STATE OF MYSORE versus ALLUM KARIBASAPPA & ORS.

Citation: [1975] 1 S.C.R. 601 · Decided: 06-08-1974 · Supreme Court of India · Bench: A.N. RAY, KUTTYIL KURIEN MATHEW · Disposal: Dismissed

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Judgment (excerpt)

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STATE OF MYSORE
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ALLUM KARIBASAPPA & ORS.
August 6, 1974
[A. N. RAY, C. J. AND K. K. MATHEW J.J
Mysore Co-operative Societies Act, 1959-Sections 30 and 54-Scope of-Superses-
sion-Natura/ justice.
Pursuant to an inspection report submitted by the Reserve Bank of India point-
ing out many irregularities in the working of a district Co-operative Central Bank,
the State Government issued two notifications under s. 54 of the Mysore Co-opera-
tive Societies Act, 1959. By the first notification the Committee of Management of
the Bank was superseded and by the second, another Committee was appointed in
its place. The respondent, who was the President of the Bank, challenged the noti-
. fications as being ultra vires the Act and in violation of principles of natural justice.
The High Court set aside the notifications.
Dismissing the appeal,
HELD : (1) The High Court rightly set aside the two notifications. The in1·
peached orders suffered from two insurmountable infirmities. The entire Committee
of Management had been superseded. The State Government did not take recourse
to the provision under s. 30 of the Act to supersede the Management. Section 54
of the Act, which contemplates exercise of control over the conduct of business,
does not confer any power to remove the President and Vice· President of the Bank.
The word "control" suggests check, restraint or in~uence.
Contr~l is intend~. to
regulate and hold in check and restrain from action. In the gutse of exerCis1ng
control the State had displaced the Committee of Management and substituted its
own Committee. The State had indirectly intended to achieve what it was directly
prohibited from doing under s. 54 of the Act.
(2) The notification was in violation of principles of natural justice. Section 30
of the Act contemplates a notice where the State intends to supersede the Manage ..
ment. In utter defiance of the powers under the statute the Committee had been
arbitrarily deprived of their right to manage the affairs of the society.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 971 of 1973.
(Appeal by special leave from the Judgment and Order dated Ist
June, 1973 of the Mysore High Court at Bangalore in W. P. No.
1949 of 1972.)
F. S. Nariman Addi. Solicitor General of India and Veerappa for
the appellllnt.
S. S. Javali and B. P. Singh, for Respondents Nos. J, 17-28.
The Judgment of the Court was delivered by
RAY, C. J.-This is an appeal by special leave from the judgment
dated 1 June, 1973 of the High Court of Mysore .
. T~e respondent Karibasappa was the Presid~nt of the Bel!ary
D1stnct .Co-~perative Central Bank Limited, Hospet. He challenged
two notification~ dat~d 11 Aug!lst, 19?2 issued by the State Govern-
ment. The ~otificahons were issued m exercise of the powers con-
ferred by sections 54 and 121 of the Mysore Co-operative Societies Act
1959 hereinafter referred to as the Act.
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SUPREME COURT REPORTS
[1975} 1 S.C.R'.
The management and administration of the Bank was conducted
by the Committee consisting of the President, the Vice-President, and
ten elected members from various constituencies and certain ncminees
of the State Government. At no time the Government nominated
more then three persons as its representatives.
The Bank had a share capital of Rs. 75 lakhs. The State Govern-
ment contributed Rs. 23 · 8 lakhs. The Reserve Bank oflndia advanced
a loan of Rs. 135 lakhs. The Apex Bank also gave a loan of Rs. 200
lakhs. The State Government guaranteed the repayment of loans to
the Reserve Bank of India.
The Reserve Bank of India from time to time inspected the Bank.
There was an inspection on 14 October, 1971. The report referred to
many irregularities and stated that the financial resources of the Bank
had improved slightly.
The Joint Registrar on 3 August, 1972 forwarded the report to the
Registrar of Co-operative Societies and suggested action under section
54 of the Act. In this background the Government issued the im-
pugned notifications on 11 August, 1972.
Broadly stated, the notifications recited that the State had given
Rs. 23 ·80 lakhs to the Bank and it was necessary in public interest to
take powers to exercise control over the conduct of the business of the
Bank to safeguard the public funds. The State Government in
exercise of the powers conferred by section 54 of the Act should have
the right to nominate as its represe

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