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: Division of Cooperative Society Ends Delegates' Status Despite Retaining Old Name
The delivered a significant ruling on the consequences of dividing a cooperative society, holding that even if the original society retains its old name and registration number, it becomes a new in law. This shift means delegates from the original society automatically cease to hold office under , and cannot continue on the under .
Division That Changes Everything
The case arose from a petition by Sachin Kumar Jain, a of the . He challenged the continued membership of three individuals—Ramnath Singh (Chairman), Pankaj Pal, and Brijendra Singh—on the Bank’s . These three were originally elected as delegates from three primary agricultural credit societies: , , and . In , the Assistant Registrar passed orders under , dividing these societies. Several villages were removed from their areas of operation and allocated to newly constituted societies like , , and . While the new societies received fresh registration numbers, the original societies were allowed to keep their old names and registration numbers.
A 'Devious Method' to Avoid Consequences
The petitioner argued that the division had fundamentally altered the original societies, making the private respondents disqualified. The State and the Bank countered that mere exclusion of a few villages and retention of the old numbers meant the original societies still existed, so no applied.
Justice Indrajeet Shukla, writing for the bench also comprising Justice J.J. Munir, delivered a sharp rebuke. The court observed that the Registrar had “devised a novel method of maintaining the name and registration number of the erstwhile Societies so as to overcome the inevitable legal consequences of division in a devious manner.” The court stressed that what matters is the “substantive character and legal identity resulting from the statutory process of division,” not the label attached to the society.
Legal Principles Applied
The court traced the statutory framework: Section 126 empowers the Registrar to order a division, which then triggers the mandatory procedure under of the Act. Under , registration confers distinct . Once division occurs, the pre-existing society’s area of operation, assets, and liabilities change, making it a new under , irrespective of retained name and number.
Relying on the settled principle from Nazir Ahmad v. King Emperor (1936) that a thing must be done in the manner prescribed by law, the court held that the Registrar cannot bypass the rigors of by simply keeping old registration numbers. The court cited a Constitution Bench decision in Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala (2001) reiterating that statutory powers must be exercised only in the manner provided.
Key Observations
The judgment made several pivotal observations:
“Thus, the juristic entity of pre-existing Cooperative Societies would stand altered and the pre-existing societies in the new form would be altogether different bodies corporate by virtue of of the Act, 1965. Thus, what assumes significance is not merely the label attached to the society, namely, its registration number or nomenclature, but the substantive character and legal identity resulting from the statutory process of division.”
“the 3rd respondent while passing the order of division in exercise of the power conferred under Section 126 of the Act, 1965, devised a novel method of maintaining the name and registration number of the erstwhile Societies so as to overcome the inevitable legal consequences of division in a devious manner.”
“A who ceased to be a member of the cannot continue to function as a member of the , for, once the foundation is removed, the superstructure must necessarily fall.”
The Fall of the Superstructure
Applying these principles, the court concluded that since the original societies were divided, the private respondents ceased to be delegates under Rule 87(ix). Consequently, they lost membership of the Bank’s and incurred under . The Chairman, Ramnath Singh, whose office was founded on his status, could no longer continue.
The court allowed the writ petition in full, directing the authorities to take action against the disqualified members. The court refrained from disturbing the retention of old numbers since the division orders were not challenged, but clarified that the old numbers shall be treated as numbers allotted under to the societies resulting from division.
This judgment reinforces that procedural compliance with statutory mandates cannot be circumvented by administrative convenience, and that democratic functioning of cooperative institutions must be preserved.
