Samitiyan Vyavasthapak Union Vs. State of Rajasthan & Ors
 INSC 349 (1
K.Ramaswamy, K.G.B. Pattanaik (J) K. Ramaswamy,J.
JT 1996 (3) 292 1996 SCALE (2)795
APPEAL NOS. 4174-75 OF 1996 [Arising out of SLP (C) Nos. 14778-79 of 1995]
granted in all the special leave petitions.
appeals arise from the judgment and order dated May 9, 1991 passed in Writ Petition No.1018-20 of 1979 by a Division
Bench of the Rajasthan High Court. The facts are fairly not in dispute.
Secretaries were recruited by the Rajasthan Credit Co-operative Institutions
Cadre Authority Limited [for short, the 'Cadre Authority Society'] constituted
under Section 4  of the Rajasthan Co-operative Societies Act, 1965 [for
short, the 'Act']. They were appointed in the respective District Co-operative
Banks initially under Recruitment and Service Conditions of the Managers of
Agriculture Credit Cooperative Societies Rules, 1977 [1977 Rules] and thereafter
under Agriculture Cooperative Credit Societies Service Rules, 1969 [for short,
the '1969 Rules'] by the Managers of the District Cooperative Banks and were
sought to be posted to the Primary Agriculture Credit Cooperative Societies
[for short, the 'PACS'] fastening liability of their salary on the PACS who
have challenged the validity of the constitution of Cadre Authority Society and
also the power of the Registrar of the Cooperative Societies [for short, the
'Registrar] to make the rules calling upon PACS to contribute to the Manager's
Salary Fund under Central Cooperative Bank Rules, 1969 [for short, the
"Bank Rules"]. The Division Bench has held that the Cadre Authority
Society cannot be registered as a cooperative society under Section 4 of the Act,
the Bank Rules are ultra vires the powers of the Registrar under Rule 41 of the
Cooperative Societies Rules, 1966 [for short, the "Rules].
R.K. Jain, Rajiv Dhavan and Jitendra Sharma, learned senior counsel appear for
these Unions and Managers.
these appeals, pursuant to the permission granted by this Court, the Government
framed the Conditions of Service of the Managers/Assistant Managers of the
Agricultural Credit Cooperative Societies Rules, 1995 and placed the same on
record. The appellants are not agreeable to those Rules.
the learned counsel have contended that under Section 4 , Cadre Authority
Society is a society regulating facilitation of disbursement of the loans by
the PACS in terms of cooperative movement for which PACS came to be registered
under the Act. The Cadre Authority Society came to be registered pursuant to
the recommendation made by Datey Committee which has gone into the credit
structure and proper utilization of the loans to the agriculturists made
available by the State Government and distributed through the State Central
Cooperative Credit Bank to the District Societies who in turn distribute the
loans to PACS. For their coordination, supervision and proper utilization
thereof the Managers\Assistant Managers [hereinafter referred to as the paid
Secretaries] are competent persons to work as liaison between the PACS and
their members and the District Banks and Central Bank. The Registrar under Rule
41 of the Rules read with Section 147  and Section 148  (xxx) of the Act
is empowered to regulate the service conditions of paid Secretaries and to
prescribe qualifications. Consequently, the Cadre Authority Society registered
under Section 4(1) of the Act is a valid society.
also contended that the 1969 Rules prescribe the mode of recruitment, method of
appointment and control of the Managers. Bank Rules prescribe the amounts
collected from PACS to pay their salaries. Therefore, the PACS are bound to
contribute towards the salary and allowances of the paid Secretaries. Shri Jitendra
Sharma further contended that they are the members of the PACS and that,
therefore, the PACS are bound by the Bank Rules. Shri Aruneshwar Gupta, learned
counsel appearing for the State contended that the Registrar has no power to
make Bank Rules nor has he power to direct the PACS to contribute for the
salary and allowances of the paid Secretaries. The High Court, therefore, was
right in recording the findings in that behalf.
question, therefore, is: whether the appellants are right in their contentions?
With a view to appreciate the contentions, the first question that arises is:
whether Cadre Authority Society could be a cooperative society registered under
Section 4(1) of the Act. Section 4  reads thus:
. Societies which may be registered and classified under this Act: Subject
to the provisions of this Act, a Cooperative Society which has its objects and
accordance with the cooperative principles, or a cooperative society
established with the object of facilitating the operations of such societies,
may be registered under this Act".
marginal note indicates that the classified societies are to be registered
under the Act. Subject to the provisions of the Act, a cooperative society
which has its object the promotion of the economic interests of "its
members" in accordance with the cooperative principles, or a cooperative
society established with the object of "facilitating the operations of
such societies", may be registered under the Act. The Cadre Authority Society,
admittedly, does not come under the first limb of Section 4 . The contention
is that since the object of the Cadre Authority Society is to facilitate the
operations of the PACS, it is a cooperative society egistered under the Act.
support thereof, Sri Jain placed the model bye-laws as part of the record. The
model bye-laws would indicate that membership of a society consists of A Class
members, viz., individuals who are above the age of 18 years and B Class
members, viz., institutions who are admitted as members of the society. The
institutions are lending societies. One of the objects is to recruit paid
Secretaries to the District Cooperative Societies. At this stage, it is
necessary to mention that the cooperative structure is built upon three- tier
system, viz., PACS consisting of individual members, at the grass-root level
within the area of operation of that society, the District Cooperative
Societies and the Central Cooperative Bank. It is not in dispute that the
District Cooperative Societies and the Central Cooperative Bank got the Cadre
Authority Society which is not a lending institution, registered and the paid
Secretaries, who are otherwise a third agency, recruited by it. They are
appointed by the Managers of the District Cooperative Societies and are
transferred by them to the PACS within the area of the operation of the
District Bank. It would, therefore, be clear that it does not come as a society
to facilitate the PACS in funding them for disbursement of loan to the members
question is: whether the PACS are bound to take the services of the paid
Secretaries? Rule 41 of the Rules reads thus:
Officers and employees of cooperative societies. –
Notwithstanding anything contained in the bye-laws of society no Cooperative
society shall appoint any person as its paid officer or employee in any
category of service, unless he possess the qualifications and furnishes the
security if so specified by the Registrar from time to time, for such category
of service an the society, or for the class of society to which it belongs. The
conditions of service of the employees of the societies shall be as specified
by the Registrar.
co-operative society shall retain in service any paid officer or employees, if
he does not acquire the qualifications or furnish the security as is referred
to in sub-rule  within such time as the Registrar may direct.
The Registrar may for special reasons, relax in respect of any paid officer or
employee, the provisions of this rule in regard to the qualifications he should
possess or the security he should furnish.
Where in the course of an audit under Sec.68 or an inquiry under Sec.70 or an
inspection under 71 or Section 72 it is brought to the notice of the Registrar
that a paid officer or servant of a Society has committed or has been otherwise
responsible for misappropriation, breach of trust or other offence, in relation
to the society, the Registrar may, if in his opinion, there is prima facie
evidence against such paid officer or servant and the suspension of such paid
officer or servant is necessary on the interest of the society direct the
committee of the society pending the investigation and disposal of the matter,
to place or cause to be placed such paid officer or servant under suspension
from such date and for such period as may be specified by him.
receipt of a direction from the Registrar under sub-rule , the committee of
the society shall, notwithstanding any provision to the Contrary in the
bye-laws, place or cause to be placed the paid officer or servant under
The Registrar may direct the committee to extend from time to time the period
of suspension and the paid officer or servant suspended shall not be reinstated
except with the previous sanction of the Registrar whose decision thereon shall
the committee fails to comply with the direction issued under servant under
suspension from such date and for such period as he may specify in the order
and thereupon the paid officer or servant, as the case may be, shall be under
suspension." It would thus be clear that notwithstanding anything
contained in the bye-laws of the Society, PACS shall not appoint any person as
its paid officer or employee in any of the categories of service unless the
concerned officer/employee is possessed of the prescribed qualifications and
security specified by the Registrar is furnished in that behalf to the Society.
The conditions of the service of the employees of the Society shall be
specified by the Register. The Society would retain the paid officers or
employees only on fulfillment of the conditions prescribed by the Registrar.
The paid officers or employees are the employees governed by the Act, Rules and
the bye- laws of the Society over which the Society has had disciplinary power
and jurisdiction, subject to the control, supervision and directions of the
147  of the Act empowers the Government to authorise the Registrar to
exercise their power under the Act subject to such conditions, if any, as may
be specified in that behalf in the notification. By virtue thereof, sub-
section  of Section 148 gives power to the Registrar to make rules. Clause
[xxx] of the said sub-section  gives power to the Registrar to prescribe qualifications
of a Manager, Secretary, Accountant or any other officer or an employees of the
society and the conditions of their service including discipline and control.
It would thus be clear that the Manager, Secretary, Accountant or any other
officer or employee shall be of the Society; the conditions of service
including discipline and control shall be in accordance with the rules made by
the Registrar under Rule 41 of the Rules. In other words, the Registrar, as a
delegate of the Government is empowered to prescribe qualifications of the
officers or employees of the Society, viz., PACS, District Cooperative
Societies or the Central Cooperative Bank, as the case may be, and the
respective Societies require them to appoint the officers or employees, i.e.,
Manager, Secretary, Accountant or any other officer or employee over whom they
have disciplinary and controlling power. Under its own bye-laws, the respective
Societies have the power to make appointment under the rules made by the
Registrar in that behalf.
question, therefore, emerges: whether the paid Secretaries appointed by the
District Cooperative Societies, recruited and controlled by the Cadre Authority
Society are the officers or employees of the Society, i.e., PACS? It is seen
that there is a dichotomy in the operational structure.
Society is a unit by itself with its members managed by the committee elected
under the provisions of the Act, the Rules and the bye-laws for specified
period. It is empowered to have control and to maintain discipline over its
officers and employees. The paid Secretaries are admittedly not the officers
appointed to the Society and by the Society. They are officers appointed by the
District Cooperative Society by its Manager, 'Manager' is defined under the 1969
Rules to mean "the manager appointed under these rules and who shall be
Chief Executive and paid employee of the society. Manager shall have no
relation with the services of the Bank employees. Due to getting salary from
the Managerial fund at Bank level he shall not be entitled for any benefits
which are being given to Bank employees. And Society shall not appoint any
person as Manager". A paid Secretary is not, therefore, a Manager
appointed by the PACS. It is seen that the structure of the employees is indicated
in Section 148  (xxx) as Manager, Secretary, Accountant or any other officer
or employee of the society. Therefore, in addition to the said establishment,
there cannot be any paid Secretary to the Society i.e., PAC. Obviously, therefore, the Societies have objected
that they cannot be fastened with the liability to contribute fund under Bank
Rules for payment of the salary of Surveillance Officer appointed by the
District Cooperative Society and to be controlled by the Cadre Authority
society. lt would, therefore, be clear that they are outside the scope of the
Cadre of PACS.
question, then is: whether the Registrar as a delegate of the Government, can
make rules in that behalf or create a fund under the Bank Rules? It is seen
that the power under Rule 41 is limited only to prescribing the qualifications
and conditions of service of the officers and employees enumerated in clause
(xxx) of sub-section  of Section 148. He, therefore, has no power to make
rules governing appointment of paid Secretaries and to create a fund under Bank
Rules for payment of salaries to them and to fasten the liability on the PACS.
The Registrar travelled beyond the power delegated to him under the Act. We
have come across Section 69A of the Maharashtra Cooperative Societies Act
which, as amended by the statute, gives such a power for creation of a Society
as recruitment agency to make appointment of such recruited candidates to the
Primary Cooperative Societies and posting them to the primary societies.
Statute also fastened the liability on the primary societies to contribute
certain percentage towards salary and allowances of such paid Secretaries.
Making the Bank Rules or the creation of a fund would, therefore, be beyond the
powers of the Registrar under Rule 41 read with Section 148  (xxx) of the
Act. The High Court, therefore, was clearly right in its findings that Cadre
Authority Society is not a society registrable under Section 4  of the Act
and that the Registrar has no power under Rule 41 to make Bank Rules.
contention of Shri Jitendra Sharma that they are members of PACS under 1977
Rules cannot be given countenance for the reason that 1977 Rules stood
superseded by 1969 Rules. Admittedly, they are not members nor are they
appointed as officers or employees of the PACS. When we called upon the counsel
to produce any order of appointment given to the paid Secretaries by any of the
PACS, he conceded that he did not have any such letters. Therefore, they cannot
be declared to be members or officers or employees of the PACS. Thus
considered, we are of the firm opinion that the view taken by the High Court is
not vitiated by any error of law.
appeals are accordingly dismissed but in the circumstances, without costs.