Court’s Decision
The Bombay High Court quashed the order passed by the Deputy Registrar of Cooperative Societies, who had appointed an Authorized Officer to manage the affairs of a housing cooperative society under Section 78A of the Maharashtra Cooperative Societies Act, 1960 (“MCS Act”). The Court held that the Registrar had acted without following the mandatory procedure of consultation with the federal society or financing bank, rendering the order unsustainable in law.
The Court observed that “the requirement of consultation under Section 78A(1)(a) is not an empty formality; it is a condition precedent to the exercise of power.” The order was accordingly set aside, restoring the status quo ante with the managing committee of the society.
Facts
The dispute arose when the Deputy Registrar, Cooperative Societies, issued an order removing the managing committee of a cooperative housing society and appointing an Authorized Officer to administer its affairs. The said action was taken purportedly under Section 78A(1)(a) of the MCS Act, citing alleged mismanagement and non-compliance with statutory duties by the committee.
The society challenged this order, contending that it was issued without consultation with either the financing bank or the federal society, as required under the Act. The Registrar’s office had neither sought their opinion nor recorded reasons for dispensing with consultation. The petitioner-society, therefore, approached the High Court, seeking to quash the appointment and reinstate the committee’s management.
Issues
- Whether the Registrar or Deputy Registrar can invoke powers under Section 78A(1)(a) of the MCS Act without consultation with the financing bank or federal society.
- Whether such consultation is mandatory or merely directory.
- Whether failure to consult vitiates the appointment of an Authorized Officer.
Petitioner’s Arguments
The petitioner argued that Section 78A(1)(a) mandates the Registrar to consult the financing bank or the federal society before appointing an Authorized Officer or taking over the management of a cooperative society. The legislative intent behind this safeguard was to ensure checks and balances in the supervisory authority’s exercise of power.
It was submitted that the impugned order was passed mechanically, without any consultation, and hence was void ab initio. The petitioner relied upon the Division Bench judgment in Vishwas Bajirao Patil v. State of Maharashtra (2022), where it was categorically held that consultation under Section 78A is mandatory and non-compliance renders the order invalid.
The petitioner further argued that even if the Registrar believed consultation was unnecessary, he was required to record reasons for dispensing with it, which was not done. It was contended that administrative expediency cannot override statutory requirements.
Respondent’s Arguments
The State and Registrar’s representatives defended the action, asserting that the appointment of an Authorized Officer was necessary due to serious irregularities in the society’s functioning. They argued that the power under Section 78A is intended to safeguard the interest of members and ensure smooth administration.
The respondents contended that the absence of consultation did not automatically vitiate the order, as the requirement was procedural. They cited the urgency of the situation and alleged mismanagement as justification for bypassing consultation. It was submitted that the purpose of the Act would be defeated if procedural delays were allowed to impede immediate administrative intervention.
Analysis of the Law
The Court analyzed the scope of Section 78A(1)(a) of the MCS Act, which empowers the Registrar to remove or supersede a committee of a cooperative society in cases of persistent default, negligence, or acts prejudicial to the interest of the society. However, the statute expressly requires prior consultation with the financing bank or federal society before such drastic action is taken.
The Court emphasized that the word “shall” in Section 78A denotes a mandatory command. The use of such language indicates legislative intent to ensure participatory governance within the cooperative structure. The consultation requirement operates as a safeguard against arbitrary administrative intervention.
It was further noted that the rule of natural justice demands prior notice and opportunity to respond before supersession of an elected body, which is also a democratic organ within the cooperative framework. Thus, consultation is not a mere procedural ritual but an essential check ensuring transparency and fairness.
Precedent Analysis
- Vishwas Bajirao Patil v. State of Maharashtra (2022 Bom HC) – Held that consultation under Section 78A is mandatory and failure to do so renders the action illegal.
- Essar Teleholdings Ltd. v. Delhi Development Authority (2018 SC) – Reaffirmed that when a statute prescribes a specific manner for doing an act, it must be done in that manner alone.
- Rajendra N. Shah v. State of Maharashtra (2021 SC) – Highlighted the democratic character of cooperative institutions and the need for adherence to statutory safeguards.
- State of U.P. v. Manbodhan Lal Srivastava (1957 SC) – Distinguished between directory and mandatory provisions, relied upon for interpretative guidance.
The Court found the principle in Vishwas Bajirao Patil directly applicable, holding that non-consultation amounts to non-compliance with a condition precedent, invalidating the entire process.
Court’s Reasoning
Justice Amit Borkar observed that the Registrar’s power under Section 78A has far-reaching implications as it displaces a democratically elected managing committee. Such a power cannot be exercised lightly or without adherence to statutory safeguards.
The Court held that consultation is a mandatory precondition for invoking Section 78A(1)(a). Even in situations of urgency, the Registrar is duty-bound either to consult or to record reasons explaining why consultation was impracticable. Since neither was done in this case, the order lacked jurisdictional foundation.
The Court further observed that administrative convenience cannot override express statutory mandates. The legislature consciously incorporated the consultation clause to prevent arbitrary takeovers by administrative authorities. Hence, failure to comply with this mandate strikes at the very root of the order’s legality.
Conclusion
The High Court quashed the impugned order appointing the Authorized Officer for breach of the mandatory consultation requirement under Section 78A(1)(a) of the MCS Act. The managing committee of the society was restored to its original position. The Court reiterated that consultation with the financing bank or federal society is an indispensable statutory safeguard, and authorities must scrupulously comply with it before invoking supervisory powers over cooperative institutions.
Implications
- Establishes that consultation under Section 78A of the MCS Act is mandatory, not discretionary.
- Reinforces the principle that administrative actions affecting democratically elected cooperative bodies must follow due process.
- Limits arbitrary takeovers by government authorities over housing societies.
- Reaffirms the cooperative sector’s autonomy and the constitutional principle of democratic self-governance under Article 243-ZI.