The main legal point established in the judgment is that a direction issued under section 30-B of the Karnataka Co-operative Societies Act must not be inconsistent with the provisions of the Act and Rules, and should serve the interest of the co-operative society members.

Headnote:
Co-operative Societies - Direction to contribute 5% of profit to fund - Karnataka Co-operative Societies Act, Section 30-B
Fact of the Case:

The Registrar of Co-operative Societies in Karnataka issued an order directing co-operative societies earning profit to contribute 5% of the profit to a fund called 'sahakara Kalyana Nidhi'. Various co-operative societies challenged the order, contending it was illegal and outside the purview of powers conferred under section 30-B of the Karnataka Co-operative Societies Act.
Finding of the Court:

The court found that the direction issued under section 30-B was not upheld as a legitimate exercise of power, as it was inconsistent with the provisions of the Act and Rules. The court held that the order was vague, failed to serve the interest of both past and present members of a society, and was illegal and not sustainable in law.
Issues: The main issue was whether the direction to contribute 5% of profit to the fund was a legitimate exercise of power under section 30-B of the Act.
Ratio Decidendi: The court analyzed the provisions of the Act and Rules related to the management of co-operative societies and funds, and concluded that the direction was inconsistent with the Act and Rules, and failed to serve the interest of the society members.
Final Decision: The court allowed the petitions and quashed the order dated January 12, 1996 of the Registrar of Co-operative Societies.

B. N. MALLIKARJUNA, J.

( 1 ) AS the order questioned in all the Writ Petitions is one and the same, common judgment would dispose of all the 52 petitions.

( 2 ) ORDER dated January 12, 1996 of the Registrar of Co-operative Societies in Karnataka (one of the respondents in all the writ petitions) is challenged by various co-operative societies in State in these 52 Writ Petitions. State of Karnataka is the other respondent.

( 3 ) REGISTRAR of Co-operative Societies, by impugned order, in exercise of the power under section 30-B of the Karnataka Co-operative Societies Act (the 'act' for short), directs the societies in the State which is earning profit to contribute 5% of the profit to the funds to be called as "sahakara Kalyana Nidhi. " It is stated that there is need to constitute such fund to provide certain benefits to such of those persons who have contributed in the development of co-operative movement in the State and who have rendered selfless service. It is also stated that the direction of this type would encourage others in the co-operative field to render selfless service. Some of the petitioners are co-operative societies functioning under the provisions of the co-operative Societies Act and some other are the institutions registered under the Act but functioning under the terms and conditions of licence granted to them under the Banking regulation Act. Petitioners challenge the order almost on similar grounds. They contend that the order is illegal; without the authority of law and outside the purview of powers conferred under section 308 of the Act. It is further contended that the societies are voluntary association of members registered under the Act. Provisions of Section 57 (4) of the Act provides for direction for Co-operative Education Fund which is now managed by Karnataka State Cooperative federation. Certain provisions in the Act and Rules provide for distribution of profits by each one of the institution and further bye-law provides for making provision as to how the profits should be distributed and in such circumstances Registrar has no power under Section 30-B to issue direction directing the societies to contribute 5% of the profit for constituting a common fund.

( 4 ) COUNTER is filed on behalf of the respondents. It is contended that direction under Section 30-B of the Act is issued in the public interest and for the purpose of securing proper implementation of co-operative movement and other development programmes. It is to be administered by the committee to be constituted by the Government and at any rate it would not be administered by the Government. The societies will have indirect control over the administration of the fund as the committee may consist of representatives of co-operative institutions. State Government has undertaken the work to uplift the co-operative movement. The fund would be utilised for the benefit of such of those members who have rendered services in the co-operative field and intended to recognise the service of co-operators for a longer period and also to encourage other co-operators to continue their selfless service in the co-operative field. It is further contended that in view of Section 40 of the Act, it is the duty of the State Government to encourage and promote the co-operative movement including encouragement of co-operative forming. Direction is issued with the sole intention of achieving the object of co-operative movement and to involve many more persons to render selfless service. Certain institutions have sent their contribution with their free-will and wish and as such there is no illegality in issuing the direction under Section 30-B of the Act.

( 5 ) HEARD the learned Counsel for the petitioners and the learned Government Pleader for respondents.

( 6 ) BEFORE adverting to the rival contentions, it would be necessary to refer to the order in question which reads thus:. . (VERNACULAR MATTER OMMITED ). .

( 7 ) FURTHER, guide-lines are also formula

Click Here to Read the rest of this document