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2020 Supreme(Ker) 503
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Anil K. Narendran, J.
The Karassery Service Co-operative Bank Ltd. - Petitioner
Versus
State of Kerala, Represented by Secretary, Department of Co-operative Societies, Government Secretariat & Ors. - Respondents
W.P.(C) No.38305 of 2016(K)
Decided On : 29-07-2020
For the Petitioner: Sri. Ajith Krishnan.
For the Respondents: Addl A.G-Sri K.K. Ravindranath, Sri P.P. Jacob - Addl, Sri B.S. Swathi Kumar-Addl, Smt. Anitha Ravindran, Sri T.A. Shaji(SR), Sri Athul Shaji for Addl. Sri. Harisankar N. Unni, Smt. S. Sikky.
IMPORTANT POINTS
The preamble of the KCS Act sets out with sufficient clearness the policy of the Legislature, i.e., orderly development of co-operative sector in the State, in accordance with co-operative principles. Sub-section (2) of Section 74B of the KCS Act, read with the provisions under Rule 178A of the KCS Rules and also the norms for opening new branches, fixed by the Registrar from time to time, prescribes the eligibility criteria and the formalities that have to be complied with for opening branches- By holding the provisions of sub-section (2) of Section 74B of the KCS Act directory, the very object of the provision will be defeated.
Headnote:
Kerala Co-operative Societies Act, 1969- Section 74B;; The Constitution of India- Articles 14, 43B, 19(1)(c) and 243ZI-Opening of branches by a Primary Agricultural Credit Society-Without obtaining prior written permission of the Registrar under sub-section (2) of Section 74B of the KCS Act-Without complying with the provisions of Rule 178A of the KCS Rules -Wilful disobeyance or failure to comply with the lawful orders or directions issued under the KCS Act and the KCS Rules-Proceedings under Section 32 of the KCS Act can be initiated against the committee of the society, in appropriate cases.
Statement of facts:
The petitioner is a Primary Agricultural Credit Society, which is classified as 'Class-I Super Grade Bank'. The petitioner has filed this writ petition under Article 226 of the Constitution of India challenging the constitutional validity of sub-section (2) of Section 74B of the Kerala Co-operative Societies Act, 1969, which deals with 'opening of branches', as being violative of Articles 14, 43B, 19(1)(c) and 243ZI of the Constitution of India.
Finding of the court:
The challenge made in this writ petition against the constitutional validity of sub-section (2) of Section 74B of the KCS Act fails.
Result: Writ petition dismissed.
Key Points: - The right to form co-operative societies is a fundamental right under Article 19(1)(c), subject to reasonable restrictions (!) (!) (!) . - Primary Agricultural Credit Societies may open branches only with prior written permission of the Registrar, and such permission is mandatory, not merely directory (!) (!) (!) . - Section 74B(2) of the KCS Act and Rule 178A prescribe eligibility criteria and formalities for opening branches, which must be strictly complied with (!) (!) (!) . - Non-compliance with prior permission requirements amounts to wilful disobedience, enabling proceedings under Section 32 of the KCS Act (!) . - The preamble of the KCS Act reflects a policy of orderly development of the co-operative sector in accordance with co-operative principles (!) (!) .
What is the scope of the right to form co-operative societies under the Constitution?
What are the permissible restrictions on opening branches by Primary Agricultural Credit Societies?
What is the mandatory versus directory nature of prior permission requirements under the KCS Act?
JUDGMENT :
The petitioner is a Primary Agricultural Credit Society, which is classified as 'Class-I Super Grade Bank'. The petitioner has filed this writ petition under Article 226 of the Constitution of India challenging the constitutional validity of sub-section (2) of Section 74B of the Kerala Co-operative Societies Act, 1969 (for brevity, 'the KCS Act'), which deals with 'opening of branches', as being violative of Articles 14, 43B, 19(1)(c) and 243ZI of the Constitution of India.
2. Going by the averments in the writ petition, the petitioner Society was formed in the year 1994. Initially, the area of operation of the Society was Karassery Panchayat in Kozhikode District. By Ext.P1 Government Order dated 16.01.2015, the 1st respondent State, in exercise of its powers under Section 101 of the KCS Act extended the area of operation of the petitioner Society to the entire Kozhikode Taluk, except Kozhikode Corporation limits, by granting exemption from clause (c) of subsection (1) of Section 7 of the KCS Act. After Ext.P1 order, the petitioner Society made applications before the 2nd respondent Registrar of Co-operative Societies, seeking permission to open 13 branches in its extended area of operation. The document marked as Ext.P2 is one such application dated 21.02.2015, made before the 2nd respondent Registrar seeking permission to open branches at Kakkodi, Poovattuparamba, Koduvally, Kuzhalmannam and Narikkuni. Without prior written permission of the 2nd respondent Registrar, the petitioner Society opened branches at Palazhi and Poovattuparamba, with effect from 14.10.2015. While so, the 3rd respondent Joint Registrar of Co-operative Societies (General), Kozhikode issued Ext.P3 order dated 21.02.2015 rejecting Ext.P2 application. Challenging Ext.P3 order, the petitioner Society filed appeal before the 1st respondent State. Thereafter, this writ petition was filed before this Court, challenging the constitutional validity of sub-section (2) of Section 74B of the KCS Act, which deals with 'opening of branches', as being violative of Articles 14, 19(1)(c) and 243ZI of the Constitution of India.
3. On 01.12.2016, when this writ petition came up for admission, this Court admitted the matter on file and issued urgent notice to the respondents. By the order dated 19.12.2016 in I.A.No.20466 of 2016, Mukkom Service Co-operative Bank Ltd. and 4 others were impleaded as additional respondents 4 to 8. By the order dated 08.02.2018 in I.A.No.2574 of 2018, Puthupaddy Service Co-operative Bank Ltd. was impleaded as additional 9th respondent. By the order dated 19.02.2018 in I.A.No.3115 of 2018, Mavoor Service Co-operative Bank Ltd. and 7 others were impleaded as additional respondents 10 to 17.
4. The 1st respondent State has filed a counter affidavit dated 20.03.2018, opposing the reliefs sought for in this writ petition. In the counter affidavit it is pointed out that Article 19(1) (c), Article 14 and Article 231ZI of the Constitution of India deals with the right of a citizen to form associations or co-operative societies as ones fundamental right. The petitioner Society represented by its Chief Executive, does not represent its members. The 97th Constitutional Amendment Act of 2011, inserting Part IXB containing Articles 243ZH to 243ZT, is declared as ultra vires the Constitution of India, by the judgment of the High Court of Gujarat dated 22.03.2014. The Civil Appeal arising out of that judgment is now pending before the Apex Court. In Ext.P1 Government Order dated 16.01.2016, while ordering extension of the area of operation of the petitioner Society, it was made clear that the 2nd respondent Registrar has to take further action in that regard. Therefore, in order to implement Ext.P1 order, certain statutory formalities are to be fulfilled by the petitioner Society, i.e., it has to amend its bye-laws and register the amended bye-laws as per the mandate of sub-section (2) of Section 12 of the KCS Act. The petitioner Society has not so
