IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 10252 of 2003 with SPECIAL CIVIL APPLICATION No 15574 of 2003 with SPECIAL CIVIL APPLICATION No 10599 of 1999 with SPCIAL CIVIL APPLICATION No 11860 of 2000 with SPECIAL CIVIL APPLICATION No 8247 of 2001 with SPECIAL CIVIL APPLICATION No 12495 of 2001 with SPECIAL CIVIL APPLICATION No 201 of 2000 with SPECIAL CIVIL APPLICATION No 7798 of 2000 with SPECIAL CIVIL APPLICATION No 8186 of 1999 with SPECIAL CIVIL APPLICATION No 8182 of 1999 with SPECIAL CIVIL APPLICATION No 1192 of 2001 with SPECIAL CIVIL APPLICATION No 3434 of 2001 with SPECIAL CIVIL APPLICATION No 11589 of 2003 with SPECIAL CIVIL APPLICATION No 13931 of 2003 with CIVIL APPLIACTION No 12036 of 2000 For Approval and Signature: HON'BLE MR.JUSTICE R.K.ABICHANDANI Sd/- and HON'BLE MR.JUSTICE D.H.WAGHELA Sd/- ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? 1 & 2 YES; 3 to 5 NO -------------------------------------------------------------- GUJARAT STATE MARKETING CO OP FEDERATION LTD. Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: SCA Nos. 10252 & 15574 of 2003 MR SK JHAVERI Senior Advocate with MS JIRGA D JHAVERI Advocate for Petitioners SCA Nos.10599/99 & 11860/00 and CA 12036 of 2000 MR KG VAKHARIA Senior Advocate with MR. MK VAKHARIA and MR. TUSHAR MEHTA Advocates for Petitioners. SCA Nos.8247/01 & 12495/01 MR PS CHAMPANERI Advocate for Petitioners SCA Nos.201/00, 7798/00, 8186/99, 8182/99, 1192/01 MR BS PATEL Advocate for Petitioners SCA NO.3434 of 2001 MR PUSHPADATTA VYAS for Petitioners SCA No.11589 of 2003 MR KD SHAH for Petitioners SCA No.13931 of 2003 MR HARIN P RAVAL for Petitioners. Versus MR SN SHELAT Advocate General with MS SHRUTI TRIVEDI GOVERNMENT PLEADER for the State (in all matters). -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE R.K.ABICHANDANI and HON'BLE MR.JUSTICE D.H.WAGHELA Date of decision: 15/06/2004 C.A.V. JUDGEMENT (Per : HON'BLE MR.JUSTICE D.H.WAGHELA for the Court:) 1. These petitions are grouped and heard together as they involve the common issue of the validity of sub-section (2) of Section 80 of the Gujarat Co-operative Societies Act, 1961 ('the Act' for short). However, the petitions are required to be divided into three sub-groups viz. the petitions in which show cause notices to appoint nominee directors were issued, where appointment orders of such nominees were already issued, and the petitions filed only on the basis of apprehension of such appointments by the Government. 2. The relevant Section 80 of the Act reads as under: "S.80 Power to appoint Government Nominee: (1) Where the State Government has subscribed to the share capital of a society, directly or through another society, or has guaranteed the repayment of the principal of and payment of interest on, debentures issued or loans raised by a society, the State Government shall, notwithstanding anything contained in the bye-laws of such society, have the right to nominate three represenetatives on the Committee of such society, in such manner as may be determined by the State Government from time to time. The members so nominated shall hold office during the pleasure of the State Government, or for such period as may be specified in the order by which they are appointed, and any such member on assuming office shall have all rights, duties, responsibilities and liabilities as if he were a member of the committee duly elected. Explanation: Any nomination of the Registrar or his nominee on the Committee of a society under the bye-laws of such society shall not be construed as nomination of the representative on that Committee in exercise of the right of the State Government under this sub-section. (2) Where the State Government is of the opinion that having regard to the public interest involved in the operation of society it is necessary or expedient so to do, it may nominate its reprepsentatives on the committee of such society as if the State Government had subscribed to the share capital of the society and the provisions of sub-section (1) shall, so far as may be apply to such nomination." "Committee" is defined in Section 2 (5) as: "the committee of management, or other directing body, to which the management of the affairs of a society is entrusted". As per Section 74 of the Act, the management of every society shall vest in a committee constituted in accordance with the Act, the rules and bye-laws, which shall exercise such powers and perform such duties as may be conferred or imposed on it respectively by the Act, the rules and the bye-laws. 3. It must be noted at the outset that constitutional validity of the provisions of sub-section (2) of Section 80 has been tested and upheld by an elaborate judgment of a Division Bench of this Court as far back as in 1984 in AMRELI DISTRICT CO-OPERATIVE SALE & PURCHASE UNION LTD. AND OTHERS v. STATE OF GUJARAT [ 1984 (2) G.L.R. 1244] wherein it is held as under: "78. Sec.80, as it originally stood in the principal Act, empowered the Government to nominate its representatives not exceeding three on the Committee of a society to the share capital of which the State Government has directly or indirectly subscribed or has guaranteed the repayment of the principal and interest on debentures issued or loans raised by such society. Two fold amendment has been made in Sec.80; firstly, by empowering the State Government to nominate its representatives notwithstanding anything contained in the bye-laws of such societies and, secondly, by inserting new sub-sec. (2) empowering the State Government to nominate the representatives on the committee of a society having regard to the public interest involved in the operation of such society it has been found necessary or expedient to do so as if the State Government had subscribed to the share capital of the society. We must reject the challenge to this new provision inserted by sub-sec. (2). The power is an enabling power which can be exercised only if the Government is satisfied that it is necessary or expedient to do so in the public interest. The number of nominees cannot exceed three since it has been specifically provided that the provision of sub-section (1) shall, so far as may be, apply to such nomination. The tenure of such nominated persons shall be as may be specified in the order by which they are appointed and, therefore, if this power is sought to be abused by the State Government, it can be always subject to challenge in the Court of Law. It does not curtail the right of association nor the right to carry on business or trade guaranteed under Art.19 (1) (c) and (g) respectively. This provision, therefore, must be sustained." "79. Before we part with the discussion pertaining to sec.80 (2), we must clarify since the petitioners apprehend abuse of this power that the State Government cannot exercise the power conferred by this section by appointing such persons who are disqualified to be members or who have incurred the disqualification as prescribed in the bye-laws. It is expected that the Government has to exercise such a wide power in a manner which does not infringe or violate the bye-laws prescribing the qualifications and/or disqualifications for being members of the society in question since otherwise this power would be arbitrary as it can be exercised for appointing those persons who might have been defeated at the elections or who would not have been entitled to be members or to continue as members of a given society in the ordinary course under the bye-laws such as persons who have committed defaults in the refund of the advances by the Society or who may be occupying offices in the society, or partners in the firm or appropriators (sic) of business having conflicting interests with that of the society. It is, therefore, expected of the State Government that it will prescribe a proper guideline in the matter of exercise of this power and see to it that the power is not exercised contrary to such guideline." 4. The above view has been consistently followed by this Court in several subsequent cases. The validity of the above provision and the exercise of power by the Government thereunder have been once again called into question in these petitions on several grounds and the submissions made in that regard are as under: 4.1 The learned counsel Mr.S.K.Jhaveri vehemently argued that the aforesaid decision of this Court upholding the validity of the provisions of sub-section (2) of Section 80 of the Act was per incuriam insofar as the ratio of the decisions in SMT. DAMAYANTI NARANGA v. UNION OF INDIA [1971 SC 966] was not considered in the context of the said provision, and, therefore, the validity of the said provision was required to be examined afresh in the light of the later judgment of the Supreme Court in ASOM RASTRABHASA PRACHAR SAMITI, HEDAYATPUR v. STATE OF ASSAM [AIR 1989 SC 2126). It was submitted that the impugned sub-section provided for appointment of directors on the formation of opinion about public interest involved in the operation of the society and the concept of public interest was left undefined. Therefore, an unbridled and unguided power on the basis of a vague concept of "public interest" was vested in the State Government the exercise of which, in effect, resulted in an arbitrary exercise of power calculated to disturb the power-balance within the managing committee of the society. It was submitted that, although this argument was dealt with in paragraph 45 of the aforesaid judgment, it was in the context of Section 17-A and not Section 80 (2) of the Act. 4.2 The learned senior counsel Mr.K.G.Vakharia submitted that the impugned provisions of Section 80 (2) imposed an unreasonable restriction on the fundamental right of the members of the society to form an association and carry on the business along the co-operative principles insofar as nominated members were thrust upon the managing committee so as to tilt the majority and destroy the autonomous character of the society. He also submitted that the provision does not prescribe any guidelines for qualifications of the nominated member, nor does it prescribe any criterion for the exercise of power to nominate, with the result that a person ineligible to be even an ordinary member of the society can be thrust upon its managing committee. He argued that by reading the provisions of sub-section (1) in sub-section (2) by incorporation, nomination of three representatives by the State in the name of public interest was but incongruous and unjustified, because public interest could as well be served by nomination of only one member. It was, on that basis, submitted that the provision was capable of being and in fact grossly abused on narrow political or partisan considerations. It was, therefore, an encroachment on the right of the members to run the association in a democratic way in accordance with the basic principles of co-operative movement. He further submitted that there cannot be any public interest involved in running of the business of the co-operative society. It was contended that even assuming the provision to be valid after reading it down, the principles of natural justice were required to be scrupulously observed in both letter and spirit at the time of exercising the power and, for an effective and proper hearing, objective facts as to how public interest was involved in operation of the society and why it was necessary or expedient to nominate representatives ought to be disclosed to the society in the show cause notice and the committee on which members were to be nominated was required to be heard. It was also submitted that appointment of nominated members cannot be for an indefinite period and their term has to expire along with the term of the committee. 4.3 The learned counsel Mr.Tushar Mehta, referring to the judgment of this Court in THE MEHSANA DISTRICT CENTRAL CO-OPERATIVE BANK LTD. v. MAREDA SEVA SAHAKARI MANDALI LTD. [1990 (1) G.L.R. 423], submitted that basic co-operative principles were offended by the impugned provisions. International Co-operative Alliance has recognized as basic co-operative principles, voluntary and open membership and democratic control. It was also submitted that adequate provisions for State control were made in Sections 73, 74, 81, 82, 86 and 160 and, in view of that, the impugned provisions cannot be allowed to operate in violation of the aforesaid basic co-operative principles. 4.4 The learned counsel Mr.B.S.Patel submitted that restriction on the fundamental rights of the society in the name of public interest was not permissible and no public interest can be served by thrusting a member on the managing committee. He submitted that the representatives nominated in the name of public interest would also have the same rights, duties, responsibilities and liabilities which are prescribed by the Act, the Rules and the bye-laws made thereunder. Therefore, subserving any public interest could hardly be compatible with the business interest and commercial activity of the society. Relying upon the judgment of the Supreme Court in T.M.A. PAI FOUNDATION AND OTHERS v. STATE OF KARNATAKA [AIR 2003 SC 355], he submitted that, in any event, a private institution will have a right to constitute its own governing body, for which qualifications may be prescribed by the State. It will, however, be objectionable if the State restrains the Board to include specific individuals on the governing body. That judgment dealt with various facets of establishment and administration of educational institutions in general and minority educational institutions in particular. He submitted that, when a co-operative society was not in an activity in which public at large was interested, no appointment in the name of public interest could be justified. He even made a curious submission that public interest can be served by making appointments in the staff of a society which actually deals with the public in the business or service activities of the society. 4.5 The learned counsel Mr.Pushpadatta Vyas submitted that the provisions of sub-sections (1) and (2) of Section 80 violate Article 14 inasmuch as they treat unequals as equals by equating the society in which the State Government has a financial stake and the society in which there is none. Relying upon the aforesaid judgment in T.M.A.PAI FOUNDATION (supra), he submitted that dictating of the formation and composition of a governing body, compulsory nomination of teachers and staff for appointment or nominating students for admission were held to be unacceptable restrictions by the 11 Judge Bench of the Apex Court. 4.6 The specific other issues raised in several petitions will be dealt with hereunder while deciding the particular petition. 5. The learned Advocate General Mr.S.N.Shelat, appearing for the respondent, submitted that the constitutional validity of the impugned provisions was already upheld by this Court in AMRELI DISTRICT CO-OPERATIVE SALE & PURCHASE UNION (supra) and there was no reason to take a different view particularly when that judgment was consistently followed thereafter. He also submitted that the Government had issued, revised from time to time and published the guidelines as envisaged in paragraph 79 of the said judgment so as to ensure that nominations were in conformity with the bye-laws of the society and the public interest and purpose of the provisions were duly served. Relying upon the judgment of the Supreme Court in SMT. SOMAWANTI AND OTHERS v. THE STATE OF PUNJAB AND OTHERS [AIR 1963 SC 151] and STATE OF BIHAR v. KALIKA KUER [ AIR 2003 SC 2443], he submitted that an earlier decision was not rendered per incuriam or liable to be ignored because a possible aspect of the matter was not considered or not raised before the Court. It was also submitted that the judgment of the Supreme Court which is contended to have not been considered in the context of the impugned provisions was indeed considered in the said judgment upholding the validity of the provisions; albeit in the earlier part of the judgment. He also submitted that, although the exercise of power in a given case may be a subject-matter of challenge, the validity of the provision itself could not be assailed on the assumption that the power could be abused. It was pointed out that, except in two petitions, either there was only show cause notice issued with a view to afford an opportunity of hearing or mere apprehensions of appointment of nominated representatives were expressed. Relying upon the celebrated judgment of the Supreme Court in SMT. MANEKA GANDHI v. UNION OF INDIA [AIR 1978 SC 597] it was submitted that the words "in the interest of the general public" were held by the Apex Court to have a clearly well-defined meaning and the ground of public interest being an amorphous, nebulous or vague and indefinite concept was not available for assailing the provision. It was also pointed out from that judgment that the theory that a peripheral or concomitant right which facilitates the exercise of a named fundamental right or gives it meaning and substance or makes its exercise effective, is itself a guaranteed right included within the named fundamental right was not acceptable. Accordingly, whereas the fundamental right to form an association was not violated by appointment of nominated members on its managing committee, the fundamental right to carry on any occupation, trade or business was expressly subject to reasonable restrictions in the interest of general public. Relying upon the judgment of the Supreme Court in PREMIUM GRANITES AND ANOTHER v. STATE OF TAMIL NADU [AIR 1994 SC 2233] and ORISSA TEXTILE AND STEEL LTD. v. STATE OF ORISSA [AIR 2002 SC 708], it was submitted that "public interest" was a definite concept and exercise of power "in public interest" must satisfy the test of reasonableness before a Court of law if it were challenged on the ground of improper exercise of power. However, it should also be borne in mind that it is not always feasible and practicable to lay down exhaustive guidelines which can cover all the contingencies. Moreover, the guidelines need not be expressly found in the impugned provisions but such guidelines can be gathered from the setting of the Act and the rules framed thereunder. Relying upon the recent judgment of the Supreme Court in DHARAM DUTT AND OTHERS v. UNION OF INDIA [(2004) 1 SCC 712], it was submitted that a legislation cannot be struck down if it was within the legislative competence of the elected legislature. The associations or unions of citizens cannot further claim as a fundamental right that they must also be able to achieve the purpose for which they have come into existence so that any interference with such achievement by law shall be unconstitutional. A right to form an association guaranteed under Article 19 (1) (c) does not imply the fulfilment of every object of an association as it would be contradictory to the scheme underlying the text and the frame of several fundamental rights guaranteed by Part III and particularly by the scheme of the guarantees conferred by sub-clauses (a) to (g) of clause (1) of Article 19. It is held in para (45) that "even in SMT. DAMAYANTI NARANGA v. UNION OF INDIA [ 1971 (1) SCC 678] the Constitution Bench has held that, after an association has been formed and the right under Article 19 (1) (c) has been exercised by the members forming it, they have no right to claim that its activities must also be permitted to be carried on in the manner they desire." Referring to the judgment of the Supreme Court in DR.PRATAP SINGH AND ANOTHER v. DIRECTOR OF ENFORCEMENT [AIR 1985 SC 989], it was also submitted that the expression "so far as may be" was always construed to mean that the provisions may be generally followed to the extent possible. That expression, as deployed in sub-section (2) of Section 80 of the Act, had to be given its full meaning and the restrictive clauses appearing in sub-section (1) of Section 80 subjecting the nominated representative to the duties, responsibilities and liabilities as if he were an elected member of the committee have to be applied accordingly. 6. There was no dispute about the proposition that the society in which representatives were proposed to be nominated was required to be given adequate and meaningful opportunity of being heard and the proposition that how and on what basis the opinion that public interest was involved in the operation of a society was formed was required to be disclosed as a part of compliance with the principles of natural justice. Similarly, the necessity or expediency of nominating representatives had to be examined and established on objective facts. The State authorities appear to have consistently followed the practice of disclosing the names of the proposed nominees and detailed guidelines, the latest being by Resolution dated 8.4.2004, which were placed on record, are being followed to determine the eligibility of the proposed nominees as stated by the learned Advocate General. The guidelines issued by the Government from time to time are not under challenge. 7. This Court has, while upholding the validity of the amendments enacted by the Gujarat Co-operative Societies (Amendment) Act, 1981, in AMRELI DIST. CO-OP. SALE & PURCHASE UNION (supra), considered and dealt with in detail the judgment of the Supreme Court in SMT. DAMAYANTI NARANGA (supra). That judgment of the Supreme Court as also several subsequent judgments led the Court to hold that the amended provision in question was, though restricting the right of concerned co-operative societies to carry on business according to their bye-laws and the decision of the societies, justified in public interest. Although the discussion was in the context of insertion of Sections 17-A, 22 (2) and 24 of the Act, the same arguments and contentions of violation of Article 19 (1) (c) were urged and considered. In fact, a very useful and apposite discussion on the issue of 'public interest' and absence of guidelines as raised in the present petitions is also to be found in paragraph 45 of the judgment which may be quoted hereunder: "45. ......It was urged on behalf of the petitioners that the entire guideline is vague and imprecise, inasmuch as there is absolutely no standard for determining as to what is in the interest of co-operative movement, or for that matter public interest or how the purpose of securing proper management can be best achieved. We are unable to persuade ourselves to agree with this criticism for the obvious reason that in the very nature of things it is not possible for the Legislature to lay down specific contingencies in the context of which this power can be exercised. In the very nature of the diverse situation that may arise as a result of the widespread tentacles of the co-operative movement where diverse situation of grave complexity and import may arise from time to time that if any attempt is made to lay down a strict formula the very purpose of the power would be defeated. The connotation of public interest as well as the interest of the co-operative movement may be overlapping, but it is not difficult to conceive a situation where the exercise of the power may be called for in the interest of the co-operative movement though it may not be strictly justified from the view point of public interest. The public interest is a larger circle while the interest of the co-operative movement is a smaller circle inside it. Though it is difficult to exhaustively enumerate what contingencies would constitute public interest and what would constitute the interest of co-operative movement, the two contingencies can be very well illustrated. The contingency of public interest