Supreme Court Upholds Co-operative Registrar in Misfeasance Proceedings Against Managing Committee Members Due to Absence of Bias. Registrar's Prior Show-Cause Notice and Administrative Supervision Did Not Disqualify Him from Acting as Arbitrator Under Rule 18 of Co-operative Societies Rules.

Writ petition challenging the Registrar's decision to act as arbitrator in misfeasance proceedings under Rule 18 of the Co-operative Societies Rules, alleging bias and violation of natural justice.

Respondent sought a writ of prohibition to restrain the Registrar from proceeding with the dispute under Rule 18 and to quash the proceedings.

The Registrar, after appointing an arbitrator who became unavailable, decided to hear the misfeasance application himself; the respondent alleged bias because of prior show-cause notice and administrative control.

The Judicial Commissioner, Ajmer allowed the writ petition, holding that though the Registrar had no pecuniary interest, there was a strong likelihood of bias; the Registrar appealed to the Supreme Court.

Whether the Registrar of Co-operative Societies was disqualified from acting as arbitrator under Rule 18 due to bias arising from the show-cause notice issued under Rule 30(3). Whether the Registrar's administrative supervision and audit functions under Section 17 of the Co-operative Societies Act, 1912 created a likelihood of bias.

Respondent argued that the Registrar had already expressed an opinion against the committee in the show-cause notice, making him a party to the dispute. Respondent argued that as administrative head with audit responsibilities under Section 17, the Registrar would be interested in blaming the committee to protect his department. Appellant argued that the show-cause notice concerned collective responsibility for removal, while Rule 18 proceedings concerned individual liability for misfeasance. Appellant argued that general supervision and audit functions do not create personal bias or disqualify the Registrar from acting as arbitrator.

A prior show-cause notice for suspension of a managing committee does not create bias in the Registrar when later deciding individual misfeasance liability under Rule 18, because the first concerns collective administrative responsibility and the second concerns individual financial responsibility. General supervisory and audit functions under Section 17 do not amount to personal or official interest sufficient to disqualify the Registrar from acting as arbitrator under Rule 18.

That notice was based on the report of the investigating auditors and was concerned with the collective responsibility of the managing committee in the discharge of their duties. We fail to appreciate how this general supervision of the Registrar over all Co-operative Societies can be said to amount to a bias in him so as to disentitle him to act as a judge or arbitrator under r. 18. He further held that if the Registrar had not suffered from the disability inherent in the situation, he would have been the most proper person to decide the dispute.

An investigation into a co-operative bank's affairs after the manager disappeared in 1953 revealed defalcation of about Rs. 6,34,000. The Registrar issued a show-cause notice on February 26, 1955 under Rule 30(3) to the managing committee and subsequently removed the committee and appointed an administrator. On April 4, 1956, seven shareholders filed a misfeasance application under Rule 18. The Registrar appointed an arbitrator, but the arbitrator became unavailable due to ill-health; on December 13, 1955, the Registrar set aside that appointment and decided to hear the dispute himself. Challenges to these orders before the Deputy Commissioner failed. The respondent then filed a writ petition before the Judicial Commissioner, Ajmer, which was allowed on the ground of bias. The Registrar appealed to the Supreme Court.

• Co-operative Societies Act, 1912: Section 17
• Co-operative Societies Rules: Rules 17, 18, 30(3)