Holding

Section 28 vests the General Body with wide discretionary power, so seniority alone is not the sole criterion and the resolution is valid, but the issue of notice to the respondent must be decided by the Cooperative Tribunal.

Summary

The appellant, a housing cooperative society, allotted land for flats and, after some members defaulted on payments, the General Body resolved that members who had paid a minimum amount would receive Phase I flats while defaulting members would be accommodated in Phase II on additional land. Respondent No.3, a defaulting member, challenged this resolution, arguing that seniority alone should be the sole criterion and that Rule 36 required expulsion of defaulters, not their accommodation, and that she had not received proper notice. The Appellate Authority and the High Court held that seniority was the prime criterion, ignoring the default, and upheld the society’s decision. The Supreme Court held that under Section 28 of the Delhi Cooperative Societies Act the General Body has wide discretionary power and that seniority alone is not the exclusive criterion; the resolution was not arbitrary, unfair, or illegal, but the question of whether notice was served must be decided by the Cooperative Tribunal. Consequently, the Court set aside the High Court judgment and remanded the matter for determination of the notice issue.

Issues considered

The validity of the General Body's resolution to allocate Phase II flats to defaulting members while giving weight to seniority.
Whether seniority alone is the exclusive criterion for flat allotment under the Delhi Cooperative Societies Act and Rules.
Whether Rule 36 of the Delhi Cooperative Societies Rules restricts the society's discretion to only expulsion of defaulting members.
Whether the society was required to serve a notice to the defaulting member before relegating her to Phase II.

Legislation cited

Delhi Cooperative Societies Act, 1972s. 28, s. 60, s. 61, s. 76
Delhi Cooperative Societies Rules, 1973s. 36, s. 39, s. 59, s. 60

Subjects

cooperative societyflat allotmentsenioritydefaulting memberRule 36Section 28noticediscretionexpulsionpayment-cum-seniority

Judgment

A MYURDHWAJ COOPERATIVE GROt:P HOIJSING SOCIETY LTD.
v.
PRESIDING OFFICER, DELHI COOPERATIVE
TRIBIJNAL AND ORS.

JULY 14, 1998
B
(G.B. PATTANAIK AND A.P MISRA. JJ.]

Delhi Cooperative Societies Act, 1972 :

C Section 28- -.Cooperative Societies-·.Cooperative housing society--
Flats- Allotment of .Criteria-Principle of seniority- Payment of dues-
Defaulting membas--General Body decided to allot flats to such defaulting
members in Phase II construction- Validity -Held: Not unfair, unjust, arbitrary,
mala fide or irrational- .Principle of seniority alone is not the only criterion
D for allotment of fast- However, it must be ensured that a demand notice is
served upon the defaulting member in such cases.

Section 28- .Cooperative Societies -General Bod)~-Powers of- Held :
Not circumvented by R.36. Section 28· -General Body meeting-Agenda-
Matter not covered by- -Taking up of-Held: Can be taken up with the
E approval of the house in the meeting of its members.

Delhi Cooperative Societies Rules, 1973 :

Rule 36- -Defaulting member-Expulsion of-Held: Rule 36 is not the
only provision to deal with a defaulting member-S.28 of the Delhi
F Cooperative Societies Act confers discretion to deal with the defaulting
member in another way.

The appellant was a housing cooperative society registered under the
Delhi Cooperative Societies Act, 1972 and the Delhi Cooperative Societies
Rules, 1973. The society was initially allotted five acres of land for
G construction of nats for its members and later some lldditional lnnd as also
nllotted. In 1988, the society raised demand for the construction of first
phase of nats on the said 5 acres and also sent reminder notice to all its
members through registered post including the main contesting respondent
No.3 (the receipt of the notice was denied by respondent No.3) Subseq11e11tly, ..
in the General Body meeting the society decided that only those members
H wllo had paid the minimum amount would be accommodated on the said 5
574

1· -
M. CO-OP. G.H. SOCIETY LTD. v. P. 0. DELHI CO-OP. TRIBUNAL 575
acres of land and other defaulting members would be eccornmodotoo on t!ie A
...

- fiats to be constr11cted on the additional land in pbase II construction.

Respondent No.3, a defaulting member, filed a petitim1 before the
arbitrator challenging the aforesaid decision, which was dismissed. The
Appellate Authority, however, held that in matter of allotment of fiats in a
cooperative society, seniority has to be the prime criteria 11otwithst1mding B
the default made a p:irtic111llr member. It zlso held tb11t l::p::: of p:iymeat coa!d
be dealt with under separate provisions by cherging interest including p::::ml
interest or by taking steps for expulsion of the concerned memhl!r: The Higb
Court upheld this decision. Hence this appeal.

On lnhalf of t!ne respondent it WllS contended thllt there WllS no provbi@n
c
except Rule 36 under which the society could have dealt with the present

-
case and under this Rule when a member defaults he cou!d only be expelled
following the procedure laid down therein; that the General Body resolution
directing those who were defaulters to be eccommodated in phese II was
illegnl and that the decision regarding relegation of respondent No.3 was D
not on the agenda of the Genernl Body Meeting.
~
Allowing the appeal, this Court

HELD: 1. Cooperative society is formed with tile l11udabfo objective to
inculcate spirit to work in a group freely for rendering benefit to its members E
through the cooperative contributions • This is only pos§ible by conferring
wide range of discretion to a society, not restricting its discretion by
interpreting a law otherwise. Therefore, the power of the society cennot be

-' circumvented within Rule 36 of the Delbi Cooperative Societies Rules, 1973
in case of default by its member of any of his dues. Such an interpretation
would be contradictory to the very cooperi:tive spirit or objectives of the
F
creation of cooperative societies. (583-D-EJ

,~ 2.1. Rule 36 does not take awny discretion of the society to expel n
member or not which is preceding the exercise of power under Rule 36. For
this there is not~ing under this Rule which either circumscribes or webs G
this discretion. Sicce this Rule is for the expufaion of its members, it is
stringent in its application. Even after giving opportunity lll:ld even ofter t!ne
General Body posses s11ch n resolution, it reqail'C§ llpprovnl of the Regi~tror.
Outside this, there is nothing, which restricts a society to !let freely rmd to
lay down its Olm poHcies. So consideration of prompt poyment in shaping its
policy which helps it to complete its project to confer to its member its fruits H
576 SUPREME COlJR f REPORTS [1998]3 S.C.R.

A at the earliest may be justified exercise of its discretion. To what extent
default is going to effect the society will depend on the facts and circumstances
of each case which has to be left to the discretion of each society. It is not
proper even for the courts to interfere with such discretion except when it
is arbitrary, irrational, ma/a fide or against any statutory provisions or
against orders having the force of law. Th11s it is not possible to uphold that
B a society has no option but to proceed under Rule 36 to expel its member.
Hence, once a society has discretion, it cannot be said that its power is
restricted to allot only under strict rules of seniority. [585-D-H; 586-A-Bl

2.2. Section 28 of the Delhi Cooperative Societies Act, 1972 vests final
C 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, buy-laws and any order having the force of law.

D
This exercise of power by the General Body, which is in issue, cannot be said
to be excluded by Rule 36. [586-CI

3. 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 default a society may or may not take
recourse under it. Apart from this Rule there are other rules dealing with
default i.e. Rules 39(1), 39(2), 59 and 60. This itself shows that defaulters
can be dealt with in various ways and in respect of what is not provided and
E not covered by these rules, the field is open for the General Body to exercise
its discretion. [586-D-E-G I
4. In the present case, it cannot be said that when respondent No.3 or
such other member, who defaulted by not even paying the minimum amount

F
as resolved could claim as a right for allotment on the principle of seniority
alone or that the resolution of the General Body 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 a very junior member paid the full amount, it is open
for a Society to resolve as it deems fit and proper by giving weightage to the
G seniority. It is within the permissible discretionary field of such society.
[586-H; 587-Al
5. 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. [587-C)

H 6. However, before treating any person to have defaulted, it is necessary
M CO-OP. G. SOCETY LTD. v. P 0 DELH! CO-OP. TRIBUNAL [MISRA, J) 577

. to record that a notice preceding such an impugned decision is actually
~rved on such member or there is deemed service under some applicable
A

Rule depending on the facts. The question of notice to respondent No.3 has
not been adverted to by any authority or Court, which requires consideration.
This case is, therefore, remitted to the Cooperative Tribunal for deciding
this sole question whether there was notice to the respondent No.3 or not
as aforesaid. In case the Tribunal finds that she had notice then she would B
not be entitled for any relief but in case she had no notice her claim for
Phase I flats cannot be defeated. (587-F-G)

A. V Asukan v. Resistrar, Cooperative Societies, CWP No. 955 of
(1989), decided on 30-4-1992; S.C. Verma v. Lawyers Cooperative Group C
Housing Society Ltd, CWP No. 1484 of (1991), decided on 22-8-1991; A. V.
Asokan v. Registrar, Cooperative Societies, (1992) 47 DLT 92; A.K. Roy v.
State of Punjab, [1986) 4 SCC 326 and State of Mizoram v. Baichwane,
(1995] 2 sec 156, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No, 16790 of D
1996.

From the Judgment and Order dated I 0.11. 95 of the Delhi High Court
in C.W.P. No. 4606of1993.

K.T.S. Tutsi, Ashok Kr. Srivastava, R.K. Gupta, V. Rana, Maninder Singh, E
Abhay Prakash Sahay, S.K. Jain, S.S. Rana, Mrs. B. Rana, (Nidesh Gupta) for
Ms. Minakshi Vij, Ms. Binu Tamta, V.B. Sahareya, D.S, Mehra and S. Rajappa
for the appearing parties.

The Judgment of the Court was delivered by
F
MISRA, J. 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 G
of Registrar, Cooperative Societies, Delh~ 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 "ODA") for the purpose of H
578 SCPREME COURT REPORTS ( 1998] 3 S.C.R.

A construction of flats for its members. This Society was allotted only 5 acres
of land in Patparganj v.· hich was not sufficient for the construction of tlats
for the aforesaid memb<:rs. However, later on, in view of relaxation to the .....
ceiling limit ODA decided to make additional allotment as per actual requin:ment,
that is to say, to the extent of 7 .666 acres of land instead of 5 acres. The
B society was also directed to deposit a sum of Rs. 11, 87, I90.80p. 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 reminder 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
C 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
-
D 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
lakhs and Rs. 1,75,000 respectively, their allotments havt: been provisionally
E confirmed and all those members who have paid the minimum credit balance
of Rs. l,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. l,32,221.50p. would only be accommodated on the flats to
be constructed on the additional land which wt:re to come in phase II
F construction. Phase I construction is on the said 5 acres of land.

Respondent No.3 filed a claim petition undt:r Section 60 of the Act on
the ground that the decision taken by the General Body on the 6th January,
1990 was illegal, malafidc, discriminatory and without jurisdiction. The matter
G 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.955of1989 titled A. V Ashokan & Othzrs v. Registrar,
Cooperative Societies and Others deckled on 30th April, 1992. On appeal
filled by Respondent No.3 under Section 76 of the Act the Appellllte Authority
(Respondent No. I) set aside the said award by its order dated 29.9.92. It held
H that in a matter of allotment of flats in a Cooperative Society, seniority has
M. CO-OP G. SOCIETY LTD. v. P.O. DELHI CO-OP. TRIBUNAL [MISRA, J.] 579
to be the prime criteria notwithstanding the default made by a particular A
. 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 B
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. I
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 S.C. C
Verma v. Lawyers Cooperative Group Housing Society 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 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 D
Kunj Cooperative Society Ltd. with reference to to category 'C' flats. The
number of flats were 60 while the applicants were 88. As all the applicants
for 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:
E
"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 F
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 G
may not have met the payment schedule and they cannot ta!ce undue
advantage of other members who have paid full amount....... Therefore,
if, after considerable difficulty, payments have been made by the
membc-TS 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 H
580 SLPREME COURT REPORTS (1998 J 3 S.C.R.

A 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:
B
"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
c 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. I, 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
D
defaulters can be prepared on either of the two basis (I) according to
the overall seniority (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
E 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. I, 11,000. 26
members paid this amount by this date. Here also number of flats were 30 for
F 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 aind by keeping the options and the seniority into
G consideration, the list was prepared as on the cut-off date of 15th
May, 1987. We cannot find any infrrmity 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
H principles laid down by the society are found to be arbitrary or
j
M. CO-OP. G. SOCIETY LTD. v. P 0 DELHI CO-OP. TRIBUNAL [M!SRA,J.J 581

irrational or unfair, the Court will not interfere with the same. We do A
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 tht:: demand was regarded as an essential
criteria for preparing the list of members. However, the said case also held: B
" .. Therefort::, where the number of defaults committed being equal, it
is the seniority which must prevail.... "

Hence si:niority was also given place in the matter of consideration for
allotment. C
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. D
Ashokan (supra) without reference to the succeeding lines hence wrongly
held that it supported the view taken by the Cooperative Tribunal (Respondent
No. I). 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 (I) E
according to the overall seniority; (2) 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.
3, Mr. Ashok Kumar Srivastava, supported by interveners' counsel submitted F
that there is no provision except Rule 36 under which the Society could have
dealt with the prnsent 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. G
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 H
582 SUPREME COURT REPORTS [1998)3 S.C.R.

A 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, l 990 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
B 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
c 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 !and for
the second phase and the possession of this additional land allotted is likely
to be delivered shortly.
D
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 If' {
and not in any other manner. Other modes are excluded. The counsel for the
respondent referred the cases in A. K. Roy and Others v. State of Punjab,
[1986] 4 SCC 326 prs. 10-ll and State of Mizoram v. Baikchawane, [1995] 2
E
sec 156 prs. 7, 8 & 9. This proposition has not been disputed by learned
counsel for the appelbint. The question is, when a member is in default then
is it that power of a Society is concretised within this Ruic 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
~
F 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
G 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 spite
of that if any member defaults can it not cancel the allotment. Similarly, can
tt not decide instead of cancelling the allotmtnt to give him an offer to get •
the flat in the next phased construction clearing ways for non-defaulters. The
H question is, can it be said, Society have no option except to allot strictly by
M. CO-OP. U SOCIETY LTD. 1•. P 0. DELHI CO-OP. TRIBUNAL [\.f!SR.\. J] 583
seniority rule in spite of such members defaulting in making the payment. If A
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 belymg 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 B
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 rccour~e
could be the Iater. 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 C
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 oy D
conferring wide range of discretion to a society, not restrict;ng its discretions
by interpreting a law otherwise. lbis 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 mC1vement. We
have no hesitation to hold, the power of Society cannot be circumvented E
withm 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 spir;.t or
objectives of the creation of Cooperative Societies. Rule 36 is quoted hereunder:

"36. Procedure for Expulsion of Members.

(\) Notwithstanding anything contained in the bye-laws, any member F
who has bee~ 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 G
the society or who, in the opinion of the committee, has brought
disrepute to the society or he has done other acts dctrunental
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 H
584 SUPREME COURT REPORTS (1998] 3 S. C.R.

A society.

Prov \dcd that no resolution shall be valid, unless the member
concerned has been given an opportunity of representing his
case to the general body as no resolution shall be effective,
unless it is approved by the Rt:gistrar.
B (2) Wh.:re 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 n:solution, the consideration of such resolution
c 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 b proposed to be brought calling upon him to be
present at the general meeting, to be held not earlier than a
period of one month from the date of such notice and to show
cause against expulsion to the general body of members. After
D hearing the member, if present, or after taking into consideration
any writtt:n 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,
E the Registrar may consider the resolution and after making such
enquiry as to whether full and final opportunity has been given
under sub-rule (I) or (2) give his approval and communicatl: 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.
F
(4) Expulsion from membership may involve forfeiture of shares ,
held by the member. The share shart be forfeited with the prior
permission of the RegistraL ln that event, the value of the share \

G
forfeited shall be credited to the reserve fund of the society.

(5) No member of a cooperat:ve society who has been expelled
under the foregoing sub-rules shall be eligible for re-admission
/I /

as a member of that 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:

H Provided that the Registrar may, on an application eithe~
¢

M CO-OP. G SOCIETY LTD. v. P 0. DELHI CO-OP TRIBl'NAL [MISRA. I] 585

. the society or the member expelled and in special circumstances,
sanction the re-admission or admission, within the said period,
A

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 B
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 C
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 the 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 D
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 E
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 undertakings including its
financial capacity etc. One Society may be in a sound position and other in F
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 G
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 H
586 SUPREME cm :R r REPORTS [ 1998 [ 3 S.C.R.

A seniority depending on facts of each case. Within permissible limits it is
always open to lay down its principk which is just. fair and proper. When
a Society could decide the manner of allotment by instalments or other modes,
there is no inhibitmn to it to modify it in case conditions are not complied
by :ts 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
B a discretion, it cannot be said its power is :estricted to allot only under strict
rule of seniority.

We find Section 28 of the Act vests fnal authority in the general body
..
of a Cooperative Society. It has wide powers including residuary power except
C 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 oflaw. This exercise of power
by the general body which is in issue cannot be said to be excluded by Rule
36.

D 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. Cnder sub-rule ( 1) of Rule 39 a disability is provided for a defaulting
E member being in am:ars exceeding three months in respect of loan taken for
being appointed to represent the Society in any other cooperative Society.
Sub-rule (2) simitarly 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 disquatification of such defaulting member who has defaulted
r
\
to any Society of any sum due even in r.:spect of any interest in any contract
F to which Society is a party etc. Then under Ruic 60 a member ceases to be
on the committee or to hotd any office in case he continut:s to be in default
in n:spect 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 Ruce 36. This itself shows defaulters can be dealt with in
G various ways and what is not provided, not covered by these rules, the field
.s open for the general body to exercise its discretion.

Reverting back to the facts of the present case, it cannot be said when
respondt:nt No. 3 or such other member, who defaulted by not even paying
..
tht: minimum as resolved could claim as a right for allotment on the principle
H of seniority alone or that the resolution of the general body dated 6.1.90 could
M CO-OP. G. SOCIETY LTD v. P 0. DELHI CO-OP. TRIBUNAL [MISRA, l J 587

in anyway be said to be unfair, unjust, arbitrary, mala fide or irrational liable A
to be struck down, It may bt· 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.
B
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, C
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.
D
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 E
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 F
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 G
ex-parte order dated 29.9.95 passed by the Delhi Cooperative Tribunal. The
case is remanded back to Respondent No. I, the Tribunal to decide on the
limited question as aforesaid. This appeal is allowed in terms as aforesaid.
Cost on the parties.

v.s.s. Appeal allowed. H