VIPULBHAI M. CHAUDHARY Vs. GUJARAT COOP. MILK MARKT. FED. LTD & ORS
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 3047 of 2015, Judgment Date: Mar 19, 2015
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3047 OF 2015
(Arising from S.L.P. (C) No. 6237/2014)
Vipulbhai M. Chaudhary ... Appellant (s)
Versus
Gujarat Cooperative Milk Marketing
Federation Limited and others ... Respondent (s)
WITH
CIVIL APPEAL NO. 3048 OF 2015
(Arising from S.L.P. (C) No. 3799/2014)
AND
CIVIL APPEAL NO. 3049 OF 2015
(Arising from S.L.P. (C) No. 5270/2014)
J U D G M E N T
KURIAN, J.:
Leave granted.
Whether in the absence of a specific provision on removal by no confidence
in the Act, Rules or even Bye-laws of a Cooperative Society, the
Chairperson/elected office bearer can be removed by a motion of no
confidence, is the short but complex question.
Appellant was removed from the office of the Chairperson of the first
respondent-cooperative society through a no confidence motion. Aggrieved,
appellant filed a writ petition which was dismissed as per the impugned
judgment and thus the appeal.
Shri Kapil Sibal, Shri H. Ahmedi and Shri Harin P. Raval, learned Senior
Counsel led the arguments 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.
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)
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)
The Statement further provides for 'seven cooperative principles' as
guidelines by which the cooperatives put their values into practice.
Following are the principles:
"1st Principle: Voluntary and Open Membership
Co-operatives are voluntary organizations, open to all persons able to use
their services and willing to accept the responsibilities of membership,
without gender, social, racial, political or religious discrimination.
2nd Principle: Democratic Member Control
Co-operatives are democratic organizations controlled by their members, who
actively participate in setting their policies and making decisions. Men
and women serving as elected representatives are accountable to the
membership. In primary co-operatives members have equal voting rights (one
member, one vote) and co-operatives at other levels are also organized in a
democratic manner.
3rd Principle: Member Economic Participation
Members contribute equitably to, and democratically control, the capital of
their co-operative. At least part of that capital is usually the common
property of the co-operative. Members usually receive limited compensation,
if any, on capital subscribed as a condition of membership. Members
allocate surpluses for any or all of the following purposes: developing
their co-operative, possibly by setting up reserves, part of which at least
would be indivisible; benefiting members in proportion to their
transactions with the co-operative; and supporting other activities
approved by the membership.
4th Principle: Autonomy and Independence
Co-operatives are autonomous, self-help organizations controlled by their
members. If they enter to agreements with other organizations, including
governments, or raise capital from external sources, they do so on terms
that ensure democratic control by their members and maintain their co-
operative autonomy.
5th Principle: Education, Training and Information
Co-operatives provide education and training for their members, elected
representatives, managers, and employees so they can contribute effectively
to the development of their co-operatives. They inform the general public -
particularly young people and opinion leaders - about the nature and
benefits of co-operation.
6th Principle: Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen the co-
operative movement by working together through local, national, regional
and international structures.
7th Principle: Concern for Community
Co-operatives work for the sustainable development of their communities
through policies approved by their members."
(Emphasis supplied)
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.
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 picture as to the need to
strengthen the democratic basis and provide for a constitutional status to
the cooperative societies. Thus, one has to see the constitutional
aspirations on the concept of cooperative societies after the 97th
Amendment in the Constitution of India which came into effect on
12.01.2012.
"STATEMENT OF OBJECTS AND REASONS
The co-operative sector, over the years, has made significant contribution
to various sectors of national economy and has achieved voluminous growth.
However, it has shown weaknesses in safeguarding the interests of the
members and fulfilment of objects for which these institutions were
organised. There have been instances where elections have been postponed
indefinitely and nominated office bearers or administrators remaining in-
charge of these institutions for a long time. This reduces the
accountability of the management of co-operative societies to their
members. Inadequate professionalism in management in many of the co-
operative institutions has led to poor services and low productivity. Co-
operatives need to run on well established democratic principles and
elections held on time and in a free and fair manner. Therefore, there is a
need to initiate fundamental reforms to revitalize these institutions in
order to ensure their contribution in the economic development of the
country and to serve the interests of members and public at large and also
to ensure their autonomy, democratic functioning and professional
management.
2. The "co-operative societies" is a subject enumerated in Entry 32 of the
State List of the Seventh Schedule of the Constitution and the State
Legislatures have accordingly enacted legislations on co-operative
societies. Within the framework of State Acts, growth of co-operatives on
large scale was envisaged as part of the efforts for securing social and
economic justice and equitable distribution of the fruits of development.
It has, however, been experienced that in spite of considerable expansion
of co-operatives, their performance in qualitative terms has not been up to
the desired level. Considering the need for reforms in the Co-operative
Societies Acts of the States, consultations with the State Governments have
been held at several occasions and in the conferences of State Co-operative
Ministers. A strong need has been felt for amending the Constitution so as
to keep the co-operatives 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 co-operative
societies based on the principles of democratic member-control, member-
economic participation and autonomous functioning;
(b) specifying the maximum number of directors of a co-operative society to
be not exceeding twenty-one members;
(c) providing for a fixed term of five years from the date of election in
respect of the elected members of the board and its office bearers;
(d) providing for a maximum time limit of six months during which a board
of directors of co-operative society could be kept under supersession or
suspension;
(e) providing for independent professional audit;
(f) providing for right of information to the members of the co-operative
societies;
(g) empowering the State Governments to obtain periodic reports of
activities and accounts of co-operative societies;
(h) providing for the reservation of one seat for the Scheduled Castes or
the Scheduled Tribes and two seats for women on the board of every co-
operative society, which have individuals as members from such categories;
(i) providing for offences relating to co-operative societies and penalties
in respect of such offences.
4. It is expected that these provisions will not only ensure the autonomous
and democratic functioning of co-operatives, but also ensure the
accountability of management to the members and other stakeholders and
shall provide for deterrence for violation of the provisions of the law.
5. The Bill seeks to achieve the above objectives."
(Emphasis supplied)
Article 43B of the Constitution of India provides for promotion of
cooperative societies:
"43B. The State shall endeavour to promote voluntary formation, autonomous
functioning, democratic control and professional management of co-operative
societies."
(Emphasis supplied)
Part IXB of the Constitution of India is titled as "The Cooperative
Societies". A few provisions would be relevant for our consideration.
Article 243ZH(b) defines "board":
"243ZH(b) "board" means the board of directors or the governing body of a
co-operative society, by whatever name called, to which the direction and
control of the management of the affairs of a society is entrusted to;"
(Emphasis supplied)
Article 243ZH(c) defines "cooperative society":
"243ZH(c) "co-operative society" means a society registered or deemed to be
registered under any law relating to co-operative societies for the time
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 vacancy on the board by
nomination out of the same class of members in respect of which the casual
vacancy has arisen, if the term of office of the board is less than half of
its original term.
(3) The Legislature of a State shall, by law, make provisions for co-option
of persons to be members of the board having experience in the field of
banking, management, finance or specialization in any other field relating
to the objects and activities undertaken by the co-operative society as
members of the board of such society:
Provided that the number of such co-opted members shall not exceed two in
addition to twenty-one directors specified in the proviso to clause (1):
Provided further that such co-opted members shall not have the right to
vote in any election of the co-operative society in their capacity as such
member or to be eligible to be elected as office bearers of the board:
Provided also that the functional directors of a co-operative society shall
also be the members of the board and such members shall be excluded for the
purpose of counting the total number of directors specified in first
proviso of clause (1)."
(Emphasis supplied)
Article 243ZT provides for continuance of the existing laws:
"243ZT. Notwithstanding anything in this Part, any provision of any law
relating to co-operative societies in force in a State immediately before
the commencement of the Constitution (Ninety Seventh Amendment) Act, 2011,
which is inconsistent with the provisions of this Part, shall continue to
be in force until amended or repealed by a competent Legislature or other
competent authority or until the expiration of one year from such
commencement, whichever is less.'."
(Emphasis supplied)
Thus, by 12.01.2013, all laws on cooperative societies were bound to be
restructured in consonance with the Ninety Seventh Amendment of the
Constitution of India and, in any case, any provision in the Act or Rules
or Bye-laws otherwise inconsistent with the Constitution will be
inoperative thereafter. Articles 43B and 243ZT are mandates to all the
States and the competent authorities to structure cooperative societies as
conceived in the Constitution of India, if not already there. Therefore, we
have to see whether the Act, Rules or Bye-laws contain any provision for
democratic functioning.
The first legislation on cooperative movement in India was the Cooperative
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[1]. 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[2].
Under the Government of India Act of 1919 (Montague Chelmsford Reforms),
cooperation became a provincial subject which gave a further impetus to the
movement. This gave birth to several cooperative land mortgage banks. The
first of its kind was registered in Punjab. Close to independence and
thereafter, we see a radical change and increased growth in the cooperative
movement. Activities were spread to all spheres of human endeavour, and
thus in 2002, National Policy on Cooperatives was announced.
The cooperative societies having been conferred a constitutional status by
the Ninety Seventh Amendment, the whole concept of cooperatives has
undergone a major change. In 1993, the local self-governments, viz.,
panchayats and municipalities were also given constitutional status under
Parts IX and IXA of the Constitution of India by the 73rd and 74th
Amendments. The Statement of Objects and Reasons would show that the
Constitution wanted the local bodies to function as vibrant democratic
units of self-government. After two decades, cooperative societies were
given the constitutional status by including them under Part IXB. The main
object for the said amendment was also to ensure "their autonomy,
democratic functioning and professional management".
The National Policy on Cooperatives announced in March 2002 has recognized
democracy, equality, equity and solidarity as values of cooperatives.
Cooperative society has been declared as a democratic institution.
Democratic principles have all through been recognized as one of the
cooperative principles though the constitutional affirmation of those
principles came only in 2012.
The principle of representative democracy is the election of
representatives by the people otherwise eligible to caste their vote and
the people thus elected, constituting the body for the management of an
institution. Thus, in the case of cooperative societies, after the
amendment in the Constitution, there has to be a Board of elected
representatives, which may be called Board of Directors or Governing Body
or a Managing Committee, etc., to which the members entrust the direction
and control of the management of the affairs of the society. That
representative body selects one among the elected representatives as its
Chairman or any other office bearer, as the case may be. Selection is the
act of carefully choosing someone 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.
In Bhanumati and others v. State of Uttar Pradesh through its Principal
Secretary and others[3], 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. This is the essence of
democratic republicanism. This explains why this provision of no-confidence
motion was there in the Act of 1961 even prior to the Seventy-third
Constitution Amendment and has been continued even thereafter. Similar
provisions are there in different States in India.
66. Democracy demands accountability and transparency in the activities of
the Chairperson especially in view of the important functions entrusted
with the Chairperson in the running of Panchayati Raj institutions. Such
duties can be discharged by the Chairperson only if he/she enjoys the
continuous confidence of the majority members in the panchayat. So any
statutory provision to demonstrate that the Chairperson has lost the
confidence of the majority is conducive to public interest and adds
strength to [pic]such bodies of self-governance. Such a statutory provision
cannot be called either unreasonable or ultra vires Part IX of the
Constitution."
In Pratap Chandra Mehta v. State Bar Council of Madhya Pradesh and
others[4] and in Usha Bharti v. State of Uttar Pradesh and others[5], the
concept of democratic principles governing the democratic institutions have
been discussed. In a democratic institution, confidence is the foundation
on which the superstructure of democracy is built. The bedrock of
democratic accountability rests on the confidence of the electorate. If the
representative body does not have confidence in the office bearer whom they
selected, democracy demands such officer to be removed in a democratic
manner.
A cooperative society is registered on cooperative principles of democracy,
equity, equality and solidarity. Democratic accountability, mutual trust,
fairness, impartiality, unity or agreement of feeling among the delegates,
cooperativeness, etc., are some of the cardinal dimensions of the
cooperative principles. A body built on such principles cannot be led by a
captain in whom the co-sailors have no confidence.
If a person has been selected to an office through democratic process, and
when that person looses the confidence of the representatives who selected
him, those representatives should necessarily have a democratic right to
remove such an office bearer in whom they do not have confidence, in case
those institutions are viewed under the Constitution/statues as democratic
institutions.
In Bhanumati case (supra), 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."
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 different purposes under the provisions
of the Advocates Act. In other words, the body which elects the Chairman or
Vice-Chairman of a State Bar Council always consists of members elected to
that Council. The democratic principles would require that a person who
attains the position of a Chairman or Vice-Chairman, as the case may be,
could be removed by the same electorate or smaller body which elected them
to that position by taking recourse to a "no-confidence motion" and in
accordance with the Rules. The body that elects a person to such a position
would and ought to have the right to oust him/her from that post, in the
event the majority members of the body do not support the said person at
that time. Even if, for the sake of argument, it is taken that this may not
be generally true, the provisions of Rule 122-A of the M.P. Rules make it
clear, beyond doubt, that a "no-confidence motion" can be brought against
the [pic]elected Chairman provided the conditions stated in the said Rules
are satisfied."
In Usha Bharti case (supra) also, this Court eloquently held at paragraph-
53 as follows:
"53. In our opinion, the provision for removing an elected representative
such as Panchayat Adhyaksha is of fundamental importance to ensure the
democratic functioning of the Institution as well as to ensure the
transparency and accountability in the functions performed by the elected
representatives."
No doubt, in the cases referred to above, the respective Acts contained a
provision regarding no confidence. What about a situation where there is no
express provision regarding no confidence? Once the cooperative society is
conferred a constitutional status, it should rise to the constitutional
aspirations as a democratic institution. So, it is for the respective
legislative bodies to ensure that there is democratic functioning. When the
Constitution is eloquent, the laws made thereunder cannot be silent. If the
statute is silent or imprecise on the requirements under the Constitution,
it is for the court to read the constitutional mandate into the provisions
concerned and declare it accordingly. Article 243ZT has given a period of
one year to frame/reframe the statues in consonance with Part IXB and
thereafter, i.e., with effect from 12.01.2013, those provisions which are
inconsistent with Part IXB, cease to operate.
Silence in Constitution and abeyance as well has 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."
In Part II, Chapter Four, the author has also dealt with the constitutional
gaps and the arts of prerogative. To the extent relevant, it reads as
follows (Page-82):
"Gaps in a constitution should not be seen as simply empty space. They
amount to a substantial plenum of strategic content and meaning vital to
the preservation of a constitution. Such interstices accommodate the
abeyances within which the sleeping giants of potentially acute political
conflict are communally maintained in slumber. Despite the absence of any
documentary or material form, these abeyances are real, and are an integral
part of any constitution. What remains unwritten and indeterminate can be
just as much responsible for the operational character and restraining
quality of a constitution as its more tangible and codified components.
..."
Where the Constitution has conceived a particular structure on certain
institutions, the legislative bodies are bound to mould the statutes
accordingly. Despite the constitutional mandate, if the legislative body
concerned does not carry out the required structural changes in the
statutes, then, it is the duty of the court to provide the statute with the
meaning as per the Constitution. ... "The job of the Supreme Court is not
to expound the meaning of the constitution but to provide it with
meaning"[6]. The reference obviously is to United States Supreme Court. As
a general rule of interpretation, no doubt, nothing is to be added to or
taken from a statute. However, when there are adequate grounds to justify
an inference, it is the bounden duty of the court to do so. ..."It is a
corollary to the general rule of literal construction that nothing is to be
added to or taken from a statue unless there are adequate grounds to
justify the inference that the legislature intended something which it
omitted to express"[7]. According to Lord Mersey in Thompson (Pauper) v.
Goold and Co.[8]... "It is a strong thing to read into an Act or Parliament
words, which are not there, and in the absence of clear necessity, it is
wrong to do". In the case of cooperative societies, after the Ninety
Seventh Amendment, it has become a clear or strong necessity to do the
strong thing of reading into the legislation, the constitutional mandate of
the cooperative societies to be governed 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"[9].
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).
Bye-law 18.2 of the first respondent, pertaining to the office of the
Chairperson of the Federation falling vacant before the expiry of his
elected term, will have to be analysed in the light of the above principle.
The provision reads as follows:
"18.2. The Chairperson of the Federation will be elected by the Board
for the Term of three years and he / she shall continue to hold his / her
office till the new Chairperson is elected and takes over. He / she shall
be honorary Chairperson. In case the elected Chairperson vacates his / her
office before expiry of his / her term or due to any other reason the post
of Chairman falls vacant, the Board shall elect the new Chairperson for the
remaining term.
The election of the Chairperson will take place in the first Board meeting
of the Federation after the expiry of the term of the elected Chairperson
or when the Chairperson's post falls vacant. In his / her absence, the
meeting shall elect its own Chairperson for that meeting from amongst the
eligible members present. The Chairperson in such event shall exercise such
power as may be delegated to him by the Board of Directors. The Managing
Director of the Federation shall not be entitled to vote and contest the
election for the post of Chairperson."
(Emphasis supplied)
Bye-law 23 deals with the powers of the Board of Directors:
"23. Powers and Functions of the Board
The entire administration, management and control of the Federation shall
be vested in the Board of Directors. The Board of Directors shall have and
exercise all such powers and enter into all such agreements made, all such
arrangements, take all such proceeding and do all such acts and things as
may be necessary or proper for the due management of the Federation and for
carrying out objects for which the Federation is established and for
securing and furthering its interest subject to the provisions of the Act
or such act as shall hereafter take its place and to any rules which may be
passed by the State Government in pursuance of the said Act and subject
also to these Bye-Laws and / or any Bye-law which may be duly made by the
Federation."
Thus, the entire administration, management and control of the
Federation are vested in the Board of Directors as per the Bye-law. This is
in terms of proviso to Section 73 of the Gujarat Cooperative Societies Act,
1961 (hereinafter referred to as "the Act"). The Section reads as 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."
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
among the members present."
The composition of the Board of Directors of the first respondent-
Federation is provided under Bye-law 18.1:
"18.1 The Board will consist of the following:
(i) Chairman of the affiliated milk unions enrolled as ordinary members;
(ii) Registrar or his representative not below the rank of Joint Registrar
[C.S.];
(iii) One Dairy Management Expert to be co-opted by the Board;
(iv) Managing Director of the Federation [ex-officio];
(v) 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."
"Committee" is defined under Section 2(5) of the Act:
"Section 2(5) "committee" means the Managing Committee or other governing
body of a society to which the direction and control of the management of
the affairs of a society is entrusted to."
"Officer" is defined under Section 2(14) of the Act:
"Section 2(14) "officer" means a person elected or appointed by a society
to any office of such society according to its bye-laws; and includes a
chairman, vice-chairman, president, vice-president, managing director,
manager, secretary, treasurer, member of the committee, and any other
person elected or appointed under this Act, the rules or the bye-laws, to
give directions in regard to the business of such society."
Section 4 of the Act provides for the registration of societies:
"Section 4- Societies which may be registered - A society, which has as its
object the promotion of the economic interests or general welfare of its
members or of the public, in accordance with co-operative principles, or as
society established with the object of facilitating the operations of any
such society, may be registered under this Act:
Provided that it shall not be registered if, in the opinion of the
Registrar, it is economically unsound, or its registration may have an
adverse effect upon any other society, or it is opposed to, or, its working
is likely to be in contravention of public policy."
A conjoint reading of all the provisions under the Act and the Bye-laws of
the Society would clearly show that the functional authority of the first
respondent-Federation vests in the Board of Directors. The entire
administration, management and control of the Federation is with the Board.
Thus, the Board of Directors is bound to do all such 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.
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.
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. Lakshmanan,
President, Thiruvilwamal Weavers Co-operative Society v. V.Velliankeri,
Member of Board of Directors, Thiruvilwamala Weavers Co-operative Society
Ltd. and others[10] and the decisions of the other High Courts submits that
no such power of removal of the Chairperson by no confidence can be read
into the provisions of the Act, Rules or Bye-laws. To quote from
S. Lakshmanan case (supra) :
"16. The Committee is elected by following the procedure prescribed under
the Act and the Rules and is guaranteed a tenure as prescribed in the Bye-
laws, by virtue of Rule 39(1). It can only be removed by the procedure
prescribed in the Act or the Rules or the Bye-laws. The only contingency
under which the Committee may be removed before the end of its tenure is
indicated in Section 33(1) of the Act. Section 33(1) of the Act envisages
the passing of a no-confidence motion by the General Body which results in
wholesale removal of the Committee. Barring this provision, there is no
other provision by which an elected individual member of the Committee can
be removed. We are, therefore, unable to accept the contention of the
appellants that such a drastic power can be read into the Act, even where
there are no provisions. ..."
In Veeramachaneni Venkata Narayana v. The Deputy Registrar of Co-operative
societies, Eluru, West Godavari District and others[11], at paragraph-10,
the view taken by the High Court of Andhra Pradesh, is as under:
"10. ... As sufficient safeguards are provided in the event of an office-
bearer of the committee not conducting himself properly or not discharging
his duties as required of him under the provisions of the Act, the Rules
and the bye-laws, the Legislature obviously did not intend to provide for
the removal of an office-bearer of a committee by way of passing of 'no-
confidence' motion against him."
In Hindurao Balwant Patil and another
v. Krishnaro Pashuram Patil and others[12], the High Court of Bombay took
the view that:
"10. ... The Act, Rules and the bye-laws do no confer any right upon the
members of the Board of Directors to remove the Chairman and the Vice-
Chairman by passing a mere vote of no confidence. Therefore it will not be
proper to confer such a wider power upon the board of directors by taking
recourse to the doctrine of implied or inherent power."
In Jagdev Singh v. The Registrar, Co-operative Societies, Haryana and
others[13], 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 & Haryana 306)
(supra) (which was a case under the Wakf Act), to our mind, does not lay
down correct law."
It may be seen that all these decisions dealt with the
pre-Ninety Seventh Amendment status of the cooperative societies. The
amendment providing constitutional status to the societies has brought out
radical changes in the concept of cooperative societies. Democratic
functioning and autonomy have now become the core constitutional values of
a cooperative society. Such societies are to be registered only if they are
founded on cooperative principles of democracy, equality, equity and
solidarity.
We may also refer to another argument by Shri Sibal. That once the Act
provides for a fixed term, the only mode of unsettling the term is as
provided under the Act. In the instant case, it is Section 76B of the Act,
which reads as follows:
"76B. Removal of officer. - (1) If, in the opinion of the Registrar, any
officer makes persistent default or is negligent in performance of the
duties imposed on him by this Act or the rules or the bye-laws or does
anything which is prejudicial to the interests of the Society or where he
stands disqualified by or under this Act, the Registrar may, after giving
the officer an opportunity of being heard, by order remove such officer and
direct the Society to elect or appoint a person or a qualified member in
the vacancy caused by such removal and the officer so elected or appointed
shall hold office so long only as the officer in whose place he is elected
or appointed would have held if the vacancy had not occurred.
(2) The Registrar may, by order, direct that the officer so removed shall
be disqualified to hold or to contest election for any office in the
society from which he is removed and in any other society for a period not
exceeding four years from the date of the order and such officer may stand
disqualified accordingly."
The provision simply deals with removal for misconduct or persistent
default/non-performance. A person with good conduct may still not earn the
confidence of the people who selected him to the office. The very concept
of cooperation is to work jointly towards the same end. Unless there is
cooperativeness among the elected cooperators who constitute the Governing
Body for achieving the object for which the society is constituted and for
which those representatives are elected by the members entrusting them with
the management of affairs of the society, there will be total chaos.
Cooperation among the cooperators is the essence of democratic functioning
of a cooperative society. If there 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.
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 others v. Debi
Ghosal and others[14]. 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 jurisdiction, and a special jurisdiction has
always to be exercised in accordance with the statute creating it. Concepts
familiar to common law[pic]and equity must remain strangers to election law
unless statutorily embodied. A court has no right to resort to them on
considerations of alleged policy because policy in such matters as those,
relating to the trial of election disputes, is what the statute lays down.
In the trial of election disputes, court is put in a strait-jacket. Thus
the entire election process commencing from the issuance of the
notification calling upon a constituency to elect a member or members right
up to the final resolution of the dispute, if any, concerning the election
is regulated by the Representation of the People Act, 1951, different
stages of the process being dealt with by different provisions of the Act.
There can be no election to Parliament or the State Legislature except as
provided by the Representation of the People Act, 1951 and again, no such
election may be questioned except in the manner provided by the
Representation of the People Act. So the Representation of the People Act
has been held to be a complete and self-contained code within which must be
found any rights claimed in relation to an election or an election dispute.
We are concerned with an election dispute. The question is who are parties
to an election dispute and who may be impleaded as parties to an election
petition. We have already referred to the scheme of the Act. We have
noticed the necessity to rid ourselves of notions based on common law or
equity. We see that we must seek an answer to the question within the four
corners of the statute. What does the Act say?"
In the background of the constitutional mandate, the question is not what
the statute does say but what the statute must say. If the Act or the Rules
or the Bye-laws do not say what they should say in terms of the
Constitution, it is the duty of the court to read the constitutional spirit
and concept into the Acts. ... "In so far as in its Act Parliament does not
convey its intention clearly, expressly and completely, it is taken to
require the enforcement agencies who are charged with the duty of applying
legislation to spell out the detail of its legal meaning. This may be done
either- (a) by finding and declaring implications in the words used by the
legislator, or (b) 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) and
the purpose of the legislation"[15].
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)"[16].
According to Donaldson J.:
"The duty of the courts is to ascertain and give effect to the will of
Parliament as expressed in its enactments. In the performance of this duty
the judges do not act as computers into which are fed the statues and the
rules for the construction of statues and from whom issue forth the
mathematically correct answer. The interpretation of statutes is a craft as
much as a science and the judges, as craftsmen, select and apply to the
appropriate rules as the tools of their trade. They are not legislators,
but finishers, refiners and polishers of legislation which comes to them in
a state requiring varying degrees of further processing."[17]
In the celebrated case of Seaford Court Estates v. Asher[18], Lord Denning
has succinctly summarized the principle on the role of the court. To quote:
"Whenever a statute comes up for consideration it must be remembered that
it is not within human powers to foresee the manifold sets of facts which
may arise, and, even if it were, it is not possible to provide for them in
terms free from all ambiguity... A judge cannot simply fold his hands and
blame the draftsman. He must set to work on the constructive task of
finding the intention of the Parliament, and he must do this not only from
the language of the statue, but also from a consideration of the social
conditions which gave rise to it and of the mischief which it was passed to
remedy, and then he must supplement the written word so as to give "force
and life" to the intention of the legislature. ... Put into homely metaphor
it is this: A judge should ask himself the question how, if the makers of
the Act had themselves come across this ruck in the texture of it, they
would have straightened it out? He must then do as they would have done. A
judge must not alter the material of which the Act is woven, but he can and
should iron out the creases."
In Rattan Chand Hira Chand v. Askar Nawaz Jung (Dead) by Lrs. and
others[19], this Court, at paragraph-17 of the judgment, has also dealt
with the principles in following words:
"17. ... The legislature often fails to keep pace with the changing needs
and values nor is it realistic to expect that it will have provided for all
contingencies and eventualities. It is, therefore, not only necessary but
obligatory on the courts to step in to fill the lacuna. When courts perform
this function undoubtedly they legislate judicially. But 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."
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 same
procedure has to be followed. In case there is no express provision under
the Act or Rules or Bye-laws for removal of an office bearer, such office
bearer is liable to be removed in the event of loss of confidence by
following the same procedure by which he was elected to office.
Now that this Court has declared the law regarding the democratic set up of
a cooperative society and that it is permissible to remove an elected
office bearer through motion of no confidence, and since in many States,
the relevant statutes have not carried out the required statutory changes
in terms of the constitutional mandate, we feel it just and necessary to
lay down certain guidelines. However, we make it clear that these
guidelines are open to be appropriately modified and given statutory shape
by the competent legislature/authority. Having gone through the provisions
regarding motion of no confidence in local self-governments, we find that
there is no uniformity with regard to the procedure and process regarding
motion of no confidence. Some States provide for a protection of two years,
some for one year and a few for six months, to the office bearers in office
before moving a motion of no confidence. However, majority of the States
provide for two years and a gap of another one year in case one motion of
no confidence is defeated. Bihar Panchayat Raj Act, 2006 provides for a
protection of two years and one year, Bihar Municipal Act, 2007 provides
for a protection of two years and one year, Himachal Pradesh Panchayati Raj
Act, 1994 provides for a protection of two years and two years, Madhya
Pradesh Panchayat Raj Avam Gram Swaraj Adhiniyam, 1993 provides for a
protection of two and a half years, Madhya Pradesh Municipalities Act, 1961
provides for a protection of two years and one year, Manipur Panchayati Raj
Act, 1994 provides for a protection of two years and one year, Orissa
Panchayat Samiti Act, 1959 provides for a protection of two years, Orissa
Grama Panchayats Act, 1964 provides for a protection of two years, Punjab
Panchayati Raj Act, 1994 provides for a protection of two years, Rajasthan
Panchayati Raj Act, 1994 provides for a protection of two years and one
year, Rajasthan Municipalities Act, 2009 provides for a protection of two
years and Uttar Pradesh Panchayati Raj Act, 1947, as followed by
Uttarakhand, provides for a protection of two years and one year. Having
regard to the set up in local self-governments prevailing in many of the
States as above, we direct that in the case of cooperative societies
registered under any Central or State law, a motion of no confidence
against an office bearer shall be moved only after two years of his
assumption of office. In case the motion of no confidence is once defeated,
a fresh motion shall not be introduced within another one year. A motion of
no confidence shall be moved only in case there is a request from one-third
of the elected members of the Board of Governors/Managing Committee of the
cooperative society concerned. The motion of no confidence shall be carried
in case the motion is supported by more than fifty per cent of the elected
members present in the meeting.
Though for different reasons, we agree with the view taken by the High
Court of Gujarat. The contra views expressed by the High Courts of Andhra
Pradesh, Bombay, Kerala and Punjab and Haryana are no more good law in view
of the Ninety Seventh Amendment to the Constitution of India.
The appeals are accordingly dismissed. There shall be no order as to costs.
..........................J.
(ANIL R. DAVE)
..........................J.
(KURIAN JOSEPH)
New Delhi;
March 19, 2015.
-----------------------
[1] "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.
[2] The Co-operative Movement in India by Eleanor M. Hough, Fourth
Edition, 1959
[3] (2010) 12 SCC 1
[4] (2011) 9 SCC 573
[5] (2014) 7 SCC 663
[6] Walter Berns, 'Government by lawyers and judges', Commentary, June,
1987 at p.18.
[7] Maxwell on The Interpretation of Statues, Twelfth Edition, page-33.
[8] [1910] A.C. 409.
[9] Constitutional Bench decision in State of West Bengal and others v.
Committee for Protection of Democratic Rights, West Bengal and others
reported in [(2010) 3 SCC 571, Paragraph-45.
[10] AIR 2002 Kerala 325
[11] I.L.R. [1975] A.P. 242
[12] AIR 1982 Bombay 216
[13] AIR 1991 P & H 149
[14] (1982) 1 SCC 691
[15] Bennion on Statutory Interpretation by Francis Bennion, 6th Edition,
p.136.
[16] Bennion on Statutory Interpretation by Francis Bennion, 6th Edition,
p.137.
[17] Corocraft Ltd v Pan American Airways Inc. [1968] 3 WLR 714 at 732.
[18] [1949] 2 All ER 155
[19] (1991) 3 SCC 67
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REPORTABLE