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PETITIONER: HARIBHAU DAGDU TANDALE

       Vs.

RESPONDENT: INDUSTRIAL CO-OPERATIVE ASSOCIATION LIMITED & ORS.

DATE OF JUDGMENT:       08/10/1996

BENCH: M.M. PUNCHHI, K. VENKATASWAMI.

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T      Venkataswami, J.      This Appeal  by Special  Leave is  preferred 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  (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 simultaneously appointed  the second  respondent  herein  as Special Liquidator 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  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 hearing, confirmed the  interim order under Section 102 of the Act on 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 Government as provided under Section 104 of the  Act on  16.7.74. Initially,  the  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 or appeal was  brought to  the notice of the second respondent, the special  Liquidator brought  an extent  of  5  acres  31 gunthas of  land belonging  to the  society  for  sale.  The

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appellant herein  offered to  purchase the said land for Rs. 22,000/- by  his tender  dated  10.7.75.  A  sale  deed  was finally executed  in favour  of the  appellant on  11.9  78. 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 to the second and third respondent invoking the suo moto power under Section 154 and called for  the records  of the  sale  transaction  for  the purpose of  examing as to whether the transaction was legal. The appellant  gave a detailed reply to the State Government inter alia  contending that the Government have no authority to invoke  the suo  moto power  to question  the sale in his 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  respondents 1 to 3 held that ’when the appeal was pending  with the  appellate authority  the  subordinate authority has  no right  to dispose  of  any  immovable  and movable  property   which  may   adversely  affect   if  the liquidation order  were to  be set  aside by  the  appellate authority’. The fourth respondent further observed ’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 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 by the 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 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 appellants 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  order   of  winding   up   passed underSection 102(2) of the Act; that the Government have not seriously  applied   their  mind,   is  apparent   from  the orderitself. 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)  specifically 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 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 sustainable. 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

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challenged the  final order,  the appeal  before  the  State Government against  the interim order must be deemed to have become infructuous  as the  interim order  merges  with  the final order.      Mr. I.G.  Shah, learned  Senior Counsel,  appearing for the first respondent-society took us through the judgment of the Bombay  High Court  and  relied  on  the  reasons  given thereon as his arguments.      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  order of  the State  Government and we shall given our reasons immediately.      For appreciating  the contentions  raised before us, it is necessary  to set  out 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)  raads  as follows:      " (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".      (b).........      (c).........      is of  the opinion  that a  society      ought to  be wound up, he may 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:-      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.      (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      appers to  be entitled,  and of all      books, records  and other documents      pertaining to  the business  of the      society and,  shall have  no access      to any ofthem.      (3) ***************      (4) ***************      (5)   The  whole of  the assets  of      the   socioety    shall   on    the      appointment  of   Liquidator  under      section vest  in  such  Liquidator,      and    notwithstanding     anything      contained in  any law  for the time      being in  force, if  any  immovable

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    property is held by a Liquidator on      behalf of  the society,  the  title      over the  land shall be complete as      soon as the mutation of the name of      his office  is effect, and no Court      shall question  the  title  on  the      ground of  dispossession,  want  of      possession 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      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      officers of the society.’      (104) The  committee or any member,      of  the   society  ordered   to  be      woundup,  may,  within  two  months      from the  date of  the issue of the      order  made   under  section   102,      appeal to the State Government:      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      section 102.      (2) ***********      105. (1)  The Liquidator  appointed      under section 103 shall have power,      subject  to   the  rules   and  the      general  supervsion,   control  and      direction of the Registrar,-      (a) ************      (b) ************      (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;      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    effective,   the      Liquidator shall proceed to realise

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    the assets  of the  society by sale      or otherwise,  and no dispute shall      becommenced 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.  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 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  empowered  to  sell immovable and  movable property  of the  society  by  public 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 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 with  the sale especially when he had knowledge of the pendency  of the  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) of sub-      section (1)  of section  105  shall      have to  be  read  along  with  the      powers of  sale contemplated  under      section 106  of  the  Act.  Section      106, on  the fact of it. deals with      the powers  of the liquidator after      the order  of  winding  up  becomes      effective.  The  legislature  could      not have  thought it  necessary  to      confer powers  of sale  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      proeprty cannot  await the disposal      of the  appeal, while  Section  106      deals with  the power  of sale when

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    the winding  up  order  has  become      final and, therefore, effective. It      is difficult  toconceive  that  the      Liquidator could  have intended  to      authorise the  sale of the property      without  any   urgency  whatsoever,      even when  the appeal  was pending.      Pending appeal  can result  both in      the  confirmation  of  the  lnterim      winding up  orde as  well as in the      vacating thereof.  The sale  powers      under Section  105 could  have been      intended only  to 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 appeal lay against the interim winding up order  and simultaneous appointment of the Liquidator. It is common  ground that  the third respondent invoked Section 102 on  the basis  of the  report of the 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 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 futile to contend that  no appeal  lay against  an order  passed under Section 102(1)(a).      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,   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  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 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 basd  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   was   in contravention of sectioins 105 and 106. Hence no help can he 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, dimissed.  However, there  will be no order as to

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costs.