Case Note & Summary
The petitioner, Shri Yuvraj Datajirao Patil, was elected as a member of the Board of Directors of Shetkari Sahakari Sangh (Respondent No.4) in 2015. Respondent No.2, who had contested and lost the election, filed an application on 5th May 2017 seeking the petitioner's disqualification on the ground that the petitioner and his son had obtained a loan of Rs.15 lakhs on 27th March 2012 from Kolhapur District Co-operative Agriculture and Rural Development Bank and defaulted on the installments. Respondent No.2 produced a recovery certificate dated 4th May 2017 issued under Section 137(1) of the Maharashtra Co-operative Societies Act, 1960 (MCS Act) against the petitioner and his son. The District Deputy Registrar issued a show-cause notice on 11th May 2017 under Section 73CA(1)(i)(b) of the MCS Act, calling upon the petitioner to show cause why he should not be declared a defaulter. The petitioner denied the allegations and contended that the loan liability had been discharged by a compromise decree in Regular Civil Suit. The District Deputy Registrar, however, held the petitioner ineligible to be re-elected, re-co-opted, or re-nominated as a member of the Managing Committee for a term of five years. The petitioner challenged this order by way of a writ petition under Article 227 of the Constitution of India. The High Court examined the provisions of Section 73CA(1)(i)(b) and noted that the disqualification applies only to a person who is in default in repayment of a loan taken from the same society or a society of which he is a member. In this case, the loan was taken from a different co-operative bank, not from Respondent No.4 society. The court also observed that the recovery certificate under Section 137(1) was not conclusive proof of default for the purpose of disqualification, and the compromise decree had discharged the liability. The court held that the impugned orders were based on a misinterpretation of law and were perverse. Accordingly, the petition was allowed, the impugned orders were quashed and set aside, and the respondents were directed to allow the petitioner to continue as a member of the Managing Committee.
Headnote
A) Co-operative Law - Disqualification of Director - Default in Loan Repayment - Section 73CA(1)(i)(b) of Maharashtra Co-operative Societies Act, 1960 - The petitioner was disqualified as a director of a co-operative society for default in repayment of a loan taken from a different co-operative bank. The court held that the disqualification provision applies only to default in repayment of a loan taken from the same society or a society of which the person is a member, not from any other entity. The recovery certificate under Section 137(1) was not conclusive proof of default for disqualification purposes. (Paras 2-10) B) Co-operative Law - Compromise Decree - Discharge of Liability - Section 73CA(1)(i)(b) of Maharashtra Co-operative Societies Act, 1960 - The petitioner had entered into a compromise decree in a civil suit, which discharged the loan liability. The court held that once a compromise decree is passed, the liability stands discharged, and the petitioner cannot be treated as a defaulter. (Paras 5-8) C) Constitutional Law - Writ Jurisdiction - Article 227 of Constitution of India - The High Court exercised its supervisory jurisdiction under Article 227 to quash the disqualification order as it was based on a misinterpretation of the law and was perverse. (Paras 1, 10)
Issue of Consideration
Whether the petitioner was rightly disqualified under Section 73CA(1)(i)(b) of the Maharashtra Co-operative Societies Act, 1960 for default in repayment of a loan taken from a different co-operative bank, and whether the recovery certificate under Section 137(1) was sufficient to establish default.
Final Decision
The petition was allowed. The impugned orders dated 11th May 2017 and the subsequent orders disqualifying the petitioner were quashed and set aside. The respondents were directed to allow the petitioner to continue as a member of the Managing Committee of Respondent No.4 society.
Law Points
- Disqualification under Section 73CA(1)(i)(b) of MCS Act requires default to a co-operative society
- not any other entity
- recovery certificate under Section 137(1) is not conclusive proof of default for disqualification
- compromise decree can discharge liability
- strict interpretation of disqualification provisions
