- (1.) THE petitioner is a Director-Secretary of the contai Co-operative Bank Limited (hereinafter referred to as the Bank ). The Bank is managed by a Board of 9 directors. The election of l/3rd members of the Board was due to be held on November 12, 1972. On November 9, 1972 a suit being Title Suit No. 383 of 1972 was instituted by one Manindra nath Bisui against the Bank in the first Court of Munsif at Contai, inter alia, for a declaration of his right to contest in the election of members of the Managing Committee of the Bank. On the prayer of the plaintiff, a temporary injunction was granted by the learned Munsif restraining the Bank from holding the election on November 12, 1972 or on any subsequent date. The petitioner received a letter from the respondent No. 1, the Assistant Registrar of Co-operative Societies, midnapore III, Contai intimating him that in terms of the Government notification dated May 25, 1973, the Managing Committee of the Bank had been superseded and the respondent No. 3 was appointed as administrator under proviso to section 26 (1) of the Bengal Cooperative Societies Act, 1940 as amended by the Amendment Act of 1973. Further, it was stated in the said letter that the respondent No. 1 had assumed charge of the Bank from the afternoon of May 31, 1973. A copy of the notification has been annexed to the petition out of which this Rules arises and marked with the letter 'e'. The notification inter alia states as follows: -And whereas the members of the managing committee of the said bank, in contravention of the mandatory provisions of by-laws 25 (3), have been advancing loans to persons exceeding the maximum credit limits without maintaining the share holding ratio of 1 to 10 to the loanee, (to give an example)have advanced Rs. 30,000 to Shri D. K. Mondal, a Director of the said bank on the said bank on the 19th, June, 1972 and have further advance to the said shri D. K. Mondal along with other directors of the Cine and Supply Corporation private Limited a loan amounting to Rs. 60,000 on the 19th June 1972; and whereas the members of the managing committee of the said bank advanced to the Cine and supply Corporation Private Limited a loan of rs. 60,000 on the 19th June 1972, against hypothecation of cinema properties and equipments of the said Corporation (two of the Directors of the said Corporation being the Directors of the said bank), repayable in 35 monthly instalments on and from July 1972, and that the said instalments have begun falling due without any repayment since October 1972; and whereas the members of the managing committee of the said bank have been, in spite of shortfall of liquid assets, persistently granting loans to interested parties including Directors of the said bank-sometimes to the extent of even rupees two lakhs, ignoring the maximum credit limit previously fixed by the Board and violating section 14 of the Banking Regulations Act, 1949; and whereas the members of the managing committee of the said bank have been granting loans and advances to defaulters without getting their applications properly processed and adequately checked, that such loans are being sanctioned only to satisfy the borrowers' interest and not the interest of the said bank and that thus the over dues of the said bank have been gradually mounting up without any effective steps being taken to reduce the same; and whereas the members of the managing committee of the said bank without reasonable security of the loan applications and without assessing the paying capacity of the applicant borrowers have been advancing loans to different businesses in which some of the Directors of the said bank themselves are involved; and whereas the members of the managing committee of the said bank have not taken any legal action against a large number of defaulting members, even though their outstanding loans have been long over-due for more than three years; and whereas during 1970-71, the elected honorary Secretary of the said bank had allowed extension or time for repayment of loan totaling rs. 24,000 without any specific authority vested in him for the said purpose under the by-laws and without any subsequent ratification of the same by the members of the managing committee of the said bank; and whereas the members of the managing committee of the said bank have been advancing loans to the Directors of the said bank to enable them to repay their outstanding earlier loans and thus to save them from being disqualified to remain as members of the managing committee for their default; and whereas on account of the aforesaid facts and circumstances, the governor is of opinion- (1) that the managing committee of the said bank has- (a) persistently made defaults and has been greatly negligent in the performance of its duties imposed on it by the Bengal Co-operative Societies act, 1940 and the rules and by-laws made thereunder, and (b) committed acts which are prejudicial to the interest of the said bank, and (c) that immediate dissolution of the said bank is essential in the interest of the said bank and the cooperative movement as a whole; now, therefore, in exercise of the powers conferred by the proviso to sub-section (1) of section 26 of the bengal Co-operative Societies Act, 1940, the Governor is pleased hereby- (a) to dissolve, with immediate effect, the managing committee of the contai Co-operative Bank Limited at contai, in the district of Midnapore, the members of which shall forthwith vacate their offices, (b) to appoint the Assistant Registrar of Co-operative Societies, midnapore III Range, as Administrator of the said Bank, in addition to his own duties, for one year with effect on and from the date of this order to manage the affairs of the said bank, and (c) to direct that the said Administrator shall exercise all the powers and perform all the duties of the managing committee of the said bank as provided in the said Act and the rules and bylaws made thereunder.
(2.) BY the said notification, the Managing Committee of the Bank has been dissolved by the State Government in exercise of its power conferred by the proviso to section 26 (1) of the act. The petitioner has challenged the notification as illegal, inoperative and void and has prayed for a writ in the nature of certiorari for quashing the said notification. The petitioner has also prayed for a writ in the nature of quo warranto against the appointment of and usurpation of office of the Administrator by the respondent No. 1.
(3.) BEFORE considering the contentions made on. behalf of the petitioner, it is necessary to refer to section 26 (1)of the Act which runs as follows :- "26. (1)-If, in the opinion of the registrar"- (a) the managing committee of any co-operative society- (i) has persistently made defaults, or has been grossly negligent, in the performance of the duties imposed on it by this Act or the rules or by-laws, or (ii) has committed any act which is prejudicial to the interest of such society or other co-operative societies, or (iii) has willfully disobeyed or willfully failed to comply with any lawful order or direction issued by the State government or the Registrar; or (b) the affairs and business of a cooperative society have, due to persistent default or negligence in the performance of duties on the part of the members of the managing committee or a section thereof; or otherwise, come to a stand-still, the Registrar may, after service of a notice upon such committee and giving such committee an opportunity of being heard, by an order in writing stating reasons therefore, dissolve such committee, the members of which shall forthwith vacate their offices and the registrar shall appoint one or mere administrators to manage the affairs of such society for such period not exceeding two years at a time as may be specified in the order and may also by an order in writing extend the period, so, however, that the total period shall not exceed five years; provided that if, on receipt of a report from the Registrar, the State government is of opinion that in view of one or more of the aforesaid circumstances immediate dissolution of the managing committee of a co-operative society is essential in the interest of such society or the co-operative movement in general, the State Government may, without giving such committee any notice, by notification in the Official gazette, giving reasons therefore, dissolve such managing committee, the members of which shall forthwith vacate their offices, and the State Government shall appoint one or more administrators to manage the affairs of such society for such period not exceeding two years at a time as may be specified in the order and may also by order extend the period, so, however, that the total period shall not exceed five years; provided further that no such step towards immediate dissolution of any central bank or co-operative land mortgage bank, or the West Bengal central co-operative land mortgage bank or the west Bengal State co-operative bonk shall be taken by the State Government without consultation with the Reserve bank. ";