Kerala High Court on Co-operative Law -- 2009 Decisions Compiled
(By R.Muralidharan, Deputy Registrar (Planning & Legal),
Co-op.Department, Pondicherry - 605009)
Stare Decisis
The expression stare decisis, as defined by the Supreme Court, means ‘to stand by decided cases; to uphold precedents; to maintain former adjudication’. This is expressed in the maxim stare decisis et non quieta movere, which means to stand by decisions and not to disturb what is settled. Lord Coke aptly described this in his classic English version as ‘those things which have been so often adjudged ought to rest in peace’. However, according to Justice Frankfurter, the doctrine of stare decisis is not ‘an imprisonment of reason’. The underlying logic of the doctrine is to maintain consistency and avoid uncertainty. The guiding philosophy is that a view which has held the field for a long time should not be disturbed because another view is possible ((2009) 3 SCC J 32).
Case law section is an approved branch of legal learning. The rulings of the Kerala High Court always rule the roost and its decisions in the field of Co-operative Law are no exception. This article encompasses various decisions of the Kerala High Court involving co-operatives, arranged chapter-wise. I am sure that the readers would stand to gain in adding to the catalogue of case laws.
Bye laws of the Society
Whether individual notice under S. 11(2) and R.12 is necessary when society enhances its share value and whether members have not paid enhanced share value have voting rights are the two questions posed in Rajan v. Electoral Officer (2009 (3) KLT 1046). Replying in negative, it was held that a reading of S. 11 in the light of R.12 indicates that S.11 and the individual notices as contemplated under S. 11(2) cannot have any relevance when the society enhances its share value. A substantial number of members have not paid the enhanced value even as on the date of publication of the final voters list. Going by the provisions contained in S. 19 read with R.28 such members cannot have voting right. The exclusion of the members who have not paid the enhanced share value from the voters list needs to be upheld. This proposition has been upheld in the judgment in Jose v. Registrar of Co-operative Societies (1992 (2) KLT 673).
Membership
Once a person is granted membership in a society, even if it is illegal for some reason, unless he is removed following the procedure laid down in R.16(3) or (4), the membership will continue and that ineligibility should be suffered by member subsequent to his acquisition of membership and should be a continuing ineligibility and that continuance is a condition precedent for initiating proceeding under R. 16(4). Otherwise, the rule will have the effect of enabling the Registrar to pick up instances which have occurred long in the past and initiate action whenever it suits him. Such power will be arbitrary and the rule making authority did not intend to confer any such power. This was so held in Porinchu v. Joint Registrar of Co-operative Societies (2009 (4) KLT 105).
Management
S.28 (1) enjoins that the general body of a society shall constitute a committee in accordance with the bye laws and entrust the management, to increase share value of ‘A’ class members, of the affairs of the society to such committee. When the bye law amendment was registered on 27.2.2006, the election of a committee, thereafter, would be in accordance with the bye laws, only if the membership and the entitlement to vote stand modulated by the amended bye law provision. The general body authorized the committee to make the bye law amendment operational since that was the basic requirement to have the election conducted in accordance with the bye laws, for constitution of a committee by the term of the committee then in office would end by efflux of time. On the face of the decision of the general body the committee deferred enforcement of that bye law amendment. This is held against the mandate of the Act and Rules and also against the command of the general body. The undisputed fact is that no member of the society has paid the additional contribution of the share value in terms of that approved amendment. This means that there was none entitled among ‘A’ class members. The resolution of the committee for conducting election would itself be a hallow document, unworthy of any institutional use. The resolution could not stand at all.
On the question of invoking power of the Registrar under R.176 to interfere with a resolution issued under R.35(1), it was held that there is no restriction anywhere in the Act or Rules which denudes the Registrar of the power to rescind the resolution passed by the committee of the society scheduling the election. The Court held further that matters relatable to decision taken by the committee or orders issued by statutory authorities preparatory to or leading to commencement of process of election do not fall with the sweep of S. 69.
On another question whether power under R.176 can be invoked by a person who has contested the election and lost, it was ruled that one may gallantly lose; yet another may meekly win. After battling it out at the hustings, he who lost need not always be expected to rest licking his wounds. A proceedings under R.176 is essentially, not a lis, but referable only to the larger supervisory and visitorial power of the Registrar in terms of that rule. The Court declined to interfere with the orders and dismissed the Writ Petitions in Vijayan v. Joint Registrar (2009 (1) KLT 360).
In Janardhanan v. State Co-operative Election Commission (2009 (1) KLT 1032) it was held that it is not for the committee of a society to make any delimitation of wards that could be done only by the general body. The Act does not contain any provision whereby the Registrar is empowered to issue any decision delimiting the constituencies, because the Registrar does not have the power to amend the bye laws. All that the Registrar is empowered to is to approve an amendment made to the bye laws by the general body. That power does not extend to any power to delimit constituencies, either on geographical or any other basis, within the area of operation of the society, or otherwise tinker with the electoral college. The Court quoted with profit the ratio laid down in Mathai v. State Election Commission (2007 (2) KLT 789).
The question raised in Calicut City Service Co-operative Bank Ltd. v. State of Kerala (2009 (2) KLT 145) was whether S.28A prohibits reservation of more than one seat for women. Answering in negative, it was held that the general body has decided to reserve a particular number of seats for women, in this case, of 33% and thereby fixing the seats reserved for women as 3. That is not impeachable as irrational. It cannot be faulted. In fact, what the bank has done is a laudable and a progressive step towards women empowerment, which should be a matter of application and practice rather than to be confined to vociferous expositions by mere trumpet-calls from platforms. The refusal to register the amendment by the Joint Registrar on the ground that there could be of only one seat for women was not sustainable.
In S. 8A(2) what is provided is that the question whether affiliation should be given or not has to be determined within a period of 60 days and if the determination of that question is not made within that period of 60 days, the application for affiliation is deemed to have been granted and the affiliation is deemed to have been given. The status of affiliation is automatic on the event of expiry of the period of 60 days fixed under S.8A(2). It does not depend upon any further act of declaration or any direction that the Registrar may give. This ruling is made in Sivadasan Nair v. Registrar (2009 (2) KLT SN 10 (C. No.13).
In Irinjalakuda Co-operative Agricultural and Rural Development Bank Ltd. & Anr. v. Kerala State Co-operative Agricultural and Rural Development Bank Ltd. & Ors. (2009 (2) KLT SN 83 (C. No. 84)) it was held that as per definition society which does not restrict its operation to a taluk is not a Primary Co-operative Agricultural Development Bank (PCARD), consequently not a member of Kerala State Co-operative Agricultural and Rural Development Bank. However, by virtue of proviso to S.2(oc) existing PCARD banks operating in more than on taluk are given time of six months from 1.1.2000 to restrict their operation to only one taluk, viz. taluk where their respective headquarters are situated. This being purpose of proviso S.2 (oc) is not invalid. Further by virtue of proviso existing PCARD banks are merely obliged to restrict their operation but they have no right to challenge existence of newly registered PCARD banks unless their area of operation are overlapping.
When the statute under which an authority functions itself lays down a procedure for the authority to follow, then that procedure has necessarily to be followed as held in Abdulla Haji v. Joint Registrar (2009 (4) KLT SN 16 (C. No.16)). Rr.16 and 44 contain the statutory mandate that no order declaring disqualification or cessation of membership is to be issued without a prior opportunity to state objections and, if sought for, an opportunity of hearing. When order of surcharge passed against a member of the committee and when the order was taken up in appeal, he cannot be disqualified without affording a pre-decisional opportunity of hearing.
Election
Amendment providing for filling up of two seats in the committee from among depositors was approved by the Registrar and election was conducted accordingly. Later Registrar directed amendment of bye laws declassifying the two seats earmarked for depositors and to open them up as general category seats. Court in Poothady Service Co-operative Bank Ltd., v. Joint Registrar (2009 (1) KLT 469 ) held that reservations of two seats in favour of depositors from among members who are eligible to vote is not a classification which could be treated as amounting to hostile discrimination and power of Registrar is not sweeping one and cannot flow merely on the ipse dixit of Registrar. The ‘purpose of the better interest of the society’ which can be germane to a decision under S. 12(5), is never to torpedo the prime interest of the society and the views of the general body except in situations where it is contrary to the laws and to the need of the society, as explicit in the existing bye laws.
When the Returning Officer records result of election, elected members become members of the committee by operation of law. The first meeting is only to elect office bearers and authorize by resolution to take charge from outgoing office bearers and a committee can be said to have ‘failed’ to enter upon office only in situations where it would be a ‘failure’ and not merely non-entering of office. The power to appoint an administrator or a committee in terms of S. 33(1)(b) would arise only when the new committee is prevented from entering upon office or the new committee fails to enter upon office. The concepts of being ‘prevented’ and of ‘failure’ are essentially matters and situations where there could be no excuse for entering upon office. Not entering of office due to break down of vehicle etc. cannot be taken as failure. The Court in Chacko Varghese v. Registrar of Co-operative Societies (2009 (1) KLT 538 ) directed the respondent to hear the petitioners and take a decision de nova on the question as to whether the part time administrator appointed should continue or whether the elected committee could assume office.
In Abraham K. Mathew v. Returning Officer (2009 (2) KLT 249 ) the dictum is that under R.35-A(4) Electoral Officer is entitled to consider objections and eligibility to vote of persons included in preliminary voters list before preparation of final voters list. Any objection relatable to the qualification to vote, if raised on publication of the preliminary voters list, shall be considered by the Electoral Officer. The resultant decision would reflect in the final voters list. Otherwise the calling of objections would be an empty formality and leave matters there. Precision, finality and conclusions on controversies are the necessary goals that have always to be maintained and ensured in the electoral process.
R.35-A(6)(b) states that every nomination paper shall be signed by two members who names are included in the voters list; thereby meaning, the final voters list that comes out in Form 35 following the process prescribed in sub-rule (4) of R.35-A. In the case in hand, the final voters list does not contain the name of the second petitioner. Any bona fide and reasonably prudent common man who submits nomination for the election has to first ensure that the person who proposes and the one who seconds the nomination are included in the final voters list. Therefore, nomination paper has to be signed by two members whose names are included in final voters list and not by persons whose names are included in preliminary voters list but omitted in final voters list.
Clause 19.5 of bye laws disqualifies a member of board in case Clause 20 is breached. Clause 20 debars chairman of member society from contesting election of board in case member society failed to supply required quantity of milk in preceding year. Clause 20 is applicable also to persons who have already been elected. ‘Preceding year’ in Clause 20 may be interpreted as year subsequent to election preceding which Clause 20 has been breached. Such interpretation would be in harmony with Clause 19.5 and purpose of provision. Moreover order passed under R. 44 read with Clause 19.5 and 20 of bye laws is not penal in nature and hence contention that ambiguity in penal provision is to be resolved in favour of petitioner is not tenable, vide M.B. Sathyan v. State of Kerala & Ors. (AIR 2009 (NOC) 1534 (Ker).
Allegation that genuine voters were not allowed to vote and votes polled were by persons impersonating genuine voters. No complaint regarding alleged irregularities made to concerned authorities on date of election. Case involving factual disputes as to whether genuine voters were prevented from voting and fake voters were allowed to vote can only be adjudicated after taking evidence and examination of witnesses. Remedy is available under Ss. 69 and 70A and writ jurisdiction cannot be invoked, as held in M.V. Raghavan & Ors. v. The Returning Officer & Anr. (2009 (2) KLT SN 11 (C. No. 15).
An interesting question has been posed touching on the interpretation of R. 44(1)(b) – whether relationship has to be understood with reference to employee in society or with reference to the candidate. Allowing the appeal, the Division Bench in Joint Registrar v. Gopalakrishna Pillai (2009 (4) KLT 824) held that the statutory provision is very clear that the relationship has to be understood with reference to the employee in the society and not with reference to the candidate. If a candidate is a near relative of a paid employee of the society, that candidate cannot be elected or appointed to the managing committee.
Inquiry
Inquiry by Registrar does not include an exercise based on instructions issued by the Minister for Co-operation. S. 65 contemplates two types of actions depending upon nature of defects, viz. major or minor. Registrar under S.65 has necessarily to conclude whether the enquiry reveals only minor defects or whether there is major defect in the constitution or working or financial condition of the society. To initiate action for supersession on basis of findings in an enquiry under S. 65(5), the Registrar has to definitely reach at a finding that there are major defects in the constitution or working or financial condition of the society, as held in Managing Committee of Kandalloor Farmers Service Co-operative Bank Ltd., Kandalloor v. Joint Registrar of Co-operative Societies (G), Alappuzha (2008 (4) KLT 856).
Supersession of Committee
The settled legal principle, as enunciated in Jesudasan v. Joint Registrar of Co-operative Societies (2009 (2) KLT 86) is that if one hears and another decides, then personal hearing becomes an empty formality and mere farce and hearing by a predecessor authority cannot possibly be of any advantage to a successor in deciding the case. In cases of supersession under S.32(1), the occurrence of the statutory facts among the different clauses is the said Section, is a matter about which the Registrar has to be satisfied, if the order that he passes has to stand on a jurisdictional issue. There is no ground to hold that the decision to be rendered under S.32 could be an institutional one. Hence, the officer who hears the objections of a committee to the notice proposing supersession under S.32(1) shall himself decide on the matter. The impugned order, admittedly rendered by one, after the committee of which the petitioner was the President was heard by another, is without jurisdiction. The Court held further that when the statutory function involves adjudication and arrival at certain conclusions for the purpose of imposing of decision which results in consequences affecting statutory rights, they cannot be treated as merely executive functions but are essentially adjudicatory functions and resultantly quasi judicial functions.
This application for review in Jesudasan vs. Joint Registrar (2009 (3) KLT 69) is of the judgment reported in 2009 (2) KLT 86 (supra). In the decision reported it was held that when the objections of committee to a notice proposing supersession under S.31(2) is heard by one officer and order of supersession is passed by successor officer, same is bad and that order cannot be passed by successor officer. In the Review Petition it is contended that proceedings are vitiated from the very drawing up and issuance of pre-decisional notice and the formation of opinion to act under S.32 ought to be by one person and same individual has to decide on objection raised. Rejecting same, Court held that it is unnecessary the same person who was satisfied and had issued the notice giving opportunity to the committee to state its objections, should himself hear the committee on its objection.
Sub-sections (c) and (d) of S. 32(1) are not qualified by the word ‘persistent’. Sub-section (c) is qualified by the words ‘by breach of trust or wilfil negligence’. Misappropriation or destruction or tampering with records or causing destruction of records to cover up any misconduct or malpractice mentioned in sub-section (d) are not qualified for any such words, since such action are per se culpable and only one single instance would do so disastrous to the society that the Registrar would certainly be justified in taking action for that single instance itself. On the question whether proceedings under S. 32 can be invoked against present committee even if some of the members of previous committee which is guilty of action are also members of the present committee, it was replied in negative. Proceedings can be invoked only for actions of the present committee as a whole, who is sought to be proceeded against under the Section, even if some of the members of the previous committee which is guilty of the action are also members of the present committee and not for actions of the previous committee. Further it was held that only if the findings against the committee are such that the continuance of the committee would be extremely prejudicial to the interest of the society, the exceptional and rare action under S. 32 shall be taken. The mere finding that the committee has done the acts alleged alone is not sufficient; the same shall be supported by a further finding that they did the same with a culpable mind, failing which the action of the Registrar would be improper. This view is found in Vallappuzha Service Co-operative Bank Ltd., v. Joint Registrar (2009 (3) KLT 838).
An order of supersession of the board of directors was passed under S.32 based on the findings of an enquiry under S.65. Copy of the enquiry report was not furnished to society or members of board. Based on the report, a show cause notice was issued under S.32(1) to which objections were filed. In compliance with S. 32(2) circle co-operative union was consulted which recommended against any proceedings under S.32. However an order of supersession was passed which is challenged in the Writ Petition. Court in Thiruvalla East Co-operative Bank Ltd. v. Joint Registrar (2009 (4) KLT 378) held that R. 66(5) is mandatory and once an enquiry report is received, Registrar is bound to hear society and members of the board before any action affecting them is taken.
Recovery of Dues
The petitioner employed with a local authority is a guarantor for a loan availed from a co-operative bank. He executed an agreement to which S.37 applies. Default was committed by creditor and bank directed employer to deduct Rs.2000 per month from guarantor’s salary. Same is challenged in Sasidharan Nair v. Trivandrum Co-operative Urban Bank Ltd. (2009 (2) KLT 280) on the ground that decision in Trivandrum Co-operative A. & R.D. Bank Ltd., v. State of Kerala (2004 (2) KLT SN 68 (C. No.79) : 2004 (2) KLJ 85) requires reconsideration and that total amount that could be recovered by recourse to S.37(1) is limited by proviso (i) to S.60(1) and there is an incorporation of 60 CPC by reference going by R.77. Court held that provision in proviso (i) of S.60 (1) CPC and proviso thereto would apply only to attachment under Rules by virtue of R.77 and that in the absence of any limit being fixed in S.37, as to the quantum of amount for deduction from the salary of particular person at a particular point of time, there can be no such inhibition being read into such statutory prescription.
Application of the Right to Information Act
The questions raised in Thalapalam Service Co-operative Bank Ltd., v. Union of India & Ors. (2009 (2) KLT 507) are (i) whether co-operative societies registered under the Kerala Co-operative Societies Act are public authorities for the purpose of the Right to Information Act? (ii) Whether the right to information and right of access to information are fundamental rights? (iii) Whether term ‘funds provided by appropriate Government’ takes within its sweep all funds provided from its own funds or funds which reach societies through Government or with its concurrence?
Even if a co-operative society is a private body, any person who desires to obtain any information in relation to a society, is entitled to move the competent public authority and such information in relation to a society would then be accessible through that public authority, unless the access of such information is forbidden by the Act. Access to information is, therefore, available to citizens in relation to all co-operative societies, in terms of the Act.
Societies are not Government organizations. S. 2(h)(ii) of the Act uses the term ‘Non-Government organizations’, one not defined in the Act. S. 2(h)(ii), therefore, refers to something that is not part of the Government; which is very true of a society. If a society is substantially financed, directly or indirectly by funds provided by appropriate Government, it falls within the inclusive definition of ‘public authority’ within the expanse of that definition clause. Any co-operative society registered under the Kerala Co-operative Societies Act is non-Government organization and if it is substantially financed, directly or indirectly by funds provided by the appropriate Government, it is a public authority for the purpose of S. 2(h) of the Act.
Answering the second question, the Court held that disclosure of information in regard to functioning of Government must be the rule and secrecy an exception. Right to information and right of access to information are species of fundamental right referable to freedom of speech, enumerated in Constitution as a fundamental right.
Funds provided by the appropriate Government is not necessarily providing funds from what belong to the appropriate Government, either exclusively or otherwise, but also those provisions which come through the machinery of the appropriate Government, including by allocation or provision of fund with either the concurrence or clearance of the appropriate Government. The use of words ‘by funds provided by’ enlarges and dilates the scope of the words ‘substantially financed’ in that provision. It has to be remembered that it would never be assumed that the legislature uses language superfluously. This answers the third question.
Dismissing the Writ Petitions, the Court ruled that co-operative societies registered under the Kerala Co-operative Societies Act are public authorities for the purpose of the Right to Information Act and are bound to act in conformity with the obligations in Chapter II of the Act.
Challenging the above decision, an appeal was filed before the Division Bench in Thalapalam Service Co-operative Bank Ltd., v. Union of India (2009 (3) KLT 1001). Partly allowing the appeal, the Division Bench held that for interpretation of the definition of public authority in S. 2(h), the definition of appropriate Government in S. 2(a) can be used as a key. S. 2(a) has two parts – the first part deals with any authority/body/institution of self Government established or constituted by the State Government. The second part clarifies that a body owned or controlled or substantially financed by the funds provided by the State Government directly or indirectly or non-government organizations substantially financed directly or indirectly will come under the definition of public authority. A co-operative society, if at all, may come only under the second part of the definition. It will become a public authority it is substantially financed directly or indirectly by the funds provided by the State Government. Whether the appellant is substantially financed directly or indirectly by the funds provided by the State Government is essentially a disputed question of fact. By virtue of Kerala Co-operative Societies Act and control of the Registrar, the society cannot be held as public authority for the purpose of the Right to Information Act. The control of the Registrar and the control of State Government are distinct and different. When S. 2(a) and S. 2(h) are read together, it is clear that a body controlled by the State Government will be a public authority. The words ‘substantially financed’ alone are qualified by the words ‘directly or indirectly by the funds provided by the State Government’ and not the other words ‘the body owned or controlled.’
The definition ‘information’ contained in S. 2(f) includes information relating to any private body, which can be accessed by a public authority under any other law for the time being in force. The Registrar and the officers exercising the powers of the Registrar have deep, pervasive and effective control over the co-operative societies and can access any information from any co-operative society. Even if a co-operative society is a private body, information can be accessed by the Information Officer concerned and furnish the same to any person.
The next question before the Division Bench was whether Registrar can invoke S. 32 of the Co-operative Societies Act to supersede it for failure to supply details sought for under the Right to Information Act. It was held that obedience to Registrar’s circular is optional and if any society does not obey the said circular no action under S. 32 of the Co-operative Societies Act can be taken against it. The society can, on the basis of the facts and materials concerning it, take a decision and act accordingly. If it feels that it is a public authority, it can appoint an Information Officer under the Act and furnish information. If it thinks that it is not a public authority, it can refuse to act as directed by the Registrar. When the matter reaches before the appropriate authority under the Right to Information Act, the said forum shall decide first whether the society concerned is a public authority as defined under S. 2(h). If it is found that the society is so financed, the competent authority can take appropriate action against the society including coercive action for not acting in accordance with the provisions of the Right to Information Act. If the decision is in favour of the society, the person aggrieved can carry the matter before higher forum. Whether a society is a public authority is a disputed question of fact which has to be resolved by the authorities under the Right to Information Act. There cannot be any general decision on that point by the Court. The finding in the judgment under appeal that co-operative societies are public authorities under S.2(h) is vacated. The appropriate authority under the Act shall take a decision on the point whether a society is a public authority when occasion arises for the same uninfluenced by any observations contained in the judgment under appeal.
Employees of the Society
If a delinquent is required to be placed under suspension beyond a period of six months, it is the bounden duty of whoever is in power to ensure that proper sanction is obtained in terms of law. The fixation of the period of six months in R.198(6) as the period for which an employee could be kept under suspension at one time and the statutory direction that no suspension could be continued beyond one year without appropriate approval of the Registrar are clearly indicative of the fact that the intention of the Rules governing the field is that the employer should not continue to maintain a person under suspension. In fact that would be against the interest of the establishment, vide Indrasenan v. Joint Registrar (2009 (2) KLT 599).
The appeal before the Division Bench in Joint Registrar v. Thiruvalla East Co-operative Bank Ltd. (2009 (3) KLT 185) is from the decision reported in 2008 (4) KLT 220. It was held that R.182 (4) (v) is only directory and not mandatory. As regards reasonable time limit within which interview has to be completed, it was held that if society is allowed to wait till list of candidates with consolidated marks are sent by Board to other co-operative societies, members of managing committee will be able to know marks secured by candidates in list. Same will vitiate interview and hence appointment made are bad.
Junior clerk/cashier is not eligible for appointment as Assistant Secretary by promotion with the aid of R. 185(1) and (2). Direct recruitment can be resorted to for appointment to the post of Assistant Secretary as rules do not specify a particular mode of appointment, vide Padmaja v. Joint Registrar of Co-operative Societies (2009 (3) KLT SN 84 (C. No.76).
The questions raised in Navaikulam Cashew Workers Industrial Co-operative Society Ltd., v. Enforcement Officer (2009 (3) KLT 1039) are whether a public servant on deputation to a co-operative society can still be called as a public servant and whether he can claim the protection of S. 197 of Criminal Procedure Code from being prosecuted in respect of offences alleged to have been committed while on such deputation. Answering both the questions in negative, the Court held that to come within the Clause Ninthly of S.21 of the Indian Penal Code the duty of the officer concerned should have been acting on behalf of the Government. In these cases management of the cashew factories are not given to the petitioners 2 and 3, but to petitioner No.1, the society which is a separate legal entity. There was no agency between petitioners 2 and 3 and the Government, nor were acting on behalf of the Government. As such petitioners are not entitled to the protection of S. 197 of the Code.