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TMI Blog2015 (3) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... s on behalf of the Appellant. Shri Tushar Mehta, Additional Solicitor General, Dr. Rajeev Dhawan, Shri Ashok Desai and Shri V. Giri, learned Senior Counsel, Shri Sanjay R. Hegde and Shri B.S. Patel, learned Counsel, led the arguments on behalf of the Respondents. 5. International Cooperative Alliance Statement on the Cooperative Identity was adopted in Manchester, United Kingdom on 23.09.1995. The 'cooperative' is defined as: A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. (Emphasis supplied) 6. The Statement also provides for 'values' on which cooperatives should model themselves, which reads as follows: Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others. (Emphasis supplied) 7. The Statement further provides for 'seven cooperative principles' as guidelines by which the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Community Co-operatives work for the sustainable development of their communities through policies approved by their members. (Emphasis supplied) 8. The cooperative movement in India started at the beginning of the 20th century. Though the movements were also based on some of the values and principles stated above, it appears that the cooperatives in India did not have effective autonomy, democratic functioning and professional management. The National Policy on Cooperatives announced by the Department of Agriculture and Cooperation, Ministry of Agriculture, Government of India adopted in March, 2002, is wholly based on the definition, values and principles stated above. 97th Amendment to the Constitution of India, in fact, gave a constitutional frame to this policy. 9. Apart from providing for the right to form cooperative societies to be a fundamental right Under Article 19 of the Constitution of India and insertion of Article 43B under the Directive Principles of State Policy on promotion of cooperative societies, the amendment also introduced a new Part IXB on Cooperative Societies. Reference to the Statement of Objects and Reasons of the amendment would give a clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atives free from unnecessary outside interferences and also to ensure their autonomous organisational set up and their democratic functioning. 3. The Central Government is committed to ensure that the co-operative societies in the country function in a democratic, professional, autonomous and economically sound manner. With a view to bring the necessary reforms, it is proposed to incorporate a new Part in the Constitution so as to provide for certain provisions covering the vital aspects of working of co-operative societies like democratic, autonomous and professional functioning. A new article is also proposed to be inserted in Part IV of the Constitution (Directive Principles of State Policy) for the States to endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies. The proposed new Part in the Constitution, inter alia, seeks to empower the Parliament in respect of multi-State co-operative societies and the State Legislatures in case of other co-operative societies to make appropriate law, laying down the following matters, namely: (a) provisions for incorporation, Regulation and winding up of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me being in force in any State; * "Office bearer" is Under Article 243ZH(e): "243ZH(e) "office bearer" means a President, Vice-President, Chairperson, Vice-Chairperson, Secretary or Treasurer of a co-operative society and includes any other person to be elected by the board of any co-operative society: * Article 243ZJ provides for the number and term of members of the board and its office bearers: 243ZJ. (1) The board shall consist of such number of directors as may be provided by the Legislature of a State, by law: Provided that the maximum number of directors of a co-operative society shall not exceed twenty-one: Provided further that the Legislature of a State shall, by law, provide for the reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on board of every co-operative society consisting of individuals as members and having members from such class or category of persons. (2) The term of office of elected members of the board and its office bearers shall be five years from the date of election and the term of office bearers shall be coterminous with the term of the board: Provided that the board may fill a casual vac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Credit Societies Act, 1904 and, thereafter, the cooperative societies emerged in India as State sponsored/promoted institutions. The main objective was only credit intended to relieve the poor agriculturists from the clutches of moneylenders. The first urban cooperative credit society under the Act of 1904 was registered in Kanjivaram in erstwhile Madras province [Brief History of Urban Cooperatives" adapted from a paper by O.P. Sharma published on Reserve Bank of India website www.rbi.org.in/scripts/briefhistory.aspx]. The traits of democracy were present in the very first legislation through the principle "one man, one vote". Since the first legislation was limited to the credit societies, a new legislation was introduced 8 years later as "Cooperative Societies Act, 1912". The restriction regarding registration limited to credit societies was taken away and any society established with the object of promoting the economic interests of its members in accordance with the cooperative principles, or a society established with the object of facilitating the operations of such a society, could be registered [The Co-operative Movement in India by Eleanor M. Hough, Fourth Edition, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 and not of the Board of directors. 18. In Bhanumati and Ors. v. State of Uttar Pradesh through its Principal Secretary and Ors. (2010) 12 SCC 1, the cooperative principles governing democratic institutions have been discussed in detail; no doubt while dealing with the Panchayati Raj institutions. However, the basic democratic principles governing both the institutions, enjoying the constitutional status, are the same and, therefore, it would be profitable to refer to the discussion on the principles. To quote: 58. These institutions must run on democratic principles. In democracy all persons heading public bodies can continue provided they enjoy the confidence of the persons who comprise such bodies. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at paragraph-67, this Court elaborated on this principle: 67. Any head of a democratic institution must be prepared to face the test of confidence. Neither the democratically elected Prime Minister of the country nor the Chief Minister of a State is immune from such a test of confidence under the Rules of Procedure framed Under Articles 118 and 208 of the Constitution. Both the Prime Minister of India and Chief Ministers of several States heading the Council of Ministers at the Centre and in several States respectively have to adhere to the principles of collective responsibilities to their respective houses in accordance with Articles 75(3) and 164(2) of the Constitution. 23. In Pratap Chandra Mehta case (supra), at paragraph-45, the principle has been discussed as follows: 45. In the instant case, the election process as contemplated under the relevant laws is that the members of a State Bar Council are elected by the electorate of advocates on the rolls of the State Bar Council from amongst the electorate itself. The elected members then elect a Chairman, a Vice-Chairman and the Treasurer of the State Bar Council as well as constitute various committees for carrying out dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been dealt extensively by Michael Foley in his celebrated work "The Silence of Constitutions". To quote from the Preface: Abeyances refer to those constitutional gaps which remain vacuous for positive and constructive purposes. They are not, in any sense, truces between two or more defined positions, but rather a set of implicit agreements to collude in keeping fundamental questions of political authority in a state of irresolution. Abeyances are, in effect, compulsive hedges against the possibility of that which is unresolved being exploited and given meanings almost guaranteed to generate profound division and disillusionment. Abeyances are important, therefore, because of their capacity to deter the formation of conflicting positions in just those areas where the potential for conflict is most acute. So central are these abeyances, together with the social temperament required to sustain them, that when they become the subject of heightened interest and subsequent conflict, they are not merely accompanied by an intense constitutional crisis, they are themselves the essence of that crisis. 27. In Part II, Chapter Four, the author has also dealt with the constitutional gaps and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as democratic institutions.... "The constitutional provisions have to be construed broadly and liberally having regard to the changed circumstances and the needs of time and polity"5. 29. Article 243ZT of the Constitution requires the laws relating to cooperative societies in force in States prior to the commencement of the Amendment Act to be in tune with and in terms of the constitutional concept and set up of cooperative societies. In fact, a period of one year has been provided in the Constitution from the commencement of the amendment for the required amendment or repeal by the competent legislature or by the competent authority, of laws which are inconsistent with Part IXB. As a corollary, the Constitution enables the competent legislature or authority to suitably amend the existing provisions in their laws in tune with the constitutional mandate. Thereafter, in case there continues to be silence in the Act or Bye-laws, the court will have to read the constitutional requirements into the existing provisions. It is essentially a process of purposive construction of the available provisions as held by this Court in Pratap Chandra Mehta case (supra). 30. Bye-law 18.2 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: Section 73: Final authority of society - Subject to the provisions in this Act and the rules, the final authority of every society shall vest in the general body of the members in general meeting, summoned in such a manner as may be specified in the bye-laws: Provided that, where the bye-laws of a society provide for the election of delegates of such members, the final authority may vest in the delegates of such members elected in the prescribed manner, and assembled in general meeting. 33. The General Body of the first Respondent-Federation, in terms of Bye-law 13.1 comprises of the following: 13.1 The General Meeting shall consist of the following: (1) The Chairman of each of the affiliated Milk Unions enrolled as Ordinary Members; (2) The Registrar; (3) The Dairy Management Expert co-opted by the Board; (4) Managing Director of the Federation; (5) A nominee of the National Dairy Development Board as long as the loan/interest of the National Dairy Development Board have not been fully repaid by the Federation. The Chairman of the Board of Directors shall preside over the General Meeting. In case of his absence, the meeting shall elect a Chairman from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch acts and things as may be necessary for the proper management of the Federation. The Chairperson of the first Respondent is elected by the Board for a term of three years and after the 97th Amendment to the Constitution, the term is five years. When the post of Chairperson falls vacant, the Board is bound to elect a new Chairperson for the remaining term. The post of Chairperson may fall vacant on account of variety of reasons like resignation, death or cessation of membership in the Board, operation of Section 76B of the Act, i.e., removal by the Registrar on account of persistent default or misconduct. 39. The removal by no confidence is not expressly provided in the Bye-laws. Neither is there any such provision in the Act or Rules. The only enabling provision is Bye-law 18.2 which mandates that in case the office of the Chairperson of the Federation falls vacant before the expiry of his term for any reason, the Board has to elect a new Chairperson for the remaining term. 40. Shri Kapil Sibal, learned Counsel appearing for the Appellant, inviting reference to the doctrine of casus omissus and placing reliance on the Full-Bench decision of the High Court of Kerala in S. Laks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h v. The Registrar. Co-operative Societies. Haryana and Ors. [AIR 1991 P and H 149], the Full-Bench of High Court of Punjab and Haryana held as follows: 22...the answer to the question posed in the beginning of the judgment, is that in absence of any provision in the Punjab Co-operative Societies Act, 1961, Rules and the Bye-laws made thereunder (as also in the Haryana Cooperative Societies Act, 1984, Rules and the Bye-laws made thereunder) for moving a no-confidence in the President of a Managing Committee/Chairman of a Board of Directors of a Co-operative Bank, it is not permissible to move such a motion, inasmuch as such a power cannot be inferred nor such a power is inherent in the members of the Managing Committee/Director of the Bank. The Office bearers can only be removed in accordance with Section 27 of the Act read with Rules 25 and 26 of the Rules. With respect we are unable to agree with the law laid down by the Division Bench in Haji Anwar Khan's case (AIR 1980 Punjab and Haryana 306) (supra) (which was a case under the Wakf Act), to our mind, does not lay down correct law. 44. It may be seen that all these decisions dealt with the pre-Ninety Seventh Amendment st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no democracy in a cooperative society, it ceases to be a cooperative society as conceived by the Constitution of India under the Ninety Seventh Amendment. 47. There is no quarrel with the well-settled proposition that a right to elect is not a fundamental right nor a common law right; it is a statutory right, and any question relating to election has to be resorted within the four corners of the Act as held by this Court in Jyoti Basu and Ors. v. Debi Ghosal and Ors.[(1982)1 SCC 691]. To quote paragraph-8: 8. A right to elect, fundamental though it is to democracy, is, anomalously enough, neither a fundamental right nor a common law right. It is pure and simple, a statutory right. So is the right to be elected. So is the right to dispute an election. Outside of statute, there is no right to elect, no right to be elected and no right to dispute an election. Statutory creations they are, and therefore, subject to statutory limitation. An election petition is not an action at common law, nor in equity. It is a statutory proceeding to which neither the common law nor the principles of equity apply but only those rules which the statute makes and applies. It is a special jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h or other obscurity of the express language as conferring a delegated legislative power to elaborate its meaning in accordance with public policy (including legal policy) and the purpose of the legislation"[Bennion on Statutory Interpretation by Francis Bennion, 6th Edition, p. 136]. 49. The conventional view is that the legislature alone makes the law. But as Bennion puts it: The truth is that courts are inescapably possessed of some degree of legislative power. Enacted legislation lays down rules in advance. The commands of Parliament are deliberate prospective commands. The very concept of enacted legislation postulates an authoritative interpreter who operates ex post facto. No such interpreter can avoid legislating in the course of exercising that function. It can be done by regarding the breadth or other obscurity of the express language as conferring a delegated legislative power to elaborate its meaning in accordance with public policy (including legal policy)"[Bennion on Statutory Interpretation by Francis Bennion, 6th Edition, p. 137]. 50. According to Donaldson J.: The duty of the courts is to ascertain and give effect to the will of Parliament as expressed in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is a kind of legislation which stands implicitly delegated to them to further the object of the legislation and to promote the goals of the society. Or to put it negatively, to prevent the frustration of the legislation or perversion of the goals and values of the society. So long as the courts keep themselves tethered to the ethos of the society and do not travel off its course, so long as they attempt to furnish the felt necessities of the time and do not refurbish them, their role in this respect has to be welcomed. 53. The cooperative 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 functioning on democratic principles is to be reflected in the respective Acts or Rules or Bye-laws both on the principle and procedure. If not, it is for the court to read the democratic principles into the Act or Rules or Bye-laws. If a procedure is prescribed in any Act or Rule or Bye-law regarding election of an office bearer by the Board, as defined Under Article 243ZH(b) of the Constitution of India, and for removal thereof, by way of a motion of no confidence, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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