SCA/15560/2003 1/64 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 15560 of 2003 With SPECIAL CIVIL APPLICATION No. 3900 of 1997 With SPECIAL CIVIL APPLICATION No. 9547 of 1996 With SPECIAL CIVIL APPLICATION No. 4344 of 2000 With SPECIAL CIVIL APPLICATION No. 7958 of 2000 With SPECIAL CIVIL APPLICATION No. 13601 of 1993 With SPECIAL CIVIL APPLICATION No. 12341 of 2000 With SPECIAL CIVIL APPLICATION No. 8675 of 2000 With SPECIAL CIVIL APPLICATION No. 8741 of 2000 For Approval and Signature: HONOURABLE MR.JUSTICE AKIL KURESHI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= VACHHOL DUDH UTPADAK SAHAKARI MANDALI LIMITED & 1 - Petitioner(s) Versus STATE OF GUJARAT & 3 - Respondent(s) ========================================================= Appearance : Special Civil Application No.15560/2003 MR PRAKASH K JANI for Petitioner(s) : 1, MS ML SHAH, AGP for Respondent(s) : 1 - 3. MR HARIN P RAWAL for Respondent(s) : 4 – 5. SCA/15560/2003 2/64 JUDGMENT Special Civil Application No.3900/1997 MR BS PATEL for Petitioner(s) : 1, MS ML SHAH, AGP for Respondent(s) : 1 – 2, MR VH PATEL for Respondent(s) : 3. Special Civil Application No.9547/1996 MR NK MAJMUDDAR for Petitioner(s) : 1, MR AP RAWAL for Respondent(s): 1 MS ML SHAH, AGP for Respondent(s):2 RULE SERVED for Respondent(s) : 3,5 MR HS MUNSHAW for Respondent(s) : 4. Special Civil Application No.4344/2000 MR SHIRISH JOSHI for Petitioner(s) : 1, MR BS PATEL for Respondent(s) : 1 – 3, MS ML SHAH, AGP for Respondent(s) : 4. Special Civil Application No.7958/2000 MR PRAKASH K JANI for Petitioner(s) : 1, MS ML SHAH, AGP for Respondent(s) : 1 - 5. MR HARIN P RAWAL for Respondent(s) : 6. Special Civil Application No.13601/1993 MR HARIN P RAVAL for Petitioner(s) : 1, MS ML SHAH, AGP for Respondent(s) : 1 – 4, MR SL VAISHYA for Respondent(s) : 5. Special Civil Application No.12341/2000 MR PRAKASH K JANI for Petitioner(s) : 1, MS ML SHAH, AGP for Respondent(s) : 1 – 3 RULE SERVED for Respondent(s): 4, MR MEHUL H RATHOD for Respondent(s) : 5. Special Civil Application No.8675/2000 MR VC VAGHELA for Petitioner(s) : 1, MR SIRISH JOSI for Respondent(s) : 1, MS ML SHAH for Respondent(s) : 2-4. Special Civil Application No.8741/2000 MR HARIN P RAWAL for Petitioner(s) : 1, MS ML SHAH, AGP for Respondent(s) : 1 – 3 RULE SERVED for Respondent(s): 4-6,8, MR BAIJU JOSHI for Respondent(s):7, MR HS MUNSHAW for Respondent(s) : 9. ========================================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI Date : 07/10/2006 ORAL JUDGMENT 1. In the present group of petitions, though there are factual differences, all petitions pertain to the question of grant or cancellation of SCA/15560/2003 3/64 JUDGMENT registration to Cooperative Societies. Since legal considerations overlap, these petitions were heard together and are being disposed of by this common judgement. 2. Before adverting to individual challenges in these petitions, brief background of these petitions needs to be noted. 3. Under the Gujarat Cooperative Societies Act, 1961 (here-in-after referred to as “the said Act”), provisions have been made for registration of societies and for condition of such registration as well as for registration of the by-laws of the societies. Certain statutory provisions made in the said Act and Rules framed thereunder will be taken note of at a slightly later stage. Suffice it to note, however, at this stage, that number of petitions are received in the High Court by the aggrieved parties either seeking registration, when request has been turned down by the authorities or opposing the registration granted to rival SCA/15560/2003 4/64 JUDGMENT cooperative societies. Learned advocates appearing for the petitioners had therefore, urged this Court to take into account various factual aspects emerging from these petitions and to provide for some guidelines or directives which would ensure that the procedure which is being adopted is more transparent and fair and is free from misuse and allegations of manipulations. 4. Broadly stated, representation made before this Court on behalf of the petitioners was that despite the provisions made under the said Act and the Rules framed thereunder and despite certain guidelines issued by the Government to regulate the procedure for grant of registration to proposed societies, the present procedure is not free from possibility of manipulation and in large number of cases, the machinery is manipulated to ensure registration of societies whose registration is either not desirable or is aimed only for the purpose of political considerations. SCA/15560/2003 5/64 JUDGMENT 5. Before taking note of submissions and suggestions made by learned advocates appearing for the parties, it would be necessary to briefly take note of statutory provisions as well as Government guidelines governing the field. 5.1 Section 4 of the said Act pertains to registration of the societies and reads as follows : “4. Societies which may be registered:- A society, which has as its object the promotion of the economics interests or general welfare of its members or of the public, in accordance with cooperative principles, or a society established with the object of facilitating the operations of any such society, may be registered under this Act: Provided that it shall not be registered if, in the opinion of the Registrar, it is economically unsound, or its registration may have an adverse effect upon any of the society, or it is opposed to, or its working is likely to be in contravention of pubic policy.” 5.2 Section 6 of the said Act provides for conditions of registration and reads as follows: “6. Conditions of registration:- 1. No society other than a federal society shall SCA/15560/2003 6/64 JUDGMENT be registered under this Act unless is consists of atleast ten persons(each of such person being a member of different family) who are qualified to be members under this Act and who reside in the area of operations of the society. 2. No society with unlimited liability shall be registered, unless all persons forming the society reside in the same town or village, or in the same group of villages. 3. No federal society shall be registered, unless it has atleast five societies as its members. 4. Nothing in this Act shall be deemed to affect the registration of any society made before the commencement of this Act. 5. The word 'limited' or 'unlimited' shall be the last word in the name of every society with limited or unlimited liability, as the case may be, which is registered or deemed to be registered under this Act. Explanation:- For the purpose of this section the expression 'member of a family' means a wife, husband, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, stepson, stepdaughter, grandson, granddaughter, brother, sister, half-brother, half-sister, and wife of brother or half- brother. “ 5.3 Section 8 of the said Act pertains to application for registration. It provides inter- alia that for the purpose of registration, the application shall be made to the Registrar in the prescribed form, and shall be accompanied by four copies of the proposed by-laws of the SCA/15560/2003 7/64 JUDGMENT society. It also provides that the person making such applications shall furnish such information in this regard to the society as the Registrar may require. 5.4 Section 9 of the said Act pertains to registration and provisional registration and Certificate of registration. Section 9 of the said Act reads as follows : “9. Registration and provisional registration, Certificate of registration:- 1. On receipt of an application for registration from a society- a) If the Registrar is satisfied that the society has complied with the provisions of this Act and the rules as to registration and that its bye-laws are not contrary to this Act and the rules, he shall register the society and its bye-laws; and b) If the Registrar is of the opinion that the application complies with the requirements of section 8 but that its bye-laws are not in conformity with the provisions of this Act and the rules, he may provisionally register the society and by an order in wiring permit the society to perform such functions subject to such condition as he may specify in the order and may also by an order in wiring direct the society to amend within the period prescribed in tis behalf its bye-laws so as to bring them in conformity with this Act an the rules. 2. When a society has been provisionally registered, the Registrar shall, on its compliance with the order made under clause(b) SCA/15560/2003 8/64 JUDGMENT of sub-section(1) finally register it and its bye-laws, and on its failure to comply with the order shall cancel its provisional registration. 3. A provisionally registered society shall not be deemed to be a society registered under this Act. 4. On the registration of a society, the Registrar shall issue to it a certificate of registration signed by him. 5. A certificate of registration issued under sub-section(4) shall be conclusive evidence that the society therein mentioned is duly registered, unless it is proved that the registration has been cancelled. 6. If the Registrar refused to register the society, he shall forthwith communicate his decision with reasons thereof, to the person who has signed first on the application.” 5.5 Section 12 of the said Act pertains to classification of societies and reads as follows: “12. Classification of societies:- The Registrar may classify all societies in such manner, and into such classes, as he thinks fit: and the classification of a society under any head of classification by the Registrar shall be final.” 5.6 Section 13 of the said Act pertains to amendments of by-laws of societies. Section lays down the procedure for registration of amendments of the by-laws of a society and SCA/15560/2003 9/64 JUDGMENT provides inter-alia that no amendment of the by- laws of society shall be valid until registered under the Act. 5.7 Section 14 of the said Act pertains to powers of Registrar to direct amendment of by- laws. Sub-section(1) of Section 14 of the said Act inter-alia provides that if it appears to the Registrar that an amendment of the by-laws except in respect of the name or objects of a society is necessary or desirable in the interest of such society, he may call upon the society to make the amendment within such time as may be specified. 5.8 Section 20 of the said Act pertains to cancellation of registration. Section 20 reads as follows : “20.Cancellation of registration : 1. The Registrar shall make an order canceling the registration of a society if it transfer the whole of its assets and liabilities to another society, or amalgamates with another society, or divides itself into two or more societies, or if its affairs are wound up or it has not commenced business within a reasonable time of its registration or has ceased to function. SCA/15560/2003 10/64 JUDGMENT 2. An order made under sub-section(1) shall be published in the Official Gazette. 3. The society shall, from the date of such order of cancellation, be deemed to be dissolved and shall cease to exist as a corporate body.” 5.9 Rule 3 of the Gujarat Co-operative Societies Rules, 1965 (here-in-after referred to as “the said Rules”) provides for application for registration. Rule 3 of the said Rules read as follows : “3. Application for registration:- Every application for registration of a society under sub-section(1) of section 8 shall be in Form A and shall be accompanied by - a) a certificate, from the bank or banks stating the credit balance in favour of the proposed society therein. b) a list of persons who have contributed to the share capital together with the amount contributed by each of them, and the entrance fee paid by them, and c) the scheme showing the details explaining how the working of the society will be economically sound and, where the scheme envisages the holding of immovable property proposed to be purchased acquired or transferred to the society. d) Period of amendment of bye-laws under Section 9(1)(b).-The period for the purpose of amendment of bye-laws under clause(b) of sub-section(1) of section 9 shall be three months from the date of the order of the Registrar under the said SCA/15560/2003 11/64 JUDGMENT clause(b)” 5.10 It can thus be seen that the said Act makes detailed provisions about the registration of the cooperative societies, conditions of registration, regarding the requirements of registration of by-laws, regarding the amendments of by-laws etc. At this stage, it may be briefly noted that Section 4 of the said Act prescribes the requirements of registration of a society and also provides for not registering a society if certain factors in the opinion of the Registrar are existing. 6. By combination of provisions contained in Gujarat Panchayat Act and in particular Section 174 and Section 145 thereof, and certain resolutions issued by the State Government in this regard, these powers of the Registrar for registering a cooperative society under Section 4 of the said Act under different situations have been vested in different authorities. For the purpose of these petitions, it is not necessary to outline in detail, such SCA/15560/2003 12/64 JUDGMENT resolutions. Suffice to say that the task of examining the applications for registration of various cooperative societies is often performed by the committees constituted for this purpose from the members of the District Panchayats under the provisions of Gujarat Panchayat Act. 7. To better regulate the applications and for providing guidelines for considering the applications for registration of societies, the State Government has been issuing circulars from time to time. 7.1 By a circular dated 14-9-1989, it is provided that as per the provisions contained in Section 6 of the said Act, proposed societies must have a minimum of 10 members who should not be the members of the same family. While considering the applications for registration of society, it should be ensured that this requirement is strictly followed and all 10 members signing the proposal for registration of the society should be belonging to different SCA/15560/2003 13/64 JUDGMENT families and it should be ensured that this requirement is properly followed. 7.2 By Government Resolution dated 2-3/4/1993, detailed guidelines have been provided for registration of Seva Sahkari Societies, Multi Purpose Cooperative Societies and Farmer's Service Cooperative Societies. Detailed procedure for registering such societies as well as requirements for registering such societies have been laid down in the said Government Resolution. 7.3 In Government Resolution dated 18-21/7/2003, further guidelines have been issued for registration of societies. In the said Government Resolution, it is stated that since sometime it has come to the notice that by the District Registrar or Assistant District Registrar(Panchayat), new Cooperative Societies are registered though there is an existing cooperative society of the same kind in the village. Particularly, instances have been SCA/15560/2003 14/64 JUDGMENT noticed where such kind of registration have been granted for Seva Sahkari and Multi Purpose Cooperative Societies. This is contrary to the interest of Cooperative movement and is likely to lead to unhealthy competition and thereby weaken the cooperative structure. This leads to internal disputes and increases litigations. It is further stated that the District Registrar and District Panchayats have been given powers for registration of societies. They should ensure the guidelines and norms laid down for such registration and ensure that in the same village, in the same category, not more than one society be registered. Particularly, Seva/ Milk/Labour/General Agricultural Cooperative Societies have been created carefully for benefits of the members and it should be examined whether the same is beneficial or not. It should be ensured that the societies are not being registered at the instance of vested interests or commercial elements to utilise such societies for their personal gain. SCA/15560/2003 15/64 JUDGMENT 7.4 On the basis of different circulars issued by the State Government providing for guidelines for registration of societies and laying down norms for registration and different categories of societies, as per the details supplied by the learned AGP Ms. M.L. Shah, following situation emerges : “Standing orders are issued time to time for the registration of Cooperative Societies under Gujarat Sate Cooperative Societies Act, 1961, Coordinating all previous standing orders/circulars, the following standing orders are hereby issued for the registration of above societies. (1) As per the provision of Cooperative Societies Act, Chief Promoters should be from different families and should be qualified to be a member of the society. (2) The bye-laws of the proposed societies should be in accordance with the provisions of the Gujarat State Cooperative Societies Act, 1961 and its rules of 1965. The ineffective and illegal provisions of the bye-laws should be deleted from the proposed bye-laws. (3) For the registration of the above societies there should be sufficient evidence to establish the residence and operation of agriculturist in the concerned rules. In this case instead of providing evidence of all farmers certificates separately, the certificates issued by Talati's respective village along with he farmers list may be considered. (4) In lieu of the certificate issued by Sarpanch of respective villages, the certificate issued by the Govt. Labour Officer, or the SCA/15560/2003 16/64 JUDGMENT Director of Agriculture, District Panchayat as Rural Workers or Agricultural laborers. (5) The District or Director of Agriculture, District Panchayat or Registrar may ensure that the procedure for granting of the sanction by the Direct Supervision Committee may be completed within three months. (6) On receipt of the proposal for registration of the societies, all queries regarding non fulfilling the preliminary conditions of the Act/Rules should be informed at once to the Promoters so as to avoid unnecessary correspondence and after the receipt of re- proposal the decision should be taken within three months. The proper guidelines and essential informations for the registration of the societies should be provided from the competent authority for taking the decision easily of the proposal for the registration of the societies within three months.” 8. At this stage it would be useful to take note of some of the provisions contained in Gujarat Agricultural Produce Markets Act, 1963. Section 11 of the Gujarat Agricultural Produce Markets Act provides for Constitution of Market committee. Section 11 of Gujarat Agricultural Produce Markets Act in so far as same is relevant for our purpose reads as follows : “11. Constitution of market committee- SCA/15560/2003 17/64 JUDGMENT (1) Every market committee shall consist of the following members, namely:- (i) eight agriculturists who shall be elected by members of managing committees of cooperative societies (other than cooperative marketing societies) dispensing agricultural credit in the market area. (iii)two representatives of the cooperative marketing societies situate in the market area and holding general licenses, to be elected from amongst the members (other than nominal, associate or sympathiser members) of such societies by the members of the managing committees of such societies: Provided that where the number of cooperative marketing societies so situate does not exceed two, only one representative shall be so elected;” 8.1 It can thus be seen that as per clause (i) of Sub-section(1) of Section 11 of the Gujarat Agricultural Produce Markets Act, eight agriculturists who shall be elected by the members of the managing committees of cooperative societies dispensing agricultural credit in the market area become the members of the Agricultural Produce Market Committee. Similarly as per clause(iii) of Sub-section(1) of Section 11 of the Gujarat Agricultural Produce Markets Act, Cooperative Marketing Societies situate in the market area and SCA/15560/2003 18/64 JUDGMENT holding general licenses also send two representatives in the Market Committee. 9. On the basis of above statutory provisions and Government guidelines, it was represented before this Court by the learned advocates appearing for the petitioners that in large number of cases, provisions for registration of cooperative societies receive different interpretations leaving scope for allegations of discrimination. From the basis of facts emerging from these petitions, it was sought to be canvassed that certain procedures, safeguards and guidelines are required to be laid down to ensure that the authorities while considering the question of registration of societies, uniform policy is adopted. It was contended that sometimes only to inflate the voters list for the purpose of electing members of managing committee of Agricultural Produce Market Committees that bogus cooperative societies are floated. It was further submitted that sometimes certain societies enjoy membership of federal SCA/15560/2003 19/64 JUDGMENT societies and for elections of such federal societies, registration of primary level societies also play important role. 10.Learned advocate Shri P.K. Jani appearing for some of the petitioners pointing out the provisions contained in Section 174 of the Gujarat Panchayat Act read with Section 145 thereof, submitted that powers are vested with the committees constituted under the District Panchayat for consideration of applications for registration of societies. Drawing my attention to Section 11 of the Gujarat Agricultural Produce Markets Act, he submitted that since as many as eight representatives of cooperative societies are to be nominated through election for Agricultural Produce Market committee, often times societies which are otherwise not serious in their operation are created. He also submitted that some of the cooperative societies also enjoy voting rights in the federal society of which such primary level societies are members for which purpose also sometimes such SCA/15560/2003 20/64 JUDGMENT societies are created. 10.1 He drew my attention to the decision of this Court in the case of B.B. Shroff & anr. v. Sardar Bhilandwala Pardi People's Co.op Bank ltd. reported in 1981(22)GLR 805, wherein learned Single Judge of this Court observed in paragraph 6 as follows : “6. In the instant case, the petitioner society is a banking cooperative society and so is the first respondent society. The grievance of the petitioner -society is that by registering the amendment of the by-laws, which extends the area of operation of the first respondent society to the area in which the petitioner -society is already operating, there will be unhealthy competition. This is as relevant aspect to be consider, if true. The attention of the authority registering the amendment was required to be focused upon this aspect of the matter and the decision with regard to registration of the amendment of the by-laws could only have been arrived at after it was found, upon investigation of all the relevant facts and circumstances, that the registration of the amendment of the by-laws extending the area of operation is not likely to have an adverse effect upon the petitioner-society and to undermine the cooperative principles in general. The order of the original authority being not before me, it is not possible to ascertain whether this perspective was kept in mind. The order of the appellate authority does not disclose that this perspective was present to its mind. Under the circumstances, the conclusion is inevitable that the power with regard to registration of the amendment of the by-laws is exercised without applying mind to SCA/15560/2003 21/64 JUDGMENT the most relevant aspect and to the fundamental questions which were required to be taken into account.” 10.2 Reliance was placed on the decision of learned Single Judge of this Court in the case of Hirabhai Vashrambhai Desai v. State of Gujarat & ors. reported in 1998(1)GLR 53, wherein learned Judge observed that if the Registrar feels that it will be economically unsound to have more than one cooperative society in an area, he may refuse registration. 10.3 He also pointed out the decision of learned Single Judge of this Court in the case of Nandotra Dudh Utpadak Sahakari Mandali Ltd. v. State of Gujarat reported in (2004) 5 GHJ 4, wherein Learned Judge observed that “in the present case, as observed earlier, the petitioner society has made huge investment of about Rs. 17 lacs, not only that but if out of 365 suppliers