Writ Petition No.3543 of 2007

2nd February, 2009

Petitioner Counsel: Shri. U. S. DASTANE
Respondent Counsel: Shri. V. M. DESHPANDE,Shri V. A. THAKRE

Cases Cited:
State of Maharashtra Vs. Ishwar Piraji Kalpatri, (1996)1 SCC 542 [Para 8]
T. M. Jacob Vs. State of Kerala, 1999 Cri.L.J. 3609 [Para 8]

JUDGMENT

JUDGMENT :- Rule. Rule made returnable forthwith.

2. With consent of learned counsel for the parties the matter is taken up for final hearing and disposal of immediately.

3. The petitioners are the members of the Managing Committee of respondent No.3 Punjabrao Deshmukh Urban Co-operative Bank Limited Amravati. Respondent No.4 was previously an employee of the State Bank and prosecution has been launched against him by the bank for certain offences. Respondent No.4, who is also share holder and member of the Bank, made an application to the Commissioner of Registrar Co-operative Societies alleging that Annual General Meeting of the said Society was held on 14.08.2005 and prior to that the Auditor's Report about accounts of 2004-05 was already in receipt but that report was not placed before the Annual General Meeting of the Society and thus there was violation of provisions of Section 75(4) of the Maharashtra Co-operative Societies Act. This is an offence under Section 146(f) punishable under Section 147(f) of the Maharashtra Cooperative Societies Act. Besides that he alleged that the petitioners as members of the Managing Committee had failed to maintain proper accounts for the year 2004-05. According to him the figure of the account pertaining to loan etc. disclosed in the statement of account placed before the Annual General Meeting were at variance with the report of the Auditor in respect of the same. He wanted to prosecute the petitioners under Section 147(f) and (k) and for that purpose no prosecution could be launched under the said Section except with the previous sanction of the Registrar as provided under Section 148(3) of the Act. Therefore, respondent No.4 moved the Registrar of the Co-operative Societies to accord sanction for the said purpose. By order dated 14.09.2006 the Co-operative Commissioner of Registrar of Co-operative Societies accorded sanction as prayed by respondent No.4 for prosecution of the petitioners. That order was challenged under Section 154 of the Act before the Government and the Minister of Co-operative rejected that revision, hence this petition.

4. Admitted fact is that after the respondent No.4 had made an application to the Registrar Co-operative Societies for sanction, that application was pending for a long time and no decision was taken. Therefore, the respondent No.4 had filed Writ Petition No.1025 of 2006. By order dated 08.03.2006 in the said Writ Petition this Court had directed the Registrar Co-operative Societies to decide that application within 6 weeks from the receipt of the said order. It appears that the Registrar did not decide the application within 6 weeks after receipt of the order from the Court and therefore respondent No.4 also moved a Contempt Petition No.181 of 2006 against the Registrar. Notice was issued in that contempt petition. However, before any further action could be taken, the Registrar passed the impugned order dated 14.09.2006 and in the result that contempt petition came to be disposed of.

5. Learned counsel for the petitioner contended that Registrar Co-operative Societies did not follow the procedure laid down in law and did not give proper opportunity to the petitioner to explain their conduct before according sanction possibly because of the pressure of notice in the contempt petition. Of course this contention has been denied by the learned AGP on behalf of the Registrar.

6. The impugned order reveals that the accounts of the respondent No.3 bank were audited by Chhangani and Haque Chartered Accountants for the year 2004-05. The Chartered Accountants prepared the report on 14.07.2005 but it was actually received by the Managing Committee on 09.08.2005. Before that on 29.07.2005 the Managing Committee had issued notice of Annual General Meeting to be held on 14.08.2005. Thus the Auditors' Report was received about 5 days before the Annual General Meeting but that report was not placed before the Annual General Meeting. So far as earlier financial years 2002-03 and 2003-04 are concerned it appears that Auditors' Reports were received long after the Annual General Meetings of those years and therefore those auditors report could not be placed before the Annual General Meeting of those two years. In the present case of course the report was already received but it was not placed. Learned counsel for the petitioner contends that as per bye law 2(c), a clear 14 days notice has to be issued for the Annual General Meeting and that notice has to be accompanied by all the documents which are to be discussed in the meeting. According to the learned counsel as auditors report was not received prior to the issue of the notice for Annual General Meeting this provision could not be complied with. Learned counsel points out that if there is failure to comply the provision of Section 74(1) the action could be taken by the Registrar under Section 75(5) and he can also accord sanction for prosecution under Section 145.

Section 75(4) and (5) reads as follows :

"Sec.75(4) : At every annual general meeting the balance sheet, the profit and loss account the audit memorandum submitted by the auditor appointed under section 81 and the committee's report shall be placed for adoption and such other business will be transacted as may be laid down in the by-laws and of which due notice has been given.

(5) If default is made, in calling a general meeting within the period or as the case maybe extended period 'prescribed under sub-section (1)' or in complying with sub-sections (2), (3) or (4) the Registrar may by order declare any officer or member of the committee whose duty it was to call such a meeting or comply with sub-sections (2), (3) or (4) and who without any reasonable excuse failed to comply with any of the aforesaid sub sections disqualified for being elected and for being any officer or member of the committee for such period not exceeding three years, as he may specify in such an order and, if the officer is a servant of the society, impose a penalty on him to pay an amount not exceeding one hundred rupees. Before making an order under this sub section, the Registrar shall give, or cause to be given a reasonable opportunity to the person concerned of showing cause against the action proposed to be taken in regard to him."

In view of the provisions of Section 75(4) it is clear that balance sheet, profit and loss account, audit memorandum submitted by the auditor with the managing committee report shall be placed for adoption before the annual general meeting. In view of the provisions of Section 75(5) if there is a failure in calling the annual general meeting or any compliance with the provisions of Sections (2), (3) and (4) of Section 75, the Registrar may by order declare a Member of the Committee whose duty it was to comply with the said provisions, who without any reasonable excuse failed to comply with the same, disqualified for being elected or for being a member of the committee for such period not exceeding three years. This is an administrative action which may be taken by the Registrar and as per this administrative action the concerned members of the committee may be declared disqualified for being elected or for being a member of the committee for a period not exceeding three years due to failure to comply with Section 75(4). However, the section also makes it clear that for taking the action the Registrar must come to the conclusion that the concerned members of the committee had failed to comply with the provisions without any reasonable excuse and to find out whether there was any reasonable excuse for non-compliance of that direction, the Registrar is expected to give reasonable opportunity to the person concerned of showing cause against the action proposed to be taken with regard to him. It means opportunity has to be given to the concerned member of the society to explain as to why he could not follow the relevant provisions and if the Registrar comes to the conclusion that the concerned member had reasonable excuse or justifiable reasons for not complying the provisions, he may not take any action under Section (5) if after giving an opportunity he finds that there was no reasonable excuse, he may take action as per the provisions of sub-section (5). Therefore it is necessary to give reasonable opportunity to the person to explain the reasons for non-compliance, without which action cannot be taken.

7. Under Section 148(3) no prosecution can be lodged under this Act except with the previous sanction to prosecute the member of the managing committee of the society or its officer for non-compliance of the provisions of this Act, according sanction for prosecution is not a mere formality. It is a settled position of law that the sanctioning authority has to consider all the material before according the sanction. It is material to note that for non compliance of certain provisions of Act administrative as well as criminal action can be taken. Criminal action, which may lead to punishment and even imprisonment, is naturally more serious than the administrative action, in consequences. If departmental action itself be taken under Section 75(5), Registrar is required to give a reasonable opportunity to the concerned person to show cause as to why action should not be taken against him. In view of this it would be reasonable to expect from the Registrar to give an opportunity to the concerned person to explain his conduct before according sanction for prosecution. If the Registrar finds that explanation is justifiable and there are reasonable excuses, he may not take administrative action. With the same logic it can be said that if he would be satisfied that there is a reasonable excuse, he may not accord sanction for the prosecution of the concerned person because the consequences of criminal prosecution are more serious than the administrative action to be taken under Section 74(5).

8. In the present case admittedly no such show cause notice was given by the Registrar to the petitioners. Therefore, they were deprived of placing material before the Registrar to show that there was a reasonable excuse for non compliance of the relevant provisions of Section 75. Learned counsel for respondent No.4 placed reliance upon State of Maharashtra Vs. Ishwar Piraji Kalpatri And Others, (1996)1 Supreme Court Cases 542 and T. M. Jacob Vs. State of Kerala And Another, 1999 Criminal Law Journal 3609 in support of his contention that sanctioning authority is not obliged to offer opportunity to the delinquent before according sanction. It may be noted that both the authorities are under the Prevention of Corruption Act wherein the concerned officer or the public authority had allegedly committed offence under Prevention of Corruption Act. After registration of offence the Investigating Officer was expected to investigate the matter, collect the material and that material is placed before the sanctioning authority. Sanctioning authority is expected to consider that material and then come to conclusion whether the sanction for prosecution should or should not be given. Naturally for sanction for a criminal case and particularly in respect of the corruption charges the accused is not expected to be given any hearing by the sanctioning authority. In my considered opinion these authorities will not be applicable to the facts of the present case. The respondent No.4 does not propose to prosecute the petitioners on corruption charges. The allegations made in his application before the Registrar for according sanction indicate that the petitioners have committed offences due to non compliance of certain provisions of the Maharashtra Co-operative Societies Act. As indicated above for the non compliance of the same provisions, administrative action can be taken against the concerned person and he may also be prosecuted under Section 147. If before taking administrative action show cause notice is necessary, for the same reason and on same logic show cause notice should also be given before according sanction for prosecution. If he is satisfied with the explanation he may refuse to take any action under Section 75(5) and may also refuse to accord sanction for the prosecution. As the Registrar did not give such an opportunity to the petitioners, the impugned order passed by him granting sanction is liable to be set aside.

9. For the aforesaid reasons the impugned order is hereby set aside. However, the Registrar shall, as indicated above issue show cause notice and hear the petitioners as well as complainant before according sanction for prosecution. He shall decide the application of the respondent No.4 on its own merits after following the procedure of law. The petitioners and the respondent no.4/original complainant shall appear before the Registrar, Co-operative Societies on 17.02.2009. The Registrar shall decide that application within 2 months thereafter. All the issues raised by the parties are left open.

Ordered accordingly.