IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN MONDAY, THE 31ST MARCH 2008 / 11TH CHAITHRA 1930 WP(C).No. 26928 of 2007(E) ------------------------------------- PETITIONERS: ------------------- 1. C.A.AJEER, SOUHRUDA, PAPPINISSERI WEST P.O., KANNUR, MEMBER NO.10. 2. MANIKKARA GOVINDHAN, MANIKKARA HOUSE, PAPPINISSERI WEST P.O., KANNUR, MEMBER NO.228. 3. C.K.NARAYANAN, CHEPPANOOR, MUYYAM P.O., TALIPARAMBA, KANNUR, MEMBER NO.167. 4. KASTURI SAHADEVAN, KASTURI HOUSE, NEAR K.V.P.TOWER, KANNUR-2, MEMBER NO.480. BY ADV. SRI.B.S.SWATHY KUMAR RESPONDENTS: ------------------------- 1. THE RETURNING OFFICER(ASSISTANT REGTISTRAR(PLANNING), OFFICE OF THE JOINT REGISTRAR(GENERAL),KANNUR) KERALA STATE CO-OP. HOSPITAL COMPLEX AND CENTRE FOR ADVANCED MEDICAL SERVICES LTD. NO.4386, PARIYARAM, KANNUR. 2. THE ADMINISTRATORS OF THE KERALA STATE CO-OP. HOSPITAL COMPLEX AND CENTRE FOR ADVANCED MEDICAL SERVICES LTD. NO.4386, PARIYARAM, KANNUR, REPRESENTED BY ITS CONVENOR. 3. SURESH BABU, ADDITIONAL REGISTRAR(CREDIT PRESENTLY CONVENOR - ADMINISTRATORS OF THE KERALA STATE CO-OP. HOSPITAL COMPLEX AND CENTRE FOR ADVANCED MEDICAL SERVICES LTD. NO.4386, PARIYARAM, KANNUR. W.P.(C) NO. 27604/2007 4. K.M.ASHRAF, THEJUS VASTHRALAYA, PAYYANNUR, MEMBER NO.25. 5. P.D.CHACKO, S/O DEVASIA, PUTHIYEDATHUTHAZHA, ULIKKAL P.O. ADDL. R6 TO R8 ARE IMPLEADED 6. C.V.GOURI NAMBIAR, THAPASYA, KANNUR - 1, MEMBER NO.191. 7. DR.N.V.KUTTIKRISHNAN, KRISHNA, SIVAGIRI NAGAR, CHOWA P.O., KANNUR, MEMBER NO.134. 8. P.V.K. NAMBIAR, THAPASYA , KANNUR 1, MEMBER NO.172. ADDL. RESPONDENTS 6 TO 8 ARE IMPLEADED AS PER ORDER DT. 20.9.07 IN IA. NO.12499/07. R1 BY GOVERNMENT PLEADER SMT.ANU SIVARAMAN BY ADV. SRI.M.K.DAMODARAN (SR.) R3 BY ADV. SRI.P.V.SURENDRANATH R4 BY ADV. SRI.M.SASINDRAN R5 BY ADV. SRI.SIJI ANTONY THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04/02/2008, ALONG WITH WPC NO. 27604 OF 2007 THE COURT ON 31.03.2008 DELIVERED THE FOLLOWING: WP(C) NO.26928/2007 APPENDIX PETITIONERS EXHIBITS EXT.P1:- COPY OF THE ELECTION NOTIFICATION PUBLISHED IN MATHRUBHOOMI DAILY DT. 3.9.2007. EXT.P2:- COPY OF THE LIST OF INDIVIDUAL MEMBERS THE NUMBER AND AMOUNT OF SHARES HELD BY THEM. EXT.P3:- COPY OF THE REPRESENTATION FILED BY THE IST PETITIONER BEFORE THE IST RESPONDENT DT. 7.9.2007. EXT.P4:- COPY OF THE REPRESENTATION SUBMITTED BY THE IST PETITIONER BEFORE THE 3RD RESPONDENT DT. 7.9.2007. EXT.P5:- COPY OF THE REPRESENTATION SUBMITTED BY THE IST PETITIONER BEFORE THE DISTRICT COLLECTOR, KANNUR DT. 7.9.2007. EXT.P6:- COPY OF THE FINAL CANDIDATE LIST PUBLISHED BY THE IST RESPONDENT DT. 14.9.2007. /TRUE COPY/ P.S. TO JUDGE tss THOTTATHIL B. RADHAKRISHNAN, J. = = = = = = = = = = = = = = = = = = = = = = = = WP(C).Nos.26928/2007-E & 27604/2007-J = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 31st day of March, 2008. JUDGMENT “CR” 1.These writ petitions are filed raising the question as to whether the administrators appointed under Section 33 of the Kerala Co- operative Societies Act, 1969, hereinafter referred to as the “Act”, were within authority to allot additional shares to members of the Kerala State Co-operative Hospital Complex and Centre for Advanced Medical Services Ltd. No.4386 after the declaration of election to that society, since Clause 20(ii)(c) of its Bye-laws provides holding of not less than Rs.10,000/- share capital in the society as a qualification for being elected to its Board of Directors from WP(C)26928 & 27604/07 -: 2 :- among the ordinary share holders. 2.According to the petitioners, such allotment of shares would be contrary to Rule 26 of the Kerala Co-operative Societies Rules, 1969, hereinafter, the “Rules”, for short, if such transfer is made within sixty days prior to the date of election. 3.The notification for election to the committee of the society was published on 3-9-2007, fixing, inter alia, the following dates: 3-9-2007 - Publication of preliminary voters' list. 6-9-2007 5 pm - Last opportunity to file objections to the preliminary voters' list. 7-9-2007 11 am- Publication of final voters' list. 12-9-2007 - Filing nominations. 13-9-2007 - Scrutiny of nominations. 14-9-2007 - Withdrawal of nominations. 23-9-2007 - Polling. WP(C)26928 & 27604/07 -: 3 :- 4.Respondents 4 to 7 in WP(C).27604/2007 and the additional respondents in WP(C).26928/2007, who are ordinary members of the society, were allotted additional shares before 12-9-2007, i.e., the date fixed for filing nominations. The question raised is whether such allotment of additional shares is in violation of Rule 26 of the Rules and whether their nominations are invalid. 5.The contentions of the petitioners and the arguments on their behalf are, firstly that, having regard to the schedule of the election as noted above, the impugned allotment of shares is in violation of the statutory injunction contained in Rule 26(1) of the Rules, which provides that no society shall admit members or approve the transfer of shares within sixty days prior to the date of election or the date of the general body meeting. Secondly, it is contended that since Clause 20(ii)(c) of the bye-laws of WP(C)26928 & 27604/07 -: 4 :- the society provides that an ordinary member should hold share capital of not less than Rs.10,000/- to be elected, Rule 35(3)(d)(ii), which provides that no member shall be nominated as a candidate, if he does not possess the necessary qualifications, if any, specified in the bye-laws of the society for election as a member of the committee, disentitles the issuance of additional shares as has been done and that the administrators are not entitled to exercise such authority which will tilt the scales of voting rights. 6.On the aforesaid, the contesting respondents contend, supported by the arguments on their behalf, that the power of the administrators under Section 33 of the Act includes the power to enrol new members, at any rate, allot further shares to existing members and further that, the issuance of more shares to existing members would not alter the balance of votes or strength of members in the society and that issuance of WP(C)26928 & 27604/07 -: 5 :- additional shares to a member would, in no way, affect the democratic process or democratic fabric of the society. 7.Rule 35 of the Rules prescribes the procedure regarding the conduct of election to the committee of the society in question. 8.Rule 35(3)(d)(ii) reads as follows: 35.Procedure regarding conduct of Election to the Committee of Societies.-The election of the members of the committee of a Society which does not come under sub-section (1) of section 28(B) of the Act shall be conducted in the following manner: (3)(d) No member shall be nominated as a candidate for election to fill a seat on the committee if he- (ii) does not possess the necessary qualifications, if any, specified in the bye- laws of the society for election as a member of the committee or;” WP(C)26928 & 27604/07 -: 6 :- 9.In terms of the aforesaid rule, the situs of examination as to qualification is the event of nomination. The crucial time to decide the validity of nomination is the date of submitting nomination. The validity of the nomination has to be judged with reference to the state of affairs as on the date of submitting nomination. - See Velunni v. Returning Officer [1990 (2) KLT 816] and Moosa v. Joint Registrar [1994 (2) KLT 943]. 10.Rule 44(1)(j) states that no member of the society shall be eligible for being elected, or appointed as a member of the committee of the society if he is disqualified under any other provisions in the bye-laws of the society. Clause 20(ii)(c) reads as follows: “20. Management (ii)Board of Directors: The Board of Directors of the WP(C)26928 & 27604/07 -: 7 :- Society shall consist of (c) Thirteen Directors to be elected by the ordinary Share Holders from among themselves of which one member shall be women and one shall be Scheduled Caste or Scheduled Tribe. The Directors to be elected from the category shall be from those ordinary members, holding not less than Rs.10,000/- share capital in the society.” 11.The prescription as to holding share capital of not less than Rs.10,000/- is a qualification for being elected. That qualification is relevant in terms of Rule 35(3)(d)(ii) only at the time of nomination. The acquisition of qualification of the immediate bench mark in the matter of holding share capital for being nominated can be satisfied at any time before submission of the nomination paper. 12.Now the question is whether the issuance of additional shares to an existing member results in infraction of Rule 26(1) of the Rules. WP(C)26928 & 27604/07 -: 8 :- 13.Rule 26 reads as follows: “26.Prohibition on admission of members and transfer of shares on the eve of general meeting.-(1) No society shall admit members or approve the transfer of shares within sixty days prior to the date of election or the date of the general body meeting. (2) Any person admitted as member and any person in whose favour the transfer of shares have been approved in contravention of this rule shall not have the right to membership or the right to vote at the said election or at the general body meeting.” 14.Section 16 contains the statutory qualifications for admission as a member of a co-operative society. Sub-section (2) thereof provides that a decision on an application for membership shall be taken within two months from the date of receipt of the application. Sub-section (2A) obliges the Registrar to determine whether such WP(C)26928 & 27604/07 -: 9 :- membership shall be given or not, in the event of the applicant making a written request upon failure of the society to dispose of the application for membership within the time limit specified in sub-section (2). That issue can still be carried under sub-section (2B). Sub- section (3) empowers the applicant with the right to know the reasons for any decision refusing membership. Section 17 provides for expulsion of members and Section 18 provides for nominal and associate members. Section 19, which is of specific importance, provides that no member of a society shall exercise the rights of a member unless he has made such payments to the society in respect of membership or has acquired such interest in the society, as may be prescribed by the rules or the bye-laws. In Vijayakumar v. Joint Registrar [1996(1) KLT 285], the distinction between “the right to vote” and “admission as members” has been clearly noticed. Section 22, which imposes restrictions on holding shares, also clearly maintains the distinction WP(C)26928 & 27604/07 -: 10 :- between “holding of shares” and “membership”. Section 23 provides restriction on transfer of share or interests. Section 25 provides for transfer of interest on death of members. The provision therein is for transfer of share or interest of a deceased member to the person or persons nominated in accordance with the rules or otherwise, to the heir or legal representative of the deceased member. The first proviso to Section 25 enjoins that such transfer shall be on the nominee, heir or legal representative, being admitted as a member of the society. These provisions in the Act clearly show that the concept of transfer of shares and admission of members are dealt with maintaining the clear distinctive identity between “members” and “persons, who are not members”. 15.Reverting to Rule 26(1) of the Rules, it can be seen that the prohibition is against admission of members or approval of transfer of shares. Whether the embargo extends to transfer of shares WP(C)26928 & 27604/07 -: 11 :- is irrelevant in the case in hand because, the allegation is not that a member has transferred his share to another. Yet, it has been noticed that in understanding the scope of sub-rule(1) of Rule 26, sub-rule(2) of that Rule would throw more light. The distinction between member and person is clearly maintained in that sub-rule when it says that any person admitted as member and any person in whose favour the transfer of shares have been approved in contravention of that rule shall not have the right to membership or the right to vote. If the intention were to bring transfer of shares between members also within the sweep of Rule 26, Rule 27(2) would not have rested at the usage of words “any person in whose favour the transfer of shares have been approved”. It is unambiguous that the prohibition in Rule 26 does not extend to transfer of shares among members, the only restriction for such transfer being that contained in Section 23 pegging the maximum holding at 1/5th in Section 22. WP(C)26928 & 27604/07 -: 12 :- 16.So much so, the impugned allotment of additional shares is not vitiated by any prohibition contained in Rule 26(1) of the Rules or otherwise. Such allotment of additional shares is valid. 17.In the result, these writ petitions fail. They are accordingly dismissed. No costs. Sd/- THOTTATHIL B. RADHAKRISHNAN, JUDGE. Sha/280308 -true copy- P.S.to Judge.