In a recent judgment, the Bombay High Court Bench of Justice Marne quashed the disqualification of members of a managing committee of a co-operative society, holding that the orders passed by the Deputy Registrar and subsequently upheld by the Divisional Joint Registrar suffered from jurisdictional errors and non-application of mind. The case involved allegations of non-compliance with the statutory provisions of the Maharashtra Co-operative Societies Act, 1960 (MCS Act), specifically concerning the failure to conduct the society’s Annual General Meeting (AGM) within the prescribed time frame.

The dispute arose when the Deputy Registrar disqualified the petitioners for a period of one year under Section 75(5) of the MCS Act, citing their failure to convene the AGM for the financial year 2021-22 within the statutory deadline. As per the provisions of Section 75(1), every co-operative society is required to hold its AGM within six months after the end of the financial year. In this case, the AGM was required to be conducted by September 30, 2022, but an extension was granted, allowing it to be held by December 31, 2022. However, the AGM was ultimately conducted on September 30, 2023, leading to the initiation of proceedings against the petitioners.

The proceedings before the Deputy Registrar began with the issuance of a show-cause notice on May 19, 2023, which included allegations of non-compliance with the AGM deadline. The petitioners responded to the notice on June 15, 2023, by filing a Say and providing explanations for the delay. Notably, after the submission of their response, no further action was taken by the Deputy Registrar, thereby indicating that the issue was effectively dropped. Despite this, the Deputy Registrar, based on the findings of an inquiry conducted under Section 89A of the MCS Act, issued a fresh show-cause notice on May 17, 2024, revisiting the same allegations and ultimately disqualifying the petitioners by an order dated August 30, 2024. This order was subsequently confirmed by the Divisional Joint Registrar on October 18, 2024.

Challenging these orders before the Bombay High Court, the petitioners contended that their disqualification was unlawful, primarily because the delay in holding the AGM was not due to their negligence but was instead caused by the failure of the society’s former Administrator to hand over the necessary financial records in a timely manner. The petitioners highlighted that they had taken charge of the managing committee on April 30, 2022, and despite repeated requests, the previous Administrator failed to provide them with the necessary documents, including the audit report for the financial year 2021-22, which was handed over to them only on July 23, 2023. Under these circumstances, they asserted that their inability to conduct the AGM within the stipulated period should not be grounds for disqualification.

The High Court, upon examining the case, found that the Deputy Registrar had acted beyond his jurisdiction by reissuing a show-cause notice on the same issue that had already been dropped earlier. The Court emphasized that once a show-cause notice has been issued, responded to, and subsequently not acted upon, it cannot be revived merely on the basis of an inquiry officer’s findings unless new material evidence emerges. Moreover, the Court highlighted that under Section 75(5) of the MCS Act, disqualification of committee members is not automatic upon a finding of non-compliance. Instead, the law mandates that the concerned officer must examine whether the managing committee members had a reasonable excuse for their failure to comply with statutory requirements before passing any order of disqualification.

In reaching its decision, the Court relied on the judgment in Gaurav K. Desai v. State of Maharashtra (2015 SCC OnLine Bom 3449), wherein it was held that authorities must apply their mind to whether a managing committee member’s explanation qualifies as a "reasonable excuse" before imposing disqualification. The Court reaffirmed that statutory authorities must exercise their discretion fairly and reasonably, particularly when dealing with cases involving democratically elected managing committee members. In this case, neither the Deputy Registrar nor the Divisional Joint Registrar had considered whether the petitioners’ justification for the delay being the lack of co-operation from the previous Administrator constituted a valid excuse under the law.

The Court ultimately held that, “the impugned orders suffer from twin vices of jurisdictional error qua violation of provisions of Section 75(1) and non-application of mind qua violation of provisions of Section 75(2) and (2B) of the MCS Act. The impugned orders are unsustainable and are liable to be set aside.” Thereby allowing the petition.

Case Title: Kshtitija Moreshwar & Ors. V. State of Maharashtra & Ors.

Advocates for the Petitioner: Senior Adv. Rajiv Chavan i/b. Ms. B.R. Mangale

Advocates for the Respondent: Mr.Y.D. Patil, AGP, Mr. S.S. Panchpor and Ms. Pratibha J. Gavhane