The Bombay High Court ruled in favor of Ramdas Yashwant Mandlik, an expert director, clearing him of responsibility in a cooperative society's financial mismanagement case. The court found that as a non-voting expert director, Mandlik wasn't responsible for the decisions leading to financial losses.
What Happened?
This case involves the Hindustan Aeronautics Limited Employees Credit Society, where a financial mistake occurred. The society moved fixed deposits to a cooperative bank, which later faced restrictions from the Reserve Bank of India (RBI). The bank's license was eventually canceled, leading to a big financial loss.
Who Was Involved?
The managing group, including 13 elected directors and one expert director, Ramdas Yashwant Mandlik, was held responsible. Mandlik, however, was a nominated expert director without voting rights.
The Controversial Resolution
A decision was made by some group members to move money from a nationalized bank to several cooperative banks, aiming to avoid taxes on interest. Unfortunately, this decision backfired when the receiving bank faced RBI sanctions.
Audit and Inquiry
Following the financial loss, an audit was conducted, leading to an investigation under Section 88 of the Maharashtra Cooperative Societies Act. The investigation held each group member responsible for Rs. 21 lakhs to cover the losses.
Initial Challenges
Mandlik challenged the responsibility decision, arguing he had no voting power or decision-making authority. Despite this, lower authorities upheld the responsibility against him.
Court's Decision
The High Court, led by Justices G. S. Kulkarni and Aarti Sathe, found that Mandlik, as an expert director, didn't participate in the decision-making process. The court noted:
"An expert director, who has no authority to vote...cannot be said to be discharging any role in the decision making."
Understanding the Role of an Expert Director
The court clarified that an expert director's role is advisory, not authoritative. This means they cannot be held responsible for decisions they didn't actively make or influence.
Impact on Cooperative Societies
This ruling highlights the importance of understanding the distinct roles within cooperative societies. It ensures that individuals are not unfairly held responsible for decisions beyond their control.
The court decided that Ramdas Yashwant Mandlik, as a non-voting expert director, was not responsible for the financial losses in the cooperative society. This decision emphasizes the need for clear roles and responsibilities within cooperative societies, ensuring that responsibility is assigned based on actual involvement and authority.
