Supersession only in exceptional circumstances, not for extraneous considerations

The Supreme Court on Thursday decried the tendency of State governments superseding elected cooperative societies for political or extraneous reasons.

“Supersession of an elected managing committee/board is an exception and [can] be resorted to only in exceptional circumstances,” said a Bench of Justices K.S. Radhakrishnan and Dipak Misra.

Sending a warning to the States, the Bench imposed Rs. 1 lakh in costs on the Madhya Pradesh government, payable to the Madhya Pradesh State Legal Services Authority. The court ordered reinstatement of the Board of Directors of the District Cooperative Central Bank Ltd., Panna, forthwith and that it be allowed to continue for the period it had been put out of office by an impugned order which was quashed.

The Bench also imposed costs of Rs. 10, 000 on the Joint Registrar, Co-operative Societies, Sagar, who passed the order. The amount “will be deducted from his salary and deposited in the Panna DCB within two months.”

Writing the judgment, Justice Radhakrishnan said an elected committee should not be penalised for the shortcomings or illegalities committed by the previous committees, unless “there is any deliberate inaction in rectifying the illegalities.” The elected committee should be given at least six months to rectify defects, if any, pointed out in the audit report on incidents which originated when the previous committee was in office. “The Registrar/Joint Registrar is legally obliged to comply with all the statutory formalities including consultation with the financing/controlling banks, etc. Only after getting their view, can an opinion be formed as to whether an elected committee be ousted or not.”

The consequences

The Bench said the Registrar/Joint Registrar should always bear in mind the consequences of supersession, which had the effect of not only ousting the Board but also disqualifying its members from contesting subsequent elections. “The Registrar/Joint Registrar shall not act under political pressure or influence and, if he does, he will be subjected to disciplinary proceedings and also held personally liable for the cost of legal proceedings.” Taxpayers’ money should not be spent by the State government or the Registrar on unnecessary litigation involving disputes among various factions in a co-operative society.

In the instant case, the Joint Registrar of Cooperative Societies, Sagar Division, superseded the Board of Directors of the Panna DCCB without consulting the Reserve Bank of India. The Board challenged the order. A single judge of the Madhya Pradesh High Court disposed of the writ petition, directing the parties to avail themselves of alternative remedy provided under Section 78 of the Act. But on appeal, a Division Bench set aside the supersession. Aggrieved, Madhya Pradesh filed the present appeal, which was dismissed.