UP Cooperative Societies Act| Courts Can Interfere Where Registrar's Discretion U/S 38(1) Is Used In Unreasonable Or Perverse Fashion: Allahabad HC
|The Allahabad High Court has highlighted that under Section 38(1) of the Uttar Pradesh Cooperative Societies Act, the formation of the opinion by the Registrar for exercising his discretion has to be done only along well-recognized and sound juristic principles with a view to promoting fairness, induce transparency and aiding equity.
The Court observed that where the mind of the Registrar has not been applied at all to what was necessary for him to consider, the Courts will not hesitate to interfere.
In that context, the Bench of Justice Jayant Banerji observed that, "Under sub-section (1) of Section 38, the opinion of the Registrar is subjective. At this stage, he is not exercising a judicial function, but, at the same time he is directing an electorate to take a specific action against two officers of the Society one of which is the Chairman of the Committee of Management. The Chairman is duly elected. Any such direction of the Registrar has to be given its full play if such direction is within the scope of his powers and, in case there are relevant materials before him. However, if such discretion is exercised by the Registrar in an unreasonable or perverse fashion, without taking into consideration admitted facts, so as to leave no doubt in the mind of a court that discretion has been exercised arbitrarily without consideration of the materials before him and / or by relying on materials that reflect only bare allegations, then after considering other attendant facts, the court may interfere in the matter. Moreover, the court would not hesitate to interfere where the mind of the Registrar has not been applied at all to what was necessary for him to consider."
In this case, the petitioners filed a writ petition challenging the orders passed by the Additional Housing Commissioner/Additional Registrar of the Uttar Pradesh Avas Evam Vikas Parishad, Lucknow. The orders, dated May 30, 2024, and July 4, 2024, directed the removal of the Chairman and Secretary of the Grih Laxmi Sahkari Awas Samiti Ltd., a housing society in Gautam Budh Nagar, and summoned them for a hearing before potential removal or disqualification.
The petitioners argued that these orders were issued without proper jurisdiction and in an arbitrary manner, especially since the dispute between one of the society members, Smt. Kunta Devi, and the society were already referred to arbitration. The arbitration process was ongoing, yet the respondent proceeded with the removal orders based on an inquiry report that the petitioners claimed was conducted behind their backs.
Additionally, the petitioners contended that the previous Secretary of the Society had not handed over essential documents, which hindered their ability to address the allegations. Despite this, the respondent issued the removal orders without considering the ongoing arbitration or the resolution passed by the Society's Committee on Management, which requested a reconsideration of the removal orders.
The petitioners sought relief from the Court, asking for the quashing of the impugned orders and protection from further actions based on those orders. The Court acknowledged the complexity of the situation and noted that original records were produced by the respondents for the final hearing. The main issue revolved around the jurisdiction and propriety of the actions taken by the respondent under Section 38 of the Uttar Pradesh Cooperative Societies Act, 1965.
The Court held that the respondent no.2, who was required to exercise discretion under Section 38(1) of the Act, 1965, did so with material irregularity and in excess of jurisdiction. The Court found that the respondent acted arbitrarily, unreasonably, and unfairly by failing to furnish the Society with copies of the Inquiry Report and other relevant documents. This failure deprived the Society of the opportunity to conduct a fair hearing, which is essential for complying with the principles of natural justice.
The Court identified several issues with the respondent's actions:
1) The order was based solely on the Inquiry Report, which only examined an individual dispute between the petitioners and Smt. Kunta Devi. Other allegations in the Inquiry Report, based on a complaint by some Society members, were not examined despite directions for inspection under Section 66 of the Act.
2) The dispute between the petitioners and Smt. Kunta Devi was already subject to a pending arbitration proceeding, making it irrelevant for the respondent to base their decision on this issue.
3) The respondent no.2 failed to conduct an inspection under Section 66 before passing the order, despite having directed such an inspection.
The Court emphasized that the Registrar's discretion under Section 38(1) must be exercised after due and independent consideration of the materials on record. The Registrar's conclusions, based on the unexamined allegations and the individual dispute, were deemed unreasonable and unsupported by relevant materials.
Moreover, the Court noted that the Inquiry Report's conclusions about the Chairman and Secretary's alleged misconduct were not substantiated by a thorough inspection or investigation. The Court criticized the respondent no.2 for relying on this flawed Inquiry Report to conclude that the officers should be removed.
Additionally, the Court found that the Inquiry Report and other documents relied upon by the Inquiry Committee were not supplied to the Society. This omission violated the principles of natural justice, as it prevented the Society from making an informed decision and confronting the officers during the hearing process.
Subsequently, the Court quashed the impugned orders dated 30.05.2024 and 04.07.2024, allowing the writ petition.
Cause Title: Committee Of Management Grih Laxmi Sakhari Awas Samiti Ltd And 2 Others vs State Of Up And 3 Others (Neutral Citation: 2024:AHC:134604-DB)
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