Supreme Court Upholds Expulsion for Non-Payment of Dues in Cooperative Society Case: Geeta vs. Financial Commissioner (29 March 2023)

Introduction

Date of the Judgment: 29 March 2023

Citation: Civil Appeal No. 1362 of 2011 (Non-Reportable)

Judges: Rajesh Bindal, J. and Aravind Kumar, J.

Can a member of a cooperative society be expelled for failing to pay dues for the construction of a flat, even if they dispute the amount owed? The Supreme Court of India recently addressed this question in a case involving the Nav Jagriti Cooperative Group Housing Society Limited. The court examined whether the society and the authorities followed the correct procedure for expelling a member due to non-payment of dues. The bench comprised of Justice Rajesh Bindal and Justice Aravind Kumar.

Case Background

The case revolves around the expulsion of the late husband of appellant no. 1 from the Nav Jagriti Cooperative Group Housing Society Limited due to non-payment of dues for the construction of a flat. The society initiated the expulsion process after the member failed to pay the required amount. The member disputed the amount owed, claiming that the cost of construction was not properly calculated.

The society issued a notice on 4.11.1991 to the late husband of appellant no. 1 for expulsion due to non-payment. On 4.3.1992, a notice for the Annual General Meeting (AGM) scheduled for 22.03.1992 was issued, specifically to consider the expulsion of persistent defaulters, including the late husband of appellant no. 1, who was stated to owe ₹1,33,920. On 22.3.1992, the society passed a resolution expelling several members, including the late husband of appellant no. 1.

Timeline

Course of Proceedings

The Joint Registrar (II), Cooperative Societies, Delhi, initially granted time until 30.04.1993 for the expelled members to deposit their dues. Upon failure to do so, the resolution of the society was approved on 23.3.1993. The late husband of appellant no. 1 then appealed to the Financial Commissioner, Delhi, under Section 76 of the Delhi Cooperative Societies Act, 1972, challenging the Joint Registrar’s order. The Financial Commissioner dismissed the appeal on 15.12.1994, noting that while the member had paid ₹1,46,000, a balance of over ₹2,00,000 was still due. The Financial Commissioner also noted that the member disputed the amount, claiming the cost of construction was not properly calculated, and declined an offer to pay the dues with interest.

Subsequently, the late husband of appellant no. 1 filed a writ petition in the High Court of Delhi, which was dismissed on July 5, 2010. The High Court noted that the member continued to dispute the cost of construction, and his default in payment remained unrebutted.

Legal Framework

The case primarily involves the interpretation and application of the Delhi Cooperative Society Rules, 1973, specifically Rule 36(2), which outlines the procedure for the expulsion of a member from a cooperative society. The appellants argued that the procedure prescribed in Rule 36 of the Delhi Cooperative Society Rules, 1973, was not followed.

The relevant part of the Delhi Cooperative Society Rules, 1973, was not extracted in the source document.

Arguments

Appellants’ Arguments:

• The appellants contended that the procedure prescribed in Rule 36 of the Delhi Cooperative Society Rules, 1973, for the cancellation of membership was not followed.
• They argued that the amount of ₹1,72,990 shown as recoverable was not due, as there was an improper enhancement of the cost of the flats.
• The late husband of appellant no. 1 never refused to pay the amount due.
• They referred to a meeting notice dated 4.3.1992, which showed ₹1,33,920 due, and a notice dated 9.2.1993, which indicated that ₹1,40,500 had already been paid up to 31.1.1993, suggesting nothing was due.

Respondents’ Arguments:

• The respondents argued that there were concurrent findings of fact by all the authorities under the Act, and the High Court had upheld the orders.
• They contended that the appellants defaulted in paying society dues.
• An offer was made to the late husband of appellant no. 1 at the appellate stage to pay the balance dues, but he did not avail it, choosing to contest the litigation.
• The society had already added a new member against the vacancy, and it was not possible to offer a flat to the appellants at this stage.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in the judgment. However, the core issue was:

• Whether the expulsion of the late husband of appellant no. 1 from the cooperative society was valid, considering the alleged non-compliance with Rule 36(2) of the Delhi Cooperative Society Rules, 1973, and the dispute over the amount due.

Treatment of the Issue by the Court

Authorities

The Supreme Court did not cite any specific cases or books in this judgment. The Court primarily relied on the facts of the case and the conduct of the parties.

Judgment

How each authority was viewed by the Court?

• Rule 36(2) of the Delhi Cooperative Society Rules, 1973: The Court acknowledged the argument regarding non-compliance with the procedure but stated that procedural law is subservient to justice. The Court emphasized that the main issue was the default in payment of dues, which the member was not willing to pay despite multiple opportunities.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the late husband of appellant no. 1 consistently defaulted on payments and did not avail of opportunities to settle the dues. The Court emphasized that procedural law should not override the substantive issue of non-payment. The conduct of the member, who disputed the amount but never paid, weighed heavily in the Court’s decision.

The Court considered the fact that the late husband of appellant no. 1 was given multiple opportunities to pay the dues, including by the Society, the Joint Registrar, and the Financial Commissioner. Despite these opportunities, the member failed to pay the dues and instead raised disputes about the cost of construction. The Court also considered the fact that the member had stated in the High Court that he was willing to pay the dues but still did not do so.

The Court rejected the argument that the procedure under Rule 36(2) of the Delhi Cooperative Society Rules, 1973, was not followed, stating that procedural law is subservient to justice. The Court emphasized that the main issue was the default in payment of dues, which the member was not willing to pay despite multiple opportunities.

The Court’s decision was based on the principle that procedural irregularities should not be allowed to undermine the substantive issue of non-payment of dues. The Court emphasized the importance of members fulfilling their financial obligations to the society.

The Court quoted from the order of the Financial Commissioner, Delhi:

“….. However, on ascertaining the facts from the parties, it was found that undisputedly the appellant has paid a sum of Rs.1,46,000/-and that he has still to pay more than Rs.2,00,000/-. This has been objected to by Shri Gupta by arguing that the cost of construction has not properly been calculated and that the appellant has always been challenging the said cost of construction. On this ground, the learned Counsel has disputed the liability of the appellant.”

“The learned Counsel also declined the offer given by this court to square up the dues by the appellant alongwith upto date interest within a reasonable period, for the same reason that the appellant is not accepting the cost of construction.”

“In view of these facts, there is no extenuating factor in favour of the appellant and I hold that the impugned order does not suffer from any infirmity.”

There was no minority opinion in this case.

Key Takeaways

• Members of cooperative societies must fulfill their financial obligations to the society.
• Disputing the amount due does not absolve a member from the responsibility to pay.
• Procedural irregularities will not be given precedence over substantive issues of default.
• Opportunities to settle dues must be availed to avoid expulsion.
• The conduct of the member, particularly their unwillingness to pay, will be considered.

Directions

The Supreme Court did not issue any specific directions in this case. The appeal was dismissed, and the orders of the lower courts were upheld.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that procedural law is subservient to justice, and members of cooperative societies must fulfill their financial obligations. The Court emphasized that a member cannot avoid expulsion by disputing the amount due without making any effort to pay. There is no change in the previous positions of law.

Conclusion

The Supreme Court dismissed the appeal, upholding the expulsion of the late husband of appellant no. 1 from the Nav Jagriti Cooperative Group Housing Society Limited. The Court emphasized that the member’s consistent default in payment and failure to avail of opportunities to settle the dues justified the expulsion. The Court also held that procedural irregularities should not override the substantive issue of non-payment.