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2002 DIGILAW 556 (KER)

President v. Deputy Director

2002-08-13

KURIAN JOSEPH

body2002
Judgment :- Kurian Joseph, J. The international Cooperative Alliance defines a cooperative as follows: "A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social ad cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise." Autonomy is thus one of foundation values of a cooperative movement. Members of a Cooperative Society are bound by its Bye-laws which is made by them and given to themselves. The Kerala Cooperative Societies Act and the Rules provide only for guidance in the matter. Taking note of the objects of the Society and the promotion of the economic interests of its members, it is for the members to determine its area of operation, without overlapping the area of operation of another society. But once a society is formed and registered issue a direction to alter the area of operation? If so to what extent? All the cases relate to the same issue and hence they are being disposed of by a common judgment. Incidently all the societies are popularly known as the mild societies - Anand Pattern Cooperative Society (APCOS), registered under the provisions of the Kerala Cooperative Societies Act. To refer to the facts of O.P.No. 15631 of 1997, the petitioner is a member of one of such societies and the area of operation of Ward numbers 1,2 and 3 of Thodiyoor Grama Panchayat. It appears some of the milk suppliers of Ward 3 approached the Deputy Director proposing to start a new consequently issued to the petitioner enquiring whether the petitioner society was willing to delink Ward No.3 and make consequential amendment in the Bye-laws. As per Exhibit P2 it was promptly informed that since such formation would prejudicially affect the interests of the society, the society was not willing to delink Ward No.3. Thereafter referring to a Government Circular, the Deputy Director informed the petitioner that area of operation of a society should be limited to two Wards in the Panchayat and hence the Deputy Director had to be informed as to which Ward was to be delinked. Exhibits P3 to P5 are such communications. The petitioner apprehends that pursuant to such communications, since the society does not amend the Bye-laws on their own, the Registrar may invoke his powers under Sec. 12(5) of the Act and amend the Bye-laws. 2. Exhibits P3 to P5 are such communications. The petitioner apprehends that pursuant to such communications, since the society does not amend the Bye-laws on their own, the Registrar may invoke his powers under Sec. 12(5) of the Act and amend the Bye-laws. 2. It is the case of the respondents that relying on a Government circular dated 26-5-1997 only the steps have been taken to limit the area of operation of a society to two Wards. Government circular dated 26-5-1997 is Exhibit P4 in O.P.No. 827 of 1998. Paragraph 2 of the circular is extracted below: "2. Government now feel that Milk production and procurement have to be increased rapidly to meet the demands of the consumers as well as the powder factory established in Alapuzha District. For easy access to farmers a large number of Primary Milk Co-operatives have to be organized especially in targeted milk producing centers. Providing Chilling and Cooling facilities can also be considered to enable transportation of milk from societies to the Diaries or the milk collection points of the Regional Unions. Hence, the following additional guidelines are issued. 1. In respect of traditional societies, the area of operation should not exceed one Grama Panchayat. 2. In respect of APCOS the area of operation should not exceed two wards of a Grama Panchayat. However in hilly tracts of districts like Idukki, Wayanad etc. the area of operation can be limited to one ward depending on the area of the ward. 3. The societies can be given some time (say one or two months) to opt for the Panchayat or ward as the case may be, to be retained as their area of operation. 3. I am afraid, taking shelter under the circular, the Registrar cannot issue directions to the existing societies to alter their area of operation and carry out necessary amendments in the Bye-laws taking more than one reason. For onething, it is doubtful whether the circular could have retrospective operation. The Registrar is to conduct himself in accordance with Secs. 7 and 12 of the Act. Under Sec.7(1)(c) of the Act, if the Registrar is satisfied that the area of operation of the proposed society and the area of operation of another society of similar type does not overlap, he may register the society and its Bye-laws. Sec. 12 deals with the amendment. 7 and 12 of the Act. Under Sec.7(1)(c) of the Act, if the Registrar is satisfied that the area of operation of the proposed society and the area of operation of another society of similar type does not overlap, he may register the society and its Bye-laws. Sec. 12 deals with the amendment. Sub-sections(5) and (6) of Sec. 12 of the Act are relevant and they are extracted below: "(5) Notwithstanding anything contained in this Act or the rules or Bye-laws, if the Registrar is satisfied that for the purpose of altering the area of operation of a registered society or for the purpose of improving the services rendered by it, an amendment of the Bye-laws of a society is necessary or desirable, he may, after consulting the financing bank, if any, to which the society is affiliated and the circle co-operative union by order in writing, require the society to make the amendment within such time as may be specified in such order or within such further time as he may grant for the purpose. (6) If within the time specified under sub-section (5), the society fails to make the amendment, as required by the Registrar or with such further changes as he may agree to, the Registrar may, after giving the society an opportunity for making its representations, register the amendments as required or agree to by him and issue to the society a copy of such amendments together with a certificate of registration signed and sealed by him, and thereupon such amendment shall be binding on the society and its members." It may be seen that the power vested in the Registrar to issue a direction for amending the Bye-laws can be exercised only on two grounds. (1) The Registrar is satisfied that for the purpose of altering the area of operation of the Society an amendment is necessary or desirable. (2) For the purpose of improving the services rendered by it an amendment is necessary or desirable. Of course, the exercise of power is subject to further conditions of consulting the financing bank and Circle Cooperative Union. If such lawful directions are not carried out under sub-sec.(6) of Sec. 12 of the Act the Registrar is empowered, after giving the society an opportunity for making its representations, register the amendments. Of course, the exercise of power is subject to further conditions of consulting the financing bank and Circle Cooperative Union. If such lawful directions are not carried out under sub-sec.(6) of Sec. 12 of the Act the Registrar is empowered, after giving the society an opportunity for making its representations, register the amendments. Under Sec. 27 of the Act, the final authority of a society vests in the general body of the members subject to the provisions of the Act, Rules and the Bye-laws. It is for them to decide their area of operation in accordance with law. After all, it is their society formed by them to secure their economic benefits. Therefore, unless the general body decides for alteration of the area of operation, the same cannot normally be done. In a situation where the general body decides to alter the area of operation, then it is for the Registrar to consider whether an amendment of the Bye-laws is necessary for altering the area of operation. There may also be occasions where the Registrar subsequently finds that there is overlapping which was not noticed at the time of registration. It is such considerations and satisfaction which are contemplated under the first limp of the power of the Registrar under Sec. 12(5) of the Act. The very initiation of a consideration for the satisfaction of the Registrar for amendment of the Bye-laws depends on the will of the people for alteration of the area of operation. As far as the second limp is concerned, the Registrar should be satisfied that an amendment is necessary for the purpose of improving the services rendered by the Society. But such consideration can be made only with respect to the existing society. But such consideration can be made only with respect to the existing society. In other words, if the general body of a society is of the view that it is not necessary to alter the area of operation either by curtailing or expanding the area for the purpose of improving the services rendered by it and once the general body takes such a resolution it is final subject of course to the power of the Registrar under Rule 176 of the Rules. 4. 4. Under Rule 10 providing for the procedure for the amendment under Sec.12(5) of the Act, the order to be issued by the Registrar under Sec.12(5) of the Act should be in Form No.5. The text of Form No.5 reads as follows: "It appears to me that an amendment/amendments of the Bye-laws of your society as indicated in the attached statement is/are necessary and that it/those is/are desirable in the interest of your society. I am to request you to consider this/these amendment/amendments in the interest of your society and to call upon you by this order under rule 10(1) of the Kerala Co-operative Societies Rules, 1969 to take necessary steps to make the amendments to the Bye-laws of your society within two months from the date of receipt of this order failing which action will be taken as provided under Sec.12 (6) of the Kerala Co-operative Societies Act, 1969." The intention is made clearer that an amendment under Sec. 12(5) is possible only if it is necessary and desirable in the interests of the society. Once the people speak for the interests, the Registrar cannot normally go against the interests as appropriately expressed by the members. 5. Therefore, merely based on the Government circular, the Registrar cannot direct the existing societies to alter their area of operation by effecting amendments in the Bye-laws. It is significant to note that under sub-sec. (6) of Sec. 12 of the Act, even if the society fails to make an amendment as directed in sub-sec. (5), the Registrar has to give the society an opportunity for making its representations and then alone register the amendments as required or agreed to by him. These expressions unambiguously make the intention of the legislature clear that ultimately it is for the members of a society to decide the area of operation of their society subject to the restrictions under Sec. 7 of the Act. No doubt, being not in conflict with any of the provisions of the Act or Rules and being intended only to provide for the orderly functioning of the Societies, the Circular dated 26-5-1997 is valid but only prospectively. 6. Under Sec. 101 of the Act where the Government is vested with powers in issuing certain orders in public interest. Sec. 101 of the Act reads as follows: 101. 6. Under Sec. 101 of the Act where the Government is vested with powers in issuing certain orders in public interest. Sec. 101 of the Act reads as follows: 101. Power to exempt societies:- The Government may, if they are satisfied that it is necessary to do so in the public interest by general or special order for reasons to be recorded exempt any society or any class of societies from any of the provisions of this Act or direct that such provisions shall apply to such society or class of societies subject to such modifications as may be specified in the order." The ingredients necessary for issuance of such an order under Sec. 101 of the Act lack in the circular dated 26-5-1997 extracted above and therefore, the said circular cannot be treated as one issued under Sec. 101 of the Act. It is also significant to note that there is no such claim either for the Government that the circular is issued in exercise of their power under Sec. 101 of the Act or for the reasons and purposes under the said Section. If only such a notification is issued by the Government, the Registrar could take appropriate steps in the matter. As of now the Registrar lacks powers to direct societies to curtail their area of operation otherwise than on the ground of overlapping omitted to be noted at the time of registration. However, while registering new societies the Registrar is bound to enforce the Circular dated 26-5-1997. The Original Petitions are allowed.