Case Note & Summary
The petitioner, Shree Vitthal Sahakari Sakhar Karkhana Ltd., a cooperative sugar factory registered under the Maharashtra Cooperative Societies Act, challenged an order dated 16 July 2009 passed by the Maharashtra State Cooperative Appellate Court. The appellate court had granted an interim injunction against the petitioner, restraining it from giving effect to Resolution No. 9A passed on 28 December 2007, which forfeited the shares of respondent nos. 1 to 11, who were Class B members of the society. The dispute arose because the petitioner increased the face value of shares held by Class B members from Rs. 2,000 to Rs. 5,000 per share, following a directive from the Regional Joint Director of Sugar dated 7 March 2000. A call was made on Class B members to pay the additional amount, but respondent nos. 1 to 11 failed to pay. Consequently, the petitioner forfeited their shares. Aggrieved, the respondents filed a dispute under Section 91 of the Maharashtra Cooperative Societies Act before the Cooperative Court at Solapur, seeking an interim injunction. The Cooperative Court rejected their application for injunction. On appeal, the Maharashtra State Cooperative Appellate Court reversed this decision and granted the injunction. The petitioner then filed the present writ petition. The High Court examined the appellate court's order and found that it had not considered the prima facie case or balance of convenience. The appellate court merely observed that the forfeiture was illegal without providing any reasoning. The High Court noted that the forfeiture was in accordance with the society's byelaws and that the respondents had not paid the call money. The court also held that the appellate court's jurisdiction under Section 97 of the Act is limited to errors apparent on the face of the record and that it cannot re-appreciate evidence or substitute its discretion unless the lower court's order is perverse. Since the appellate court did not find any error in the trial court's order, it exceeded its jurisdiction by granting the injunction. The High Court allowed the petition, set aside the appellate court's order, and restored the trial court's order rejecting the injunction.
Headnote
A) Cooperative Law - Share Forfeiture - Validity of Forfeiture for Non-Payment of Call Money - Maharashtra Cooperative Societies Act, 1960, Section 91 - The petitioner cooperative society increased face value of shares pursuant to government directive and forfeited shares of Class B members who failed to pay the call. The appellate court granted injunction against forfeiture. Held that the forfeiture was valid under the byelaws and the appellate court erred in granting injunction without considering prima facie case (Paras 1-5). B) Cooperative Law - Interim Injunction - Jurisdiction of Appellate Court - Maharashtra Cooperative Societies Act, 1960, Section 97 - The appellate court's jurisdiction under Section 97 is limited to errors apparent on the face of the record. The appellate court cannot re-appreciate evidence or substitute its discretion unless the lower court's order is perverse. Held that the appellate court exceeded its jurisdiction by granting injunction without finding any error in the trial court's order (Paras 6-8).
Issue of Consideration
Whether the Maharashtra State Cooperative Appellate Court erred in granting an interim injunction against the forfeiture of shares by a cooperative society for non-payment of call money, without considering the prima facie case and balance of convenience.
Final Decision
The High Court allowed the writ petition, set aside the order dated 16 July 2009 passed by the Maharashtra State Cooperative Appellate Court, and restored the order of the Cooperative Court at Solapur rejecting the application for interim injunction.
Law Points
- Forfeiture of shares for non-payment of call money is valid under cooperative law
- appellate court's jurisdiction limited to errors apparent on face of record
- prima facie case required for interim injunction
