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8. Before we set out the contentions urged by the respective Counsel it would be profitable to refer broadly the legislative development on the topic of co-operative societies particularly in pre-reorganised State of Bombay and thereafter in the State of Gujarat pursuant to bifurcation. It should be recalled that the Government of India had placed on the statute book the first piece of legislation pertaining to co-operative societies which was known as the Co-operative Credit Societies Act, 1904. The necessity of such legislation was felt because there was no other Act at that time under which an association or a society could be formed for the purposes of promoting the economic interest of its members in accordance with the well-recognised co-operative principles and therefore, the co-operative societies had to be organised under the Indian Companies Act, 1882. Some of the provisions of the Companies Act, 1882 were wholly inapt to the societies envisaged for implementation of the recognised co-operative principles. An appropriate legislation was, therefore, felt to be the need of those times so as to take out these societies from the operation of the general law on the subject and instead devise effective provisions relating to the constitution and objects of such societies. The Government also thought it desirable to confer upon such societies certain kind of privileges and facilities so as to encourage and assist the formation and working of such societies. The Law Committee appointed by the Government of India to consider the question of the establishment of the co-operative societies in India was of the opinion that it would be inappropriate to call these societies as banks and therefore, it preferred to call them as co-operative credit societies. The Act of 1904 was based on the English Friendly Societies Act of 1896. Two basic objectives prompted the Government of India to enact this Act, namely, simplicity and elasticity. Any programme of rural development postulates the gradual extension of the credit facilities. In order to satisfy this basic need, the credit societies were required to be formed. The Government, therefore, thought it necessary to put such an Act on the statute book not in deference to the public demand but only with a view to encourage and supervise the movement for imparting the advantages of organised thrift, self-help and mutual aid. The important features of that Act can be shortly recapitulated. Societies were classed as rural and urban and their area of operation was closely restricted. Loans could be disbursed only to the members on personal or such other satisfactory security. Annual audit was a compulsory feature. Members' interest in the share capital was strictly limited. All the transactions of the society were not liable to be subjected to stamp duties, registration charges or income-tax. These societies were put under the control, supervision and regulation of the officer known as Registrar who was invested with very wide powers in that behalf. The activities of the society were only to extend limited credit facilities to the people from small stations in life. The experience which the Government acquired in the course of working of the Act was not satisfactory since no worthwhile progress was marked in development of the rural credit. It was in order to remove the lacuna that the Co-operative Societies Act, 1912 was enacted which was the second phase of the co-operative movement in this country. The first major structural change which was sought to be achieved by the 1912 Act was that the distinction between rural and urban societies was done away with and co-operative societies with other objectives besides credit facilities were permitted to be formed so as to promote the economic interest of their members. Registrars had wide discretion in supervision of the co-operative structure. This Act of 1912 is still in force throughout the country except in Bombay and other states where it is replaced by the State Acts. Nonetheless, it should be emphasised that one of the most important activities which these societies carry on in this country is that of providing credit facilities. The third phase was reached with the appointment and report of Megteron Committee on Co-operation in 1915 which examined the entire movement from all the relevant angles and made many constructive suggestions which had far-reaching repercussions. The fourth phase was reached when by the Government of India Act, 1919 co-operation became a provincial subject and it came to be administered by the ministers of provincial Government. Pursuant to the said subject being transferred to the provincial Government, a number of committees of enquiry were set up which submitted reports pointing out important steps which the provincial Government should take in order to encourage co-operation movement. The provincial Governments felt the need of separate Acts to suit the requirements of co-operative movement as developed in the respective provinces. The erstwhile province of Bombay was the first provincial Government which took lead in the matter by enacting the Bombay Co-operative Societies Act, 1925. As contra-distinguished with the Act of 1912 which was restricted in its operation to agriculturists, artisans and persons of limited means, the Bombay Act of 1925 was extended to all the persons having common economic needs irrespective of the needs being limited or otherwise. The Preamble to 1925 Act recited that it was enacted with a view to facilitate the formation and working of co-operative societies for promotion of thrift, self-help and mutual aid not only amongst agriculturists but also other persons with common economic need so as to bring about better living, better business, and better methods of production. In 1925 Act, an attempt was made for the first time to classify distinctly the various societies having regard to their object, finance and methods of working. It was also for the first time that a scheme of the winding-up, liquidation and dissolution of societies on the lines of the Indian Companies Act, 1913 was incorporated in the 1925 Act. It also provided for summary recovery of the societies' dues as adjudicated in arbitration proceedings. Pursuant to the suggestions of two important committees set up by the Government of India in 1944, namely. Agricultural Finance Sub-committee and Co-operative Planning Committee and having regard to the reports of the committees set up by the Government of Bombay, namely, the Committee of Co-operative Education and Training, the Agricultural Credit Association Committee and the Committee for the Promotion of Village Industries, the Government of Bombay in 1948 undertook comprehensive legislation for amending the 1925 Act. The Statement of Objects and Reasons of the amending Act in 1948 revealed (i) the tendency of gradual removal of bureaucratic control over the co-operative movement; (ii) splitting up of a single society into two or more societies wherever the members so desire; and (iii) incorporating adequate safeguards for recovery of advances by the societies to their members. After the bifurcation of the Bombay State in May 1960 and consequent setting up of Gujarat State, the need was felt by the Government of the new State of Gujarat to consolidate and amend the law relating to co-operative societies in the State of Gujarat and therefore, the Gujarat Co-operative Societies Act, 1961 was enacted and put on the statute book. It appears that the Gujarat State Law Commission undertook the exercise of examining the principal Act with a view to find out what amendment should be made therein. It submitted its report on the working of the principal Act in January 1976 to the then Chief Minister of the State of Gujarat. Similarly, the Annual Conference of State Ministers of Co-operation held at Bangalore in June-July 1969 advocated certain reforms which the Conference felt it necessary in the different State Acts. It is in the light of this report of the State Law Commission and the suggestions of the Ministers' Conference that the State Government amended the principal Act first in 1981 and thereafter again extensively in 1982. What is the nature of the amendments made in the principal Act will be stated broadly hereafter so that the rival contentions can be appreciated in the proper perspective. The precise nature of the amendments in relevant sections will be indicated while dealing with the challenge to those amendments. It should be noted at this stage that in enacting the principal Act the State Government kept before its mind the recommendations made in the report of the two important Committees, namely, Rural Credit Survey Committee appointed by the Reserve Bank of India in August 1951 and the Committee appointed by the Government on Co-operative law. It can be safely stated without the fear of contradiction that a purposeful attempt is discernible in the principal Act that the Co-operative societies at different levels in particular and the Co-operative movement in general were sought to be developed systematically in accordance with the directive principles of the Constitution. Four points may be noted as indicative of the anxiety of the State Government to put the whole co-operative movement on systematic basis. The provision for associate, nominal and sympathiser membership so as to enable the societies to have the benefit of the experience of the outsiders is indicative of this anxiety on the part of the State Government. The provision for constituting the principal and subsidiary state partnership funds from which share capital contributions can be made to co-operative societies is another such indicative factor. The provision for amalgamation of the sick units with the healthy units is also indicative in this direction. That provisions relating to liquidation and consequential matters are codified and are brought in line with the provisions of the Companies Act, 1956 is also indicative of this anxiety on the part of the State Government. It is pertinent to emphasise that though Gujarat Act made vital departures from the Bombay Act it was nonetheless a consolidating and amending Act and not a new measure altogether. We may remind ourselves broadly as to what the two amending Acts sought to provide for in the principal Act. In order to appreciate these amendments it would be convenient to group these impugned provisions according to the relevant topics which are as under: