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2019 DIGILAW 2268 (KAR)

SIDDAPPA MADIVALAPPA UGARKHOD, OCC. AGRICULTURE R/O DEGAON, KITTUR v. BASAVARAJ KALLAPA KUGATI

2019-12-10

ALOK ARADHE, N.S.SANJAY GOWDA

body2019
JUDGMENT : The appeals are admitted for hearing. With consent of learned counsel for the parties, same is heard finally. 2. In this intra Court appeal the appellants have assailed validity of the order dated 22.11.2019 passed by the learned Single Judge by which writ petitions preferred by the respondents are allowed and the direction issued by the appellate authority and the Election Officer for enrolling of new members and permitting them to participate in the election of the society has been quashed. The learned Single Judge has further directed the Election Officer to prepare voters list and to conduct the First General Meeting of the Society as expeditiously as possible and hold the elections of the Society on or before 25.12.2019. It is further directed that respondent No.6 to 16 and all others who wish to enroll themselves as members of the Society are at liberty to make an application in accordance with law before the board of the Society. 3. In order to appreciate the appellants’ challenge to the impugned order, few facts need mention which are stated infra; 4. The appellant No.6 submitted an application before the Deputy Registrar of Co-operative Societies, Belagavi to establish a new Co-operative Bank in the name of Kittur Taluka Prathamika Sahakari Krishi Mattu Grameena Abhivrudhi Bank in Kittur. The aforesaid application was rejected. On 14.08.2018, on the basis of proposal submitted by respondent No.1, Kittur Taluka Prathamika Sahakari Krishi Mattu Grameena Abhivrudhi Bank in Kittur was registered under Section 8 of the Karnataka Co-operative Societies Act, 1959 (herein after referred to as ‘Act’). The appellants being aggrieved filed an appeal under Section 106 of the Act, challenging the registration of the Society. The aforesaid appeal was disposed of by an order dated 18.09.2017. The Appellate Authority upheld the order of the registration of the Society. However, the Appellate Authority granted the permission to the appellant to move an application seeking membership before the Chief Promoter and the Chief Promoter was directed to decide the application in accordance with the rules. Being aggrieved, respondent Nos.1 and 2 filed a writ petition in which challenge was made to the order dated 18.12.2018 passed by the Appellate Authority. During the pendency of the petition, the respondent No.6 published calendar of events by which elections of the society were sought to be held on 03.09.2019. Being aggrieved, respondent Nos.1 and 2 filed a writ petition in which challenge was made to the order dated 18.12.2018 passed by the Appellate Authority. During the pendency of the petition, the respondent No.6 published calendar of events by which elections of the society were sought to be held on 03.09.2019. The learned Single Judge by an ad-interim order dated 09.09.2019 permitted the elections to be conducted to the board of new society subject to the fulfillment of certain conditions however the declaration of the result of elections was prohibited until further orders from the Court. 5. The elections were held on 29.09.2019 and only eligible persons were allowed to vote and persons who were disqualified in terms of Section 17(1)(c) of the Act were not allowed to cast vote. The learned Single Judge by an order dated 22.11.2019 allowed the writ petitions and set aside the impugned order dated 18.12.2018 passed by the Appellate Authority, as well as the voters list prepared on 31.08.2019. The voters list prepared in pursuance of the interim order in the writ petitions was also quashed. The learned Single Judge directed the respondent No.4-Returning Officer to hold First General Meeting of the respondent No.2-Society and to announce the result of the elections of the first Board of the Society on or before 25.12.2019 subject to the condition that the voters list shall contain only the names of the pre-registration members approved by the Registering Authority annexed to the Certificate of Registration dated 14.08.2018. In the aforesaid background, these intra Court appeals have been filed. 6. Learned counsel for the appellants submitted that the fundamental right to form a Co-operative Society guaranteed under Article 19(1)(c) of the Constitution of India includes right to run and manage Co-operative Society as well as for participation in the Annual General Meeting subject to eligibility conditions laid down in Section 16 of the Act. It is further submitted that right to form a Co-operative Society is a fundamental right and in the absence of any provision for enrolment as a member of Co-operative Society from the date of its registering till the First General Body Meeting, the fundamental right to form an association which is guaranteed to the appellants under Section 19(1)(c) cannot be kept under suspension. Attention of this Court has also been invited to Article 43-B of the Constitution of India as well as preamble to the Act. It is further submitted that the Act in question is a act to permit voluntary formation, autonomous functioning, democratic control and professional management of a Co-operative Societies in the state of Karnataka. 7. Our attention has also been invited to Section 2(c), Section 7, Section 8, Section 16 and Section 17 and Section 28-A(4) of the Act and it is submitted that if the interpretation put forth by the learned single Judge is accepted, right to participate in the First General Body Meeting and right to contest to the first Board will remain only in the hands of members and picked by the promoters or chief promoters. It is also submitted that Section 28-A(4) does not provide that first meeting shall be attended only by pre-registered members and the Act does not impose any express bar on enrollment of members, post incorporation and before first general body meeting of the society. It is also urged that it is not the case of respondent Nos.1 and 2 that the appellants have incurred any disqualification to become members of the society. It is further submitted that under Section 106(4) of the Act, the Appellate Authority has power to pass “such orders as it may deem fit” and aforesaid words have to be read in the context of Article 19 (1) (c) of the Constitution as well as the preamble to the Act. In support of aforesaid submissions, learned counsel for the appellants has placed reliance on decision of Hon’ble Supreme Court in State of Karnataka and Another Vs. Hansa Corporation (1980) 4 SCC 697 and Andhra Pradesh Dairy Development Corporation Federation Vs. B.Narasimha Reddy and Others, (2011) 9 SCC 286 . 8. On the other hand, learned counsel for respondent No.1 has submitted that the Act does not contemplate induction of the members after process of registration is complete till holding of its first general body meeting. It is further submitted that the process of registration was complete on 18.08.2018 and till then none of the appellants made an application seeking to become member of the society. It is further submitted that even otherwise, since the appellants are members of the another Co-operative society, they are disqualified under Section 17(4) of the Act. It is further submitted that the process of registration was complete on 18.08.2018 and till then none of the appellants made an application seeking to become member of the society. It is further submitted that even otherwise, since the appellants are members of the another Co-operative society, they are disqualified under Section 17(4) of the Act. It is also pointed out that in compliance of the direction issued by the learned single Judge the appellants did not submit any application to the Chief Promoters for becoming a member and in fact the applications were submitted to the Deputy Registrar. In support of his submissions, learned counsel for respondent No.1 has placed reliance on the decision of Hon’ble Supreme Court in Raja Kulkarni Vs. State of Bombay, AIR 1954 SC 73 and All India Bank Employees Association Vs. The National Industrial Tribunal (Bank Disputes) Bombay and Others, AIR 1962 SC 171 . 9. Learned Additional Advocate General has supported the case of the appellants and has pointed out that the Deputy Registrar has rightly accepted the share capital of the appellants and has directed the Chief Promoter to enroll the appellants as members of the society. 10. When a query was put to learned counsel for the appellants, he fairly submitted that there is no order formally admitting the appellants as members of the society. However, it is pointed out that the amount of Rs.18,00,000/-, which was deposited by the appellants as share capital is with the society. 11. We have considered the respective submissions made by the learned counsel for the parties and have perused the records. The pivotal question which arises for consideration in this intra-court appeal is whether after registration of the society and till holding of the first general body meeting, whether the new members can be enrolled as members of cooperative society. 12. At this stage, it is apposite to take note of the long title of the Act as well as Sections 2(c), 7, 8, 16, 17, 28A(4) of the Act which are reproduced below for the facility of reference: “An Act to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies in the State of Karnataka.” “ 2. Definitions.-In this Act, unless the context otherwise requires.- (a) x x x x x x x (b) x x x x x x x (c) “Co-operative Society” means a society registered or deemed to be registered under this Act;” “7. Registration.-(1) If the Registrar is satisfied,— (a) that the application complies with the provisions of this Act rules and the provisions of any other law for the time being in force; (b) that the objects of the proposed society are in accordance with section 4; (c) that the aims of the proposed society are not inconsistent with the principles of social justice; (d) that the proposed bye-laws are not contrary to the provisions of this Act and the rules; and (e) that the proposed society complies with the requirements of sound business and has reasonable chances of success; the Registrar shall, within a period of three months from the date of receipt of the application, register the co-operative society and its bye-laws and send by registered post, a certificate of registration and the original registered bye-laws signed with date and seal by him to the chief promoter mentioned in the application or to the chief executive of the Cooperative which is converted. (2) If the Registrar is unable to dispose of such application within the period specified in sub-section (1), the society and the bye-laws shall be deemed to have been registered. (3) Where the Registrar refuses to register a proposed co-operative society, he shall forthwith communicate his decision, with the reasons therefor, to the person making the application and if there be more than one to the person who has signed first in the application. (4) The Registrar shall maintain a register of all co-operative societies registered or deemed to be registered under this Act.” “8. Registration certificate.-Where a cooperative society is registered or is deemed to be registered under this Act, the Registrar shall issue a Certificate of Registration signed by him, which shall be conclusive evidence that the cooperative society therein mentioned is a cooperative society duly registered or is deemed to be registered under this Act.” “16. Registration certificate.-Where a cooperative society is registered or is deemed to be registered under this Act, the Registrar shall issue a Certificate of Registration signed by him, which shall be conclusive evidence that the cooperative society therein mentioned is a cooperative society duly registered or is deemed to be registered under this Act.” “16. Persons who may become members.- (1) Subject to the provisions of section 17, no person shall be admitted as a member of a cooperative society except the following, namely:— (a) an individual who needs the services of such co-operative society and is residing in the area of the operation of the society and is competent to enter into contract under the Contract Act, 1872 (Central Act IX of 1872): (a-1) a depositor; (b) any other co-operative society; (c) the state Government or the Central Government; (d) the Life Insurance Corporation of India, State Warehousing Corporation and such other institutions as may be approved by the State Government; (e) a firm, a company or any other body corporate constituted under any law for the time being in force including a society registered under the Karnataka Societies Registration Act, 1960 (Karnataka Act 17 of 1960); (f) a Market Committee established under the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (Karnataka Act 27 of 1966); (g) a local authority. Explanation.—For the purpose of this clause, local authority means, a Municipal Corporation, Municipal Council, Town Panchayat, Zilla Panchayat, Taluk Panchayat or Grama Panchayat constituted under any law for the time being in force. (2) No co-operative society shall, without sufficient cause, refuse admission to membership to any person duly qualified therefor under the provisions of this Act, rules and bye-laws. (3) Any person seeking admission as a member of any co-operative society shall make an application in writing for admission as a member of such society. (4) Every co-operative society shall within two months from the date on which application for admission was delivered to such society either admit or refuse to admit any such person as a member, and shall send a written communication of such admission or refusal to the applicant before the said period. (4) Every co-operative society shall within two months from the date on which application for admission was delivered to such society either admit or refuse to admit any such person as a member, and shall send a written communication of such admission or refusal to the applicant before the said period. If no communication of admission as a member is received by the applicant before the expiry of the said period, his application for admission shall be deemed to have been refused by the co-operative society on the last day of the said period for purposes of section 105A. (8) Notwithstanding anything contained in this section and section 17, the State Government shall be deemed to have been admitted as a member of a co-operative society on the day it subscribes to the share capital of such co-operative Society.” Sub-sections (5), (6) and (7) omitted by Act No.3 of 2013, w.e.f. 11-2-2013 “17. Disqualification for membership.-(1) No person shall be eligible for admission as a member of a co-operative society, if he,— (a) has applied to be adjudicated an insolvent or is an undischarged insolvent; or (b) has been sentenced for any offence, other than an offence of a political character or an offence not involving moral turpitude, such sentence not having been reversed or the offence pardoned and a period of five years has not elapsed from date of expiry of the sentence. (c) carries on business of the kind carried on by such co-operative society; (d) is already a member of a co-operative society carrying on business of the same kind as itself; (e) is not eligible for membership under Section 16; (f) is paid employee of the society or of its financing bank; or (2) If a member becomes subject to any of the disqualifications specified in sub-section (1), he shall be deemed to have ceased to be a member from the date when the disqualification was incurred. (2-A) If a member fails to fulfil his obligations as a member under the Act, rules or bye-laws, for a continuous period of three years, he shall, on the expiry of such period, cease to be a member. (2-A) If a member fails to fulfil his obligations as a member under the Act, rules or bye-laws, for a continuous period of three years, he shall, on the expiry of such period, cease to be a member. (3) If any question arises as to whether a member is deemed to have ceased or has ceased to be a member under sub-section (2) or (2-A), the Registrar may either suo-motu or on a report made to him and after giving an opportunity to the person concerned of being heard, decide the question.” “28-A. Management of co-operative societies vest in the board.-(1) x x x x x x (2) x x x x x x x (3) x x x x x x x (4) Subject to the provisions of sections 29-A and 39-A, the term of office of the members of the board shall save as otherwise five years and they shall be deemed to have vacated office as such members of the Committee on the date of completion of the said term: Provided that if an election to the board of any co-operative society had already been held in accordance with the bye-laws of such society, prior to the commencement of the Karnataka Cooperative Societies (Amendment) Act, 1997, the term of office of the board of such co-operative society shall be three years including the co-operative year in which such election was held. Provided further that the first general meeting of a society after registration shall be held within one month from the date of its registration to elect the first board to manage the affairs of the society and the term of office of such board shall also be five years from the date of election. Provided also that the first general meeting of the Co-operative Society or Societies formed after amalgamation or reorganization or division in accordance with section 14 shall be held within three months from the date of registration to elect the first board to manage the affairs of the Co-operative Society or Societies, and the term of office of such board shall also be five years from the date of election.” 13. The Act, is an Act to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies in the State of Karnataka. The Act, is an Act to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies in the State of Karnataka. The amendment to the preamble of the Act has been incorporated in the Act with effect from 11.02.2013, which is inconsonance with the 97th Amendment to the Constitution of India under Article 19(c) of the Act. Under the amended Article 19(c) of the Act, right to form a co-operative society is a fundamental right. It is trite law that a fundamental right cannot be kept under suspension (See Nikesh Tarachand Shah Vs. Union of India (2018) 11 SCC 1 ). At this stage, it is pertinent to note that the Act does not contain any express prohibition prohibiting the authority from enrolling any person as member of the cooperative society from the date of registration till holding of the first general body meeting. 14. It is well settled rule of statutory interpretation that the provisions of the act have to be read in the context of the object of the act and the provisions of the act have to be interpreted in such a manner which sub-serves the object of the Act (See B.R.Enterprises Vs. State of Uttar Pradesh and Others (1999) 9 SCC 700 ). Similar view has been taken in Tarlochan Dev Sharma vs. State of Punjab and others, AIR 2001 SC 2524 . 15. Before proceeding further, it is apposite to take note of Section 106(4) of the Act, which reads as under: (4) In disposing of an appeal under this section the Appellate Authority, may after giving the parties an opportunity of making their representations, pass such order thereon as it may deem fit. 16. Thus, the words “such orders thereon as it may be deem fit” have to be read in the context of object of the Act namely to promote voluntary formation, autonomous functioning, democratic control and professional Management of co-operative societies. If any other interpretation is permitted, the same would enable the Chief Promoter to pick up the persons to form a co-operative society to manage the affairs of the co-operative society in its own way by keeping at bay all other eligible candidates. If any other interpretation is permitted, the same would enable the Chief Promoter to pick up the persons to form a co-operative society to manage the affairs of the co-operative society in its own way by keeping at bay all other eligible candidates. Therefore, the appellate authority, in our considered opinion and for the reasons assigned supra, has power to direct the Chief Promoter to consider the applications which may be submitted for membership in accordance with the extant Rules. Therefore, we are not inclined to accept the finding recorded by the learned single Judge that the Appellate Authority under Section 106(4) of the Act has no power to direct the Chief Promoter to enroll the new members. Therefore, we hold that after registration of the society till holding of the first general body meeting, new members can be enrolled as members of the co-operative society. 17. Admittedly, the appellants have not made any application to the Chief Promoter. However, it is not in dispute that share capital of Rs.18,00,000/-is in the account of the society. Therefore, the appellants are directed to submit an application to the Chief Promoter within a period of two weeks from the date of receipt of certified copy of the order passed today. The Chief Promoter on receipt of the aforesaid applications, which may be filed by the appellants, shall decide the same strictly in accordance with the Rules and the byelaws of the society. 18. The impugned order passed by the learned single Judge insofar as it pertains to quashing of the directions to enroll the new members is hereby quashed. Needless to state that the Returning Officer namely respondent No.4 shall hold fresh elections after decision is taken by the Chief Promoter on the application seeking membership of the appellants and other applicants. Accordingly, the appeals are disposed of.