PANCHALINGA PANCHAPPA PATTANASHETTI AND OTHERS Vs. THE COMMISSIONER FOR CANE DEVELOPMENT AND DIRECTOR OF SUGAR AND OTHERS

JUDGEMENT

(1.) THE Petitioners in these petitions, questioning the legality and validity of the registration of bye -law dated 19th December, 1997 bearing No. DSK.STL.TIDDUPADI/165 of 1998 -99 passed by the second Respondent vide Annexure -B, and the further amendment of bye -law dated 29th December, 2000 bearing No. DSK.ESTS.AMD/100 of 2000 -01 on the file of the first Respondent vide Annexure -C, have presented the instant writ petitions. In the alternative, the Petitioners have sought to declare that, the amendment of by -law vide Annexures -B and C referred supra are not applicable in respect of the members admitted prior to the coming into force of the amendment under Annexures -B and C. Further, the Petitioners have assailed the correctness or otherwise of the impugned notices dated 12th December 2002 and 3rd February, 2003 vide Annexures -D1 to D6 bearing No. SO.SA.SA.KA.NI.BA/SHERU of 2002 -03 issued by the fifth Respondent. The Petitioner have also sought for a direction, directing the Respondents 3 to 5 not to exclude any member from voting, participating and contesting in the election proposed to be held on 21st March, 2003 or on any other subsequent date on the ground of non -payment of difference amount of the enhanced share value.

(2.) THE Petitioners herein claim to be the members of the fourth Respondent -Someshwar Sahakari Sakkare Karkhane Niyamita ('Sugar factory' for short). The membership of the 4th Respondent -Sugar factory is divided into five categories. The grower members are called 'A' class, Co -operative Institutions called 'B' class, State Government 'C' class, non -grower members 'D' class and nominal members are called 'E' class. As per the bye -laws of the sugar factory, it provided for an authorised share capital of Rs. 02 Crores divided into 10,000 shares of Rs. 2,000/ - each for 'A' class members and 10,000 shares of Rs. 5,000/ - each for 'B' class members, 18,000 shares of Rs. 5,000/ - each for 'C' class members and 5,000 shares of Rs. 2,000/ - each for 'D' class members, a copy of which is produced as Annexure -A to the writ petitions.

(3.) THE principal ground urged by the learned Counsel appearing for the Petitioners is that, a plain reading of the bye -law as registered under Annexures -B and C clearly indicate that, the enhanced face value of the share will be applicable only in respect of persons to be admitted as members on and after the date of amendment. He submitted that, the fourth Respondent has made applicable even in respect of the existing members so as to exclude them from voting, participating and contesting in the elections. Therefore, if the amended bye -laws are made applicable to the existing members, then, it is totally illegal, arbitrary and is liable to be struck down. As per Section 19 of the Karnataka Co -operative Societies Act, ('Act' for short), the amendment to the bye -law comes into force from the date of registration or such date as is indicated in the order. He submitted that, in the instant case, no specific date is indicated, under Annexures -B and C, and Annexures -B and C come into force from the date of their respective amendment, namely from 19th December, 1997 and 29th December, 2000 respectively. There are totally about 14,000 members in the Sugar factory including these Petitioners prior to the coming into force of the amended bye -laws. Therefore, the enhancement of the face value of the share is not applicable to the existing members as per the amended bye -law and if at all is made applicable, it is only prospective in nature. Therefore, it should be declared that, the bye -law as amended vide Annexures -B and C are not applicable in respect of the existing members or otherwise they are liable to be struck -down if they are made applicable to the existing members. Further, to substantiate the said submission, he placed reliance on the order passed by this Court on 22nd November, 1991 in Writ Petition No. 24884 of 1991 and submitted that, the enhancement of share capital under the bye -law is not applicable in respect of the existing members and that being so, the amended bye -laws vide Annexures -B and C are liable to be set aside, holding that, the amended bye -law is not applicable to the persons who are admitted as members prior to the coming into force of the bye -laws. Further, he submitted that, the action of the third Respondent in interpreting the bye -laws vide Annexures -B and C as being applicable to the existing members and thereby holding that, there is a liability under Sections 19 and 20 of the Act is totally illegal and without authority of law, in as much as a person can be a defaulter if there is an original liability and such liability is not discharged. He submitted that, the question of original liability under Section 19 of the Act does not arise at all in as much as the Petitioners have paid the required amount and are holding shares of the value of Rs. 2,000/ - which was condition precedent for admission of members as on that date. He submitted that, once the Petitioners are admitted as members, and are holding the shares, they continue to be the members and are entitled for all the rights and liabilities as members and unless the bye -law provides for acquiring additional share or additional interest etc., the question of excluding such members from voting, participating and contesting in the election or to the benefits of the membership is totally capricious and illegal. Further, he submitted that, the Respondents have violated the mandatory provisions of Rules 14(3) (4) and (5) of the Karnataka Co -operative Society Rules in as much as the fifth Respondent has issued the impugned notices vide Annexures -D1 to D6 demanding payment of difference amount on share capital and in default of the Petitioners, to exclude the Petitioners from voting, participating and contesting election, is totally without authority of law. Therefore, the action of the 5th Respondent is totally arbitrary and is opposed to the democratic norms in as much as more than 75% of the members are sought to be excluded from voting, participating and contesting in the election thereby the election proposed to be held will be only farce of an election. Further, he submitted that, some of the members voluntarily paying the difference of amount with regard to the enhanced share value, do not, in any way make the provision valid or will not make the amended bye -law applicable in respect of the existing members. If at all the Sugar Factory wants to mobilize the funds for its improvement, the only remedy to mobilize additional funds is by way of providing for purchase of additional shares by the existing members and the enhancement of the face value of the shares is only prospective and would apply only in respect of the new members and not retrospective applying to the already existing members. Therefore, taking into consideration all these aspects of the matter, the impugned amended bye -laws proposed and certified by the competent authority are not in strict compliance of the mandatory provisions of the Act and Rules and the said consequential demand seeking payment of difference amount of share capital vide Annexures -D1 to D6 are one without authority of law. Therefore, the learned Counsel appearing for the Petitioners submitted that, the amended bye -laws as referred above are liable to be set aside.