992 SCC (2) 604 JT 1992 (2) 367

1992 SCALE (1)716

ACT:

Maharashtra Co-operative Societies Act, 1960 :

Section 73 (2) (As inserted by Maharashtra Amendment Act XX

of 1986).

Specified Society-Co-operative Bank-Board of

Directors-Election-Provision requiring Registrar to describe

the maximum number of members on the Society held directory-

Purpose of Section 73 (2) Explained.

Section 27 (3)-Proviso-Deletion of Proviso-Effect of.

HEADNOTE:

Election to the Board of Directors of the appellant

Bank, a specified co-operative Society under the

Maharashtra Co-operative Societies Act, 1960, were to be

held as provided under Section 73 (G) of the Act read with

Maharashtra Specified Co-operative Societies (Elections to

Committees) Rules, 1971. By the Maharashtra Act No. XLV of

1983 the Maharashtra Co-operative Societies Act was amended

and a proviso was added to sub-section (3) of Section 27.

This amendment was challenged and the High Court declared

the proviso to sub-section (3) of Section 27 as void and

inoperative. Thereafter respondent. No. 1 and 2 filed a

writ petition in the High Court which was allowed by

directing that all steps taken on the basis of proviso to

section 27(3) were null and void. The parties aggrieved

against the aforesaid decision filed appeals before this

Court. During the pendency of the appeals Section 73 of the

Maharashtra Co-operative Societies Act was amended and sub-

section (2) was added to it. Further by Act No. X of 1988

Ist proviso to Section 27(3) was deleted. After the

aforesaid changes in the 1960 Act, this Court, by its order

dated March 13, 1989, disposed of the appeals directing that

elections to the Co-operative Societies may be held in

accordance with the amended law. Thereafter the Collector

declared the election programme of the appellant bank under

which last date for filing nominations was 23.10.1991 last

date for scrutiny was 25.10.1991, last date for withdrawal

was 11.11.1991 and the date of polling was fixed on

27.11.1991. By a notification dated 27th December,

297

1991 the State of Maharashtra postponed elections upto 15th

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8

April, 1992.

Respondents No. 1 and 2 filed a writ petition in the

Bombay High Court challenging the election programme. By

its judgment dated November 19, 1991 the High Court allowed

the petition holding that (i) in view of the mandatory

provision of section 73(2) it was incumbent on the Registrar

of Co-operative Societies to prescribe the maximum number of

members on the Committee of the appellant bank by publishing

an order in the official gazette; (ii) since no such order

was published, the election process fixed by the Collector

was illegal and invalid; and (iii) the election process was

in violation of this Court's order dated March 15, 1989.

Against the decision of the High Court the Co-operative Bank

filed an appeal in this Court.

On behalf of the appellant bank it was contended that

(i) with the deletion of proviso to section 27(3), section

73(2) has become redundant; (ii) that the word `may' in

section 73(2) clearly meant that it was an enabling

provision and the said sub-section does not cast any duty on

the Registrar to exercise the power of prescribing maximum

number in every case but only confers upon him the

discretion to make such an order if the circumstances

enumerated in the said provision necessitated the exercise

of such power; and (iii) since bye-law No.28 of the Bank

already prescribed the maximum number of members in the

Committee to 21 members and as such there was no question of

passing any order under section 73(2).

For the respondents it was contended that unless the

Registrar applied his mind in the light of Section 73(2) no

elections could have been declared by the Collector. It was

necessary for the Registrar to apply his mind as to whether

the maximum number prescribed in the bye-laws of a society

was justified or not and thereafter issue an order and to

publish the same in the official gazette.

Allowing the appeal, this Court,

HELD: 1. The main purpose of introducing proviso to

sub-section (3) of Section 27 was to widen and make the

scope of voters as broad based while electing members to the

Committees of a federal society. It was laid down that all

the members elected as well as co-opted shall have the right

to vote on behalf of such society while electing the members

to the Committee of a federal society. The provision was

declared invalid by the High

298

Court and thereafter it was also deleted by a Legislative

fiat by Maharashtra Act No. (X) of 1988. The position as

now stands is that in case of an election to the members of

the Committee of a federal society, any member of such

society shall not have more than one vote. [305 C-E]

The purpose of inserting sub-section (2) of Section 73

of the Act was that there was a necessity to control the

large number, if any, of the elected and co-opted members

getting a right of vote allowed under the proviso to sub-

section (3) of section 27 of the Act. However, when the

proviso to sub-section (3) of Section 27 was struck down by

the High Court and also deleted by the legislature itself,

the purpose of introducing sub-section(2) in Section 73,

lost its thrust and relevance and even if it continued in

the Statute, it would be considered as directory and not

mandatory. [305 E-F]

1.1 It is no doubt that sub-section (2) of Section 73

of the Maharashtra Co-operative Societies Act starts with a

non obstante clause overriding anything contained in any bye

laws of a society, but at the same time the discretion has

been left to the Registrar to prescribe the maximum number

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8

of members of Committee of the society or class of

societies. This provision does not compel the Registrar nor

makes it obligatory to prescribe maximum number even when

the Registrar may be satisfied with the maximum number

already prescribed in the bye-laws of such society.

[305 F-G]

2. The order dated 27th December 1991 issued by the

Government postponing the elections upto 15th April, 1992

would not apply to such co-operative societies in whose case

the election process from the stage of 1991. In view of

this, the notification dated 27th December, 1991 cannot

apply in the case of the appellant Beed District Central Co-

operative Bank as the election process of filing nominations

was fixed for 23.10.1991 and even the date of polling was

27.11.1991 i.e. much before 26th December, 1991. [306 B-C]

3. The Collector District Beed shall complete the left

out stage for election to the Board of Directors of the

appellant Bank. [306-D]

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1111 of

1992.

299

From the Judgment and Order dated 19.11.91 of the

Bombay High Court in W.P. No. 3398 of 1991.

Soli J. Sorabjee and A.M. Khanwilkar for the

Appellants.

U.R. Lalit, V.N. Ganpule and K. Madhava Reddy, V.B.

Joshi, S.M. Jadhav and A.S Bhasme for the Respondents.

S.K. Dholakia, R.B. Masodkar and K.L. Taneja for the

Intervenors.

The Judgment of the Court was delivered by

KASLIWAL, J. Special leave granted.

This appeal is directed against th Judgment of High

Court of Judicature of Bombay at Aurangabad dated November

19, 1991. Brief facts of the case are that elections to

the Board of Directors of the Beed District Central Co-op.

Bank Limited a specified co-operative society under the

Maharashtra Co-operative Societies Act, 1960 (hereinafter

referred to as `the Principal Act') were to be held for the

years 1991-1996. The elections are held as provided under

the provisions of Section 73(G) of the Act read with

Maharashtra specified Co-operative Societies (Elections to

Committees) Rules, 1971 (hereinafter referred to as `the

Rules of 1971'). The Constitution of the Board of Directors

of the Beed District Central Co-op. Bank Ltd., (hereinafter

referred to as `the Beed Co-op. Bank. The elections of the

Board of Directors for the years 1991-96 had become due in

November, 1990. With a view to conduct the elections, voters

lists were initially finalised on 28.2.1990 but the same

were postponed on account of Government directions,

Eventually the Collector declared the elections of the Beed

Co-op. Bank under Rule 16 of the Rules of 1971 on 8.10.1991.

According to the election programme last date for filing

nominations was 23.10.1991, last date for scrutiny on

25.10.1991, last date for withdrawal 11.11.91 and the date

of polling was fixed on 27.11.91, Jagannath, respondent No.

1 and individual member of the Beed Co-op. Bank and

Ramkirshana Maroti being member of Agriculture Service Co-

operative Society, Bhayala and delegate of the said society

in the Beed Co-op. Bank filed writ petition in the Bombay

High Court challenging the aforesaid election. The High

Court took the view that the election process had been

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8

started in derogation and violation of Section 73(2) of the

Act and as such

300

the same was declared is illegal and invalid . It was

directed that it will be open to the authorities to start a

new election programme adhering to the mandatory requirement

of Section 73(2) of the Act taking every step in a proper

and careful manner. The Beed Co-op. Bank and its Chairman

have come in appeal before this Court challenging the order

of the High Court.

In order to appreciate the controversy we find it

necessary to mention the background of the litigation as

well as the various changes brought from time to time in the

relevant provisions of law. The Maharashtra Legislature by

the Maharshtra Act No. (XLV) of 1983 sought several

amendments in the Maharashtra Co-operative Societies Act,

1960. The relevant amendment for our purpose is the

following proviso added to sub-sec. (3) of Sec. 27 of the

Act:

"Provided that, notwithstanding anything contained

in this Act or in the rules made thereunder or in

any bye-laws of any society, where such other

society is a federal society belonging to any of

the categories specified in Section 73-G, then all

the members elected to , and the members, if any,

co-opted or appointed under Section 73-B on the

committee of such first society shall have the

right to vote on its behalf in the affairs of such

other society;

Provided further that, where the election is to a

reserved seat under Section 73-B, no person shall have more

than one vote".

The aforesaid amendment was challenged by filing writ

petitions Nos. 2170 and 2054 of 1984 and the High Court by

its order dated 8.1.1985 declared the aforesaid proviso to

sub-section (3) of Section 27 as void and inoperative.

After the said decision a writ petition No. 787 of 1984 was

filed by four petitioners including Jagannath and

Ramakrishan, the present respondents Nos. 1 and 2 and the

High Court following its earlier decision dated 8.1.1985

rendered in Writ petition Nos. 2170 and 2054 of 1984, by an

order dated 15.1.1985 allowed the writ petition and gave a

declaration that all steps taken by the Beed Central co-op.

Bank Ltd., for holding elections of the Bank and all the

steps taken on the basis of Proviso to sub-s.(3) of Section

27 were null and void. The parties aggrieved against the

aforesaid decision filed Special Leave Petition before this

Court. This Court granted Special Leave and registered

Civil Appeals Nos. 1907 and 1908 of 1989. Before the

aforesaid appeals came up for final hearing by

301

this Court the Maharashtra Legislature brought the

Maharashtra Act No. (XX) of 1986 an Act further to amend the

Maharashtra Co-operative Societies Act, 1960. By this

amendment Act, Section 73 of the Principal Act was

renumbered as sub-s.(1) thereof; and after sub-s.(1) as so

renumbered, the following; sub-s.(2) inserted:

"(2) Notwithstanding anything contained in any

bye-laws of a society or class of societies, the

Registrar may, having regard to the area of

operation, subscribed share capital or turnover of

a society or class of societies, by general or

special order, published in Official Gazette,

prescribe the maximum number of members on the

committee of such society or class of societies,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8

as may be specified in such order".

The Maharashtra Legislature further brought an

amendment by Maharashtra Act No. (X) of 1988 to amend the

Maharashtra Co-operative Societies Act, 1960 and the Ist

proviso to sub-s.(3) of section 27 was deleted. After the

aforesaid changes in the principal Act, this Court by order

dated March 13, 1989 disposed of the Civil Appeal Nos. 1907

and 1908 of 1989. This Court passed the following order:-

"It is brought to our notice by the learned

counsel for both the parties that subsequent to

the Judgment of the High Court Section 73 of the

Maharashtra Co-operative Societies Act has been

amended by addition of sub-section (2) of Section

73 of the Act in 1986. In view of the above

amendment it is submitted by learned counsel for

both the parties that the elections to the co-

operative societies in question have to be held in

accordance with the amended law. We accordingly

make an order in substitution of the order of the

High Court that elections to the co-operative

societies may be held in accordance with the

amended law as early as possible. The appeals are

disposed of accordingly."

Thereafter the Collector fixed the programme of

election mentioned above and the respondents Jagannath and

Ramakrishna filed the writ petition challenging the

programme of election and the writ petition filed by them

was allowed by order dated November 19, 1991 which is now

the subject matter of challenge before us.

302

We have heard learned counsel for the parties and have

thoroughly perused the record. The short controversy raised

before us is regarding sub-s. (2) of Section 73 of the Act

inserted in the Act by Maharashtra Amendment Act (XX) of

1986, to be mandatory or directory. The High Court has

taken the view that the above provision is mandatory and it

was incumbent on the Registrar of the co-operative societies

to prescribe the maximum number of members of the Committee

of the Beed Co-operative Bank by issuing a specific order

and to publish such order in the Official Gazette. The High

Court further held that in the absence of such order in

respect of the Beed Co-operative Bank followed by

publication in the official Gazette, the election process

fixed by the Collector was liable to be declared illegal and

invalid. The High Court also took the view that this Court

also in its order dated 15.3.1989 had clearly given a

direction to comply with the provisions of sub-s. (2) of

Section 73 and as such the programme of election fixed by

the Collector was in violation of the order of this Court

also.

Shri Soli J Sorabji, Learned Senior Counsel, appearing

on behalf of the appellants submitted that sub-s. (2) of

Section 73 was inserted only with a view to curtail the

unequal voting rights conferred on the members of the

society circumstanced on account of insertion of proviso to

sub-s. (3) of Section 27 of the Act. It was contended that

admittedly the aforesaid porviso to sub-s. (3) of Section 27

was deleted on 22.4.1988 by Maharashtra Act No.X of 1988.

With the deletion of the above proviso sub-s. (2) of Sec. 73

became redundant. It was contended that the insertion of

sub-s. (2) of Section 73 was necessitated for validating the

proviso to sub-s. (3) of Section 27 as both these provisions

were complimentary to each other. It was contended that

prior to the insertion of sub-s. (2) of Section 73, the

constitution of the Committee of the Beed Co-operative Bank

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8

was dependent on its own bye laws which were dully approved

by the Registrar of the co-operative societies. The bye law

No. 28 of the Beed Co-operative Bank already prescribed the

maximum number of members in the committee to 21 members and

as such there was no question of passing any order under

sub-s. (2) of Section 73. It was submitted that the word

`may' in sub-s. (2) of Section 73 clearly meant that the

said provision was an enabling provision and not mandatory

as held by the High Court. The said sub-section does not

cast any duty on the Registrar to exercise the power of

prescribing maximum number in every case but only confers

upon him the discretion to make such an order if the

circumstances enumerated in the

303

said provision necessitated the exercise of such power. It

was also contended that such power could alone be exercised

by the Registrar where either the maximum number of members

on the Committee fixed in the bye laws was required to be

changed in the opinion of the Registrar or where the the bye

laws of a society may not have fixed the maximum number at

all. In that kind of case, if any , order was passed by the

Registrar then such order was required to be published in

the official Gazette.

It was also contended that if this provision is held to

be mandatory, it would result in invalidating the

constitution of numerous managing Committees of the co-

operative societies in the State of Maharashtra and this

could never have been the intention of the Legislature.

On the other hand Sh. U.R. Lalit, Learned Senior

counsel for the respondents Nos. 1 and 2 Sh. Dholakia ,

Learned Senior Counsel for one of the Intervenors supported

the impugned Judgment of the High Court. It was contended

that unless the Registrar applied his mind in the light of

the provisions contained in sub-s.(2) of Section 73 no

elections could have been declared by the Collector. It was

necessary for the Registrar to apply his mind as to whether

the maximum number prescribed in the bye laws of a society

was justified or not and thereafter issue an order and to

publish the same in the official Gazette. In the

alternative it was submitted that in the event of this

Hon'ble Court taking a different view from that of the High

Court, it was necessary to issue a fresh election programme

in view of the fact that all the contesting candidates were

informed that the election programme fixed by the Collector

had been set aside by the High Court. It was also submitted

that the State of Maharashtra has now issued a Notification

on 27th December, 1991 postponing such elections upto 15th

April, 1992.

It is worthwhile to note that the stand taken by the

State of Maharashtra before us is that proviso to sub-s. (3)

of Section 27 was inserted in order to make the electorate

broad based and more representative in character, where the

other society was federal society belonging to any of the

category mentioned in sub-s. (3) of Section 27 of the Act,

it was proposed to provide that the right to vote on behalf

of the members of society should be conferred on all the

elected members and co-opted members appointed on the

committee under Section 73 instead of single representative

exercising such right of vote. The said provision was

304

declared invalid by the High Court of Bombay by its

Judgmentde dated 8.1.1985 and the said proviso was deleted

by Act No. (X) of 1988. As the said proviso has been

deleted, the sub- s.(2) of Section 73 has lost its relevance

now and it has remained only as an enabling provision

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8

instead of a mandatory one.

We shall have to consider the question of sub-s. (2) of

Section 73 being mandatory or directory in the background of

changes made from time to time in the Principal Act and the

effect of the directions given by this Court in its order

dated 13.3.1989. The Beed District Central Co-operative

Bank is a specified Co-operative Society having a federal

character. The elections to the Board of Directors have to

be held according to the provisions of the Rules of 1971 in

conformity with the provisions of the Act and the bye laws

made by it. The constitution of the Board of Directors is

provided in bye law No.28 which clearly states that the

management of business and affairs of the bank shall be

entrusted to a Board of Directors which shall hold office

for five years consisting of not more than 21 members. Thus

the bye-laws clearly specify that the maximum number of the

Board of Directors would be 21. The bye laws have been made

with the approval of the Registrar Co-operative Societies.

Proviso to Sub-s.(3) of Section 27 was inserted by Act

No.(XLV) of 1983. Section 27 dealt with voting powers of

members. After deletion, of the proviso to Sub-s. (3) of

Section 27, by Maharashtra Act (XX) of 1988, Sub-s. (3) of

Section reads as under : (p.103) (Annexure-D)

S. 27 Members and their Rights and Liabilities :

Voting powers of members 1[(1) Save as

otherwise provided in sub-sections (2) to (7),

both inclusive, no member of any society shall

have more than one vote in its affairs; and every

right to vote shall be exercised personally and

not be proxy :

Provided that, in the case of equality of

votes of the Chairman shall have a casting vote;]

(2) Where a share of a society is held

jointly by more than one person 2 [the person

whose names stands first in the share certificate,

if present, shall have the right to vote. But in

his absence the person whose name stands second,

and in the

305

absence of both, the person whose name

stands next, and likewise, in the absence of the

preceding persons the person whose name is next on

the share certificate, who is present and who is

not, minor, shall have the right to vote.]

(3) A society which has invested any part of

its funds in the shares of another society, may

appoint one of its members; to vote on its behalf

in the affairs of that other society; and

accordingly such member shall have the right to

vote on behalf of first society;

The main purpose of introducing proviso to sub-s.(3) of

Section 27 was to widen and make the scope of voters as

broad based while electing members to the committee of a

federal society. It was laid down that all the members

elected as well as co-opted shall have the right to vote on

behalf of such society while electing the members to the

Committee of a federal society. The provision was declared

invalid by the High Court and thereafter it was also deleted

by a Legislative fiat by Maharashtra Act No.(X) of 1988.

The position as now stands is that in case of an election to

the members of the committee of a federal society, any

member of such society shall not have more than one vote.

The purpose of inserting sub-s. (2) of Section 73 of the Act

was that there was a necessity to control the large number,

if any, of the elected and co-opted members getting a right

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8

of vote allowed under the proviso to sub-s. (3) of Section

27 of the Act. However, when the proviso to sub-s. (3) of

Section 27 was struck down by the High Court and also

deleted by the Legislature itself, the purpose of

introducing sub-s.(2) in Section 73, lost its thrust and

relevance and in our view even if it continued in the

Statute, it would be considered as directory and not

mandatory. It is no doubt that sub-s. (2) of Section 73

starts with a non obstante clause overriding anything

contained in any bye laws of a society, but at the same time

the discretion has been left to the Registrar to prescribe

the maximum number of members of the Committee of the

society or class of societies. In our view this provision

does not compel the Registrar nor makes it obligatory to

prescribe maximum number even when the Registrar may be

satisfied with the maximum number already prescribed in the

bye laws of such society. As already mentioned above the

State of Maharashtra has also taken the stand in their

written submissions placed before us that after the deletion

of the proviso to sub-s. (3) of Section 27 the provision of

sub-s. (2) of Section 73 has lost its relevance

306

and it has remained only as an enabling provision instead a

mandatory one.

Thus we find force in the submissions made on behalf of

the Beed Co-operative Bank, the appellant before us that the

provision of section 73(2) are directory and not mandatory.

As regards the order dated 27th December, 1991 issued

by the Government postponing the elections upto 15th April,

1992 and placed on the record of the case suffice to say

that the same would not apply to such co-operative societies

in whose case the election process from the stage of making

nominations has already commenced on or before 26th

December, 1991. In view of this, the notification dated

27th December, 1991 cannot apply in the case of the

appellant Beed District Central Co-operative Bank as the

election process of filing nominations was fixed for

23.10.91 and even the date of polling was 27.11.1991 i.e.

much before 26th December, 1991. In view of these

circumstances we allow this appeal, set aside the Judgment

of the High Court and dismiss the Writ petition filed by the

respondents Nos. 1 and 2. In the facts and circumstances

of the case we pass no order as to costs. As a result of

the above order the Collector District Beed shall complete

the left out stage for election to the Board of Directors of

the Beed District Central Co-operative Bank limited.

T.N.A. Appeal allowed.

307