Karnataka High Court
Shri Nithyananda Electrical ... vs Joint Registrar Of Co-Operative ... on 28 June, 1989
Equivalent citations: ILR1990KAR665, 1989(2)KARLJ356
ORDER Chandrakantaraj Urs, J.
1. The petitioner is a Co-operative Society duly incorporated under the Karnataka Co-operative Societies Act, 1959 (hereinafter referred to as 'the Act'). It has for its objects the purchase of spare parts, bulbs, wires, switches and other electrical equipments pertaining to the electrical works in an electrical fitting and also to supply electrical equipments to the Government or other authority. The area of operation of the Society is the Municipal limits of Bhatkal Town and a radius of five miles from the Municipal area within Bhatkal Taluk. It is aggrieved by the registration granted to the third respondent-Honnavar and Bhatkal Taluka Rural Electrical Co-operative Society Ltd., Honnavar, by the first respondent - The Joint Registrar of Co-operative Societies, Belgaum. Therefore, the present Writ Petition under Article 226 of the Constitution inter alia contending that such grant of registration is contrary to law and is opposed to Section 4 of the Act and therefore this Court should strike down Annexure-C to the petition, a letter dated 18-10-1984 addressed to the Registrar of Co-operative Societies, Bangalore, by the Deputy Registrar of Co-operative Societies, Karawar, Uttara Kannada District, as well as direct by issue of a Writ of Mandamus to the first respondent-The Joint Registrar of Co-operative Societies, Belgaum, to reconsider his order sanctioning the Bye-laws of the third respondent to the extent they compete with the objects of the petitioner-Society and further direct the Joint Registrar of Co-operative Societies to recall his order dated 4-8-1984 sanctioning the Bye-laws of the third respondent and pass an order after hearing the petitioner.
2. Mr. T.S. Ramachandra, learned Counsel for the petitioner-Co-operative Society, has founded his argument on the language employed by Section 4 of the Act and Rule 5 of the Karnataka Co-operative Societies Rules, 1960 framed under the Act. He also placed reliance upon the ruling of the Division Bench of this Court in the case of KUNDAWADA SERVICE CO-OPERATIVE SOCIETY v. STATE OF KARNATAKA, 1981(1) KLJ 27 - Sh.No. Item No. 71: WP No. 1386 of 1979 DD 4-12-1980
3. Section 4 of the Act is as follows:
"4. Societies which may be registered-Subject to the provisions of this Act, a Co-operative Society which has its objects the promotion of the economic interests or general welfare of its Members, or of the public, in accordance with Co-operative principles, or a Co-operative Society established with the object of facilitating the operations of such a society, may be registered under this Act:
Provided that no Co-operative Society shall be registered if it is likely to be economically unsound, or the registration of "which may have an adverse effect on development of the co-operative movement."
The Section does no more than state the general qualifications for registration of a Co-operative Society subject to the conditions Imposed in the proviso thereto. The express bar for registration of the Co-operative Society is that the Co-operative Society if registered is likely to be economically unsound it should not be registered or if the Co-operative Society if registered will have an adverse effect on the development of the co-operative movement, It shall not be registered. In other words, the registering Authority must from an opinion that the applicant Co-operative Society is economically unsound. In other words, if the financial structure projected in the application, the particulars of which are required to be furnished in terms of Sections 6 and 7 of the Act are such that they will lead to the opinion being formed that the Co-operative Society is likely to be unsound financially, the registration should be refused. The same material furnished in the application form for registration must also lead the registering Authority to reach the conclusion that the Society if registered should defeat the Co-operative movement in the State having regard to its objects and therefore should not be registered. That is, if the society has for its objects the antithesis of the purposes envisaged by the Act and the objects envisaged under the Act such society should not be registered.
4. Prohibition contained in Section 4 is not difficult to understand. If the capital structure projected does not or is not likely to support the objects of the Co-operative Societies registered, there is a mandate by Legislature not to register such Co-operative Societies as they are economically not sound. Similarly as I have pointed out earlier, Society cannot be permitted to be registered under the Act which has for its objects the very destruction of the Co-operative movement.
5. Neither of the grounds for refusing the registration are expected to act as a restriction reasonable or otherwise imposed by law on the Fundamental Rights guaranteed under Article 19 of the Constitution. The normal Rule is to lean in favour of constitutionality of a statute. A construction which leans in favour of the constitutionality of a statute should be preferred as against construction which would render the statute In question ultra-vires the rights of the citizens guaranteed to them in Para-Ill of the Constitution.
6. Under Article 19 of the Constitution, right to and carry on trade are guaranteed rights. The Act does no more than regulate and encourage the Co-operative movement. It is not meant to restrict either the movement or prevent persons from associating themselves together to form a juristic person like the Co-operative Society. Therefore, the Courts must give very liberal construction to the proviso to Section 4 of the Act.
7. However, Mr. Ramachandra drew my attention to the ruling of the Division Bench, to which I have already adverted. What fell for consideration in Kundawada Service Co-operative Society v. the State of Karnataka supra, were Sections 12 and 13 of the Act. Section 12 deals with amendment of Bye-laws of the Co-operative Society. Sub-section (1) thereof provides, no amendment of any Bye-law shall be valid unless such amendment has been registered under the Act. In other words, any change in the Bye-laws of Co-operative Society must obtain the approval of the concerned Registrar exercising jurisdiction over the Co-operative Society. In the aforementioned case decided by the Division Bench, certain amendment of 3ye-laws approved by the Registrar were held to be bad as the approval was given without giving an opportunity to another society which was affected by the amendment of the Bye-laws by which another society extended its area of operations encroaching upon the activities carried on by the other Co-operative Society in the extended area. But, the Division Bench did not consider the rights of the society or its Members in terms of the rights guaranteed under the Constitution, but extended the principles of natural justice only on the ground that the other society was likely to be affected by the extended area of operation in the same field by the society whose Bye-law stood amended by the permission granted That ruling is an authority for the proposition that society affected must be given an opportunity before the Bye-laws are approved.
8. The Rules framed in that behalf also enjoins upon the Registrar to apply his mind to the change of Bye-laws whenever he Is called upon to approve the amendment or modification of Bye-laws. That is not the same as denying the rights of citizens to incorporate themselves under the Co-operative Societies Act as a Co-operative Society under Article 19 of the Constitution.
9. Even on facts, I find that while the petitioner-Society's activities are limited to Bhatkal, the respondent Co-operative Society has sought registration for activities in the whole of Honnavar Taluk and Bhatkal Taluk. Therefore, the competition if any, is confined to a small area and a larger area is left for the activities of the respondent-Co-operative Society, whose registration is questioned in this Writ Petition.
10. Both the societies are trading societies in electrical goods in all its aspects i.e., doing works contract as well as supplying materials. An element of competition in the field even in the limited area cannot be said to endanger the co-operative movement nor make the other Co-operative Society economically unviable. There is always enough scope for more than one Co-operative Society to thrive in its activities in a given area. But the emphasis in proviso to Section 4 is on whether the new society which is sought to be brought into existence is economically viable. To apply the test, the Registrar need not hear all the societies which may be operating in the area. Such a construction would render registration of any body corporate almost impossible. What is permissible for a Co-operative Society, if the contention of the petitioner-society is upheld, should with equal force apply to all other body corporates which are to be incorporated under various statutes. That Rules out all possibility of competition in the economic field in the Country, which is not the scheme of our Constitution. On the other hand, the Directive Principles of State policy enjoins that the State should endeavour to avoid concentration of wealth in the hands of one.
There is no merit in this petition and it is rejected.