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PATNA HIGH COURT
R.L.Narasimham and K.B.N.Singh JJ.
Harakh Bhagat
Versus
Assistant Registrar, Co Operative Societies
Civil Writ Judicial No. 672 of 1966 ;
Decided On : JULY 21, 1967
COOPERATIVE SOCIETY - COMPULSORY AMALGAMATION - RULE 39 OF BIHAR COOPERATIVE SOCIETIES RULES, 1959 - VALIDITY - ARTICLE 14, 19(1)(C) OF THE CONSTITUTION - DELEGATION OF POWER - SECTION 6(2) OF THE BIHAR AND ORISSA COOPERATIVE SOCIETIES ACT, 1935.
Fact of the Case:
Petitioner No. 1, a member of the Working Committee of Raipura Multipurpose Cooperative Society Limited, and Petitioner No. 2, the Society itself, challenged an order dated 28th June, 1966, passed by the Assistant Registrar, Co-operative Societies, compulsorily amalgamating the Society with Budhuchak Multipurpose Co-operative Society, under Rule 39 of the Bihar Co-operative Societies Rules, 1959.
Finding of the Court:
The Court held that Rule 39, providing for compulsory amalgamation, was not in excess of the rule-making power conferred by Section 66(2)(ix) of the Act. The Court also held that the provision for compulsory amalgamation was not outside the scope of the Act, which contemplated both voluntary and compulsory amalgamation. Further, the Court held that Rule 39 did not confer unfettered arbitrary power on the Registrar, as certain objective standards were laid down for consideration. The Court also held that Rule 39 did not offend Article 19(1)(c) of the Constitution, as the fundamental rights guaranteed under Article 19 applied to citizens and not to incorporated bodies.
Issues: 1. Whether Rule 39 of the Bihar Co-operative Societies Rules, 1959, providing for compulsory amalgamation, was in excess of the rule-making power conferred by Section 66(2)(ix) of the Bihar and Orissa Co-operative Societies Act, 1935? 2. Whether the provision for compulsory amalgamation was outside the scope of the Act, which contemplated only voluntary amalgamation? 3. Whether Rule 39 conferred unfettered arbitrary power on the Registrar? 4. Whether Rule 39 offended Article 19(1)(c) of the Constitution? 5. Whether the Assistant Registrar had the jurisdiction to exercise power under Rule 39?
Ratio Decidendi: 1. The Court held that Rule 39 was not in excess of the rule-making power conferred by Section 66(2)(ix) of the Act, as the word "amalgamation" used in the provision was not restricted to voluntary amalgamation only. 2. The Court held that the provision for compulsory amalgamation was not outside the scope of the Act, as the preamble of the Act showed that the Act provided not only for the formation of Societies but also for "facilitating the working of the Societies with the ultimate aim of promoting thrift, self-help and mutual aid." 3. The Court held that Rule 39 did not confer unfettered arbitrary power on the Registrar, as certain objective standards were laid down for consideration, such as the financial position of the Societies and other relevant matters. 4. The Court held that Rule 39 did not offend Article 19(1)(c) of the Constitution, as the fundamental rights guaranteed under Article 19 applied to citizens and not to incorporated bodies. 5. The Court held that the Assistant Registrar did not have the jurisdiction to exercise power under Rule 39, as the power of delegation under Section 6(2) of the Act was conferred only on the State Government and not on the Registrar.
Final Decision: The Court allowed the writ petition and quashed the order of the Assistant Registrar directing amalgamation of the Raipura M.P.C.S. and Budhuchak M.P.C.S.
R.L.Narasimham, J.
1. This is an application under Articles 226 and 227 of the Constitution by a member of the Working Committee of Raipura Multipurpose Cooperative Society Limited (Petitioner No. 1) and also by the said Society (Petitioner No. 2) for quashing an order dated the 28th June, 1966, (Annexure D) passed by Shri S. K. Sahai, Assistant Registrar, Co-operative Societies, compulsorily amalgamating the said Co-operative Society with Budhuchak Multipurpose Co-operative Society, in purported exercise of the powers conferred by rule 39 of the Bihar Co-operative Societies Rules, 1959.
2. As is well known, the Co-operative movement in Bihar is regulated and guided by the Bihar and Orissa Co-operative Societies Act, 1935, (hereinafter referred to as the Act), whose preamble is worth quoting:
"Whereas it is expedient to facilitate the formation, working and consolidation of Cooperative Societies for the promotion of thrift, self-help and mutual aid among agriculturists and other persons with common needs and for that purpose to consolidate and amend the law relating to Cooperative Societies -------"
The Registrar of Co-operative Societies and his subordinate officials have been conferred extensive powers by the Act to superwise the working of the Societies and to take appropriate action even to the extent of superseding the managing committees of the Societies (Section 41) for liquidating or dissolving the Societies (Section 44) in extreme cases. The Societies, after incorporation, are conferred duties and privileges which are set out in Chapter III of the Act. The rights and liabilities of the members of the registered Societies also are dealt with in Chapter IV. Sec. 66 of the Act confers power on the State Government to make rules "to carry out all or any of the purposes of the Act". Clause (ix) of Sub-rule (2) of that section specifies the following matters as being included in the rule-making power, namely, "prescribe the procedure to be followed when societies change the form or extent of their liability, and provide for the amalgamation and division of societies and prescribes the conditions of such amalgamation and division".
3. The Bihar Co-operative Societies Rules, 1959 , (hereinafter referred to as the Rules), were made in exercise of this rule-making power. Rule 37 deals with division of Co-operative Societies. The provisions of this rule seem to indicate that a division of a registered Society can be made only if the members of the Society resolve to divide themselves into two or more registered Societies. Rule 38 deals with voluntary amalgamation of Societies. This rule also envisages such amalgamation only when two or more registered Societies resolve to amalgamate themselves into a new Society. Rule 39, however, confers power on the Registrar to compulsorily amalgamate registered Societies, As the validity of this rule is under challenge, I shall quote it in full:-
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"39.(1) If the Registrar is satisfied, after taking into consideration the financial position of two or more societies and such other matters relating to the societies as may be proper, that it is in the interest of those societies to be amalgamated into a now society, he may, by order in writing, require the managing committees of the societies concerned to convene general meetings of the share-holders and creditors thereof within six weeks from the date of the order, for the purpose of considering a proposal to amalgamate the societies into a new society.
(2) If the managing committees fail to call any such meeting for the purpose, or if the decision in any such meeting is against the proposed amalgamation or no decision is taken at any such meeting the Registrar may, on the expiry of six weeks from the date of his order and after satisfying himself that the interest of the creditors has been adequately safe-guarded, direct that the said societies shall be amalgamated into a new society with effect from a date to ha specified in the dire
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