# [1975] 1 S.C.R. 601

- **Citation:** [1975] 1 S.C.R. 601
- **Court:** Supreme Court of India
- **Decided:** 1974-08-06
- **Case number:** Civil Appeal No. 971 of 1973
- **Bench:** A. N. Ray, K. K. Mathew J
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1975-1-s-c-r-601-6360
- **Pages:** 4

## Headnote

Mysore Co-operative Societies Act, 1959-Sections 30 and 54-Scope of-Supersession-Natura/ justice.
Pursuant to an inspection report submitted by the Reserve Bank of India pointing out many irregularities in the working of a district Co-operative Central Bank,
the State Government issued two notifications under s. 54 of the Mysore Co-operative Societies Act, 1959. By the first notification the Committee of Management of
the Bank was superseded and by the second, another Committee was appointed in
its place. The respondent, who was the President of the Bank, challenged the noti-
. fications as being ultra vires the Act and in violation of principles of natural justice.
The High Court set aside the notifications.
Dismissing the appeal,
HELD : (1) The High Court rightly set aside the two notifications. The in1·
peached orders suffered from two insurmountable infirmities. The entire Committee
of Management had been superseded. The State Government did not take recourse
to the provision under s. 30 of the Act to supersede the Management. Section 54
of the Act, which contemplates exercise of control over the conduct of business,
does not confer any power to remove the President and Vice· President of the Bank.
The word "control" suggests check, restraint or in~uence.
Contr~l is intend~. to
regulate and hold in check and restrain from action. In the gutse of exerCis1ng
control the State had displaced the Committee of Management and substituted its
own Committee. The State had indirectly intended to achieve what it was directly
prohibited from doing under s. 54 of the Act.
(2) The notification was in violation of principles of natural justice. Section 30
of the Act contemplates a notice where the State intends to supersede the Manage ..
ment. In utter defiance of the powers under the statute the Committee had been
arbitrarily deprived of their right to manage the affairs of the society.

## Text

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601
STATE OF MYSORE
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ALLUM KARIBASAPPA & ORS.
August 6, 1974
[A. N. RAY, C. J. AND K. K. MATHEW J.J
Mysore Co-operative Societies Act, 1959-Sections 30 and 54-Scope of-Supersession-Natura/ justice.
Pursuant to an inspection report submitted by the Reserve Bank of India pointing out many irregularities in the working of a district Co-operative Central Bank,
the State Government issued two notifications under s. 54 of the Mysore Co-operative Societies Act, 1959. By the first notification the Committee of Management of
the Bank was superseded and by the second, another Committee was appointed in
its place. The respondent, who was the President of the Bank, challenged the noti-
. fications as being ultra vires the Act and in violation of principles of natural justice.
The High Court set aside the notifications.
Dismissing the appeal,
HELD : (1) The High Court rightly set aside the two notifications. The in1·
peached orders suffered from two insurmountable infirmities. The entire Committee
of Management had been superseded. The State Government did not take recourse
to the provision under s. 30 of the Act to supersede the Management. Section 54
of the Act, which contemplates exercise of control over the conduct of business,
does not confer any power to remove the President and Vice· President of the Bank.
The word "control" suggests check, restraint or in~uence.
Contr~l is intend~. to
regulate and hold in check and restrain from action. In the gutse of exerCis1ng
control the State had displaced the Committee of Management and substituted its
own Committee. The State had indirectly intended to achieve what it was directly
prohibited from doing under s. 54 of the Act.
(2) The notification was in violation of principles of natural justice. Section 30
of the Act contemplates a notice where the State intends to supersede the Manage ..
ment. In utter defiance of the powers under the statute the Committee had been
arbitrarily deprived of their right to manage the affairs of the society.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 971 of 1973.
(Appeal by special leave from the Judgment and Order dated Ist
June, 1973 of the Mysore High Court at Bangalore in W. P. No.
1949 of 1972.)
F. S. Nariman Addi. Solicitor General of India and Veerappa for
the appellllnt.
S. S. Javali and B. P. Singh, for Respondents Nos. J, 17-28.
The Judgment of the Court was delivered by
RAY, C. J.-This is an appeal by special leave from the judgment
dated 1 June, 1973 of the High Court of Mysore .
. T~e respondent Karibasappa was the Presid~nt of the Bel!ary
D1stnct .Co-~perative Central Bank Limited, Hospet. He challenged
two notification~ dat~d 11 Aug!lst, 19?2 issued by the State Government. The ~otificahons were issued m exercise of the powers conferred by sections 54 and 121 of the Mysore Co-operative Societies Act
1959 hereinafter referred to as the Act.
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SUPREME COURT REPORTS
[1975} 1 S.C.R'.
The management and administration of the Bank was conducted
by the Committee consisting of the President, the Vice-President, and
ten elected members from various constituencies and certain ncminees
of the State Government. At no time the Government nominated
more then three persons as its representatives.
The Bank had a share capital of Rs. 75 lakhs. The State Government contributed Rs. 23 · 8 lakhs. The Reserve Bank oflndia advanced
a loan of Rs. 135 lakhs. The Apex Bank also gave a loan of Rs. 200
lakhs. The State Government guaranteed the repayment of loans to
the Reserve Bank of India.
The Reserve Bank of India from time to time inspected the Bank.
There was an inspection on 14 October, 1971. The report referred to
many irregularities and stated that the financial resources of the Bank
had improved slightly.
The Joint Registrar on 3 August, 1972 forwarded the report to the
Registrar of Co-operative Societies and suggested action under section
54 of the Act. In this background the Government issued the impugned notifications on 11 August, 1972.
Broadly stated, the notifications recited that the State had given
Rs. 23 ·80 lakhs to the Bank and it was necessary in public interest to
take powers to exercise control over the conduct of the business of the
Bank to safeguard the public funds. The State Government in
exercise of the powers conferred by section 54 of the Act should have
the right to nominate as its representatives, fifteen persons on the
Board of Management and to appoint one among them as
the President, one as the Vice-President and one other as the
Managing Director of the Bank. The President, the Vice-President
and the Managing Director under the notification should exercirn powers
and discharge their functions subject to the supervision, direction and
control of the State Government. The notification further stated that
section 29 which conferred power on the State Government subject to
any notification under section 54 or section 121 to have the right to
nominate as its representatives not more than three persons or onethird of the total number of members of the Committee of the Cooperative Society, whichever is less would be modified by substituting
the words "have the right to nominate as its representatives 15 persons
of the Committee of the Co-operative Society of whom one shall be
appointed as Managing Director". The notification conferred power
on the Managing Director subject to the policy decision of the Board,
the right to conduct the business of the Bank and to sanction expenditure on establishment and certain other powers.
The second notification nominated fifteen persons to form the
Board of Directors of the Bank. The Deputy Commissioner Bellary
was appointed the President of the Bank.
The Bank challenged the notifications on three grounds. First,
the action of the Government was ultra vi res the Act; second, the action was bad in violation of principles of natural justice; third, the
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MYSORE v. A. KARtllASAPPA (Ray, C.J.)
60'3
action was takell because of political rivalry with an evil eye to remove
the President from the otliice.
The High Court upheld the first two contentions and ret adde the
order.
Section 54 of the Act provides that where State aid <mc•nting to
not less than two lakhs of rupees is given to any co-operative rnciety,
the State Govenunent, if it is satisfied that it is necesrnry in public
interest so to do, may by notificationin the official gazette take power to
exercise such control over the cenduct of business of such wciety as
shall suffice in the opinion of the State Government to safeguard the
interests of the State.
Section 121 enacts that the State Government may, by general or
special order published in the official gazette, exempt any co-operative
society or any class of societies from any of the provisions of this Act
or may direct that such provisions shall apply to such society or class
of societies with such modifications as may be specified in the order.
At this stage, reference may be made to section 30 of the Act which
provides for supersession of Committee. If, in the opinion of the
Registrar, the Committee of any Co-operative Society persistently
makes default or is negligent in the performance of the duties imposed
on it by this Act or the Rules or the bye-laws, or commits any act
which is prejudicial to the interests of the society or its members, or
is otherwise not functioning properly, the Registrar may, after giving
the committee an opportunity to state its objections, if any, by order
in writing, remove the committee and appoint a new committee consisting of one or more members of the society in its place or appoint
one or more Administrators who need not be members of the society.
Section 30 further provides that the Registrar can manage the affairs
of the society for such period or periods not exceeding two years.
There is also a provision for extension of the period so that the aggregate period does not exceed four years.
Section 29 to which reference has already been made provides for
the nomination by the Government of persons on the committee of
the Society where the State Government has subscribed to the share
capital of a co-operative society or guaranteed the repayment of leans.
The members nominated by the Government under section 29 of the Act
does not exceed three or one:third of the total number of members
of the Committee, whichever is less.
Section 54 of the Act indicates that the power thereunder is to be
exercised in public interest. The control over the business of the
Society contemplated under section 54 should be such as is sufficient in
the opinion of the State Government to safeguard the interests of the
State .
In the present case, the impeached orders suffer from two insurmountable infirmities. One is that the entire committee of Management has been superseded. There is a provision under section 30 of
the Act to supersede the management. The State Government does
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[1975] 1 S.C,R,
not take recourse to the section. Indirectlythe State Government has
overthrown the Committee of Management including the President and
the Vice-President. The President and the Vice-President are officers
within the meaning of section 2(g) of the Act. Section 54 does not
confer any power to remove the President and the Vice-President of the
Society. Section 54 contemplates exercise of control over the conduct
of the business. The word "control" suggests check, restraint or
influence. Control is intended to regulate and hold in check and restrain from action. In the guise of exercising control the State has
displaced the committee of Management and substituted its own Committee. The State has indirectly intended to achieve what it is directly
prohibited from doing under section 54 of the Act.
The second vice of the notification is that it is in violation of principles of natural justice. Section 30 of the Act contemplates a notice
where the State intends to supersede the Management. The Committee has been deprived of their right to manage the affairs of the
Society. They have been deprived of the right arbitrarily and in utter
defiance of the powers under the statute.
The High Court rightly set aside the impeached notificatiom.
For these reasons, the appeal fails and is dismissed: The State
will pay costs to the respondents.
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P.B.R.
Appeal dismissed.
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