NAOLEKAR, J. - (1.) -
(2.) THIS special appeal is preferred against the order of a learned single Judge dated 7.2.95. The admitted facts emerged in the case which are necessary for deciding the questions envolved in this appeal are, that the appellant is a member of respondent no. 2, the Jodhpur Nagrik Sahakari Bank Ltd, Jodhpur (for short 'the bank'). The election programme was published by notification dated 10.11.94 in Rajasthan Patrika dated 11.10.94 for election to the posts of members of the Board of Directors. The appellant filed his nomination paper and his nomination paper was rejected on 18.11.94. It is complained that the copy has not been given of the order of rejection. The rejection was on the ground that M/s. S.V. Construction, which is a partnership firm, given loan facilities in the form and shape of cash credit. The cash credit facility was not renewed by the Bank after the expiry of the period of one year. The firm's limit was cancelled on 7.6.94. Shri Devi Chand Bafna, the appellant was the surety for the cash credit limit. On 12.7.94 a notice of demand was made on the surety, the appellant, and thereafter a final award in terms of s. 117 of the Rajasthan Co-operative Societies Act, 1965 (for short 'the Act') was passed against both. The nomination of the appellant was rejected on the ground that he is a surety of the defaulter firm M/s S.V. Construction. After the rejection of the nomination paper, the appellant filed a writ petition in the High Court, which was registered as S.B. Civil Writ Petition No. 5394/94, Devi Chand vs. State of Rajasthan & others. On 25.11.94 an interim order was passed and the petitioner/appellant was permitted to contest and participate in the election subject to the result of the writ petition. It was further directed that the result of the election shall not be declared till further orders. Subsequently, the ex-parte stay order was confirmed by order dated 7.2.94 and it was directed that the matter be listed for final disposal at the admission stage. The learned single Judge on consideration of and on a combined reading of s. 34 of the Act and bye laws 13, 14, 31 and 32 and rule 25 of the Rajasthan Co-operative Societies Rules, 1966 (For short 'the Rules') held that the bye laws and the rules have a statutory force and the petitioner has been debarred from contesting the election to the membership of Board of Directors in view of s. 34 of the Act. The learned single Judge has also held that if the surety defaulter is permitted to contest election, it will create an anomalous postion inasmuch as under bye law 34(i) a defualter surety cannot remain a Director and therefore, the disqualification of defaulter is also applicable to as surety defaulter on the principle that once the liability of principal debtor arises, the surety's liability is coextensive. With great respect to the learned single Judge, we find ourselves unable to subscribe with the view taken by him for the reasons hereinafter referred.
(3.) IT is contended by the counsel for the appellant that the rejection of the nomination paper is devoid of authority and contrary to the provisions of the Act and the Rules, the bye laws framed there under. A surety defaulter is not debarred from contesting election of Board of Directors. On the other hand it is contended by the counsel appearing for respondents no. 1 to 3 that on combined reading of the provisions of the Act, bye laws and Rules, the intention of the legislature is to debar the defaulter surety from contesting the election of the Board of Directors. For the better understanding of the respective contentions and as they have also been relied by the learned single Judge, it will be appropriate to refer to s. 34 of the Act, bye laws 13, 14, 31 and 32 and rule 25 of the Rules. They are as under: - "34. Disqualification of membership etc. of committees: - (1)......... (2)......... (3)......... (4) No persons shall be eligible for being elected or appointed as a member of a committee if he is in default to the society or to any other society, in respect of any loan or loans taken by him for such period as is specified in the bye laws of the society concerned or in any case for a period exceeding three months and such a member as aforesaid shall cease to hold office as soon as he has incurred the disqualification mentioned in this sub- section. (14). Resignation, Cessation and Expulsion of member: - (ii) Membership will cease: - a).............. b)............. c). On breach of any conditions prescribed under bye-law 9. (iii) A shareholder member may be expelled as provided in Section 9 of the Cooperative Societies Act and Rules made thereunder. Shares held by an expelled member are liable to be forfeited. Transfer of shares may be declined to a shareholder member (a). If the member is indebted or is liable as surety to another member who is indebted to the Bank. 31. Eligibility for Election as Director:- A shareholder member shall not be eligible to be elected as director unless he is a shareholder member of the bank for at least two continuous years prior to the date of election and should have maintained a deposit account with the bank for a continuous period of 2 years with a credit balance of not less than Rs. 500/-. Subject to a bank has completed its 2 year working. To newly organised banks this clause will not be applicable. 32. Vacation of office by a Director :- A Director shall be deemed to have vacated his office before the expiry of his term if: i) He becomes a defaulter either as a borrower or as a surety. Rule 25. Restrictions on defaulting Member to vote at the election - No member shall be eligible to vote at the meeting fixed for any election if on the date thirty days prior to the date of such meeting, he is a defaulter against whom decree has been issued under section 117." Section 34 of the Act prescribes disqualifications for membership of Board of Directors. Under sub-section (4) of s. 34, no person shall be eligible to be elected or appointed as a member of a committee if he is in default to the society or to any other society, in respect of the loan taken by him, for a period specified in the bye laws of the society or in any case for a period exceeding three months and such a member shall cease to hold office as soon as he has incurred the disqualification mentioned in this sub-section. sub-section(4) is in two parts. The first part refers to eligibility of being elected or appointed as a member of the committee and the second part is with regard to the person already elected as a member and incurred disqualification. The words "No person shall be eligible for being elected or appointed as a member of a committee if he is in default to the society or to any other society, in respect of any loan or loans taken by him" are significant and refer to default of a person, who has taken the loan. There is no reference of the surety of that person. Bye law 31 is another provision, which prescribes eligibility for election to a post of Director. A share holder member shall not be eligible to be elected as a Director of the Bank having standing or two years, unless he has a Bank account of minimum of Rs. 500/- continously for two years in the Bank. These are two provisions which prescribe the eligibility of a member for election to the post of Director. Bye law 32 is in regard to the vacation of the office by a Director and under that a Director is deemed to have vacated his office beofore the expity of his term if he becomes a defaulter either as a borrower or as a surety. This provision shall apply only after a person becomes a Director because it speaks of the vacation of the office of Director. A disqualification to remain a Director is applied both to a borrower as well as to his surety. ;