Case Note & Summary
Background: The dispute arose from winding up proceedings under the Maharashtra Co-operative Societies Act, 1960 against Industrial Co-operative Association Limited, a cooperative society. The Registrar, acting under Section 102(1)(a) on the basis of an auditor's report, passed an interim winding up order on 17 June 1974 and appointed a Special Liquidator under Section 103. The society objected and filed an appeal under Section 104 to the State Government against the interim order on 16 July 1974. The State Government initially stayed the liquidation on 26 August 1974 but vacated the stay on 27 September 1975 because the liquidator had assumed charge. Meanwhile, the Registrar confirmed the interim order on 12 August 1974 without granting the personal hearing requested by the society. During the pendency of the society's appeal, the Special Liquidator sold 5 acres 31 gunthas of the society's land to the appellant, Haribhau Dagdu Tandale, through a tender dated 10 July 1975 and a sale deed dated 11 September 1978 for Rs. 22,000. The appellant was put in possession. When the State Government learned of the sale, it issued notices invoking suo motu revisional powers under Section 154 and called for records. After a hearing, by order dated 3 January 1982, the State Government set aside both the winding up order and the sale, holding that the liquidator could not dispose of immovable property while an appeal against the winding up was pending and that the confirmation of the winding up order was in violation of natural justice. The State Government directed the liquidator to hand over charge and to help the society's committee recover possession upon refund of the appellant's dues. The appellant challenged this order in the Bombay High Court by W.P. No. 390/82, but the High Court dismissed the writ petition on 13 April 1982. The present appeal by special leave was filed before the Supreme Court. Legal Issues: The Supreme Court considered whether an appeal lay against an interim winding up order, whether the State Government could set aside the confirmation order in suo motu revision, whether the liquidator could sell society's property during pendency of the appeal, and whether Section 103(6) protected the sale. Arguments: The appellant's senior counsel argued that no appeal lay from the interim order, that the Government misapplied its revisional power by setting aside the confirmation instead of the interim order, that Section 103(6) made the liquidator's acts binding despite cancellation of the interim order, and that the interim order had merged into an independent final order dated 12 August 1978 making the appeal infructuous. The respondent society relied on the reasoning of the High Court, which had upheld the State Government's order. Court's Analysis: The Supreme Court examined Sections 102, 103, 104, 105 and 106. It held that upon an interim winding up, the liquidator receives only custody and control under Section 103(2); assets vest under Section 103(5) but the power to sell under Section 105(1)(c) must be read with Section 106. Section 106 provides that a winding up order becomes effective only after the expiry of the appeal period or dismissal of the appeal. Since the society's appeal was pending when the sale took place, the winding up order was not effective and the liquidator had no authority to realize assets by sale. It agreed with the High Court's harmonious construction that Section 105 covers urgent sales, such as perishable property, while Section 106 governs sales after the order becomes final. It also affirmed the State Government's finding that personal hearing was denied and natural justice violated. The Court rejected the appellant's contentions and upheld the High Court's reasoning. Decision: The Supreme Court dismissed the appeal, affirming the Bombay High Court and the State Government's order. The sale in favour of the appellant was set aside; the winding up order was set aside; the liquidator was to restore possession to the society's committee after refunding the appellant's price and expenses.
Headnote
A) Co-operative Societies - Winding Up - Interim Order and Appeal - Maharashtra Co-operative Societies Act, 1960, Sections 102(1)(a), 104 - An interim order of winding up passed by Registrar under Section 102(1)(a) is appealable to State Government under Section 104; the society filed such appeal and the State Government validly exercised appellate jurisdiction. The Supreme Court upheld the High Court's view that the appeal was maintainable and that the State Government could set aside the winding up order after finding violation of natural justice. Held that the appellant's objection to maintainability was not sustainable. (Paras not mentioned) B) Co-operative Societies - Winding Up - Personal Hearing and Natural Justice - Maharashtra Co-operative Societies Act, 1960, Section 102 - The Registrar confirmed the interim winding up order without granting the personal hearing requested by the society and required by statute, thereby violating principles of natural justice. The State Government found this violation and set aside the winding up order; the Supreme Court agreed that the order was rightly set aside. Held that an order passed in breach of natural justice is invalid. (Paras not mentioned) C) Co-operative Societies - Liquidator's Power of Sale - Pending Appeal and Effectiveness of Winding Up - Maharashtra Co-operative Societies Act, 1960, Sections 103, 105(1)(c), 106 - Liquidator's power under Section 105(1)(c) to sell immovable property must be read with Section 106 which provides that winding up order becomes effective only after expiry of appeal period or dismissal of appeal; sale of society's land during pendency of appeal against interim winding up was without authority and invalid. The sale to the appellant was set aside. Held that a liquidator cannot realize assets by sale while appeal against winding up order is pending. (Paras not mentioned) D) Co-operative Societies - Statutory Interpretation - Harmonious Construction of Sections 105 and 106 - Maharashtra Co-operative Societies Act, 1960, Sections 105, 106 - Section 105 power of sale is intended to cover urgent cases such as perishable property that cannot await disposal of appeal, while Section 106 deals with sale after winding up order becomes final and effective. The High Court's reconciliation of these provisions was accepted. Held that no conflict exists between the two sections when read harmoniously. (Paras not mentioned) E) Co-operative Societies - Suo Motu Revisional Power - Legality of Sale and Winding Up - Maharashtra Co-operative Societies Act, 1960, Section 154 - State Government could invoke suo motu revisional power to examine legality of sale transaction by liquidator and confirmation of winding up; such exercise was proper. The appellant's contention that Government had no authority was rejected. Held that suo motu revision was validly exercised. (Paras not mentioned) F) Co-operative Societies - Binding Nature of Liquidator's Acts - Section 103(6) - Maharashtra Co-operative Societies Act, 1960, Section 103(6) - Argument that acts done by liquidator are binding on society even if interim order later cancelled did not protect the sale because the sale was in violation of Section 106, being made during pendency of appeal; the provision could not validate an illegal sale. Held that Section 103(6) cannot override the requirement that winding up become effective. (Paras not mentioned)
Issue of Consideration
Whether liquidator's sale of society's land during pendency of appeal against interim winding up order was valid; whether State Government could set aside winding up and sale in appellate and suo motu revisional jurisdiction; whether personal hearing was necessary before confirming winding up.
Final Decision
Appeal dismissed; Supreme Court affirmed Bombay High Court and State Government order setting aside winding up and sale; liquidator directed to hand over charge and help committee recover possession after refunding appellant's dues.
Law Points
- Winding up order effective only after appeal period expires or appeal dismissed
- Liquidator cannot sell immovable property pending appeal
- Power under Section 105 harmonized with Section 106
- Natural justice requires personal hearing before confirming winding up
- Suo motu revisional power under Section 154 validly exercised
- Section 103(6) does not validate illegal sale
