GURDIAL SINGH Vs. STATE OF PUNJAB

JUDGEMENT

(1.) PETITIONER No. 1, who is the Director and Chairman of the Board of Directors of the Morinda Co-operative Sugar Mills Morinda and the other petitioners who are its share holders have moved this court under Articles 226/227 of the Constitution of India for issuance of a writ of qua warranto or any other suitable writ declaring the appointment of respondent No. 4 as Managing Director of the Punjab State Federation of Co-operative Sugar Mills Limited, Chandigarh for short 'sugarfed' as illegal.

(2.) THE facts as gathered from the pleadings and bye-laws of the 'sugarfed' are as under:-The 'sugarfed' is a Society registered under the Punjab Co-operative Societies Act, 1961 (for short the Act ). It assists in the promotion and organisation of sugar mills in the State of Punjab. The entire administration, management and control of the 'sugarfed' vest in the Board of Directors. The Board of Directors of the 'sugarfed' ceased to function with effect from January I, 1984. The Registrar of Cooperative Societies, Punjab functioned as Administrator from January 9, 1984 to July 30, 1985. The period for which an administrator could be appointed could not exceed one year and six months as postulated in proviso to sub-section (1 -D) of Section 26 of the Act, On July 31, 1985 a communication was addressed by Registrar, Co-operative Societies signed on his behalf by Deputy Registrar, Co-operative Societies (Establishment) to the Managing Director 'sugarfed' directing that the matters relating to day-to-day working of the 'sugarfed' be referred to the Registrar, Co-operative Societies, Punjab since there was no Administrator or Board of Directors of the 'sugarfed'. In pursuance of the Chief Secretary's order issued vide endorsement No. 6/ 172/85/ias (3)/14747 dated October 31, 1985, the Governor of Punjab placed the services of respondent No. 4, a Member of Indian Administrative Service, at the disposal of the Administrator 'sugarfed' for appointing him as Managing Director of the 'sugar-fed'. Respondent No. 4, on attaining age of the superannuation retired from the Indian Administrative Service on the after-noon of April 30, 1989. The Government of Punjab vide endorsement No. 16/3/89-4 PP (1) dated April 19, 1989 re-employed respondent No. 4 as a Managing Director of the 'sugarfed' for a period of one year after the date of superannuation on the standard terms and conditions as per Government policy and procedure applicable in such cases. On the basis of the Government order dated April 19, 1989, appointment order vide endorsement No. 57 61/89-CIC III/ 7055 dated April 21, 1989 was issued. It is the validity of this order which has been challenged in this Writ Petition. The principal ground of attack is that respondent No. 4 ceased to be a Member of Indian Administrative Service on April 30, 1989 and could not be re-employed as Managing Director of the 'sugarfed'. Respondents Nos. 1 and 2 filed separate written statements while joint written statement was filed on behalf of the 'sugarfed' and the Managing Director. Respondent No. 1 filed written statement signed by the Secretary to Government Punjab Cooperative Department Shri Jai Singh Gill. The appointment of respondent No. 4 was justified under bye-law 17. 1 of the bye-laws of the 'sugarfed'. It was also stated that, the appointment could be made in accordance with the provisions of Section 26 (2) of the Act only if there was a Board of Directors of the 'sugarfed'.

(3.) THE only question which arises for consideration is whether under bye-law 17. 1, the Government of Punjab was competent to re-employ respondent No. 4 as Managing Director of the 'sugarfed'. It will be useful to reproduce bye-law 17. 1 of the bye-laws and it reads thus:-17. 1 "the Managing Director shall be the wholetime Chief Executive Officer of the Sugarfed. He may either be appointed by the Board, subject to the approval of the Registrar, or by the Government under the provisions of the Act. The Managing Director shall have all the powers and duties to run the business of the Sugarfed in accordance with the policies and programme laid down by the Board. " The Society registered under the Act carries on its functions in accordance with the bye-laws which have to be submitted to the Registrar of Societies along with an application of registration. The bye-law is a charter for carrying on the business of the society. Clause 4 of the bye-laws contains the definitions. Sub-clause (a) of Clause 4 of the bye-laws defines the term 'act' which means the Punjab Cooperative Societies Act, 1961. Sub-clause (c) of clause 4 defines the term 'bye-laws' which means the registered bye-laws of the 'sugarfed'. Sub-clause (e) of clause 4 of the bye-laws defines the term 'board' which means the Board of Directors of the Sugarfed duly elected as per provisions of the Act, Rules and the bye-laws. Sub-clause (i) of clause 4 of the bye-laws defines the term 'government' which means (he Government of the State of Punjab. The Managing Director is a whole time Chief Executive Officer of the 'sugarfed'. He may be appointed either by the Board subject to the approval of the Registrar or by the Government under the provisions of the Act, The Government can appoint a Managing Director but that has to be in conformity of the provisions of the Act which means the Punjab Cooperative Societies Act. Sub-section (2) of Section 26 of the Act envisages the appointment of a Managing Director by the State Government only when the Government have subscribed to the share capital of a Co-operative Society or has guaranteed the repayment of the principal of and payment of interest on debentures issued for loans raised by a Co-operative Society. The government has a right to nominate on the committee such number of persons not exceeding three or 1/3rd of the total number of members thereof whichever is less. A proviso has been added to sub-sec. (2) of S. 26 of the Act that where the government has subscribed to the share capital of a cooperative society to the extent of twenty lacs of rupees or more, the government may, notwithstanding anything contained in the bye-laws of the Society appoint one of the members nominated under clause (a) of sub-section (2) of Section 26 of the Act as Chairman of the Committee or nominate another member in addition to those nominated under clause (a) of sub-section (2) of Section 26 of the Act and appoint him as Managing Director. Another proviso has been added to subsection (2) of Section 26 of the Act that no person shall be appointed as a Managing Director unless he is a member of Indian Administrative Service, Punjab Civil Service (Executive Branch) or a Deputy Registrar or a Joint Registrar or Additional Registrar Cooperative Societies. There is no other provision in the Act authorising the State Government to nominate a Managing Director. The requisite qualifications for appointment of a Managing Director are contained in proviso to clause (b) of Section 26 of the Act. So when the Government has to appoint a Managing Director of the 'sugarfed' under by-law 17. 1 of the bye-laws, it could only appoint a person who fulfils qualifications laid down in the proviso. A member of the Indian Administrative Service could be appointed as a Managing Director of the Sugar-fed' but only when he is a member of the Service. After his retirement, he ceases to be a member of the Indian Administrative Service. The guideline for appointment of a Managing Director of the 'sugarfed' by the Government as envisaged under bye-law 17. 1 of the bye-laws of the 'sugarfed' is contained in Section 26 (2) of the Act. The bye-law has to be read in conjunction with sub-section (2) of Section 26 of the Act and not in isolation. The bye-law does not stipulate that the Government can appoint any person as a Managing Director. The bye-law specifically provides that the Government can appoint Managing Director only under the provisions of the Act. The Act provides for appointment of a Managing Director by the Government only in terms of second proviso to sub-section (2) of Section 26 of the Act. The Government was competent to appoint a Managing Director under bye-law 17. 1 of the bye-laws who has the requisite qualifications as provided in second proviso of sub-section (2) of Section 26 of the Act. Respondent No. 4 had ceased to be a member of the Indian Administrative Service w. e. f. April 30, 1989 and was ineligible for appointment as a Managing Director of the 'sugarfed'.