Radha Charan Sharma vs U.P. Cooperative Federation and Others

Satish Chandra, C.J.—The U.P. Co-operative Federation Ltd., Respondent No. 1, employed the Petitioner Radha Charan Sharma on February 24, 1965, as a sales representative in its Co-operative Drugs Factory at Ranikhet. The appointment was for a period of 3 months only but he cominued in service. In 1969, he was transferred as an accountant-cum-godown keeper in the branch office of the Federation at Faizabad. Reports of theft of fertiliser and misappropriation of money and materials having been received, the Federation on August 29, 1969 served on the Petitioner an order of suspension dated July 21, 1969 suspending the Petitioner with immediate effect on payment of a subsistence allowance of 1/4 of his emoluments. This order was passed by the secretary of the Federation.

Sri Sharma, the Petitioner, filed the present writ petition in July, 1972 praying that the order of suspension be quashed because it was passed malafide and in violation of the statutory regulations. He further prayed that he be reinstated in his post.

When the writ petition came up for hearing before a Division Bench, the Respondent''s counsel raised a preliminary objection that since the Federation was a private and a non-statutory body and since the regulations framed by it were nonstatutory, the writ petition was not maintainable. Reliance was placed on a Division Bench decision in Devendra Pratap Singh v. District Co-operative Bank Ltd., Hardoi W.P. No. 1106 of 1976 decided on September 12, 1979. The Division Bench hearing the writ petition felt that the following questions required determination:

Whether a co-operative society which is an apex or state level co-operative society governed by the provisions of the U.P. Cooperative Societies Act is a Statutory body or is a "State" within the meaning of that expression in Article 12 of the Constitution.

Whether the U.P. Co-operative Societies Employees Regulations framed in exercise of the powers conferred u/s 122 of the Act have the force of law?

Whether the employees of such a co-operative society whose conditions of service are governed by the Regulations are entitled to invoke the jurisdiction of this Court in a writ petition filed under Article 226 of the Constitution alleging that the Co-operative Society has violated any of the regulations or rules governing the service conditions ?

The Division Bench felt that in view of the decision of this Court in Aley Ahmad Abdi v. District Inspector of Schools Allahabad 1976 AWC 731 (FB) and of the Supreme Court in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, , certain observations made by the Division Bench in Devendra Pratap Singh''s case (Supra) required reconsideration. It accordingly referred the entire writ petition for hearing and decision by a larger Bench. That is how this matter has come before this Bench.

On facts the position is that the U.P. Co-operative Federation Ltd., Respondent No. 1, is a Cooperative Society registered under the U.P. Cooperative Societies Act, 1912. It framed the U.P. Cooperative Federation Service Rules. They came into force from July 1, 1956. The allegation in Para. 3 of the writ petition that the Registrar Co-operative Societies and the U.P. State Government framed these service rules under Sections 121 and 122 of the U.P. Co-operative Societies Act, 1965 is incorrect. Annexure 1 to the writ petition is a copy of the rules. Sub-rule (ii) of Rule 1 states that the rules shall be deemed to have come into force from July 1, 1956. The Co-operative Societies Act was enacted in 1965. The rules could not hence be framed under Sections 121 and 122 of that Act. The clearout averment in Paragraph 10 of the counter affidavit that these rules were not framed by the State Government or the Registar, but were framed by the Federation itself in the year 1956 appears to be correct. The contrary allegation in the writ petition or its reiteration in the rejoinder affidavit is not established.

Learned Counsel for the Petitioner invited our attention to Section 43 of the Co-operatives Societies Act, 1912. He referred to Clauses (c) and (g) of Sub-section (2) of Section 43. Section 43 confers rule making power on the State Government. The various clauses of Sub-section (2) indicated the matters of the subjects on which the rules may be framed by the State Government. However, there is no evidence to establish that the service rules which are Annexure 1 to the writ petition were, in fact, framed by the State Government u/s 43 of the Act. They appear to have been framed by the Federation itself. In this view the matter seems to be concluded by a decision of the Supreme Court in Co-operative Central Bank Ltd. and Others Vs. Additional Industrial Tribunal and Others, . In that case, Section 16 of the Andhra Pradesh Co-operative Societies Act (No. 7 of 1964) required that no amendment of any bye law of a society shall be valid unless such amendment has been registered under this Act. Sub-section (2) of Section 16 stated that every proposal for such amendment shall be forwarded to the Registrar who shall, if he is satisfied that the proposed amendment fulfils the conditions specified in Sub-section (1) of Section 7, register the amendment within a period of 60 days from the date of receipt of such proposals. Sub-section (5) of Section 16 authorises the Registrar to suggest appropriate amendments of the bye laws of the society which are necessary or desirable in the interest of the to-operative movement.

One of the questions raised in that case in the Supreme Court was that the bye-laws of the co-operative society framed in pursuance of the Act had the force of law. Rejecting this submission, the Supreme Court held:

It has no doubt been held that, if a statute gives power to a Government or other authority to make rules, the rules so framed have the force of statute and are to be deemed to be incorporated as a part of the statute. That principle, however, does not apply to bye-laws of the nature that a co-operative society is empowered by the Act to make. The bye-laws that are contemplated by the Act can be merely those which govern the internal management business or administration of a society. They are of the nature of the Articles of Association of a Company incorporated under the Companies Act. They may be binding between the persons affected by them but they do not have the force of a statute.

In relation to bye-laws laying down conditions of service of the employees of the society, their Lordships went on to hold:

In respect of bye laws laying down conditions of service of the employees of a society, the bye laws would be binding between the society and the employees just in the same manner as conditions of service laid down by contract between the parties. In fact, after such bye laws laying down the conditions of service are made and any person enters the employment of a society those conditions of service will have to be treated as conditions accepted by the employee when entering the service and will thus bind him like conditions of service specifically forming part of the contract of service. The bye laws that can be framed by a society under the Act are similar in nature to the Articles of Association of a Company incorporated under the Companies Act and such Article of Association have never been held to have the force of law.

Under the Co-operative Societies Act, 1912 Co-operative Societies were required to be registered with the Registrar. If the Registrar is satisfied that a society has complied with the provisions of the Act and the Rules and that its proposed be laws are not contrary to the rules, he may register the society and its bye laws. Section 11 provided that no amendment of the bye-laws of a registered society shall be valid until the same has been registered under this Act, for which purpose a copy of the amendment shall be forwarded to the Registrar. If the Registrar is satisfied that any amendment of the bye-laws is not contrary, to this Act, or the rules he may, if he thinks fit, register amendment. It is evident that the position in the present case is identical with the Co-operative Central Bank''s case (supra) decided by the Supreme Court. On a parity of reasons the rules which are Annexure I to the writ petition and which were framed by the Federation itself did not have the force of a statute or of law.

During the course of hearing, we enquired from the learned Counsel as to which of the rules contained in Annexure 1 to the writ petition have been violated. He was not able to point out any particular rule. His submission was that the Respondent-Federation did not initiate any enquiry against the Petitioner even though more than three years had passed since the service of the order of suspension. This charge has been controverted in the counter affidavit. It has been stated that inspite of the service of the suspension order, the Petitioner did not handover complete charge of his office till July 1972. After the Petitioner had handed over complete charge, the stock was verified, a charge sheet was prepared and was sought to be served on the Petitioner but each time it was returned with a postal endorsement "left without address". Attempt was made to serve the charge sheet more than once but each time the Petitioner managed to evade its service. For that reason, the enquiry could not be completed in time, Learned Counsel countered this averment by saying that he was continuously writing letters to the Respondents to withdraw the suspension order and reinstate the Petitioner or to complete the enquiry but nothing was done. Learned Counsel for the Petitioner pointed out that these letters were sent by post. None of these letters contained the address of the Petitioner so that he could be contacted. From these facts it is apparent that the Petitioner himself was guilty of delaying the completion of the disciplinary enquiry. He did not, at any time, present himself before the authorities of the Federation to know as to what was happening in his enquiry. No particular rule requires that the enquiry must be completed within a given period of time. On facts, we cannot say that the Respondents are guilty of not completing the enquiry in a reasonable time. On the other hand, the Petitioner himself appears to be guilty of delaying the matter. Hence, on the averments of learned Counsel, no violation of any of the rules contained in Annexure 1 appears to have been made out.

Learned Counsel for the Petitioner invited our attention to the U.P. Co-operative Societies Employees Service Regulations, 1973. They came into force on July 3, 197.3. There is nothing in these regulations indicating that they shall have retrospective effect so as to cover the order of suspension passed in 1969. Clause (a) of Sub-rule (vii) of Regulation 85 provides that an employee who is under suspension on the date of coming into force of these regulations shall continue to draw such portion of pay and such allowances as he was allowed to draw for the period of suspension. This only shows that the pre-existing rules will continue to operate and apply to an employee under suspension. In the present case, Rule 20 of the 1956 Rules provide that a suspended employee shall be entitled to 1/4 of his emoluments as subsistence allowance. Under Regulation 85 of 1973 Regulations, the subsistence allowance is to be equal to 1/3 of the emoluments. Inspite of it for employees who were under suspension on the date of coming into force of these regulations, the pre-existing rules have been made to apply. This does not show that the Regulations of 1973 have any retorspective operation. Further, learned Counsel was unable to point out any particular regulation which may be said to have been violated by the Respondents in passing the impuned order of suspension. In the view, it seems unnecessary to decide whether the Respondent-Federation is a "State" within meaning of that expression in Article 12 of the Constitution so as to amenable to a writ petition.

But assuming that we are wrong in holding that the rules or the regulations do not have the force of law and that some rule or regulation has been violated, let us see whether the Respondent Federation can be held to be "State" within meaning of Article 12. The question whether a juristic personality falls within the purview of Article 12 has engaged the attention of the Supreme Court and various High Courts on a number of occasions. The latest decision on this topic is Ajay Hasia v. Khalid Sehravardi W.P. No. 1304 of 1975, decided by the Supreme Court on November 13, 1980. In that case the question was whether the Regional Engineering College, Srinagar which was a Society registered under the Jammu and Kashmir Registration of Societies Act, 1898 was an authority within meaning of Article 12 of the Constitution so that a writ petition could lie against it.

Article 12 defines "State" to include, inter alia, the Government of India, the Government of each of the States and all local and other authorities within the territory of India or under the Control of the Government of India. The question was whether a Society can be said to be "other authority" under Article 12. The Supreme Court in this case held that it is immaterial for this purpose whether the corporation is created by or under the Statute. The test is that it is instrumentality or agency of the Government and not as to how it is created. The enquiry has to be not as to how the juristic person is born but why it has been brought into existence. The Corporation may be a statutory corporation created by a statute or it may be a Government company or a company formed under the Companies Act, 1956 or it may be a society registered under the Societies Registration Act, 1860 or any other similar statute. Whatever be its genetical origin, it would be an "authority" within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. They laid down several tests to determine whether a corporation is an instrumentality or agency of the Government:

(1) One thing is clear that if the entire share capital of the Corporation is held by Government it would go alongway towards indicating that the Corporation is an instrumentality or agency of the Government.

(2) Where the financial assistance of the State is so much as to meet entire expenditure of the Corporation, it would afford some indication of the Corporation being impregnated with governmental character.

(3) It may also be relevant factor whether the Corporal ion enjoys monopoloy status which is State conferred (sic).

(4) Existence of deep and pervasive State Control may afford an indication that the Corporation is a State agency or instrumentality.

(5) 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.

(6) Specifically, 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.

For these the court heavily relied upon its decision in Ramana Dayaram Shetty''s case (Supra).

This development of the law was inspired in Patt III and the Directive Principles of State Policy in Part IV of the Constitution should not be rendered futile, meaningless and ineffective by the State Transferring some of its governmental activities to juristic persons like Corporation and Co-operative Societies. If a Corporation is found to be a mere agency or instrumentality of the Government owned and controlled by it, it is, in fact, an incarnation of the Government. Such an agency must equally obey the Constitutional Limitations of the Fundamental Rights and the Directive Principles.

It is obvious that a juristic personality like a Cooperative society which is registered under the Act but is otherwise free of governmental control will not be an authority within meaning of Article 12. In the present case, it has been stressed that 40 to 60 per cent of the share-holding of the Federation is owned by the State Government. The President of the Federation is the Registrar of Cooperative Societies, a Government servant, and the Secretary of the Federation is the Deputy Registrar, another Government Servant. The Petitioner has not indicated what is the Constitution of the Federation in which organ or body of the Federation is the power of management and taking decisions resides. It has not been shown how far the Government controls the activities or decision making power of the managing authority of the Federation. In these circumstances, it is difficult to hold that the Federation was an authority within meaning of Article 12.

It is unnecessary to dilate on this aspect further because in Sehravardi''s case (Supra) the Supreme Court itself appended a note of caution. It observed:

It is also necessary to add that merely because a juristic entity may be an ''authority'' and therefore ''State'' within the meaning of Article 12, it may not be elevated to the position of ''State'' for the purpose of Articles 309 and 311 which find a place in Part XIV. The definition of ''State'' in Article 12 which includes an ''authority'' within the territory of India or under the Control of the Government of India is limited in its application to only Part III and by virtue of Article 36 to Part IV; it does not extend to the other provisions of the Constitution hence a juristic entity which may be ''State'' for and purpose of Part XIV or any other provision of the Constitution.

In the present case, the controversy is in respect of suspension order passed in service of disciplinary power of the Federation. Learned Counsel for the Petitioner did not even suggest that Article 14 or 16 of the Constitution has, in any manner, been violated. The Petitioner hence cannot claim the relief of reinstatement on the analogy of Articles 309, 310 and 311 of the Constitution. In such a case as the present one, the rule laid down in Smt. J. Tiwari Vs. Smt. Jwala Devi Vidya Mandir and Others, , that no reinstatement can be claimed against a private body even if the order passed by it is found to be wrongful, may well apply. In Devendra Pratap Singh''s case (Supra), it was only observed that a duty of public nature even if it is non-statutory may be enforced by a writ of mandamus against a non-statutory body. For this view, it relied on the observations of the Full Bench of this Court in Aley Ahmad Abidi (Supra). It is unnecessary for us to elaborate or discuss the matter further because, as already seen, this specific aspect does not, on the facts of the case, arise. No rule involving a duty of a public nature has been shown to have been violated.

In the result, the writ petition fails and is accordingly dismissed with costs.