DEEPAK ANANDA PATIL versus THE STATE OF MAHARASHTRA & ORS on 4 January 2023

1. Leave granted.

2. These appeals arise from a judgment dated 22 September 2022of a Single Judge of the High Court of Judicature at Bombay.

3. The ninth respondent, Shri Chhatrapati Rajaram Sahakari SakharKarkhana Limited, is a cooperative society registered under theMaharashtra Co-operative Societies Act 1960. The society has its ownbye-laws and is engaged primarily in the production of sugar. Thejurisdiction of the cooperative society extends to 122 villages in seventalukas of District Kolhapur and it has 17,173 cultivator members.

4. Bye-law 17-A prescribes the requirements for being a ‘producermember’ of the society. The bye-law stipulates that a member should (i)have attained the age of 18 years; (ii) be an occupier of land within thejurisdiction of the society/factory as owner or tenant; and (iii) cultivatesugarcane in a minimum area of 10 gunthas of land.

5. In 2019, complaints were filed by respondents 3 to 8 whileinvoking the provisions of Section 11 of the Maharashtra Cooperative A

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ASocieties Act 1960. The complaints which were addressed to the Registrar,sought the removal of approximately 2000 members on the ground thatthey did not fulfill the conditions of eligibility.

6. On 3 January 2020, the Regional Joint Director (Sugar)addressed a communication to the cooperative society adverting to theBfact that the complainants had alleged that the members whose nameswere set out in a list of members attached as ‘Annexure A’ were, as thecase may be, not residing in the jurisdiction of the factory; not holdingten gunthas of land; and did not fulfill the requirements of eligibility interms of the bye-laws. The notice to show cause also adverted to thefact that writ petitions were filed before the High Court of Judicature atCBombay in which an order had been passed on 20 December 2019directing the Regional Joint Director to conclude the enquiry by 15February 2020.

7. The cooperative society, upon receipt of the notice from theRegional Joint Director, forwarded a copy to all the members whoseDeligibility was sought to be disputed. The allegations in the notice toshow cause were disputed by at least some of the members. Themembers disputed the allegation that they were not eligible in terms ofthe bye-laws and sought an opportunity to produce evidence in supportof their eligibility.

E8. On 14 February 2020, the Regional Joint Director (Sugar) heldthat the members whose names were set out in Annexure B to AnnexureB-6 were disqualified from being members of the society. The breakupof these members is as follows:

(i) 59 members did not hold the minimum area of agriculturalFland within the jurisdiction of the factory; (ii)709 members did not hold agricultural land within thejurisdiction of the factory; (iii)205 members held land on the basis of usufructuarymortgages for which there was no entry in the revenueGrecords; (iv)33 members were dead, requiring the deletion of theirnames; (v)69 members were found to have been recorded more thanHonce;

(vi) The shareholding of 2 members stood cancelled; and

(vii) The factory had consented to the deletion of 338 members.

A total of 1415 members comprised in Annexures B to B-6 to theorder were directed to be deleted. 484 members (Annexures A and A-1) were found to meet the conditions of eligibility.

9. An appeal against the order of the Regional Joint Director(Sugar) under Section 152 of the Maharashtra Cooperative SocietiesAct 1960 was dismissed on 18 February 2021 by the Minister ofCooperation.

10. This led to the institution of writ petitions before the HighCourt. The Single Judge rejected the Writ Petitions by the impugnedjudgment and order dated 22 September 2022. The Single Judge hasobserved that there was no controversy on factual aspects and dealtwith the submission that the Registrar had no jurisdiction under Section11 to enquire into whether a member stood disqualified after the formationor registration of the cooperative society. The Single Judge held that theexpression “for the purpose of the formation or registration or continuanceof society” was deleted by way of an amendment to Section 11. Hence,it was held that the power of the Registrar under Section 11 is notrestricted to enquiring into the eligibility only at the stage of the formationor registration of the society.

11. We have heard Mr Maninder Singh and Mr Neeraj KishanKaul, senior counsel appearing on behalf of the appellants; Dr AbhishekManu Singhvi, senior counsel appearing on behalf of the originalcomplainants and Mr Tushar Mehta, Solicitor General of India appearingon behalf of the State of Maharashtra. The sugar factory is representedby Mr Siddarth Bhatnagar, senior counsel.

12. The principal submission which has been urged on behalf ofthe appellants is that there has been no enquiry at all on an individualbasis on whether or not the members who were sought to be disqualifiedfulfilled the condition specified in the bye-laws. In this context, it wassubmitted that:

(i) One omnibus notice was issued to the cooperative societycontaining an annexure listing out the members who weresought to be disqualified;

(ii) There was no specific allegation of ineligibility againstindividual members; A

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A(iii)Confronted with an order of the High Court dated 20December 2019 requiring the enquiry to be concluded inless than 2 months i.e. by 15 February 2020, the RegionalJoint Director pursued the enquiry in haste withoutconsidering the individual eligibility of each of the memberswho were sought to be disqualified;B

(iv) Though a Committee was apparently constituted to verifythe allegations in the show cause notice, the report of theCommittee was not divulged either to the cooperative societyor to the members who were sought to be disqualified.CHence, it was urged that there was a breach of the principles ofnatural justice. Moreover, it was submitted that the grounds in the appealbefore the appellate authority under Section 152 as well as before theHigh Court in the Writ Petitions would indicate that there were seriousobjections to the findings of ineligibility on facts. Since the facts have notbeen enquired into, it was submitted that an order of remand to theDRegional Joint Director (Sugar) would be warranted.

13. Dr Abhishek Manu Singhvi, senior counsel appearing on behalfof the original complainants in the enquiry submitted:

(i) No submissions were raised before the High Court in regardEto the lack of enquiry into individual eligibility; and

(ii) The only submission which was urged was on the basis ofSection 11.

Hence, it was urged that it would not be open to the appellants toassert any other submission and, if they are aggrieved by the order ofFthe High Court, the correct remedy would be in the form of a review.

14. The second limb of the submission of Dr Singhvi is that thereare concurrent findings in the order of the Regional Joint Director andthe appellate authority on factual aspects which have been affirmed bythe dismissal of the writ petition under Article 226 of the Constitution ofGIndia. Hence, it was urged that there is no warrant for the interferenceof this Court.

15. While considering the rival submissions, certain basic factsemerge from the record. An omnibus show cause notice was issued on3 January 2020 to the cooperative society by the Regional Joint DirectorH(Sugar) acting on the basis of complaints raising a dispute with regard to the eligibility of nearly 2,000 members. The cooperative society forwardeda copy of the show cause notice to each of the members.

16. The Single Judge of the High Court has recorded thesubmission of the counsel appearing on behalf of the complainants that aCommittee was constituted to verify the allegations and that theCommittee submitted its report to the Regional Joint Director (Sugar).The report, insofar as it contained findings with regard to the eligibility ofindividual members, was crucial for the members to set up their defensein regard to the plea of their alleged ineligibility. A copy of the report wasnot supplied to the individual members or to the cooperative society.

17. It is a well-established principle of administrative law that anadjudicatory body cannot base its decision on any material unless theperson against whom it is sought to be utilized has been apprised of itand given an opportunity to respond to it. Surveying the precedentsextensively, MP Jain & SN Jain’s treatise on Principles of AdministrativeLaw[1] notes that:

“If the adjudicatory body is going to rely on any material, evidenceor document for its decision against a party, then the same mustbe brought to his notice and he be given an opportunity to rebut itor comment thereon. It is regarded as a fundamental principle ofnatural justice that no material ought to be relied on against aparty without giving him an opportunity to respond to the same.The right of being heard may be of little value if the individual iskept in the dark as to the evidence against him and is not given anopportunity to deal with it. The right to know the material on whichthe authority is going to base its decision is an element of the rightto defend oneself. If without disclosing any evidence to theparty, the authority takes it into its consideration, anddecides the matter against the party, then the decision isvitiated for it amounts to denial of a real and effectiveopportunity to the party to meet the case against him. Theprinciple can be seen operating in several judicialpronouncements where non-disclosure of materials to theaffected party has been held fatal to the validity of the hearingproceedings.

(emphasis supplied)

1 MP Jain & SN Jain, Principles of Administrative Law (LexisNexis, 8th ed.) at 490-91.

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A18. In T. Takano v Securities and Exchange Board of India[2],a two judge bench of this court, of which one of us was a part (D.Y.Chandrachud, J.), discussed the line of cases of this Court on the duty todisclose investigative material. The Court analyzed the ratio in NatwarSingh v Director of Enforcement[3], Krishna Chandra Tandon v Union of India[4], Khudiram Das v State of West Bengal[5], Union of India vBMohd. Ramzan Khan[6], Managing Director, ECIL, Hyderabad v B.Karunaka[7], State Bank of Patiala v SK Sharma[8], State of UttarPradesh v Ramesh Chandra Mangalik[9], Kothari Filaments vCommr. Of Customs[10], and noted that:

“39.The following principles emerge from the above discussion:

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(i) A quasi-judicial authority has a duty to disclose thematerial that has been relied upon at the stage ofadjudication; and

(ii) An ipse dixit of the authority that it has not relied on certainDmaterial would not exempt it of its liability to disclose suchmaterial if it is relevant to and has a nexus to the action thatis taken by the authority. In all reasonable probability, suchmaterial would have influenced the decision reached by theauthority.

EThus, the actual test is whether the material that isrequired to be disclosed is relevant for purpose ofadjudication. If it is, then the principles of naturaljustice require its due disclosure.”

(emphasis supplied)

FIn the present case, it is undisputed that the Committee’s Reportsubmitted to the Regional Joint Director (Sugar) contained findings with 2 (2022) 8 SCC 162

3 (2010) 13 SCC 255

4 AIR 1974 SC 1589

G5 (1975) 2 SCC 81

6 (1991) 1 SCC 588

7 (1993) 4 SCC 727

8 (1996) 3 SCC 364

9 (2002) 3 SCC 443

10 (2009) 2 SCC 192H

regard to the eligibility of individual members. It was both relied uponand relevant for the purpose of adjudication. It is also undisputed thatthe Report was not supplied to the individual members or to the cooperativesociety.

19. On the issue of the impact of such non-disclosure, in T. Takano,summarizing the ratio of the Constitution Bench in B. Karunakar[11], wenoted that:

“A Constitution Bench of this Court in Karunakar (supra) heldthat the non-disclosure of the relevant information is not in itselfsufficient to warrant the setting aside of the order of punishment.It was held that in order to set aside the order ofpunishment, the aggrieved person must be able prove thatprejudice has been caused to him due to non-disclosure.To prove prejudice, he must prove that had the materialbeen disclosed to him the outcome or the punishment wouldhave been different. The test for the extent of disclosure andthe corresponding remedy for non-disclosure is dependent on theobjective that the disclosure seeks to achieve. Therefore, the impactof non-disclosure on the reliability of the verdict must also bedetermined vis-à-vis, the overall fairness of the proceeding. Whiledetermining the reliability of the verdict and punishment, the courtmust also look into the possible uses of the undisclosed informationfor purposes ancillary to the outcome, but that which might haveimpacted the verdict.”

The Committee’s Report dealing directly with the findings on theeligibility of the individuals would have been relevant for any of theindividuals to dispute the factual aspects on the basis of which theireligibility was called into question. Furthermore, in the absence of anyother specific allegation or grounds of ineligibility being made availableto the individuals, it is certain that the non-disclosure of the Reportprejudiced them.

20. Further, it emerges from the record that there was a directionby the High Court in the exercise of its writ jurisdiction for the conclusionof the enquiry by 15 February 2020. The notice to show cause specificallyreferred to the direction in terms of which the Regional Joint Directorwas to conclude the enquiry within a stipulated time frame. Neither the 11 Supra A

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Aorder of the Regional Joint Director (Sugar) nor the order of the appellateauthority has dealt with the facts pertaining to the eligibility of each ofthe members. The findings of the Regional Joint Director are summarizedin the Annexure to the order of which Annexures B to B-6 have beensummarized in the earlier part of this judgment. There has been noconsideration of the nature of the ineligibility qua each member, theBground of ineligibility or of the documentary material which was producedin support of the claim that the member was ineligible.

21. The submission on behalf of the appellants is that severalmembers were enrolled as members of the society in 1984 and as aresult of the action of the Regional Joint Director, they would be made toCsuffer serious prejudice as a consequence of their losing the membershipof the cooperative society. The order under Section 11 has seriousconsequences for the members. An omnibus order of this nature hasbeen passed by the Regional Joint Director, preceded by a general noticeto show cause which was issued to the cooperative society. There hasDbeen no application of mind to the grounds of ineligibility which wereasserted against each member. The order under Section 11 operates tooust a particular individual from the membership of the society. Theprinciples of natural justice must be observed in relation to each memberwhose membership is sought to be ousted. There was a clear breach ofthe principles of natural justice.E

22. For the above reasons, it would be appropriate to set aside theimpugned order of the High Court and to restore the proceedings to theRegional Joint Director. Though the High Court has proceeded exclusivelyon the basis of the submission with reference to Section 11, we findfrom the record that there were serious objections which were raisedFboth in the appeal and before the High Court in the pleadings in regard tothe alleged ineligibility of the members. The consequence of oustingsuch a large group of members from the membership of a cooperativesociety would result in a serious miscarriage of justice unless individualfacts are considered in each case.G23. We accordingly allow the appeals in the following terms:

a.We set aside (i) the impugned judgment and order of theHigh Court dated 22 September 2022; (ii) the order of theRegional Joint Director (Sugar) dated 14 February 2020;and (iii) the order in appeal of the Minister of CooperationHdated 18 February 2021; b.The proceedings shall stand restored to the file of theARegional Joint Director (Sugar);

c.Since the members have appeared in these proceedings, nofurther notice to show cause would be necessary to themembers; B

d.The members who are sought to be proceeded against shallbe entitled to a disclosure of the scrutiny report of theCommittee as well as of the copy of the complaints and thedocuments which are annexed thereto. This exercise shallbe completed within a period of one month from the date ofthis order; C

e.Thereafter, the members would be at liberty to submit theirreplies within a period of one month; f.The Regional Joint Director shall pass fresh orders afterfurnishing to the members an opportunity of being heardwithin a period of three months thereafter.

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24. The appeals shall stand allowed in the above terms.

25. Pending applications, if any, stand disposed of.

MA Nos 1978-1979 of 2022

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26. The Interlocutory Applications seeking restoration of SpecialLeave Petition (C) Nos 20001-20002 of 2022 are allowed.

27. The Special Leave Petitions are restored to file in their originalnumbers.

SLP (C) Nos 20001-20002 and 22734-22737 of 2022

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28. In terms of the order passed in Civil Appeal Nos 88-89 of2023, the Special Leave Petitions are disposed of.

29. Pending applications, if any, stand disposed of accordingly.

Divya Pandey(Assisted by : Dayaar and Roopanshi Virang, LCRAs)

Appeals allowed.

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