HEMANT VIMALNATH NARICHANIA & ANR Vs. ANAND DARSHAN C.H.S.LTD.& ORS.

Maharashtra Co- operative Societies Act, 1960

Section 18 - POWER TO DIRECT AMALGAMATION, DIVISION AND REORGANISATION IN PUBLIC INTEREST, ETC

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 1653 of 2016, Judgment Date: Feb 23, 2016

Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1653 OF 2016
(Arising out of S.L.P. (C) No.31265 of 2010)

Hemant Vimalnath Narichania and another ….. Appellants

Versus

Anand Darshan C.H.S. Ltd. and others …..Respondents

WITH

CIVIL APPEAL NO. 1654 OF 2016
(Arising out of S.L.P. (C) No.32678 of 2010)

J U D G M E N T

Uday Umesh Lalit, J.

1. Leave granted.

2. These appeals challenge the common Judgment and Order dated
02.08.2010 passed by the High Court of Judicature at Bombay in Writ
Petition Nos.8194 of 2009 and 2980 of 2010.

3. The subject of division of an existing Co-operative society in the
State of Maharashtra is dealt with by Section 18 of the Maharashtra Co-
operative Societies Act, 1960 (hereinafter referred to as “the Act”) which
Section is to the following effect:-
“18. POWER TO DIRECT AMALGAMATION, DIVISION AND REORGANISATION IN PUBLIC
INTEREST, ETC:
(1) Where the Registrar is satisfied that it is essential in the public
interest, or in the interest of the cooperative movement, or for the
purpose of securing the proper management of any society, that two or more
societies should amalgamate or any society should be divided to form two or
more societies or should be reorganised then notwithstanding anything
contained in the last proceeding section but public subject to the
provisions of this section, the Registrar may, after consulting such
federal society as may be notified by the State Government by order
notified in the Official Gazette, provide for the amalgamation, division or
reorganisation of those societies into a single society, or into societies
with such constitution, property, rights, interests and authorities, and
such liabilities, duties and obligations, as may be specified in the order.

No order shall be made under this section, unless—

(a) a copy of the proposed order has been sent in draft to the society or
each of the societies concerned;

(b) the Registrar has considered and made such modifications in the draft
order as may seem to him desirable in the light of any suggestions and
objections which may be received by him within such period (not being less
than two months from the date on which the copy of the order as aforesaid
was received by the society) as the Registrar may fix in that behalf,
either from the society or from any member or class of members thereof, or
from any creditor or class of creditors.

(3) The order referred to in sub-section (1) may contain such incidental,
consequential and supplemental provisions as may, in the opinion of the
Registrar, be necessary to give effect to the amalgamation, division or
reorganisation.

(4) Every member or creditor of or other person interested in, each of
the societies to be amalgamated, divided or reorganised, who has objected
to the scheme of amalgamation, division or reorganisation, within the
period specified, shall be entitled to receive, on the issue of the order
of amalgamation, division or reorganisation his share or interest, if he be
a member, and the amount in satisfaction of his dues if he be a creditor.

(5) On the issue of an order under sub-section (1). the provisions in sub-
sections (2), (3) and (4) of section 17 shall apply to the societies so
amalgamated, divided or reorganised as if they were amalgamated, divided or
reorganised under that section, and to the society amalgamated, divided or
reorganised.

(6) Nothing contained in this section shall apply for the amalgamation of
two or more co-operative banks or two or more primary agricultural credit
societies.”

The procedure in that behalf is detailed in Rule 17 of the Maharashtra
Cooperative Societies Rules, 1961 (hereinafter referred to as “the Rules)
which is as under:-
“17. Direction by Registrar for amalgamation, division and reorganisation
of societies:-

(1) Before issuing any order under sub-section (I) of Section 18
providing for the amalgamation, division or reorganisation of any society
or societies, the Registrar shall prepare a draft scheme in respect of such
amalgamation, division or reorganisation stating in particular the manner
in which the new committee or committees, of the society or societies
resulting from such amalgamation, conversion or reorganisation shall be
constituted and the by-laws which such society or societies shall follow.
The Registrar shall then consult such federal society as may be notified by
the State Government in the Official Gazette, and after considering the
suggestions, if any, that will be made by such federal society, shall send
a copy of the draft of the order proposed to be issued by him under sub-
section (1) of Section 18, to the society or each of the societies
concerned calling upon it or them to invite objections or suggestions from
any member or class of members thereof or from any creditor or class of
creditors and to submit such objections and suggestions together with its
own or their own suggestions and objections within a period of not less
than two months from the date on which the copy of the draft aforesaid was
received by it or them.

(2) The Registrar shall consider all such suggestions and objections and
make such modifications in the draft order as may seem to him desirable in
the light of those suggestions or objections and then issue a final order
under sub-section (I) of Section 18.

(3) Any member or creditor of each of the societies to be amalgamated,
divided or reorganised, who has objected to the scheme of amalgamation,
division or reorganisation within the period specified in sub-rule (i), may
apply to the Registrar for payment of his share or interest, if he be a
member, and the amount in satisfaction of his dues, if he be a creditor.
Such application shall be separate and distinct from the objection or
suggestion which he may have submitted to the society or the Registrar
under clause (b) of sub-section (2) of Section 18. It shall be competent
for the Registrar to nominate an officer not below the rank of a Deputy
Registrar to investigate such applications and to determine the payments
required to be made to the members or creditors, as the case may be.

(4) Subject to the provisions of the Act, the rules and the by-laws, the
Registrar may by order require the society concerned to meet in full or
satisfy otherwise all due claims of the members and creditors and thereupon
the society shall be bound to meet in full or satisfy otherwise all due
claims of the members and creditors within such time as may be specified by
the Registrar in the order.”

4. The facts leading to the filing of the present appeals are as under:

(a) Respondent No.1 herein i.e. Anand Darshan Co-operative Housing
Society Ltd. (registered under the provisions of the Act) consists of two
buildings. The first building has one wing namely “A Wing” consisting of
16 apartments, a bank and two garages while the second building has two
Wings namely B and C Wings with 41 apartments and nine garages.

(b) On 24.05.2007, 12 members from A Wing of Respondent No.1 -Society
moved Application No.1 of 2007 before Deputy Registrar, “D” Ward, Mumbai
for division of Respondent No.1 - Society by division of its assets and
liabilities.

(c) A scheme for division as contemplated under Rule 17 was therefore
prepared on 16.07.2007. After setting out the areas of both the
buildings, it was stated that ‘A’ Wing Building had 41.68% share and
interest in the property/open space of Respondent No.1 - Society while the
other Building having ‘B’ and ‘C’ Wings had 58.32% share and that the
right/title and interest in the property/land including additional FSI that
might be available in future in respect of these buildings would also be in
same proportion. A plan was enclosed detailing proposed division while
certain areas and facilities were to be enjoyed in common.

(d) On 19.07.2007 the scheme was forwarded under a covering letter from
the office of Deputy Registrar, D Ward, Mumbai to Respondent No.1 -Society
and also to Maharashtra District Housing Federation Limited, namely, the
Federal Society.

(e) A draft order was prepared on 05.09.2007 by the office of the Deputy
Registrar detailing out the scheme for division and other consequential
matters. This draft order was then sent to Respondent No.1 -Society and
the Federal Society. This was followed by second draft order dated
18.03.2008 to similar effect which was marked to Respondent No.1 -Society
and the Federal Society.

(f) On 09.05.2008 following resolution was passed by the Federal Society:
“Under the said proposal of Division, there are 3 Wings of a single
building and the division is to be made wing-wise (But) if wing-wise
division is made in one building then it is possible that a dispute may
again arise among the Members regarding the use of the building’s open
space. In view thereof, it is resolved that the said division cannot be
recommended by the Federation.”

(g) In response to the aforesaid resolution, a detailed representation
was made on 02.06.2008 stating inter alia that as a matter of fact three
Wings of Respondent No.1 - Society were not located in one single building
but were in two different buildings, A Wing of the Society being in one
separate building while the other two Wings – B and C in another building.
Draft building plans, photographs and other materials were also annexed.
This led to communication dated 19.07.2008 addressed by the Federal Society
to the Deputy Registrar acknowledging the receipt of material stating that
A, B, C Wings of the Society were not in a single building and that A Wing
of the Society was in an independent building. Further, the letter
requested the Deputy Registrar to take a decision about the division
accordingly. Around this time the Federal Society wrote to the proposed
Society of A Wing that it had by letter dated 19.07.2002 written to the
Deputy Registrar recommending proposal of division.

(h) Thereafter the draft order was circulated by the Deputy Registrar on
22.08.2008 seeking comments regarding proposed division and he fixed
15.09.2008 as the date for hearing objections, etc. This draft order was
again marked to Respondent No.1 -Society. According to the draft order,
Respondent No.1 - Society would be divided in two societies:-
(a) The Respondent No.1 -Society would, upon bifurcation, continue with
only two existing Wings namely, B and C Wings with 41 apartments, nine
garages, one Office Meeting Room and one Pump House while
(b) New Society namely New Anand Darshan Cooperative Housing Society
Limited would comprise of 16 apartments from the existing A Wing with a
Bank, two Garages, Security Office and a Meter Room.
(c) And certain facilities would continue to be enjoyed in common by both
these Societies.

(i) Thereafter on 03.11.2008 final order directing division of the
existing Society i.e. Respondent No.1 – Society was passed. The relevant
portion of the Order reads as under:-
“In exercise of the powers conferred on me under Section 18 (1) of the
Maharashtra Co-operative Societies Act, 1960 and Rule 17 (2) thereunder I,
Rajkumar Patil, Deputy Registrar, Co-operative Societies D-Ward, Mumbai,
divided (the Society viz.) the Anand Darshan Co-operative Housing Society
Limited., C.S.No.744, 13-Dr. G.D. Deshmukh Marg, Mumbai – 400 026 into two
independent Societies and cancel/revoke the registration of the Anand
Darshan Co-op. Housing Society Limited. Regn.No.B-3126/1961 dated 28.4.1961
which has been divided under Section 21 and Rule 16(7) thereunder.

After the division the building having “A” Wing and “B” and “C” Wings have
to be given two (separate) registrations under Section 9(1) of the
Maharashtra Co-op. Societies Act, 1960 and the Rules thereunder for the
purpose of the flats in the said Wings for the purpose I register the below-
mentioned new societies under the Registration Numbers mentioned against
them.

Members in the building having “B” and “C” Wings are hereby ordered to
submit to this office, the Registration Case Papers in the relevant
prescribed Form to register the new Society of their Building. Further, as
mentioned in the attached Proforma “A” Two Independent Managing Committees
are created in respect of the Two Independent Societies…..”

(j) This order of the Deputy Registrar regarding division was challenged
by way of Appeal No.250 of 2008 by Respondent No.1 - Society before
Divisional Joint Registrar, Cooperative Societies, Mumbai Division, Mumbai,
who dismissed this appeal by his order dated 16.04.2009. This led to the
filing of Revision Application No.231 of 2009 which also came to be
dismissed by the Revisional Authority vide order dated 26.08.2009.

(k) Respondent No.1 – Society challenged these orders by filing Writ
Petition No.8194 of 2009 in the High Court of Judicature at Bombay. 17
Members of B and C Wings of Respondent No.1 -Society also preferred Writ
Petition No.2980 of 2010 in the High Court claiming similar reliefs.

(l) Said writ petitions came to be allowed by the High Court by Judgment
and Order under appeal setting aside the concurrent view taken by three
authorities in the matter. It was observed by the High court that Section
18(2) of the Act obliges the Registrar to prepare a draft order and send
the same to the Society inviting suggestions and objections, that after
receipt of such suggestions and objections the Registrar was further duty
bound to consult the Federal Society and only thereafter an order under
Section 18 dividing the Society could be passed. Since the final draft
order was never sent to the Federal Society for obtaining its
recommendations, according to the High Court, there was infraction on the
part of the Deputy Registrar. The High Court therefore allowed the said
writ petitions and remanded the matter back to the Deputy Registrar to take
fresh decision after following the procedure under Section 18 of the Act
and under Rule 17 of the Rules.

5. In these appeals arising out of the common judgment and order passed
by the High Court, we have heard Mr. Shyam Diwan, learned Senior Advocate
for the appellants and Mr. Shekhar Naphade, learned Sr. Advocate for
Respondent No. 1 – Society and Mr. Venkata Krishna Kunduru, learned
Advocate for the State.

6. Section 18(1) of the Act and Rule 17 of the Rules deal with, inter
alia, division of an existing Society. The power under Section 18(1) of
the Act can be exercised if the Registrar is satisfied with the essential
requirements mentioned in the said sub-section (1). The Section, however,
obliges the Registrar to exercise such power after consulting such Federal
Society as may be notified in the Official Gazette. Sub-section (2) of
Section 18 imposes two more conditions and states that (a) no order for
division be made unless a copy of the proposed order has been sent in draft
to the concerned Society and (b) the Registrar shall consider the
suggestions and objections, if any, either from the Society or from any of
its members and may make such modifications in the draft order as may seem
desirable to him. Rule 17(1) of the Rules while detailing out the
procedure to be followed, lays down that before issuing any order under
Section 18(1) providing for division of an existing Society, the Registrar
shall prepare a draft scheme. The Rule further lays down that the
Registrar shall then consult the Federal Society and after considering the
suggestions, if any, made by such Federal Society, shall send a copy of the
draft order proposed to be issued by him to the Society. The Society
would also be called upon to invite the objections or suggestions from any
member or class of members of the Society. Said sub-rule (2) then states
that the Registrar shall consider all such suggestions and objections and
make such modifications in the draft order as may seem desirable to him
and shall then issue a final order under sub-section (1) of Section 18.

7. Thus as regards division of an existing Society, following steps
emerge from the reading of these provisions.

The Registrar shall first prepare a draft scheme.

b. He shall then consult the Federal Society. As part of process of
consultation, the Registrar would naturally be obliged to send the draft
scheme to the Federal Society.

c. The suggestions, if any, made by the Federal Society would then be
considered and the Registrar shall thereafter prepare a draft order,
proposed to be issued by him. This draft order shall then be sent to the
concerned Society calling upon the said Society to invite objections or
suggestions from any of its members.

d. If any suggestions or objections are made to the draft order, the
Registrar shall consider if any modifications seem desirable and in the
light of such suggestions or objections he shall then issue a final order.

8. These provisions make it very clear that the stage for consultation
with the Federal Society is when the draft scheme is contemplated. After
the stage of consultation with the Federal Society is over, the next stage
arises for preparing draft order which is then circulated for inviting the
objections or suggestions. The provisions nowhere contemplate the draft
order to be again sent to the Federal Society as part of process of
consultation. The assessment made by the High Court in that behalf is
completely incorrect. In the present case, at the stage of draft scheme
the Federal Society was consulted in the matter and thereafter draft order
was prepared in respect of which objections or suggestions were invited.
The High Court was not, therefore, justified in holding that there was
infraction on part of the Deputy Registrar in the present matter. In our
view, the exercise of power by the Deputy Registrar and the procedure
adopted by him were perfectly in tune with Section 18 of the Act and Rule
17 of the Rules.

9. We, therefore, allow these appeals and set aside the judgment and
order under appeal. The order dated 03.11.2008 passed by the Deputy
Registrar accepting the proposal for division of Respondent No.1 - Society
as confirmed by the Appellate and Revisional Authorities is restored. The
matter shall now be taken up by the Deputy Registrar for passing
consequential directions, if any.

10. The appeals are allowed in aforementioned terms. No order as to
costs.

……………………………J
(V.GOPALA GOWDA)

……………………………J
(UDAY UMESH LALIT)
New Delhi
February 23, 2016

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