BALAKRISHNAN NAIR Vs. STATE OF KERALA

JUDGEMENT

(1.) THE two writ petitioners herein are members of the Board of Directors of the Trivandrum District Co -operative Bank Ltd.( hereinafter referred to as the Bank ),the 1st petitioner being also the President of the Board.They have brought this writ petition seeking to quash the order Ext.P -1,dated the 9th July 1973 passed by the Registrar of Co -operative Societies,Kerala(2nd respondent)removing the Board of Directors of the Bank and appointing the 3rd respondent as Administrator to manage the affairs of the Bank for a period of six months,in purported exercise of the powers of the 2nd respondent under sub -sections(1)and(3)of section 32 of the Kerala Co -operative Societies Act,1969(hereinafter referred to as the Act ).The petitioners contend that the ground stated in Ext.P -1 in justification of the decision to supersede the Board of Directors are neither factually correct nor legally valid and that the impugned order has been passed by the 2nd respondent mala fide at the instance of a person by name Sreekanteswaram M.Kesavan Nair who has been impleaded as the 4th respondent.It is alleged in the writ petition that the 4th respondent was also a Director of the Bank but had resigned on account of some misunderstanding which is said to have arisen as between himself and the other members of the Board because of the unwillingness of the latter to appoint some nominees of the 4th respondent in the service of the Bank.The further allegation of the petitioners is that the 4th respondent is a close confidant of the Minister for Co -operation and an influential person belonging to the parti­cular political party to which the Minister belongs and to wreak his vengeance against the other members of the Board the 4th respondent approached the Minister for superseding the Board.According to the petitioners,as part of his plan,the 4th respondent got one Velayudha Panicker to file a petition before the Minister making unfounded allegations against the Board of Directors and he also instigated the ˜District Co -operative Bank Employees 'Union to start an agitation and stage a strike by the employees with the deliberate object of creating an artificial atmosphere of confusion and chaos so as to provide an excuse for the Department to take action against the Board.Another plea strongly put forward by the petitioners is that there was no emergency justifying the invocation by the 2nd respondent of the power conferred by section 32(3)of the Act to supersede the Board of Directors without even giving it an opportunity to state its objections and without consulting the Circle Co -operative Union and the State Co -operative Union.A challenge has also been raised by the petitioners against the constitutionality of section 32(3)of the Act,the contention taken by them being that the said section is viola­tive of Article 14 of the Constitution since it confers a naked and arbitrary power on the Registrar to summarily supersede the committee of the society without any guide -lines being laid down for the exercise of the said discretionary power.

(2.) A detailed counter -affidavit has been failed in the case by the 2nd respondent setting out the facts and circum­stances which led to the passing of the impugned order.It is stated therein that the term of the Board of Directors of the Bank was due to expire in the normal course on 31st August 1973.According to the averments contained in the counter -affidavit,the Board of Directors in willful disobedience of instructions issued by the 2nd respondent in an order dated 30th May 1973 and in an earlier circular dated 3rd January 1973 had created many new supervisory posts and had also hastily taken steps for selecting as many as 40 per­sons to be appointed as clerks,typists and peons in the Bank.It is said that the implementation of the proposal for ap­pointing those 40 persons would lead to an increase of 40 per cent of existing staff and the resulting addition to the establi­shment cost of the Bank would cause considerable strain on the Bank's finances which were already in an unsatisfactory state.The counter -affidavit of the 2nd respondent proceeds to state that on 5th July 1973 the Minister for Co -operation forwarded to him for necessary action a petition submitted by one Velayudha Panicker alleging many irregularities in the procedure adopted by the Board of Directors in the matter of making appointments to the service of the Bank and that the 2nd respondent,therefore,directed the Joint Registrar of Co -operative Societies(Credit ),Trivandrum to enquire into the allegations contained in the petition.In pursuance thereof the Joint Registrar conducted investi­gation and submitted a report to the 2nd respondent on 9th July 1973.It is said that the enquiry report revealed that the Board of Directors of the Bank had created many new supervisory posts and had already made appointments thereto in disregard of the directions contained in the circular dated 3rd January 1973 issued by the 2nd respondent.It was also disclosed by the report that though the Directors had been granted permission to make appointments only to 17 posts they had with undue haste selected as many as 40 persons as clerks,typists and peons to be appointed in the Bank and that the said appointments were about to be made.The 2nd respondent states that if the Board of Directors was allowed to proceed with appointments of 40 persons irreparable harm and prejudice would be caused to the finance of the Bank and the Bank's interest would be seriously jeopardised.It is further stated by the 2nd respondent that the report of the Joint Registrar revealed that the entire staff of the Bank had struck work on 7th July 1973 in protest against the wholesale appointments proposed to be made by the Board of Directors and that consequent on the strike the affairs of the Bank had come to a standstill.An order had been issued by the 2nd respondent on 6th July 1973 to the President of the Board of Directors staying all proceedings of the Board for making the new appointments but in total disregard and open defiance of the said order the President had hurriedly issued orders of appointments to candidates in order to make it appear that the stay order was incapable of being implemented.It is averred by the 2nd respondent that after bestowing anxious consideration of all the facts and circumstances which had led to a complete stalemate in the functioning of the Bank,he was satisfied that unless immediate action was taken to restore normalcy and to resume the functioning of the Bank it would result in serious and irreparable harm to the Bank's interests and that the matter was of such urgency that it was not possible to wait till the procedure of calling for objections from the Board of Directors or of consultation with the circle union and.the financing bank was gone through.It is contended that the action taken by him in invoking the powers under section 32(3)of the Act was fully warranted and legal.

(3.) THE Minister in charge of Co -operation has filed a counter -affidavit wherein he has categorically denied the peti­tioner's allegation that the 4th respondent is a "confidant "of the Minister and that he had approached him for supersed­ing the Bank.The Minister has stated that he had received a petition from one Shri Velayudha Panicker complaining certain malpractices on the part of the President and the other Directors of the Bank and he had only forwarded the said complaint to the Registrar of Co -operative Societies for necessary action and report.The allegations in ground C of the original petition connecting the 4th respondent and the Minister and the suggestion that the impugned action was taken at the instigation of the 4th respondent have been specifically and strongly denied in the Minister's counter -affidavit.