Dismissed

M.K.Abdulsalam v. State of Kerala

Kerala HC25 Jul 2018WA/574/2018

Case brief

AI extract

What is this about?

In writ appeals challenging the Kerala Co-operative Societies (Amendment) Act, 2017, the High Court held that restricting voting rights in District Co-operative Banks to Primary Agricultural Credit Societies and Urban Co-operative Banks does not violate fundamental rights or democratic principles, upholding the legislative classification.

What did the court decide?

The writ appeals were dismissed with no costs awarded.

M.K.Abdulsalam Vs State of Kerala — Cooperative Societies | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN

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WEDNESDAY, THE 25TH DAY OF JULY 2018 / 3RD SRAVANA, 1940

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W.A.No. 574 of 2018 IN WPC.No.14083/2017

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AGAINST THE JUDGMENT DATED 08-12-2017 IN WP(C).No.14083/2017 OF HIGH COURT OF KERALA

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APPELLANTS/PETITIONERS:

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1 M.K.ABDUL SALAM, MULLAKKARA HOUSE, ETTUMUNA, P.O.KARUVANNUR, THRISSUR DISTRICT, KERALA-680711.

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2 C.I. SEBASTIAN, CHIRAYATH HOUSE, P.O.VATANAPPALLY, THRISSUR. KERALA-680614. 3 BHASKARAN ADHAMKAVIL, ADHAMKAVIL HOUSE, PANANCHERRY, P.O.PATTIKKAD,THRISSUR, KERALA. 4 E. SATHYABHAMA, SREEPADAM, KUNNATH LANE, P.0.THIRUVAMBADY, THRISSUR-22, KERALA. 5 VINCENT KATTUKARAN, KATTUKARAN HOUSE, ARANATTUKARA, THRISSUR, KERALA. 6 P.R. NAMBISAN, PALLIPPAT HOUSE, ARIYANNUR, THRISSUR, KERALA. 7 P.A JOSE, PULLOKKARAN HOUSE, CHOUKADESOM, P.O.ELINJIPRA, THRISSUR, KERALA. 8 E. VENUGOPALA MENON, VRINDAVANAM, P.O. THONNURKARA, CHELAKKARA, THRISSUR, KERALA. 9 P. SULAIMAN, AMMANATH HOUSE, P.O.SOUTH KONDAZHY, THRISSUR-679106, KERALA. 10 K.K. SAIDMOHAMMED, KUNNATH HOUSE, BEACH ROAD, P.O.CHAVAKKAD, THRISSUR, KERALA. 11 K.G. ARAVINDAKSHAN, KADAVIL HOUSE, P.O.VALLACHIRA, THRISSUR.

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-2-

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WA574/2018

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12 O.S CHANDRAN, OLLEKKATT HOUSE, SREERAGAM, ANAMALA ROAD,

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P.O.CHALAKUDY-680307, THRISSUR.

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13 K. MADHAVAN,

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S/O PARAMESWARAN BHATTATHIRIPAD, KARUR MANA,

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P.O.KAIPARAMBA, THRISSUR- 680546,KERALA.

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14 LATHA PREMAN,

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W/O PREMACHANDRAN, PARANGANATT HOUSE,

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CHAKKAMKANDAM P.O., THRISSUR- 680522, KERALA.

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15 MARYKJUTTY THANKACHAN, THANICKAL HOUSE, T.T.ROAD, KANAKADHARA LANE,

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KURIACHIRA-680006, THRISSUR, KERALA.

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BY ADV.SRI.GEORGE POONTHOTTAM

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RESPONDENTS/RESPONDENTS:

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STATE OF KERALA,

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REPRESENTED BY ITS CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM-695001.

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THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM-695001.

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DISTRICT CO-OPERATIVE BANK, THRISSUR-680001, REPRESENTED BY THE GENERAL MANAGER.

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THE PART TIME ADMINISTRATOR, DISTRICT CO-OPERATIVE BANK, THRISSUR-680001.

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R1 & R2 BY ADVOCATE GENERAL SRI.C.P.SUDHAKARA PRASAD SPECIAL GOVERNMENT PLEADER SRI.K.S.MOHAMAD HASHIM R3 & R4 BY ADV. SRI.P.C.SASIDHARAN

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THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ALONG WITH W.A.NO.581/2018 & CONNECTED CASES ON 19.7.2018, THE COURT ON 25.7.2018 DELIVERED THE FOLLOWING:

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“CR”

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V. CHITAMBARESH & SATHISH NINAN, JJ.

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= = = = = = = = = = = = = = = = = = = = = = = =

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W.A.Nos.574, 581, 594, 633 & 634 of 2018

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= = = = = = = = = = = = = = = = = = = = = = = =

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Dated this the 25^th day of July, 2018

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Judgment

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Chitambaresh, J.

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“If you want to be incrementally better: Be

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competitive. If you want to be exponentially

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better: Be co-operative.”

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said an unknown author whose message is yet to percolate to the masses.

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The challenge in these writ appeals is confined to

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Section 2(ia), the third proviso to Section 18(1) and Explanation I to Section 32(1) of the Kerala Co-operative Societies Act, 1969 (hereinafter referred to as 'the Act' only).

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The above provisions brought in by the Kerala Co-operative Societies (Amendment) Act, 2017 (hereinafter referred to as

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WAs.574, 581, 594, 633 & 634/2018

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-: 2 :-

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'the Amending Act') are extracted below for the sake of clarity:

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Section 2(ia):

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“ 'District Co-operative Bank' means a Central Society having jurisdiction over one revenue district and having as its members Primary Agricultural Credit Societies and Urban Cooperative Banks and the principal object of which is to raise funds to be lent to its members, including nominal or associate members.”

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Section 18(1) . Third proviso:

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“Provided also that a District Co-operative Bank may admit any co-operative society registered under the provisions of this Act, other than Primary Agricultural Credit Societies and Urban Co-operative Banks, functioning within its area of operation as a nominal or associate member.”

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Section 32(1) . Explanation I:

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“For the purposes of this proviso, financial assistance includes any financial assistance

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WAs.574, 581, 594, 633 & 634/2018

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-: 3 :-

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from the Kerala Co-operative Development and Welfare Fund Board, Deposit Guarantee Scheme implemented by the Kerala Co-operative Deposit Guarantee Fund Board, Kerala Cooperative Risk Fund Scheme implemented by the Kerala Co-operative Development and Welfare Fund Board, National Bank for Agriculture and Rural Development, National Co-operative Development Corporation and any other financial institution under the control of the State or Central Government and also any financial assistance guaranteed by the said institutions.”

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The appellants contend that Primary Agricultural Credit Societies and Urban Co-operative Banks have the right to vote as members in the District Co-operative Bank as per Section 2(ia) of the Act. Other co-operative societies registered under the Act can only be admitted as nominal or associate members to the District Co-operative Bank without any right to vote as per the third proviso to Section 18(1) of the Act. The appellants urge that the right to be members of the District

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WAs.574, 581, 594, 633 & 634/2018

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-: 4 :-

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Co-operative Bank without any right to vote violates Article 19(1)(c) of the Constitution of India. The same also militates against the Co-operative Principles - particularly Democratic Member Control - enunciated in Schedule II formulated under Section 2(eccc) of the Act. The appellants further point out that Explanation I has been added after the third proviso to Section 32(1) of the Act to rope in many Boards and Corporations having little governmental control. Explanation I facilitates the Government to topple down democratically elected committee to the societies by supersession for the slightest displeasure. This according to the appellants will not be in the best interest of a society which is bound to function as a democratic institution and conduct its affairs based on democratic principles. The Government points out that the courts should be slow to interfere with the legislative wisdom and that there is always a presumption in favour of constitutionality unless established otherwise.

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We heard Mr George Poonthottam, Advocate on

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WAs.574, 581, 594, 633 & 634/2018

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-: 5 :-

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behalf of the appellants, Mr C.P.Sudhakara Prasad, Advocate General on behalf of the State and Mr P.C.Sasidharan, Advocate on behalf of the contesting respondents.

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It is true that only Primary Agricultural Credit Societies and Urban Co-operative Banks can be admitted as members of the District Co-operative Bank with a right to vote as per Section 2(ia) of the Act. Other co-operative societies registered under the Act can only be admitted as nominal or associate members without any right to vote as per the third proviso to Section 18(1) of the Act. A nominal or associate member under Section 18 of the Act shall not have the right to vote under Section 20(b) of the Act though funds can be lent to them by the District Co-operative Bank. Does the denial of the right to vote to other co-operative societies as nominal or associate members infringe Article 19(1)(c) of the Constitution of India? The right of a citizen to form a co-operative society has been protected under Article 19(1)(c) by virtue of the Constitution (Ninety-seventh Amendment) Act, 2011 with

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WAs.574, 581, 594, 633 & 634/2018

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-: 6 :-

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effect from 15.2.2012. It is one thing to say that a citizen has a right to form a co-operative society and quite another thing to say that a member society has a right to form a Central Society. Firstly, a co-operative society is not a citizen who alone can have fundamental rights guaranteed under Part III of the Constitution of India and secondly, even a citizen has no fundamental right to be a member of a society. The right of a citizen to be a member of a society is governed by the Act, Rules and bye-laws (see Zoroastrian Co-op. Housing Society Ltd. v. District Registrar [(2005) 5 SCC 632]). The contention that the fundamental right of co-operative societies other than Primary Agricultural Credit Societies and Urban Co-operative Banks is infringed is totally misconceived.

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The appellants rely on the Co-operative Principles enunciated under Schedule II framed under Section 2(eccc) of the Act to contend that they are not adhered to by the District Co-operative Bank. The Co-operative Principles are:

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i. Open and voluntary membership

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WAs.574, 581, 594, 633 & 634/2018

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-: 7 :-

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ii. Democratic Member Control iii.Member economic Participation iv.Autonomy and Independence v. Education, Training and Information vi.Co-operation among Co-operatives vii.Concern for community

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The appellants relying on Article 43-B of the Constitution of India assert that the State should endeavour to promote autonomous functioning, democratic control and professional management of co-operative societies. Our attention was also invited to the following passage in Vipulbhai M.Chaudhary v. Gujarat Co-operative Milk Marketing Federation Ltd. and others [(2015) 8 SCC 1] to drive home their point:

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“51. The co-operative society registered under the Central or the State Act is bound to function as a democratic institution and conduct its affairs based on democratic principles. Democratic function on democratic principles is to be reflected in the respective Acts or Rules or bye-laws both on principle and procedure. If not, it is for the court to read the democratic

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WAs.574, 581, 594, 633 & 634/2018

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-: 8 :-

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principles into the Act or Rules or byelaws............”

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We do not think that the constitution of the District Cooperative Bank is in any way undemocratic as the Government have their own justification in not extending the right to vote to all co-operative societies.

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There exists a three tier co-operative credit system comprising of Primary Agricultural Credit Societies at primary level, District Co-operative Banks at middle level and State Cooperative Bank at apex level. The counter affidavit reflects that the Government had appointed a committee to study and report about the changes to be made in the Board of Management of District Co-operative Banks. The committee comprised of the following persons:

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a) Registrar of Co-operative Societies - Convener b) Additional Registrar(Credit) - Member c) Additional Registrar(Consumer) - Member d) Deputy Registrar(Credit) - Member

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WAs.574, 581, 594, 633 & 634/2018

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-: 9 :-

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The committee in its report had recommended that the voting right in District Co-operative Banks should be limited to Primary Agricultural Credit Societies and Urban Co-operative Banks and not for all. Otherwise it turned the co-operative credit structure topsy-turvy shrinking the volume of agricultural lending to ten percent of total lending by the involvement of other co-operative societies. The committee opined that the management control should be vested with the Primary Agricultural Credit Societies and Urban Co-operative Banks which are part of short term credit system. The business decisions by the involvement of other co-operative societies may not be credit-oriented and hence the necessity to keep them away from the management control.

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The Government was well within their powers to exclude co-operative societies other than Primary Agricultural Credit Societies and Urban Co-operative Banks from the management control of District Co-operative Bank. The legislative wisdom of this act by amending Section 2(ia) and

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WAs.574, 581, 594, 633 & 634/2018

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-: 10 :-

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adding the third proviso to Section 18(1) of the Act cannot be tested or substituted by this Court. It is settled law that court should show undue deference to the parliamentary wisdom and exercise self-restraint while examining the vires of legislations validly enacted. Reference to the following decisions is apposite:

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i. Bachan Singh v. State of Punjab [(1980) 2 SCC 684] ii. Maru Ram v. Union of India [(1981) 1 SCC 107] iii. State of M.P. v. Bala [(2005) 8 SCC 1] iv. Vikram Singh v. Union of India [(2015) 9 SCC 502]

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We do not want to multiply the decisions on the point except

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to borrow the following words of Mr Justice K.Balakrishnan Nair who authored the judgment in Philip v. State of Kerala [2008 (2) KLT 555(DB)]:

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“15. We think that the wisdom of the legislature should prevail. Its representatives are the best judges of what is good for the people. If the legislature thinks that a particular type of societies alone should be admitted as members of the DCB, it has to be recognised as the law of

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WAs.574, 581, 594, 633 & 634/2018

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-: 11 :-

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the land. If the legislature thinks that some other type of societies should also be admitted to the membership of the DCB, it has to be recognised as the law of the land.”

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The Government has thought it fit to confer the right of vote only on the Primary Agricultural Credit Societies and Urban Co-operative Banks as members of the District Co-operative Bank which cannot be said to be irrational.

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The power of supersession of the managing committee under Section 32(1) of the Act for acts not conducive to the society has long ago been recognised and third proviso thereto is as follows:

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“Provided also that the Board of Cooperative Society shall not be superseded or kept under suspension where there is no Government share holding or loan or financial assistance or any guarantee by the Government or any Board or Institutions constituted by the Government.”

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The term 'Government share holding' or 'any Board or

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WAs.574, 581, 594, 633 & 634/2018

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-: 12 :-

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Institutions constituted by the Government' has been clarified by mentioning the various Boards, Schemes and Corporations by Explanation I added thereto. The Explanation I explains the ambit of the third proviso already existing and is to dispel any doubt as regards the categories of societies brought within the umbrella of Section 32(1) of the Act. The idea behind this is that any society availing loan or financial assistance from any agency having Government links should always be under the watchful eyes of the Department. Any default, negligence, disobedience or misappropriation contrary to the avowed object of the Act should result in unseating the members from the managing committee of the society. The power of supersession of the managing committee of a society is canalised and strictly governed by the statutory provisions on pre-existing conditions. We do not think that the adding of Explanation I after the third proviso to Section 32(1) of the Act would entail in toppling down the elected managing committee from office arbitrarily. There is always a

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WAs.574, 581, 594, 633 & 634/2018

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-: 13 :-

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presumption in favour of constitutionality and a law will not be declared unconstitutional unless the case is so clear as to be free from any doubt. We are consciously not adverting to Article 243ZL inserted in Part IX-B of the Constitution of India regarding supersession of the managing committee since the issue is still res integra. The Gujarat High Court has struck down the amendment made to Part IX-B of the Constitution of India in the case reported in 2013 (2) GLR 1698 against which the Supreme Court has been moved. Suffice it to say that Explanation I added after the third proviso to Section 32(1) of the Act has not been proved to be arbitrary violative of Article 14 of the Constitution of India.

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No other point is urged.

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The writ appeals are dismissed. No costs.

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Sd/V. CHITAMBARESH, JUDGE

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Sd/SATHISH NINAN, JUDGE

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Sha/200718

M.K.Abdulsalam v. State of Kerala

Case brief

What is this about?

What did the court decide?

M.K.Abdulsalam v. State of Kerala

Case brief

What is this about?

What did the court decide?

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