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

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 related to the construction of a flat. The society had issued a notice on 4.11.1991 to the late husband of appellant no. 1 for the expulsion of his membership due to default in payment of dues. A meeting notice dated 4.3.1992 was issued for the Annual General Meeting to be held on 22.03.1992, specifically to consider the expulsion of members who were persistent defaulters, including the late husband of appellant no. 1. The society claimed that a sum of ₹1,33,920/- was due from him. On 22.3.1992, a resolution was passed to expel several members, including the late husband of the appellant, due to non-payment.

The matter was then referred to the Registrar, Cooperative Societies, Delhi. The Joint Registrar (II), Cooperative Societies, Delhi, on 23.3.1993, granted time to the expelled members to deposit their dues by 30.04.1993, failing which the society’s resolution would be approved. The late husband of appellant no. 1 appealed this order before the Financial Commissioner, Delhi, who dismissed the appeal on 15.12.1994. The Financial Commissioner noted that while the late husband of appellant no. 1 had paid ₹1,46,000/-, a balance of over ₹2,00,000/- was still due. An offer was made to pay the dues with interest, which was declined. The appellant then filed a writ petition before the High Court of Delhi, which was also dismissed on July 5, 2010.

Timeline

Course of Proceedings

The Joint Registrar (II), Cooperative Societies, Delhi, initially granted time until 30.04.1993 for the expelled members to pay their dues. Upon failure to do so, the resolution of the society expelling the members was approved. The late husband of appellant no. 1 then appealed to the Financial Commissioner, Delhi, who dismissed the appeal on 15.12.1994, noting that a significant amount was still outstanding despite some payments. The Financial Commissioner also noted that the appellant had declined an offer to pay the dues with interest within a reasonable period. Subsequently, a writ petition was filed before the High Court of Delhi, which was also dismissed on July 5, 2010. The High Court noted that the appellant was disputing the cost of construction. The High Court upheld the concurrent findings of facts recorded by all the authorities under the Act regarding the default of the appellants in paying the dues of the society.

Legal Framework

The case involves the interpretation and application of the Delhi Cooperative Societies Act, 1972, and the Delhi Cooperative Society Rules, 1973. Specifically, Rule 36 of the Delhi Cooperative Society Rules, 1973, which outlines the procedure for cancellation of membership in a cooperative society, was a focal point of the arguments. However, the Supreme Court observed that the procedural law is subservient to justice.

Arguments

Appellants’ Arguments:

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

Respondents’ Arguments:

• The respondents argued that there were concurrent findings of facts by all authorities under the Act, upholding the default in payment of dues by the appellants.
• They stated that an opportunity was given to the late husband of appellant no. 1 at the appellate stage to pay the balance dues, which was not availed.
• They submitted that a meeting of the society held on 31.1.1995 had filled the vacancy created by the expulsion, and thus, no flat could be offered to the appellants at this stage.
• The respondents maintained that the late husband of appellant no. 1 was disputing the cost of construction, indicating that the default in payment of amount to the society goes unrebutted.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was whether the expulsion of the late husband of appellant no. 1 from the cooperative society was valid, considering the alleged procedural lapses and the dispute over the amount due.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court did not cite any specific cases or books in this judgment. The primary focus was on the facts of the case and the application of relevant rules under the Delhi Cooperative Societies Act, 1972 and the Delhi Cooperative Society Rules, 1973.

The Court considered the following legal provisions:

• Delhi Cooperative Societies Act, 1972: Specifically, Section 76, which provides for appeals against the orders of the Joint Registrar.
• Delhi Cooperative Society Rules, 1973: Rule 36, which outlines the procedure for cancellation of membership.

Judgment

The Supreme Court dismissed the appeal, upholding the decision of the High Court and the lower authorities. The Court emphasized that the late husband of appellant no. 1 had consistently defaulted on payments and had not availed of multiple opportunities to rectify the situation.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the consistent default in payment by the late husband of appellant no. 1, despite multiple opportunities to settle the dues. The Court emphasized the principle that procedural technicalities should not override the fundamental obligation to fulfill financial commitments to a cooperative society. The Court also noted that the late husband of appellant no. 1 had been disputing the cost of construction, indicating that the default in payment of amount to the society goes unrebutted.

Logical Reasoning

Key Takeaways

✓ Members of cooperative societies must fulfill their financial obligations promptly.

✓ Procedural technicalities cannot be used to avoid the consequences of non-payment of dues.

✓ Cooperative societies can expel members who consistently default on payments after giving sufficient opportunities to settle dues.

Directions

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

Development of Law

The ratio decidendi of this case is that procedural lapses cannot override the fundamental obligation of a member of a cooperative society to pay their dues. The Court emphasized that procedural law is subservient to justice, reinforcing the principle that substantial justice should prevail over technicalities. There is no change in the previous position of law.

Conclusion

The Supreme Court dismissed the appeal, upholding the expulsion of the late husband of appellant no. 1 from the cooperative society. The Court emphasized that consistent default in payment of dues, despite multiple opportunities to settle the matter, justified the expulsion. The judgment reinforces the importance of fulfilling financial obligations to cooperative societies and clarifies that procedural technicalities cannot be used to avoid the consequences of non-payment.