Recently, the Supreme Court examined an important question arising from State reorganization whether a cooperative society registered under a State law automatically becomes a multi-State cooperative society merely because the parent State is bifurcated. The case required the Court to interpret the scope of a statutory deeming provision under the Multi-State Cooperative Societies Act, 2002, and its impact on State control over cooperative institutions.
Brief Facts:
The case arose from the bifurcation of the erstwhile State of Uttar Pradesh in 2000, which led to the creation of the State of Uttarakhand. The cooperative society involved was a sugar factory originally registered under the Cooperative Societies Act, 1912 and later governed by the Uttar Pradesh Cooperative Societies Act, 1965. Following reorganisation, the State Government initiated steps for restructuring and proposed privatisation of certain cooperative sugar mills. Shareholders of the society challenged these actions before the Allahabad High Court, contending that after reorganisation, the society had acquired the status of a multi-State cooperative society under Section 103 of the 2002 Act, thereby excluding State jurisdiction.
Contentions of the Appellant (State):
The counsel for the Appellant (State) contended that Section 103 of the Multi-State Cooperative Societies Act, 2002 does not operate automatically upon State reorganisation. The counsel argued that the decisive factor under the provision is whether the objects of the cooperative society extend to more than one State, and not the residence of members or incidental activities outside the State. The State maintained that the society’s objects and core operations remained confined to Uttar Pradesh even after bifurcation. The counsel further submitted that Uttarakhand never exercised regulatory, financial, or administrative control over the society, and therefore the State continued to have jurisdiction over it.
Contentions of the Respondents:
The counsel for the Respondents argued that following reorganisation, the cooperative society’s functioning was no longer confined to a single State, as its membership and procurement activities extended into Uttarakhand. The counsel contended that Section 103 creates a statutory deeming fiction which comes into effect once a society operates across reorganised States. According to them, continuing regulation by the State Government would amount to impermissible extra-territorial application of State law. On this basis, they asserted that the society had been converted into a multi-state cooperative society, placing it exclusively under Central control.
Observation of the Court:
The Supreme Court observed that a statutory provision cannot be interpreted in isolation and must be read in the context of the overall legislative scheme. Interpreting Section 103 of the Multi-State Cooperative Societies Act, 2002, the Court noted that “a provision cannot be construed in isolation to fit a particular factual situation” and emphasised that the words of a statute “must necessarily draw their meaning from the context and the scheme of the enactment.” In this regard, the Court relied on its earlier decision in Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, reiterating that statutory interpretation must avoid mechanical application.
The Court further observed that the Central Act makes a clear distinction between the “objects of a society” and its “area of operation”, noting that “Section 103 uses the expression ‘object of the society’ being confined to one State.”
The provision does not advert to the “area of operation”.” It held that this distinction cannot be blurred through interpretation, particularly when the statute itself treats the two concepts separately.
Rejecting the argument that the residence of members could determine the nature of the society, the Court observed that “the geographical location or residence of the members is wholly irrelevant for determining whether a cooperative society attains the status of a multi-State cooperative society.” The Court clarified that Section 103 is attracted only when the objects of the society extend to more than one State.
The Bench also referred to Naresh Shankar Srivastava v. State of Uttar Pradesh, noting that the precedent applied only where cooperative societies were actually operating in more than one State, and could not be mechanically extended to cases where the society’s objects remained confined to a single State.
The decision of the Court:
The Supreme Court held that the cooperative society did not automatically become a multi-State cooperative society after State reorganisation. It ruled that Section 103 of the Multi-State Cooperative Societies Act, 2002 applies only when the objects of the society extend to more than one State. Since the society’s objects remained confined to a single State, the High Court’s view was found unsustainable. Accordingly, the appeals were allowed and the writ petitions stood dismissed.
Case Title: The State of Uttar Pradesh through Principal Secretary & Ors. V. Milkiyat Singh & Ors. Etc
Case No.: Civil Appeal No(S).7050-7051 Of 2010
Coram: Hon’ble Mr Justice Vikram Nath and Hon’ble Mr Justice Sandeep Mehta
Counsel for the Petitioner: Senior Advocate Rana Mukherjee, Advocate-on-Record Rohit K. Singh, Advocate Sneha Ahmed, Advocate Oindrila Sen, Advocate Shivansh Pundir, Advocate Yashveer Singh, and Advocate Kartikey Bansal.
Counsel for the Respondent: Advocate-on-Record P. Narasimhan, Advocate-on-Record P. K. Chakravarty, Advocate-on-Record Anuvrat Sharma, Advocate-on-Record Abhishek Kumar Singh, Advocate Abhinav Jaganathan, Advocate Kritika Ranjan, Advocate Pallavi Singh, and Advocate Anamika Yadav.
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