The Radaur Cane Growers Co-op. Society Ltd. vs State of Haryana and Others

G.C. Mital, J.—The Radaur Cane Growers Co-operative Society, Radaur, District Karnal, is a registered Co-operative Society under the Punjab Co-operative Societies Act, 1961 (hereinafter referred to as the Act and the rules framed thereunder as the Rules) with head office at Radaur, District Karnal. Mostly cane growers of the area are members of the Society and the cane-produced by the members is sold to Saraswati Sugar Mill, Yamunanagar (hereinafter called the Sugar Mill).

By notification dated 7th May, 1962, issued by the State Government, the Sugar Mill was notified as eligible for membership of the Society and ultimately the Sugar Mill became a member of the Society. According to the bye-laws of the Society, the Sugar Mill could nominate 5 delegates from amongst the members or its staff and could nominate two persons for becoming members of the Managing Committee. Since there was some doubt in the mind of the Inspector, Co operative Sugar Cane Societies, Yamunanagar, about the aforesaid nomination by the Sugar Mill, he referred the matter for opinion to the Cane Commissioner, Punjab, who was also the Registrar of the Co-operative Societies. Sh. J.S. Sarohia Cane Commissioner, Punjab, vide decision dated 19th June, 1962, (Annexure A) opined that the Sugar Mill is entitled to nominate five delegates to the general body of the Society so long as the existing bye laws of the Society so provide.

The aforesaid matter was again raked up at level of the Cane Commissioner exercising the powers of the Registrar, Co operative Societies and this time the matter was considered by a different officer, who by decision dated 16th May, 1963, Annexure ''B'', held that bye law 13 is not consistent with the provisions of the Act and therefore, in view of Section 81 of the Act it no longer appears to be valid with the result that the Sugar Mill has no power to nominate. In coming to this conclusion, the provisions of Section 18, 26(2)(a) and (b) of the Act were taken into consideration. The earlier order Annexure ''A'' was accordingly modified. The same matter was once again taken up at the same level and this time vide order dated 28th July, 1969, (Annexure ''D'') the original order was found to be correct and the subsequent order Annexure ''B'' was, therefore, withdrawn. The matter was later taken for reconsideration fourth time and by order dated 12th August, 1969, (Annexure ''E'') which is a non speaking order, the order dated 28th July, 1969, (Annexure ''D'') was withdrawn and status quo ante was restored with the result that the final decision of the Cane Commissioner-cum-Registrar, Co-operative Societies before the filing of the writ petition, was that the Sugar Mill has no power to nominate five delegates to be included in the general body of the Society.

To impugn order dated 12th August, 1969, (Annexure ''E'') the Society has come to this Court in writ petition under Article 226 of the Constitution of India. Originally the State of Haryana and the Cane Commissioner were made parties. Later on the Sugar Mill filed an application for being impleaded as a party, being vitally interested in the result of the writ petition and by order of this Court dated 21st October, 1969 was allowed to be impleaded as a Respondent.

The counsel for the Society has urged that the decision contained in Annexure ''A'' is the correct decision and subsequent decisions contained in Annexures ''B'' and ''E'' are wholly illegal and are opposed to the plain reading of the provisions of the Act, rules and bye laws and therefore, deserve to be quashed. In highlighting the argument it is urged that it is the general body and the members of the Society who have the final authority in all matters, as contained in Section 23 of the Act although it is true that each member of the Society shall have one vote. On the basis of proviso to Section 23 it is further argued that the final authority shall vest in the smaller body consisting of the delegates of the Society elected or selected in accordance with the bye-laws where it is so provided in the bye-laws of the Society and each delegate shall have one vote in the affairs of the Society. At the time of registration of the Society with the Registrar of the Co-operative Societies along with the application for registration, the proposed bye-laws of the Society are to be submitted for the consideration of the Registrar and if the Registrar is satisfied in respect of the matters contained in Section 8 of the Act, he can register the Society and its bye-laws. The bye-laws so registered become operative for the working of the Society. For amendment of the bye-laws, procedure contained in Section 10 of the Act has to be followed. The power to amend bye laws u/s 10 of the Act vests with the general body of the Society. However Section 10-A further empowers the Registrar of the Co-operative Societies to require the Society by an order in writing to make amendment in the bye-laws within such time as may be specified and on failure of the Society to do so, the Registrar after giving hearing to the Society with regard to the proposed amendment in the bye-laws can register the amendments as desired by him or in such modified form as may be suggested by the Society during hearing and agreed to by him and thereafter on registration, such amendment shall be binding upon the society and its members.

u/s 18 of the Act every member of the society has one vote and so also the nominees besides giving right of second or casting vote to the Chairman in case of equality of votes.

It is urged on behalf of the Petitioners that inspite of the fact that every member of the Society as also the nominated member has one vote, Section 18 of the Act nowhere even remotely suggests that Society cannot make bye-laws to authorise sugarmili to nominate five delegates to become numbers of the smaller body exercising the powers of the general body in accordance with bye-laws and therefore, orders Annexures ''B'' and ''E'' are based on wrong interpretation of Section 18 of the Act.

Then my attention is invited to Section 26 of the Act which has been used against the Petitioners in order Annexure ''B''. A reading of this section shows that it relates to the election and nomination of the members of the committee of the society which ultimately manages that affairs of the society. Sub-section 2(a) of this section provides that where the Government has subscribed to the share capital of a cooperative society or has taken liability by way of guarantee for borrowing money exceeding fifty per cent of the working capital of the society the Government or any persons authorised by it in this behalf shall have the right to nominate on the committee such number of persons not exceeding three or one third of the total number of members thereof, whichever is less, as the Government may determine. Sub-section 2(b) provides that where any finance institution, duly notified by the State Government, has provided financing to a co-operative society, such financing institution shall have the right to nominate one person on the committee. From a reading of the aforesaid, in order Annexure ''B'' it was held that if Government could nominate not exceeding three members and the financing institution one member how could it be that bye-law 13 could provide for nomination of five members by the Sugar Mill and therefore, a combined reading of Section 18 with Section 26(2)(a) and (c) shows that bye-law 13 was in contravention of the aforesaid provisions with the result that the Sugar Mill could nominate only one member on the General Body of the Society and could not nominate five persons, as provided in the bye-laws.

The counsel for the Petitioner has brought to my notice the obvious fallacy in the order Annexure ''B''. In order to appreciate the argument it will be useful to notice that bye-laws 13 and 22 fall for consideration. It will be useful to reproduce the same.

The members of a village will elect one delegate for every 15 members or fraction of this number to represent them in a general meeting. The presence of at least 1/3 of the members shall be necessary for electing delegates. The proceedings shall be signed by all presentees. Such better farming or other Co-operative Society shall be entitled to nominate one delegate and Sugar Factory five delegates from amongst the members or its staff.

The managing committee shall consist of 7 delegates, one elected from each zone, two nominees of the sugar factory, one nominee of the Registrar Co operative Societies and one the Cane Commissioner, as members over the age of 21 years including the President and one or more Vice-Presidents. The committee shall be elected for three years. However, if for any reason election is not held for one or more of the zones, the committee consisting of such members as have already been elected or nominated shall function provided these members constitute the quorum required for the meeting of the commitee under the bye-laws. In case the already elected or nominated members do not constitute the required quorum or a legally constituted committee does not exist at any time for one reason or the other, all the powers of the committee shall vest with the Cane Commissioner, Haryana, till that contingency lasts.

A regarding of bye-law 13 shows that the members of a village will elect one delegate from amongst every 15 members or fraction to represent them in a general meeting. Besides the above, each better farming or other Co-operative Society has been authorised to nominate one delegate and sugar mill has been authorised to nominate five delegates from amongst the members or its staff.

A reading of bye law 22 shows that a managing committee of a Co operative Society is to consist of 7 delegates, one elected from each zone, two ninees of the sugar mill, one nominee of the Registrar, Co-operative Societies and one nominee of the Cane Commissioner, the term of which is to be for three years.

Bye-law 13 is with regard to the election of delegates from amongst total General Body of members of the Society, as provided in this bye-law, besides au horising nomination of delegates by better farming or other Co-operative Society and five by sugar mill and all these delegates constitute the smaller body to exercise the powers of the general Body in accordance with the bye laws as provided by proviso to Section 23 of the Act whereas bye-law 22 talks of the election or nomination of members of the committee of a Society, which is done u/s 6 of the Act. Therefore, there is obvious mistake in the reasoning''s adopted in Annexure ''B'' while noticing bye-law 13 for the interpretation of Section 26(2)(a) and (c) read with Section 18, for which matter bye-law 22 alone would be relevant.

The Petitioner is a Cane Growers Co-operative Society and is interested in the proper working of it so that best advantage could be derived from its working etc, for the benefit of the Society and its members. It is not disputed on both sides that the sugar cane produced by the villagers including members is sold to the sugar mill. The variance between the State on one side and the Petitioner and sugar mill on the other side is that for the sale of sugar cane, by members of the Society and non-members, whether made through the Petitioner Society or not the Petitioner-Society gets commission from the sugar mil only if sugar mill is allowed the benefit of bye-laws 13 and 22 and not otherwise. On the other hand, the case of the State Government is that for sale of sugar by non-members otherwise through Society, the Society will not be entitled to commission apart from the aforesaid understanding between Society and the sugar m 11 but it is the decision of the State Government that no member of a Co-operative Society can make sale of sugar-cane direct to the sugar mill without the permission of the Cane Commissioner, Haryana and such permission has never been granted with the result that the cane grower members are bound to sell their sugar cane to the sugar mill through the Society, with the result that in all sales from all members of the Society it gets commission from the sugar mill and therefore, there is no loss to the Society even it bye-laws 13 and 22 are opposed to the provisions of the Act and are struck down.

Assuming that the stand of the State is correct yet in the absence of bye-law 13 and 22, the Petitioner-Society would be at loss of commission for all direct sales made to the sugar mill by non-members without the intervention of the society.

The Cane Commissioner/Registrar of the Co-operative Societies have been taking various decisions on the point under issue and twice the decision was one way and on other two occasions the decision was contrary to the earlier decision. Therefore, Co-operative Department of the State Government has not been sure about the correct interpretation and for the final decision to be taken in this regard.

On reading of all the provisions of the Act and the bye-laws, I am of the opinion that the decision taken in Annexure ''B'' was correct and deserves to be upheld unless there is something either expressy or by implication in any provision of the Act or rules. A beneficial interpretation deserves to be given to the relevant provision so that can promote better working of the Society, Since the main purpose of the creation of the Society was the supply of sugar to the sugar mill, it would be reasonable that for the better working of the Society, the sugar mill should also be given some representation in its General Boby as well as the Managing Committee and for this matter bye-law 13 was provided originally in the year 1954 in the principal bye-laws of the Society which was duly registered under the Act in accordance with law and this bye law stood the test of time till, 1962, when the matter was racked up for consideration. Section 23 is with regard to the management of the Societies, the final authority of which vests in the General Body of the members subject to the proviso wherein the bye-laws provided for smaller body consisting of de agates then the smaller body exercises the powers of the General Body and each delegate has been provided with one vote in the affairs of the Society. Nothing is contained in this section to exclude the inclusion of delegates from outside the General Body of members. Therefore, bye law 13 cannot be termed as in contravention of Section 23 of the Act. A reading of bye law 13 shows that besides authorising sugar mill to have five delegates, one delegate each has been authorised to be nominated by a better farming or other Co-operative Society and this to my mind is for the better working of the Society so that besides delegates from General body, the delegates of every Co-operative Society including sugar mill who are members are also allowed to have say in the affairs of, the Society. Their presence would certainly promote better working of the Society.

Similarly Section 26 of the Act provides for the election and nomination of the members of the Committee of the Society. From a reading of this provision I do not find any restriction in the inclusion of members from the sugar mill or the nomination by Registrar or cane Commissioner. It is true that in Sub-section 2(a), the Government or its delegate has been authorised to nominate not more than 3 members and financing institution has been authorised to nominate not more than one member under Sub-section 2(a) but that by itself does not show that the Society cannot provide for inclusion of other members by a sugar mill or authorise nomination by Registrar or Cane Commissioner. Bye-law 22 to my mind is not in violatian of Section 26 of the Act Rather it will promote the working and interest of the Society by having two members of the sugar mill and one member each to be nominated by the Registrar and the Cane Commissioner who can certainly assist in better working of the Society.

For the aforesaid reasons, I am of the confirmed view that bye-laws 13 and 22 are not inconsistent with Sections 18 and 26 of the Act. No other provision has been brought to my notice by the counsel for the State to show that these bye-laws are inconsistent to those sections or the rules. In this view of the matter, since bye-laws 13 and 22 are not inconsistent with the provisions of the Act, they would not be hit by the saving clause contained in Section 81 of the Act.

Before parting it would be useful to notice that the bye-laws are registered by the Registrar after scrutiny u/s 8 of the Act. The proposed amendments are then scrutinised by the Registrar u/s 10 of the Act and the Amendments were approved and duly accepted by the Registrar. In the present case the impugned orders were passed by the Cane Commissioner exercising powers of the Registrar, Co-operative Societies Section 10-A of the Act authorises the Registrar to suggest to the Society the amendment of any bye-law within the time specified by him and in case the Society refuses to do so, the Registrar is further empowered to amend the bye-law and notify the same after affording opportunity to the Society. The Registrar would be better advised to take action u/s 10-A of the Act instead of taking decision one way or the other, as has been done in this case. From this also I infer that no effort is made by the competent authority to amend or alter or change the bye-laws and therefore, the bye-laws must hold the field till they are changed or modified in accordance with law.

For the reasons recorded above, I allow this writ petition with costs, counsel''s fee being Rs. 200/- and quash order Annexure ''E'' dated 12th August, 1969.