REGISTRAR CO OPERATIVE SOCIETIES Vs. DHARAM CHAND

JUDGEMENT

(1.) This is an appeal on a certificate granted by the Judicial Commissioner, Ajmer. The brief facts necessary for present purposes are these. There is a Bank in Ajmer known as the Commercial Co-operative Bank Limited, Ajmer (hereinafter referred to as the Bank), which is registered under the Co- operative Societies Act, No. II of 1912 (hereinafter referred to as the Act). Dharam Chand, respondent No. 1 (hereinafter referred to as the respondent), along with certain other respondents were members of the managing Commitee of the Bank. One Nandlal Sharma was the paid manager of the Bank. This man disappeared in 1953 and thereafter defalcation to the extent of about Rs. 6, 34,000/- was detected. Consequently, the managing committee passed a resolution suspending the business of the Bank subject to the approval of the Registrar. The then Registrar Shri Nagar approved the resolution and appointed an Inspector of Co-operative Societies to hold an immediate inquiry. He also appointed a firm of Chartered Accountants as investigating auditors. On investigation by the auditors embezzlement to the extent of about Rs. 6,34,000/- was found. Thereupon the successor Registrar, Shri Chitnis gave notice to the respondent and other members of the managing committee of February 26, 1955, asking them to show cause why the committee should not be suspended under R. 30(3) of the Rules framed under the Act. A reply to the notice was given by the respondent and others in which they denied allegations of mismanagement, etc. The then Registrar Shri Chitnis however appointed an administrator of the Bank after removing the managing committee. In the meantime, an application was made under R. 18 of the Rules by seven shareholders of the Bank to the Registrar of April 4, 1956. Rule 18 authorises the Registrar to decide any dispute brought before him under that rule either himself or through the appointment of one or more arbitrators. Any dispute concerning the business of a Co-operative Society between members or past members of the Society or persons claiming through them, or between a member or past member or person so claiming and the Committee or any officer can be referred under R. 18. Such reference can be made by the Committee or by the Society by resolution in general meeting or by any party to the dispute, or if the dispute concerns a sum due from a member of the Committee to the Society by any member of the Society. In consequence of this application the then Registrar appointed Shri Hem Chand Sogani, an advocate, as an arbitrator. The application was in the nature of a misfeasance proceeding against the members of the managing committee and the prayer was for an award against thirteen persons (including the respondent) directing them to pay certain amounts including the entire loss amounting to about Rs. 6,34,000/- which was said to have been occasioned on account of glaring breach of law and the rules and the bye-laws of the Bank and betrayal of confidence by the members of the managing committee. The appointment of the arbitrator was challenged by the president of the managing committee before the Deputy Commissioner through a revision petition but the challenge failed. As however Shri Sogani was in ill-health, he expressed his inability to act as arbitrator. Consequently, on December 13, 1955, the then Registrar set aside the order appointing Shri Sogani as arbitrator and informed the parties that he would decide the dispute himself. This order was also challenged in revision before the Deputy Commissioner; but the attempt failed. Thereafter the present petition was filed by the respondent before the Judicial Commissioner, Ajmer, and a large number of grounds were urged in support of it, and it was prayed that the Registrar be prohibited from proceeding to deal with the application under R. 18 and the proceedings arising therefrom be quashed.

(2.) The petition was decided by the Judicial Commissioner on April 18, 1956. He negatived all the contentions raised on behalf of the respondent except one; and it is with that contention only that we are concerned in the present appeal. That contention is that the Registrar is in the position of a party and had expressed his opinion unequivocally against the respondent and other members of the committee in the notice which he gave on February 26, 1955, and therefore his constituting himself as a tribunal to decide the dispute under R. 18 was against the principles of natural justice, inasmuch as a party constituted himself the judge. This contention found favour with the learned Judicial Commissioner and he held that although the registrar had no pecuniary or proprietary interest in the dispute yet in view of the circumstances of the case there was a strong likelihood of bias and therefore the Registrar's acting as the tribunal would be against the principles of natural justice. He further held that if the Registrar had not suffered from the disability inherent in the situation, he would have been the most proper person to decide the dispute. The petition was therefore allowed and a writ of prohibition was issued to the Registrar directing him not to proceed with the dispute before him. This was followed by an application to the Judicial Commissioner for a certificate of fitness in order to file an appeal to this court, which was granted; and that is how the matter has come up before us.

(3.) The official bias of the Registrar is sought to be based on two circumstances: the first is the notice issued by the then Registrar on February 26, 1955, asking the members of the managing committee (including the respondent) to show cause why they should not be suspended, and the second is that the Registrar is the head of the Co-operative Department and as such has certain legal powers over all Co-operative Societies (including the Bank) in his administrative capacity and therefore he would not be an impartial person to decide this dispute, particularly in view of the provisions of S. 17 of the Act