Yashoda Nandan, J. - (1.) THE petitioners claimed to be members of the U.P. Industrial Co -operative Bank Ltd. (hereinafter referred to as the " bank "), a society registered under the U.P. Co -operative Societies Act.
(2.) A dispute arose between the petitioners and the bank about the petitioners ' claim for return of their goods said to be worth about Rs. 16,000 pledged with the bank. The petitioners claimed the pledged goods and/or Rs. 16,000 as their value plus damages at the rate of Rs. 150 per day from 17th August, 1963, for loss alleged to have been suffered by them in business on account of the failure of the bank to return the pledged goods. The petitioners submitted in writing the dispute to the Registrar, Co -operative Societies, for decision in April, 1964. The dispute was referred for decision by the Registrar to Sri Jai Ram Prasad, Industrial Inspector, as the sole arbitrator. The arbitrator refused to decide the question of the petitioners' claim for return of the pledged goods or for payment of their value by the bank on the ground that the goods were in the custody of the court. The claim for damages made by the petitioners was rejected by the arbitrator. Against the award of the arbitrator the petitioners filed an appeal purporting to be under Rule 133 of the Rules framed under the U.P. Co -operative Societies Act before the Registrar, Industrial Co -operative Societies, U.P. The Registrar transferred the appeal for hearing to the Assistant Registrar (Handloom) Industrial Co -operative Societies, U.P., Kanpur. According to the petitioners, during the pendency of the appeal an agreement was arrived at between the parties. On the 28th June, 1966, the Assistant Registrar passed an order, the operative portion of which is as follows: "(1) The appellants shall pay the full amount of loan outstanding against them plus interest that have accrued till 17 -8 -63 to the respondent, the U.P. Industrial Co -operative Bank. (2) The respondent, U.P. Industrial Co -operative Bank, shall release the goods in favour of the appellants after receipt of the said amount. (3) The respondent shall pay compensation to the appellants at the rate of Rs. 40 per day w.e.f. 17 -8 -1963 till the date of release of the goods. (4) The cost of the appeal shall be borne by the parties concerned." This order of the Assistant Registrar purports to be based on the alleged compromise relied upon by the petitioners. 5. On the 13th July, 1966, the bank filed an appeal against the order of the Assistant Registrar. The appeal was heard by Sri K.N. Mathur, who was at the relevant time a Deputy Registrar , Industrial Co -operative Societies, U.P. The order of the Assistant Registrar was set aside by the Deputy Registrar. The Deputy Registrar ordered that the bank should not pay any compensation to the petitioners. The Deputy Registrar, however, ordered that the bank should return the goods pledged by the petitioners after obtaining payment for the same. The costs, according to the order, were to be borne by the parties concerned. By means of this petition, the petitioners have prayed for a suitable order or direction commanding respondent No. 2, the Registrar, Industrial Co -operative Societies, U.P., Kanpur, to bring forth his record before this court and to quash the order of the Deputy Registrar. There is also a prayer for any other suitable writ, order or direction which this court may deem fit and proper in the circumstances of the case. 6. Before dealing with the petition on merits, I would like to dispose of a contention in the nature of a preliminary objection raised by the respondent bank based on allegations contained in the supplementary counter -affidavit filed on the 14th August, 1967, wherein it is alleged that Sri Ikramuddin, petitioner No. 1, was at no time even " a nominal member of the bank". As far as Mohammad Yamin, petitioner No. 2, is concerned, according to the supplementary counter -affidavit, he was merely a nominal member of the bank under bye -law No. 5 (C) of the bye -laws of the bank. The contention raised was that under Rule 115 of the U.P. Co -operative Societies Rules a dispute between a member or past member and the society alone could be referred to an arbitrator and since the petitioners were not members of the bank but were at best nominal members thereof, a dispute raised by them could not be referred to an arbitrator under Rule 115 of the U.P. Co -operative Societies Rules and in consequence the entire proceedings were invalid. Learned counsel appearing for the respondent bank contended that if this court came to the conclusion that the order passed by the Deputy Registrar deserved to be quashed it was just and proper that the entire proceedings including the order of the Assistant Registrar which was in favour of the petitioners be quashed. 7. The petition was filed on the 2nd November, 1966. It was alleged in paragraph 1 of the petition that the petitioners are members of the bank. On the 18th May, 1967, a counter -affidavit was filed by Sri A.K. Srivastava, the general manager of the bank, wherein the contents of paragraph 1 of the petition were admitted. At no stage of the proceedings before the authorities constituted under the U.P. Co -operative Societies Act, the contention now sought to be raised was advanced. In the circumstances of the case, I do not consider it fit and proper to permit the respondent bank to take up this plea for the first time in these proceedings. Since I propose to quash the order passed by the Deputy Registrar and to direct that the appeal filed by the bank be decided afresh, it will be open to the appellate authority to allow this contention to be raised if it considers it proper to do so. 8. As far as the merits of this petition are concerned, it was firstly contended by learned counsel appearing for the petitioners that the decision of the Deputy Registrar, Sri K.N. Mathur, was a nullity since the Deputy Registrar being one of the directors of the bank was biased and incompetent on that account to hear and decide the appeal. In my judgment, there is force in this contention which must in consequence prevail. According to the allegations contained in the petition, the petitioners objected that Sri K.N. Mathur was not competent to hear the appeal and to pass any orders of stay as he did, since he was one of the directors of the bank and was in consequence interested in the affairs of the bank. A counter -affidavit has been, filed by Sri K.N. Mathur, the Deputy Registrar, who states that he is not one of the elected directors of respondent No. 1 and does not represent its shareholders or any other constituent. He is only one of its ex -officio directors in his capacity as secretary of the U.P. Industrial Co -operative Association " in order to watch the interests of the Association from which respondent No. 1 has derived much of its finances........." 9. A copy of the bye -laws of the U. P. Industrial Co -operative Association Ltd. of which Sri K.N. Mathur admittedly was the secretary at the relevant time was made available to me by counsel for the respondent bank. According to bye -law No. 5 the membership of the Association shall be open to all societies registered under the Co -operative Societies Act. The management of the Association, according to bye -law No. 24, vests in the general body, the board of directors, the committee of management, the president and the secretary thereof. The board of directors of the Association consists among others of one ex -officio member appointed by the president as secretary. The Director of Industries, U. P., is the ex -officio president of the Association and Sri K.N. Mathur was, it appears, appointed by him as its secretary and thus became a member of the board of directors. He is also a member of the committee of management of the Association in his capacity as secretary thereof. According to bye -law No. 56, Sri K.N. Mathur as the secretary of the Association subject to the general control of the president was the chief executive officer of the Association and was responsible for its proper working. A copy of the bye -laws of the bank has been filed as an annexure to the petition. The secretary of the U. P. Industrial Co -operative Association Ltd. is, according to bye -law No. 40, an ex -officio member of the general body. The board of directors of the bank, according to its bye -laws is the chief executive body of the bank and all responsibility for its affairs rests in it. In his capacity as the secretary of the U. P. Industrial Co -operative Association Ltd., Sri K.N. Mathur was not only a member of the general body but also of the board of directors of the bank. As a member of the general body, Sri Mathur had a right to take part in the election of the members of the board of directors and as a member of the board of directors he is one of those who are responsible for the affairs of the bank. He admits in his counter -affidavit that in his capacity as the secretary of the U. P. Industrial Co -operative Association he is an ex -officio director of the bank in order to watch the interest of this Association from which the bank derives much of its finances. It is thus clear that he is vitally interested in the affairs of the bank in various capacities and is closely identified with it. It is true that Sri K.N. Mathur had no pecuniary interests of a personal nature in the affairs of the bank but in his official capacity he was so closely identified with the affairs of the bank that I do not find it possible to hold that he could be relied upon to decide the appeal before him in a detached and unbiased fashion such as is expected of a Tribunal required to act judicially. In Manak Led v. Dr. Prem Chand : A.I.R. 1957 S.C. 425 Gajendragadkar J. speaking for the court held that: " " It is well settled that every member of a tribunal that is called upon to try issues in judicial or quasi -judicial proceedings must be able to act judicially; and it is of the essence of judicial decisions and judicial administration that judges should be able to act impartially, objectively and without any bias. In such cases the test is not whether in fact a bias has affected the judgment; the test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the tribunal might have operated against him in the final decision of the tribunal. " 10. It was further held that: " Where pecuniary interest is not attributed but instead a bias is suggested, it often becomes necessary to consider whether there is a reasonable ground for assuming the possibility of a bias and whether it is likely to produce in the minds of the litigant or the public at large a reasonable doubt about the fairness of the administration of justice. It would always be a question of fact to be decided in each case. " 11. As closely connected as Sri Mathur was to one of the parties to the dispute, I find it difficult to conclude that he could act impartially, objectively, without any bias and that there was no ground for assuming the possibility of bias and partiality in favour of the bank. That the doctrine of bias applies not only to strictly judicial proceedings but also to tribunals and bodies which are given jurisdiction to determine judicially the rights of parties is no longer capable of controversy. In Manak Lal the facts were that in proceedings under Section 145, Criminal Procedure Code, between one Pukhraj and others and Dr. Prem Chand, one Sri Chhangani had appeared as a counsel for* Dr. Prem Chand while Manak Lal represented the opponents of Dr. Prem Chand. During those proceedings Manak Lal, who as already stated was a counsel representing the opponents of Dr. Prem Chand, produced a fictitious copy of an interim order. A complaint was filed against Manak Lal by Dr. Prem Chand under Section 13 of the Legal Practitioners Act alleging that Manak Lal was guilty of professional misconduct and the complainant prayed that suitable action be taken against him in that behalf. The learned Chief Justice of the High Court of Rajasthan under Section 10(2) of the Bar Councils Act as it stood at the relevant time sent the complaint for enquiry to a Tribunal nominated by him. Sri Chhangani was nominated as the chairman of the Tribunal. Sri Chhangani was a senior member of the Bar and was at one time the Advocate -General of the State of Rajasthan. The Tribunal came to the conclusion that Manak Lal was guilty of professional misconduct in having got a false stay order written by a clerk by improper means and thereby he managed to take illegal and undue advantage on behalf of his client and, therefore, deserved to be punished for the same. The High Court agreed with the findings of the Tribunal and it directed that Manak Lal should be removed from practice. It was against that order that Manak Lal appealed to the Supreme Court. The Supreme Court held that it had no hesitation in assuming that when Sri Chhangani agreed to work as the chairman of the Tribunal, he did not remember that he had appeared for the complainant in some proceedings under Section 145, Criminal Procedure Code. It was further held that it was not at all unlikely that Sri Chhangani had no personal contact with Dr. Prem Chand and may not have been aware of the fact that in the case from which the proceedings against Manak Lal arose he had appeared at any stage for Dr. Prem Chand. In spite of these findings, the Supreme Court took the view that the constitution of the Tribunal appointed by the learned Chief Justice of the High Court of Rajasthan suffered from a serious infirmity in that Sri Chhangani, who had appeared for Dr. Prem Chand in the criminal proceedings in question, was appointed a member of the Tribunal and in fact acted as its chairman. It is worthy of note that the interests of Sri Chhangani in favour of Dr. Prem Chand or against Manak Lal were much more remote than the interests of Sri K.N. Mathur in the affairs of the bank. 12. In G. Nageshwara Rao v. Andhra Pradesh State Road Transport Corporation, : A.I.R. 1959 S.C. 308 an order passed by the Chief Minister in exercise of the powers under the Motor Vehicles Act was quashed because the hearing of the objection had been done by the secretary of the transport department whose report was approved by the Chief Minister of the State. The Supreme Court quashed the order because it took the view that the secretary of the department who had heard the objection was a part of the department which was a party to the objection to be decided. The position of Sri K.N. Mathur who was one of the directors of the bank, to a certain extent, can be said to be analogous to the secretary of the department of transport. 13. The conduct of Sri K.N. Mathur during the pendency of the appeal lends weight to the contention of the petitioners that the bank's appeal was not heard and decided by an impartial Tribunal. It appears that when the appeal was filed before him by the batik Sri K.N. Mathur on 13th July, 1966, passed an interim order staying execution of the order of the Assistant Registrar. On the same date the petitioners filed an application before the Second Civil Judge. Kanpur, for execution of the order of the Assistant Registrar by the issue of a precept to the Civil Judge, Meerut, for attachment of the bank's property at Meerut. On the 15th July, 1966, the petitioners applied to the Civil Judge that execution be expedited and that instead of a precept being issued for the attachment of Meerut properties, a writ be issued for the attachment of the properties of respondent No. 1 at Kanpur. The learned Civil Judge allowed this request and a writ of attachment was issued to the amin. On the 30th July, 1966, the amin of the court of the learned Civil Judge arrived at the office of respondent No. I at Kanpur and started attaching the movable properties of the bank. It appears that officials of the bank requested the amin not to attach the properties of the bank in view of the interim order granted by Sri Mathur. The officials of the bank having failed to persuade the amin not to proceed with the attachment proceedings approached Sri Mathur. The Deputy Registrar consequently went to the premises where the attachment proceedings were taking place and submitted before the amin something in the nature of an application, copy of which has been filed as annexure "B" to the petition. Relevant part of the application is as follows : "In connection with the attachment order passed by the court against the U.P. Industrial Co -operative Bank, one hour time may kindly be given to bring the order of the court." 14. In his report to the court the amin stated that in compliance with the order of the court he went to effect attachment of properties of the bank and while there the general manager of the bank met him and he telephoned to Sri K.N. Mathur, Assistant Registrar, who soon arrived at the spot in response to the telephonic call. Sri. K.N. Mathur, according to this report, after some discussion with regard to the order of the civil court asked for one hour's time to obtain an order from the civil court which was granted to him by the amin. In his counter -affidavit, Sri. Mathur has not denied the correctness of the report of the amin or that he applied for time before the amin in order to enable the bank to obtain orders from the civil court. He has only stated that he felt that the execution of the order of the Assistant Registrar having already been stayed on the 13th July, 1966, "fairness demanded that the respondent No. 1 should get some time to move the civil court for relief", and he, therefore, requested the amin to grant an hour's time to the respondent No. 1 to bring a stay order. This conduct of Sri Mathur who was seized of an appeal which he had to decide judicially was wholly incompatible with his position as a Tribunal entrusted with quasi -judicial functions and, in my opinion, clearly discloses a bias on his part in favour of the respondent bank. His conduct indicates the extent of his interest in the affairs of the bank of which he admittedly was a director. In Andhra Pradesh State Road Transport Corporation v. Satyanarayana Transport Ltd., : A.I.R. 1965 S.C. 1303 it was observed by Gajendragadkar C.J., that: "In dealing with cases of bias, it is necessary to remember that 'no one can act in a judicial capacity if his previous conduct gives ground for believing that he cannot act with an open mind.' The broad principle which is universally accepted is that a person trying a cause even in quasi -judicial proceedings, must not only act fairly, but must be able to act above suspicion of unfairness." 15. Sri K.N. Mathur, who was charged with the duty of adjudicating between two parties, was required to decide the dispute with an independent mind without any inclination or bias in favour of one party or the other. I have no difficulty in holding that the conduct of Sri Mathur during the pendency of the appeal before him is inconsistent with the conduct required of an impartial tribunal. 16. Learned counsel for respondent No. 1, however, urged that the question with regard to the bias was not raised by the petitioners before Sri K.N. Mathur and consequently the petitioners were disentitled to raise the question now. It was contended that the petitioners according to their own case were aware of the fact that Sri K.N. Mathur was one of the directors of the respondent bank and in spite of it the petitioners did not challenge before him his jurisdiction to proceed to hear the appeal. They took the chance of the appeal being decided in their favour and it was only when the decision turned out to be against them that they are now raising this plea. Reliance was placed by learned counsel on the decision of the Supreme Court in Manak Lal. Relying on this decision, it was contended that the petitioners were precluded from raising this point in this writ petition on account of their waiver or acquiescence. On the material on record, however, I do not find it possible to hold that there was either waiver or acquiescence by the petitioners to the appeal being decided by Sri K.N. Mathur such as to disentitle them to raise this plea before this court. In paragraph 13 of the petition, it has been stated that, " The petitioners objected that Shri K.N. Mathur was not competent to hear the appeal and to pass any orders of stay as he was one of the directors of the bank and, therefore, was interested in the affairs of the bank and further he had appeared before the amin on behalf of the bank and had asked him for one hour's time to bring a stay order from the court and the appeal was filed at his instance." 17. True copies of the objection, copy of the application made by Sri K.N. Mathur for time and the report of the amin have been annexed to the petition as annexures " A ", " B " and " C " respectively. Annexure " A " to the writ petition purports to be an objection on behalf of the petitioners who were respondents to the appeal before Sri K.N. Mathur, Deputy Registrar. It is dated 5th August, 1966. Paragraphs 3, 4 and 5 of annexure " A " are as follows : "3. That you are not at all competent and have no right, power or jurisdiction to hear the appeal or to pass any order staying the execution of the decree as you are amongst the directors of the appellant bank and being interested in the affairs of the bank.
(3.) THAT you gave in writing to the amin on behalf of the bank that one hour's time be given to bring the stay order from the court concerned as such you are deeply interested in the management of the bank at the costs of the respondents.;