STATE OF M.P. AND OTHERS versus SANJAY NAGAYACH AND OTHERS

Citation: [2013] 3 S.C.R. 738 · Decided: 16-05-2013 · Supreme Court of India · Bench: K.S. RADHAKRISHNAN · Disposal: Dismissed

Judgment (excerpt)

[2013] 3 S.C.R. 738 
A 
STATE OF M.P. AND OTHERS 
B 
v. 
SANJAY NAGAYACH AND OTHERS 
(Civil Appeal No. 4691 of 2013 etc.) 
MAY 16, 2013 
[K.S. RADHAKRISHNAN AND DIPAK MISRA, JJ.] 
Madhya Pradesh Co-operative Societies Act, 1960: 
s.31(1), second and third provisos and s.31(2) read with 
C s.49(7 A)(i), proviso - Supersession of Board of Directors of 
District Co-operative Bank - Without prior consultation with 
RBI ..:.. Held: When an authority invested with the power 
purports to act on its own but in substance the power is 
exercised by external guidance or pressure, it would amount 
D to non-exercise of power, statutorily vested -
In the instant 
case, there is sufficient evidence to conclude that Joint 
Registrar was acting under extraneous influence and under 
dictation -
Order of supersession is not only in clear violation 
of second proviso to s.53(1), but also allegations raised in 
E show cause notice are deficiencies mostly relating to systems 
and procedures and are of general nature and not grave 
enough to overthrow a democratically elected Board of 
Directors -
Board of Directors was superseded illegally, and, 
therefore, in view of proviso to s. 49(7 A)(i), they need to be . 
F put back-if1'-office and' allowed to continue for the period they 
were put out of office - Ordered accordingly - Costs imposed 
on State Government and officer concerned - Legislation -
Legislative intent. 
G 
H 
s.31 (1) second proviso -
Expression 'previous 
consultation with the Reserve Bank' - Connotation of - Held: 
Previous consultation is a condition precedent before forming 
an opinion by Joint Registrar to supersede the Board of 
Directors or not -
Mere serving a copy of show cause notice 
738 
STATE OF M.P. v. SANJAY NAGAYACH 
739 
on RBI with supporting documents is not what is A 
contemplated under second proviso to s. 53(1) - For a 
meaningful and effective consultation, copy of reply filed by 
Bank to various charges and a/legations levelled against 
them should also be made available to RBI as well as the 
action proposed by Joint Registrar, after examining the reply 
B 
submitted by Bank - Only then, there will be ~n effective 
consultation and views expressed by RBI will be a relevant 
material for deciding whether elected Board be superseded 
or not - In addition to six propositions laid doivn in the case 
of Indian Administrative Services (SCS) Association, U.P., c 
one more proposition that may be added is that when the 
outcome of proposed action is to oust a democratically 
elected body, previous consultation with RBI is to be 
construed as mandatory. 
Constitution of India, 1950: 
Art. 226 - Writ petition - Alternative remedy - Held: In 
the instant case, Division Bench of High Court has rightly 
exercised its jurisdiction under Art. 226 and the alternative 
remedy of appeal is no bar in exercising that jurisdiction, 
since the order passed by Joint Registrar was arbitrary and 
in clear violation of second proviso to s.53(1) of the Act -
Madhya Pradesh Co-operative Societies Act, 1960 - s. 78. 
Co-operative Societies: 
D 
E 
F 
Supersession of elected bodies - Held: Co-operative 
philosophy on society must rest on free universal association, 
democratically governed and conditioned by equity and 
personal liberty -
Registrar/Joint Registrar, while exercising 
power of supersession has to form an opinion and that opinion G 
must be based on some objective criteria, which has nexus 
with final decision and he is bound to follow judicial precedents 
- The manner in which State Government took so much 
interest by spending huge public money pursuing the matter 
upto Supreme Court, that too without following binding H 
740 
SUPREME COURT REPORTS 
[2013] 3 S.C.R. 
A precedents of High Court, depr,ecated -
In vi~w of 
mushrooming of cases in various courts challenging orders 
of supersession of elected committees, general directions 
given - Precedent - Judicial deprecation. 
8 
The Board of Directors of a District Co-operative 
Central Bank were served with a show cause notice 
dated 2.3.2009 issued by the Joint Registrar, Co-operative 
Societies, u/s 53(2) of the Madhya Pradesh Co-operative 
Societies Act, 1960, containing 19 charges. Detailed 
C replies were sent by the Board of Directors on 6.5.2009 
and 16.5.2011. However, by order dated 30.9.2011, the 
Joint Registrar, Co-operative Societies, superseded the 
Board of Directors of the Co-operative Bank and 
appointed an Administrator. The Board of Directors

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