Supreme Court of India
HARIBHAU DAGDU TANDALEversusINDUSTRIAL CO-OPERATIVE ASSOCIATION LTD. AND ORS.
- Citation
- 1996 INSC 1164
- Decided
- 8 October 1996
- Disposal
- Dismissed
- Bench
- M M PUNCHHI
Holding
The liquidator cannot sell the society’s property under Section 105 while an appeal against the interim winding‑up order is pending, and the State Government’s suo moto exercise of power under Section 154 to set aside such a sale was proper.
Summary
The Registrar, invoking Section 102(1)(a) of the Maharashtra Co‑operative Societies Act, 1960, issued an interim winding‑up order against Industrial Co‑operative Association Ltd and appointed a special liquidator. The society appealed to the State Government under Section 104, but while the appeal was pending the liquidator sold the society’s land to Haribhai Dagdu. The Government, using suo moto powers under Section 154, set aside both the winding‑up order and the sale, directing the liquidator to hand over the society to its committee. The appellant challenged this order, arguing that no appeal lay against an interim order, that the sale was protected by Section 103(6), and that the interim order merged with a later final order. The Supreme Court held that an appeal does lie against an interim winding‑up order, that the liquidator’s power to sell under Section 105 is exercisable only after the winding‑up becomes effective (i.e., after the appeal period expires), and that the Government’s suo moto intervention was lawful. Consequently, the appeal was dismissed.
Issues considered
- Whether an appeal lies against an interim winding‑up order and appointment of a liquidator under Section 102(1)(a) and Section 103 of the Act.
- Whether the State Government can invoke suo moto powers under Section 154 to set aside a sale of society property pending an appeal.
- Whether the liquidator may exercise the power of sale under Section 105 while the appeal against the interim winding‑up order is pending.
- Whether the 'acts done' provision in Section 103(6) shields the sale from being set aside.
- Whether the doctrine of merger between an interim order and a subsequent final order applies in this context.
Legislation cited
- Maharashtra Co-operative Societies Act, 1960s. 102, s. 103, s. 103(5), s. 103(6), s. 104, s. 105, s. 106, s. 154
Subjects
liquidationinterim winding‑upappealsale of propertyco‑operative societiesSection 105Section 106suo moto revisionnatural justicemerger doctrine
Judgment
A HARIBHAU DAGDU TANDALE
v.
INDUSTRIAL CO-OPERATIVE ASSOCIATION LTD. AND ORS.
OCTOBER 8, 1996
B
(M.M. PUNCHHI AND K. VENKATASWAMI, JJ.]
Maharashtra Co-operative Societies Act, 1960-Sections 102 to
106-Liquidation-lntelim order of winding up-Appointment of a Liquida-
tor-Power to sell property of the Society-Power u/s 105 must be read in
C conjunction with power to sell u/s 106--Sale of property dwing pendency cf
appeal-Legality of
The third respondent in exercise of his powers u/s 102(i) (a) of the
Maharashtra Co-operative Societies Act, 1960 issued an interim winding
D up order, called upon the first respondent society to show cause why a final
order of winding up the society should not be passed and also simul-
taneously appointed the second respondent as Special Liquidator u/S 103
of the Act. The interim order was confirmed u/S 102(2) of the Act without
affording the personal hearing requested by the first respondent. The first
respondent filed an appeal to the State Government !J/S 104 of the Act.
E While the appeal was pending, the Special Liquidator sold the land belong-
ing to the society to the appellant. The Government issued notices to the
second and third respondents invoking the suo moto power u/S 154 of the
Act, to question the sale in favour of the appellant. The order of winding
up and the sale was set aside and the Liquidator was directed to hand over
p the charge of the society to the committee, holding that when the appeal
was pending with the appellate authority the subordinate authority had no
right to dispose of any property which may adversely affect if the liquida-
tion order were to be set aside by the appellate authority. The appellant
challenged the order of the State Government. The High Court. confirmed
the order of the State Government and dismissed the Writ Petition,
G holding that the power of sale conferred on the Liquidator under clause
(a) of sub-section (i) of Section 105 shall have to be read along with the
powers of sale contemplated u/S 106 of the Act; that Section 105 covers
cases where sale of the property cannot await the disposal of the appeal,
while Section 106 deals with the power of sale when winding up order has
H become final and, therefore, effective; that pending appeal can result both
288
H.D. TANDALEv. INDL. CO-OP.ASSN. LTD. 289
in the confirmation of the interim winding up order as well as in the A
vacating thereof; that the sale powers u/s 105 could have been intended
only to meet such cases where sale of perishable articles or some other
- property of such nature cannot wait till the disposal of the appeal. Hence
this app eaI.
The appellant submitted that no appeal lay to the State Government
B
against an interim order of winding up and appointment of Liquidator;
that the State Government was not justified in invoking suo moto
revisional powers for setting aside the confirmation order of winding up
passed u/S 102(2) of the Act; that the sale by the liquidator ought not to
have been set aside merely on the ground that interim winding up order c
was not sustainable as all acts done and proceedings taken by the liquida-
tor shall be binding on the society even if the interim order had sub-
sequently been cancelled; that the interim order of winding up having been
matle final subsequently by the third respondent by an independent order
and the society having not challenged the final order, the appeal before the
D
State Government against the interim order must be deemed to have
become infructuous as the interim order merged with the final order.
Dismissing the appeal, this Court
HELD : 1.1. Under the provisions of the Maharashtra Co- operative E
Societies Act, 1960, as soon as an interim order of winding up was passed
and a Liquidator was appointed, he gets only the custody and control of all
the property, effects and actionable claims to which the society appears to
be entitled, and of all books, records and other documents pertaining to the
business of the society. It is only under Section 103(5) of the Act, the assets F
of the society vest in the Liquidator. Under Section 105(1)(c), the Liquida-
tor is empowered to sell immovable and movable property of the society by
public auction or private contract but this power must be read in conjunc-
tion with the powers to sell, given under Section 106 which says that after a
•• winding up becomes effective, the Liquidator shall proceed to realise the
assets of the society to sale or otherwise. The winding up order becomes G
effective only after the expiry of the period for appeal against the order
made under sub-section (1) of Section 102 or where the appeal has been
dismissed. If an appeal is filed and the same is pending, the winding up
order will not become effective and the Liquidator shall not proceed to
realise the assets of the society by sale or otherwise. [295-H, 296-A-C] H
290 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A 1.2 Third respondent invoked Section 102 of the Act, on the basis of
the report of the Auditor. The winding up order was passed u/s 102(i)(a) of
the Act. Section 104 expressly provided an appeal to the Government
against an order u/s 102 which includes order u/s 102(a). Therefore, an
appeal lies against an order passed u/s 102(1)(a) of the Act. However
proviso excludes such appeal being available to orders under sub-clause (i),
B (ii) or (iii) of clause (c) of sub-section (i) of Section 102 of the Act. [297-C]
1.3. The exercise of power by the Government u/s 154 of the Act
cannot be faulted. The Government while considering the appeal of the
Society u/S 104 and! on coming to know of the Developments pending
C appeal regarding sale of society's land invoked the powers u/s 154 to find
out the propriety and legality of the sale. (297 -E]
1.4. The interim order is expre'ssly liable to be confirmed or vacated
by the authority who passed the interim order. The appellate authority who
has a right to decide the correctness of an interim order cannot be denuded
D from considering the same on the ground that a final order had been
passed pending appeal. The merger theory will not apply to the instant
case. (297-G]
1.5. Words 'acts done' in Section 103(6) of the Act will cover only
E legally carried out acts and not otherwise. Here the sale by the liquidator
pending appeal before Government was in contravention of Sections 105
and 106 of the Act. Hence Section 11}3(6) of the Act coulll not be invoked.
(297-H, 298-A]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2051 of
1982.
F
From the Judgment and Order dated 13.4.82 of the Bombay High
Court in W.P. No. 390 of 1982.
Bhimrao Naik, Rakesh K. Sharma for K. Rajendra Choudhary for
G the Appellant.
S.M. Jadhav for the Respondent No. 4.
l.G. Shah and Ms. V.D. Khanna for the Respondent No. 1.
H The Judgment of the Court was delivered by
H.D. TANDALEv. INDL CO-OP.ASSN.LTD.[VENKATASWAMI,J.) 291
VENKATASWAMI, J. This Appeal by Special Leave is preferred A
against a Division Bench Judgment of the Bombay High Court in W.P.
No.390/82 dated 13th April, 1982. The learned Judges by the judgment
under appeal have confirmed an Order of the State Government passed
while exercising appellate as well as suo moto revisional jurisdiction in a
matter arising out of The Maharashtra Co-operative Societies Act, 1960 B
(hereinafter called "the Act").
The third respondent herein purporting to exercise his powers under
Section 102(1)(a) issued an interim winding up order dated 17.6.1974 and
called upon the first respondent-society to show cause why a final order
winding up the society should not be passed. The third respondent also C
simultaneously appointed the second respondent herein as Special Liqui-
dator under Section 103 of the Act.
The first respondent in response to the notice dated 17.6.1974 gave
a detailed reply objecting to the proposed final order of winding up and D
appointment of Special Liquidator under Section 103 of the Act. The first
respondent while requesting for vacation of the interim order requested
for a personal hearing before passing final order. The third respondent,
however, without affording the personal hearing requested by the first
respondent and though the statute required giving of such personal hear-
ing, confirmed the interim order under Section 102(2) of the Act on E
12.8.1974.
The first respondent meanwhile aggrieved by the interim order of the
third respondent dated 17.6.1974 preferred an appeal to the State Govern-
ment as provided under Section 104 of the Act on 16.7.74. Initially, the F
fourth respondent (State Government) granted a stay on 26.8.74 but the
same was vacated on 27.9.75 on the ground that the second respondent
Liquidator has already assumed charge of the affairs of the society. While
the appeal was pending before the fourth respondent and inspite of the
fact of filing of appeal was brought to the notice of the second respondent, G
the special Liquidator brought an extent of 5 acres 31 gunthas of land
belonging to the society for sale. The appellant herein offered to purchase
the said land far Rs. 22,000 by his tender dated 10.7.75. A sale deed was
finally executed in favour of the appellant on 11.9.1978. Pursuant to the
sale, the appellant was put in possession of the said land also. At that stage,
when the Government came to know of the sale, issued notices tci the H
292 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A second and third respondents invoking the suo moto power under Section
154 and called for the records of the sale transaction for the purpose of
examining as to whether the transaction was legal. The appellant gave a
detailed reply to the State Government inter alia contending that the
Governm~nt have no authority to invoke the suo moto power to question
I
B the sale in 4is favour. The Government considered the appeal of the first
respondent filed under Section 104 of the Act and also the suo moto
revision together and after personally hearing the appellant and respon-
dents 1 to 3 held that 'when the appeal was pending with the appellate
authority the subordinate authority has no right to dispose of any immov-
able and movable property which may adversely affect if the liquidation
C order were to be set aside by the appellate authority'. The fourth respon-
dent further obsen'ed 'that the perusal of the records show that no hearing
was given to the society and thereby the principles of natural justice had
been violated. After giving reasons the fourth respondent also found that
the order of winding up itself was uncalled for and consequently set aside
D the same. The sale in favour of the appellant was also set aside and the
Liquidator was directed to hand over the charge of the society to the
committee from whom he has taken the charge. The Government further
directed the Liquidator to help the committee to take possession of the
land from the appellant after paying all the necessary dues i.e. the price of
the land paid by the appellant and other expenses, if any, incurred ·b~ the
E appellant.
Aggrieved by the order· of the fourth respondent - State Government
- dated 3.1.1982, the appellant moved the Bombay High Court to set aside
the same and to sustain the sale in his favour. As noted earlier the learned
F Judges of Bombay High Court for well-considered reasons, overruling the
. arguments advanced on behalf of the appellant, confirmed the order of the
State Government and dismissed the Writ Petition. The present appeal is
against the order of the Bombay High Court.
•
Mr. Bhimrao Naik, learned Senior Counsel, appearing for the appel-
G lant, has pressed before us the following points in assailing the judgment
and order of the Bombay High Court. The points were that no appeal lay
to the Government (fourth respondent) against an interim order of winding
up and appointment of Liquidator. The fourth respondent was not justified
in invoking suo moto revisional powers for setting aside the confirmation
H order of winding up passed under Section 102(2) of the Act; that the
H.D. TANDALEv. INDL CO-OP.ASSN. LTD. [VENKATASWAMI,J.] 293
Government have not seriously applied their mind, is apparent from, the A
order itself. Because though the appeal filed by the society was against the
interim order, the Government have set aside the confirmation order of
winding up. In any event, Section 103(6) i;pecifically provides that all acts
done and proceedings taken by the liquidator shall be binding on the
society even if the interim order has subsequently been cancelled and that
B
being the position, the sale by the liquidator ought not to have been set
aside merely on the ground that interim winding up order was not sus-
tainable. He also contended that the interim order of winding up having
been made final subsequently by the third respondent by an independent
order dated 12.8.78 and the society having not challenged the final order,
the appeal before the State Government against the interim order must be C
deemed to have become infructuous as the interim order merges with the
final order.
Mr. LG. Shah, learned Senior Counsel appearing for the first respon-
dent-society took us through the judgment of the Bombay High Court and
relied on the reasons given thereon as his arguments. D
On a careful consideration of the rival arguments and after carefully
going through the judgment of the Bombay High Court, we are of the view
that the learned Judges of the Bombay High Court have given well-founded
reasonings for sustaining the ordtr of the State Government and we shall E
give our reasons immediately.
· Hor avpreciating the contentions raised before us, it is necessary to
set put relevant portions of Section 102, 103, 104, 105 and 106 of the Act.
Chapter 10 in the Act deals with liquidation. Section 102(1)(a) reads as
follows: F
"(1) If the Registrar-
.,.
(a) after an inquiry has been held under section 83 or an inspection
has been made under section 84 or on the report of the auditor
auditing the accounts of the society, or". G
(b) ···········
(c) ···········
is of the opinion that a society ought to be wound up, he may H '
294 SUPREME COURT REPORTS (1996) SUPP. 7 S.C.R.
A issue an interim order directing it to be wound up." .
Admittedly the order of winding up was based on the report of the
auditor. Hence, the other parts of Section 102(1) are unnecessary.
The relevant portion of Section 103 reads as follows :
B
"103. (1) When an interim order is passed under the last preceding
section or a final order is passed under that section, for the winding
up of a society, the Registrar may, in accordance with the rules,
appoint a person to be Liquidator of the society, and fix his
remuneration.
c
(2) On issue of the interim order, the officers of the society shall
hand over to the Liquidator the custody and control of all the
property, effects and actional claims to which the society is or
appears to be entitled, and of all books, records and other docu-
.D ments pertaining to the business of the society and, shall have no
access to any of them.
{3) ***************
(4) ***************
E (5) The whole of the assets of the society shall on the appointment
of Liquidator under section vest in such Liquidator, and not-
withstanding anything contained in any law for the time being in
force, if any immovable property is held by a Liquidator on behalf
of the society, the title over the land shall be complete as soon as
F the mutation of the name of his office is effect, and no Court shall
question the title on the ground of dispossession, want of posses-
sion or physical delivery of possession.
(6) In the event of the interim order vacated, the person appointed
as Liquidator shall hand over the property, effects and actionable
G claims and books, records and other documents of the society to
the officers who had delivered the same to him. The acts done,
and the proceedings taken by Liquidator, shall be binding on the
society, and such proceedings shall, after the interim order has
been concelled under the preceding section, be continued by the
H officers of the society."
;
H.D. TANDALEv. INDL. CO-OP.ASSN.LID.[VENKATASWAMI,J.] 295
(104) (1) The committee or any member, of the society ordered A
to be wound up, may, within two months from the date of the issue
of the order made under section 102, appeal to the ~tate Govern-
ment.
Provided that no appeal shall lie against an order issued under
sub-clause (i), (ii) and (iii) of clause (c) of sub- section (1) of B
section 102.
(2) ************
105. (1) The Liquidator appointed under section 103 shall have C
power, subject to the rules and the general supervision, control
and direction of the Registrar-
(a) ************
(b) ***~********
'· D
(c) to sell the immovable and movable property and actionable
claims of the society by public auction or private contract, with
power to transfer the whole or part thereof to any person or body
corporate, or sell the same in parcels;
' E
106. After expiry of the period for appeal against the order made
under sub-section 10 of Section 102 or where the appeal has been
dismissed, the order for winding up shall be effective and shall
operate in favour of all the creditors and of all the contributories
of the society, as if it had been made on the joint petition of
creditors land contributories. When a winding up order becomes F
effective, the Liquidator shall proceed to realise the assets of the
society by sale or otherwise, and no dispute shall be commenced
or, if pending at the date of the winding up order, shall be
proceeded with, against the society, except by leave of the
Registrar and subject to such terms as the Registrar may impose. G
The Registrar, may of his opinion, however, entertain or dispose
of any dispute by or against the society."
A careful reading of the above provisions show that as soon as an
interim order of winding up was passed and a Liquidator was appointed,
he gets only the custody and control of all the property, effects and H
296 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A actionable claims to which the society appears to be entitled, and of all
books, records and other documents pertaining to the business of the
society. It is only under Section 103(5) the assets of the society vest in the
Liquidator. No doubt under Section 105(1)(c), the Liquidator is em-
powered to sell immovable and movable property of the society by public
B auction or private contract but this power must be read in conjunction with
the power to sell given under Section 106 which says that after a winding
up becomes effective, the Liquidator shall proceed to realise the assets of
the society by sale or otherwise. The winding up order becomes effective
only after the expiry of the period for appeal against the order made under
sub-section (1) of Section 102 or where the appeal has been dismissed. In
C other words, if an appeal is filed and the same is pending, the winding up
order will not become effective and the Liquidator shall not proceed to
realise the assets of the society by sale or otherwise. This is exactly the
reason given by the Government while setting aside the sale stating that
when the appeal was pending, the Liquidator should not have proceeded
D with the sale especially when he had knowledge of the pendency of appeal.
· . The High Court also has given considered reasons to reconcile the sale
under Section 105 and the sale under Section 106 of the Act. The High
Court observed as under :
"The power of sale conferred on the Liquidator under clause (a)
E of sub-section (1) of Section 105 shall have to be read along with
the powers of sale contemplated under saction 106 of the Act.
Section 106, on the fact of it, deals with the powers of the Liqui-
dator after the order of winding up becomes effective. The legis-
lature could not have thought it necessary to confer powers of sale
F both under Section 105 and under Section 106 of the Act. If both
the Section confer the power of sale it becomes the duty of the
Court to find out the respective spheres for exercise of these
powers. Looked at from this point of view, section 105 appears to
have been intended to cover cases where sale of the property
cannot await the disposal of the appeal, while Section 106 deals
G with the power of sale when the winding up order has become final
and, therefore, effective. It is difficult to conceive that the Liqui-
dator could have intended to authorise the sale of the property
without any urgency whatsoever, even when the appeal was pend-
ing. Pending appeal can result both in the confirmation of the
H interim winding up order as well as in the vacating thereof. The
H.D. TANDALEv. INDL CO-OP.ASSN. LTD.[VENKATASWAMI,J.) 297
sale powers under Section 106 could have been intended only to A
meet such cases where sale of perishable articles or some other
property of such nature cannot for some reason or the other wait
till the disposal of the appeal."
We agree with the above reasoning of the High Court. We are not
able to agree with the learned Senior Counsel for the appellant that no
B
appeal lay against the interim winding up order and simultaneous appoint-
ment of the Liquidator. It is common ground that the third respondent
invoked Section 102 on the basis of the report of Auditor. Therefore, the
relevant provision for passing winding up order is 102(1)(a). Section 104
expressly provided an appeal to the Government against an order under C
Section 102 which includes order under section 102(1)(a). However proviso
excludes such appeal being available to orders under sub-clause (i)(ii) or
(iii) of clause ( c) of sub-section (1) of Section 102. In the light of the above,
it is 1utile to contend that no appeal lay against an order passed under
Section 102(1)(a).
D
The Government while considering the appeal of the first respondent
under Section 104 and on coming to know of the developments pending
appeal namely the sale of society's land invoked the power under Sec. 154
to find out the propriety and legality of the sale. It is not the case of the
appellant that an appeal lies against the sale by the liquidator. Therefore, E
the exercise of power by the Government under Section 154 cannot be
faulted. Here again there is no substance in the argument of the learned
Senior Counsel. The other contention that the interim order merges with
final order and therefore, in the absence of any separate appeal against the
final order, the appeal against interim order will become infructuous, is F
also without substance. If the foundation is knocked of, structure standing
on it cannot stand in the air, automatically falls down. The interim order
is expressly liable to be confirmed or vacated by the authority who passed
the interim order. That being the position, the appellate authority who has
a right to decide the correctness of an interim order cannot be denuded
from considering the same on the ground that a final order has been passed G
pending appeal. The merger theory will not apply to the instant case.
Therefore, the High Court was right in rejecting such a contention. The
contention based on Section 103(6) also not acceptable as "acts done"
contemplated in that section will cover only legaly carried out acts and not
otherwise. Here the sale by liquidator pending appeal before Government H
298 SUPREME COURT REPORTS (1996] SUPP. 7 S.C.R.
A was in contravention of sections 105 and 106. Hence no help can be derived
from section 103(6) of the Act.
In the result, none of the arguments advanced before us on behalf of
the appellant, appeal to us. The appeal is therefore, dismissed. However,
there will be no order as to costs.
B
R.A. Appeal dismissed.
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