IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN WEDNESDAY, THE 14TH JANUARY 2009 / 24TH POUSHA 1930 WP(C).No. 23156 of 2006(F) ---------------------------------------- PETITIONER(S): ------------------------ THE POOTHADY SERVICE CO-OP.BANK LTD. NO.F.1011, KENICHIRA, WAYANAD-673 596, REP. BY ITS PRESIDENT JOSE KAITHAMATTOM. BY ADV. SRI.P.N.MOHANAN RESPONDENT(S): -------------------------- 1. JOINT REGISTRAR OF CO-OP.SOCIETIES (G) WAYANAD. 2. K.S. SANKARAN, KOLLIVAYAL HOUSE, KANIYAMPATTA P.O., WAYANAD. GOVERNMENT PLEADER SRI. I.V.PRAMOD FOR R1 ADV. SRI.V.G.ARUN FOR R2 THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06/01/2009, THE COURT ON 14/01/2009 DELIVERED THE FOLLOWING: Kss THOTTATHIL B. RADHAKRISHNAN, J. = = = = = = = = = = = = = = = = = = = = = = = = W.P.(C).No.23156 of 2006-F = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 14th day of January, 2009. JUDGMENT “CR” 1.The petitioner is a service co-operative bank. Certain amendments to its bye-laws were approved on 22-4-1998. Among other things, those amendments provide for filling up of two seats in the committee, from among depositors. On the basis of that approved bye-law, Election Sub Rules were framed and approved on 4-11-1998. The area of operation is delimited into 11 wards on geographical basis. The identity of a seat each mandatorily to be reserved for women and SC/ST and of the two seats to be filled from among the depositors, are to be identified on the basis of lots. Elections were being conducted on the basis of the aforesaid. WP(C)23156/06 -: 2 :- 2.Acting on a complaint made by the second respondent on 24-2-2006, the first respondent issued Ext.P5 on 16-8-2006 directing the society to amend the bye-laws declassifying the two seats earmarked for depositors and to open them up as general category seats. This is under challenge on the ground that the first respondent has acted in excess of jurisdiction and powers of the Registrar under the Kerala Co-operative Societies Act, 1969, hereinafter, the “Act” and the Kerala Co-operative Societies Rules, 1969, hereinafter, the “Rules”. It is specifically contended that the impugned action is even beyond the powers of the Registrar under Section 12(5) of the Act and that it is an encroachment into the democratic status of the society and the final authority of its General Body in terms of Section 27 of the Act. It is also pointed out that the second respondent, who made the complaint leading to the impugned Ext.P5, was formerly, the Secretary of the petitioner and certain proceedings, as referred to in the writ petition, have led to his WP(C)23156/06 -: 3 :- triggering the impugned action. 3.The first respondent has filed a counter affidavit seeking to sustain the decision contained in Ext.P5. The fact that the provision for filling up two seats in the committee from among the depositors is part of the approved bye- laws, is not disputed. It is contended that in the two elections held on 7-2-1999 and 1-2-2004, that is, after such approval of the bye-laws as such, the same persons, namely, one Jose Kaithamattom and C.S.Prakasan were returned elected candidates from among the depositors, though the wards earmarked for depositors in both those elections were different. Accordingly, it is contended that reservation of two seats exclusively for depositors is a barrier to the freedom of the members and against the principles of co-operation and that such a provision results in discrimination among members on the basis of the quantum of amount that they hold in deposit with the bank, because only those depositors who WP(C)23156/06 -: 4 :- have a deposit of Rs.25,000/- prior to 180 days from the date of submission of nomination would be entitled to contest against those two seats. The first respondent contends that the petitioner is a primary agricultural credit society and its main object is to extend short-term agricultural loans to its members, majority of whom are small or marginal farmers and agricultural labourers. According to the Joint Registrar, the provision in the bye-laws for election of two members to the committee, exclusively from the depositors, results in casting a shadow on the freedom and democratic control under the democratic set up of the co-operative society. The Joint Registrar supports the impugned decision, pithily, relying on sub-section 5 of Section 12, as is apparent from paragraph 11 of the counter affidavit. 4.The second respondent, in his counter affidavit, supports the impugned decision. 5.In terms of sub-section 2(a) of Section 6 of the WP(C)23156/06 -: 5 :- Act, even while applying for registration of a society, the availability of the proposed bye- laws is obligatory. If the Registrar is satisfied that the conditions enumerated in Section 7(1) of the Act are satisfied, he may register the society and its bye-laws. Refusal to register or failure to act within the statutory time frame as contained in the different provisions of Section 7 gives right to different remedies. 6.Once the bye-laws are registered in terms of Section 7, no amendment thereto shall be valid unless such amendment is registered. The conditions in Section 7 have to be satisfied, mutatis mutandis, for registration of the amendments also. These prescriptions of law as contained in Section 12 are particularly regulated by sub-sections 1 to 4B thereof. Amendment of bye-laws changing the name of the society or its form or extent of liability are governed by Sections 10 and 11 respectively which, among other things, provide in sub-section WP(C)23156/06 -: 6 :- 4 of Section 11 that an amendment changing the form or extent of its liability shall not be registered except on satisfying the conditions prescribed therein, including the assent of the members and creditors. 7.Sub-section 5 of Section 12 provides that notwithstanding anything contained in the Act or the Rules or the bye-laws, if the Registrar is satisfied that an amendment of the bye-laws of a registered society is necessary or desirable (i) for the purpose of altering the area of its operation or (ii) for the purpose of improving the services rendered by it, he may require the society to make the amendment. This is a compulsory mode of compelling the society to amend its bye-laws. There are only two situations in which the Registrar may compel amendment. They are those as are noticed herein above, as available in Section 12(5) of the Act. It needs to be noticed that standing outside the sphere of Sections 10, 11 and 12(1) to 12(4B) and with WP(C)23156/06 -: 7 :- specific exclusion of the operation of sub- section 4 of Section 11, sub-sections 5 and 6 of Section 12 operate as a composite provision, forming a code by itself. Consultation with the financing bank and circle co-operative union is necessary in case of affiliated societies. A time frame could be fixed and even extended by the Registrar for the society to comply with that direction. On failure of the society to do so, the Registrar is empowered by sub-section 6 of Section 12 to register the amendments as required by him or agreed to by him on representation by the society. 8.The impugned Ext.P5 states that Clause 33(c) of the bye-laws, which relates to the filling up of two seats in the committee from among the depositors, is contrary to the Act and Rules. According to the Joint Registrar, the reservation of two seats in terms of Clause 33(c) results in classification among the members of the society, thereby excluding a person with no deposit from WP(C)23156/06 -: 8 :- contesting against those seats. This, according to the Joint Registrar, is in violation of the principles of co-operation and the democratic nature of a co-operative society and the freedom of the individual members would be stultified by that provision and hence, to provide justice to all members, it is necessary that Clause 33(c) in so far as it relates to the reservation of two seats for depositors has to be deleted. 9.As already noticed, the two alternate purposes for which a compulsory amendment could be directed are (i) for the purpose of altering the area of operation of the society and (ii) for the purpose of improving the services rendered by it. It is not even faintly suggested in support of the impugned decision that the proposed compulsory amendment stands with the support of the first among those alternate limbs, namely, “for the purpose of altering the area of operation”. The crux of the judicial determination of the dispute in hand, therefore, WP(C)23156/06 -: 9 :- gets confined to be as to whether the compulsory amendment directed is one that is ordered for the purpose of improving the services rendered by the society. 10.The petitioner is a farmers' service co- operative bank. It is a primary credit society falling under the type “credit societies” as a “short term/medium term” one, going by the statutory classification in Rule 15 of the Rules. The primary credit societies have the District Co-operative Bank as the Central Society and the Kerala State Co-operative Bank as the Apex Society. 11.The primary credit societies, including primary co-operative banks, take deposits; give loans and do the banking business. No co-operative bank other than a primary credit society can do banking business or use the name bank in their title without getting licence and without following the regulations under the Banking WP(C)23156/06 -: 10 :- Regulation Act. These factors have been extensively noticed by this Court in Cherukode Co-op. Rural Bank Ltd. v. Parur Service Co-op. Bank [2006 (3) KLT 38]. In that precedent, the Division Bench agreed with the observations in Muhammad Usman v. Registrar of Co-operative Societies [2003(1) KLT 69]. In Muhammad Usman, it was rightly noticed, among other things, that a primary credit society is entitled to accept, from the public, deposit of money, withdrawable by cheques. These factors are being appreciated in the context of this case to understand the scope of the services rendered by the petitioner, which is a primary agricultural credit society. The nature of operations of a primary agricultural credit society includes the activity of taking deposits. 12.A society, to be registered under the Act, should have, as its object, the promotion of the economic interest of its members or of the interest of the public, in accordance with co- WP(C)23156/06 -: 11 :- operative principles. This is the prescription of Section 4 of the Act. The co-operative movement, by its very nature, is a voluntary association where individuals unite for mutual benefit in production and distribution of wealth upon principles of equity, reason and common good. See Zoroastrian Cooperative Housing Society Ltd. v. District Registrar, Coop. Societies(Urban) [(2005) 5 SCC 632]. Therefore, if the General Body of the members of a primary agricultural credit society which is the final authority in that society in terms of Section 27 of the Act, decided to elect two among the 11 members of its committee exclusively from among depositors who have a minimum deposit of Rs.25,000/- before 180 days of the submission of the nomination paper, the object sought to be achieved by that provision of the bye-law is explicit; that this motivates the urge to save and to deposit amounts which would ultimately be only in the interest of the depositor as also the institution. The interest of the depositors in such a society WP(C)23156/06 -: 12 :- could also be a criterion for such a bye-law provision. It is not as if any person possessing merely money, can become a member. If one is to be a member, who is not merely a nominal member and to be entitled to vote in terms of Section 20 of the Act, he should possess such qualifications as may be required in terms of the bye-laws for membership. Therefore, the reservation of two seats is in favour of depositors from among members who are eligible to vote. It is not a classification which could be treated as amounting to hostile discrimination, having regard to the object of equity, social justice and economic development sought to be achieved by organizing the co-operative societies as self governing democratic institutions, having ultimately, the achievement of the national goals enshrined as Directive Principles of State Policy in the Constitution of India. 13.Economic development and social justice have to go hand-in-hand. Social justice cannot be WP(C)23156/06 -: 13 :- commanded by thwarting economic development. Economic power cannot be permitted to grow at the cost of social justice. Without economic stability, social justice cannot be achieved. Balancing the goals of social justice and economic development on the touchstone of the fundamental principles of equity, as encapsulated even in Preamble to the Act, the provision in the bye-law of a primary agricultural credit society reserving two out of 11 of seats in its committee for the depositors, that too, on the volition of the General Body, with the approval of the competent authority granted way back in 1999, cannot be treated as a matter affecting the services rendered by that society. 14.The improvement contemplated in the second limb among the two alternate conditions on which a compulsory registration can be ordered under Section 12(5) is the improvement of the services rendered by the society and only if it is necessary or desirable for that purpose, could a WP(C)23156/06 -: 14 :- compulsory amendment be ordered. 15.The power of the Registrar under Section 12(5) is not a sweeping one and cannot flow merely on the ipse dixit of the Registrar even if such power is conferred “notwithstanding anything contained in the Act or the Rules or the Bye- laws”. This is because, if the fundamental object sought to be achieved by the Act, namely, the democratic status of a co-operative society as a self governing institution based on concepts of equity, social justice and economic development, is violated in the process of acting under Section 12(5), that would be a situation where the Registrar acts against the basic tenets of the seminal concept of co-operation. That would tantamount to liquidating the root of the legislation which gives him the power under Section 12(5). The power to order or compel registration under Section 12(5) cannot be exercised, in any manner, defeating the Act, Rules or the bye-laws. That power is intended WP(C)23156/06 -: 15 :- only to be exercised to take care of situations which come as a natural flow of the provisions of the Act and the Rules. It is profitable to read Zoroastrian Cooperative Housing Society Ltd. (supra), in this context. The “purpose of the better interest of the society”, which can be germane to a decision under Section 12(5), is never, to torpedo the prime interest of the society and the views of the General Body except in situations where it is contrary to the laws and to the need of the society, as explicit in the existing bye-laws. This is the reason why, even after the communication of a direction under Section 12(5) requiring the society to make a particular amendment, the society is entitled to an opportunity to make a representation in terms of Section 12(6). The Registrar is obliged to consider such a representation and then the amendment would be as required by him under sub- section 5 of Section 12 or agreed to by him on the basis of the representation. WP(C)23156/06 -: 16 :- 16.The insistence on a requirement to amend the bye-law and the agreement of a Registrar to a representation by the society under sub-section 6 of Section 12 are matters which call for exercise of statutory power. It is the power to act in accordance with law and not beyond. That exercise is not the individual's fancy. The power under Section 12(5) is not to substitute the views of the Registrar for the views of the General Body and therefore, the power under sub-sections 5 and 6 of Section 12 ought to be used most sparingly. 17.As against any suggestion that there can be no classification at all, I would immediately recall Section 28A of the Act which provides a minimum mandatory reservation in favour of women and members belonging to SCs or STs. Reservation is permissible. Classification is permissible. That should have an intelligible differentia, to answer the touchstones of social justice and economic empowerment and equity which are the guiding beacons of co-operative sector. While WP(C)23156/06 -: 17 :- Section 28A provides a mandate as to the minimum in favour of two classes of citizens who require the legislative support to achieve the goal of social justice, there is no prohibition in the Act or the Rules against classification of seats in the interest of economic development. The mere view in the impugned order that there is a classification among members is no ground to hold that there was any hostile discrimination. There is an intelligible differentia in the matter of earmarking of two seats for the depositors. 18.Pointedly on the facts, it is not disputed by the second respondent that he was the Secretary of the petitioner society till he retired on 30-6-2001. He had more than 20 years of service to his credit. The amendments approved as per Ext.P1, providing the reservation in favour of the depositors, was a matter which was brought in, while he was in service. In his counter affidavit, he does not demonstrate anything to liquidate the inference of the petitioner that WP(C)23156/06 -: 18 :- the second respondent is inimical to the petitioner because it filed a writ petition against his financial interest touching a Government decision for grant of higher grade to him and that he was unsuccessful in his attempt to have even a supersession of the committee of the petitioner. 19.The impugned order does not show any reference to the fact situations as available in the institution that may generate a decision under sub-sections 5 and 6 of Section 12 of the Act. A reading of Ext.P5 shows that it is generated and sought to be sustained only on views of a general nature but not touching any particular matter relatable to the affairs of the petitioner society or the services rendered by it, much less, improving the services rendered by it. Therefore, Ext.P5 does not stand with the support of “any purpose of improving the services rendered” by the petitioner society. Hence, that decision is not one issued by reaching on a WP(C)23156/06 -: 19 :- conclusion in accordance with law that such amendment is necessary or desirable for the purpose of improving the services rendered by the petitioner and that it is necessary to compel such amendment. 20.For the aforesaid reasons, the impugned Ext.P5 is in excess of jurisdiction; is contrary to law and is unsustainable. In the result, this writ petition is allowed quashing Ext.P5. No costs. THOTTATHIL B. RADHAKRISHNAN, JUDGE. Sha/120109