Vs. Registrar, Co-Operative Societies & Anr  Insc 234 (25 April 2006)
Sinha & P.P. Naolekar S.B. Sinha, J :
petitioner was working as a Branch Manager in the Kangra Central Co-operative
Bank Ltd (Respondent No.2, "Society"). A disciplinary proceeding was
initiated against him purporting to be in terms of Rule 56(b) of the Kangra
Central Co-operative Bank Employees (Terms of Employment and Working
Conditions) Rules, 1980 (for short the "Rules") read with Section
35-B(4) of the Himachal Pradesh Co-operative Societies Act, 1968 (for short the
"Act"). He was found guilty therein. The Managing Director of the
Society, by an order dated 18.11.1993, terminated his services purported to be
in exercise of his power under Rule 2(p) of Appendix 1(a) of the Rules. In the
meantime, an Administrator was appointed by the State to manage its affairs.
The appellant herein preferred an appeal against the said order terminating his
services before the Administrator on or about 2.12.1993. However, the Administrator
had no occasion to deal with the said appeal. By an order dated 18.11.1995, the
Board of Directors of the Respondent No.2 dismissed the said appeal. He reached
the age of superannuation on 30th September, 1996.
appellant filed a writ petition before the High Court of Himachal Pradesh at Shimla,
inter alia, praying for quashing of the order of termination dated 18.11.1995,
as also the order of the appellate authority dated 16.1.1996. He further prayed
for grant of all consequential benefits pursuant to or in furtherance of the
quashing of the said order of punishment.
writ petition filed by the appellant was based on the premise that the 1st
respondent is a 'State' within the meaning of Article 12 of the Constitution of
India. A Division Bench of the Himachal Pradesh High Court, by reason of the
impugned judgment and order dated 6.6.2003, dismissed the said writ petition
holding that the writ petition was not maintainable. The appellant is, thus,
Vijay Kumar, learned counsel appearing on behalf of the appellant submitted
that the High Court committed a serious error in coming to the conclusion that
respondent No.1 is not a 'State' within the meaning of Article 12 of the
Constitution of India. According to the learned counsel, the activities of the
Co-operative Society being to lend money to the agriculturists, the same would
come within the purview of the law laid down by a Seven Judge Bench of this
Court in Pradeep Kumar Biswas vs. Indian Institute of Chemical Biology & Ors.
reported in (2002) 5 SCC 111. It was further contended that in terms of the
provisions of the Rules framed under the Himachal Pradesh Co- operative
Societies Act, 1968, the respondent No.1 was obligated to comply with the
principles of natural justice. It was submitted that the impugned order is violative
of the provisions of the Rules as, inter alia, a copy of the inquiry report was
not supplied to the Appellant, it was wholly unsustainable.
J.S. Attri, the learned Additional Advocate General for the State of Himachal Pradesh, on the other hand, would support
the judgment contending that it is not a case where the State had deep and
pervasive control over the affairs of the Society. It was pointed out that out
of three directors in the Board, the State could appoint only one.
decision of the Board of Directors in all matters is final. The membership of
the State in the Co-operative Society was limited.
legislature of the State of Himachal Pradesh
enacted the Himachal Pradesh Co-operative Societies Act, 1968; some of the
relevant provisions whereof are:
Final authority in co-operative society:-
final authority in a co-operative society shall vest in the general body of
members in a general meeting:
that where the bye-laws of a co-operative society provide for the constitution
of a smaller body consisting of delegates of the society elected or selected in
accordance with such bye-laws, the smaller body shall exercise such powers of
the general body as may be prescribed or as may be specified in the bye-laws of
manage-ment of every society shall vest in a managing committee constituted in
accordance with the rules and the bye-laws, which shall exercise such powers
and perform such duties as may be conferred or imposed respectively, by this
Act, the rules and the bye-laws.
Appointment, powers and functions of Managing Directors:-
Government has subscribed to the share capital of a co-operative society to the
extent of rupees five lakhs or more, the Government may, notwithstanding
anything contained in the bye laws of the society, nominate another member in
addition to those nominated under section 35 and appoint him as Managing
that no person shall be appointed as Managing Director of a co- operative
society unless he is a member of the Indian Administrative Service or Himachal
Pradesh Administrative Service or Class-I Officer of the co-operative
Department, except the Himachal Pradesh State Co- operative Land Development
Bank and the Himachal Pradesh State Co-operative Milk Federation where
technical persons may by appointed as Managing Directors.
nominated and appointed as the Managing Director under sub-section (1) shall be
ex-officio member of the committee and shall hold office during the pleasure of
the State Government and shall have a right to participate in the deliberations
of the committee and shall also have the right to vote.
Director appointed under sub-section (1) shall exercise such powers as are
assigned to him under the bye-laws or delegated to him by the committee. He
shall discharge all such functions, consistent with the bye-laws or delegated
to him by the committee. He shall discharge all such functions, consistent with
the bye-laws, as are assigned to him by the Government or the Registrar. He
shall work under the superintendence and control of the committee.
Director of a co-operative society shall be its principal executive officer.
All employees of the society shall function and perform their duties under his
superintendence and control.
director appointed under sub-section (1) shall be deemed to be on deputation
with the society and his salary and allowances, as determined by the State
Government, shall be paid from the funds of the society.
Powers to depute Government servant to manage affairs of a co-operative
State Government may, on the application of a society and on such conditions as
may be prescribed, depute a Government servant to the service of the society
for the purpose of managing its affairs and the Government Servant so deputed
shall exercise such powers and perform such duties as may be prescribed.
Access to documents:-
Registrar and, subject to any restriction prescribed, an auditor, arbitrator or
any person conducting supervision or inspection or audit or inquiry shall at
all reasonable times have free access to the books, accounts, documents,
securities, cash and other properties, belonging to or in the custody of a
society." Pursuant to or in furtherance of the rule making power contained
in the said Act, the State made Rules known as the Himachal Pradesh
Co-operative Societies Rules, 1971, some of which are relevant for the purpose
of this case. Rules are as under:
Constitution of Managing Committee
committee of a Co- operative society shall be constituted by:-
amongst the members of the society at the annual/special general meeting;
the Registrar in the manner provided in the Rule 39;
nominees of the
Government under section 35 of the Act; and
nominees of the
other Co- operative Societies as provided in the bye-laws.
committee of the society shall have not less than five nor more than twenty-one
members, including the Government nominee as may be fixed in the bye-laws.
The terms of the
Managing Committees constituted under sub-rule (1) shall be-
in relation to
Primary Societies 2 years;
in relation to
Secondary Societies 3 years; and
in relation to
apex societies 4 years;
that the out-going managing committee shall, unless the State Government
otherwise directs, continue to function till another Managing Committee is
constituted under these rules;
further that no person shall be eligible to hold office of President or
Vice-President or elected Member of the Managing Committee continuously for
more than two terms unless a period of two years has elapsed after then expiry
of the term of the Managing Committee in which he last hold office of President
or Vice-President or Vice-President or elected member.
shall, as soon as may be possible, elect from among its members a President,
Vice President and such other officers as are specified in the bye-laws unless
they provide for such election by general meeting.
A casual vacancy
in the office of an elected member shall be filled up by co-option from amongst
the members of the society by the managing committee. The managing committee
member so co-opted shall qualify all the conditions laid down in the rules for
membership of the committee of a society and shall retire within 90 days or at
the next annual general meeting, whichever is earlier, and the vacancy thus
caused shall be filled up at such meeting by election of a managing committee
member in whose place originally occurred.
relating to the election to a committee of a member or an officer shall be
referred to the Registrar under section 72 of the Act within 30 days from the
date of declaration of the result of such election.
Appointment of Managing Committee Member by the Registrar
any limits prescribed in the bye-laws, in order to represent appropriate
interest, the Registrar shall have powers to appoint an additional number of
members for the Managing Committee, not exceeding one-third of the number of
that the total number of committee members so appointed or nominated and elected
under clauses (a) (b), (c) and (d) of sub-rule (1) of rule, 38 shall not exceed
the maximum limit laid down under sub-rule (2) of rule 38.
Out of the
persons appointed under sub-rule (1) one shall be a person belonging to
scheduled castes, one belonging to scheduled tribes and the remaining, if any,
representing other appropriate interests including the interests of women,
unless a member each belonging to the Scheduled castes and scheduled tribes and
representing other interests has already been elected on such Committee.
The members so
appointed under sub- rules (1) and (1-A) shall hold office till the next
election of the Managing Committee or till another person is appointed in his
place, whichever is earlier and shall have the right to vote.
Registrar shall either confirm their membership to the committee or shall
appoint other persons in their place for the next term of the Committee.
Committee members appointed under this rule may or may not be the members of
the society but should have all the qualifications prescribed for membership of
a Co- operative Society and the managing committee.
If a vacancy
occurs in the office of an appointed member on the managing committee the
vacancy shall be filled up by an appointment by the Registrar, and not by
rule empowers the Registrar to make appointments on the managing committee of a
society to represent certain appropriate interests not represented on the
committee. The appointments made under this rule shall be subject to the
provisions contained under sub-rule 2 of rule No.38.
Proportion of individuals and societies for constituting committee –
Co-operative Society, the membership of which is not exclusively confined to
individuals the representation of individuals and societies on the committee
and the general body shall be such as may be laid down in the bye-laws of the
Duties of Managing Committee
managing committee shall observe in all their transactions the provisions of
the Act, rules and bye- laws, and in particular, shall perform the following
to receive and
to maintain true
accounts of money received and expended, and accounts of the assets and
to prepare for
submission to the annual general meeting
Profit and Loss Account;
to prepare the
statements of accounts required at audit and to place them before the Auditor;
to prepare, and
submit all statements and returns, required by the Registrar in such form as he
accounts of the society regularly and periodically in proper books;
to maintain a
register of members up to date;
the inspection of books and audit of accounts of the society by those entitled
to inspect/audit them;
to convene the
annual general meeting in due time;
to ensure that
loans and advances are applied for the purposes for which they are made, and
that they are punctually repaid;
to examine and
take prompt action in cases of all arrears and defaults in repayments of loans
to perform such
other duties as may be entrusted by the general meeting; and
in general to
carry on the business of the society in accordance with its bye- laws.
Officers and employees of Co-operative Societies –
anything contained in the bye-laws of a society, no Co- operative Society shall
appoint any person as its paid officer or employees in any category of service
unless he possesses the qualifications and furnishes the security, if so
specified by the Registrar, from time to time, for such category of service in
the society, or for the class of society to which it belongs. The conditions of
service of the employees of the societies shall be specified by the Registrar.
society shall retain in service any paid officer or employee, if he does not
acquire the qualification or furnish the security as is referred to in sub-rule
(1) within such time as the Registrar may direct.
society shall employ a salaried officer or servant with total monthly
emoluments exceeding rupees 'one thousand' without the previous permission of
the Registrar. The promotion of an employee to a higher post shall be deemed to
be an appointment under this sub-rule.
may for special reasons to be recorded in writing relax in respect of any paid
officer or employee.
provisions of this rule in regard to the qualifications he should possess or
the security he should furnish.
the course of an audit under section 61, or an inspection under section 65 or
an inspection under section 66, or an inquiry under section 67, it is brought
to the notice of the Registrar that the paid officer or servant of the society
had committed, or has been otherwise responsible for mis- appropriation breach
of trust or other offence, in relation to the society or has willfully
neglected or failed to discharge his duties and functions as enjoined on him
under the Act, rules or bye-laws or is otherwise responsible for any act or
omission thereby adversely affecting the interest of the society, the Registrar
if in his opinion there is prima facie evidence against the paid officer or
servant, and suspension of such paid officer or servant is necessary in the
interest of the society, direct the committee of the society, pending the
investigation and disposal of the matter, as the case may be, 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.
On receipt of a
direction from the Registrar under sub-rule (5), the committee of society shall
notwithstanding any provision to the contrary in the bye-laws, place or cause
to be placed the paid officer or servant under suspension forthwith.
If the committee
fails to comply with the direction issued under sub-rule (5), the Registrar may
make an order placing such paid officer or 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.
The officer or
servant suspended under this rule shall be re-instated only after the previous
approval of the Registrar." Respondent No.1-Co-operative Society also
framed its bye-laws in terms of Rule 2(c) whereof the Board would mean all
Directors of the Bank or the Managing Committee.
not in dispute that the Society has not been constituted under an Act. Its
functions like any other Co-operative Society are mainly regulated in terms of
the provisions of the Act, except as provided in the bye-laws of the Society.
The State has no say in the functions of the Society. Membership, acquisition
of shares and all other matters are governed by the bye-laws framed under the
Act. The terms and conditions of an officer of the Co-operative Society,
indisputably, are governed by the Rules. Rule 56, to which reference has been
made by Mr. Vijay Kumar, does not contain any provision in terms whereof any
legal right as such is conferred upon an officer of the Society.
not been shown before us that the State exercises any direct or indirect
control over the affairs of the Society for deep and pervasive control. The
State furthermore is not the majority shareholder. The State has the power only
to nominate one director. It cannot, thus, be said that the State exercises any
functional control over the affairs of the Society in the sense that the
majority directors are nominated by the State. For arriving at the conclusion
that the State has a deep and pervasive control over the Society, several other
relevant questions are required to be considered, namely:
How the Society
enjoys any monopoly character?;
Do the functions
of the Society partake to statutory functions or public functions?; and
Can it be
characterized as public Authority? The respondent No.1-Society does not answer
any of the afore- mentioned tests. In the case of a non-statutory society, the
control thereover would mean that the same satisfies the tests laid down by
this Court in Ajay Hasia vs. Khalid Mujib Sehravardi [(1981) 1 SCC 722]. [See
Zoroastrian Coop. Housing Society Ltd. vs. District Registrar, Coop. Societies
(Urban) & Ors. reported in 2005 (5) SCC 632.] It is well settled that
general regulations under an Act, like Companies Act or the Co-operative
Societies Act, would not render the activities of a company or a society as
subject to control of the State.
control in terms of the provisions of the Act are meant to ensure proper
functioning of the Society and the State or statutory authorities would have
nothing to do with its day-to-day functions.
decision of the Seven Judge Bench of this Court in Pradeep Kumar Biswas
(supra), whereupon strong reliance has been placed, has no application in the
instant case. In that case, the Bench was deciding a question as to whether in
view of the subsequent decisions of this Court, the law was correctly laid down
in Sabajit Tewary vs. Union of India & Ors. [(1975) 1 SCC 485], and it not
whether the same deserved to be overruled. The majority opined that the Council
of Scientific and Industrial Research (CSIR) was a 'State' within the meaning
of Article 12 of the Constitution of India. This Court noticed the history of
the formation thereof, its objects and functions, its management and control as
also the extent of financial aid received by it. Apart from the said fact it
was noticed by reason of an appropriate notification issued by the Central
Government that CSIR was amenable to the jurisdiction of the Central
Administrative Tribunal in terms of Section 14(2) of the Administrative
Tribunals Act, 1985. It was on the aforementioned premises this Court opined
that Sabhajit Tewary (supra) did not lay down the correct law. This Court
reiterated the following six tests laid down in Ajay Hasia vs. Khalid Mujib Sehravardi
[(1981) 1 SCC 722]:
is clear that if the entire share capital of the corporation is held by
Government, it would go a long way towards indicating that the corporation is
an instrumentality or agency of Government.
financial assistance of the State is so much as to meet almost entire
expenditure of the corporation, it would afford some indication of the
corporation being impregnated with Governmental character.
It may also be
relevant factor ..whether the corporation enjoys monopoly status which is State
conferred or State protected.
deep and pervasive State control may afford an indication that the corporation
is a State agency or instrumentality.
If the functions
of the corporation are of public importance and closely related to Governmental
functions, it would be a relevant factor in classifying the corporation as an
instrumentality or agency of Government.
if a department of Government is transferred to a corporation, it would be a
strong factor supportive of this inference' of the corporation being an
instrumentality or agency of Government." This Court further held:
picture that ultimately emerges is that the tests formulated in Ajay Hasia are
not a rigid set of principles so that if a body falls within any one of them it
must, ex hypothesi, be considered to be a State within the meaning of Article
12. The question in each case would be whether in the light of the cumulative
facts as established, the body is financially, functionally and
administratively dominated by or under the control of the Government. Such
control must be particular to the body in question and must be pervasive. If
this is found then the body is a State within Article 12. On the other hand,
when the control is merely regulatory whether under statute or otherwise, it
would not serve to make the body a State." (Emphasis supplied) As the
respondent No.1 does not satisfy any of the tests laid down in Pradeep Kumar Biswas
(supra), we are of the opinion that the High Court cannot be said to have commtted
any error in arriving at a finding that the respondent-Bank is not a State
within the meaning of Article 12 of the Constitution of India.
are, however, not oblivious of a three judge Bench decision in Gayatri De vs. Mousumi
Cooperative Housing Society Ltd. & Ors. [(2004) 5 SCC 90], wherein this
Court held a writ petition to be maintainable against the cooperative society
have, in paragraphs supra, considered the judgments for and against on the
question of maintainability of writ petition. The judgments cited by the
learned Senior Counsel appearing for the respondents are distinguishable on
facts and on law. Those cases are not cases covered by the appointment of a
Special Officer to manage the administration of the Society and its affairs. In
the instant case, the Special Officer was appointed by the High Court to
discharge the functions of the Society, therefore, he should be regarded as a
public authority and hence, the writ petition is maintainable." The said
decision, therefore, is of no assistance to us.
attention has also been drawn to U.P.
State Cooperative Land development Bank Ltd. vs. Chandra Bhan
Dubey & Ors. [(1999) 1 SCC 741], wherein the writ petition was held to be
maintainable principally on the ground that it had been created under an Act.
Reliance has also been placed upon Ram Sahan Rai vs. Sachiv Samanaya Prabandhak
& Anr. [(2001) 3 SCC 323], wherein again the appellant thus was recruited
in a Society constituted under the U.P. Cooperative Land Development Bank Act,
1964 and this Court, having examined different provisions of rules, bye-laws
and regulations, was of the firm opinion that the State Government exercised
all-pervasive control over the Bank and moreover its employees were governed by
statutory rules, prescribing an entire gamut of procedure of initiation of
disciplinary proceedings by framing a set of charges culminating in inflicting
of appropriate punishment, after complying with the requirements of giving a
show-cause and an opportunity of hearing to the delinquent.
therefore, evident that in Ram Sahan Rai (supra) also the cooperative society
was held to be established under a statute. We may notice that in Nayagarh
Cooperative Central Bank Ltd. & Anr. vs. Narayan Rath & Anr. [(1977) 3
SCC 576], this Court was of the opinion that:
High Court has dealt with the question whether a writ petition can be
maintained against a cooperative society, but we are inclined to the view that
the observations made by the High Court and its decision that such a writ
petition is maintainable are not strictly in accordance with the decisions of
this Court. We would have liked to go into the question for ourselves, but it
is unnecessary to do so as Respondent 1 by his writ petition, was asking for
relief not really against a cooperative society but in regard to the order
which was passed by the Registrar, who was acting as a statutory authority in
the purported exercise of powers conferred on him by the Cooperative Societies
Act. The writ petition was in that view maintainable." We may notice in
some decisions, some High Courts have held wherein that a writ petition would
be maintainable against a society if it is demonstrated that any mandatory
provision of the Act or the rules framed thereunder, have been violated by it.
[See Bholanath Roy & Ors. vs. State of West Bengal & Ors. reported in
(1996) Vol.1 Calcutta Law Journal 502.] The Society has not been created under
any statute. It has not been shown before that in terminating the services of
the appellant, the Respondent has violated any mandatory provisions of the Act
or the rules framed thereunder. In fact, in the writ petition no such case was
the foregoing reasons, the appeal being devoid of any merit is dismissed.
However in the facts and circumstances of the case, there shall be no order as