A two-judge bench dismissed a writ petition challenging amended byelaw 31 of a cooperative bank which required candidates to hold 1000 shares to contest elections. The court held the byelaw is not inconsistent with the Act nor arbitrary.
The challenge to amended byelaw 31 fails and the petition is dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
-1-
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE SIDE
Writ Petition No. 42l3 of 2005
Kulbhushan Kushaba Awati. ... Petitioner
vs
State of Mah and ors.. respondents
Dr V.K.Chowdhary for the Petitioner
Mr. Y D Mulani AGP for respondent nos.l to 3
Mr.S.R.Borulkar with Mr. A.B.Vagyani for
respondent no. 6
CORAM;A.P.SHAH & D.Y.CHANDRACHUD JJ.
Dated 22.7.2005
P C:
Heard Advocates.
2. The Petitioner is a member of Respondent No. 6
- Ashta People’s Cooperative Bank Ltd, which is
also a cooperative society registered under the
Maharashtra Cooperative Societies Act, l960.The
Respondent No.6 Bank is carrying banking business
under a licence from the Reserve Bank of India
under section22 of the Banking Regulation Act,
l949. By this petition, the Petitioner is seeking
to challenge the validity of the amended byelaw 3l
of the Bank primarily on the ground that the said
byelaw is inconsistent with the provisions of
section 27(l) of the Maharashtra Cooperative
Societies Act, l960, hereinafter referred to as the
-2-
said Act. The amended byelaw 3l provides that for
contesting the election for the post of Director of
the Bank, the person concerned prior to the year
ending of the election should be a member of the
society for at least 2 years and should have at
least l000 shares in his name. The amended byelaw
has been approved in the General Body Meeting with
requisite majority on l2.2.2003 and has been duly
sanctioned by the Additional Commissioner and
Special Registrar vide order dated 22.4.2003.
34. Dr Choudhary, learned counsel appearing for
the petitioner contends that the byelaws have no
statutory force and cannot be equated with the
statutory provisions and even if the amended byelaw
3l provides for eligibility for election for
director, same would not have been considered in
view of the provisions of section l44E of the said
Act. He contends that the amended byelaw is
totally inconsistent with the provisions of section
27(l) of the said Act and in view of the settled
position that in case of conflict the provision of
the Act should prevail, the impugned byelaw is
liable to struck down as altravires. In any event
according to Dr. Choudhary the byelaw is
discriminatory inasmuch as it restricts the right
-3-
to contest the election only to the members who are
holding requisite number of shares thereby causing
discrimination among the members who are holding
requisite shares and those who are not holding l000
shares as required by the byelaw. In support of
his contentions Dr Choudhary relied upon the
decision of the Apex Court in Babaji Kondaji Garad
vs Nashik Merchants Coop Bank Ltd, AIR l984 SC l92
and the decision of the division bench of this
court in J P Badadare vs State of Maharashtra, l985
CTJ 262.
4. Per contra Mr.Borulkar, learned counsel
appearing for Respondent Bank contends that the
amended byelaw does not confer more than one vote
and it merely imposes additional condition for
contesting the election to the managing committee.
The amended byelaw therefore is in no way
inconsistent with section 27(l). Mr. Borulkar
contends that the Reserve Bank of India has issued
directives to all Primary (Urban) Cooperative Banks
recommending extension of capital to risk assets
ratio in phased manner. In view of the directives
issued by the Reserve Bank of India, the respondent
no.6 Bank decided to amend the byelaws for
augmentation of the share capital and the amendment
-4-
was also sanctioned by the General Body and it was
also approved by the Registrar as required by
section l3 of the said Act. Accordingly the said
byelaw has equal force as the provision of the Act
and the Rules under the said Act and the said
byelaw has to be considered while examining the
eligibility and qualification of a person
contesting the election to the managing committee
of the society. In support of his contentions Mr
Borulkar relied upon the decisions of this court in
Jairam vs State of Maharashtra, l996 CTJ 235,
Minakshi Murlidhar Ghodke vs The Additional Commer,
Nasik Division, Nasik, l997 (l) Mah L J l82 and
Pandurang Hindurao Patil vs. State of Maharashtra,
l984 CTJ l25.
5. We have considered the rival contentions of the
learned counsel for the parties. Section 27 (l) of
the said Act which is relevant for our purpose
reads as under:
"27(l) No member of any society shall have
more than one vote in its affairs, provided
that, in the case of an equality of votes
the Chairman shall have a casting vote.
Save as otherwise provided in sub-section
-5-
(2) to (7) every right to vote shall be
exercise personally, and not by proxy.
Provided that in the case of an equality of
votes the Chairman shall have a casting
vote."
6. Section l44E of the said Act reads as follows:
"l44E. Disqualification for membership-(l)
A person shall be disqualified for being
elected as, and for being a member, of the
committee of any specified society-
a) if he is a salaried employee of any
society (other than a society of employees
themselves) or holds any office of profit
under any society except when he holds or is
appointed to the office of a Managing
Director or any other office declared by the
State Government by general or special order
not to disqualify its holder or is entitled
to be or is elected, appointed or coopted to
any reserved seat on the committee of a
society under section 73BB.
b) if he has been convicted of an offence
-6-
punishable under section l53A or section
l7lE or section l7lF or sub-section (2) or
sub-section(3) of section 505 of the Indian
Penal Code, or under section l44Q or clause
(a) of sub-section (20 of section l44R of
the Act, unless a period of six years has
elapsed since the date of his conviction.
c) if he has been convicted by a Court in
India for any offence or sentenced to
imprisonment for not less than two years,
unless the period of five years has elapsed
since his release;
d) if he is found guilty of a corrupt
practice by the Commissioner of the
Division, unless a period of six years has
elapsed since the date on which the decision
of the Commissioner takes effect.
e) if he so disqualified by or under any
other provision of this Act.
2) For the purposes of clause (a) of
sub-section (l), a person is not to be
deemed to hold an office of profit under a
-7-
society, if he do not receive any
remuneration other than compensatory
allowance honorarium payable under
sub-section (2) of section 65 not exceeding
Rupees six thousand per year.
Explanation- In this sub-section
"compensatory allowance,and the travelling
allowance, the daily allowance or such other
allowance which is paid to the holder of the
office for the purpose of meeting the
personal expenditure in preforming the
functions as holder of the office.
3) Notwithstanding anything contained in
clause (b) or the sub-section (l) a
disqualification under either clause shall
not, in case of a person who on the date of
the conviction is a member of the specified
society, take effect until three months have
elapsed from that date or, if within that
period an appeal or application or that is
brought in respect of the conviction or the
sentence under appeal or application is
disposed of by the Court".
-8-
7. Byelaw 3l which is reproduced by the Petitioner
in para 3 of the petition reads as follows:
"Byelaw No.3l; For having participation in
the election for the post of director of the
bank, the4 person concerned prior to the
year ending of the election should be a
member of the said society for at least two
years and the person concerned contesting
election should have at least l000 shares in
his name. However, this condition shall not
be applicable for the persons contesting
from Backward Class and for the reasons who
are holding shares for the economically
backward class".
8. In Babaji Kondaji Garad and ors vs Nasik
Merchants Coop Bank Ltd Nasik and ors (supra) the
Apex Court in para l5 of the report held thus:
"l5. Section 73B provides a legislative
mandate. Rule 6 has a status of subsidiary
legislation or delegated legislation.
Byelaw of a cooperative society can at best
have the status of an Article of Association
of a company governed by the Companies Act,
-9-
l956 and as held by this court in
Cooperative Central Bank Ltd and ors vs
Additional Industrial Tribunal, Andhra
Pradesh and ors (l970 (l) SCR 205) the
byelaws of a cooperative society framed in
pursuance of provision of the relevant Act
cannot beheld to be law or to have the fore
of law. They are neither statutory in
character nor they have statutory flavour so
as to be raised to the status of law. Now
if there is any conflict between a statute
and the subordinate legislation it does not
require elaborate reasoning to firmly state
that the statute prevails over subordinate
legislation and the byelaw if not in
conformity with the statute in order to give
effect to the statutory provision the rule
or bye law has to be ignored. The statutory
provision has precedence and must be
complied with. Further the opinion of the
Dy Registrar as expressed in his circular
dated l.2.l979 and his letter dated 4.6.l979
has no relevance because his lack of
knowledge or misunderstanding of law as
expressed in opinion has no relevance. The
High Court relying upon the aforementioned
-10-
two documents observed as under:
"There is no inconsistency between section
73B and the bye laws because even the
Government has construed section 73B in such
manner that even though the byelaws are not
amended and reserved seats remain unfilled
by election the same can be filled up by
cooption."
With respect, we find it difficult to
subscribe to this untenable approach that a
view of law or a legal provision expressed
by a government officer can afford reliable
basis or even guidelines in the matter of
construction of a legislative measure. It
is the function of the court to construe
legislative measures and in reaching the
correct meaning of a statutory
provision,opinion of executive branch is
hardly relevant. Nor can the court abdicate
in favour of such opinion".
9. The learned single Judge of this court (Barde
J.) in the case of Jairam vs State of Maharashtra
(supra) observed in para l0 as follows:
-11-
"l0.While considering the effect of such
byelaw which provides further qualifications
than the qualification laid down under
section 73FF of the Maharashtra Cooperative
Societies Act, l960, and Rule 58(l) of the
Maharashtra Cooperative Societies Rules,
l96l it is observed by the learned single
Judge of this court in the case of Sambha
s/o Gangaram Pikale vs The State of
Maharashtra and ors(supra);
" It cannot be said that no additional
qualifications can be prescribed under the
rules. It would be within the jurisdiction
of the Registrar to examine whether the bye
laws including such qualifications are
proper and reasonable.Since the present
byelaw is approved by the Registrar, it can
well be presumed that the Registrar has
accepted its necessity"
Thus the import and legality of such byelaw
is fully considered in this later judgment
with reference to the provisions of section
73FF of the Maharashtra Cooperative
-12-
Societies Act, l960 and Rule 58(l) of the
Rules framed thereunder.In such
circumstances, the controversy raised in the
present matter is set at rest by this
judgment delivered by this court in the case
of Sambha s/o Gangaram Pikale vs The State
of Maharashtra and ors ( cited supra)".
l0. In the case of Pandurang Hindurao Patil vs
State of Maharashtra(supra) the division bench of
this court has held that the byelaws, if any,
framed by the cooperative society and which are
approved by the Registrar have the equal force as
the provisions of the Act and Rules framed
thereunder and are required to be taken into
consideration while finding out whether a
particular member is qualified or not to contest
the election. In Minakshi vs Additional Commr
(supra) another learned single Judge ( R M Lodha
J.) considered the amendment to byelaw whereby a
member was made ineligible to be elected as a
director unless he was a member of the bank for two
continuous years and had maintained deposit amount
with the bank for one year immediately preceding
the year in which elections were to be held. The
learned Judge held that the said byelaw is not
-13-
contrary to the provisions of section 73FF of the
said Act and Rule 58(l) of the Rules framed
thereunder. It was held that only additional
qualifications are laid down by the society as to
who should be eligible to contest the election. In
the light of this settled legal position it is not
possible to accept the contention of Dr Choudhary
that no additional qualifications can be prescribed
under the byelaws or rules. It would be within the
jurisdiction of the Registrar to examine whether
the byelaws including such qualifications are
proper or reasonable. Once a byelaw is approved by
the Registrar it can well be presumed that the
Registrar has accepted its necessity. We also do
not find any merit in the contention that the
amended byelaw 3l is contrary to section 27(l) of
the said Act. What section 27(l) provides is a
rule
that no member of the society shall have more than
one vote in its affairs and that right to vote
shall be exercised personally and not by proxy.
The effect of the byelaw is not that a member is
conferred more than one vote but merely imposes an
additional condition for contesting election to the
managing committee. The amended byelaw which
provides for holding of additional shares as a
-14-
condition of eligibility for contesting the
election cannot be said to be inconsistent with
section 27(l) of the Act.
ll. Dr Choudhary placed strong reliance on the
decision in J P Badadare vs State of Maharashtra
(supra) in which the division bench has struck down
the proviso to section 27 as arbitrary and
violative of Art l4 of the Constitution. The
proviso to section 27 provided that where a society
is a member of a federal society belonging to any
of the categories specified in section 73G then all
the members elected to, and the members, if any
coopted or appointed under section 73B on the
committee of such society shall have a right to
vote on its behalf in the affairs of the federal
society. The court noted that the members of the
managing committee of these member societies differ
in strength. Some primary cooperative societies
have only 6 members on the managing committee,while
other primary coop societies have differing
membership ranging upto 2l. This number, therefore
varies from primary coop society to society. All
these primary coop societies had only one vote
under section 27(3) of the said Act before
26.l2.l983 by which proviso was added to section
-15-
27. By reason of proviso to sub-section (3) of
section 27 each coop society would have as many
votes as would be the total number of its members
on the managing committee. In other words, within
the same class of primary coop societies affiliated
to the federal coop society, there was
discrimination between the same class and some coop
societies, would have more voting rights than the
others depending upon the number of members on
their managing committees. Therefore there was
obvious hostile discrimination between coop
societies similarly circumstanced. The ratio in
Badadare’s case has no application to the facts of
this case. The amended byelaw 3l does not make any
hostile discrimination between different class of
members but merely imposes an additional condition
for eligibility whereby the member desirous of
participating in the election for the managing
committee must hold more than l000 shares.The
members belonging to backward class and
economically backward class are specifically
exempted from this condition. We do not find any
arbitrariness or unreasonableness in the byelaw
imposing additional condition of holding l000
shares for contesting the election to the managing
committee. In the circumstances, the challenge to
-16-
the amended byelaw 3l must fail and the petition
accordingly stands dismissed.
l2. Mr.Borulkar, learned counsel appearing for the
Bank stated that any member who is desirous of
contesting the election can buy l000 shares at any
time before submission of nomination papers and if
such member produces proof that he has requisite
number of shares,his nomination papers will be
accepted.
3 issues framed by the court
Whether amended byelaw 31 imposing a requirement of holding 1000 shares for contesting the election is inconsistent with section 27(1) of the Maharashtra Cooperative Societies Act, 1960.
Whether the additional qualification prescribed in the byelaw creates arbitrary discrimination violative of Article 14 of the Constitution.
Whether the Registrar's approval of the amended byelaw validates the additional eligibility conditions despite the petitioner's challenge.
Colour shows how this judgement treated each authority
Babaji Kondaji Garad vs Nashik Merchants Coop Bank LtdReferred¶17
Babaji Kondaji Garad vs Nashik Merchants Coop Bank Ltd, AIR 1984 SC 192 · Who else cites this
J P Badadare vs State of MaharashtraDistinguished¶70
J P Badadare vs State of Maharashtra, 1985 CTJ 262
Cooperative Central Bank Ltd and ors vs Additional Industrial Tribunal, Andhra Pradesh and orsReferred¶47
Cooperative Central Bank Ltd and ors vs Additional Industrial Tribunal, Andhra Pradesh and ors (1970 (1) SCR 205) · Who else cites this
Jairam vs State of MaharashtraReferred¶21
Jairam vs State of Maharashtra, 1996 CTJ 235
Minakshi Murlidhar Ghodke vs The Additional Commissioner, Nasik DivisionReferred¶61
Minakshi Murlidhar Ghodke vs The Additional Commer, Nasik Division, Nasik, 1997 (1) Mah LJ 182
Pandurang Hindurao Patil vs. State of MaharashtraReferred¶21
Pandurang Hindurao Patil vs. State of Maharashtra, 1984 CTJ 125
Sambha s/o Gangaram Pikale vs The State of Maharashtra and orsExplained¶56
Sambha s/o Gangaram Pikale vs The State of Maharashtra and ors
3 provisions across 1 enactments
Kulbhushan Kushaba Awati
State of Maharashtra
Ashta People's Cooperative Bank Ltd
A.P. Shah
D.Y. Chandrachud
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court