1. By the present writ petition, the petitioner society challenges the Judgment and Order dated 30 August 2019 passed by respondent No. 3 in Revision Application No. 289 of 2016.

2. The facts giving rise to the present writ petition, in brief, are as follows. Jolly Brothers Private Limited, Mumbai, was admitted as a member of the petitioner society on 13 June 1965. On 5 May 2006, Jolly Brothers Private Limited transferred and assigned Share Certificate No. 35 in favour of respondent No. 1. Subsequently, in the year 2010, a Deed of Declaration came to be executed between respondent No. 1 and Jolly Brothers Private Limited.

3. Respondent No. 1 submitted an application seeking membership and transfer on 14 February 2011. The said application was rejected by the petitioner society on 14 March 2011. Thereafter, on 25 April 2011, Jolly Brothers Private Limited, Mumbai submitted a second application seeking transfer and grant of membership in favour of respondent No. 1. The said application was rejected on 20 July 2011 and again on 10 November 2011. Being aggrieved, respondent No. 1 preferred Appeal No. 1864 of 2012, which was subsequently withdrawn unconditionally on 9 February 2012.

4. Thereafter, Jolly Brothers, Pune submitted a third application on 21 June 2013 seeking grant of membership in favour of respondent No. 1. The said application was also rejected on 20 June 2014. Respondent No. 1 preferred an appeal on 7 May 2016 challenging the rejection of membership dated 20 June 2014. The appeal came to be allowed on 7 May 2016. Being aggrieved thereby, the petitioner society preferred a revision application, which came to be dismissed on 30 August 2019. Hence, the present writ petition.

5. Mr. Shah, learned Senior Advocate appearing for the petitioner society, submitted that Jolly Brothers Private Limited, incorporated in the year 1951, was the original member of the society. He contended that the second application dated 25 April 2011 was submitted by a different company and was, therefore, rightly rejected. According to him, the said company did not challenge the rejection by filing an appeal. Though respondent No. 1 had preferred an appeal against the rejection, the same was withdrawn unconditionally without notice to the society. It was, therefore, submitted that the subsequent application was not maintainable in law, principally on the ground that the applicant company was not a member of the society and, further, that the earlier order had attained finality upon unconditional withdrawal of the appeal. It was further submitted that the Deed of Transfer and Assignment relied upon by respondent No. 1 is an unregistered document, whereas only the Deed of Declaration stands registered. According to the petitioner, in the absence of a registered instrument of transfer, no valid transfer can be recognized in the eyes of law, and consequently the application seeking transfer was not maintainable. It was additionally contended that the Deed of Transfer and Assignment pertained to Share Certificate No. 35, which had already been transferred in favour of Dr. Ravindra Talwar, and therefore there was no lawful transfer of Share Certificate No. 8. It was further urged that even the Deed of Rectification was unregistered. On this basis, it was submitted that the transfer purportedly relied upon related to shares not belonging to the original member, rendering the impugned order illegal and unsustainable in law.

6. Learned Senior Counsel further submitted that the application in question was made by another company without any subsisting legal right. Consequently, respondent No. 1 had no locus standi to challenge the rejection of such application, as she possessed no independent enforceable right. It was, therefore, contended that the appeal preferred by respondent No. 1 itself was not maintainable. It was further argued that the impugned order was passed on the basis of a third application, whereas the earlier two applications, namely one at the instance of respondent No. 1 and the other at the instance of the Mumbai company, had already been rejected. Insofar as the first rejection is concerned, no appeal was preferred and the same attained finality. In respect of the second rejection, although an appeal was filed by respondent No. 1, the same was withdrawn unconditionally. It was, therefore, submitted that the third application filed at the instance of a different company was barred by principles analogous to res judicata. It was also contended that respondent No. 1 was estopped from filing a fresh application based on new documents which were not relied upon in the earlier proceedings. According to the petitioner, failure of the authorities to appreciate these aspects has resulted in grave material irregularity. On these grounds, it was prayed that the writ petition be allowed.

7. Per contra, Mr. Anturkar, learned Senior Advocate appearing on behalf of respondent No. 1, relying upon the communication issued by the petitioner dated 20 June 2014, submitted that absence of a registered instrument was not the ground on which membership was rejected. Inviting attention to Section 23 of the Maharashtra Cooperative Societies Act, 1960, he submitted that the Act recognizes the principle of open membership, and where membership is denied, the society is under an obligation to record reasons which alone form the basis of the decision. According to him, the scope of Section 23(2) is to examine the justiciability and sufficiency of such reasons, and the society cannot subsequently introduce new grounds during the course of litigation, including the alleged absence of a registered instrument.

8. In support of the aforesaid submissions, reliance was placed on the judgment of this Court in New Dion Cooperative Housing Society Limited vs. State of Maharashtra and Others, reported in 2007 (1) Mh.L.J. 416. It was submitted that in paragraph 7 of the said judgment, this Court delineated the scope of Section 23 and held that the authority under the Act is required to examine whether sufficient reasons exist for declining membership. On this basis, learned Senior Counsel prayed for dismissal of the writ petition.

9. In rejoinder, Mr. Shah, learned Senior Advocate appearing for the petitioner society, submitted that the earlier application submitted by respondent No. 1 had already been rejected on the ground of absence of a registered instrument. It was, therefore, contended that respondent No. 1 cannot now dispute or seek to avoid the said ground, as the same formed the basis of the earlier rejection.

ANALYSIS OF SUBMISSIONS AND FINDINGS:

Scope and Scheme of Section 23 of the Maharashtra Cooperative Societies Act, 1960.

10. For the purpose of adjudicating the issues involved in the present matter, it is necessary to reproduce Section 23 of the Maharashtra Cooperative Societies Act, 1960, which reads as under.

                   “23. Open membership.— (1) No society shall without sufficient cause, refuse admission to membership to any person duly qualified therefor under the provisions of this Act and its by-laws.

                   (1A) Where a society refuses to accept the application from an eligible person for admission as a member, or the payment made by him in respect of membership, such person may tender an application in such form as may be prescribed together with payment in respect of membership, if any, to the Registrar, who shall forward the application and the amount, if any so paid, to the society concerned within thirty days from the date of receipt of such application and the amount; and thereupon if the society fails to communicate any decision to the applicant within sixty days from the date of receipt of such application and the amount by the society, the applicant shall be deemed to have become a member of such society. If any question arises whether a person has become a deemed member or otherwise, the same shall be decided by the Registrar after giving a reasonable opportunity of being heard to all the concerned parties.

                   (2) Any person aggrieved by the decision of a society, refusing him admission to its membership, may appeal to the Registrar within a period of sixty days from the date of the decision of the society. Every such appeal, as far as possible, be disposed of by the Registrar within a period of three months from the date of its receipt : Provided that, where such appeal is not so disposed of within the said period of three months, the Registrar shall record the reasons for the delay.

                   (3) The decision of the Registrar in appeal, shall be final and the Registrar shall communicate his decision to the parties within fifteen days from the date thereof.

                   (4) Without prejudice to the foregoing provisions of this section, in the case of agro-processing societies or any other society for which a definite zone or an area of operation is allotted by the State Government or the Registrar, it shall be obligatory on the part of such society to admit, on an application made to it, every eligible person from that zone or the area of operation, as the case may be, as a member of such society, unless such person is already registered as a member of any other such society, in the same zone or the area of operation.”

11. Section 23 of the Maharashtra Cooperative Societies Act, 1960 recognises the principle of open membership. At the same time, the Act does not compel the society to admit every applicant. It permits refusal when there are legally valid reasons. The section therefore lays down a clear procedure. It guides the society on how it should deal with an application for membership. In addition, it gives supervisory authority to the Registrar so that the decision of the society can be examined under the statutory scheme.

12. Sub-section (1) explains that if a person fulfils the qualifications prescribed under the Act and the bye-laws of the society, that person has a right to be considered for membership. The society cannot reject such an application without sufficient cause. The expression “sufficient cause” means the society must furnish on lawful grounds. The reason must have a clear connection with the eligibility of the applicant or with compliance of the provisions of the Act, the Rules and the bye-laws.

13. Sub-section (1A) provides an additional safeguard to the applicant. Experience has shown that in some cases societies avoid taking a decision by refusing to accept the application itself or by declining to receive the necessary payment. To prevent such situations, the legislature has provided a remedy. The applicant may submit the application and the required payment directly to the Registrar in the prescribed manner. The Registrar then forwards the same to the concerned society within thirty days. After the society receives the application, it must communicate its decision within sixty days. If the society does not take any decision within that period, the Act treats the applicant as a deemed member. The provision further states that if any dispute arises as to whether a person has become a deemed member, the Registrar shall decide that question after giving an opportunity of hearing to all concerned parties.

14. Sub-section (2) provides that when a society refuses membership, the applicant is not left without remedy. The Act grants a statutory right of appeal to the Registrar. Such an appeal must be filed within sixty days from the date on which the decision of the society is communicated. The provision also indicates that the Registrar should dispose of the appeal within three months as far as possible. If the appeal cannot be decided within that period, the Registrar must record the reasons for the delay.

15. Sub-section (3) gives finality to the decision of the Registrar in appeal. Once the Registrar decides the matter, that decision becomes binding upon the parties under the scheme of the Act. The provision further requires that the decision must be communicated to the parties within fifteen days. Communication of the decision is necessary because it enables the parties to know the result, understand the reasons given, and take further steps in accordance with law if any remedy is available.

16. When all these provisions are read together, it becomes clear that Section 23 creates a complete statutory scheme. The society is required to give clear and sufficient reasons if it refuses membership. There is also a right of appeal before a statutory authority. Finally, the decision of the Registrar brings finality to the dispute within the scheme of the Act.

17. The scheme of the Act shows that a dispute about membership does not end with the decision taken by the society. The Act provides a further provision to examine whether the decision is correct. In the first stage there is a statutory appeal before the competent authority. In the next stage, in appropriate cases, the High Court may exercise its power of judicial review. These two stages operate in different fields and serve different purposes. Therefore, while deciding the present matter, it becomes necessary to keep this distinction clearly in mind.

Whether a Society Can Support Rejection on Grounds Not Recorded in the Original Order.

18. A statutory appeal under Section 23(2) of the Act, and in some cases under Section 152, is the first independent scrutiny of the decision taken by the society. The appellate authority is entitled to look into the entire material placed on record. It may examine the documents produced by the parties, consider whether the applicant satisfies the eligibility conditions, and determine whether the refusal of membership is justified under the provisions of the Act and the bye-laws of the society. In that sense, the authority may look at the matter afresh and form its own opinion about the correctness of the society’s decision.

19. At the same time, the appellate authority is not expected to decide a completely new case. Its task is to examine the legality of the society’s decision. Therefore, the authority must confine itself to the reasons which the society had actually recorded while rejecting the application. The society cannot take advantage of the appellate stage to add new grounds or to improve its earlier decision. If such new reasons are allowed, the applicant would be facing changing grounds of rejection, which would be unfair. A society cannot deny membership on grounds which are not found either in the Act or in its registered bye-laws. Any reason introduced later would amount to an afterthought and cannot be accepted. Thus, the appeal must revolve around the original reasons recorded by the society.

20. A situation may sometimes arise where, during the course of the appeal, the society demonstrates before the appellate authority that the applicant on the face of it is not qualified to be admitted as a member. Therefore, in such cases it cannot compel the society to admit a person who is plainly disqualified under the Act or the bye-laws. The authority must determine whether the disqualification is apparent from the material already placed on record. The proper course in such a situation is to set aside the defective order of rejection and remit the matter back to the society for fresh consideration. By adopting this course, the authority ensures that the society passes a fresh order by clearly stating the correct grounds.

21. Another aspect which needs to be noted is that findings of fact recorded by the appellate authority normally attain a certain degree of finality. Since the authority has the power to examine evidence and evaluate the record, its conclusions on factual matters are generally binding in further proceedings. Such findings are not easily disturbed by higher forums unless it is shown that they are perverse, based on no evidence, or reached by ignoring important material on record.

Scope of Judicial Review under Articles 226 and 227:

22. The jurisdiction exercised by the High Court under Articles 226 and 227 of the Constitution stands on a different footing. Judicial review is not another appeal. The High Court does not normally re-examine the entire evidence or substitute its own view for that of the authorities under the Act. The power exercised by the High Court is supervisory in nature. Its purpose is to ensure that the authorities have acted within the limits of law and have followed the principles of natural justice.

23. The difference between an appeal and judicial review is that in an appeal, the authority may reassess the evidence and arrive at its own findings. In judicial review, the High Court generally refrains from doing so. The Court interferes only when there is a clear legal defect in the decision-making process.

24. The circumstances in which the High Court may interfere are well recognised. If the authority has acted without jurisdiction, or has exercised power which the law does not confer, the Court may step in. Similarly, if the principles of natural justice are violated, for example if the applicant was not given an opportunity of hearing, the order cannot be sustained. The Court may also interfere where there is an apparent error of law on the face of the record. Another ground is perversity. A decision is said to be perverse when it is based on no evidence or when vital evidence is ignored.

25. A situation arises where a society refuses membership on grounds which have no connection with the Act or the bye-laws. A society cannot deny membership by referring to unrelated disputes or alleged violations which fall outside the cooperative Act, Rules and Bye laws. When such extraneous grounds are relied upon, the High Court has consistently intervened and set aside the orders.

26. Judicial review also follows the rule that an order must stand or fall on the reasons recorded in it. The High Court does not permit an authority to defend its order by giving new explanations during the writ proceedings. If the reasons mentioned in the original order are legally unsustainable, the order cannot be saved by subsequent justifications.

27. Therefore, the High Court examines whether the society and the appellate authority have acted within the framework of law. The Court does not conduct a fresh trial of facts. It only checks whether the decision suffers from illegality, procedural unfairness or jurisdictional error. If such defects are present, the Court interferes. If the process is found to be lawful, the Court normally respects the findings recorded by the statutory authorities.

Examination of Documents:

28. In the present case, the record shows that the society issued a communication while rejecting the request for transfer and membership. That communication shows the decision of the society at that point of time. It shows what weighed with the society while refusing the request. For the purpose of examining the legality of that decision, the court has to look at the contents of that communication. The society cannot later defend the rejection on grounds which are not found in that document. Proceedings before a higher authority or before the court are not meant for creating new reasons to support an earlier decision. The validity of the decision must therefore be tested only on the reasons which were originally stated.

29. In the present case, it becomes necessary to first look at the sequence of events and the different communications issued by the petitioner society while considering the request for transfer and membership. The record shows that the first rejection was communicated by the society on 14 March 2011. Thereafter, another communication was issued on 20 July 2011. This was followed by one more rejection communicated on 10 November 2011. Subsequently, the matter again came to be considered by the society and a final communication dated 20 June 2014 was issued, by which the application of respondent No.1 seeking transfer and membership was rejected. It is this final communication which has led to the filing of the present petition before this Court.

30. This sequence of communications clearly indicates that the issue of transfer and membership was not decided by the society in a single instance. The request made on behalf of respondent No.1 was examined on several occasions. On each of these occasions the society considered the documents placed before it and the claim which was made for transfer of the shares and membership of the society. Therefore, while examining the legality of the final rejection dated 20 June 2014, the earlier communications cannot be ignored. Those communications form part of the same decision making process and help in understanding what weighed with the society while dealing with the request.

31. Among these communications, the letter dated 20 July 2011 assumes importance. In that communication the society had given several reasons for refusing the request. One of those reasons, mentioned as ground No.6, specifically states that the Deed of Rectification dated 1 February 2011 was not registered. By referring to this aspect, the society had clearly indicated that it was not satisfied about the legality of the transfer documents relied upon by respondent No.1.

32. The importance of these reasons becomes clearer when Section 23 of the Act is considered. Section 23 requires that whenever a society refuses to admit a person as a member, the society must record and communicate the reasons for such refusal. In the present matter, the society had issued more than one communication while dealing with the request of respondent No.1. Each of these communications contains certain reasons which weighed with the society. When the final rejection was communicated on 20 June 2014, those earlier communications had already formed part of the background and the overall process of consideration. Therefore, while examining whether the society had sufficient cause to refuse membership, it becomes necessary to read all these communications together.

33. If any of these communications contains a specific ground relating to the validity of the transfer, such ground cannot be ignored merely because it appeared in an earlier communication. The earlier reasons form part of the same part of events. Thus, while examining the legality of the final rejection under Section 23, the Court is entitled to take into account the reasons which the society had recorded in these communications.

34. Seen from this angle, the reference made in ground No.6 of the communication dated 20 July 2011 becomes relevant. That ground records that the Deed of Rectification dated 1 February 2011 was not registered. This shows that the society had raised a clear objection regarding the validity of the documents relied upon for transfer. The objection was not raised for the first time later. It was part of the reasoning of the society from an earlier stage itself. This circumstance indicates that the society had consistently questioned the legality of the transfer documents relied upon by respondent No.1, and it formed part of the reasoning which led to the rejection of the request for membership.

35. For the reasons stated above, the writ petition is allowed.

36. Orders dated 7 May 2016 and 30 August 2019 stand quashed. The society’s rejection of the application for transfer and membership dated 20 June 2014 is restored. Respondent No.1 is not entitled to be registered as a member on the basis of the documents now on record.

37. The petitioner society shall update its membership register to reflect the continued status of membership as it stood before the 7 May 2016 order.

38. The society shall not admit respondent No.1 as a member unless and until respondent No.1 proves a valid and duly registered transfer by producing registered instrument.

39. If respondent No.1 produces fresh, valid and registered documents within three months from the date of this judgment, the society may consider the same in accordance with law. Any fresh claim shall be processed under Section 23 and the society must record reasons in writing for its decision.

40. There will be no order as to costs.

41. At this stage, learned Advocate for respondent No.1 seeks stay of the judgment. However, for the reasons recorded in this judgment, the oral request for stay is rejected.