Karnataka High Court
The Regional Oilseeds Growers Co ... vs The State Of Karnataka on 27 March, 2024
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF MARCH, 2024
BEFORE
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
WRIT PETITION NO.20797 OF 2023 (S-RES)
C/W
WP NO.21050/2023 (S-RES), WP NO.20964/2023 (S-RES)
IN WP NO.20797/2023 (S-RES)
BETWEEN:
THE KARNATAKA CO-OPERATIVE OIL SEEDS
GROWERS FEDERATION LTD.,
NO.11, 4TH FLOOR, BLUE CROSS CHAMBERS,
INFANTRY ROAD CROSS,
BANGALORE - 560 001
REPRESENTED BY ITS MANAGING DIRECTOR
SRI GANGAPALLI CHANDRASHEKAR REDDY,
S/O G. CHENNA REDDY
AGED ABOUT 61 YEARS
REGISTRED UNDER KARNATAKA
CO-OPERATIVE SOCIETIES ACT, 1959.
...PETITIONER
(By Sri JAYAKUMAR S PATIL, SENIOR ADVOCATE FOR
SRI. A MOHAMMED TAHIR, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
DEPARTMENT OF CO-OPERATION
2
M.S.BUILDING
BANGALORE - 560001
REPRESENTED BY ITS SECRETARY
2. THE REGISTRAR OF CO-OPERATIVE
SOCIETIES
ALI ASKER ROAD
BANGALORE - 560001.
3. THE ADDITIONAL REGISTRAR OF
CO-OPERATIVE SOCIETIES
ALI ASKER ROAD
BANGALORE - 560001.
4. NATIONAL DAIRY DEVELOPMENT BOARD,
80 FEET ROAD,
NEXT TO N.G.V. INDOOR STADIUM,
8TH BLOCK, KORMANGALA,
BANGALORE-95.
AMENDED VIDE ORDER
DATED 21/11/2023
...RESPONDENTS
(By Sri V.G. BHANUPRAKASH, AAG A/W
SMT. B SUKANYA BALIGA, AGA FOR R1 TO R3
SRI. B N ANANTHANARAYANA, ADVOCATE FOR R4)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND
227 OF CONSTITUTION OF INDIA, PRAYING TO
QUASHING THE ORDER DTD 19.08.2023 BEARING NO. CO 101
PMC 2023 PASSED BY RESPONDENT NO. 1 VIDE ANNEXURE-G1
DIRECTING PETITIONER FEDERATION TO REDO THE
RECRUITMENT PROCESS BY FOLLOWING THE RESERVATION
POLICIES AS DIRECTED BY THE GOVERNMENT AND ETC.,
3
IN WP NO.21050/2023 (S-RES)
BETWEEN
THE REGIONAL OILSEEDS GROWERS
CO OPERATIVE SOCIETIES UNION LTD.,
HUBLI, HEBBALLI ROAD
TAJ NAGAR, HUBLI-580031.
REPRESENTED BY ITS MANAGING DIRECTOR
SRI L SHIVAPRAKASH
REGISTERED UNDER KARNATAKA CO-OPERATIVE
SOCIETIES ACT, 1959
...PETITIONER
(By Sri. JAYAKUMAR S PATIL, SENIOR ADVOCATE FOR
SRI. A MOHAMMED TAHIR, ADVOCATE)
AND
1. THE STATE OF KARNATAKA
DEPARTMENT OF CO-OPERATION
M.S.BUILDING
BANGALORE - 560 001
REPRESENTED BY ITS SECRETARY
2. THE REGISTRAR OF CO-OPERATIVE
SOCIETIES
ALI ASKER ROAD
BANGALORE - 560052.
3. THE ADDITIONAL REGISTRAR OF
CO-OPERATIVE SOCIETIES
ALI ASKER ROAD
BANGALORE - 560052.
4. NATIONAL DAIRY DEVELOPMENT BOARD,
80 FEET ROAD,
NEXT TO N.G.V. INDOOR STADIUM,
4
8TH BLOCK, KORMANGALA,
BANGALORE-95.
AMENDED VIDE ORDER
DATED 20/11/2023
...RESPONDENTS
(By Sri V.G. BHANUPRAKASH, AAG A/W
SMT. B SUKANYA BALIGA, AGA FOR R1 TO R3
SRI. B N ANANTHANARAYANA, ADVOCATE FOR R4)
THIS WP IS FILED UNDER ARTICLES 226 & 227 OF THE
CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER DTD
19.08.2023, BEARING NO.CO 101 PMC 2023 PASSED BY R1
VIDE ANNEXURE-H1 DIRECTING PETITIONER SOCIETY TO REDO
THE RECRUITMENT PROCESS BY FOLLOWING THE RESERVATION
POLICIES AS DIRECTED BY THE GOVERNMENT.
IN WP NO.20964/2023 (S-RES)
BETWEEN
THE REGIONAL OILSEEDS GROWERS
CO OPERATIVE SOCIETIES UNION LTD.,
POST BOX NO.328
INDUSTRIAL AREA, HYDERABAD ROAD
RAICHUR-584101
REPRESENTED BY ITS MANAGING DIRECTOR
SRI N NINGAPPA S/O NIJALINGAPPA
AGED ABOUT 60 YEARS
REGISTERED UNDER KARNATAKA CO-OPERATIVE
SOCIETIES ACT, 1959
...PETITIONER
(By Sri. JAYAKUMAR S PATIL, SENIOR ADVOCATE FOR
SRI. A MOHAMMED TAHIR, ADVOCATE)
5
AND
1. THE STATE OF KARNATAKA
DEPARTMENT OF CO-OPERATION
M.S.BUILDING
BANGALORE - 560001
REPRESENTED BY ITS SECRETARY
2. THE REGISTRAR OF CO-OPERATIVE
SOCIETIES
ALI ASKER ROAD
BANGALORE - 560052.
3. THE ADDITIONAL REGISTRAR OF
CO-OPERATIVE SOCIETIES
ALI ASKER ROAD
BANGALORE - 560052.
4. NATIONAL DAIRY DEVELOPMENT BOARD,
80 FEET ROAD,
NEXT TO N.G.V. INDOOR STADIUM,
8TH BLOCK, KORMANGALA,
BANGALORE-95.
AMENDED VIDE ORDER
DATED 21/11/2023
...RESPONDENTS
(By Sri V.G. BHANUPRAKASH, AAG A/W
SMT. B SUKANYA BALIGA, AGA FOR R1 TO R3
SRI. B N ANANTHANARAYANA, ADVOCATE FOR R4)
THIS WP IS FILED UNDER ARTICLES 226 & 227 OF THE
CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER DTD
19.08.2023 BEARING NO.C0 101 PMC 2023 PASSED BY R-1
VIDE ANNX-H1 DIRECTING PETITIONER SOCIETY TO REDO THE
6
RECRUITMENT PROCESS BY FOLLWOING THE RESERVATION
POLICIES AS DIRECTED BY THE GOVERNMENT.
THESE PETITIONS HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 26.03.2024 COMING ON FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
The captioned petitions are filed assailing the order dated 19.08.2023 passed by respondent No.1, wherein petitioners-Society is directed to redo the recruitment process by following the reservation policies as directed by the Government.
2. The facts leading to the case as under:
The petitioner in W.P.No.20797/2023 is an Apex Society registered under the Karnataka Co-operative Societies Act, 1959. Petitioners in W.P.Nos.20964/2023 and 21050/2023 are secondary Societies affiliated to the Apex Society. The petitioners-Society would contend that neither the State nor the Central Government holds any 7 share capital, disputing the State's authority to direct the Cooperative Society to implement reservation policies. The petitioners-Society, including a nominee Director of the National Dairy Development Board (NDDB), passed a resolution to fill sanctioned posts. The State Government seeks to impose reservation policies under the Karnataka Schedule Caste and Schedule Tribes and Other Backward Classes Act, 1990. However, the petitioners rely on a previous Court judgment bearing W.P.No.7457/1993, which stated that the said Act applies only to Cooperative Societies where the Government holds a majority share or exercises effective control in management. The petitioners argue that the NDDB, which is not defined as a Government entity under the Karnataka General Clauses Act, and the petitioners-Society, do not fit the criteria outlined in the 1990 Act. The Society's management is vested in the Board of Directors, the majority of whom are elected, emphasizing its autonomy.8
3. The respondent No.1-State would contend that the petitions lack merit. Respondent No.1-State would vehemently assert that the petitioner-Apex Society, registered under the Karnataka Cooperative Societies Act, qualifies as an assisted society. The respondent counters the petitioners' claim of not receiving financial assistance from the State Government, citing loans provided to the federation and the significant share capital invested by the National Dairy Development Board (NDDB). Furthermore, the respondent No.1-State points out that the petitioner federation previously voluntarily assured to follow the reservation roster in future recruitments. Respondent No.1-State would also contend that the Federation is substantially financed by the NDDB through share capital, loans, and Government subsidies, undermining the petitioners contention of lack of state financial assistance. Therefore, the respondent would contend that it has validly exercised its powers in issuing directions and petitioner- 9 federation are bound to follow the directions to give effect to the constitutional obligations urging this Court to dismiss the petitions.
4. Having heard learned Senior Counsel appearing for the petitioners, learned Additional Advocate General for respondent Nos.1 to 3 and learned counsel appearing for respondent No.4, the following questions would arise for consideration;
1. Whether the order passed by respondent No.1 directing petitioner federation to redo the recruitment process by following the reservation policies as directed by the Government is sustainable?
2. Whether loans provided by the Government constitute sufficient grounds to deem the Cooperative Society as assisted by the State?
5. In the case of Mandya District Central Co- operative Bank Employees Union and Another vs. 10 State of Karnataka and Others1, this Court addressed a similar issue regarding the authority of the Registrar to direct the enforcement of reservation policies in all Cooperative Societies. The Court's observations in this case provide valuable insights into the current matter. Let's delve into the key points made by the Court:
i) The term 'State' under Article 12 of the Constitution encompasses various authorities within the territory of India or under the control of the Government of India.
Public sector undertakings or establishments can be considered 'State' if they meet specific criteria laid down by the Supreme Court. However, cooperative societies are not automatically considered 'State' entities unless they meet certain conditions.
ii) The definition of 'establishment in public sector' under the relevant Act is interpreted to include cooperative societies where the State owns 51% or more of the 1 2005 SCC Online Kar 900 11 shareholdings or exercises effective control. This interpretation is based on previous judicial pronouncements, such as the Sadalaga case.
iii) Cooperative societies are not considered creatures of statute but are regulated and controlled by the provisions of the Cooperative Societies Act. They operate similarly to incorporated companies, with regulatory control exercised by the government being purely regulatory, not substantive.
iv) The 1990 Act is a special legislation governing reservation, with overriding effect in matters of reservation. Section 30-B of the Karnataka Cooperative Societies Act allows the State Government to issue directions to cooperative societies, including in matters of reservation. However, the provisions of the 1990 Act regarding the definition of 'public sector establishment' have already received interpretation by the court, and it is not 12 permissible for the State to circumvent these provisions through the implementation of Section 30-B.
v) Precedent and legal interpretation support the principle that special laws prevail over general laws. The 1990 Act is viewed as exhaustive in matters of reservations, while Section 30-B of the Cooperative Societies Act is seen as a specific enunciation of this principle. The definition of 'public sector establishments,' as interpreted by the Court, cannot be ignored by the Registrar of Cooperative Societies in issuing orders contrary to the writ issued by the Court.
vi) The impugned circulars issued by the Registrar are not deemed to be in exercise of the powers conferred under Section 30-B of the Karnataka Cooperative Societies Act. Therefore, the Registrar cannot issue orders that contravene the principles established by the Court regarding the definition of 'public sector establishments'. 13
vii) The entire management and control of cooperative societies, including financial affairs, administration, and day-to-day transactions, are vested in the Managing Committee. This principle is affirmed by the Supreme Court in the case of General Manager, K.S.C.M. Ltd. v. Satrughan Nishad. The bye-laws govern the functioning of the Managing Committee, indicating the autonomy of cooperative societies in their internal governance.
viii) The State has not demonstrated how the cooperative bank involved in the case can be characterized as an agency or instrumentality of the State or under its deep and effective control. Provisions such as Section 30-B of the Act, which allows the State Government to give directions to cooperative societies in public interest, do not transform the society into an agency of the State. The mere existence of provisions for the approval of pay scales and cadre strength does not alter the independent nature of cooperative societies.
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ix) An examination of various provisions of the Act, including Chapter-VI Section 40, reveals that the cooperative movement is voluntary and encourages autonomy among societies. Cooperative societies are not intended to be agencies of the state or departments of cooperation; rather, they operate independently within the framework of the law.
x) The contention that the provision for representation of Scheduled Castes and Scheduled Tribes in the Managing Committee of the society justifies reservation in employment is unfounded. Section 28-A(3)(1) serves a different purpose, and the intent and purpose of reservation in employment cannot be equated with representation in the Managing Committee.
6. Therefore, this Court directed that Section 23 of the Karnataka Scheduled Castes, Scheduled Tribes, and Other Backward Classes (Reservation of Appointment, etc.) 15 Act, 1990, as made in W.P.No.50930/2003, be declared arbitrary, illegal, and void. This Court further provided for an alternative, stating that the provision should be read down to apply only to those cooperative societies in which the State Government holds a majority of shares or exercises effective control.
7. In the present case, it is essential to examine whether the State Government's provision of loans to the petitioner-federation constitutes sufficient grounds to deem the federation as assisted by the State, thereby justifying the issuance of directions to follow reservation rosters. Additionally, it needs to be determined whether the State has failed to prove majority shareholding in the federation, thus lacking the authority to issue such directives.
8. The financial assistance received by the petitioner-federation, as provided in the statement of objection filed by the State, is culled out as follows: 16
"(a) The State Government has given short term loan to KOF to the tune of Rs.1.93 Crores and the interest accrued till date is Rs.5.5 Crores. The total due is Rs.7,34 Crores.
(b) State Government has given a Soft Loan of Rs.1.16 lakhs without any interest. It is due till date.
(c) NDDB (Central Government undertaking body) has given working capital to the tune of Rs.8.00 Crores to the Federation.
(d) The Federation has obtained Rs.4.58 Crores in the form of government advances and incentives to various farming activities. Utilization Certificates had been submitted to that effect."
9. The financial assistance provided by the Government to the petitioner-federation, as outlined in the statement of objection, raises pertinent questions regarding the characterization of the federation as an Assisted Society and the extent of governmental control over its operations. Despite the substantial sums received by the petitioner- 17 federation, it is essential to discern whether such assistance qualifies as transformative enough to categorize the federation as an assisted entity. Furthermore, considering the involvement of the NDDB as a Central Government undertaking, the jurisdictional authority of the State Government to issue directives comes under scrutiny.
10. Firstly, the provision of loans by the State Government to the petitioner-federation, including a significant short-term loan and a soft loan without interest, may indeed represent financial support. However, the mere provision of loans, even with accrued interest, does not inherently signify an assisted status. The absence of equity ownership or controlling interest by the State Government suggests limited influence over the federation's management and decision-making processes.
11. Moreover, while the NDDB, as a Central Government undertaking, has provided substantial working 18 capital to the petitioner-federation, its involvement does not confer authority upon the State Government to issue directives. The NDDB's status as a Central Government entity operates within a distinct jurisdictional framework, separate from the State Government's purview. Therefore, the State Government's ability to dictate operational matters to the petitioner-federation, particularly in absence of majority shareholding or effective control, remains questionable. As such, the State Government's attempt to exercise control over the petitioner-federation, based solely on financial assistance provided, lacks legal basis and encroaches upon the autonomy of the federation as a cooperative society registered under the Karnataka Co- operative Societies Act, 1959.
12. In essence, while the financial assistance extended to the petitioner-federation by the State Government and the NDDB is notable, it does not automatically categorize the federation as an Assisted 19 Society. Thus, the State Government's attempt to exert control over the petitioner-federation through financial means alone is legally untenable.
13. Estoppel, a principle rooted in equity, operates to prevent a party from asserting a right or claim inconsistent with its prior conduct or representations, where another party has reasonably relied on such conduct or representations to their detriment. Similarly, waiver entails the intentional relinquishment or abandonment of a known right or privilege by a party. However, the mere fact that the petitioner federation previously assured compliance with reservation rosters on two occasions does not inexorably lead to the conclusion that the doctrine of estoppel or waiver automatically apply in the present scenario. While the federation may have expressed willingness to comply with reservation rosters on previous occasions, such assurances cannot be viewed in isolation from the petitioner's legitimate rights and obligations as a 20 cooperative society. Therefore, the State Government's contention that the doctrine of estoppel or waiver apply to compel the petitioner federation's compliance with the impugned order lacks a sufficient legal basis.
14. Therefore, loans provided for commercial purposes or under market-driven terms may not inherently signify state assistance, particularly if they do not entail substantial financial support or control. Critical to the determination of the state's authority to issue directives to the petitioner-federation is the establishment of majority shareholding by the State Government. Control by the State must be of a substantial nature, typically involving majority shareholding or effective control over the entity. Without concrete evidence demonstrating majority shareholding, the State lacks the requisite authority to issue directives and exert control over the federation's internal decision-making processes. Furthermore, while Cooperative Societies are subject to regulatory frameworks, 21 they retain autonomy in their day-to-day operations, including recruitment processes. The State's authority is limited to regulatory or supervisory functions and does not extend to dictating internal decisions of the federation, such as recruitment processes, particularly in the absence of majority shareholding.
15. In the case of Thalappalam Service Cooperative Bank Limited and Others vs. State of Kerala and Others2, the Apex Court emphasized a fundamental distinction between bodies created by statute and those governed by statutes after their formation. The cooperative societies in question were categorized as falling under the latter category, meaning they were not bodies created by statute but rather bodies governed by statutes after their establishment. The Societies Act conferred upon these cooperative societies the status of body corporates, granting them perpetual succession, a common seal, and 2 (2013) 16 SCC 82 22 the power to hold property, enter into contracts, initiate legal proceedings, and perform all necessary actions for their intended purposes. This recognition endowed them with legal personality and autonomy akin to corporations. Crucially, Section 27 of the Societies Act vested the ultimate authority of a society in its general body of members, affirming the principle of member governance. Additionally, the management of these societies was entrusted to a managing committee constituted in accordance with their bye-laws, as mandated by Section 28 of the Societies Act. The Apex Court underscored that in the context of such societies, the final authority resided with the general body of members, not with the Registrar of Cooperative Societies or the State Government. This affirmation of member autonomy highlighted the democratic and self-governing nature of cooperative societies, wherein decisions regarding their management and operations were entrusted to their members rather 23 than external regulatory authorities. By emphasizing the supremacy of the general body of members in cooperative societies, the Court reasserted the principle of internal governance and autonomy, shielding these societies from undue interference by external entities such as government bodies or regulatory authorities.
16. The Hon'ble Apex Court placed significant emphasis on Article 43-B of the Constitution, which was introduced through the Ninety-seventh Amendment. This article mandates the State to promote voluntary formation, autonomous control, and professional management of cooperative societies. By enshrining these principles in the Constitution, the amendment aimed to elevate the status of cooperative societies and foster their development as independent entities governed by democratic principles. Furthermore, the Apex Court highlighted the insertion of Part IX-B into the Constitution, which contains Articles 243- ZH to 243-ZT. These provisions specifically address the 24 promotion and regulation of cooperative societies at the local level. However, unlike Panchayats and Municipalities, Cooperative Societies are not considered units of self- government under this framework. Instead, they are recognized as autonomous bodies with a distinct role in economic and social development, operating within the framework of democratic governance and professional management.
17. In dissecting the meaning of the term "controlled" within the context of the case, the Apex Court emphasized the need for a substantial level of control by the appropriate government to categorize a body as a "public authority" under Section 2(h)(d)(i) of the RTI Act. Mere supervision or regulation, whether by statute or otherwise, does not suffice to confer public authority status on a body. Instead, the control exercised by the appropriate government must be of a substantial nature, akin to ownership or substantial financing. The Apex Court 25 clarified that the powers wielded by regulatory authorities such as the Registrar of Cooperative Societies under the Cooperative Societies Act are limited to regulatory or supervisory functions. These powers do not extend to dominating or interfering with the day-to-day management or affairs of the society. Statutorily, the management and control of cooperative societies are vested in their Management Committee or Board of Directors, rather than in regulatory authorities.
18. Having thoroughly examined the aforementioned principles, including pertinent judgments and statutory provisions, I have arrived at several conclusions regarding the state's directive to the petitioner federation. Firstly, the autonomy of cooperative societies, as established in legal precedents such as the Thalappalam case (supra), underscores that internal governance matters, including recruitment processes, fall within the purview of the society's members rather than external regulatory 26 authorities like the State Government. Furthermore, the precedent set forth in the Mandya District Central Co- operative Bank Employees Union case (supra) serves as a significant reference point, highlighting the limitations on state intervention in cooperative societies' affairs. This Court has meticulously examined the judgment and reaffirmed its principles, particularly regarding the necessity of majority shareholding or effective control by the State for it to issue directives to cooperative societies.
19. Crucially, the absence of majority share capital held by the State in the petitioner federation undermines the legitimacy of the State's directive. Without majority shareholding, the State lacks the requisite authority to dictate internal processes such as recruitment policies. Such interventions would infringe upon the autonomy and democratic governance structure of cooperative societies, contravening established legal principles. 27
20. Therefore, the order requires to be quashed as it exceeds the State's regulatory authority and as established in the judgment cited supra, 30-B is applicable only to Co- operative Societies where the State holds majority shares or exercises effective control.
21. For the reasons stated supra, this Court proceeds to pass the following:
ORDER
(i) The writ petitions are allowed;
(ii) The impugned order dated 19.08.2023 passed by the respondent No.1-State is hereby quashed;
(iii) Pending I.As., if any, do not survive for consideration and stands disposed of.
Sd/-
JUDGE CA