Deepak Ananda Patil vs The State Of Maharashtra

Deepak Ananda Patil … Appellant

versus

The State of Maharashtra & Ors … Respondents

WITH

MA Nos 1978-1979 of 2022

in

SLP (C) Nos 20001-20002 of 2022

AND

SLP (C) Nos 22734-22737 of 2022

Signature Not Verified Digitally signed by GULSHAN KUMAR ARORA Date: 2023.01.11 16:19:38 IST Reason: JUDGMENT

Dr Dhananjaya Y Chandrachud, CJI

Civil Appeal Nos 88-89 of 2023

1. Leave granted.

2. These appeals arise from a judgment dated 22 September 2022 of a

Single Judge of the High Court of Judicature at Bombay.

3. The ninth respondent, Shri Chhatrapati Rajaram Sahakari Sakhar

Karkhana Limited, is a cooperative society registered under the

Maharashtra Co-operative Societies Act 1960. The society has its own

bye-laws and is engaged primarily in the production of sugar. The

jurisdiction of the cooperative society extends to 122 villages in seven

talukas of District Kolhapur and it has 17,173 cultivator members.

4. Bye-law 17-A prescribes the requirements for being a ‘producer member’

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 the

jurisdiction of the society/factory as owner or tenant; and (iii) cultivate

sugarcane in a minimum area of 10 gunthas of land.

5. In 2019, complaints were filed by respondents 3 to 8 while invoking the

provisions of Section 11 of the Maharashtra Cooperative Societies Act

1960. The complaints which were addressed to the Registrar, sought the

2 removal of approximately 2000 members on the ground that they 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 the fact that the

complainants had alleged that the members whose names were set out in

a list of members attached as ‘Annexure A’ were, as the case may be, not

residing in the jurisdiction of the factory; not holding ten gunthas of land;

and did not fulfill the requirements of eligibility in terms of the bye-laws.

The notice to show cause also adverted to the fact that writ petitions

were filed before the High Court of Judicature at Bombay in which an

order had been passed on 20 December 2019 directing the Regional Joint

Director to conclude the enquiry by 15 February 2020.

7. The cooperative society, upon receipt of the notice from the Regional

Joint Director, forwarded a copy to all the members whose eligibility was

sought to be disputed. The allegations in the notice to show cause were

disputed by at least some of the members. The members disputed the

allegation that they were not eligible in terms of the bye-laws and sought

an opportunity to produce evidence in support of their eligibility.

8. On 14 February 2020, the Regional Joint Director (Sugar) held that the

members whose names were set out in Annexure B to Annexure B-6 were

disqualified from being members of the society. The breakup of these

members is as follows:

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(i) 59 members did not hold the minimum area of agricultural land

within the jurisdiction of the factory;

(ii) 709 members did not hold agricultural land within the jurisdiction of

the factory;

(iii) 205 members held land on the basis of usufructuary mortgages for

which there was no entry in the revenue records;

(iv) 33 members were dead, requiring the deletion of their names;

(v) 69 members were found to have been recorded more than once;

(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 the order

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 Societies Act 1960 was

dismissed on 18 February 2021 by the Minister of Cooperation.

10. This led to the institution of writ petitions before the High Court. The

Single Judge rejected the Writ Petitions by the impugned judgment and

order dated 22 September 2022. The Single Judge has observed that

there was no controversy on factual aspects and dealt with the

submission that the Registrar had no jurisdiction under Section 11 to

4 enquire into whether a member stood disqualified after the formation or

registration of the cooperative society. The Single Judge held that the

expression “for the purpose of the formation or registration or

continuance of 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

not restricted to enquiring into the eligibility only at the stage of the

formation or registration of the society.

11. We have heard Mr Maninder Singh and Mr Neeraj Kishan Kaul, senior

counsel appearing on behalf of the appellants; Dr Abhishek Manu Singhvi,

senior counsel appearing on behalf of the original complainants and Mr

Tushar Mehta, Solicitor General of India appearing on behalf of the State

of Maharashtra. The sugar factory is represented by Mr Siddarth

Bhatnagar, senior counsel.

12. The principal submission which has been urged on behalf of the

appellants is that there has been no enquiry at all on an individual basis

on whether or not the members who were sought to be disqualified

fulfilled the condition specified in the bye-laws. In this context, it was

submitted that:

(i) One omnibus notice was issued to the cooperative society

containing an annexure listing out the members who were sought to

be disqualified;

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(ii) There was no specific allegation of ineligibility against individual

members;

(iii) Confronted with an order of the High Court dated 20 December

2019 requiring the enquiry to be concluded in less than 2 months

i.e. by 15 February 2020, the Regional Joint Director pursued the

enquiry in haste without considering the individual eligibility of each

of the members who were sought to be disqualified;

(iv) Though a Committee was apparently constituted to verify the

allegations in the show cause notice, the report of the Committee

was not divulged either to the cooperative society or to the

members who were sought to be disqualified.

Hence, it was urged that there was a breach of the principles of natural

justice. Moreover, it was submitted that the grounds in the appeal before the

appellate authority under Section 152 as well as before the High Court in the

Writ Petitions would indicate that there were serious objections to the findings

of ineligibility on facts. Since the facts have not been enquired into, it was

submitted that an order of remand to the Regional Joint Director (Sugar) would

be warranted.

13. Dr Abhishek Manu Singhvi, senior counsel appearing on behalf of the

original complainants in the enquiry submitted:

(i) No submissions were raised before the High Court in regard to the

lack of enquiry into individual eligibility; and

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(ii) The only submission which was urged was on the basis of Section

11.

Hence, it was urged that it would not be open to the appellants to assert

any other submission and, if they are aggrieved by the order of the 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 there are

concurrent findings in the order of the Regional Joint Director and the

appellate authority on factual aspects which have been affirmed by the

dismissal of the writ petition under Article 226 of the Constitution of India.

Hence, it was urged that there is no warrant for the interference of this

Court.

15. While considering the rival submissions, certain basic facts emerge from

the record. An omnibus show cause notice was issued on 3 January 2020

to the cooperative society by the Regional Joint Director (Sugar) acting on

the basis of complaints raising a dispute with regard to the eligibility of

nearly 2,000 members. The cooperative society forwarded a copy of the

show cause notice to each of the members.

16. The Single Judge of the High Court has recorded the submission of the

counsel appearing on behalf of the complainants that a Committee was

constituted to verify the allegations and that the Committee submitted its

report to the Regional Joint Director (Sugar). The report, insofar as it

contained findings with regard to the eligibility of individual members,

7 was crucial for the members to set up their defense in regard to the plea

of their alleged ineligibility. A copy of the report was not supplied to the

individual members or to the cooperative society.

17. It is a well-established principle of administrative law that an adjudicatory

body cannot base its decision on any material unless the person against

whom it is sought to be utilized has been apprised of it and given an

opportunity to respond to it. Surveying the precedents extensively, MP

Jain & SN Jain’s treatise on Principles of Administrative Law1 notes that:

“If the adjudicatory body is going to rely on any material, evidence or document for its decision against a party, then the same must be brought to his notice and he be given an opportunity to rebut it or comment thereon. It is regarded as a fundamental principle of natural justice that no material ought to be relied on against a party without giving him an opportunity to respond to the same. The right of being heard may be of little value if the individual is kept in the dark as to the evidence against him and is not given an opportunity to deal with it. The right to know the material on which the authority is going to base its decision is an element of the right to defend oneself. If without disclosing any evidence to the party, the authority takes it into its consideration, and decides the matter against the party, then the decision is vitiated for it amounts to denial of a real and effective opportunity to the party to meet the case against him. The principle can be seen operating in several judicial pronouncements where non-disclosure of materials to the affected party has been held fatal to the validity of the hearing proceedings.

(emphasis supplied)

18. 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.),

1 MP Jain & SN Jain, Principles of Administrative Law (LexisNexis, 8th ed.) at 490-91. 2 (2022) 8 SCC 162

8 discussed the line of cases of this Court on the duty to disclose investigative material. The Court analyzed the ratio in Natwar Singh v Director of Enforcement3, Krishna Chandra Tandon v Union of India4, Khudiram Das v State of West Bengal5, Union of India v Mohd. Ramzan Khan6, Managing Director, ECIL, Hyderabad v B. Karunaka7, State Bank of Patiala v SK Sharma8, State of Uttar Pradesh v Ramesh Chandra Mangalik9, Kothari Filaments v Commr. Of Customs10, and noted that:

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

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

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

Thus, the actual test is whether the material that is required to be disclosed is relevant for purpose of adjudication. If it is, then the principles of natural justice require its due disclosure.” (emphasis supplied) In the present case, it is undisputed that the Committee’s Report

submitted to the Regional Joint Director (Sugar) contained findings with

regard to the eligibility of individual members. It was both relied upon

and relevant for the purpose of adjudication. It is also undisputed that the

Report was not supplied to the individual members or to the cooperative

society.

3 (2010) 13 SCC 255 4 AIR 1974 SC 1589 5 (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 192

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19. On the issue of the impact of such non-disclosure, in T. Takano,

summarizing the ratio of the Constitution Bench in B. Karunakar11, we

noted that:

“A Constitution Bench of this Court in Karunakar (supra) held that the non-disclosure of the relevant information is not in itself sufficient to warrant the setting aside of the order of punishment. It was held that in order to set aside the order of punishment, the aggrieved person must be able prove that prejudice has been caused to him due to non-disclosure. To prove prejudice, he must prove that had the material been disclosed to him the outcome or the punishment would have been different. The test for the extent of disclosure and the corresponding remedy for non-disclosure is dependent on the objective that the disclosure seeks to achieve. Therefore, the impact of non- disclosure on the reliability of the verdict must also be determined vis-à-vis, the overall fairness of the proceeding. While determining the reliability of the verdict and punishment, the court must also look into the possible uses of the undisclosed information for purposes ancillary to the outcome, but that which might have impacted the verdict.”

The Committee’s Report dealing directly with the findings on the

eligibility of the individuals would have been relevant for any of the

individuals to dispute the factual aspects on the basis of which their

eligibility was called into question. Furthermore, in the absence of any

other specific allegation or grounds of ineligibility being made available to

the individuals, it is certain that the non-disclosure of the Report

prejudiced them.

11 Supra

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20. Further, it emerges from the record that there was a direction by the High

Court in the exercise of its writ jurisdiction for the conclusion of the

enquiry by 15 February 2020. The notice to show cause specifically

referred to the direction in terms of which the Regional Joint Director was

to conclude the enquiry within a stipulated time frame. Neither the order

of the Regional Joint Director (Sugar) nor the order of the appellate

authority has dealt with the facts pertaining to the eligibility of each of

the members. The findings of the Regional Joint Director are summarized

in the Annexure to the order of which Annexures B to B-6 have been

summarized in the earlier part of this judgment. There has been no

consideration of the nature of the ineligibility qua each member, the

ground of ineligibility or of the documentary material which was produced

in support of the claim that the member was ineligible.

21. The submission on behalf of the appellants is that several members were

enrolled as members of the society in 1984 and as a result of the action

of the Regional Joint Director, they would be made to suffer serious

prejudice as a consequence of their losing the membership of the

cooperative society. The order under Section 11 has serious

consequences for the members. An omnibus order of this nature has

been passed by the Regional Joint Director, preceded by a general notice

to show cause which was issued to the cooperative society. There has

been no application of mind to the grounds of ineligibility which were

asserted against each member. The order under Section 11 operates to

11 oust a particular individual from the membership of the society. The

principles of natural justice must be observed in relation to each member

whose membership is sought to be ousted. There was a clear breach of

the principles of natural justice.

22. For the above reasons, it would be appropriate to set aside the impugned

order of the High Court and to restore the proceedings to the Regional

Joint Director. Though the High Court has proceeded exclusively on the

basis of the submission with reference to Section 11, we find from the

record that there were serious objections which were raised both in the

appeal and before the High Court in the pleadings in regard to the alleged

ineligibility of the members. The consequence of ousting such a large

group of members from the membership of a cooperative society would

result in a serious miscarriage of justice unless individual facts are

considered in each case.

23. We accordingly allow the appeals in the following terms:

a. We set aside (i) the impugned judgment and order of the High Court

dated 22 September 2022; (ii) the order of the Regional Joint

Director (Sugar) dated 14 February 2020; and (iii) the order in

appeal of the Minister of Cooperation dated 18 February 2021;

b. The proceedings shall stand restored to the file of the Regional Joint

Director (Sugar);

12 c. Since the members have appeared in these proceedings, no further

notice to show cause would be necessary to the members;

d. The members who are sought to be proceeded against shall be

entitled to a disclosure of the scrutiny report of the Committee as

well as of the copy of the complaints and the documents which are

annexed thereto. This exercise shall be completed within a period of

one month from the date of this order;

e. Thereafter, the members would be at liberty to submit their replies

within a period of one month;

f. The Regional Joint Director shall pass fresh orders after furnishing to

the members an opportunity of being heard within a period of three

months thereafter.

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

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

MA Nos 1978-1979 of 2022

26. The Interlocutory Applications seeking restoration of Special Leave

Petition (C) Nos 20001-20002 of 2022 are allowed.

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

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

28. In terms of the order passed in Civil Appeal Nos 88-89 of 2023, the

Special Leave Petitions are disposed of.

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

…..…..…....…........……………….…......CJI [Dr Dhananjaya Y Chandrachud]

…..…..…....…........……………….…........J. [Pamidighantam Sri Narasimha]

New Delhi;

January 04, 2023.

-GKA-

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