KCS Act | Registrar Can’t Appoint Special Officer U/S 31(1) On Account Of Resignations If They Are Withdrawn Within 15 Days: Karnataka High Court

The Karnataka High Court has said that if resignations tendered by Directors of a cooperative society are withdrawn within 15 days, then there is no resignation which can be said to have been taken place and the Registrar of Cooperative Societies, under the Karnataka Cooperative Societies Act, in such circumstances cannot appoint a Special Officer for the society.

A single judge bench of Justice Suraj Govindaraj allowed the petition filed by T N Shivaraju and others, who are Directors of the Town Cooperative Society Ltd, and quashed the order dated 6.3.2023, passed by Deputy Registrar of Cooperative Societies appointing a special officer to the society under Section 31 (1) of the Act.

“The moment resignations are withdrawn powers under sub-section (1) of Section 31 cannot be exercised,” said the court, adding, “There was no power which could be exercised under sub-Section (1) of Section 31 by respondent No.3 (Deputy Registrar) the said order is without jurisdiction”.

The petitioners had argued that on 6.3.2023, five directors had submitted their resignation, and there being no quorum, the authorities exercised powers under subsection (1) of Section 31 and appointed a Special Officer.

However, out of the five directors who had submitted their resignation, on 8.3.2023, petitioners No. 7 and 8 had withdrawn their resignations; thereby, the quorum was available for the holding of the next meeting.

“This fact, having occurred on 8.3.2023 within a period of 15 days, respondent No.3 has acted in haste under sub-section (1) of Section 31," the court was told.

It was argued that, “power to appoint a Special Officer has to be made only if requirement under Section 29(B) is fulfilled. Without such fulfilment, no power under sub-section (1) of Section 31 can be exercised."

The government advocate opposed the plea contending that in terms of sub-section (1) of Section 31, a non-obstante clause is present where the Registrar has been provided with powers to appoint a Special Officer notwithstanding anything contained in the Act, Rules and bye-laws for a period not exceeding six months. The appointment of a Special Officer cannot be circumscribed by the requirement under Section 29B, and as such, the appointment is proper and correct.”

“An order passed under sub-section (1) of Section 31 is an appealable order in terms of Section 106 (1)(e)(1), and as such, the petitioner may be relegated to the alternative remedy of an appeal,” the State said.

Findings

The bench referred to Section 29B of the Act which pertains to Resignation of a member of a board or office bearer of a Co-operative Society.

“Even though a resignation may be submitted, the person who has submitted the resignation is given a period of 15 days to withdraw the resignation. It is further clear that the resignation does not come into effect or become effectual on submission of the resignation but will become effectual only if, within a period of 15 days, it is not withdrawn,” said the court.

It added:

“If the said resignation is withdrawn within the said period of 15 days, then in law and fact, there is no resignation which can be said to be in place from and on the date of withdrawal, consequentially, the post would not become vacant.”

Noting that a Special Officer can be appointed if in the opinion of the Registrar, the Cooperative Society is not functioning in accordance with the provision of Acts, Rules and Byelaws, on account of the number of members in the Board falling short of the required number to form a quorum due to disqualification, resignation or death or removal of a member, the bench said:

“In the present case the resignation having been submitted on 6.3.2023 has been withdrawn by petitioners No.7 and 8 on 8.3.2023. Therefore, the said resignation is ineffectual; when it is ineffectual, the question of exercise of power under sub-section (1) of Section 31 will not arise since the required number to form a quorum continues to exist on account of the withdrawal of the resignation.”

Rejecting the contentions of the government counsel the bench said:

“Power vested with a Registrar of Co-operative Societies (under section 31 (1) of the Act) to be exercised judiciously by applying his mind and if circumstance so demand, the said power cannot be exercised arbitrarily at the whims and fancies of the Registrar.”

It added:

“Any order passed by exercising the powers under the non-obstante clause would necessarily have to be coupled with reasons as to why a Special Officer is appointed to a Co-operative Society.”

Following which it held:

“The exercise of powers under sub-section (1) of Section 31 made by respondent No.3 is under the first portion of the subsection (1) of Section 31 and not under the non-obstante clause. Having held that the resignation had not become effectual, Respondent No.3 would not have the power to exercise on 6.3.2023 to appoint a Special Officer, since respondent No.3 would derive such power to exercise only after the expiry of 15 days of the resignation being submitted in terms of Section 29B of the KCS Act.”

Finally it said:

“An alternative and efficacious remedy needs to be efficacious in nature, and the order which is challenged should have been passed by the authority having jurisdiction to do so. In view of my above finding that there was no power which could be exercised under sub-Section (1) of Section 31 by respondent No.3 the said order being without jurisdiction, I am of the considered opinion that the said alternative remedy is not an efficacious one.”

Case Title: T N Shivaraju & others And State of Karnataka & Others

Case No: WRIT PETITION NO. 6419 OF 2023

Citation: 2023 LiveLaw (Kar) 142

Date of Order: 27-03-2023

Appearance: Advocate Devi Prasad Shetty for petitioners.

AGA A.R Shardamba for R1 TO R3