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N.A Gregory v. The Secretary Manimala Service Co. Operative Bank & Others
Factual and Procedural Background
The petitioner was the President of the Manimala Service Co-operative Bank, a co-operative society registered under the Kerala Co-operative Societies Act, 1969. Alleging misconduct, seven out of thirteen managing committee members requisitioned the Secretary (the first respondent) to convene an extraordinary managing committee meeting to consider a motion of no confidence. The Secretary, relying on bye-law 38(a), convened the meeting by notice dated June 20, 1989, and the meeting was held on June 23, 1989. Seven members attended, the remainder boycotted, and a motion of no confidence was passed.
The petitioner applied to the Assistant Registrar to stop the June 23 meeting; no action was taken. The Secretary then convened another meeting for June 27, 1989 to elect a new President. Again the Assistant Registrar took no action, whereupon the petitioner filed writ petition O.P. No. 5312 of 1989 in this court complaining about the inaction. This court noted the Government Pleader's statement that the Assistant Registrar “had not granted permission” to hold the meetings, closed the original petition and observed the petitioner could move the appropriate authority under Rule 176 of the Kerala Co-operative Societies Rules, 1969 to rescind the June 23 resolution (judgment dated July 3, 1989; Ext. P4).
Pursuant to that direction, the petitioner petitioned the Joint Registrar under Rule 176, contending (1) that the Act, the Rules and the bye-laws did not contemplate removal by a motion of no confidence; and (2) the June 23 meeting was not validly convened because the Secretary had no authority to convene it. The Joint Registrar rejected the petition (Ext. P8), holding that the managing committee that can elect a President can also remove him (relying on principles underlying section 16 of the Interpretation and General Clauses Act, 1125 and the decision in Narayanan Nair v. Joint Registrar) but that Rule 176 did not permit rescission where the attack on the resolution is based on alleged invalidity in convening or quorum. The petitioner challenged Ext. P8 in this court, raising the same contentions.
Legal Issues Presented
- Whether the managing committee of a cooperative society that is entitled to elect a President has the concomitant power to remove the President (by a motion of no confidence).
- Whether the meeting of the managing committee held on June 23, 1989 was validly convened in accordance with the bye-laws (specifically bye-law 38(a)), and if not, whether the resolution passed thereat is liable to be rescinded.
- Whether Rule 176 of the Kerala Co-operative Societies Rules, 1969 empowers the Registrar (or Joint Registrar) to rescind resolutions that are invalid because they were passed at meetings improperly convened, lacking quorum or otherwise held in breach of the Act, Rules or bye-laws.
Arguments of the Parties
Petitioner's Arguments
- The Act, the Rules and the bye-laws do not contemplate removal of the President by a motion of no confidence; such a mode of removal is not authorised.
- The meeting held on June 23, 1989 was not validly convened because the Secretary had no authority to convene it; therefore the motion of no confidence passed at that meeting was null and void and susceptible to rescission under Rule 176.
Respondents' / Registrar's Arguments and Reasoning (as recorded)
- The Joint Registrar held that if the managing committee is empowered to elect a President, it is equally competent to remove him; this view was supported by the principle in section 16 of the Interpretation and General Clauses Act, 1125 and the decision in Narayanan Nair v. Joint Registrar (1982 KLT 602).
- On the second point, the Joint Registrar took the view that Rule 176 permits rescission only on certain specified grounds and does not permit scrutiny of the validity of a resolution insofar as the challenge is based on invalidity of the meeting (lack of quorum or improper convening). Thus he rejected the petition as not maintainable under Rule 176.
- The Government Pleader informed this court that the Assistant Registrar “had not granted permission” to hold the meetings on June 23 or 27 (appearing before this court in the writ). The first respondent's counsel suggested the counter-affidavit in C.M.P No. 21931 of 1989 be treated as the counter-affidavit in the original petition.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Narayanan Nair v. Joint Registrar, 1982 KLT 602 | Supports the proposition that a managing committee that can elect a President can also remove him; consistent with the principle in section 16 of the Interpretation and General Clauses Act, 1125. | The court accepted and followed this decision, stating full agreement and relying on it to uphold the managing committee's competence to remove the President by a motion of no confidence. |
Court's Reasoning and Analysis
The court proceeded through a multi-part analysis, addressing first the power of the managing committee to remove the President and secondly the challenge to the validity of the June 23 meeting and the scope of Rule 176.
On the question of power to remove, the court agreed with the decision in Narayanan Nair v. Joint Registrar and with the principle underlying section 16 of the Interpretation and General Clauses Act, 1125: if the managing committee is entitled to elect a President, it is within their power to undo that appointment by cancelling it in appropriate proceedings. Accordingly, a resolution removing the President is not assailable merely on the ground that removal was effected by a motion of no confidence.
On the second point — the legality of convening the June 23 meeting — the court examined bye-law 38(a). That bye-law requires a meeting of the committee to be called when a requisition is made by not less than one-third of the committee members; where such requisition is made, the Secretary is empowered (and bound) to convene the meeting. Here, seven out of thirteen members requisitioned the meeting (more than one-third and, in fact, more than 50%), so the Secretary had the authority and duty to convene the meeting. The court held the distinction drawn by the petitioner between power and duty was immaterial in the circumstances because the Secretary's power to convene was discernible from the bye-law and, once the prescribed number requisitioned the meeting, convening it was the Secretary's duty. Because a meeting convened on that basis complied with the bye-law, the court found no illegality justifying interference under Article 226 of the Constitution.
The court then addressed the Joint Registrar's rationale that Rule 176 did not permit scrutiny of resolutions attacked on grounds of invalid convening or lack of quorum. The court rejected this narrow reading. It quoted Rule 176 in full and explained that the rule empowers the Registrar to rescind resolutions that are ultravires or contrary to the Act, Rules, bye-laws, departmental directions, or calculated to disturb the society's orderly functioning. The court reasoned that a valid resolution must pass a dual test: (1) it must not be contrary to the Act, Rules or bye-laws; and (2) it must be passed at a meeting convened and held in accordance with law. Material illegality in convening or conducting a meeting vitiates the resolution and thereby makes it capable of being rescinded under Rule 176. Thus, Rule 176 encompasses resolutions invalid due to illegalities in convening or conduct of the meeting.
Despite this broader interpretation of Rule 176, the court found that the particular meeting of June 23, 1989 had been properly convened and therefore the petitioner derived no relief. The court also declined to examine the legality of the June 27 meeting, noting the Bank had elected a new President and that not all interested parties were before the court.
Holding and Implications
ORIGINAL PETITION DISMISSED.
Implications and direct consequences:
- The court dismissed the original petition on the merits because it found (a) the managing committee possessed the power to remove the President by a motion of no confidence; and (b) the June 23, 1989 meeting was validly convened under bye-law 38(a), rendering the resolution removing the petitioner valid.
- The court clarified the scope of Rule 176: the Registrar's power to rescind resolutions includes scrutiny of resolutions invalidated by illegality in the convening or conduct of the meeting (such illegality can render a resolution contrary to the Act, Rules or bye-laws and hence susceptible to rescission). This was expressed as a corrective to the Joint Registrar's narrower view, though the court did not grant relief to the petitioner on the present facts.
- The court declined to adjudicate the legality of the June 27, 1989 meeting, observing that a President had been elected and that not all interested parties were before the court.
- There was no order as to costs.
1. Parties are agreed that the original petition itself may be taken up and disposed of Counsel for the first respondent submits that the counter affidavit filed in C.M.P No. 21931 of 1989 may be treated as the counter affidavit in the original petition. The petitioner was the President of the Manimala Service Co-operative Bank. Limited (hereinafter referred to as the Bank), a Co-operative Society registered under the Kerala Co-operative Societies Act, 1969 (the Act). On certain allegations of misconduct, seven out of the thirteen members of the managing committee of the Bank made requisition to the first respondent, Secretary of the Bank, to convene as extra-ordinary meeting of the managing committee to consider a motion of no confidence against the petitioner. The first respondent felt obliged by bye-law 38(a) of the bye-laws of the Bank to convene the meeting of the managing committee, since the requisition was made by more than one third of the members of the committee. He accordingly convened a meeting of the Board on June 23, 1989 and served notice thereof on the petitioner on June 20, 1989.
2. The petitioner thereupon moved the Assistant Registrar of Co-operative Societies to stop the meeting on the ground that it was not properly convened. But, the latter did not take any action. The meeting was held on June 23, at which the seven requisitionists attended, the others boycotted, and the motion of no Confidence was passed. The petitioner then received another notice Ext. P2 dated June 23, 1989 from the first respondent Secretary convening a meeting of the managing committee on June 27, 1989 to elect a new President. The petitioner moved the Assistant Registrar to stop the meeting, but this time also no action was taken. Thereupon, he filed writ petition O.P No. 5312 of 1989 in this court complaining about the inaction of the Assistant Registrar. The Government Pleader, who appeared submitted before this court that the Assistant Registrar “had not granted permission” to hold the meetings on 23rd or 27th June. This court noted the submission, and closed the original petition with the observation that the petitioner may move the appropriate authority under Rule 176 of the Kerala Co-operative Societies Rules, 1969 (the Rules) to rescind the resolution passed on June, 23. A copy of the judgment of this court dated July 3, 1989 is Ext. P4.
3. The petitioner moved the Joint Registrar accordingly under Rule 176, raising two points in substance. Firstly he contended that neither the Act, the Rules nor the bye-laws contemplated a motion of no confidence for removal from office of the President of a Co-operative Society. Secondly it was stated that the meeting which was held on June 23, 1989, at which the motion of no-confidence was passed, had not been validly convened as the Secretary, who convened it, had no authority to do so, either under the Act, the Rules or the bye-laws. The motion of no-confidence passed at such a meeting was therefore null and void.
4. The Joint Registrar rejected the petition by his proceedings Ext. P8. He held that when the managing committee is entitled to elect a President, it was equally competent for them to remove him from office, on principles underlying section 16 of the interpretation and General Clauses Act, 1125. The decision of this court in Narayanan Nair v. Joint Registrar, 1982 KLT 602 holding like wise was relied on. On the second point, the Joint Registrar took an extreme view. He noted that the challenge to the resolution was based on the invalidity of the meeting at which it was passed. Such invalidity of a meeting, because of lack of quorum, or irregularity in its convening or otherwise, does not fall within the purview of rule 176, which permitted recission of a resolution only on certain specified and limited grounds. The petition under rule 176 was not therefore, maintainable on the second ground alleged by the petitioner. The petition was therefore rejected.
5. Petitioner challenges Ext. P8, raising the same contentions as he had done before the Joint Registrar.
6. The power of the managing committee to remove the president, after passing a motion of no confidence, has been upheld in the decision in Narayanan Nair v. Joint Registrar, 1982 KLT 602, with which I am in full agreement. If the managing committee could elect a President, equally it must be within their power to undo their action by cancelling the appointment in appropriate proceedings. It is well within their purview to undo an act done by them, which stands recognised in section 16 of the interpretation and General Clauses Act, 1125. The resolution passed on June 23, 1989 is not therefore assailable on this ground.
7. The second point raised is the illegality in the convening of the meeting on June 23, 1989. Having heard counsel, I find it bereft of substance. The meeting in question was convened on the requisition made by seven out of the thirteen members of the managing committee. Bye-law 38(a) of the bye-laws of the Bank requires a meeting of the committee to be called when a requisition is made in that behalf by not less than one-third of the members of the committee. In such circumstances, the Secretary is empowered to convene a special meeting. In this case, the requisition was made by more than 50% of the members and therefore the Secretary was empowered, and bound, to convene a meeting of the committee. The distinction made by the petitioner between powers and duties is not very material so long as the power of the Secretary to convene a meeting is discernible from bye-law 38(a). When the requisition was made by the prescribed number of members, it was the duty of the Secretary to convene a meeting, and that is what he did by convening such a meeting on June 23, 1989. I do not find any illegality in the said meeting justifying interference under Article 226 of the Constitution. All the members who attended, numbering seven were unanimous in their resolution to remove the petitioner from the presidentship. The second contention of the petitioner also therefore fails.
8. This is sufficient to entail dismissal of the original petition. However, I must refer to the very curious reasoning adopted by the Joint Registrar in his order Ext. P8. He says that rule 176 does not enable him to scrutinise the validity of a resolution, assailed on the ground that the meeting in which it was passed had no proper quorum, or that it had not been properly convened. I am afraid that there is no warrant for such a constricted view of rule 176. Rule 176 reads:
“Registrar's power to rescind resolution - Notwithstanding anything contained in the bye laws of a registered society, it shall be competent for the Registrar to rescind any resolution of any meeting of any society or of the committee of any society, if it appears to him that such resolution is ultravires of the objects of the society, or is against the provisions of the Act, Rules, Bye-laws or of any direction or instructions issued by the Department, or calculated to disturb the peaceful and orderely working of the society or is contrary to the better interest of the society.”
9. Inter alia, it enables the Registrar to rescind a resolution if it is against the provisions of the Act. Rules or Bye-laws. The rule is intended to subserve a definite purpose, to provide effective control and supervision by the department over the functioning of Co-operative societies, a power which finds statutory expression in section 66 of the Act. Rule 176 subserves the provisions of section 66, by providing a machinery for effectuating that power. If the narrow view taken by the Joint Registrar be correct, the Registrar will be rendered a helpless on looker against illegal resolutions, passed at meetings, not properly convened or held. Take for instance an extreme case where a meeting is held without quorum. Is the Registrar bound to fold his hands in stoic silence for the alleged inability of rule 176 to reach such a situation? The reasonable reading of rule 176 should be that it posits not merely invalidity by reason of the reisolution being plainly contrary to the Act, Rules or the Bye-laws, but also invalidity caused by illegalities in the very convening or the conduct of the meeting at which it was passed. A resolution to be valid has to pass a dual test. It should not be contrary to the Act, Rules or Bye-laws. It should also be passed at a meeting convened and held in accordance with law. The Act, the Rules or the Bye-laws contemplate only resolutions passed at meetings properly convened and held. Such a meeting is the very sine qua non for a valid resolution. Any material illegality in convening or conducting a meeting will vitiate the resolution itself and render it contrary to the provisions of the Act, Rules or Bye laws. The resolution can be said to be in accord with the provisions of the Act, Rules or the Bye laws only if it is one passed at a meeting convened or held in accordance with the statutory provisions or the provisions of the Bye laws, and not otherwise. Therefore, a resolution passed at a meeting convened or held illegally is equally within the ambit of recission under rule 176 and subject to scrutiny in exercise of the powers thereunder.
10. This does not however afford any relief to the petitioner, for I am at one with the respondents on the plea that the meeting held on June 23, 1989 had been properly convened. I have made the observations in the preceding paragraph on the scope of rule 176 only because of the Joint Registrar's abnegation of jurisdiction by the order Ext. P8, on a misunderstanding of the scope of Rule 176. Counsel for the petitioner-submits that the meeting held on June 27, 1989 was also illegal. I do not think it necessary to go into this question. The petitioner has been removed from the Presidentship. The Bank cannot go without a President. A President was therefore, elected on June 27. In any case, none of the other interested parties is before this court. Therefore, I decline to entertain this point, or to adjudicate on the same.
11. The original petition is dismissed, without however any order as to costs.
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