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2024 Supreme(Ker) 364
IN THE HIGH COURT OF KERALA AT ERNAKULAM
AMIT RAWAL, C.S. SUDHA, JJ.
M. Saidalavi Master and Ors. – Appellants
Versus
State of Kerala, Represented By The Secretary To Government, Department Of Co-Operation and Ors. – Respondents
WA No. 1957 of 2023, WA No. 1962 of 2023, WA No. 1975 of 2023, WA No. 1977 of 2023, WA No. 2114 of 2023
Decided On : 29-02-2024
Important Points
Subject
Cooperative Law - Amalgamation and Merger
Act Referred
BANKING REGULATIONS ACT : S.44(a), S.56, S.21(a), S.3
CONSTITUTION OF INDIA : Art.12, Art.43(b), Art.32, Art.245, Art.246
DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION ACT : S.2(i), S.2(gg)
KERALA CO-OPERATIVE SOCIETIES ACT : S.14(a), S.74(h)(1)(a), S.14
KERALA CO-OPERATIVE SOCIETIES RULES : R.13
Headnote
Facts of the case:
The petitioners, including former officials of the Malappuram District Co-operative Bank, challenged the constitutional validity of amendments allowing the Registrar to amalgamate the bank without a resolution, arguing it infringed on their rights and legislative competence.
Findings of Court:
The court found that the amendments were constitutional and within the legislative competence of the State, emphasizing the need for de-layering in cooperative banking.
Issues: The main issues included the legislative authority of the State to amend the Co-operative Societies Act and the validity of the Registrar's order for amalgamation without a resolution.
Ratio Decidendi: The court ruled that the amendments to the Co-operative Societies Act were valid, allowing the Registrar to order amalgamation in the absence of a resolution, and that the State had the legislative competence to regulate cooperative societies.
Result: All writ appeals are dismissed.
For the Appellants : George Poonthottam (Sr.), Nisha George, A.L. Navaneeth Krishnan, E.K. Nandakumar (SR.)(N-23), M. Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, Raja Kannan, Akhila Nambiar.
For the Respondents: Adv. Gen.- Sri. K. Gopalakrishna Kurup, Shri. P.P. Thajudeen Spl. G.P.
JUDGMENT :
Amit Rawal, J.
The question involved in all the intra-court appeals preferred against the common judgment rendered in four writ petitions preferred by former President, Vice President of erstwhile Malappuram District Co-operative Bank and 93 individuals stated to be the Presidents of Primary Agricultural Credit Societies and Urban Co-operative Banks whereby all the petitioners were not successful in laying challenge to the constitutional validity of Section 14A of Kerala Co-operative Societies Act, 1969 (hereinafter called as 'Act, 1969'), Section 74H(1)(a) of the Act, 1969 and order passed by the Registrar, Co-operative Societies dated 12th of January, 2023 ordering amalgamation of Malappuram District Co-operative Bank with Kerala State Co-operative Bank.
2. The arguments raised in all the afore-mentioned writ petitions, which have been extensively dealt with by the Single Judge, were with regard to the Entry Nos.43, 45 of List-I and 32 of List-II of the 7th Schedule of the Constitution of India as well as amended provisions of Section 44A of the Indian Banking Regulation Act, 1949 effective from 26th of June, 2020. In other words, the pith and substance of the claim in the writ petitions was State Government by causing an amendment in Section 74H(1)(a) could not confer power on the Registrar, in the absence of the resolution either by simple majority or by ¾th majority as it was then in vogue, i.e., before amendment can order the amalgamation of the District Co-operative Society into State Co-operative.
3. The other question was since one of the functions of the District Co-operative Bank was ‘Banking’, amalgamation of banking company would be within the domain of Central legislation and not by the State.
4. Whether in the absence of consultation with the RBI, amalgamation as provided under Section 44A of the 1949 Act effective from 26.6.2020 providing ¾th majority could have been done away with by the State legislation.
5. All these questions raised in the writ petitions have been answered against the appellants/petitioners.
6. There were fourteen (14) district co-operative societies in the State of Kerala. The provisions of the Kerala Co-operative Societies Act, 1969, initially, envisaged amalgamation of the District Co-operative into State Cooperative by way of ¾th majority but later by simple majority and finally in the absence of the resolution either by simple or otherwise Registrar could order for amalgamation. The said amendment was caused by inserting Section 74(1)(a) of 1969 Act with effect from 11th of April, 2020 for the purpose of de-layering.
7. All the thirteen (13) Co-operative Societies had agreed to pass resolution and for the purpose of amalgamation/merging with the State Government except the Society in question, i.e., the Malappuram Co-operative Society.
8. The genesis of the arguments on behalf of the learned senior counsels representing the appellants/petitioners before the Single Bench and this Court are summarised hereinbelow:-
(i) Merger/amalgamation of Co-operative Society under the 1969 Act was provided under Section 14 and Rule 13 of the 1969 Act and the Rules framed thereunder.
In the year 2019 amendment was caused by inserting Section 14A providing a distinct procedure for the purpose of merger by requiring a simple majority by deleting the provisions of ¾th for the purpose of amalgamation/merger with Kerala State Co-operative Bank.
(ii) Two general body meetings of the Malappuram District Co-operative Society, after the incorporation of Section 14A of the Act, 1969, were held and the proposal for merger was defeated by 2/3rd and even simple majority.
(iii) Chapter X(C) was incorporated in the Act, 1969 and Section 74H(1)(a) provided a different procedure for merger of District Co-operative Bank with State (Kerala) Cooperative Bank empowering the Registrar to merge the District Co-operative with the State Co-operative, in the absence of resolution.
(iv) Malappuram District Co-operative
