R.K. VARMA, J.

(1.) This is a petition under Articles 226/227 of the Constitution of India" whereby the petitioner, who is an elected Director of the Citizens Urban Co-operative Bank Ltd., has sought quashing of the show-cause notice dated 20-2-1984 {Annexure H) and the order of supersession dated 28-5-1984 (Annexure J).

(2.) The facts leading to this petition briefly stated are as under : The Citizens Urban Co-operative Bank Ltd. is a Co-operative Society registered under Section 9 of the M. P. Co-operative Societies Act, 1960 (hereinafter referred to as the Act) on 20-6-1974. The working of the said Bank is regulated by its bye-laws (Annexure A to the petition). According to the bye-law 17, the affairs of the Bank are to be conducted by a Board of Directors, consisting of 16 members of who 12 are the elected representatives of the share-holders of the Bank, The term of the office of the Board of Directors is three years, according to Section 49 (7A) of the Act and the bye-law 17. The Board of Directors elects from amongst the members, a Chairman and a Vice Chairman.

(3.) The election of the previous Board of Directors had taken place on 4-7-1979 and the term of its office consequently expired on 4-7-1982. According to sub-section (8) of Section 49 of the Act, it is obligatory for the Board to hold election of an incoming Board prior to the expiration of its term and if the Board fails to conduct such election and does not hand-over charge on expiration of its term of three years all the members of the Board are deemed to have vacated their seats and the Registrar has to assume charge till the next elections are held. In the instant case, the Board which was elected on 4-7-1979 failed to take steps, for holding elections of the new Board before the expiry of its term and consequently on the expiry of the term of three years, the Joint Registrar, Co-operative Societies, Bhopal (respondent No. 2) exercising powers under Section 49 (8) of the Act, by order dated 1-9-1982 assumed charge of the Bank and directed Shri V. D. Dixit, Asstt. Registrar (respondent No. 3) to look after the work till the new Board took over charge.

(4.) The Asstt. Registrar (respondent No. 3) remained in charge of the Bank on behalf of the Registrar from 1-9-1982 to 30-8-1983 on which date consequent on the election of the Directors held on 28-8-1983, the newly elected Board of Directors took over charge of the Bank. In the newly elected Board of Directors, out of the 12 elected members, four of them were elected as Directors for the first time while the remaining eight were also on the previous Board of Directors.

(5.) It appears that certain complaints were made to the Registrar about the working of the Bank during the period 1-9-1982 to 30-8-1983 when the Registrar (respondent No. 1) was in charge of the Bank and was conducting its affairs through respondent No. 3 who was looking after the management of the Bank on his behalf. The Registrar by his order dated 12-8-1983, directed an inquiry to be held into the working of the Bank under Section 59 of the Act and authorized the Deputy Registrar, Co-operative Societies, District Indore, to conduct the said inquiry. The Deputy Registrar commenced the inquiry on 1-2-1984 and after completing the same, submitted his report dated 13-2-1984 to the Registrar.

(6.) The Joint Registrar-respondent No. 2 issued on 20-2-1984 a show-cause notice (Annexured) to the Board of Directors and to the individual directors, stating that during the course of the inquiry it was found that the Board of Directors had failed to comply with the directives of the Reserve Bank of India and the Co-operative Department and had committed serious breaches of the provisions and bye-laws of the Bank and calling upon the Board to show cause why the Board of Directors of the Bank should not be superseded under Section 53 (i) of the Act for the reasons set out in the said show-cause notice.

(7.) The Board of Directors filed its detailed reply to the show-cause notice dated 20-2-1984 pointing out that the charges relate to the previous period when the respondent No. 3 or the previous Managing Committee was in charge of the Bank and most of the misconduct or negligence or breaches alleged in the show-cause notice related to the period prior to the taking over charge of the Baak by the present Managing Committee. It was stated in the reply that the presant Managing Committee could not be held responsible for the acts of the respondent No. 3 who was functioning as the representative of the Registrar himself, or of the old Board of Directors whose term had long before expired. The Board also requested for the opportunity of personal hearing before any decision was taken on the show-cause nolice.

(8.) The respondent No. 2, without affording any opportunity of hearing to the Board or to its individual members, passed an order of supersession dated 28-5-1984 (Annexure J) holding that the charges referred to in the show-cause notice were fully proved and directing supersession of the board of Directors for a period of one year in the first instance under Section 53 (1) of" the Act and appointing respondent No, 4 to manage the affairs of the Bank during the said period.

(9.) The petitioner has, therefore, challenged in this petition the order of supersession (Annexure J) as well as the show-cause notice (Annexure H) on the ground that the show-cause notice is founded on irrelevant material being complaints for the period prior to the election of the present committee for which, it was not answerable and that the order of supersession is passed in violation of the principles of natural justice, without application of mind and without effective consultation with the Reserve Bank. In this regard the learned counsel for the petitioner has raised the following three contentions for quashing the impugned show-cause notice and the order of supersession, namely : (i) that the Board of Directors was not given a reasonable opportunity for showing cause against the proposed order of supersession as envisaged in Section 53 (2) of the Act inasmuch as no opportuaity of discussion and personal hearing was granted inspite of the request made by the Chairman of the Board in his letter dated 5-3-1984 to the respondent No. 2 ; (ii) that tbe order of supersession was passed without effective or meaningful consultation with the Reserve Bank which requirement was obligatory and a condition precedent for validity of the order ; and (iii) that the show-cause notice was based on irrelevant material, being complaints pertaining to the period before the election of the present Board of Directors and the impugned order of supersession was passed on a non-application of mind.

(10.) As regards the question of personal hearing, the learned counsel cited a decision of the Supreme Court reported in M/s. Travancore Rayons v. The Union of India [AIR 1971 Supreme Court 862] in which the following observations have been made : "It is true that the rules do not require that a personal hearing shall be given, but if in appropriate cases where complex and difficult questions requiring familiarity with technical problems are raised, personal hearing is given, it would conduce to better administration and more satisfactory disposal of the grievances of citizens." But, in the instant case, no complex and difficult questions requiring familiarity with technical problems have been pointed out so as to make it an appropriate case requiring personal hearing. As such, it cannot be contended that the opportunity given to the Board to show-cause, was not reasonable.

(11.) The second submission made by the learned counsel is on the ground of non-compliance with the mandatory requirement of the proviso to Section 53 (1) of the Act which provides that ia case of a Co-operative Bank, the order of supersession shall not be passed without previous consultation with the Reserve Bank. In the instant case, only a copy of show-cause notice dated 20-2-1984 was forwarded to the Reserve Bank, but the petitioners reply to the said notice along with other relevant material was not forwarded to the Reserve Bank. It is the contention of the learned counsel for the petitioner that consultation with the Reserve Bank previous to the order of supersession means an effective and meaningful consultation, which is possible only when the entire relevant material of the case including the petitioners reply showing cause why the committee should not be superseded is placed before the Reserve Bank. Otherwise the requirement of consultation would be reduced to a mere empty formality if mere copy of the show-cause notice is sent to the Reserve Bank without any further material relevant for consideration, as has been done in the instant case. This contention of the learned counsel has force and must be upheld. It ii true that no proper consultation is possible in any case unless all relevant material is placed for application of mind to form an opinion. The requirement of consultation certainly is not confined to the formal approval of show-cause notice by the Reserve Bank which has to be consulted on the question of supersession prior to passing of the order in that regard by the Registrar. Tbe impugned order of supersession (Annexure J) is, therefore, not sustainable, having been based without compliance with the mandatory requirement of previous consultation with the Reserve Bank which has to be a real and effective consultation.

(12.) As regards the irrelevant material in the show-cause notice and non-application of mind in making the order of supersession, the learned counsel has referred to a few items of charges as illustrative of his third submission aforesaid.

(13.) It is urged that as per item No. 6 of the charges In the show-cause notice (Annexure H) and the order of Supersession (Annexure J) the present Board of Directors is held responsible for failure of the old Board of Directors to call an annual general meeting of the members under Section 49 of the Act before vacating the office on 1-9-1982 as per sub-section (8) thereof. The responsibility is sought to be fastened by a queer reasoning that some of the members in the present Board of Directors happened to be the members in the old Board of Directors as well. The charge is, therefore, irrelevant and the finding holding the charge proved is given without application of mind.

(14.) With respect to charge No. 9 in the show-cause notice alleging deliberate design on the part of the Chairman Shri Sohan Mehra to have Director Smt. Mehra on the staff Committee when Shri Mehra had been authorized to constitute the said Committee by the Board and the Board thereafter, ratified the decision of Shri Mehra, the finding in the order of supersession is that the charge is proved. This indicates non-application of mind.

(15.) Charge No. 22 in the show-cause notice alleges failure on the part of the Board to raise deposits under bye-law 18 (4) whereas when the present Board of Directors took over charge the Bank was in a difficult financial situation brought about on account of reckless advaaces made by the respondent No. 3 who was in charge of the Bank and was conducting its affairs oa behalf of the Registrar during the period 1-9-1982 to 30-8-1983 in contravention of the instructions of the Reserve Bank in the matter or grant of loans.

(16.) In the petition, it is stated that the liquid capital of the Bank had already fallen below the prescribed limit by 27.47 lacs and that there was a liability on the Bank to the extent of 1.21 crores rupees which the Bank had to discharge by 1-8-1983, with the result that the level of liquid capital fell still further with the said payment. Even so, the respondent No. 3 made further advances of over 27 lacs rupees between the period 30-7-1983 to 26-8-1983 with the result that the level of liquid assets came down below the prescribed level by 45.53 lacs rupees. The picture thus, was that when the newly elected Board took over, the coffers of the Bank were almost empty. The respondents in their return have, however, stated that it is not admitted that the Bank was under an obligation to pay 1.21 crores rupees by 1-8-1983, but have not made any positive averment about the correct figure. In the circumstances, the charge No. 22 was in fact based on the massive irregularities committed by the respondent No. 3 for which the present nevly elected Board could not be answerable. Yet, the charge has been held to be proved in the order of supersession, apparently on a non-application of mind.

(17.) Learned counsel for the petitioner contended that if the irrelevant charges and the findings reached without applicatioa of mind were to be excluded, it cannot be said that the respondent No. 2 would still have reached the saa.e subjective satisfaction so as to pass an order of supersession. In the circumstances the order of supersession is not sustainable and deserves to be quashed. We up-hold the contention of the learned counsel and hold that the order of supersession is vitiated and invalid is liable to be quashed.

(18.) In view of the discussion aforesaid, we are of the opinion that this petition must be allowed and is hereby allowed with costs. The order of supersession dated 25-8- 1934 (Annexure J) is quashed. Counsels fee Rs. 200/-, if certified. The outstanding amount of security, if any, shall be refunded to the petitioner. Petition allowed.