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CASE NO.: Appeal (civil)  3986 of 2004

PETITIONER: Sumangalam Coop. Housing Society Ltd

RESPONDENT: Suo Motu, High Court of Gujarat & Ors

DATE OF JUDGMENT: 03/01/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: JUDGMENT WITH C.A. 3987/2004, 3988-3989/2004, 3990/2004,  3991/2004  AND 3992-3993/2004

Dr. ARIJIT PASAYAT, J.

         Challenge in these appeals is to the judgment rendered  by a Division Bench of the Gujarat High Court which suo  motu registered a writ petition on the basis of the copies of  documents purported to have been received from one Piyush  Soni.  It was alleged that there were several irregularities and  illegalities in connection with the allotment of land to  Sumangalam Co-operative Housing Society Ltd. The High  Court entertained several other civil applications and passed  the impugned judgment inter alia holding that there were  several irregularities and illegalities committed in the  allotment of land.  The judgment of the High Court in SCA No.  10640 of 2000 is the subject matter of challenge in these  appeals.  Shri Altaf Ahmad, learned Senior counsel was  appointed as Amicus Curiae.  

We have heard learned counsel for the parties at length.   It is relevant to note that since valuation of the property  allotted was one of the major grounds which weighed with the  High Court while dealing with the matter, therefore, on the  suggestion of counsel for the parties, Dr. Roshan H. Namavati,  an approved valuer was asked to determine the market value  of the properties in question as on the date of allotment i.e. on  1.3.1990.  It appears that High Court found that one Mr. H.K.  Khan has disposed of a plot for Rs.22,00,000/-.  According to  the High Court same was the market price at which the plot   in question could have been transferred by Ahmedabad  Urban  Development Authority (in short the ’AUDA’) by applying the  principle of 10% appreciation in market value.  Calculated on  that basis the High Court came to the conclusion that on the  basis of the price of land allotted to Mr. H.K. Khan the  allotment was made at an unreasonable rate.

Dr. Roshan H. Namavati has valued that property in  question as follows:

"SUMMARY AND CONCLUSION:

The results obtained by me based on my inspection of  properties under valuation as well as instances, the fair  market value of F.P. No. 694, 695, 696 as on 1-3-1990 will be:

Based on H.K. Khans’ (F.P. 695/17) sale of a  of a

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developed small commercial plot. = Rs. 575/- ps.mt.

Based on instances of 3 residential plots in the the  Bodakdev Scheme. = Rs. 540/- p.s.mt.

Based on instances of F.P. 109 of Thaltej T.P. Scheme which is diagonally opposite to F.P. 694, 695  695 and 696. = Rs. 480/- p.s.mt.

In the light of the above, I am of the opinion that fair market  value of F.P. 694, 695 and 696 in an undeveloped stage, with  encroachment, having residential as also commercial potential  requiring infrastructure, earth file as on 1.3.1990 will be 20,494  x Rs.540/- P.s.mt. = Rs.1,10,66,760/-"

The stand of the appellants is unanimous to the extent  that they have all highlighted that the value at which transfer  has been made is in no way less than the market price.  Mode  by which the High Court has made the valuation has  practically no basis.

Broadly the issues addressed by the High Court in the  impugned judgment are: (the parties are described as per their  position in the High Court) 1. Mix-up of identities between Respondent No.2 and  Respondent No.4. 2. Impersonation by the office bearers of Respondent  No.2 as those of Respondent No. 4.  Suppression before the High Court in Special Civil  Application Nos. 3082 and 3781 of 1991 culminating in the  judgment dated 24.09.1991 of the fact that two other societies  being Respondent nos. 2 and 3 existed and the land had been  allotted by Ahmedabad Urban Development Authority (AUDA)  to Respondent No.2 and not Respondent No.4 It may be noted that Respondent No.2 was called  Sumangalam Cooperative Housing Society, Gandhi Nagar  bearing registration No.9675 which was cancelled on  9.12.1996. Respondent No.3 was called New Sumangal Cooperative  Housing Society Ltd. Taluka Daskroy bearing registration  No.13338 which also cancelled on 9.12.1996. Respondent No.4 is called Sumangalam Cooperative  Housing Society, Bodakdev and bears registration No.1492. Background facts vis-‘-vis Respondent No.2 are relevant: On 16.07.1987 Respondent No.2 made an application for  allotment of land admeasuring 6651 sq. mtrs. from F.P.  No.707 TPS Bodakdev; 12514 sq. mtrs. land from F.P. No.695  TPS Bodakdev; 8693 sq. mtrs. of land from Survey No.189 and  190 from TPS Vastrapur, and 9208 sq. mtrs. from survey  No.199 TPS Vastrapur. It was also requested to fix the rate of  the land at Rs.300/- per sq. mtrs. On 21.07.1987 Respondent No.2 made a modified  application for allotment of land stating that "eventually about  150 Govt. employees of various categories would be members  of the Society". On 24.11.1987 Respondent No.2 indicated that T.P. Plot  695 is designated for neighbourhood garden, play ground,  library etc. and further requested that they may be granted  4000 sq. mts. of this land on condition that part of this land  will be used for purposes within the meaning of  "neighbourhood centre" and assured AUDA that Respondent

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No.2 was prepared to purchase land bearing survey Nos. 189  and 190 (Part) and survey Nos.199/1, 2, 3 of Vastrapur at the  price indicated by AUDA. On 09.12.1987 resolution was adopted by AUDA to allot  lands to Respondent No.2 bearing Survey No. 189, 190 Paiki of  Vastrapur admeasuring 8693 sq. mtr., Survey Nos.199/1/2/3  of Vastrapur admeasuring 9208 sq. mtr. And Bodakdev Final  Plot No.694 admeasuring 2739 sq. mtr., F.P. No.695  admeasuring 12516 sq. mtr. And F. P. No.696 admeasuring  5239 sq. mtr. on lease for 90 years. The land was to be allotted  subject to certain terms and conditions, and the price was to  be determined by the Chief Town Planner. The decision was  communicated to the President of Respondent No.2 Society  vide letter No. Estate/Vashi/2267/16836 dated 10.12.1987.  On 16.07.1988 Respondent No.2 requested for the  review of the price charged. On 16.07.1989 Respondent No.2 paid Rs.6,65,000/-. On 07.10.1989, by resolution No. 50 (89-90), AUDA  resolved to refund the amount deposited by the Respondent  No.2 and to dispose of the lands by public auction. On 21.12.1989 Respondent No.2 claimed right to land.  Respondent No.2 Society, mentioning its registration  No.9675/86 made an application on 21.12.1989 signed by S.  Jagadeesan requesting to reconsider the price and allot the  land in response to cancellation of allotment. It is further  stated in the said letter that the Society bearing registration  No.9675/86 has paid the amount of more than Rs.6 lakhs  and, therefore, they have preferential right over the land. On 19.01.1990 vide resolution No.63 AUDA reconsidered  its earlier decision and decided to allot Plot Nos.694, 695 and  696 Bodakdev TP Scheme No.1/B, admeasuring 16,571 sq.  mtr. Land to Respondent No.2 Society. On 13.05.1990 Respondent No.2 paid Rs.1,03,85,000 to  AUDA by Cheque No.1426322 of State Bank of Saurashtra  and AUDA issued its receipt No.44414 dated 30.5.1990. On 01.06.1990 Respondent No.2 took the possession of  the land. Similarly position vis-a-vis Respondent No.4 are relevant: On 05.07.1990 Respondent No.4 came into being under  Registration No.14292. On 26.02.1991 AUDA passed a resolution in its 123rd   meeting allotting 3923 sq. mtrs of land possession whereof  was taken by Respondent no.4 after payment of price of  Rs.26,70,600. Respondent No.4 also took possession of 16571 sq. mtrs  of land, possession of which had been given to Respondent  No.2 and price of Rs.6,65,000 and Rs.1,03,85,000 had been  paid by Respondent no.2 on 16.06.1989 and 30.05.1990  respectively.  From the above events the High Court in its impugned  judgment has concluded that Respondent No.4 and its officers  are guilty of having practiced fraud on AUDA as well as the  High Court because - (a) Respondent No.4 has impersonated as Respondent  No.2 (b) Respondent No.4 has obtained possession of land on  the basis of such impersonation from AUDA and for the price  which had been paid by Respondent No.2 at the price  prevailing the year 1987 much before Respondent No.4 was  born. (c) Respondent No.4 suppressed this fact in earlier  proceedings before the High Court resulting in the judgment  dated 24.09.1991 and thus secured the judgment by  practising fraud on the court.  The High Court held that by impersonation office bearers

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of Respondent No.4 brought about the following consequences:   (1) Respondent No.4 secured allotment of land at the  price determined in 1987 while it actually came into existence  on 5th July 1990. (2) Out of 54 members who were allotted plots by  Respondent No.4, 42 persons had also been allotted plots by  Government at Gandhi Nagar. (3) Respondent No.4 had taken possession of the land on  the basis that it had 77 members while it had distributed plots  only amongst 54 persons. The credentials of the valuer Dr. Roshan H. Namavati are  quiet impressive.  He is an approved valuer for more than five  decades and is an author of several books on valuation.  A few  provisions of Gujarat Co-operative Societies Act, 1961 (in short  the ’Act’) were  succinctly stated in Zoroastrian Cooperative  Housing Society Ltd. and Another  v. District Registrar,  Cooperative Societies (Urban) and Others  (2005(5) SCC 632)  more particularly in paragraphs 11 to 13 and 15. They read as  follows:  "11. Section 23 deals with removal of a  member in certain circumstances. Section 24  speaks of open membership. Sub-Section (1)  thereof, which is of immediate relevance, reads  as follows:- "24. Open membership. (1) No  society shall, without sufficient  cause, refuse admission to  membership to any person duly  qualified therefor under the  provisions of this Act, the rules and  bye- laws of such society."

Be it noted that admission to membership  could not be refused only to a person who was  duly qualified therefor under the Act, the Rules  and the bye-laws of such Society. In other  words, the bye-laws are not given the go-by in  spite of the introduction of the concept of open  membership as indicated by the heading of the  Section. Section 29 of the Act restricted the  right of a member other than the State  Government or a society to hold more than one  fifth of the total share capital of the society.  Section 30 places restriction on transfer of  share or interest. It reads :- "30. Restrictions on transfer of  share or interest.- (1) Subject to  the provisions of section 29 and  sub- section (2) a transfer of, or  charge on, the share or interest of a  member in the capital of a society  shall be subject to such conditions  as may be prescribed. (2) A member shall not transfer any  share held by him, or his interest in  the capital or property of any  society, or any part thereof, unless.- (a) he has held such share or  interest for not less than one year; (b) the transfer or charge is made to  the Society, or to a member of the  Society, or to a person whose  application for membership has  been accepted by the Society; and  (c) the committee has approved such

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transfer."

It can be seen that a restriction is placed on  the right of a member to transfer his share by  sub-section (2) of Section 30 and the transfer  could be only in favour of the society or to a  member of the society or to a person whose  application for membership has been accepted  by the society and the committee has approved  such transfer. Section 31 provides for transfer  of interest on death of a member. Even an heir  or a legal representative, had to seek and  obtain a membership in the society, before the  rights could be transferred to him. The section  also leaves a right to the heir or legal  representative to require the society to pay him  the value of the share or interest of the  deceased member, ascertained as prescribed.  Section 32 of the Act provides that the share or  interest of a member in the capital of a  Cooperative Society is not liable to attachment.  Under Section 36 of the Act, the society even  has the power to expel a member and unless  otherwise ordered in special circumstances by  the Registrar, such expelled member does not  have a right of re-admission to membership.  Sections 44 to 46 place restrictions on  transactions with non-members and the said  transactions were to be subject to such  restrictions as may be prescribed. Under  Chapter V of the Act, any society duly  registered under the Act would be entitled to  State aid. Under Section 73 of the Act, the final  authority of the society is to vest in the general  body of the society, subject to it being  delegated in terms of the bye-laws of the  society. The powers and functions of the  Committee in which the management of every  society vested, are dealt with in Section 74 of  the Act. 12. The Gujarat Co-operative Societies Rules,  1965 was framed in terms of the Act. Rule  12(2) provides that no Co-operative Housing  Society shall, without sufficient cause, refuse  admission to its membership, to any person  duly qualified therefor under the provisions of  the Act and its bye-laws, to whom an existing  member of such society wants to sell or  transfer his land or house and no such society  shall, without sufficient cause, refuse to give  permission to any existing member to sell or  transfer his plot of land or house to another  person who is duly qualified to become a  member of that society.  13. A peep into the history of the legislation  brought in to govern the co-operative  movement in the country seems justified. The  real first legislation touching the co-operative  movement was the Co-operative Credit  Societies Act, 1904. When that Act came into  being, there was no other Act in force under  which an association or a society could be  formed for the purpose of promoting the  economic interests of its members in  accordance with the well recognized co-

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operative principles, though a co-operative  society could be organized under the Indian  Companies Act, 1882. Lacuna was found in  the working of that Act especially in the  development of rural credit. To remove the  same, the Cooperative Societies Act, 1912 was  enacted. Under Section 4 of that Act, a society  which had as its object, the promotion of  economic interests of its members in  accordance with economic principles, could be  registered under the Act. Under Section 6, no  society could be registered which did not  consist of at least 10 persons above the age of  18 years and where the object of the society  was the creation of funds to be lent to its  members unless such persons either resided  in the same town or village or in the same  group of villages or they were members of the  same tribe, class, caste or occupation unless  otherwise directed by the Registrar of Co- operative societies. Section 14 placed  restrictions on the transfer of share or interest  by a member and the transfer could be made  only to the society or to a member of the  society. What is relevant for our purpose is to  notice that normally, the membership in a  society created with the object of creation of  funds to be lent to its members, was to be  confined to members of the same tribe, class,  caste or occupation. The Co-operative Societies  Act, 1912 continued in force until the  concerned States enacted laws for themselves.  It was, thus, that the Bombay Co-operative  Societies Act, 1925 was enacted. We have  earlier noticed some of the relevant provisions  of the Act and it is not necessary to repeat  them here. Under Section 72 of the Act, a  society registered either under the Co- operative Credit Societies Act, 1904 or the Co- operative Societies Act, 1912 was to be deemed  to be registered under the Act. What is  required to be noticed is that in this Act also,  when the object of the society was the creation  of funds to be lent to its members, the  membership had to be confined to persons  belonging to the same town or village or same  group of villages or they had to be members of  the same tribe, class (originally it was caste) or  occupation unless the Registrar ordered  otherwise. It was this Act, under which the  present appellant Society got itself registered,  though it later came to be governed by the  Gujarat Co-operative Societies Act which was  subsequently enacted. We have already  adverted to the general provisions thereof but  it may be relevant to notice here that under  Section 6, no society other than a federal  society, could be registered unless it consisted  of at least 10 persons belonging to different  families and who resided in the area of  operation of the society and no society with  unlimited liability could be registered unless  all persons forming the society, resided in the  same town or village or in the group of villages.  Section 24 of the Act put restrictions in respect

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of membership. Section 30 restricted the right  of transfer and Section 31 the right of  inheritance. Thus, running right through the  relevant enactments, is the concept of  restricted membership in a co-operative  society. The concept of open membership  referred to in Section 24 of the Act has,  therefore, to be understood in this  background, especially when we bear in mind  that it only placed an embargo on refusal of  admission to membership to any person duly  qualified therefor under the provisions of the  Act, the Rules and the bye-laws of the society. 15. The cooperative movement, by its very  nature, is a form of voluntary association  where individuals unite for mutual benefit in  the production and distribution of wealth upon  principles of equity, reason and common good.  No doubt, when it gets registered under the  Cooperative Societies Act, it is governed by the  provisions of the Cooperative Societies Act and  the Rules framed thereunder. In Smt.  Damyanti Naranga v. The Union of India and  Ors. [1971 (1) SCC 678], this Court, discussing  the scope of the right to form an association  guaranteed by Article 19(1)(c) of the  Constitution of India, stated that the right to  form an association necessarily implies that  the persons forming the association have also  the right to continue to be associated with only  those whom they voluntarily admit in the  association. Any law, by which members are  introduced in the voluntary Association  without any option being given to the members  to keep them out, or any law which takes away  the membership of those who have voluntarily  joined it, will be a law violating the right to  form an association. Based on this decision, it  is contended on behalf of the Society that its  members have the right to be associated only  with those whom they consider eligible to be  admitted and the right to deny admission to  those with whom they do not want to  associate, cannot be interfered with by the  Registrar by imposing on them a member who  according to them was not eligible to be  admitted. The argument on this basis is  sought to be met on behalf of the respondents  by reference to another decision of this Court  in Daman Singh and Ors. v. State of Punjab  and Ors. [ 1985 (2) SCC 670]. Therein, their  Lordships, after referring to Damyanti’s case  (supra), held that that decision had no  application to the situation before them. The  position was explained in the following words:- "That case has no application  whatever to the situation before us.  It was a case where an unregistered  society was by statute converted  into a registered society which bore  no resemblance whatever to the  original society. New members could  be admitted in large numbers so as  to reduce the original members to  an insignificant minority. The

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composition of the society itself was  transformed by the Act and the  voluntary nature of the association  of the members who formed the  original society was totally  destroyed. The Act was, therefore,  struck down by the Court as  contravening the fundamental right  guaranteed by Art. 19(1)(f). In the  cases before us we are concerned  with co-operative societies which  from the inception are governed by  statute. They are created by statute,  they are controlled by statute and  so, there can be no objection to  statutory interference with their  composition on the ground of  contravention of the individual right  of freedom of association."

The history and nature of co-operative movement have  been projected in very clear terms in the judgment.   For the purpose of the present case, Sections 17,  (Amalgamation, transfer, division or conversion of Societies),  20 (Cancellation of registration), 23 (Removal from  membership in certain circumstances), 24 (open membership  are relevant.  Additionally, no member of respondent Nos.2  and 3 societies has made any complaint against respondent  No.4 or its office bearers.  That has significant impact on the  controversy.  The valuation done by Dr. Roshan H. Namavati  demolishes the basis of the conclusion by the High Court  regarding undervaluation.   The appeals are, therefore, allowed.  The observations  made against various officials are uncalled for and have to be  treated to have been deleted.  

The appeals are accordingly allowed with no orders as to  cost. We record our appreciation for the fair and able  assistance rendered by Mr. Altaf Ahmad, learned Amicus  Curiae.