Kerala High Court
Saji Cheriyan vs The State Of Kerala on 11 February, 2012
Author: A.M.Shaffique
Bench: A.M.Shaffique
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE
FRIDAY, THE 5TH DAY OF JULY 2013/14TH ASHADHA, 1935
WP(C).No. 3757 of 2012 (T)
---------------------------
PETITIONER(S):
--------------------------
1. SAJI CHERIYAN,
FORMER PRESIDENT & DELEGATE TO THE GENERAL BODY
OF THE DISTRICT CO-OPERATIVE BANK LIMITED.,
ALAPPUZHA, HEAD OFFICE, ALAPPUZHA-688 001.
2. V.T.PURUSHOTHAMAN,
FORMER DIRECTOR & DELEGATE TO THE GENERAL BODY
OF THE DISTRICT CO-OPERATIVE BANK LIMITED .,
ALAPPUZHA, HEAD OFFICE, ALAPPUZHA-688 001.
BY SRI.M.K.DAMODARAN,SENIOR ADVOCATE
ADVS. SRI.P.K.VIJAYAMOHANAN
SRI.ALAN PAPALI
SRI.GILBERT GEORGE CORREYA
SRI.NISHIL.P.S.
RESPONDENT(S):
----------------------------
1. THE STATE OF KERALA,
REPRESENTED BY THE SECRETARY TO GOVERNMENT,
CO-OPERATION DEPARTMENT, THIRUVANANTHAPURAM-695 001.
2. THE REGISTRAR OF CO-OPERATIVE SOCIETIES,
THIRUVANANTHAPURAM-695 001.
3. THE PART-TIME ADMINISTRATOR,
ALAPPUZHA DISTRICT CO-OPERATIVE BANK LTD.,
JOINT REGISTRAR OF CO-OPERATIVE SOCIEITES (GENERAL),
ALAPPUZHA-688 001.
R1 & R2 BY GOVERNMENT PLEADER SRI.NOUSHAD THOTTATHIL
R3 BY ADV. SRI.GEORGE POONTHOTTAM
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 15-02-2013, ALONG WITH WPC.NO. 3809 OF 2012 AND CONNECTED
CASES, THE COURT ON 05-07-2013 DELIVERED THE FOLLOWING:
sts
WP(C)NO.3757/2012
APPENDIX
PETITIONER'S EXHIBITS:
P1 COPY OF THE ORDINANCE NO.18 OF 2012 PUBLISHED VIDE KERALA
GAZETTE EXTRA ORDINARY NO.288 DATED 11/02/2012
P2 COPY OF THE ORDER NO.CB (3) 72/98/2012 (IV) DATED 11/02/2012 OF THE 2ND
RESPONDENT.
P3 COPY OF THE KERALA CO-OPERATIVE SOCIEITES (AMENDMENT) ACT, 2012
(ACT 13 OF 2012) PUBLISHED VIDE KERALA GAZETTE EXTRAORDINARY
NO.1558 DATED 23/07/2012
RESPONDENT'S EXHIBITS: NIL
/TRUE COPY/
P.S.TO.JUDGE
sts
A.M.SHAFFIQUE, J
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W.P.(C) Nos. 3757, 3761, 3763,
3764, 3797,3809, 3854, 3872,
3874, 3889, 3890, 3891, 3892,
13477, 28937, 28988, 29011,
29129, 29130, 29131
and 29194 of 2012
-----------------------------------------
Dated this the 5th day of July, 2013
J U D G M E N T
All these writ petitions relates to the challenge against the Kerala Co-operative Societies (Amendment) Act 2012, Act 13 of 2012 (hereinafter referred as the "Amendment Act").
2. The writ petitions are filed by elected representatives of the Managing Committee of various societies who are affected by the Amendment Act for different reasons.
3. The factual details in these writ petitions are common. The Kerala Co-operative Societies Act W.P.C.No.3757/2012 & connected cases 2 (hereinafter referred to as the 'principal Act') was amended by Ordinance No. 18 of 2012 which was notified in the Kerala Gazette on 11.2.2012. Various provisions of the Ordinance were also under challenge in several of these writ petitions and later when the Ordinance was replaced by the Amendment Act by notification in the Kerala Gazette on 23.7.2012, the writ petitions were amended in order to challenge the provisions of the Amendment Act.
4. The main contention urged by the petitioners is that the Amendment Act is ultravires the Constitution and the principles of Co-operative movement as envisaged in the Constitution.
5. The Amendment Act reads as under:
'THE KERALA CO-OPERATIVE SOCIETIES (AMENDMENT) ACT, 2012 An Act further to amend the Kerala Co-operative Societies Act, 1969. Preamble.- WHEREAS, it is expedient further to amend the Kerala Co-operative Societies Act, 1969 for the purposes hereinafter appearing;
W.P.C.No.3757/2012 & connected cases 3 BE it enacted in the Sixty-third Year of the Republic of India as follows::
1. Short title and commencement.-
(1) This Act may be called the Kerala Co-operative Societies (Amendment) Act, 2012.
(2) Clauses (ii) and (iii) of section 2 and clause (i) of section 4 shall be deemed to have come ino force on the 12th day of August, 2011, clause (i) of section 2, section 3, clause (ii) of section 4 and section 5 shall be deemed to have come into force on the 11th day of February, 2012 and the remaning provisions of this Act shall be deemed to have come into force on the 11th day of April, 2012.
2. Amendment of section 2.- In the Kerala Co-operative Societies Act, 1969 (21 of 1969) (hereafter referred to as the principal Act) , in section 2, -
(i) for clause (ia) the following clause shall be substituted, namely:-
(ia) "District Co-operative Bank' means a central society, the principal object of which is to raise funds to be lent to its members and individuals, with jurisdiction over one revenue district and having as its members any type of primary societies and W.P.C.No.3757/2012 & connected cases 4 Federal and Central societies having headquarters in such district.
(ii) in clause (oc), for the existing proviso, the following proviso shall be substituted, namely:-
"Provided that no Primary Co-operative Agricultural and Rural Development Bank shall be registered without the bifurcation of assets and liabilities of the existing societies having the area of operation in more than one Taluk and the societies shall restrict their operation in the area of the respective society on such bifurcation".
(iii) after clause (qb), the following clause shall be inserted, namely:-
"(qc) "Special Officer" means an officer, not below the rank of an Assistant Registrar, appointed by the Registrar to take into custody the assets and liabilities of the society which secured registration without bifurcating the area of operation of an existing society and to register new societies and to constitute committees as provided in section 28 of the Act".
3. Amendment of section 18.- In section 18 of the principal Act, in sub-section (1), the first and the second provios shall be omitted.
W.P.C.No.3757/2012 & connected cases 5
4. Amendment of section 28.- In section 28 of the principal Act,-
(i) after sub-section (1C), the following sub- sections shall be inserted, namely:-
"(1D) Notwithstanding anything contained in this Act or in any judgment, decree or order of any court, the registration of any Primary Co-operative Agricultural and Rural Development Bank without the bifurcation of area, assets and liabilities of the society and the constitution of the committee pursuant to any such registration without such bifurcation shall be void and the Registrar shall appoint Special Officer for each of such Societies which were registered without bifurcation of area, assets and liabilities.
(1E) The Special Officer so appointed shall,-
(i) take into custody or bring under his control, the property, effects and actionable claims to which the erstwhile society is or appears to be entitled to and shall take steps as may be necessary or expedient to prevent loss or deterioration of or damage to such property, effects and claims;
(ii) take such steps for the bifurcation of area, assets and liabilities of the society W.P.C.No.3757/2012 & connected cases 6 and also shall take all steps to register new society with the members of the sosciety so bifurcated and constitute the committee;
(iii) such bifurcation shall be completed within a period of one year from the date of commencement of the Kerala Co-operative Societies (Amendment) Ordinance, 2012 (9 of 2012).".
(ii) after sub-section (1E) is so inserted, the followng sub-sections shall be inserted, namely:-
"(1F) Notwithstanding any thing contained in the bye-laws of the District Co- operative Bank, two seats in the committee of each District Co-operative Bank shall be reserved for depositor member societies in the Bank.
(1G) Notwithstanding anything contained in the bye-laws of the District Co- operative Bank, two seats in the committee of each District Co-operative Bank shall be reserved for representatives who possess experience in Banking or professional qualification:
Provided that, if no person is elected to the committee from the above, the Registrar can co-opt the members to the committee, for the time being, from among W.P.C.No.3757/2012 & connected cases 7 the members of the society or who are otherwise qualified.
(1H) Notwithstanding anything contained in the bye-laws of the District Co- operative Bank, at least one seat in respect of each taluk shall be reserved for the representatives of Primary Agricultural Credit Societies in the committee of the District Co-operative Bank.
(1I) Notwithstanding anything contained in the bye-laws of the District Co- operative Bank, at least four seats in the committee of the District Co-operative Bank shall be reserved for other types of Co-operative Societies as members in the District Co-operative Bank".
5. Special provision in respect of the existing District Co-operative Banks.- (1) Notwithstanding anything contained in the principal Act, or in any judgment, decree or order of any court, tribunal or other authority, on the commencement of the Kerala Co-operative societies (Second Amendment) Ordinance, 2012 (18 of 2012),-
(a) any primary society which had ceased to be a member of the District Co-
operative Bank as on the commencement of the Kerala Co-operative Societies W.P.C.No.3757/2012 & connected cases 8 (Amendment) Act, 2008 (9 of 2009) shall be deemed to have become members of such District Co-operative Bank and the share amount, if any, of such society transferred to suspense account shall be deemed to be the share amount in respect of the said society;
(b) the nominal or associate member admitted after the commencement of the Kerala Co-operative Societies (Amendment) Act, 2008 (9 of 2009) shall cease to be the members of the District Co-operative Bank and shall apply for membership in the District Co-operative Bank afresh;
(c) the committee in office of the District Co-operative Bank at such commencement shall cease to exist and the Registrar shall be competent to appoint a new committee or one or more administrator or administrators who need not be members of the society, to manage the affairs of the Bank for a period not exceeding six months, as may be specified in the order, which period may, at the discretion of the Registrar, be extended from time to time, so however, that the aggregate period does not exceed one year. W.P.C.No.3757/2012 & connected cases 9 (2) The committee or the administrator or the administrators appointed under sub-section (1) shall, subject to the control of the Registrar and to such instructions as he may, from time to time give, have the power to exercise the powers and perform the functions of the committee or of any officer of the society and take such action as may be required in the interest of the society.
(3) The committee or the administrator or the administrators shall before the expiry of its or his or their term of office, arrange for the constitution of a new committee in accordance with the provisions contained in the principal Act and the bye-laws of the Bank.
6. Repeal and Saving.- (1) The Kerala Co-operative Societies (Amendment) Ordinance, 2012 (26 of 2012) is hereby repealed.
(2) Notwithstanding such repeal, anything done or deemed to have been done or any action taken or deemed to have been taken under the principal Act as amended by the said Ordinance shall be deemed to have been done or taken under the principal Act, as amended by this Act." W.P.C.No.3757/2012 & connected cases 10
6. The contention urged by the petitioners for challenging the vires of the Act are as under:
(i) Part 9-B was incorporated in the Constitution as per the 97th Constitution Amendment with effect from 15.2.2012, and a duty is imposed on the State to promote voluntary formation, autonomous functioning, democratic control and professional management of Co-operative Societies and the role of the State Government has been considerably reduced in order to promote co-operative movement. In Article 243-ZJ of the Constitution, it is provided that the term of officers of the elected members shall be five years. As per Article 243-ZL, no existing society shall be superseded except for reasons mentioned therein. By virtue of the Ordinance which was later replaced by the Amendment Act, the existing Board which had not completed 5 years had been dissolved, which is in clear violation of the constitutional provisions. The Amendment Act is therefore in total violation of the Constitutional provisions.
(ii) Section 2(ia) of the principal Act was introduced by way of an amendment as per Ordinance No. 62 of W.P.C.No.3757/2012 & connected cases 11 2007 which was the subject matter of challenge before this Court and after considering the scope of amendment a Division Bench of this Court had upheld the said amendment in Philip v. State of Kerala (2008 (2) KLT
555). The definition of District Co-operative Bank in the principal Act read as under:
"District Co-operative Bank means a central society having jurisdiction over one revenue district having as its members Primary Agricultural Credit Society and Urban Co-operative Banks and the principle object of which is to raise funds to be lent to its members, including nominal or associate members".
As per the principal Act, Agricultural Credit Co-operative Societies and Urban Co-operative Banks came under the purview of the District Co-operative Banks. In the case of other societies they have their own apex and central societies. While amending the definition of District Co- operative Banks the object achieved is to make any type of Primary Societies, Federal and Central Societies having headquarters in the District to be members of the District Cooperative Bank. There is no reasonable nexus or object W.P.C.No.3757/2012 & connected cases 12 to be achieved by including the nominal or associate members who have their own apex or central societies. Therefore those societies which are not similarly situated are now brought under a common umbrella and hence violative of Article 14 and that grouping together the societies which cannot be grouped together, which will destroy the very object of the co-operative movement.
(iii) That Section 5 of the Amendment Act is a transitory provision and does not amend or incorporate any provision in the principal Act, whereas, it introduces provisions to remove the Managing Committee in office of the concerned District Co-operative Bank and to capture the administration of the Banks and hence those provisions of the Act are totally unreasonable and violative of Articles 14, 19 and 243ZL of the Constitution of India and amounts to colourable legislation.
(iv) As per Section 5 of the Amendment Act certain special provisions had been made in respect of existing District Cooperative Banks. This provision according to the petitioners is virtually creating a statutory fiction by which the rights of various members are either taken W.P.C.No.3757/2012 & connected cases 13 away or in respect of certain persons who had ceased to be members, they were permitted to continue as members. By virtue of the Amendment Act 2008, (Act 9 of 2009) the right to remain as members of the District Co-operative Banks was confined to "Primary Agricultural Credit Societies and Urban Co-operative Banks whose principal object was to raise funds to its members including nominal or associate member. Prior to Act 9 of 2009 the definition of 'District Co-operative Bank' was similar to the present definition, that is; having as its members any type of primary societies, federal and central societies having headquarters in such District. Therefore the very purpose of Section 5(1)(a) was to bring in a deeming provision by which all primary societies who had ceased to be members of the District Co-operative Bank as on the commencement of the Kerala Co-operative Societies (Amendment) Act 2008 to have become members of such District Co-operative Bank. It is also stated that the share amount, if any, of such society transferred to suspense account shall be deemed to be the share amount in respect of the said W.P.C.No.3757/2012 & connected cases 14 society. Section 5(1)(b) further indicates that the nominal or associate members admitted after the commencement of the Kerala Co-operative Societies (Amendment) Act 2008 shall cease to be the members of the District Cooperative Bank and shall apply for membership afresh. Section 5(1)(c) indicates that the committee in office of the District Co-operative Bank at such commencement shall cease to exist and the Registrar shall be competent to appoint a new committee or one or more administrator to manage the affairs of the Bank.
(v) By virtue of the Amendment Act existing members are send out and non-existing defunct members are given fresh life. If the object of the Amendment Act is to bring in all type of societies into the management of the committee, the object can be achieved only by conducting a fresh election for which it is possible for the existing committee to take steps. In so far the period of existing committee has not expired, removing them from power is totally invalid. Hence there is no nexus with the object sought to be achieved by introducing the said W.P.C.No.3757/2012 & connected cases 15 provisions.
7. The learned counsel for the petitioners also relied upon the following judgments in order to substantiate their contentions:
(i) In Damyanti Naranga v. Union of India, (1971) 1 SCC 678) the Supreme Court held as under:
"6. It was argued that the right guaranteed by Article 19(1)(c) is only to form an association and, consequently, any regulation of the affairs of the Association, after it has been formed, will not amount to a breach of that right. It is true that it has been held by this Court that, after an Association has been formed and the right under Article 19(1)(c) has been exercised by the members forming it, they have no right to claim that its activities must also be permitted to be carried on in the manner they desire. Those cases are, however, inapplicable to the present case. The Act does not merely regulate the administration of the affairs of the Society; what it does is to alter the composition of the Society itself as we have indicated above. The result of this change in composition is that the members, who voluntarily formed the W.P.C.No.3757/2012 & connected cases 16 Association, are now compelled to act in that Association with other members who have been imposed as members by the Act and in whose admission to membership they had no say. Such alteration in the composition of the Association itself clearly interferes with the right to continue to function as members of the Association which was voluntarily formed by the original founders. The right to form an association, in our opinion, necessarily implies that the persons forming the Association have also the right to continue to be associated with only those whom they voluntarily admit in the Association. Any law, by which members are introduced in the voluntary Association without any option being given to the members to keep them out, or any law which takes away the membership of those who have voluntarily joined it, will be a law violating the right to form an association. If we were to accept the submission that the right guaranteed by Article 19(1)(c) is confined to the initial stage of forming an Association and does not protect the right to continue the Association with the membership either chosen by the founders or regulated by rules made by the W.P.C.No.3757/2012 & connected cases 17 Association itself, the right would be meaningless because, as soon as an Association is formed, a law may be passed interfering with its composition, so that the Association formed may not be able to function at all. The right can be effective only if it is held to include within it the right to continue the Association with its composition as voluntarily agreed upon by the persons forming the Association".xxx
(ii) In Asom Rastrabhasa Prachar Samiti v. State of Assam, (1989) 4 SCC 496) the Supreme Court held as under:
"22. It is therefore clear that so far as the present case is concerned it is not only that the new members are introduced, not only that the complete control is left to the Board to be nominated by the Government, about the persons no norms have been laid down, the person so nominated could be anyone and no control is kept to those who formed the Society, those who had a right to form an association will be kept away and the Society shall be run by a group of persons nominated by the Government in W.P.C.No.3757/2012 & connected cases 18 accordance with Section 3. It is therefore clear that what was done in the Sammelan Acts which were under examination in the Constitution Bench judgment referred to above, much more has been done in this case. In this case virtually the right of association has been taken away and not only that it is a sort of deprivation for all times as it is not even provided that this Board may be an interim Board and thereafter a proper board will be elected but here this Board will continue to control and manage the affairs of the Society."xxxxx
(iii) In Philip v. State of Kerala (2008 (2) KLT
555) the Division Bench of this court held as under:
"9. Though several contentions were taken, the learned counsel for the petitioner fairly submitted that while considering the constitutional validity of a legislation, the only point to be considered is whether the provisions of the legislation violate any of the constitutional provisions. If the legislation does not infringe or impinge upon any of the constitutional limitations, the courts have no power to invalidate the same. Normally, the Legislature should be W.P.C.No.3757/2012 & connected cases 19 conceded the freedom to decide, what should be the law on a subject, which it is authorised to legislate under List II of the Seventh Schedule of the Constitution of India, provided the provisions of the legislation do not violate any of the constitutional limitations like those contained in Part III. Both sides conceded that the only point that arises for decision concerning the validity of Ext.P2 Ordinance, is whether it is unconstitutional for being violative of Art.14 of the Constitution of India".xxxxxx
10.xxxxxxx "The question to which we must therefore address ourselves is whether the classification made by the Act in the present case satisfies the aforesaid test or it is arbitrary and irrational and hence violative of the equal protection clause in Art.14."
"13. The point to be decided is whether the legislative action to segregate the members of the DCB into two groups will stand the test of Art.14. According to the petitioner, all the co-operative societies belong to a homogeneous class. Their further classification based on the nature of their business is unjustified. There is no intelligible differentia between the two W.P.C.No.3757/2012 & connected cases 20 groups of societies and the said classification has got no rational nexus with the object sought to be achieved by the KCS Act, which is orderly development of the co- operative movement, as evident from the preamble of the Act.
14. The respondents, on the other hand, would submit that the Primary Agricultural Credit Societies and Urban Co-operative Banks form a separate group. They are engaged in agricultural credit activities and banking respectively. They raise funds for the above activities. There are other societies, which work in specified and restricted fields. For example, milk societies are meant only for milk producers. Housing societies are meant only for those who intend to purchase a house or land for constructing a house. Similar is the case of Serifed, Matsyafed etc. There is a clear distinction between the societies engaged in agricultural credit and banking and other societies engaged in various other activities. There is a clear intelligible differentia between them. The respondents also submit that it is not proper to give membership to all sorts of societies in the DCB other than the above said societies engaged in raising W.P.C.No.3757/2012 & connected cases 21 funds for agricultural credit and banking.
The new provisions help the orderly
development of the co-operative
movement. Thus, the said classification has got a rational nexus with the object sought to be achieved, it is submitted.
15. We think that the wisdom of the legislature should prevail. Its representatives are the best judges of what is good for the people. If the legislature thinks that a particular type of societies alone should be admitted as members of the DCB, it has to be recognised as the law of the land. If the legislature thinks that some other type of societies should also be admitted to the membership of the DCB, it has also to be recognised as the law of the land. This Court cannot sit in appeal over the wisdom of the legislature. Here, though what is impugned is only an Ordinance, the above principles will squarely apply. In this context, we think, it is quite apposite to quote a few authorities on this aspect".xxxxx "18. The above decisions in felicitous words highlight the principle that the courts should be slow to interfere or tinker with legislative wisdom. The people of our State should be W.P.C.No.3757/2012 & connected cases 22 conceded the freedom to decide what law should govern them. Their representatives in the Legislative Assembly can pass any law, subject, of course, to the constitutional limitations. The Government having majority in the Legislative Assembly, should also be conceded the same degree of freedom to legislate by issuing an Ordinance. Here also, the power has to be exercised, subject to the constitutional limitations. The courts should respect the judgment and wisdom of the legislature on social and economic issues, reflecting the will of, "we the people". The Judges, however learned or erudite they may be, may not substitute their judgment for that of the legislature."
(iv) In A.P. Dairy Development Corpn. Federation v. B. Narasimha Reddy, (2011) 9 SCC
286) the Supreme Court held as under :
"10. The State promulgated Ordinance 2 of 2006 excluding the milk dairy cooperative societies from the societies covered by the 1995 Act and imported the fiction that such dairies would be deemed to have been registered under the 1964 Act, with effect W.P.C.No.3757/2012 & connected cases 23 from the date of registration under the 1995 Act. The Government Order dated 4-2-2006 was issued to give effect to such amendments and also to take care of transitional position, particularly providing that the District Collector would appoint the person-in-charge under Section 32(7) of the 1964 Act to manage the affairs of all primary milk producers' cooperative societies till further elections or until further orders, so that affairs of those societies would be managed properly.
11. Writ petitions were filed before the High Court by various District Milk Producers' Cooperative Unions challenging Ordinance 2 of 2006 and consequential Government Order dated 4-2-2006. The High Court vide interim order dated 8-2-2006 stayed the operation of the Government Order dated 4- 2-2006. Meanwhile, the Ordinance was converted into the Act. By the impugned judgment dated 1-5-2007, the High Court allowed the writ petitions. Hence, these appeals".
xxxxxx "18. It is well-settled law that Article 14 forbids class legislation, however, it does not forbid reasonable classification for the W.P.C.No.3757/2012 & connected cases 24 purpose of legislation. Therefore, it is permissible in law to have class legislation provided the classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and that differentia must have a rational relation to the object sought to be achieved by the statute in question. Law also permits a classification even if it relates to a single individual, if, on account of some special circumstances or reasons applicable to him, and not applicable to others, that single individual may be treated as a class by himself. It should be presumed that the legislature has correctly appreciated the need of its people and that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds. There is further presumption in favour of the legislature that legislation had been brought with the knowledge of existing conditions. The good faith on the legislature is to be presumed, but if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded W.P.C.No.3757/2012 & connected cases 25 as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation. The law should not be irrational, arbitrary and unreasonable inasmuch as there must be nexus to the object sought to be achieved by it. (Vide Budhan Choudhry v. State of Bihar and Ram Krishna Dalmia v. Justice S.R. Tendolkar.)"xxxxxxx "28. In view of the above, it becomes evident that the right of citizens to form an association is different from running the business by that association. Therefore, the right of individuals to form a society has to be understood in a completely different context. Once a cooperative society is formed and registered, for the reason that cooperative society itself is a creature of the statute, the rights of the society and that of its members stand abridged by the provisions of the Act. The activities of the society are controlled by the statute. Therefore, there cannot be any objection to statutory interference with their composition or functioning merely on the ground of W.P.C.No.3757/2012 & connected cases 26 contravention of individual's right of freedom of association by statutory functionaries.
29. It is a settled legal proposition that Article 14 of the Constitution strikes at arbitrariness because an action that is arbitrary, must necessarily involve negation of equality. This doctrine of arbitrariness is not restricted only to executive actions, but also applies to the legislature. Thus, a party has to satisfy that the action was reasonable, not done in unreasonable manner or capriciously or at pleasure without adequate determining principle, rational, and has been done according to reason or judgment, and certainly does not depend on the will alone. However, the action of the legislature, violative of Article 14 of the Constitution, should ordinarily be manifestly arbitrary. There must be a case of substantive unreasonableness in the statute itself for declaring the act ultra vires Article 14 of the Constitution. [Vide Ajay Hasia v. Khalid Mujib Sehravardi, Reliance Airport Developers (P) Ltd. v. Airports Authority of India, Bidhannagar (Salt Lake) Welfare Assn. v. Central Valuation Board, Grand Kakatiya Sheraton Hotel and Towers W.P.C.No.3757/2012 & connected cases 27 Employees and Workers Union v. Srinivasa Resorts Ltd. and State of T.N. v. K. Shyam Sunder.]"
xxxxx "47. The cooperative movement by its very nature, is a form of voluntary association where individuals unite for mutual benefit in the production and distribution of wealth upon principles of equity, reason and common good. So, the basic purpose of forming a cooperative society remains to promote the economic interest of its members in accordance with the well- recognised cooperative principles. Members of an association have the right to be associated only with those whom they consider eligible to be admitted and have right to deny admission to those with whom they do not want to associate. The right to form an association cannot be infringed by forced inclusion of unwarranted persons in a group. Right to associate is for the purpose of enjoying in expressive activities. The constitutional right to freely associate with others encompasses associational ties designed to further the social, legal and economic benefits of the members of the association. By statutory interventions, the W.P.C.No.3757/2012 & connected cases 28 State is not permitted to change the fundamental character of the association or alter the composition of the society itself. The significant encroachment upon associational freedom cannot be justified on the basis of any interest of the Government. However, when the association gets registered under the Cooperative Societies Act, it is governed by the provisions of the Act and the Rules framed thereunder. In case the association has an option/choice to get registered under a particular statute, if there are more than one statutes operating in the field, the State cannot force the society to get itself registered under a statute for which the society has not applied."
xxxxxx "60. Principles of cooperation as incorporated in Section 3 and given effect to in the other provisions of the 1995 Act permit better democratic functioning of the society than under the 1964 Act. Whereas the 1995 Act provides for State regulation to the barest minimum, the 1964 Act provides for extensive State control and regulation of cooperative societies which is inconsistent with the national policy with regard to W.P.C.No.3757/2012 & connected cases 29 cooperative societies evolved in consultation and collaboration with the States which stands accepted by the State of A.P. and reflected in the scheme of the 1995 Act which is based on the model law recommended by the Planning Commission of India. Thus, reverting back to the cooperative societies under the 1964 Act is a retrograding process by which the Government would enhance its control of these societies registered under the 1995 Act. They would be deprived not only of benefits under the said Act, but rights accrued under the 1995 Act would also be taken away with retrospective effect.
61. Cooperative law is based on voluntary action of its members. Once a society is formed and its members voluntarily take a decision to get it registered under the X Act, the registration authority may reject the registration application if conditions prescribed under the X Act are not fulfilled or for any other permissible reason. The registration authority does not have a right to register the said society under the Y Act or even a superior authority is not competent to pass an order that the society would be registered under the Y Act. Such W.P.C.No.3757/2012 & connected cases 30 an order, if passed, would be in violation of the first basic cooperative principle that every action shall be as desired by its members voluntarily. Introducing such a concept of compulsion would violate Article 19(1)(c) of the Constitution of India. It is not permissible in law to do something indirectly, if it is not permissible to be done directly. (See Sant Lal Gupta v. Modern Coop. Group Housing Society Ltd.)
62. The 2006 Act had been enacted without taking note of the basic principles of cooperatives incorporated in Section 3 of the 1995 Act which provide that membership of a cooperative society would be voluntary and shall be available without any political restriction. The cooperative society under the Act would be a democratic organisation as its affairs would be administered by persons elected or appointed in a manner agreed by members and accountable to them.
63. The legislature has a right to amend the 1995 Act or repeal the same. Even for the sake of the argument, if it is considered that the legislature was competent to exclude the milk cooperative dairies from the operation of the 1995 Act and such an Act W.P.C.No.3757/2012 & connected cases 31 was valid i.e. not being violative of Article 14 of the Constitution, etc. the question does arise as to whether the legislature could force the society registered under the 1995 Act to work under the 1964 Act. Importing the fiction to the extent that the societies registered under the 1995 Act, could be deemed to have been registered under the 1964 Act tantamounts to forcing the members of the society to act under compulsion/direction of the State rather than on their free will. Such a provision is violative of the very first basic principles of cooperatives. More so, the Act is vitiated by non-application of mind and irrelevant and extraneous considerations."
(v) In State of T.N. v. K. Shyam Sunder, (2011) 8 SCC 737), the Supreme Court held as under:
"36. In State of Punjab v. Gurdial Singh, this Court held that when power is exercised in bad faith to attain ends beyond the sanctioned purposes of power by simulation or pretension of gaining a legitimate goal, it is called colourable exercise of power. The action becomes bad where the true object is to reach an end different from the one for which the power is entrusted, guided by an W.P.C.No.3757/2012 & connected cases 32 extraneous consideration, whether good or bad but irrelevant to the entrustment. When the custodian of power is influenced in exercise of its power by considerations outside those for promotion of which the power is vested, the action becomes bad for the reason that power has not been exercised bona fide for the end design."
(vi) In State of W.B. v. E.I.T.A. India Ltd., (2003) 5 SCC 239) the following paragraph is relied upon:
"4. In examining the constitutional validity of the impugned provisions of a statute, it will be useful to bear in mind the following well-settled propositions. If a legislation is found to lack in legislative competence or is found to be in contravention of any provision of Part III or any other provision of the Constitution, the impugned legislation cannot escape the vice of unconstitutionality (see: Kesavananda Bharati v. State of Kerala and also State of A.P. v. McDowell & Co.). A challenge to any statutory provision on the ground of the classification being discriminatory and violative of Article 14 of the Constitution, can be successfully met on the principle of reasonable classification having nexus to W.P.C.No.3757/2012 & connected cases 33 the object of the Act sought to be achieved (see: State of Bombay v. F.N. Balsara and Budhan Choudhry v. State of Bihar). However, the legislature enjoys a greater latitude for classification in the field of taxation (see: Steelworth Ltd. v.
State of Assam, Gopal Narain v. State of U.P. and Ganga Sugar Corpn. Ltd. v. State of U.P.). No legislation can be declared to be illegal, much less unconstitutional on the ground of being unreasonable or harsh on the anvil of Article 14 of the Constitution, except, of course, when it fails to clear the test of arbitrariness and discrimination which would render it violative of Article 14 of the Constitution. (See: Steelworth Ltd. and McDowell & Co.)
(vii) In Pt. Rishikesh v. Salma Begum, (1995) 4 SCC 718), the following paragraph is relied upon:
"17. xxxxxx As soon as assent is given by the President to the law passed by Parliament it becomes law. Commencement of the Act may be expressed in the Act itself, namely, from the moment the assent was given by the President and published in the Gazette, it becomes operative. The operation may be postponed giving power W.P.C.No.3757/2012 & connected cases 34 to the executive or delegated legislation to bring the Act into force at a particular time unless otherwise provided. The Central Act came into operation on the date it received the assent of the President and shall be published in the Gazette and immediately on the expiration of the day preceding its commencement it became operative. Therefore, from midnight on the day on which the Central Act was published in the Gazette of India, it became the law. xxxxxxxx Equally is the procedure of the State Legislature. Inconsistency or incompatibility in the law on concurrent subject, by operation of Article 254, clauses (1) and (2) does not depend upon the commencement of the respective Acts made by Parliament and the State Legislature. Therefore, the emphasis on commencement of the Act and inconsistency in the operation thereafter does not become relevant when its voidness is required to be decided on the anvil of Article 254(1). Moreover, the legislative business of making law entailing with valuable public time and enormous expenditure would not be made to depend on the volition of the executive to notify the W.P.C.No.3757/2012 & connected cases 35 commencement of the Act. Incompatibility or repugnancy would be apparent when the effect of the operation is visualised by comparative study."
(viii) In State of Kerala v. Mar Appraem Kuri Co. Ltd., (2012) 7 SCC 106) the Supreme Court held as under:
"78. To sum up, Articles 246(1), (2) and 254 (1) provide that to the extent to which a State law is in conflict with or repugnant to the Central law, which Parliament is competent to make, the Central law shall prevail and the State law shall be void to the extent of its repugnancy. This general rule of repugnancy is subject to Article 254(2) which inter alia provides that if a law made by a State Legislature in respect of matters in the Concurrent List is reserved for consideration by the President and receives his/her assent, then the State law shall prevail in that State over an existing law or a law made by Parliament, notwithstanding its repugnancy."
(ix) In Sonapur Tea Co. Ltd. v. Deputy Commissioner (1962) 1 SCR 724), the Supreme Court W.P.C.No.3757/2012 & connected cases 36 held as under:
"9. xxxxxxThe doctrine of colourable legislation really postulates that legislation attempts to do indirectly what it cannot do directly. In other words, though the letter of the law is within the limits of the powers of the legislature, in substance the law has transgressed those powers and by doing so it has taken the precaution of concealing its real purpose under the cover of apparently legitimate and reasonable provisions (Vide:
K.G. Gajapati Narayan Deo v. State of Orissa) This position is not and can not be disputed."
(x) In Britnnel v. Secretary of State for Social Security (1991(2) All E.R. 726), the House of Lords held as under:
"Applying the principle that a position was transitional in character where its operation was expected to be temporary, in that it becomes spent when all past circumstances with which it was designed to deal had been dealt with, in contrast to primary legislation which continued to deal indefinitely with new circumstances arising after its passage."
W.P.C.No.3757/2012 & connected cases 37
8. Counter affidavit is filed by the State inter alia contending that as per the special provision in the Ordinance the committee in office of the District Co- operative Bank ceased to exist and the Registrar was competent to appoint a new committee or one or more administrators who need not be the members of the Society, to manage the affairs of the Bank for a period not exceeding six months. The existing committees ceased to exist with effect from 11th February, 2012, the date of ordinance and the Registrar of Co-operative Societies appointed concerned Joint Registrars in the Districts as Part Time Administrators vide orders No. C.B(3)7298/2012
(i) to (xiii) dated, 11.02.2012. In the case of State Co- operative Bank, Government Secretary has been appointed as Part Time Administrator. Reference is made to Section 2(j) of the Kerala Co-operative Societies Act which defines Financing Bank which means a Co- operative Society having as its members only other type of Co-operative Societies and the main object of which is to raise money and lend to its members. The funds of the District Co-operative Bank consists of not only the funds of W.P.C.No.3757/2012 & connected cases 38 Primary Agricultural Credit Societies and Urban Banks, but also of other Non-Credit Societies. By Act 9 of 2009 the representatives of Societies other than Primary Agricultural Credit Societies and Urban Co-operative Banks had no right to vote. Co-operative Societies are set up on democratic principles and a true and meaningful participation in the affairs of the Society by the members is the basis of such principle. By Act 9 of 2009 credit Societies were denied voting right in District Co- operative Banks. Several Societies similarly placed were excluded. As per Rule 15 of the Kerala Co-operative Societies Rules, employees Credit Societies and Agricultural Improvement Societies are also Credit Societies. They have no Central Society. The classificatiion made as per Act 9 of 2009 is under inclusive. Reliance is also placed on the Division Bench judgment in Philip's case (supra) to contend that the wisdom of the legislature should prevail. If the legislature thinks that some other type of Societies should also be admitted to the membership of the District Co-operative Bank, it has also to be recognized as the law of the land. W.P.C.No.3757/2012 & connected cases 39
9. It is stated that the Government as per G.O. (Rt) No. 431/2001/Co-operation dated 29.9.2001 appointed a committee under the Chairmanship of Sri.K.R.Aravindakshan to study the organizational set up and working of the District Co-operative Banks. After a detailed study the committee recommended to the Government that District Co-operative Bank should be the Central Society for all Primary Societies in the District. Act 3 of 2002 was enacted based on this committee report.
10. It is contended that Clause (3) of Article 243 ZJ of the Constitution provides that Legislature of the State shall by law make provisions for co-option of persons to be members of the Board having experience in the field of banking, management, finance or specialization in any other field relating to the objects and activities undertaken by the Co-operative society, as members of the board of such society. Sub-section (IG) of section 28 of the Act introduced by the Act will give effect to the said provision in a democratic manner as and when it comes into force. Section 5 of the Act is a transitional W.P.C.No.3757/2012 & connected cases 40 provision which has no independent existence. Transitional provisions in an Act or other instrument are provisions which spell out precisely when and how the operative parts of the Act or instrument are to take effect.
11. It is further contended that the action by which the Board of the District Co-operative Bank ceased to exist is not an action superseding the Committee as per the provisions of Section 32 of the Kerala Co-operative Societies Act. The attempt of the petitioners is to term the cessation of the Board as supersession.
12. Learned senior counsel Sri.D.Somasundaram placed reliance on the following judgments:
(i) In Ashok Kumar v. Union of India, (1991) 3 SCC 498, the following paragraphs are relied upon:
9. xxxIt is only when a legislature which has no power to legislate frames a legislation so camouflaging it as to appear to be within its competence when it knows it is not, it can be said that the legislation so enacted is colourable legislation.In K.C. Gajapati Narayan Deo v. State of Orissa the Orissa Agricultural Income Tax (Amendment) Act, 1950, was challenged on W.P.C.No.3757/2012 & connected cases 41 the ground of colourable legislation or a fraud on the Constitution as its real purpose was to effect a drastic reduction in the amount of compensation payable under the Orissa Estates Abolition Act, 1952. xxxxx Mukherjea, J. who spoke for the court observed as under: (SCR pp. 10-11) "It may be made clear at the outset that the doctrine of colourable legislation does not involve any question of bona fides or mala fides on the part of the legislature. The whole doctrine resolves itself into the question of competency of a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power."
Thus the whole doctrine resolves itself into a question of competency of the concerned legislature to enact the impugned legislation. If the legislature has transgressed the limits of its powers and if such transgression is indirect, covert or disguised, such a legislation is described as W.P.C.No.3757/2012 & connected cases 42 colourable in legal parlance. The idea conveyed by the use of the said expression is that although apparently a legislature in passing the statute purported to act within the limits of its powers, it had in substance and reality transgressed its powers, the transgression being veiled by what appears on close scrutiny to be a mere pretence or disguise. In other words if in pith and substance the legislation does not belong to the subject falling within the limits of its power but is outside it, the mere form of the legislation will not be determinate of the legislative competence. In Sonapur Tea Co. Ltd. v. Mst. Mazirunnessa it was reiterated relying on Gajapati case that the doctrine of colourable legislation really postulates that legislation attempts to do indirectly what it cannot do directly. xxxxx"
(ii) In Karimbil Kunhikoman v. State of Kerala, 1962 Supp (1) SCR 829 a constitution bench of the Supreme Court held as under:
"4. We now come to the attack made on the Act on the ground that it is a piece of colourable legislation beyond the legislative competence of the State legislature. What W.P.C.No.3757/2012 & connected cases 43 is colourable legislation is now well-settled: see K.C. Gajapati Narayan Deo v. State of Orissa where it was held "that the question whether a law was a colourable legislation and as such void did not depend on the motive or bona fides of the legislature in passing the law but upon the competency of the legislature to pass that particular law, and what the courts have to determine in such cases is whether though the legislature has purported to act within the limits of its powers, it has in substance and reality transgressed those powers, the transgression being veiled by what appears, on proper examination, to be a mere pretence or disguise. The whole doctrine of colourable legislation is based upon the maxim that you cannot do indirectly what you cannot do directly".
(iii) In VASUDEVAN & OTHERS v. STATE OF KERALA & OTHERS, 1985 KLT 344 ( F.B.) a full bench of Kerala High Court held as under:
"19. Now coming to the contention of the petitioners that the respondents' inaction was motivated by political considerations, we do not think the contention has any W.P.C.No.3757/2012 & connected cases 44 force. Beg C.J., in State of Rajasthan V. Union of India (A.I.R. 1977 S.C. 1361 at p. 1377) has thus observed:
"Under our system, quest of political power, through formation of several political parties with different socio- economic policies and programmes and ideologies, is legal. Hence, it cannot be said that a mere attempt to get more political power for a party, as a means of pursuing the programme of that party, as opposed to that of other parties, is constitutionally prohibited or per se illegal..........................."
Therefore, the contention raised by the petitioners regarding the political motives of the respondents also cannot be sustained".
(iv) In Govt. of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720), the following paragraphs are relied upon:
"46. In our opinion, there is one and only one ground for declaring an Act of the legislature (or a provision in the Act) to be invalid, and that is if it clearly violates some provision of the Constitution in so evident a manner as to leave no manner of doubt. This violation can, of course, be in different ways e.g. if a State Legislature makes a law W.P.C.No.3757/2012 & connected cases 45 which only Parliament can make under List I to the Seventh Schedule, in which case it will violate Article 246(1) of the Constitution, or the law violates some specific provision of the Constitution (other than the directive principles). But before declaring the statute to be unconstitutional, the court must be absolutely sure that there can be no manner of doubt that it violates a provision of the Constitution. If two views are possible, one making the statute constitutional and the other making it unconstitutional, the former view must always be preferred. Also, the court must make every effort to uphold the constitutional validity of a statute, even if that requires giving a strained construction or narrowing down its scope vide Rt. Rev. Msgr. Mark Netto v. State of Kerala SCC para 6 : AIR para 6. Also, it is none of the concern of the court whether the legislation in its opinion is wise or unwise."xxxxx
13. The learned counsel for the Administrator had taken a contention that the members of a Co-operative Society has no right to challenge the vires of the Act. Reference is made to State of U.P. v. C.O.D. Chheoki W.P.C.No.3757/2012 & connected cases 46 Employees' Coop. Society Ltd., (1997) 3 SCC 681) which reads as under:
14. The question is whether such a power is violative of Article 19(1)(c) of the Constitution. Shri Raju Ramachandran, learned Senior Counsel for the respondents, contends that the Constitution has conferred right on every citizen to form a society or to be its member. Formation of the society includes therein inviolability of incorporate character or enrolment of any member who fulfils the objects of the society as per the bye-laws. No outsider would be interposed or thrust against his/her wishes. No outsider, therefore, could be brought or nominated as member of the Management Committee without being a member of the General Body. In Daman Singh v. State of Punjab (SCC at p. 681), the Constitution Bench had held that the creation, the constitution and the management of the society is a creature of the statute. They are controlled by the statute and so, there can be no objection to statutory interference with their composition on the ground of contravention of the individual W.P.C.No.3757/2012 & connected cases 47 right to freedom to form association. In para 11, this Court held that once a person becomes a member of a Cooperative Society, he loses his individuality qua the society and he has no independent rights except those given to him by the statute and the bye-laws. He must act and speak through the society or rather, the society alone can act and speak for him qua rights or duties of the society as a body." xxxxxx "17. So, the society having been formed is governed by the provisions of the Act. The individual members do not have any fundamental right to the management of the Committee except in accordance with the provisions of the Act, rules and bye- laws. The management of the Committee is regulated by Section 29 of the Act. The composition thereof is also regulated by the Act and has to be in accordance with the Rules and the bye-laws. The Rules referred to hereinbefore have to be in furtherance of and in conformity with the provisions contained in Section 130(2)(xii) and (xii-A) and the Rules providing for reservation in the election of the Committee or for nomination to the Management Committee of the members W.P.C.No.3757/2012 & connected cases 48 belonging to the weaker sections and women should be to effectuate socio-
economic and political justice assured by the Preamble, Articles 38 and 46 of the Constitution."
14. Before proceeding further I shall analyse the case law for a clear understanding in regard to the nature of interference possible in the case.
15. In E.I.T.A. India Ltd. case (supra) the Supreme Court held that If a legislation is found to lack in legislative competence or is found to be in contravention of any provision of Part III or any other provision of the Constitution, the impugned legislation cannot escape the vice of unconstitutionality. A challenge to any statutory provision on the ground of the classification being discriminatory and violative of Article 14 of the Constitution, can be successfully met on the principle of reasonable classification having nexus to the object of the Act sought to be achieved. No legislation can be declared to be illegal, much less unconstitutional on the ground of being unreasonable or harsh on the anvil of Article 14 of the Constitution, except, of course, when it fails to clear W.P.C.No.3757/2012 & connected cases 49 the test of arbitrariness and discrimination which would render it violative of Article 14 of the Constitution.
16. P. Laxmi Devi's case (supra) is relied upon to emphasise the power of the court to interfere with a legislative process. It is held that the Judges should must maintain judicial self restraint while exercising the power of judicial review of legislation. It is further held that the legislature must be given freedom to do experimentation in exercising its power which does not clearly and flagrantly violate constitutional limits. The Supreme Court held that there is only one ground for declaring an Act of the legislature (or a provision in the Act) to be invalid, and that is, if it clearly violates some provision of the Constitution in so evident a manner as to leave no manner of doubt. But before declaring the statute to be unconstitutional, the court must be absolutely sure that there can be no manner of doubt that it violates a provision of the Constitution. If two views are possible, one making the statute constitutional and the other making it unconstitutional, the former view must always be preferred. Also, the court must make every effort to W.P.C.No.3757/2012 & connected cases 50 uphold the constitutional validity of a statute, even if that requires giving a strained construction or narrowing down its scope.
17. In Philip's case (supra) while dealing the constitutional validity of section 2(ia) of the principal Act, the Division Bench of this court after a detailed evaluation of the case law held that the wisdom of the legislature should prevail as the representatives are the best judges of what is good for the people. If the legislature thinks that some other type of societies should also be admitted to the membership of the DCB, it has also to be recognised as the law of the land and the Court cannot sit in appeal over the wisdom of the legislature. The representatives in the Legislative Assembly can pass any law, subject to the constitutional limitations and the courts should respect the judgment and wisdom of the legislature on social and economic issues.
18. The question therefore to be considered is whether the Amendment Act violates any constitutional provisions. The contention is with reference to violation of constitutional provisions especially Articles 243-ZI to W.P.C.No.3757/2012 & connected cases 51 243-ZL These amendments were introduced by the 97th Amendment which came into force on 15.2.2012. Article 243-ZI imposes an obligation on the legislature of the State to make law with respect to incorporation, regulation and winding up of co-operative societies on the principles of voluntary formation, democratic member control, member-economic participation and autonomous function. It is not in dispute that as far as the State legislature is concerned already the Co-operative Societies Act, 1969 is in force which is based on the principles as contained under Article 243-ZI of the Constitution. Therefore the amendment now made in terms of Amendment Act does not violate any of the principles stated in Article 243-ZI.
19. Article 243-ZJ relates to the formation of the Board and the maximum number of Directors, the reservation to be provided for Scheduled Caste or Scheduled Tribes women etc. The Article further provides that the term of office of elected members of Board is to be fixed as five years from the date of election and the term of office bearers shall be co-terminus with the term W.P.C.No.3757/2012 & connected cases 52 of the Board. The Article also directs appointment of experts in the field of Banking, Management, Finance or specialization in any other field relating to the objects and activities to be undertaken by the Society as its Board Members. As far as the maximum number of Directors of the Society is concerned, the amendment has not changed at all whereas in respect of reservation of the members in a Committee, two seats in the District Co- operative Bank is reserved for representatives who possessed experience in Banking of professional qualification in terms of S.28 (1G) of the Amendment Act. The amendments made as per the Amendment Act is not contrary to Article 243-ZJ.
20. It is contended by the petitioners that when the Constitution stipulates the term of office of elected members and its office bearers shall be five years from the date of election and that the term of office bearers shall be co-terminus with the term of the Board by enacting the transitory provision in terms of S.5 of the Amendment Act especially S.5(1)(c) which states that the committee in office of the District Co-operative Bank shall W.P.C.No.3757/2012 & connected cases 53 cease to exist is clearly against the mandate of Article 243-ZJ. It is not in dispute that the term of office of the elected members of the Board and its office bearers was five years. It is also not in dispute that by Ordinance 18 of 2012 coming into force, which was later replaced by the Amendment Act, the committee in office had ceased to be in office with effect from 11.2.2012. The Constitutional amendment was made only on 15.2.2012. Therefore at the time when Ordinance 18 of 2012 came into force and the transitory provisions had come into effect the office bearers has ceased to be members of the Board as on 11.2.2012. Apparently it cannot be stated that the constitutional amendment was applicable when the transitory provision under section 5(1)(c) of the Amendment Act has taken effect. That apart, Article 243-ZJ is intended to make a stipulation in the State enactment that the term of office of elected members of the Board and the office bearers shall be five years. It does not prohibit the State Government in making provisions for disqualification of such members or from terminating their membership of the Board by making a W.P.C.No.3757/2012 & connected cases 54 statutory provision under circumstances which requires termination of such membership. In the present case the Amendment Act had come into force for the purpose of three specific amendments. One is to amend the definition of District Co-operative Bank, the next was to delete two provisos from Section 18 of the principal Act which was consequential to the amendment of section 2 (ia) and 3rd was to amend Section 28 to incorporate sub- sections (1D) to (1I). Section 5 of the Amendment Act is only a transitory provision, which is intended to give effect to the amendments. On a perusal of the above said amendments or the transitory provisions, I do not think that it violates any of the aforesaid constitutional provision.
21. Article 243-ZL deals with supersession and suspension of the Board and interim management. In fact, no provision had been made in the Amendment Act in regard to Article 243-ZL. The argument is that when the constitution provides for specific provision for suspension or supersession of a Society, its term of office can be interfered only if the Board had committed any of W.P.C.No.3757/2012 & connected cases 55 the acts mentioned in Clauses (i) to (v) of the Article. It is contended that the transitory provision under Section 5 (2) and 5(3) of the Amendment Act is totally against Article 243-ZL. As already indicated, the application of constitutional provision would come into effect only from 15.2.2012 and the effect of the transitory provision which are impugned had occurred even prior to the said date. That part, Article 243-ZL only deals with supersession and suspension of the Board including interim management. It does not cover a situation of the entire Board ceasing to be in office by way of a transitory provision on account of amendment to the provisions of the Act. In the case on hand when the definition of District Co-operative Bank had undergone a change when Section 2(ia) of the principal Act is amended with effect from 11.2.2012, necessarily the legislature will have to make provision to take care of a situation which resulted on coming into force of the amendment. Such procedure cannot be termed as violative of Article 243 ZL of the Constitution.
W.P.C.No.3757/2012 & connected cases 56
22. The next contention is based on grouping of societies which cannot be grouped together and that it will destroy the very object of Co-operative movement. This argument is based on the amendment made to Section 2 (ia) of the principal Act. Reference is made to Philip's case (supra). The said case has no application to the facts in the present case. In Philip's case, the challenge was regarding restricting the membership of District Co- operative Banks with Primary Agricultural Credit Society and Urban Co-operative Banks having the principle object of raising funds to be lent to its members. The Division Bench of this Court in Philip's case held that it amounts to a reasonable classification which the State legislature has the power to enact. In the case on hand, what is under challenge is extending the scope of membership to a large number of societies. Philip's case was based on a classification and the question to be decided was whether such a classification is based on an intelligible differentia. Apparently that is not the situation here. By the amendment the membership of the District Co- operative Bank is expanded and given a wider sphere and W.P.C.No.3757/2012 & connected cases 57 therefore the question of classification does not arise. Therefore, merely for the reason that a Division Bench of this Court had upheld the definition of District Co- operative Bank in the principal Act, does not mean that the State Government cannot amend the said provision to provide a wider membership to various societies. For that reason, I cannot agree with the learned counsel for the petitioners that there is violation of Article 14 of the Constitution of India.
23. Another contention urged is that by the Amendment Act, certain type of members have ceased to be members whereas non-members are given membership. Once it is found that the amendment is valid and constitutionally permissible, it is not open for the petitioners to challenge the transitory provision which are intended to give life to the amendments and are required to be followed to give effect to the amendment made in terms of the Amendment Act.
24. In Damyanti Naranga case (supra) the Supreme Court was considering a case in which validity of a rule which prevented a Government servant to join as a W.P.C.No.3757/2012 & connected cases 58 member of any service association of Government servants was under challenge. Supreme Court held that any law by which members are introduced in the voluntary association without any option being given to the members to keep them out or any law which takes away the membership of those who have voluntarily joined, will be a law violating the right to form an association. This judgment has no application to the present case as the factual circumstances in the said judgment is totally different. That was a case in which an association was formed and thereafter the legislature had enacted a law regulating the administration of the affairs of the Society, altering the composition of the Society itself. The result of such change in composition was that the members who voluntarily formed the association were compelled to act in that association with other members who have been imposed as members by the Act. Apparently District Co-operative Bank is not a voluntary association. It is a Society created under the provisions of a statute and the membership of the Society is always subject to the provisions in the statute. Hence W.P.C.No.3757/2012 & connected cases 59 the above judgment has no application.
25. In Asom Rastrabhasa Prachar Samity case (Supra), the validity of Asom Rashtrabhasha Prachar Samiti (Taking Over of Management and Control) Act, 1984, was under challenge. By the provisions of this Act virtually the Samiti which was a public body constituted by its members having elected Byabasthapika Sabha and Karyapalika were substituted by Board appointed by the Government and all the functions, properties and affairs of the Samiti were taken over by this Board under the Ordinance and ultimately the Act. It was found that it was left to the discretion of the Government to appoint the whole of the Board which will take place of not only the Managing Committee but also the place of Byabasthapika Sabha which normally used to be an elected body. In that case the learned Judges relied upon the Constitution Bench judgment in Damyanti Naranga's case declared the Act ultra vires Article 19(1)(c) of the Constitution. I don't think that the law laid down in Asom Rastrabhasa Prachar Samity case is applicable to the facts of this case.
W.P.C.No.3757/2012 & connected cases 60
26. In A.P. Dairy Development Corpn. case (supra) the Supreme Court considered the validity of Ordinance 2 of 2006 excluding the milk dairy cooperative societies from the societies covered by the 1995 Act and imported the fiction that such dairies would be deemed to have been registered under the 1964 Act, with effect from the date of registration under the 1995 Act and the Government Order to give effect to such amendments and the transitional position, providing that the District Collector would appoint the person-in-charge under Section 32(7) of the 1964 Act to manage the affairs of all primary milk producers' cooperative societies till further elections or until further orders. The question considered was whether it is permissible in law to have class legislation and or whether it is arbitrary action involving negation of equality. It is held that the basic purpose of forming a cooperative society is to promote the economic interest of its members in accordance with the well- recognised cooperative principles and the members of an association have the right to be associated only with those whom they consider eligible to be admitted and have right W.P.C.No.3757/2012 & connected cases 61 to deny admission to those with whom they do not want to associate. The right to form an association cannot be infringed by forced inclusion of unwarranted persons in a group and by statutory interventions, the State is not permitted to change the fundamental character of the association or alter the composition of the society itself. The significant encroachment upon associational freedom cannot be justified on the basis of any interest of the Government. But the Supreme Court further proceeded to hold that when the association gets registered under the Cooperative Societies Act, it is governed by the provisions of the Act and the Rules framed thereunder. In case the association has an option/choice to get registered under a particular statute, if there are more than one statutes operating in the field, the State cannot force the society to get itself registered under a statute for which the society has not applied. It is held that the legislature could not force the society registered under the 1995 Act to work under the 1964 Act. I don't think that the facts in A.P. Dairy Development Corpn. case (Supra) has any application to the case on hand. The law laid down in the W.P.C.No.3757/2012 & connected cases 62 above judgment is that the legislature could not force the society registered under one Act to work under another Act. That apart it is held that when the association gets registered under the Cooperative Societies Act, it is governed by the provisions of the Act and the Rules framed thereunder. Therefore what was considered by the Supreme court was the legislative function in excluding the milk dairy cooperative societies from the societies covered by the 1995 Act and importing the fiction that such dairies would be deemed to have been registered under the 1964 Act.
27. Britnnel's case (supra) is relied upon to contend that the transitional provision cannot have any effect after the amendment and can have only a limited life that until the amendment has taken effect. As in the case of legislation the transitory powers can be exercised for a period of time until the purpose of the amendment is achieved. That is the very reason for which transitory provisions are made. In the case on hand when the amendment is made to specific provisions of the Act, necessarily transitory provisions are to be made to give W.P.C.No.3757/2012 & connected cases 63 complete effect to the said Amendment Act which alone had been done in the present case. Section 5 had come into effect on 11.2.2012 along with the amendment of section 2(ia) and shall operate until repeal of the Amendment Act or until the statutory provisions are complied. Therefore it cannot be stated that section 5 of Amendment Act suffers from any vice to declare it unconstitutional.
28. Shyam Sundar (supra), and Sonapur Tea Company (supra) were relied upon to contend that the Amendment Act is a colourable exercise of jurisdiction. What is colourable exercise of jurisdiction is considered by the Supreme Court in the above judgments. It is only when the power is exercised in bad faith to attain ends beyond the sanction purpose of power by stimulation or pretension of gaining a legitimate goal it amounts to colourable exercise of power. It is also held that the doctrine of mala fides does not involve any question of bona fide or mala fide on the part of legislature as the Court is concerned to a limited issue of competence of the particular legislature to enact a particular law. The motive W.P.C.No.3757/2012 & connected cases 64 of legislature while enacting a statute is inconsequential. As against the aforesaid judgments, the respondents relied upon Ashok Kumar's case (supra) in order to emphasise that the contention regarding colourable exercise of power is not made out. It is held by the Supreme Court that if the legislature has transgressed the limits of its powers and if such transgression is indirect, covered or disguised, such a legislation is described as colourable in legal parlance. Such transgression should be veiled by what appears on close scrutiny to be a mere pretence or disguise. Karimbil Kunhikoman's case (supra) is a Constitution Bench judgment which is also relied upon to demonstrate as to what is colourable legislation. It is held that the whole doctrine of colourable legislation is based upon the maxim that you cannot do indirectly what you cannot do directly. Therefore the question would be whether the transitory provisions are intended to reach an end different from the one for which power is entrusted and whether it is guided by extraneous consideration. When the power is available to make a law, it cannot be stated to be a colourable W.P.C.No.3757/2012 & connected cases 65 exercise of power. Only in instances where there is no power and the object of the legislation is to enact a law without there being a power and to achieve an object which is not available under law it becomes a colourable exercise. No such situation has arisen in the present case. As already indicated the amendments made under the Amendment Act are permissible amendments for which the State had the legislative competence. The transitory provisions are apparently incorporated to give effect to the amendments made, as without such transitory powers, the amendment will be rendered futile and the object of the amendments could not be achieved. Such being the situation, I am of the view that the the doctrine of colourable exercise of power does not apply to the facts of the case.
29. Selma Beegum's case (supra) and Mar Appraem Kuri (supra) has been relied upon for the proposition of repugnancy. It is argued that when a State law is in conflict with or repugnant to the Central Law which Parliament is competent to make the Central law shall prevail and the State law shall be void to the extent W.P.C.No.3757/2012 & connected cases 66 of repugnancy. These judgments will have no application as the State legislature has the power to frame a law with reference to Co-operative Societies as provided Entry 32 of list II and therefore the Amendment Act is also within the legislative power of the State Legislature.
30. In Chheoki Employees' Coop. Society Ltd., case (supra) is relied upon by the respondents to contend that after formation of the Society, if a law is made, it does not violate Article 19 (1)(c) of the Constitution. It is held that no citizen has a fundamental right under Article 19(1)(c) to become a member of a Co-operative Society. His right is governed by the provisions of the statute. Once he becomes a member of the society he has no independent right and no individual member is entitled to assail the constitutionality of the provisions of the Act, Rules and the bye-laws as his right under the Act is subject to its operation. He does not have any fundamental right to be in the management of the committee except in accordance with the provisions of the Act, Rules and bye laws. This judgment supports the W.P.C.No.3757/2012 & connected cases 67 stand taken by the respondents.
31. Having regard to the aforesaid findings I am of the view that the petitioners have not succeeded in challenging the vires of the Amendment Act.
In the result the above writ petitions are dismissed.
Sd/-
A.M.SHAFFIQUE, JUDGE.
rka /true copy/