Myurdhwaj
Cooperative Group, Housing Society Ltd. Vs. The Presiding Officer, Delhi Cooperative Tribunal & Ors
[1998] INSC 329 (14
July 1998)
G.B.
Pattanaik, A.P. Misra Misra, J.
ACT:
HEAD NOTE:
The
short question raised in this appeal is, "whether in the allotment of
flats to its members by the Cooperative Housing Society (hereinafter referred
to as 'the society') the criteria is seniority irrespective of default in the
payment of dues or whether it is payment- cum seniority?" The appellant is
a registered Housing Cooperative Society, registered in the Office of
Registrar, Cooperative Societies, Delhi, under the Delhi Cooperative Societies Act, 1972 (hereinafter referred
to as "the Act") and the Delhi Cooperative Societies Rules 1973
(hereinafter referred to as "the Rules"). It was constituted for the
purpose of allotment of flats to its members. At the relevant time 460 members
were in roll. This society applied for allotment of land to the Delhi
Development Authority (hereinafter referred to as "DDA") for the
purpose of construction of flats for its members. This Society was allotted
only 5 acres of land in Patparganj which was not sufficient for the
construction of flats for the aforesaid members. However, later on, in view of
relaxation to the ceiling limit DDA decided to make additional allotment as per
actual requirement, that is to say, to the extent of 7.666 acres of land
instead of 5 acres. The society was also directed to deposit a sum of Rs. 11,
87, 190.80p. towards the cost of additional land. In 1988, the Society raised
demand for the construction of first phase of flats on the said 5 acres and
also sent remainder notice to all its members through registered post including
the main contesting Respondent No.3 Mrs. Veena Kumar vide notice dated 26th April,
1989( the receipt of the notice was denied by Respondent No.3) As per the said
notice the cost of construction of flat of each of its member was said to be Rs.
2,75,213/- approximately.
The
mode of payment as per the first notice was, to pay initially Rs. 2,21,705/- by
each of such allottee but since only Rs. 85,100/- was paid hence through the
aforesaid notice it was directed to pay the balance amount of Rs.1,36,705/-
within thirty days. Further it resolved those defaulting shall be expelled from
the Society. A general body meeting was convened by the Society on 6th January, 1990. In this meeting the general body
took a softer view, inspite of the said notice dated 6th April, 1989. It resolved, all its members who
were allotted HIG(L) and HIG(S) category and had paid Rs. Two laks and Rs. 1,75,000/-
respectively, their allotments have provisionally confirmed and all those
members who have been provisionally confirmed and all those members who have
paid the minimum credit balance of Rs. 1,32,221.50p. were accommodated at Plot
No.60, Patparganj, Delhi Subject to their qualifying requirement for being a
member in the society and subject to their making payment of the balance
amount, but those who failed to pay even Rs. 1,32,221.50p. would only be
accommodated on the flats to be constructed on the additional land which were
to come in phase II construction.
Phase
I construction is on the said 5 acres of land.
Respondent
No. 3 filed a claim petition under Section b60 of the Act on the ground that
the decision taken by the General Body on the 6th January, 1990 was illegal, malafide, discriminiatory
and without jurisdiction. The matter was referred to the Arbitrator under
Section 61 of the Act. The Arbitrator gave the award in favour of the
appellant-Society on the basis of a decision in Civil Writ Petition No. 955 of
Societies and Others decided on 30th April, 1992. On appeal filled by Respondent No. 3 under Section 76 of
the Act the Appellate Authority (Respondent No.1) set aside the said award by
its order dated 299.92. It held that in a matter of allotment of flats in a
Cooperative Society, seniority has to be the prime criteria notwithstanding the
default made by a particular member. It also recorded so far as lapse of payment,
it could be dealt with under separate provisions by charging interest including
penal interest or by taking steps for expulsion of concerned member.
After
coming to know of this order, the appellant filed review, which was dismissed.
Thereafter the appellant filed a Writ petition which was also dismissed by the
High Court.
The
main contention raised now by the appellant which was also raised before the
High Court, viz., the Respondent No.1 wrongly held principle of seniority as
the only criteria in the matter of allotment. It is urged, in view of the
decision taken by the High Court in the case of A.V. Ashokan (Supra) and in
Civil Writ Petition No. 1484 of 1991 titled Limited, dated 22.8.91, the
decision of the Tribunal is liable to be set aside. These decisions hold that
the allotment of flats should be on the principle of a payment- cum-seniority.
The submission of the appellant is, High Court did not appreciate these
decisions, hence committed grave illegality in dismissing the writ petition.
The Case of A.V. Ashokan (supra) pertains to the allotment of flats by Saraswati
Kunj Cooperative Society Ltd. with reference to category 'C' flats at Patparganj
could not be accommodated hence they were shifted to another land where further
flats were being constructed. The Court recorded:
"While
some members contended that the list should be prepared according to the date
of enrollment as a member, others submitted that the list should be prepared
according to the date of payment of the amounts due. We may also note that the
General Body had, in a meeting in March, 1987, decided that a list should be
prepared of those members who had paid Rs.1,50,000/- by 15th December, 1986 and thereafter the list should be
prepared according to the date of payment........ It is not possible to ignore
seniority of members while. at the, same time, we cannot ignore the fact that
some members may have paid the amounts claimed from them while more senior
members may not have met the payment schedule and they cannot take undue
advantage of other members who have paid full amount....... Therefore, if,
after considerable difficulty, payments have been made by the members it will
be unfair to disregard the dates of payment completely. In our opinion,
therefore, the most fair and equitable method of drawing up the list of eligible
members for allotment of remaining 38 flats of category C could be to draw up
the list according to the date of payment of the full call money by the members
concerned... " Thereafter an application was made for clarification of
this order which is reported in 1992 Vol. 47 Delhi Law Times page 92 in which
B.N. Kirpal, J. as he then was, held:
"
We find that persons who paid the full amount after 15th December, 1986 really fall in a single category and it will not be
fair to treat them separately. Furthermore, we find that some regard has also
to be given to the seniority of the members.... In drawing up the list of
members who made the payment after 15th December, 1986 we find that most of the
money has been paid by the members within a period of two or three months.
Merely because persons who is at serial No. 1, for example has paid money one
week after a person who became a member many years thereafter should not be a
reason for giving higher weightage to the date of payment. All members who paid
money after 15th
December, 1986 are
defaulters. Therefore, the list of defaulters can be prepared on either of the
two basis (1) according to the overall seniority (2) according (2) according to
the date of the payment.... " In the case of S.C. Verma (supra), it was a
case of the Lawyers Cooperative Group Housing society Limited. In this case
also, the dispute pertained to the allotment of flats in category 'C'. Here
again was the same problem, the number of applicants were larger than the
number of flats to be allotted . In this case also cut off date to make payment
was fixed as 15th May,
1987. All members who
paid the entire due as on this date, were to be included in the list. The
amount required to be paid by this date was Rs.1,11.000/-. 26 members paid this
amount by this date. Here also number of flats were 30 for its 65 members. It
was held:
"
... The society had to lay down a reasonable criteria for finalising the list
of members. The criteria which the society adopted was that all payments having
been made in accordance with the demand which has been raised and by keeping
the options and the seniority into consideration, the list was prepared as on
the cut-off date of 15th May, 1987. We cannot find any infirmity in the
principle so adopted. It is essential for the Cooperative Society to decide as
to what is the principle which it should follow in determining or finalising
the list of the members to whom flats are to be allotted.
Unless
and until the principles laid down by the society are found to be arbitrary or
irrational or unfair, the Court will not interfere with the same. We do not
find any such infirmity in the procedure which has been adopted or established
viz. to prepare a list of members as on 15th May, 1987 who had not committed any
default... " In this case the payment of the demand was regarded as an
essential criteria for preparing the list of members.
However,
the said case also held:
"..
Therefore, where the number of defaults committed being equal it is the
seniority which must prevail.... " Hence seniority was also given place in
the matter of consideration for allotment.
Learned
senior Counsel Mr. K.T.S. Tulsi appearing for the appellant submitted that the
High Court did not properly apply its mind to the aforesaid decisions when it
held contrary to the said decisions that it did not lay down any proposition as
submitted by the appellant. It is urged, High Court relied upon few lines from
paragraph 2 of the aforesaid clarificatory judgment in A.V. Ashokan (supra)
without reference to the succeeding lines hence wrongly held that it supported
the view taken by the Cooperative Tribunal (Respondent No.1). The submission
made is, in this very paragraph, the Court categorised and graded how allotment
is to be made, which is not purely in terms of seniority but
payment-cum-seniority with due weightage of seniority. it clearly held that
list of defaulters can be prepared on either of the two basis (1) according to
the overall seniority; () according to the date of payment. In other words, it
is left on the discretion of a Society depending on the facts and circumstances
of each case.
On the
other hand learned senior Counsel appearing for respondent No. Mr. Ashok Kumar Srivastava
supported by interveners' counsel submitted that there is no provision except
Rule 36 under which the society could have dealt with the present case and
under this when a member defaults he could only be expelled following the
procedure laid down therein. Thus the general body resolution, directing those
who were defaulters to be accommodated in phase II is illegal as it is based on
no sanction conferred under the rules. In other words, Society is left with no
other option but to expel such a member. However, where Society wants to confer
benefit to its members the only criteria which it could adopt it to allot the
accommodation according to their seniority, irrespective of their default. On
facts, it is submitted that Respondent No.3 initially deposited a sum of Rs.
85,000 /-, thereafter sent a sum of Rs. 1, 83,000/- through cheque dated 8th
November, 1990 making the total contribution to Rs. 2,68,000/- and gave an
undertaking that she would pay all the reasonable amounts towards the interest
for the defaulted period, if any. According to her, she came to know only on 3rd November, 1990 that she has been relegated from
first phase to second phase by the General Body. She claims, she is one of the
original members of the society and sent a letter dated 8th November, 1990 to the Society requesting for the
restoration of her status as member of the first phase. However, the Society
through reply dated 19.11.90 returned the said cheque and informed that through
a registered notice dated 26.4.89, a demand was sent earlier for the payment of
Rs. 1,36, 705/- and since the said amount was not paid till 6.1.90 thus as per
the said resolution of the General Body, she was relegated to the second phase.
The learned counsel for the respondent on the other hand further submits that
neither additional land has been allotted nor there is any second phase of
construction. To this, learned senior counsel for the appellant, Mr. Tulsi
submits, Society has already made total payment for the additional land for the
second phase and the possession of this additional land allotted is likely to
be delivered shortly.
Returning
to Rule 36, submission for the respondent is, when a statute provides a thing
to be done in a manner it has to be done in that manner alone and not in any
other manner. Other modes are excluded. The Counsel for the State of Punjab (1986 (4) Scc 326 prs. 10-11) and
State of This proposition has not been disputed by learned counsel for the
appellant. The question is, when a member is in default then is it that power
of a Society is concretised within this Rule to expel such defaulting member or
can it within its peripheral jurisdiction resolve to take recourse to any other
policy decision, to enable such defaulting member to deposit the balance amount
either by extending time or giving any such incentive as it deem fit and proper
or to take recourse to such consequential measures as it deem fit and proper.,
The present case is similar to the cases which arose in the Delhi High Court.
The question, is in the matter of allotment of flats, can a Society not lay
down its own policy as to how instalments are to be paid, within what time and
in doing so can it not place certain conditions under it? In other words, can
or can it not resolve that members must pay the stipulated amount by fixing any
cut off date. If in spited of that if any member defaults can it not cancel the
allotment. Similarly, can it not decide instead of cancelling the allotment to
give him an offer to get the flat in the next phased construction clearing ways
for non-defaulters. The question is, can it be said, Society have no option
except to allot strictly by seniority rule in spite of such members defaulting
in making the payment If power could be said to be limited then it means let
seniors default let juniors wait as long as seniors do not pay but in no case
cancel or even modify preferences in their allotment. In our considered
opinion, such an interpretation would be squeezing the power of the general
body of a Society within the limits of Rule 36 belying all the objectives of
the cooperative spirits of the Act. Thus by this, if this be so, either bear
with the defaults of such members at the cost of non-defaulting members or
expel them from membership. Such an interpretation would be too harsh even on
senior members if only recourse could be the later. Even a senior member may
have financial stresses resulting into default of not able to pay for a flat
even the minimum fixed amount within the stipulated time, then will it be fair
to expel him? The option has to left with the society to deal with different
situations as may arise from time to time. Taking away this discretion and
binding it to exercise powers under Rule 36 would be interpreting against the
very objective of the Act, leaving no option with the Cooperative Society. The
Cooperative Society is formed with laudable objective to inculcate spirit to
work in a group freely for rendering benefit to its members through the
cooperative contributions. This is only possible by conferring wide range of
discretion to a society, not restricting its discretions by interpreting a law
otherwise. This has to be for furthering the cause of cooperative movement.
That is why various rigours of laws including taxes and fees are diluted for
enhancing the spirit of the cooperative movement. We have no hesitation to
hold, the power of Society cannot be circumvented within Rule 36 in a case of
default by its member of any of his dues. Such an interpretation would be
contradictory to the very cooperative spirit or objectives of the creation of
Cooperative Societies. rule 36 is quoted hereunder:
"36.
Procedure for Expulsion of Members.
(1)
Notwithstanding anything contained in the bye-laws, any member who has been
persistently defaulting in payment of his dues or the payment of claims made by
a housing society for raising funds to fulfil its objects, has been failing to
comply with the provisions of the bye-laws regarding sales of his produce
through the society or, other matter in connection with his dealings with the
society or who, in the opinion of the committee, has brought disrepute to the
society or he has done other acts detrimental to the interest or proper working
of the Society, the society may, by a resolution passed by a majority of not
less than three-fourth of the members entitled to vote who are present at a
general meeting, held for the purpose, expel a member from the society.
Provided
that no resolution shall be valid, unless the member concerned has been given
an opportunity of representing his case to the general body an no resolution
shall be effective, unless it is approved by the Registrar.
(2)
Where any member of a cooperative society proposes to bring a resolution for
expulsion of any other member, he shall give a written notice thereof to the
president of the Society. On receipt of such notice or when the committee itself
decides to bring in such resolution, the consideration of such resolution shall
be included in the agenda for the next general meeting and a notice thereof
shall be given to the member against whom such resolution is proposed to be
brought calling upon him to be present at the general meeting, to be held not
earlier then a period of one month from the date of such notice and to show
cause against expulsion to the general body of members. After hearing the
member, if present, or after taking into consideration any written
representation which he might have sent, the general body shall proceed to
consider the resolution.
(3)
When a resolution passed in accordance with sub-rule (1) or (2) is sent to the
Registrar or otherwise brought to his notice, the Registrar may consider the
resolution and after making such enquiry as to whether full and final
opportunity has been given under sub-rule (1) or (2) give his approval and
communicate the same to the society and the member concerned within a period of
6 months. The resolution shall be effective from the date of approval.
(3)
Expulsion from membership may involve forfeiture of shares held by the member.
The share shall be forfeited with the prior permission of the Registrar. In
that event, the value of the share forfeited shall be credited to the reserve
fund of the society.
(5) No
member of a cooperative society who has been expelled under the foregoing
sub-rules shall be eligible for re-admission as a member of that society or for
admission as a member of any other society or for admission as a member of any
other society of the same class for a period of three years from the date of
such expulsion:
Provided
that the Registrar may, on an application either by the society or the member
expelled and in special circumstances, sanction the re-admission or admission,
within the said period, of any such member as a member of the said society or
of any other society of the same class, as the case may be. Before giving such
sanction for re-admission or admission by the Registrar, an opportunity of
hearing may be given to both the society and member concerned." This Rule
deals with the procedure for the expulsion of members. In case Society decides
to expel its member who is persistently defaulting in making the payment of his
dues the procedure to be followed could only be what is provided under this
rule and no other. The principle referred earlier that if a thing is required
to be done in a manner as provided under the law has to be done in that manner
alone and no other manner will apply with equal force under rule 36, when a
society decides to expel its member. In case of expulsion of procedure provided
under it and the expulsion has to be only under the mode provided therein and
no other which is mandatory in nature. But this is only after decision is made
to expel its member. This rule does not take away discretion of the Society to
expel a member or not which is preceding the exercise of power under Rule 36.
For this there is nothing under this Rule which either circumscribes or webs
this discretion. Since this Rule is for the expulsion of its members, it is
stringent in its application. Even after giving opportunity and even after
general body passes such a resolution, it requires approval of the Registrar.
Outside this, there is nothing which restricts a Society to act freely and to
lay down its own policies. It is always open to it to decide on a fact to expel
him or not. Its discretion to act is curtailed only by a statutory provision or
any order having force of law. A policy may depend on various factors, its
planning, projects undertaking including its financial capacity etc. One
Society may be in a sound position and other in limping position thus may give
to its member larger or lesser benefits as the case may be. Thus it is always
open to a Society to lay down its own principle for making such allotments. So
consideration of prompt payment in shaping its policy which helps it to
complete its project to confer to its member its fruits at the earliest may be
justified exercise of its discretion. To what extent a default is going to effect
a Society will depend on facts and circumstances of each case which has to be
left at the discretion of each Society. It is not proper even for the courts to
interfere with such a discretion, except when it is arbitrary, irrational, mala
fide, against any statutory provisions or against orders having force of law.
This will not be possible if strict principle of seniority is followed. However
it is open for a Society to give weightage to seniority depending on facts of
each case. Within permissible limits it is always open to lay down its
principle which is just, fair and proper. When a Society could decide the
manner of allotment by instalments or other modes, there is no inhibition to it
to modify it in case conditions are not complied by its members Thus it is not
possible to uphold that Society has no option but to proceed under Rule 36 to
expel its member. Hence once a society has a discretion, it cannot be said its
power is restricted to allot only under strict rule of seniority.
We
find Section 28 of the Act vests final authority in the general body of a
Cooperative Society. it has wide powers including residuary power except those
not delegated to any other authority under the Act, the Rules and its bye-
laws. In other words, its power, if any, is only restricted by the Act, the
Rules, the bye-laws and any order having force of law. This exercise of power
by the general body which is in issue cannot be said to be excluded by Rule 36.
Rule
36 does not deal with every default for one to come under it. In fact, mere
default itself is not covered under this Rule. Default has to be persistent.
Even in a case of persistent, a society may or may not take recourse under it.
Apart from this Rule there are other rules dealing with default. Under sub-rule
(1) of Rule 39 a disability is provided for a defaulting member being in
arrears exceeding three months in respect of loan taken for being appointed to
represent the Society in any other cooperative Society. Sub- rule (2) similarly
provides disability of defaulting member who is in arrears to the Society for
the aforesaid period to represent the Society. Rule 59 also refers to a
disqualification of such defaulting member who has defaulted to any Society of
any sum due even in respect of any interest in any contract to which Society is
a party etc.
Then
under Rule 60 a member ceases to be on the committee or to hold any office in
case he continues to be in default in respect of any sum due. So there are
rules laying down how to deal with defaulting member. one of them is, if
society desires to expel one then it has to bring him under Rule 36.
This itself
shows defaulters can be dealt with in various ways and what is not provided,
not covered by these rules, the field is open for the general body to exercise
its discretion.
Reverting
back to the facts of the present case, it cannot be said when respondent No. 3
or such other member, who defaulted by not even paying the minimum as resolved
could claim as a right for allotment on the principle of seniority alone or
that the resolution of the general body dated 6.1.90 could in anyway be said to
be unfair, unjust, arbitrary, mala fide or irrational liable to be struck down.
It may
be where a very senior defaulting member paid the balance amount only one week
after very junior member paid the full amount, it is open for a Society to
resolve as it deem fit and proper by giving weightage to the seniority. It is
within the permissible discretionary field of such Society.
So far
giving notice to respondent No. 3 we find there is specific averment by the
appellant that a registered notice dated 26th April, 1986 was sent to her, a
copy of which has been filed in this appeal. The respondent's case is, she has not
received any notice from the Society either of the default or laying down cut
off date for the payment, including notice dated 26th April, 1986, further the
decision of the general body dated 6.1.90 of relegating her or other such
person to phase II was not on agenda. To this last argument we do not find any
merit. A general body can always with the approval of the house in the meeting
of its members take up any other matter not covered by the agenda and on that
account no illegality could be held.
So far
question of notice to respondent No. 3 whether given or not, is a question not
adverted to or decided by Respondent No. 1 viz., Delhi Cooperative Tribunal or
the High Court. Before treating any person to have defaulted, it is necessary
to record that a notice proceeding such impugned decision is actually served on
such member or there is deemed service under some applicable Rule depending on
the facts. We feel this question of notice to Respondent No.3 has not been
adverted to by any of the said authority or Court which requires consideration.
For this we send back this case to the Tribunal for deciding this sole question
whether there was notice to the respondent No. 3 or not as aforesaid. In case
the Tribunal find she had notice she would not be entitled for any relief but
in case she had no notice her claim for phase I flats cannot be defeated.
Accordingly,
we hold that a principle of seniority alone cannot be said to be the correct
criteria and the criteria resolved by the General Body being just, proper and
fair does not call for any inference by this court.
Accordingly,
we quash the impugned judgment of the High Court dated 10.11.1995 and the ex-parte
order dated 29.9.95 passed by the Delhi Cooperative Tribunal. The case is
remanded back to Respondent No. 1, the Tribunal to decide on the limited
question as aforesaid. This appeal is allowed in terms as aforesaid. Cost on
the parties.
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