Case: Zoroastrian Co-operative Housing Society Limited and Anr Vs. District Registrar Co-operative Societies and Ors

respondent No.3 as a member in the Society is that the bye-law confining membership to a person belonging to the Parsi community and the insistence on respondent No.2 selling the building or the flats therein only to members of the Parsi community who alone are qualified to be members of the Society, would amount to an absolute restraint on alienation within the meaning of Section 10 of Transfer of Property Act. Section 10 of the Transfer of Property Act cannot have any application to transfer of membership. Transfer of membership is regulated by the bye-laws. The bye-laws in that regard are not in challenge and cannot effectively be challenged in view of what was have held above. Section 30 of the Act itself places restriction in that regard. There is no plea of invalidity attached to that provision. Hence, the restriction in that regard cannot be invalidated or ignored by reference to Section 10 of the Transfer of Property Act.35. Section 10 of the Transfer of Property Act relieves a transferee of immoveable property from an absolute restraint placed on his right to deal with the property in his capacity as an owner thereof. As per Section 10, a condition restraining alienation would be void. The Section applies to a case where property is transferred subject to a condition or limitation absolutely restraining the transferee from parting with his interest in the property. For making such a condition invalid, the restraint must be an absolute restraint. It must be a restraint imposed while the property is being transferred to the transferee. Here, respondent No.2 became a member of the Society on the death of his father. He subscribed to the bye-laws. He accepted Section 30 of the Act and the other restrictions placed on a member. Respondent No.2 was qualified to be a member in terms of the bye-laws. His father was also a member of the Society. The allotment of the property was made to appellant in his capacity as a member. There was really no transfer of property to respondent No.2. He inherited it with the limitations thereon placed by Section 31 of the Act and the bye-laws. His right to become a member depended on his possessing the qualification to become one as per the bye-laws of the Society. He possessed that qualification. The bye-laws provide that he should have the prior consent of the Society for transferring the property or his membership to a person qualified to be a member of the Society. These are restrictions in the interests of the Society and its members and consistent with the object with which the Society was formed. He cannot question that restriction. It is also not possible to say that such a restriction amounts to an absolute restraint on alienation within the meaning of Section 10 of the Transfer of Property Act. 36. The restriction, if any, is a self-imposed restriction. It is a restriction in a compact to which the father of respondent No.2 was a party and to which respondent No.2 voluntarily became a party. It is difficult to postulate that such a qualified freedom to transfer a property accepted by a person voluntarily, would attract Section 10 of the Act. Moreover, it is not as if it is an absolute restraint on alienation. Respondent No.2 has the right to transfer the property to a person who is qualified to be a member of the Society as per its bye-laws. At best, it is a partial restraint on alienation. Such partial restraints are valid if imposed in a family settlement, partition or compromise of disputed claims. This is clear from the decision of the Privy Council in Mohammad Raza vs. Mt. Abhas Bandi Bibi, ALR 59 I.A. 236 and also from the decision of the Supreme Court in Gummanna Shetty and others vs. Nagaveniamma, AIR 1967 SC 1595 . So, when a person accepts membership in a cooperative society by submitting himself to its bye-laws and secures an allotment of a plot of land or a building in terms of the bye-laws and places on himself a qualified restriction in his right to transfer the property by stipulating that the same would be transferred back to the society or with the prior consent of the society to a person qualified to be a member of the society, it cannot be held to be an absolute restraint on alienation offending Section 10 of the Transfer of Property Act. He has placed that restriction on himself in the interest of the collective body, the society. He has voluntarily submerged his rights in that of the society. 37. The fact that the rights of a member or an allottee over a building or plot is attachable and saleable in enforcement of a decree or an obligation against him cannot make a provision like the one found in the bye-laws, an absolute restraint on alienation to attract Section 10 of the Transfer of Property Act. Of course, it is property in the hands of the member of the strength of the allotment. It may also be attachable and saleable in spite of the volition of the allottee. But that does not enable the Court to hold that the condition that an allotment to the member is subject to his possessing the qualification to be a member of the cooperative society or that a voluntary transfer by him could be made only to the society itself to another person qualified to be a member of the society and with the consent of the society could straight away be declared to be an absolute restraint on alienation and consequently an interference with his right to property protected by Article 300A of the Constitution of India. We are, therefore, satisfied that the finding that the restriction placed on rights of a member of the Society to deal with the property allotted to him must be deemed to be invalid as an absolute restraint of alienation is erroneous. The said finding is reversed.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]17. It appears to us that unless appropriate amendments are brought to the various Cooperative Societies Acts incorporating a policy that no society shall be formed or if formed, membership in no society shall be confined to persons of a particular persuasion, religion, belief or region, it could not be said that a society would be disentitled to refuse membership to a person who is not duly qualified to be one in terms of its bye-laws.bye-laws.19. It is true that it is very tempting to accept an argument that Articles 14 and 15 read in the light of the preamble to the Constitution of India reflect the thinking of our Constitution makers and prevents any discrimination based on religion or origin in the matter of equal treatment or employment and to apply the same even in respect of a co-operative society. But, while being thus, tempted, the Court must also consider what lies behind the formation of co-operative societies and what their character is and how they are to be run as envisaged by the various Cooperative Societies Acts prevalent in the various States of this Country. Running through the Cooperative Societies Act, is the theory of area of operation. That means that membership could be denied to a citizen of this Country who is located outside the area of operation of a society. Does he not have a fundamental right to settle down in any part of the country or carry on a trade or business in any part of the country? Does not that right carry with it, the right to apply for membership in any cooperative society irrespective of the fact that he is a person hailing from an area outside the area of operation of the society? In the name of enforcing public policy, can a Registrar permit such a member to be enrolled? Will it not then go against the very concept of limiting the areas of operation of cooperative societies? It is, in this context that we are inclined to the view that public policy in terms of a particular entity must be as reflected by the statute that creates the entity or governs it and on the Rules for creation of such an entity. Tested from that angle, so long as there is no amendment brought to the Cooperative Societies Acts in the various States, it would not be permissible to direct the societies to go against their bye-laws restricting membership based on its own criteria.The argument that public policy is as reflected by the constitutional guarantees, which govern rights and obligations has to be approached with caution. It will be easy for State Legislatures to provide in their respective Co-operative Societies Acts that no society could be formed or registered under the Act as confined to a group, a sex, a religion or members of a particular persuasion or way of life. But that is different from saying that in the name of open membership, subject to its bye-laws contemplated by the relevant provisions of the Act, a direction could be issued to ignore the bye-laws and to admit a person who is not qualified to become a member. Moreover, what is public policy in the context of a co-operative society got registered by certain persons coming together and laying down a qualification for membership in that society, is a question that has to be considered essentially in the context of the availability of such a right in India to form such associations and the absence of a prohibition in that behalf contained in the Co-operative Societies Act and the Rules. In fact, the Act and the Rules contemplate classification of a society and even there, no prohibition has been indicated in respect of the confining of the membership to a class of people. The decisions of the Bombay High Court relied on by counsel for the respondent, in our view, have proceeded on the basis of the concept of open membership without giving adequate importance to the provision in the very section that the open membership is subject to bye-laws of the society or the qualification prescribed for membership in the society. In that context, it is not possible to import ones inherent abhorrence to religious groups or other groups coming together to form, what learned counsel for the respondent called ghettos. That is certainly an important aspect but that is an aspect that has to be tackled by the legislature and not by the authorities under the Act directing the co-operative society to go against its own bye-laws or by the courts upholding such orders of the authorities, based on presumed public policy when the Act itself does not warrant it or sanction it.It is true that in secular India it may be somewhat retrograde to conceive of co-operative societies confined to group of members or followers of a particular religion, a particular mode of life, a particular persuasion. But that is different from saying that you cannot have a co-operative society confined to persons of a particular persuasion, belief trade, way of life or a religion. A co-operative society is not a state unless the tests indicated in Ajay Hasia are satisfied. There is no case here that the appellant society satisfies the tests laid down by Ajay Hasia so as to be considered to be a state within the meaning of Article 12 of the Constitution. The fundamental rights in Part III of the Constitution are normally enforced against State action or action by other authorities who may come within the purview of Article 12 of the Constitution. It is not possible to argue that a person has a fundamental right to become a member of a voluntary association or of a co-operative society governed by its own bye-laws. So long as this position holds, we are of the view that it is not possible, especially for a Registrar who is an authority under The Co-operative societies Act, to direct a co-operative society to admit as a member, a person who does not qualify to be a member as per the bye-laws registered under the Act. Nor can a Registrar direct in terms of Section 14 of the Act to amend the bye-laws since it could not be said that such an amendment, as directed in this case is necessary or desirable in the interests of the appellant society. What is relevant under Section 14 of the Act is the interests of the society and the necessity in the context of that interest. It is not the interest of an individual member or an aspirant to a membership.27. It is true that in the activities of a society, as envisaged by the bye-laws, the society may acquire rights or incur obligations which may be enforced. But the incurring of such an obligation or the acquiring of such a right, cannot stand in the way of the right to form an association guaranteed by Article 19(1)(c) of the Constitution available to the members of the society who formed themselves into the appellant Society. The position under the Bombay Co-operative Societies Act under which the Society was originally formed was also no different as can be seen from the relevant provisions of the Act. It, therefore, appears to us to be not open to the Registrar or any other authority under The Co-operative Societies Act to direct the Society to go against its own bye-laws and to admit a person to membership as has been sought to be done in this case.The above conclusion would lead us to the question whether there is anything in The Gujarat Co-operative Societies Act and the Gujarat Co-operative Societies Rules restricting the rights of the citizens to form a voluntary association and get it registered under the Co-operative Societies Act confining its membership to a particular set of people recognized by their profession, their sex, their work or the position they hold or with reference to their beliefs, either religious or otherwise. It is not contended that there is any provision in the Gujarat Co-operative Societies Act prohibiting the registration of such a co-operative society. We have already referred to the history of the legislation and the concept of confinement of membership based on residence, belief or community. The concept of open membership, as envisaged by Section 24 of the Act is not absolute on the very wording of that Section. The availability of membership is subject to the qualification prescribed under the provisions of the Act, the Rules and the bye-laws of such society. In other words, if the relevant bye-law of society places any restriction on a person getting admitted to a co-operative society, that bye-law would be operative against him and no person, or aspiring member, can be heard to say that he will not be bound by that law which prescribes a qualification for his membership.31. In our view, the High Court made a wrong approach to the question of whether a bye-law like bye-law No. 7 could be ignored by a member and whether the Authorities under the Act and the court could ignore the same on the basis that it is opposed to public policy being against the constitutional scheme of equality or non-discrimination relating to employment, vocation and such. So long as the approved bye-law stands and the Act does not provide for invalidity of such a bye-law or for interdicting the formation of co-operative societies confined to persons of a particular vocation, a particular community, a particular persuasion or a particular sex, it could not be held that the formation of such a society under the Act would be opposed to public policy and consequently liable to be declared void or the society directed to amend its basic bye-law relating to qualification for membership.Another ground relied on by the Authorities under the Act and the High Court to direct the acceptance of respondent No.3 as a member in the Society is that the bye-law confining membership to a person belonging to the Parsi community and the insistence on respondent No.2 selling the building or the flats therein only to members of the Parsi community who alone are qualified to be members of the Society, would amount to an absolute restraint on alienation within the meaning of Section 10 of Transfer of Property Act. Section 10 of the Transfer of Property Act cannot have any application to transfer of membership. Transfer of membership is regulated by the bye-laws. The bye-laws in that regard are not in challenge and cannot effectively be challenged in view of what was have held above. Section 30 of the Act itself places restriction in that regard. There is no plea of invalidity attached to that provision. Hence, the restriction in that regard cannot be invalidated or ignored by reference to Section 10 of the Transfer of Property Act.