Citation : 2021 Latest Caselaw 5604 Patna
Judgement Date : 30 November, 2021
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.14267 of 2014
======================================================
1. Laxmikant Sharma, son of Late Siya Sharan Sharma, resident of Village -
Raghunathpur, P.O. - Siddhipur, P.S. - Khiri Mor, Block - Paliganj, District - Patna at present Chairman of Mera Patauna PACS.
2. Vijay Kumar Singh, son of Late Jangal Singh, resident of Village -
Akhtiyarpur, P.O. and P.S. - Paliganj, District - Patna at present Chairman of Rampur Nagma PACS.
3. Umesh Singh, son of Late Ramanand Singh, resident of At and P.O. -
Chandhosh, P.S. - Sigori, District - Patna at present Chairman of Chandhos PACS.
... ... Petitioner/s Versus
1. The State Of Bihar through its Principal Secretary, Co-operative Department, Gov. of Bihar, Patna
2. The Registrar, Co-operative Societies, Bihar, Patna.
3. Block Development Officer, Paliganj, Patna.
... ... Respondent/s ====================================================== with Civil Writ Jurisdiction Case No. 15188 of 2014 ======================================================
1. Bihar Rajya Sahkarita Vikash Samanway Samiti, Patna (Bihar) having its office at G-1, Kanti Palace, Shastri Nagar, Bailey Road, Patna- 800027, through its General Secretary-cum-Convenor, Dr. Sunil Kumar Singh, Son of Shri Maharana Pratap Singh, Resident of Village- Dumari Bujurg, Police Station- Nayagawon, District- Saran, Chapra
2. Dr. Sunil Kumar Singh, Son of Shri Maharana Pratap Singh, Resident of Village- Dumari Bujurg, Police Station- Nayagawon, District- Saran, Chapra
... ... Petitioner/s Versus
1. The State Of Bihar through its Principal Secretary, Co-operative Department, Govt. of Bihar, Patna
2. The Registrar, Co-operative Societies, Bihar, Patna
... ... Respondent/s ====================================================== Appearance :
(In Civil Writ Jurisdiction Case No. 14267 of 2014) For the Petitioner/s : Mr. Tuhin Shankar, Advocate For the Respondent/s : Mr. Rajiv Kumar Singh, Advocate (In Civil Writ Jurisdiction Case No. 15188 of 2014) For the Petitioner/s : Mr. Y.V. Giri, Senior Advocate Mr. Ashish Giri, Advocate Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
For the Respondent/s : Mr. Lalit Kishore, A.G.
Mr. Pawan Kumar, AC to AG ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE S. KUMAR CAV JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE)
Date : 30-11-2021
The following issues arise for consideration:
1. Whether the Bihar Co-operative Societies Rules, 1959 (referred to as the Rules) suffer from the vice of excessive delegation of the powers envisaged under the parent Statute, i.e. the Bihar Co-operative Societies Act, 1935 (referred to as the Act)?
2. Whether the power to the specified officers to grant membership in a society violates Article 19(1)(c) of the Constitution of India; and provisions of the Act?
3. Whether the order passed by a superior authority can be subjected to scrutiny by an authority subordinate to it? Whether the Rules provide for a redressal or appeal mechanism against the orders passed by such subordinate authority? Hence, whether Rule 7(4) of the subordinate legislation (Rules) is manifestly arbitrary?
2. The Petitioners in the present petition are a Primary
Agricultural Co-operative Society ("PACS") and are aggrieved Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
by the State's actions dated 25.03.2013, directing PACS to enrol
a minimum of 1000 members from amongst the weaker section
of particular caste denominations. This was to be done by way
of a special camp in the presence of all the members of the
Managing Committee, Block Co-operative Extension Officer,
and the PACS Manager, failing which disciplinary proceedings
were to be initiated against all concerned. This action was
challenged in CWJC No. 18367 of 2013 titled Dasdhrath
Singh versus The State of Bihar & Ors. Vide order dated
01.11.2013, this Court stayed the directives issued by the State
Government.
3. However, the State Government directed the local
officers of various districts to commence the exercise of
membership drive of the PACS at their level. Under that, the
BDO, Paliganj, inducted many persons as members of the
Petitioner-Society. This was vide letter Nos. 1225, 1225(ka)
dated 26.06.2014, letter No. 1273, 1285 dated 28.06.2014, letter
Nos. 1287, 1300, 1301 dated 30.06.2014 and the exercise was
carried out under Rule 7(4) of the Rules.
4. The petitioners claim that the exercise of power is by a
usurpation of the powers of the PACS and its Managing
Committee.
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
5. Hence the writ petition (CWJC No.14267 of 2014
titled as Laxmikant Sharma & Ors. Versus the State of Bihar &
Ors.) with the following prayers:-
"(i) To declare that the provisions of impugned Rule 7(4) of the Bihar Cooperative Societies Rules, 1959 as ultra vires the Constitution of India being violative of Articles 19(1)(c), 43(b) and 243(ZL) of the Constitution of India as well as ultra vires the Sections 27(1), 32A(1)(n) and (p) of the Bihar Cooperative Societies Act, 1935 in so far as the same completely encroaches the domain of the Primary Agricultural Society registered under the Bihar Co-operative Societies Act, 1935 with respect to the Membership of the PACS giving the said power/prerogative to the Government functionaries such as Block Development Officer, Assistant Registrar, Cooperative Societies and District Cooperative Officer.
(ii) To consequently quash the order dated 26.06.2014 contained in letters No.1225, 1225(ka), order dated 28.6.2014 contained in letters No.1273, 1285, order dated 30.06.2014 contained in letter No.1287, 1300 and 1301 issued by the Block Development Officer, Paliganj in exercise of power vested in him under Rule 7(4) of the Bihar Cooperative Societies Rules, 1959 by which 250 persons were made members of petitioners Primary Agricultural Cooperative Society, Paliganj (Patna) as being illegal and without jurisdiction.
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
(iii) To any other relief or reliefs for which the petitioners are found to be entitled in the facts and circumstances of the case."
6. Similar is the relief and issue in the analogous matter.
Submissions of the Petitioner
7. Shri Y. V. Giri, learned Senior Advocate appearing for
the petitioners, submits that under Rule 7, any person wanting to
obtain Membership of a society has to apply in Form-V. The Act
is a self-contained Code and Rule 7(4) suffers from the vice of-
(a) excessive delegation; (b) arbitrariness; and (c) introduction
of Rule 7(4) encroaches upon the power of the Society/PACS to
have any say on the issue of Membership, as any un-desirous
applicant may approach the concerned Officer and have himself
inducted as a member.
8. Opposing the petition, learned Advocate General
argued that:-(a) There is a presumption of a statute being
constitutionally valid. (b) A principal or subordinate legislation
can be held to be ultra vires only due to lack of legislative
competence; ultra vires the Constitution or the parent Statute.
(c) In any event, an attempt must be made to save the statute by
reading down and not striking it. (d) Subordinate legislation was
brought in the line and spirit of the parent statute, i.e. the Act. Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
The object was to give effect to the provisions of Section 2(l) of
Chapter-I; sub-section (6) of Section 44AQ of Chapter VI-C; as
also Section 44AT and 44AU of Chapter- VI-D of the Act. (e)
Elaborating further, it is argued that the statute's mandate is that
every Primary Agriculture Credit Society is represented by at
least one adult member of the family who shall be a nominal or
associate member of the Society and entitled to a right to vote.
Section 44AT (Chapter VI-D), given the non-obstante clause
contained therein, has an overriding effect on the other
provisions of the Act or the Rules framed thereunder, as also the
bylaws of the Society. (f) Further, a person who wants to
become a borrower or depositor of a Primary Agriculture Credit
Society shall compulsorily be made a member or an associate
member with full voting rights.
Provisions of Law
9. The golden web that runs through the fabric of the co-
operation movements is of self-help and mutual help through
democratic management and a conscious eschewing of the
profit motive. With the Constitution's Ninety-seventh
Amendment, with effect from 15th February 2012, an impetus
was given to the Cooperative Societies movement by insertion
of Part IX-B in the Constitution of India. This whole Chapter Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
dealing with co-operative societies comprising Articles 243ZH
to 243 ZT was introduced, enabling the Legislature to make
provisions concerning the incorporation, regulation and winding
up of co-operative societies based on the principles of voluntary
formation, democratic member-control, member-economic
participation and autonomous functioning.
10. Much prior thereto, the Bihar Co-operative Societies
Act, 1935 (referred to as the Act) came to be incorporated. This
was with an endeavour of expediting the facilitation of
formation, working and consolidation of co-operative societies
for the promotion of thrift, self-help and mutual and among
agriculturists and other persons with common needs. All laws
relating to Co-operative Societies within the State of Bihar
stood consolidated and amended for that purpose.
11. The Act is a complete Code in itself, right from the
formation till the liquidation of a Society. The Act's object, inter
alia, is to promote self-help, non-profit motive and democratic
working thereof evidenced by the electoral process. The State is
enjoined with a duty to act in a manner to promote the concept
of co-operation. The Act comprising of 67 Sections is divided
into VIII Chapters.
12. Chapter I (Section 2) contains the definition clause; Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
Chapter II (Sections 6 to 12) deals with the Registration of
Societies; Chapter III (Sections 13 to 26) deals with
incorporation, duties and privileges of registered societies.
13. The State has framed Rules termed the Bihar Co-
operative Societies Rules, 1959 (referred to as the Rules) to
make the Act functional.
14. For the adjudication of lis, the relevant provisions of
the Act and the Rules are reproduced as under:
Bihar Co-operative Societies Act, 1935
2. Definitions. -
"(f) 'member' includes a person joining in the application for the registration of a society and a person admitted to Membership after registration in accordance with the rules and the bye-laws of such Society;"
"(fff) 'nominal or associate member' means a member who possesses such privileges or rights of a member of a society, and who is subject only to such liabilities of a member as may be specified by the bye-laws;"
"(gggg) 'Primary agricultural credit society' means a cooperative society, the primary object of which is to render assistance, financial or otherwise, •to farmers, rural artisans and agricultural labourers and includes farmers service society and multipurpose cooperative Society;"
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
"27. Right of a Member. - (1) Member of a Co-operative Society shall exercise the rights of a member after he has made such payment to the Society in respect of Membership as may be prescribed in the rules or Bye-laws of the Society:
Provided that notwithstanding anything contained in any provisions of this Act, the member of a Cooperative society can exercise the right to vote at the election of members of the Board of Society only after ensuring minimum attendance, as required in the meetings convened for participation in management of the Society and availing of minimum requisite services of the Society as may be prescribed by the Rules or the By-laws of the Society made under this Act.
(2) Every Co-operative Society shall provide access to every member to the books, information and accounts of the Co-operative Society kept in regular transaction of its business with such member.
(3) Every member of a Co-operative Society shall have the right to get all information/documents regarding books, information and accounts of the Co-operative Society kept in regular transaction of its business. The Chief Executive Officer/Manager of the Co- operative Society shall ensure access to the member to all required information/documents.
(4) The members of any Cooperative Society shall have the right to get cooperative education Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
and cooperative related training as per the Rules or Bye-laws made under any provisions of this Act."
"32A. Annual General Meeting. (1) .....
.....(n) appeal of a person whose application for Membership has been rejected or whose Membership has been terminated by the Board."
"44 AQ. Power of Registrar to order liquidation of Societies and amalgamation of several Societies.- ....
.....(2) (a) In order to achieve the objective of this Act, to bring uniformity in the operation of the societies under this Chapter, to enhance their strength and usefulness and to make them viable for the purpose of development of agriculture, the area of a Primary Agriculture Credit Society shall be co-terminus with that of a panchayat and there will be only one such Society in each panchayat.
.... ..
.....(6) Every family residing within the local limits of the new Society determined under sub- section (2) shall be represented by at least one adult member of the family who shall be a normal or associate member of the Society and shall be entitled to a right of voting if he pays a membership fee and may become a full-fledged member of the Society if he purchases at least one share of the Society and he shall be entitled to receive loan therefrom and shall also be eligible to hold any elective post of the Society."
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
"44AT. Over-riding effect of Chapter VI-
D- Notwithstanding anything contrary or inconsistent contained in any other chapter of this Act or the Bihar Self Supporting Co-operating Societies Act 1996 or rules framed thereunder or bye-laws of any registered society or orders issued thereunder, the provisions of this chapter shall have overriding effect."
"44AU. Ensuring Membership of Primary Agricultural Credit Society to depositors and borrowers.- Every person who is a borrower or depositor of a Primary Agriculture Credit Society or wants to become a borrower or depositor of such Society shall be compulsorily made a member or an associate member of such Society in terms of sub-section (6) of section- 44 AQ with full voting rights."
The disputes resolution mechanism is provided under Section 48 of the Act.
"66. Power to make rules.- .....
....(ii) prescribe the conditions to be complied with by persons applying for admission or admitted as members and provide for the election and the admission of member and the payment to be made and the interests to be acquired before the exercise of the right of Membership."
The Bihar Co-operative Societies Rules, 1959 Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
"7. Admission to Membership. - (1) (a) Every person desiring admission to Membership of a registered society shall apply in form V.
(b) The Secretary of the Society or any person duly authorised by him in this behalf shall immediately grant a receipt for the application in the form at the foot of form V.
(c) In case the Secretary of the Society or any such person as aforesaid does not receive the application or grant a receipt for it, the applicant may submit his application to the Block Development Officer or the Assistant Registrar or Cooperative Societies or the District Cooperative Officer, who shall immediately grant him a receipt for the application in the prescribed form, and shall at once send the same to the Society concerned.
(d) The application shall be considered by a Managing Committee of the Society and the decision of the Committee thereon shall be communicated to the applicant within 15 days of receipt of the application and, where the application is rejected, with reasons therefore.
(e) If no decision is communicated to the applicant within the period specified above, it shall be deemed that the application has been accepted and the applicant has been admitted to the Membership of the Society.
(2) A person whose application for admission to Membership has been rejected by the managing committee may, within sixty days of the Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
communication of the decision to him appeal to the Registrar whose decision shall be final.
(3) On payment of the admission fee and share money as prescribed in the bye-laws, a member shall be entitled to all the rights and shall be subject to all the liabilities of a member.
(4) Notwithstanding anything contrary contained in this Rule or bye-laws of a Primary Agriculture Credit Society, if any person applies for Membership of such a society with a declaration to the Block Development Officer or Assistant Registrar, Cooperative Societies or District Co-operative Officer that-
(a) he fulfills the criteria for attaining Membership of such a society,
(b) no other member of his family is a member of the Society and
(c) he has applied for Membership to the managing committee of such Society and has not been admitted as a member, the concerned Block Development Officer or Assistant Registrar Co-operative Societies or District Co-operative Officer, as the case may be, shall order such person to be made a member of the said Society."
(Emphasis supplied)
15. It is thus seen that a member includes a person joining
in the application for registration of a society and admitted to
Membership after registration under the Rules and the bye-laws Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
of such Society. Nominal or associate member means a member
who possesses such privileges or rights of a member of Society
and is subject only to such liabilities of a member as may be
specified by the bye-laws.
16. Primary Agricultural Credit Society would encompass
a co-operative society, the primary object of which is to render
assistance, financial or otherwise, to farmers, rural artisans and
agricultural labourers and would further include farmers service
society and multipurpose co-operative Society. A short Term
Co-operative Credit Society includes the Primary Agricultural
Credit Societies.
17. The Act specifically does not provide a person who
can be and how he can be admitted as a member of a Primary
Agricultural Credit Society. However, it does mandate that
every person residing within the local limits of such Society
shall be represented by at least one adult member of the family,
who shall be nominal or associate member of the Society and
entitled to a right to vote upon payment of membership fee. And
also have a right to become a full-fledged member of the
Society if he purchases at least one share, thus entitling him to
receive a loan and being eligible to hold any elective post of the
Society.
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
18. The dispute resolution mechanism amongst the
members, including persons claiming through members or
deceased members, is regulated under the provision of Section
48, but what is important is that by virtue of clause (n) of sub-
section (1) of Section 32A, an appeal against the rejection of an
application of Membership lies before the Board of a Co-
operative Society which expression would include Managing
Committee (sub-section (e) of Section 2) for which meeting of
the agent is to be convened within six months.
19. Section 66, empowers the State Government to
prescribe rules, more specifically, in laying down conditions to
be complied with by the persons applying for admission and
admitted as members and the payment to be made and the
interests to be acquired before the exercise of the right of
Membership.
20. The State Government has framed the Rules, and we
are concerned with Rule 7, which we have already reproduced
(supra). Every person desirous of being admitted as a member
of a registered society has to apply in Form V. The same is
extracted as under:-
"FORM No. V [Rule 7 (1)] Form of application for Membership Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
To THE COMMITTEE OF MANAGEMENT COOPERATIVE SOCIETY Sir, I hereby apply for admission as a member of the --
----Society. I have carefully read the bye-laws and rules of the society/ the bye-laws and rule have been read out and explained to me I hereby agree to abide by the same.
I request that you will allot me----------------------------------------------------shares and I hereby agree to accept the same or any less number that you may allot to me.
I am/am not a member of----------------------------------------------- Society.
I also do hereby nominate the person named below as the person to whom shall be transferred my shares, deposits and loans or any other interest in the Society after my death.
Yours faithfully.
Signature ... ...
Father's or husband's name ... ...
Age ... ...
Profession ... ...
Permanent Address ... ...
Present Address ... ...
Name of nominee ... ...
Relationship ... ...
Age of nominee ... ...
Address of nominee ... ...
We (members of the Society)
-----------------------------------------------
recommend that -------------------------be admitted as a member of the ------------------------------------------------Society
-------------
------------------------------Signature of
----------------------------------------------
(1) ----------------------------------------and (2) -----------------------------------"
21. The applicant must submit the form to the Secretary
of the Society, who shall immediately issue a receipt. In the
event of failure, the applicant can submit an application to the
Block Development Officer (BDO), the Assistant Registrar of
the Co-operative Societies, or the District Co-operative Officer, Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
who is also obliged to issue a receipt and, in turn, send the form
to the concerned Society. After that, the Management
Committee of the Society is bound to decide to be
communicated within fifteen days of receipt thereof. In the
event of rejection of application, reasons are required to be
afforded. It is not that the Management Committee can sit over
such application for if no decision is communicated within the
said period (15 days), the application is deemed to have been
accepted with the applicant admitted to the Society's
Membership. The matter is not put to rest there. By sub-rule (2)
of Rule 7, a person whose application stands rejected by the
Managing Committee has a right to prefer an appeal to the
Registrar whose decision would be final. Thus, the Act and the
Rules provide a self-contained mechanism for expeditious
disposal of application for Membership and the consequential
right to the applicant to file an appeal, if so required.
22. The Registrar is a person appointed to perform the
duties of Registrar of Co-operative Societies under the Act, and
the Board includes the Managing Committee to whom the
management of the affairs of a Co-operative Society is
entrusted. The Board is an elected body, and the Registrar is a
nominated authority, senior-level functioning, above the rank of Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
the Block Development Officer (BDO)/ the Assistant Registrar,
Co-operative Societies/ or the District Co-operative Officer. But
Rule 7(4) provides for an incongruous situation where
notwithstanding the decision of the Managing Committee or the
Registrar; the lower level functionary, i.e. the Block
Development Officer or the Assistant Registrar of Co-operative
Societies or the District Co-operative Officer, can sit over the
judgment and admit any person to Membership. Thus, a
subordinate authority (functionary) is to sit over the decision of
the superior authority/body. The Act stipulates the time frame
within which the application has to be procured and the decision
taken thereupon. It is a complete code in itself. It provides for a
mechanism of appeal. It provides a redressal mechanism to the
aggrieved party that is truly in the spirit of mandate of sub-
section (6) of Section 44 AQ whereby at least one adult member
of the family should be a nominal/associate member/full-
fledged member of a Primary Agricultural Credit Society.
23. Yet another anomaly in the Rule is the absence of any
redressal mechanism either in the Act or the Rules, against the
erroneous decision or misuse of powers by the authority
constituted under Rule 7(4). It also renders nugatory the power
envisaged under clause (n) of sub-section (1) of Section 32A Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
and sub-rule (2) of Rule 7, providing a remedy for redressal to
the aggrieved applicant.
Issue No.1 - Excessive Delegation of Power
24. The primary issue for our consideration is whether the
subordinate legislation, the Bihar Cooperative Societies Rules,
1959, is framed the powers envisaged under the parent Act, i.e.
the Bihar Cooperative Societies Act, 1935.
25. Section 66 of the parent Act provides for the power to
the State Government to make rules for the registered Co-
operative societies. Sub-section (i) and (ii) provide the power to
the State Government to make rules regarding the admission of
members, conditions to be complied with by the applicants and
the payments to be made. Although this section empowers the
State Government to make rules regarding Membership of the
Society, this power, as contemplated by the Legislature could
not have envisaged the situation where the members of the
Society would not exercise any control over new Membership.
26. Rule 7(4) seeks to make this existing procedure
redundant and give unfettered powers to the officers of the State
Government in providing Membership to applicants. There is no
established procedure for appeal against the order of the BDO
or the Assistant Registrar as provided for in the amended Rules. Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
27. The power to make rules regarding the admission of
new members cannot overstep the fundamental right guaranteed
under the Constitution of India under Article 19(1) (c).
Therefore, the subordinate legislation, i.e. the Bihar Co-
operative Societies Rules, 1959, is not empowered by the parent
legislation to render the rights of the members of the Society
redundant with regard to the admission of new members. The
subordinate legislation is not empowered to do the same by the
parent Act.
28. One of the basic requirements of a valid delegated
legislation is that the authority to which the delegated power is
delegated, i.e., delegatee, must keep within the prescribed limits
of the delegation. The delegated legislation, if deemed to exceed
these limits, can be struck down as ultra vires. In the case of
State of Tamil Nadu v. P. Krishnamurthy, (2006) 4 SCC 517,
the Hon'ble Apex Court laid down the parameters for judicial
review of subordinate legislation. A delegated legislation can be
challenged under any of the following grounds:
"15. ...(a) Lack of legislative competence to make the subordinate legislation.
(b) Violation of fundamental rights guaranteed under the Constitution of India.
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
(c) Violation of any provision of the Constitution of India.
(d) Failure to conform to the Statute under which it is made or exceeding the limits of authority conferred by the enabling Act.
(e) Repugnancy to the laws of the land, that is, any enactment.
(f) Manifest arbitrariness/unreasonableness (to an extent where the Court might well say that the legislature never intended to give authority to make such rules)."
29. The Court further provided certain features to be
considered in ascertaining the validity of the subordinate
legislation.
"16. The Court considering the validity of a subordinate legislation, will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate legislation conforms to the parent statute."
30. When the subordinate authority exercises the power
of rulemaking beyond the principles and objects laid down in
the Act and the Rules are made without adherence to the
provisions and guidelines of the Act, which provides such
rulemaking power, it is declared ultra vires the parent Act. Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
31. In the case at hand, the Bihar Co-operative Societies
Act, 1935 under Section 66 provides the State Government with
the power to make rules regarding the conditions to be complied
with while applying for Membership to such Co-operative
Societies.
32. The delegated authority has enacted Rule 7(4) via an
amendment to the Bihar Co-operative Societies Rules, 1959,
which provides the power to the Block Development Officer
(BDO) and Assistant Registrar, to make applicants members if
the applicants satisfy certain conditions. But the procedure of
Membership is already provided under Rule 7, requiring the
Managing Committee of the relevant PACS to decide on the
membership application, appeal whereof would lie to the
Registrar.
33. A perusal of the provisions of the parent Act reveals
the State Government is empowered to frame Rules and
prescribe conditions to be complied with by applicants making
an application for Membership to a co-operative society and
also provide for admission of member with payment to be made
and the interests to be acquired. The Act empowers the
Government to make Rules for- (a) prescribing conditions to be
complied with by the persons for admission or admitted as Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
member; (b) provide for the election; (c) admission of members;
(d) payment to be made; and (e) interests to be acquired before
the exercise of the right of membership. All these expressions
have to be read ejusdem generis and the expression provide for
the "election and admission of member" would not encompass
the power to induct a member de hors the statute, Rules or Form
V stipulated in the Rules itself. A rule formed pursuant to the
above stated powers cannot subvert the democratic member
control of the Co-operative Society, which is an essential aspect
as recognized by the Hon'ble Apex Court, and would include
the exercise of grant of a membership to an applicant, by virtue
of the word voluntary in so far as it pertains to an adult member
of the family in question, or an executive officer being the
appellate authority. The impugned Rule 7(4) oversteps this
provision, empowering the Officers of the State Government
like the BDO and the Assistant Registrar to decide to grant
Membership to applicants without the need to consult with the
existing members of the relevant PACS through its
representatives, thereby fundamentally altering the nature and
composition of the cooperative society. This power, therefore, is
grossly out of step with the provision of the parent Act and
ought to be held ultra vires.
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
34. The striking down of the Rules, in no manner,
impinges upon the right of an adult member of a family in the
local area to be rightfully represented in PACS of that area.
There cannot be any difficulty in agreeing with the submissions
of the learned Advocate General that there is always a
presumption that the Statute is constitutionally valid and that at
the first instance, an endeavour must be made to read down,
rather than strike down the provisions of statute. However, in
the instant case, the rule is neither in the line with the parent
Statute, nor is there any scope of the same being read down,
with the only option, therefore, being to strike down the rule. As
already observed, the remaining rules do take care of achieving
the statutory object of inclusion of at least one adult member of
the family in the society with a right to vote. Section 44 AT
(Chapter VI-D), cannot be brought in to save the impugned rule
for reasons already stated and more so, in view of the limited
scope of the rule making power.
35. The law is well settled on the issue of the subordinate
legislation exceeding its rulemaking power. The Hon'ble Apex
Court in Kerala SEB v. Indian Aluminium Co. Ltd., (1976) 1
SCC 466, explained the application of the rule of ultra vires to
subordinate legislation. The Court held that where executive Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
authority is given the power to frame subordinate legislation
within the stated limits, rules made outside such limits would
not be valid notwithstanding that the rules have been placed
before the legislature and are subject to modification,
amendment or annulment as the legislatures deem fit. The
relevant extracts are as follows:
"25. ...We are, therefore, of opinion that the correct view is that notwithstanding the subordinate legislation being laid on the table of the House of Parliament or the State Legislature and being subject to such modification, annulment or amendment as they may make, the subordinate legislation cannot be said to be valid unless it is within the scope of the Rulemaking power provided in the Statute."
(Emphasis supplied)
36. In Dwarka Nath v. Municipal Corporation of
Delhi. (1971) 2 SCC 314, the Hon'ble Apex Court observed that
the inclusion of the requirement to mention the address of the
manufacturer in the subordinate legislation was over its powers
under Section 23(1) of the Prevention of Food Adulteration
Act,1954. The Act provided that the Central Government may
prescribe rules to restrict packing and labelling of food articles,
with the object that it would not deceive the public so to its
quality and quantity. The impugned rule requiring the Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
manufacture to mention the address did not fall within the limits
of "quality and quantity" as prescribed under the parent Act and
hence was held to be ultra vires.
37. In Vipulbhai M. Chaudhary v. Gujarat
Cooperative Milk Marketing Federation Limited and
Others, (2015) 8 SCC 1, the Hon'ble Apex Court held that:-
"The principle of representative democracy is the election of representatives by the people otherwise eligible to cast their vote and the people thus elected, constituting the body for the management of an institution. Thus, in the case of cooperative societies, after the amendment in the Constitution, there has to be a Board of elected representatives, which may be called Board of Directors or Governing Body or a Managing Committee, etc. to which the members entrust the direction and control of the management of the affairs of the society. That representative body selects one among the elected representatives as its Chairman or any other office-bearer, as the case may be. Selection is the act of carefully choosing someone as the most suitable to be the leader or office-bearer. Thus, there is a lot of difference between election of delegates/representatives to constitute a body and selection of a person by the body from amongst the elected members to be the leader. It is to be borne in mind that the management and control of the society is entrusted to the representative body viz. the Board of Directors and that the Chairperson elected by the Board of Directors is the Chairperson of the society Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
and not of the Board of Directors."
The Hon'ble Court further held that:-
"In a democratic institution, confidence is the foundation on which the superstructure of democracy is built. The bedrock of democratic accountability rests on the confidence of the electorate. If the representative body does not have confidence in the office-bearer whom they selected, democracy demands such officer to be removed in a democratic manner. A cooperative society is registered on cooperative principles of democracy, equity, equality and solidarity. Democratic accountability, mutual trust, fairness, impartiality, unity or agreement of feeling among the delegates, cooperativeness, etc. are some of the cardinal dimensions of the cooperative principles. A body built on such principles cannot be led by a captain in whom the co-sailors have no confidence. If a person has been selected to an office through democratic process, and when that person loses the confidence of the representatives who selected him, those representatives should necessarily have a democratic right to remove such an office-bearer in whom they do not have confidence, in case those institutions are viewed under the Constitution/statutes as democratic institutions."
38. Although it has been enacted in pursuance of the
power provided under Section 66, the impugned rule does not
comply with the limits thereunder. The challenged rule offers
unfettered power to officers of the State Government regarding Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
Membership to PACS; does not provide a mechanism for
redressal against the decision; and that it allows for the control
to a State Government Officer to make an applicant a member
of the relevant PACS, not conforming to the existing procedure
of Membership as stipulated under Sections 26, 44AQ; 44AT; or
44AU of the Act.
39. Given that the impugned rule has not been framed
within limits placed by the parent Act, i.e. the unit of
prescribing conditions to be complied with, before application
for Membership, the same ought to be held ultra vires the parent
Act.
40. Further, it is necessary to establish whether the
subordinate legislation is violative of constitutional provisions.
The petitioners have challenged its validity because it is
violative of Article 19(1)(c) of the Constitution. This has been
discussed in the subsequent issues.
Issue No. 2 - Violation of Article 19(c)
41. Article 19(1)(c) of the Constitution of India
guarantees the right to every citizen to form associations, unions
or cooperative societies of their choice voluntarily, subject, of
course, to reasonable restrictions imposed by the law. This right
is a voluntary act, and thus unwarranted or impermissible. The
freedom under this Article is not only for the formation of such Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
societies but also extends to the effective functioning of these
associations and/or societies to enable them to achieve their
lawful objectives.
42. Any association, union or cooperative Society formed
under the right guaranteed by Article 19(1)(c) is a creature of
Statute, and the provisions of the Statute abridge the rights of
the Society and its members. Therefore, objections to statutory
intervention merely on the grounds of freedom to form an
association or cooperative societies are not permissible.
43. One of the essential features of the right guaranteed
under Article 19(1)(c) is the right of the members of the
association, union or co-operative Society to continue to
associate with only those whom they voluntarily admit and
agree to include in their association, union or co-operative
society. Any change or statutory intervention which affects the
right of the members to continue to function as members of the
association, where the members are not provided with the option
to reject the inclusion of new members or have their
Membership taken away, would violate the right to form
associations under Article 19.
44. The law regarding challenging the constitutional
validity of subordinate legislation for its violation of Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
fundamental rights and constitutional provisions is well settled.
45. The Hon'ble Apex Court has consistently upheld that
subordinate legislation ought to be struck down when violating
fundamental rights and constitutional provisions. In Air India v.
Nargesh Meerza, (1981) 4 SCC 335, the Hon'ble Apex Court
held that the impugned delegated legislation ought to be struck
down as it is violative of Article 14 of the Constitution. The
Court found that the condition which provided termination of
service for air-hostesses upon her first pregnancy to be most
unreasonable and arbitrary terming it as "manifestly
unreasonable and arbitrary".
46. Further, in Dwarka Prasad Laxmi Narain v. State
of U.P., 1954 SCR 803 and Lakshman v. State of M.P.,(1983)
3 SCC 275, the Hon'ble Apex Court struck down the
subordinate legislation on the ground that it violated
fundamental rights and other constitutional provisions.
Therefore, the subordinate legislation must conform with the
requirements of the Constitution and the fundamental rights.
47. The question at hand, is whether the subordinate
legislation enacted by the State Government can usurp the
power of the Society to determine its own Membership. It is
well settled that the composition of the Society is one of the Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
essential features that are guaranteed by Article 19(1)(c). The
introduction of Rule 7(4) in the Bihar Cooperative Societies
Rules 1959 trudges over the right of members of the PACS to
regulate the Membership in the PACS. Therefore, the voluntary
nature of the association is eradicated, and it no longer
resembles the Co-operative Society that was originally created.
48. Rule 7(4) provides unfettered power to the State
Government and its local officers to determine which applicant
shall be made a member to a PACS. It cannot be workable
alongside the existing procedures of Rule 7(1) and 7(2). An
applicant is not required to interact with, be inspected by, or
even make the Society aware of their desire to become a
member before an order can inevitably make them a member of
the State Government or its other officers.
49. The parent Act envisages the role of an appellate
authority through Section 48 and the subordinate legislation
through Rule 7(2) on the issue of Membership. The role is given
to the person appointed as the Registrar of Co-operative
Societies under the Statute. The position of any appellate
authority is essential for keeping a check on the powers of the
executive or other bodies. Rule 7(4) does not provide for a
procedure of appeal to the decision of the BDO or the Assistant Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
Registrar either by the applicant in case of rejection, or the
PACS in both cases of acceptance or rejection.
50. Rule 7(4) is an absolute power to make an applicant a
member of the PACS and the situation is similar to the one
described in Damyanti Naranga v. Union of India, (1971) 1
SCC 678, where the State Government is creating an alternative
procedure for Membership which may result in a situation
where the original members will become the minority in the
Society which they founded, thus violating their fundamental
right under Article 19(1)(c).
51. On behalf of the State, the submission has tried to
provide a reason for the inclusion of Rule 7(4) that it was in
consonance with the objects and purpose of the Statute. The
Respondents submitted that the object of the Amendment
introducing Rule 7(4) was to spread the benefits of the PACS to
a larger section of the Society. They cite Section 44AQ and
Section 44AU under the Act to justify the new members'
inclusion in the PACS. Having perused the sections above, it
appears that they only apply in the instance of granting benefit
to at least one member of a family in the local area. A broader
and more general power of giving Membership is not envisaged
thereunder.
Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
52. Learned Advocate General rightly points out that the
noble object of the enactment of provisions of both the Chapters
VI-C and VI-D is to ensure participation of every family in the
cooperative movement, whereby at least one person from every
family in the village is statutorily required to be made a member
of the Primary Agriculture Credit Society. Petitioner also does
not dispute such a fact. However, the issue at hand is totally
different, and the provisions of Sections 44AT and 44 AU, in
any manner, do not advance the case of the State in rendering
the amendment under the Rules to be in consonance with the
provisions of the Act. The blanket power conferred upon a
subordinate authority remains uncanalized, and as such in our
considered view, it suffers from the vice of arbitrariness, more
so when an authority subordinate to the appellate authority is
conferred with the power of deciding issue of Membership,
rendering the parties aggrieved under the Statute, to be
remediless.
53. In State of U.P. v. C.O.D Chheoki Employees'
Cooperative Society, (1997) 3 SCC 681, the Apex Court has
held that no citizen has a fundamental right under Article 19(1)
(c) to become a member of a Co-operative Society. The Statute
governs the right of an individual. So, the right to become or to Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
continue being a member of the Society is a statutory right. The
grant of Membership is a mere opportunity that is dependant
upon the acceptance given by the existing members of the
Society subject to the bye-laws and the procedures under the Act
and the Rules.
54. In Thalappalam Service Coop. Bank Ltd. v. State
of Kerala, (2013) 16 SCC 82, the Hon'ble Apex Court has held
that the rights of the citizens to form cooperative societies
voluntarily is now considered to be a fundamental right.
55. In Damyanti Naranga (supra), the Hon'ble Apex
Court examined a question related to the Hindi Sahitya
Sammelan, a society registered under the Societies Registration
Act, 1860. The Parliament enacted the Hindi Sahitya Sammelan
Act, under which outsiders were allowed to become members of
the Sammelan without the decision of the original members.
The Court, after analysing the right under Article 19(1) (c), held
that any law altering the composition of the association
compulsorily would be a breach of the right to form association
because it violated the composite right of forming an association
and the right to continue it as the original members desired. The
relevant extracts are as follows:
"6....The result of this change in composition is that the members, who voluntarily formed the Association, are Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
now compelled to act in that Association with other members who have been imposed as members by the Act and in whose admission to Membership they had no say. Such alteration in the composition of the Association itself clearly interferes with the right to continue to function as members of the Association which was voluntarily formed by the original founders. The right to form an association, in our opinion, necessarily implies that the persons forming the Association have also the right to continue to be associated with only those whom they voluntarily admit in the Association. Any law, by which members are introduced in the voluntary Association without any option being given to the members to keep them out, or any law which takes away the Membership of those who have voluntarily joined it, will be a law violating the right to form an association..."
(Emphasis supplied)
56. The case of Andhra Pradesh Dairy Development
Corporation Federation v. B. Narasimha Reddy, (2011) 9
SCC 286, further reinforces Damyanti Naranga (supra) State
is not permitted to change the fundamental character of the
association or alter the composition of the Society itself. The
relevant extracts are as follows:
"47.The cooperative movement by its very nature, is a form of voluntary association where individuals unite for mutual benefit in the production and distribution of wealth upon principles of equity, reason and common good. So, the basic purpose of forming a cooperative Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
society remains to promote the economic interest of its members in accordance with the well-recognised cooperative principles. Members of an association have the right to be associated only with those whom they consider eligible to be admitted and have right to deny admission to those with whom they do not want to associate. The right to form an association cannot be infringed by forced inclusion of unwarranted persons in a group. Right to associate is for the purpose of enjoying in expressive activities. The constitutional right to freely associate with others encompasses associational ties designed to further the social, legal and economic benefits of the members of the association...."
(Emphasis supplied)
57. A discussion surrounding the rights under Article
19(1)(c) would necessarily include Article 43B. The concepts of
promotion of voluntary formation, autonomous functioning,
democratic control and management would conversely represent
themselves in Article 19(1)(c).
58. We must assess whether Rule 7(4) would satisfy the
requirement of public order or morality under Article 19(4) to
be considered a reasonable restriction on the right of individuals
to form co-operative societies.
59. Article 19(6) of the Constitution, the State ought to
conform to two tests to satisfy the requirements of the Article,
firstly that the restriction on the appellants' fundamental rights Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
must be reasonable and secondly that it should be in the interest
of the general public.
60. Therefore, in substituting the existing membership
application procedure and making the current method
redundant, the impugned rule has violated the fundamental right
under Article 19(1)(c) and, as such, is ultra vires the
Constitution.
61. While answering the question of reasonableness, we
ought to also consider the arbitrariness and absurdity that
emerge from the impugned rule. The same has been discussed
subsequently.
Issue No. 3-Manifest Arbitrariness
62. We have already seen that one of the tests under
which the constitutional validity of subordinate legislation can
be challenged is that it should not be manifestly arbitrary.
63. This situation presents absurdity at its outset, where a
lower authority may scrutinise the order of a superior authority.
The Registrar under the Act is clearly designated as the
appellate authority and is empowered to decide disputes
regarding the Membership of individuals. However, it is
improbable that his subordinates can scrutinize, let alone
overrule, the order regarding the rejection of application for Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
Membership or termination of Membership.
64. Section 48 of the Act clearly provides that disputes
regarding the business or functioning of the Society be referred
to the Registrar who shall have the authority to decide the
dispute himself; subject it to arbitration; or transfer it for
disposal to another person exercising the control of the
Registrar. In contrast, general members of a society are only
allowed to vote on appeals regarding Membership issues. This
power of general members is far from clearly defined and is
unlikely to have been contemplated to rival the authority of the
Registrar.
65. A general interpretation of any statutory right of
appeal provides that the order or decision of an inferior
authority is subject to the scrutiny of superior authority to
ensure that the decision was correct and provide a mechanism to
keep a check over the powers of the decision-making authority.
66. As already observed, procedure for appeal is laid
under the parent Act as Section 48. However the impugned rule
does not provide a procedure for redressal against the order of
the BDO or the Assistant Registrar.
67. The law on 'manifest arbitrariness' is well explained
by the Hon'ble Apex Court in Khoday Distilleries Ltd. v. State Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
of Karnataka, (1996) 10 SCC 304. The Court observed as
follows:
"13. ...The tests of arbitrary action which apply to executive actions do not necessarily apply to delegated legislation. In order that delegated legislation can be struck down, such legislation must be manifestly arbitrary; a law which could not be reasonably expected to emanate from an authority delegated with the law- making power. In Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India(1985) 1 SCC 641, this Court said that a piece of subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent legislature. A subordinate legislation may be questioned under Article 14 on the ground that it is unreasonable; 'unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary'....In India, arbitrariness is not a separate ground since it will come within the embargo of Article 14 of the Constitution. But subordinate legislation must be so arbitrary that it could not be said to be in conformity with the Statute or that it offends Article 14 of the Constitution."
68. Further, in Sharma Transport v. State of A.P.,
(2002) 2 SCC 188, the Hon'ble Apex Court held that, to strike
a delegated legislation as arbitrary, it has to be established that
there is manifest arbitrariness. The expression arbitrary means,
"25. ...in an unreasonable manners fixed or done Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
capriciously or at pleasure, without adequate determining principle, not founded in the nature of things, non-rational, not done or acting according to reason or judgment, depending on the will alone."
69. In Maneka Gandhi v. Union of India, (1978) 1 SCC
248, and as we have already discussed in Nargesh Meerza
(Supra), the Hon'ble Apex Court has consistently held that
administrative rulemaking power can be challenged on the
grounds of reasonableness and arbitrariness within the purview
of fundamental rights and constitutional provisions.
70. Rule 7(4) gives indiscriminate power to the executive
to grant the Membership of a PACS to a person. It is contended
that this rule diminishes the statutory authority of the Managing
Committee of the PACS and makes Rule 7(1) and 7(2)
redundant, and gives the executive power of appeal without
declaring them an Appellate Authority.
71. There is no remedy available to the PACS or applicant
in case of application rejection under Rule 7(4). The final
authority of a society vests in the general body of members and
is managed by the Managing Committee under Section 14 of the
Societies Act. Given the application of Rule 7(4) the final
authority rests with the Registrar of Cooperative Societies or Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
State Government, and not the general body of members of the
PACS.
72. Powers exercised by the Registrar of Co-operative
Societies and State Government under the Cooperative Societies
Act is only regulatory and supervisory in nature and not to
interfere with the management of the affairs of the Society.
73. The impugned Rule 7(4) of the Bihar Co-operative
Societies Rules, 1959 has created the following unreasonable
and arbitrary situations:
a. An incongruous situation where the order of a
superior officer, i.e. the Registrar of Co-operative
Societies, is subject to scrutiny by an inferior
officer, the BDO or the Assistant Registrar. The
BDO or Assistant Registrar may award
Membership to PACS irrespective of the order of
the Registrar.
b. The power of dispute resolution regarding issues of
Membership of the Registrar is inherently usurped
by the BDO or the Assistant Registrar as the
former's role is left redundant regarding the
amendment.
c. The power of the BDO and Assistant Registrar is Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
unchecked as there is no clear redressal method
against their order, either for the applicant or the
PACS for which application was made.
d. The powers of the general members of the PACS,
that of voting on matters of appeal on the issue of
Membership are taken away or rendered redundant
as per the impugned Rule 7(4).
74. Given the above manifestly arbitrary and
unreasonable situations given rise to by the impugned Rule, we
are inclined to hold that Rule 7(4) of the Rules is ultra vires the
parent Act for being manifestly arbitrary and unreasonable.
Conclusion
75. In conclusion, placing reliance on the above
discussion and having answered the core issues surrounding
Rule 7(4), this Court holds that it is ultra vires and
unconstitutional for it falls foul of Article 19(1)(c) as also the
Patent Statute, i.e. the Act. The reasons are summarized as
follows:
a. Rule 7(4) provides an alternative mechanism for
admission of new members into a PACS without
the need for the assent of its Managing Committee.
This procedure makes the existing process Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
redundant.
b. The procedure under Rule 7(4) does not have a
provision for an appeal against the authority's
decision. A provision of appeal has been envisaged
under the parent Act.
c. Rule 7(4) falls foul of Article 19(1)(c) as it
empowers the State to interfere with the
composition of the Society in a manner not
envisaged by the parent Act.
d. The parent Act does not contemplate a situation
where the State Government through its officers,
can determine the composition of the Society
without the consent of the original members.
e. The object and purpose of Rule 7(4) do not satisfy
the requirement of a reasonable restriction to the
fundamental right guaranteed to every citizen under
Article 19(1)(c).
76. The impugned rule 7(4) is held ultra vires the
Constitution and the parent Act, inter alia, for the reasons:
a. It is in excess of the powers prescribed under the
parent Act.
b. It is violative of Article 19(1)(c) as it makes the Patna High Court CWJC No.14267 of 2014 dt. 30 -11-2021
power of the general members deciding upon new
Membership, redundant.
c. It is manifestly arbitrary and unreasonable as it
does not have a redressal mechanism or a
procedure of appeal. Further, it creates an
incongruous situation of usurping the power of a
superior officer by making their order subject to
scrutiny by subordinate officers.
77. Issues raised are thus answered accordingly.
78. Both the writ petitions are disposed of with the
observations above.
79. Interlocutory Application(s), if any, shall stand
disposed of.
(Sanjay Karol, CJ)
S. Kumar, J. I agree.
( S. Kumar, J)
K.C.Jha/-
AFR/NAFR AFR
CAV DATE 27.01.2021
Uploading Date 30.11.2021
Transmission Date
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