Shivamrut Dudh Utpadak Sahakari ... vs The State Of Maharashtra, ...
2004 Latest Caselaw 218 Bom

JUDGMENT

C.K. THAKKER, C.J.

1. Rule. Mr. C.J. Sawant, Senior Advocate, instructed by Mr. P.M. Patil, Assistant Government Pleader, appears and waives service of notice of rule on behalf of respondent Nos. 1 to 3. Dr. B.R. Naik, Senior Advocate, instructed by Mr. Prashant Naik, appears and waives service of notice of rule on behalf of respondent No. 4. In the facts and circumstances and with the consent of parties, the matter has been taken up for final hearing.

2. This petition is filed by the petitioners for an appropriate writ, direction or order quashing and setting aside orders passed by the State of Maharashtra, Respondent No. 1, under Section 157 read with Section 77A of the Maharashtra Cooperative Societies Act, 1960 (hereinafter referred to as "the Act"), granting exemption under Sections 73-G and 73-H of the Act to Maharashtra Rajya Sahakari Dudh Mahasangh Maryadit, respondent No. 4 herein, as ultra vires, unconstitutional and bad-in-law. A relief is also sought to declare Bye-law No. 7.3.3. of respondent No . 4-Society ultra vires, unconstitutional and unlawful. A prayer is made to direct respondent-authorities to hold election of Board of Directors of respondent No. 4-Society forthwith in accordance with law. During the pendency of the petition, a notification was issued on 14th November, 2003 by the first respondent-State. By way of amendment, therefore, a prayer is made to quash the said notification also.

3. The case of the petitioners before this Court is that they are Co-operative Societies registered under the Act. They are established with primary object of collecting milk from their areas of operation. The petitioner-societies are collecting milk from different Primary Milk Societies who are their members and registered under the Act so that they may get good rates benefitting to milk producers. Respondent No. 1-State of Maharashtra has supervisory control on milk production and its distribution in the State of Maharashtra. Respondent No. 2 is Collector of Mumbai, who has been conferred with the power under the Act to hold election of co-operative societies situated in Mumbai. Respondent No. 3 is Joint Registrar. Cooperative Societies appointed by the first respondent and is having control over the Cooperative Societies. The first respondent has framed guidelines for registration of milk societies in the State. In pursuance of the said guidelines, respondent No. 4 is registered in accordance with the provisions of the Act as the Apex Society having territorial jurisdiction throughout the State.

4. The Respondent No. 1 issued a resolution laying down three tier system of milk societies; (i) Primary Milk Societies at Village level; (ii) Intermediate Societies at Taluka level or District level; and (iii) Federal Society at State level. The petitioners are Intermediate Societies. They collect milk from Primary Societies, Milk Producers and Farmers who are members of Primary Societies and supplying milk to Primary Societies. Primary Societies in turn supply the milk collected by them to Petitioners-Taluka and District Intermediate Societies and the petitioners supply it to respondent No. 4-Apex Society. Respondent No. 1, by issuing a Government Resolution, appointed Board of Directors consisting of 12 members including the Minister of Dairy as the President for a tenure of five years in respondent No. 4. The order was subsequently modified and the number of Directors were increased to 17 and then to 27.

5. Thereafter from time to time Board of Directors of respondent No. 4 was nominated by Respondent No. 1. No election of respondent No. 4 was ever held.

6. On or about November 30, 2000, the petitioners learnt that the State Government had issued an order under Section 77-A read with Section 157 of the Act exempting respondent No. 4 Society from the provisions of the Act. According to the petitioners, no such exemption could have been granted. It is alleged that in the audit for the year 2001-20O2 of respondent No. 4, the Auditor had raised several objections showing various illegalities, irregularities and violation of the provisions of the Act and Rules by Respondent No. 4. One of such serious objections raised was of not holding election of the Board of Directors. Considering the provisions of the Act, Rules and Bye-laws, it was recommended that respondent No. 4 should take steps to hold election. Petitioners also made grievance to the then Chief Minister and requested him to take appropriate steps for holding election. It is asserted by the petitioners that in response to the request, the then Chief Minister ordered to hold election of the Board of Directors of respondent No. 4-Society. Since no action was taken by the respondent-authorities for about one year, the petitioners were constrained to approach this Court by filing the present petition on 7th October, 2003. The main prayer in the petition is to Issue a direction to the State authorities to hold election of Board of Directors of respondent No. 4 in accordance with the provisions of the Act, Rules and Bye-laws.

7. On 30th November, 2002, a decision was taken by the first respondent in purported exercise of powers under Section 77-A by granting exemption to respondent No. 4 from holding election of Board of Directors and by granting extension of nominated Board for six months. A notice was, therefore, sent by petitioners through an advocate to respondent Nos. 2, 3 and 4 on 6th September, 2003 (Exhibit-G) i.e. to Mahasangh, Joint Registrar, Cooperative Societies (Dairy) and Collector of Bombay, requesting them to start election process immediately by announcing election programme failing which the petitioners would take appropriate proceedings in accordance with law. Nothing, however, was done by the respondents.

8. It is also the case of the petitioners that after the petition was instituted on 7th October, 20O3, there was further development. It was stated that the petition was called out for admission hearing on 13th November, 2003 when Additional Government Pleader applied for an adjournment of hearing on the ground that Mr. C.J. Sawant, ex-Advocate General of the State of Maharashtra engaged by respondent No. 1 was to appear in the matter and he was held up before the Full Bench and the matter be adjourned to 17th November, 2003. The prayer was granted by the Court. Taking undue advantage of the said situation between 13th November, 2003 and 17th November, 2003, a decision was taken on 14th November, 2003 by the first respondent-State. In exercise of powers under Section 157 read with Section 73 of the Act, a notification was issued superseding earlier notification and by granting exemption to respondent No. 4 from provisions of Section 73-G and 73-H of the Act and by nominating a Board of Directors for respondent No. 4 to manage its affairs for a period of five years. The said notification is also challenged by the petitioners by an amendment which was granted and carried out.

9. On November 20, 2003, the Division Bench directed the Registry to place the matter on December 2, 2003. It was also recorded that by consent, the petition would be disposed of at the admission stage.

10. Affidavits and further affidavits were filed by the contesting respondents. In the first affidavit dated 18th November, 2003 filed by the Deputy Secretary, Animal Husbandry, Dairy and Fisheries Department, it was stated that though the petitioners had sought direction to hold election of the Board of Directors of respondent No. 4, such elections were "not possible". The circumstances for "impossibility" of holding such elections have been highlighted in the affidavit. It is inter alia, stated that though respondent No. 4 was registered in 1967, it started functioning only in 1983-84, it had a small staff of about 1500 employees supplying nine lakhs litres milk per day and was earning profit. But there was another dairy, Aarey Milk Dairy run by the State Government having five dairies and supplying fourteen lakhs litres milk but running at a loss for several years; in 1991 or thereabout a proposal to merge Aarey Dairy with respondent No. 4 was considered, but it could not be effected on account of opposition of about 9000 employees though their service conditions were to be protected; Aarey Dairy was, therefore, interested in transferring all its five dairies to respondent No. 4. The Respondent No. 4 and its members were willing to take over the said Dairies. It is stated that in the public interest, therefore, a notification was issued on 14th November, 2003, keeping in mind the interest of milk producers, dairy societies as well as consumers; and hence, as a matter of policy, the State Government decided to have a nominated Board of Directors which would look after the management of respondent No. 4. It is stated that the State Government exercised the power in accordance with the provisions of Section 157 read with Section 73 of the Act and in supersession of its earlier notification dated 6th June, 2003 granted necessary exemption to respondent No. 4 from the provisions of Sections 73-G and 73-H of the Act. The said action was in accordance with law and could not be objected; the function of Issuance of notification dated 14th November, 2003 was in the nature of legislative function and a subordinate piece of legislation. Such action, therefore, could not be challenged in a petition; the policy decision was in consonance with the Preamble of the Act for providing "an orderly development of the cooperative movement in the State" and also in accordance with the Directive principles of State policy enunciated in Part-IV of the Constitution.

11. An additional affidavit in reply was also filed by the deponent after the petition was amended contending that reliance placed on Clause 13 of the Letter of Understanding of "Operation Flood III Programme" with the Government of India and National Dairy Development Board ("NDDB" for short) was not well founded and was rot attracted. It was stated that the said scheme and programme came to an end on 31st March, 1996. It was also denied that obligation was cast on respondent No. 1 or respondent No. 4 to hold election and by granting exemption, the principles relating to holding of election were violated. It was denied that there was any attempt on the part of the respondents to over-reach the orders of the Court. It was asserted that the proposal for issuing notification under Section 157 of the Act was under consideration of the Government and an action was taken in bona fide exercise of power. It was neither arbitrary nor mala fide. The notification was issued in public interest. It did not interfere with the right of the petitioners nor it took away the 'heart and soul' of the co-operative movement. Since action was legislative, it did not contemplate an opportunity of hearing nor the principles of natural justice could be invoked.

12. Two affidavits in reply were filed by General Manager of respondent No. 4 opposing the prayers made in the petition. It was contended that the matters relating to election are not "common law rights." They are merely statutory rights. No fundamental right, therefore, can be claimed by the petitioners in the matter of election. According to respondent No. 4, the impugned action was strictly in accordance with law and had been taken in larger public interest and could hot be questioned. It was stated that respondent No. 4 had taken huge loans from NDDB of about Rs. 90 crores. Respondent No. 4 was principal borrower and the State Government was a guarantor. Since working of respondent No. 4 was satisfactory and it was making profits, there was a move by the State Government to merge Aarey Colony with Respondent No. 4. Accordingly, an action was taken and the petitioners had no right to object the said action. The notification dated 14th November, 2003, according to Respondent No. 4 also, is legislative in character and could not be challenged on the ground of violation of principles of natural justice. The relevant factors have also been highlighted in the affidavit and a prayer is made to dismiss the petition.

13. Respondent No. 4 has also filed an additional affidavit after the petition was attended reiterating what was stated in the earlier affidavit in reply. It was contended that there was no Infirmity in the notification dated 14th November, 20O3. According to respondent No. 4, Memorandum of Understanding was never implemented and it ceased to operate after 1996. Even otherwise, it never interfered with plenary legislative power of the State Government to issue notification under Section 157 read with Section 73 of the Act. Such power, therefore, could be exercised by the State Government. The notification could not be said to be mala fide and when after considering the relevant facts and circumstances, a policy decision was taken by the Government, the same calls for no interference. It was, therefore, prayed that the petition deserves to be dismissed.

14. We have heard Mr. N.V. Walawalkar with Mr. Dilip Bodake for the petitioners, Mr. C.J. Sawant, Senior Advocate, instructed by Mr. P.M. Patil, Assistant Government Pleader, for respondent Nos. 1 to 3 and Dr. B.R. Naik, Senior Advocate, with Mr. Prashant Naik for respondent No. A.

15. The learned counsel for the petitioners raised various contentions. It was submitted that though respondent No. 4 was established and constituted as early as in 1967, no election at all has been held till to-day. The said action is clearly illegal, unlawful and violative of basic concept of co-operative movement. It was submitted that several requests had been made to the State Government to hold election of Board of Directors of respondent No. 4 but the authorities have not accepted the said legal and reasonable demand. As per the Memorandum of Understanding arrived at between the State Government and respondent No. 4, such an election was required to be held and there should be elected Board of Directors, and not permanently nominated Board. Moreover, Auditor has also highlighted serious irregularities and one of such irregularities related to non-holding of election of Board of Directors. It was urged that normal rule would be applicability of the Act to all co-operative societies. It is an exception to grant exemption from operation of the Act. In the instant case, unfortunately exemption was granted to respondent No. 4 from the provisions of the Act and from holding election of Board of Directors indiscriminately. The action has been taken very lightly and casually without application of mind. Other measures, actions and steps under the Act which could have been taken have neither been taken nor even considered by the first Respondent. The petitioners, who are the members of respondent No. 4, were never consulted. They were not even informed. Thus, there is non-observance of principles of natural justice and fair play. The notification dated November 14, 2003 is illegal, unlawful and has been issued in colourable exercise of power with mala fide intention and oblique motive to deprive the petitioners-Intermediate Societies- from getting Board of Directors of Respondent No. 4 elected and to be managed through democratic method. The action is highly objectionable as the first respondent had taken undue advantage of the situation, in that though the petition was filed on 7th October, 2003 and was called out for hearing on November 13, 2OO3, an adjournment was sought on behalf of the first respondent-State informing the Court that a Senior Advocate was to appear on behalf of the State and as he was busy before the Full Bench, the matter be adjourned to 17th November, 2003. But for such prayer, the court would have proceeded with the matter. The prayer was granted and the matter was adjourned to 17th November, 2003 and between 13th November and 17th November, 2003, the impugned notification was issued by the first respondent on 14th November, 2O03. It was not at all appropriate and befitting of the State Government to issue notification when the matter was sub judice and the action of the State Government of not holding election of Board of Directors of respondent No. 4 was subject matter of petition. Thus, apart from any other ground, on that ground alone, notification dated 14th November, 2003 deserves to be quashed and set aside. It was also urged that from the very date 6f inception of respondent No. 4, there is nominated Board of Directors. Even if it is assumed that respondent No. 4 started functioning from 1983-84, for about two decades, the first respondent did not think it fit to hold election of Board of Directors. Such an action cannon be allowed as it would be contrary to all canons of justice and fair play.

16. On merits, it was submitted that the notification dated 14th November, 2003 cannot be said to be legal or lawful. The factors weighed with the State Government are neither relevant nor germane, members of respondent No. 4 were never consulted, they were not made even aware of such a decision, there was no earthly reason for the first respondent for granting exemption to respondent No. 4 from the provisions of Sections 73-G and 73-H of the Act and by nominating Board of Directors to manage the affairs of respondent No. 4 for five years, Aarey Dairy cannot be ordered to be merged with respondent No. 4 particularly keeping in view the financial position of Aarey Dairy vis-a-vis respondent No. 4. There was no concurrence of respondent No. 4 as observed in the notification. All the members of the Board of Directors of respondent No. 4 were nominated members and obviously they succumbed to the pressure of respondent No. 1 and the decision, therefore, cannot be said to be voluntary and after application of mind. In the affidavits in reply filed on behalf of the State, certain additional reasons have been given for taking the impugned action. It is settled law that no additional factors, grounds or reasons can be taken into account for upholding the validity of the notification. On all these grounds, therefore, the notification deserves to be quashed and set aside and the petition deserves to be allowed.

17. On behalf of the respondents, on the other hand, it was submitted that the petitioners have not made out even a prima facie case. The notification dated 14th November, 2003 is in the nature of a policy decision taken by the State Government. Such a decision could not be challenged in a petition and this Court in exercise of extraordinary jurisdiction under Article 226 of the Constitution would not interfere with it. Moreover, the State Government has exercised power of exemption under Section 157 of the Act. Such power is legislative in character. Exercise of legislative power -primary or delegated- is not subject to observance of principles of natural justice. Only thing which can be seen is, whether the power has been exercised bona fide. Since, in the Instant case, the Government was satisfied that considering the facts and circumstances in their entirety, exemption was required to be granted, a notification has been issued and the petitioners cannot make grievance against such action. It was also contended that electoral rights are neither fundamental rights nor common law rights. They are merely statutory rights. When a statute confers right to vote, right to contest, right to get elected, etc. the rights can be curtailed or taken away by statutory provision and no complaint can be made, if an action is taken by complying with the provisions of law. It was also urged that the Act has been enacted with the object of providing orderly development of co-operative movement in the State. To ensure said orderly development of cooperative movement, notification dated 14th November, 2003 has been issued. For the reasons recorded in the said notification, such notification cannot be held to be illegal or unlawful. It was submitted that respondent No. 1 is a class by itself. There is no other co-operative society like respondent No. 4 in the State. As such, it stands on a totally different footing and cannot be compared with other co-operative societies. it was also submitted that the State Government wanted to protect interests of milk producers, dairy societies and consumers. Such an object is in the fulfillment of the provisions of the Act and not in any manner derogatory. From the notification, it is clear that there was a tripartite agreement between respondent No. 4, NDDB and the first respondent-State Government. Under the said agreement, NDDB had sanctioned and disbursed substantial amount of loan to members of respondent No. 4. Thus, respondent No. 4 is a borrower of NDDB and the State Government is a guarantor. An amount of about Rs. 85 crores is due and payable to NDDB, which is a Government of India Undertaking and respondent No. A has to pay the said amount. Since the Government is the guarantor and there exist a parallel dairy organisation viz. Aarey Dairy, which is a State Government organisation running at a loss since last several years having nearly 9000 employees, it was thought proper and advisable fey the State Government to merge Aarey Dairy with Respondent No. 4. The action was taken in concurrence of respondent No. 4 and petitioners cannot challenge the said decision when respondent No. 4 has no objection to such merger. It was also submitted that the provisions of Section 157 of the Act are explicitly clear. They authorise the State Government to exempt "any society" or class of societies from any of the provisions of the Act or the Rules made thereunder. Constitutional validity or vires of the said provision has not been challenged by the petitioners. Thus, while deciding the question, the Court will read the provisions of Section 157 of the Act and decide whether the said section empowers the State Government to issue such notification and grant exemption. If the reply is in the affirmative, the matter must end. The language of Section 157 leaves no room of doubt that such a power has been conferred on the State Government. The notification, on that ground also, therefore, cannot be held bad in law. Reasons for issuance of notification and grant of exemption have been recorded in the notification itself. Moreover, affidavits have been filed by respondent No. 1, State Government as well as by respondent No. 4-Soclety. From those affidavits also, it is, amply clear that the power has been exercised by the State Government bona fide, keeping in view the relevant and valid considerations. Apart from the fact that there is no miscarriage of justice, the action has been taken in furtherance of justice and the petition deserves to be dismissed.

18. Before we deal with rival contentions of the parties, relevant provisions of the Act may be considered. The Preamble of the Act states that "with a view to providing for the orderly development of the co-operative movement in the State of Maharashtra in accordance with the relevant directive principles of State policy enunciated in the Constitution of India", it was thought expedient to consolidate and amend the law relating to co-operative societies in the State. Chapter VII deals with management of societies. Section 73 provides for constitution of Committees, their powers and functions. It enacts that the management of every society shall vest in a Committee, constituted in accordance with the provisions of the Act, the Rules and Bye-laws and shall exercise such powers and perform such duties as may be conferred or imposed by the Act, the Rules or Bye-laws. The term "Committee" is defined in Section 2(7) of the Act as "the Committee of management or Board of Directors or other directing body, by whatever name called, in which management of the affairs of the society is vested under Section 73. Section 73-G makes provision for conduct of election to Committees and of Officers of certain societies and term of office of members of such Committees. Section 73-H provides for responsibility of Committee to hold election before expiry of term. It also states that where there is a wilful failure on the part of the Committee to hold election before the expiration of its term, the Committee shall cease to function and the Registrar may either himself take over the management of the society or appoint an Administrator. The Registrar or Administrator shall then hold election within a period of six months and the Committee shall be constituted before expiration of the said period. Section 77-A of the Act provides for appointment of members of Committee, new Committee or Administrator, where there is failure to elect member to constitute Committee or where Committee does not enter upon office. Section 157 of the Act is in Chapter XIV (Miscellaneous) and authorises the State Government to exempt any society or class of societies from any of the provisions of the Act or Rules made thereunder. It reads thus:

"157. Power to exempt societies from provisions of the Act.- The State Government may, by general or special order, exempt any society or class of societies from any of the provisions of this Act, or of the rules made thereunder, or may direct that such provisions shall apply to such society or class of societies with such modification not affecting the substance thereof as may be specified in the order.

Provided that, no order to the prejudice of any society shall be passed, without an opportunity being given to such society to represent its case."

19. It is no doubt true that in purported exercise of power under Section 157 of the Act, the first respondent has issued notification impugned in the present petition on 14th November, 2003. The said notification reads thus:

ORDER Agriculture, Animal Husbandry, Dairy Development and Fisheries Department, Mantralaya Annexe, Mumbai-400 032.

Dated the 14th November, 2003

Whereas, the Maharashtra Rajya Sahakari dooth Mahasangh Maryadit, Mumbai (hereinafter referred to as "the said society" ) registered in the year 1967 under the Maharashtra Co-operative Societies Act, 1960 (Mah. XXIV of 1961) (hereinafter referred to as "the said Act"), is one of its kind and holds unique position as a Dairy Federation having the area of operation as the entire State of Maharashtra;

AND WHEREAS, the Board of Directors in which the management of the affairs of the said society is vested, is constituted under Section 73 of the said Act;

AND WHEREAS, Section 73 of the said Act contemplates such constitution in accordance with the Act, rules and bye-laws made thereunder;

AND WHEREAS, the said society from its very inception has a nominated Board of Directors duly nominated by the State Government for such period, as notified therein;

AND WHEREAS , by Government Resolution, Agriculture, Animal Husbandry, Dairy Development and Fisheries Department No. MLK :801/C.R. 161/2001 (Part-I) padum-10, dated the 6th June 2003, issued under Section 157 of the said Act nominating a Board of Directors of the said society consisting of . -

(1) The Minister for Dairy Chairman Development (2) The State Minister for Vice-

Dairy Development          Chairman
(3) Shri Shridharrao
Shankarrao Thakre,
Chairman,Wardha Jilha
Dudh Utpadak Sangh,
Wardha, representing
dairy co-operative
societies in the State          Member
(4) The Principal Secretary  Member
( A.D.F. ) 
 

till a new board of Directors is constituted, or till further orders, whichever occurs earlier;
 

AND WHEREAS, the area of operation of the said society is the entire State of Maharashtra with 71 members, who are Federations either Co-operative Dairies at District level or Taluka level or Dairy Co-operative Societies registered or societies deemed to be registered either the said Act or the Multi State Co-operative Societies Act, 2002;
 

AND WHEREAS, there exists a tripartite agreement between the said society, the National Dairy Development Board ( NDDB ) and the State Government, under which the National Dairy Development Board has sanctioned and disbursed certain loans to members of the said society and the said society is regarded as a borrower of National Dairy Development Board and the State government as a guarantor in respect thereof;

AND WHEREAS, an amount of about Rs. 85 crores is now due to the National Dairy Development Board, which is the Government of India undertaking, wherein the said society is borrower and the State Government is guarantor;

AND WHEREAS, out of the members of the said society, who have availed of the said loan facility from National Dairy Development Board, some societies have gone into liquidation or rehabilitation and recovery of dues from such societies of large amounts, is thrown in jeopardy;

AND WHEREAS, there exists a parallel Dairy Organisation, viz. Aarey Milk Dairy, which is the State Government organisation;

AND WHEREAS, while the said society on an average collects milk and sells or converts milk and sells in open market to retailers in the city of Mumbai and elsewhere to the tune of nine lakh litres per day and, as against the same, similarly, the Aarey Milk Dairy etc. also collects milk and sells or converts Bilk and sells in open market to retailers, in the city of Mumbai and elsewhere to the tune of fourteen lakh litres per day;

AND WHEREAS, the employees of the said society are nearly 1500 and is running at a profit for the last several years;

AND WHEREAS, the employees of the said Aarey Milk Dairy etc. are nearly 9000 and is running at a loss for the last several years;

AND WHEREAS, with the concurrence of the said society a decision is taken by the State Government to merge Aarey silk Dairy with the said society;

AND WHEREAS, partial implementation of the said merger policy of the State Government has taken place and the remaining policy of such merger is being carried out and will take some time to complete the same;

AND WHEREAS, in public interest, it is necessary to issue an order under Section 157 of the said Act, keeping the control over the management of the said society in the hands of a nominated Board of Directors of the said society, with such nominees being the nominees appointed by the State Government for some time, giving adequate representation to dairy societies in the State;

AND WHEREAS, in such nominated Board of Directors, larger representation to the Co-operative Milk producers society is sought to be given by the Government;

AND WHEREAS, the said society which is peculiar in character, in the sense that no other similar co-operative society exists in the State, and, in the circumstances stated above, there is need to have a Board of Directors in which the management of the affairs of the said society is vested by the State Government;

AND WHEREAS, it is necessary to issue an Order in public interest under Section 157 of the said Act, constituting a Board of Directors of the said society as required by the provisions of the said Section 157;

NOW, THEREFORE, in exercise of the powers conferred by Section 157 read with Section 73 of the said Act and in supersession of Government Resolution, Agriculture, Animal Husbandry, Dairy Development and Fisheries Department No. MLK 1801/C.R. 161/2001/(Part-I)/padum-10, dated the 6th June, 2003, the Government of Maharashtra hereby exempts the said society from the provisions of Sections 73-G and 73-H of the said Act; and hereby nominates the following Members to be the Board of Directors to manage the affairs of the said society for a period of five years with effect from the date of issue of the Order or till the elected Board of Directors is constituted after the elections of the said society, whichever is earlier. The Board of Directors shall consist of the following members, namely:-

(1) the Minister for Dairy Ex-officio Development, Chairman;

(2) the State Minister for   Ex-officio
Dairy Development,            Vice-
            Chairman
(3 ) Shri Shridharrao
Shankarrao Thakre,
Director, Wardha Jilha
Dudh Utpadak Sangh,
Wardha, representing
Dairy Co-operative
Societies in the State           Member
(4) The Principal Secretary   Member
( A.D.F. )
(5) not more than four members
to be nominated by the State
Government from Dairy
Department or ancillary
Departments of the State,
(6) not more than twelve members
to be nominated by the State
Government, from amongst
representatives of Dairy
Co-operative Societies as may
be determined by the State
Government. 
 

By order and in the name 

of the Governor of 

Maharashtra.
 

Sd/- (J.P. Dange) 

Principal Secretary to Government 

 

20. It is pertinent to note that before the notification dated November 14, 2003 was issued, the petitioners have approached this court The petition was instituted on October 7, 2003. The complaint of the petitioners before this Court was that even though respondent No. 4-Society was established before more than three decades, till today no election at all has been held. Such an action cannot be said to be in consonance with law. It is only during the pendency of the petition that notification dated 14th November, 2003 was issued which is also challenged. As observed earlier, the Court at the initial stage clarified that the matter would be taken up for final disposal and on that basis submissions were made by the learned counsel for the respective parties.

21. Now, true it is that right to vote, right to contest election and right to get elected are merely statutory rights. They are neither common law rights nor fundamental rights. The learned counsel for the petitioners have conceded this legal position. They, however, contended and, in our opinion, rightly, that where a statute is enacted by a competent legislature providing for holding of elections and conduct and management of society by elected body, it is not open to the State Government to totally ignore the provisions of law and to nominate Board of Directors or continue one and the same Board of Directors without holding election overlooking and keeping aside those provisions. Such act would be without authority of law and would destroy the basic and primary object of enacting the law. Since the object of the Act is to develop co-operative movement in the State, it can be developed only by elected representatives of the society. Necessary provisions have, therefore, been made in the Act for holding election. It is also provided that election should be held in accordance with the provisions of the Act, Rules and Bye-laws. It is thus the intention of the legislature that these provisions must be complied with and observed in letter and spirit. It is, therefore, provided that if there is default or failure on the part of the societies in holding election, the officers appointed by the State Government would take necessary steps for holding election. A bald assertion of the State Government that election may not be held and exemption can be granted under Section 157 of the Act at any time, hence, cannot be upheld.

22. The point is also covered by several decisions of the Supreme Court. In Chandrika Jha v. State of Bihar and Ors., , under the Bihar and Orissa Co-operative Societies Act, 1935, the Registrar was empowered to nominate first Board of Directors. In exercise of the said power, a Committee of management was nominated for a period of six months or till further orders. During the period of six months, the election of the Board of Directors was to be held. The nomination of the first Board of Directors, however, was extended from time to time on the basis of the orders issued by the Chief Minister of the State at the instance of one of the Directors who had a direct approach to the Chief Minister. The order of the Chief Minister extending the term of the Board of Directors by usurping statutory functions of the Registrar under the Eye-laws was challenged.

23. Upholding the challenge and quashing and setting aside the action of the State Government, the Supreme Court observed:

"The case illustrates an unfortunate trend which has now become too common these days in the governance of the country. The appellant who was nominated to be the Secretary of the first Board of Directors and is apparently a political person had a direct approach to the seat of power viz., the then Chief Minister Dr. Jagannath Misra. The result was that the first Board of Directors as constituted by the Registrar kept on flouting with impunity the repeated directions of the Registrar, Co-operative Societies in that behalf, since they were not interested in holding the general meeting for the purpose of election of the Board of Directors. Instead of complying with the directions of the Registrar, the appellant by using the letterhead of the District Congress Committee(I), Vaishalli and after bypassing the Registrar of Co-operative Societies and all other officials directly approached Dr. Jagannath, Misra, the then Chief Minister of Bihar and got the term of the first Board of Directors extended from time to time and the election of the new Board postponed without any lawful justification

The Court proceeded to state:

"The short question that falls for determination is whether the then Chief Minister was entitled to usurp the functions of the Registrar of Co operative Societies under bye-law 29. Further, the question is whether the Minister was entitled to issue a direction to the Registrar of Co operative Societies to reconstitute the nominated Board of Directors under bye- law 29; and if so, whether he could go further and assume the functions of the Registrar and forward to him a list of names to be nominated on the reconstituted Board. Under bye-law 29, it is the function of the Registrar to constitute the first Board of Directors which necessarily carries with it the Incidental or ancillary power to reconstitute such Board when he is satisfied that the circumstances attendant so require."

The Court commented that the Chief Minister dealt with the question as if it was an executive function of the State Government and thereby clearly exceeded his powers in usurping the statutory functions of the Registrar by extending term of the first Board of Directors from time to time. According to the Court, neither the Chief Minister nor the Minister for Co-operation or Industries had the power to arrogate to himself the statutory functions of the Registrar. The act of the Chief Minister in extending the term of the Committee of Management from time to time was not within his power. Such action was also violative of provisions of Rules and Bye-laws. The Court stated:

The Act as amended from time to time was enacted for the purpose of making the cooperative societies broad-based and democratizing the Institution rather than to allow them to be monopolized by a few persons. The action of the Chief Minister meant the very negation of the beneficial measure contemplated by the Act."

24. In Babaji Kondaji Garad and Ors. v. Nasik Merchants Co-operative Bank Ltd., the question before the Apex Court related to construction of provisions for reservation of seats for Scheduled Castes or Scheduled Tribes. The Court observed that the provision must receive construction which would achieve the object of the Act. Considering the provisions of Section 73 of the present Act, the Court stated:

"A co-operative society is to be governed by a committee elected by democratic process. This democratic process must permeate in filling in reserved seats otherwise the committee would not enjoy a representative character. One can draw light from the provisions contained in Part XVI of the Constitution and especially Articles 330 and 332 which provide for reservation of seats in the House of People and in the Legislative Assembly of every State for the Scheduled Castes and the Scheduled Tribes. The felt necessities of the time and the historical perspective of class domination led to the constitutional guarantee of reservation so that India can be truly a Sovereign Socialist Secular Democratic Republic. A republic is made up of men and institutions. That is why democratic institutions have to be set up by providing for election and to make the democratic institutions truly representative, reservation of seats for those who on account of their backwardness, exploitation and unjust treatment both social and economic cannot obtain representation because of the class domination. This is the genesis of reservation. Therefore any provision making for reservation must receive such construction as would advance the purpose and intendment underlying the provision making reservation and not thwart it."

It was observed by the Court that the methodology of filling in reserved seats employed in Section 73-B provided a clue to its correct construction and there should be no doubt that opportunity must be provided for filling in seats by election. It is the failure of the election machinery to fill in the seats which would enable the concerned authority to fill in the seats by appointment or co-option.

25. It was contended on behalf of the authorities that the object underlying Section 73-B could as well be fulfilled by co-opting two persons eligible to fill in reserved seats. Negativing the contention the Court stated:

"If this approach is ever accepted, it would strike a death-knell of the democratic principle of giving the constituency the right to elect its representatives and it would be usurped by a coterie of certain elected persons. From enjoying a direct representation, the constituency would move backwards and the process of regress would be that instead of direct election by the constituency which is the statutory right granted by Section 73-B, the right to select would be usurped by the Board of Directors who would decide who should be co-opted to fill in the reserved seats, Such a retrograde movement is undemocratic. The struggle to get direct representation cannot be thwarted in this manner. This becomes manifest from the fact that the power to co-opt the members to fill in reserved seats is conferred on the members of the committee i.e. on the Board of Directors. To tersely put the issue in focus, the method of co-option, denudes the power of the constituency to elect members and is usurped by a small body like the Board of Directors. The outcome is not difficult to gauge. The Committee will co-opt members who would be their puppets, totally ignoring whom the constituency i.e. the general body of members would have elected. If this is the effect of co-option, it could never be equated with election much less accorded precedence over election by the general body of the members that is the constituency."

26. In Smt. Damyanti Naranga v. the Union India and Ors., , the Supreme Court stated that if the law is passed not merely for ensuring proper management and administration of the property but for depriving the persons, in whom the property vested of their right to hold the property, the law cannot be justified as a reasonable restriction under Article 19(5) of the Constitution.

27. In Asom Rastrabhasa Prachar Samiti, Hedayatpur-Gauhati-3 and Anr. v. State of Assam and Ors., , constitutional validity of Section 3 of Asom Rashtrabhasha Prachar Samiti (Taking over Management and Control) Act, 1984 was challenged. The Court observed that when the Act was enacted to meet a temporary contingency for taking over the management for some time, it ought to have provided for restoration of the elected body in due course. Since the Act was silent on that point and although the Act was temporary Act, provisions thereof were violative of Article 19(1)(c) of the Constitution as it infringed fundamental right of the members to manage the institution. The Court also noted that though in the heading of the Act it was stated that it was an act to provide for "temporary transfer of the management and control of the affairs of the A.R.B.P.S. from the Byabas thapika Sabha Karyapalika", it was just an 'eye wash' because the management of the Samiti was not in proper hands, it was not a temporary arrangement, and after the Act in 1984, at no point of time, normal functioning had been restored by holding election in accordance with the constitution of the society. If the Act was enacted to meet a temporary contingency for taking over the management temporarily, it could have provided for restoration of elected body in due course. As it was not done, the action could not be upheld. The Government had not chosen to take any step whatsoever to restore the society back to its elected authorities and office-bearers. There was, therefore, no option but to hold the Act ultra vires.

28. In State of Punjab and Ors. v. Bhajan Singh and Anr., , interpreting the provisions of the Punjab Municipal Act, 1911 and Punjab State Election Act, 1994, the Apex Court held that election process could not be scuttled. The Court stated:

"Election process was scuttled and the democratic values throttled by a bureaucrat who happened to be the Principal Secretary of the Local Government Department (hereinafter referred to as "the said Secretary") of the State of Punjab at the relevant time. Flouting all norms, violating statutory provisions and showing scant respect for the principles of law, the said Secretary deprived Respondent 1, the elected representative of the people to perform his duties firstly as member and then as the President of the Municipality, obviously to oblige his political opponents who incidentally happened to belong to the ruling parties (Shiromani Akali Dal and BJP ) in the State of Punjab. Inaction attributable to the said secretary in performance of his statutory obligations and instead ill- action taken by him is a matter of concern not only for Respondent 1 but all those who believe in the rule of law and the preservation, development, and conservation of democratic institutions with their values in the country. There is no gainsaying that free, fair, fearless and impartial elections are the guarantee of a democratic polity. For conducting, holding and completing the democratic process, not only a potential law based upon requirements of the society tested on the touchstone of experience of the times, but also an independent impartial apparatus for implementing and giving effect to the results of the election is the sine qua non for ensuring the compliance of statutory provisions and thereby strengthening the belief of the common man in the rule of law, assured to be given to the people of this country. Any attempt made to weaken the system, particularly when its intention is likely to affect the socio-politico fabric of the society, if not checked and curtailed, may result in consequences which could not be else but disastrous to the system. No person, much less a civil servant, can be permitted to frustrate the will of the people expressed at the elections, but his acts of omission and commission. The law relating to the elections is the creation of the statute which has to be given effect to strictly in accordance with the will of the legislature."

29. The Court also observed that ever, where power is conferred by competent legislature, it must be exercised, keeping in mind the reject, duration and other attenuating circumstances in mind.

30. In D.C. Wadhwa v. State of Bihar, , a Professor of Politics "deeply interested in ensuring proper implementation of the constitutional provisions" approached the Apex Court against the practice of issuing promulgation of Ordinance by the State of Bihar on the large scale being fraud on the Constitution. New, it cannot be gainsaid that Article 213 of the Constitution enables the Governor to issue an Ordinance but as such Ordinances were issued indiscriminately on large scale, deprecating the practice and upholding the agreement of the petitioner, the Court stated:

"It is settled law that a constitutional authority cannot do indirectly what it is not permitted to do directly. If there is a constitutional provision inhibiting the constitutional authority from doing an act, such provision cannot be allowed to be defeated by adoption of any subterfuge. That would be clearly a fraud on the constitutional provision."

(emphasis supplied)

31. No doubt, Mr. Sawant submitted that the action taken by the State Government of issuing notification under Section 157 of the Act is legislative in character. Such an action, according to Mr. Sawant, cannot be called in question, unless it is without authority of law or malicious. For the said proposition, he invited our attention to several decisions including decisions of the Apex Court in (i) H.C.Suman and Anr. v. Rehabilitation Ministry Employees' Co-operative House Building Society Ltd., New Delhi and Ors., , (ii) Ramprasad Wamanrao Kadam Bordikar v. State of Maharashtra and Ors., 1996 (1) Mh LJ 983, and (iii) Crompton Greaves Ltd. v. State of Maharashtra and Ors., .

32. It was also submitted that a court of law would be slow to interfere with such actions. It would uphold the right of the State Government which has been conferred on it by a competent legislature. It was urged that power to exempt can be granted by a Legislature and no objection can be raised against exercise of power by a competent authority. Reference in this connection was made to a decision of the Supreme Court in State of West Bengal and Anr. v. Rash Behari Sarkar and Anr., .

33. So far as the proposition of law is concerned, there cannot be two opinions. The learned counsel for the petitioners also did not dispute the settled legal position. He, however, submitted that in the instant case, the power has been exercised illegally, arbitrarily, capriciously and with oblique motive. It was submitted that precisely keeping in view the well settled legal principle, the petitioners have not challenged vires of Section 157 of the Act which empowers the Government to grant exemption in favour of a particular society or class of societies

34. It was then argued by Mr. Sawant that the Court may consider that this is a policy matter or a policy decision. Such matters though are subject to judicial review by this Court under Article 225 of the Constitution, normally, the Court would not interfere with policy decisions. The counsel relied upon the decisions of the Supreme Court in (i) Registrar of Co-operative Societies, Trivandrum and Anr. v. K. Kunjabmu and Ors., (1960) 1 SCC 340, (ii) D.C. Bhatia and Ors. v. Union of India and Anr. and (iii) Bhavesh D. Parish and Ors. v. Union of India and Anr., . It was also submitted that power to amalgamate or merge is not violative of Article 19 of the Constitution. Such a provision has been held to be in consonance with law in Daman Singh and Ors. v. State of Punjab and Ors., . It was, therefore, submitted that the action does not call for interference. Moreover, relevant circumstances have been kept in mind and have been reflected in notification itself. The Court in the light of what was stated in the notification coupled with the language of Section 157 of the Act, may not substitute its opinion for the opinion of the Government.

35. We are unable to uphold the argument. As is clear, respondent No. 4 was established as early as in 1967. From the affidavits in reply by respondent No. 1 as well as by respondent No. 4, it appears that it started functioning from 1983-84, but even then, it is in existence and functional since last two decades. It is obligatory on the respondent authorities to hold election in accordance with the provisions of the Act, Rules and Bye-laws. One can understand, if for a temporary period nominated Board of Directors is appointed. Thus, when first Board of Directors was nominated by the State Government, no objection could be raised in principle against such action. But if a process is allowed to continue indefinitely, to us, the grievance of the petitioners is justified that it would make all the provisions relating to election of society nugatory, otiose and meaningless. Unless compelled, a court of law cannot approve an interpretation which would destroy the very purpose of the Act. The rule, therefore, is that a Board of Directors must be elected and not nominated, unless there are exceptional circumstances which must be reflected in the notification. On principle, therefore, the action on the part of the first respondent in not holding election for about twenty years cannot be said to be legal or lawful. In any case, notification dated 14th November, 2003 exempting respondent No. 4 from the provisions of the Act for a further period of five years and of nominating Board of Directors by the State cannot be upheld and must be declared unlawful and ultra vires the power and authority of the State Government.

36. There is another reason also why the notification must be held illegal. The notification itself recites that whereas respondent No. 4 is "running at a profit for the last several years', Aarey Dairy "is running at a loss for the last several years". Thus, respondent No. 4 and Aarey Dairy cannot be said to be similarly situated and cannot be compared. Respondent No. 4 is having employees of about 1500 while Aarey Dairy is having employees of about 9000. In the notification, it was stated that the decision had been taken by the State Government to merge Aarey Dairy with respondent No. 4 society with the concurrence of respondent No. 4.

37. In our opinion, the learned counsel for the petitioners is right in contending that the members of respondent No. 4 society i.e. the petitioners and other intermediate societies were never consulted. Consultation with the society would mean consultation with elected body. In this case, elected body was in existence since the date of inception of respondent No. 4-Society from 1967 or from 1983-84. The contention of respondent No. 1, therefore, that consultation with the society would not mean consultation with members of the society is totally ill-founded and misconceived. The ratio laid down by the Supreme Court in Daman Singh would not apply to the facts of the case. If an elected body is in existence, such body is consulted and a decision is taken, probably no objection can be raised against that decision but when there was no elected body at all and the entire Board of Directors was a nominated one, the ratio in Daman Singh would not apply. In this case, admittedly, there was no elected body. The so-called concurrence has been given by the Board of Directors nominated by the State Government which, according to the Petitioners, 'puppets' of the first respondent. Concurrence by such body can neither be said to be 'concurrence' nor even real and meaningful 'consultation' and the decision in Daman Singh, therefore, is of no help to the respondents.

38. There is still another reason for holding the notification illegal and inoperative. In the notification, certain grounds have been put forward by the first respondent for exercise of power under Section 157 of the Act. In the affidavit in reply of the State Government, more grounds have been added. They are specified in Clause (e) of para 3 of the affidavit. In the said paragraph it is stated that the notification was issued on 14th November, 2003, keeping in mind the interest of milk producers, Dairy Societies and consumers. There is no whisper in the notification as to what is stated in para 3(e) of the affidavit. The notification merely refers to position of respondent No. 4 vis-a-vis Aarey Dairy and loan advanced and disbursed by NDDB to respondent No. 4 for which State Government stood as guarantor. It was, therefore, in our opinion, not open to respondent No. 1 to rely on additional factors/circumstances or put forward other grounds/ reasons not specified in the notification.

39. In Commissioner of Police, Bombay v. Gordhandas Bhanji, , it has been held by the Supreme Court that the validity of the order passed by the statutory authority must be judged by the reasons recorded therein and cannot be construed in the light of subsequent explanation given by the authority concerned or by filing an affidavit. A similar view has been taken by the Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner, 1978 SC 851. Reiterating the principle laid down in Gordhandas Bhanji, the Supreme Court said;

"Orders are not like old wine becoming better as they grow older"

40. In the present case, therefore, it is not open to the State Government to support the order on the added grounds enumerated in clause (e) of paragraph 3 of the affidavit in reply dated 18th November, 2003 of the first respondent.

41. Mere look at the notification dated 14th November, 2003 makes it more than clear that the Board of Directors which has been nominated by the State Government has no democratic representation. The Board, consists of three Directors, nominated as Directors in their ex officio capacity i.e. (i) the Minister for Dairy Development ex- officio Chairman; (ii) the State Minister for Dairy Development, ex-officio Vice-chairman; (iii) the Principal Secretary (ADF) ex-officio Director, (iv) One Mr. Shridharrao Shankarrao Thakre, nominated representing Dairy Co-operative Societies in the State, (v) not more than four members, nominated by the State Government from Dairy Department or ancillary Departments of the State; and (vi) not more than twelve members, nominated by the State Government, free amongst representatives of Dairy Co-operative Societies "as may be determined by the State Government."

42. For the reasons aforesaid, the action of respondent No. 1. State of Maharashtra of issuing notification dated November 14, 2003 must be held illegal, unlawful and without authority of law. Similarly, the action of the respondent-authorities of not holding the election of respondent No. 4 and granting exemption to the said respondent under Section 157 read with Section 73 of the Act from the provisions of the Act and constituting Board of Directors and nominating members thereof is also held illegal and unlawful and hereby quashed and set aside. A writ of mandamus is issued to respondent Nos. 1 to 3 to take appropriate steps in accordance with law for holding election of Respondent No. 4. Such action must be taken as early as possible.

43. Rule is made absolute to the extent indicated above. In the facts and circumstances, however, there shall be no order as to costs.

Parties be given copies of this order duly authenticated by the Sheristedar/Private Secretary.

44. The learned counsel for respondent Nos. 1 to 3 at this stage makes a prayer that the operation, execution and implementation of the judgment be stayed for some time so as to enable the said respondents to approach the Hon'ble Supreme Court.

45. Learned counsel for the petitioners strongly objects to the said prayer contending that election has not been held for about three decades.

46. In the facts and circumstances, and when respondent Nos. 1 to 3 intend to challenge the order passed by us, it would be appropriate, : we grant some time so as to enable them to move the Supreme Court. Hence, the implementation of this judgment is stayed for a period of six weeks from today.