Kerala High Court Upholds Three-Term Limit for Co-op Society Committee Members, Overturns Single Bench Ruling

Ernakulam, Kerala – In a significant decision impacting the governance of credit co-operative societies in Kerala, a Division Bench of the High Court of Kerala has upheld the constitutional validity of Section 28(2A) of the Kerala Co-operative Societies Act. This provision restricts members of the committee of a credit society from being eligible for election for more than three consecutive terms. The judgment, delivered on May 28, 2025, by Justices Amit Rawal and K. V. Jayakumar , set aside an earlier ruling by a Single Bench that had struck down the amendment as unconstitutional.

The State of Kerala had filed thirty-three intra-court appeals challenging the Single Bench's order dated October 30, 2024, which had invalidated the term-limit amendment introduced by Act No.9 of 2024.

Background: The Challenged Amendment and Single Bench Decision

The core of the dispute revolved around the newly inserted Section 28(2A) of the Kerala Co-operative Societies Act, which states:

"(2A) Notwithstanding anything to the contrary contained in the Act, rules or in the bye-laws of a credit society, no member of the Committee of a society shall be eligible for election to the Committee for more than three consecutive terms, irrespective of whether the term is in full or in part."

The explanation to this sub-section defines "credit society" to include a wide range of financial co-operatives such as the Kerala State Co-operative Bank, Primary Agricultural Credit Societies, Service Co-operative Banks, Urban Co-operative Banks, and others.

The Single Bench had struck down this provision, primarily reasoning that it infringed upon the fundamental right to form co-operative societies under Article 19(1)(c) of the Constitution, interfered with the autonomous functioning and democratic control mandated by Article 43-B and Article 243-ZI, and was manifestly arbitrary and discriminatory under Article 14.

Arguments Before the Division Bench

State of Kerala's Contentions (Appellant)

Represented by Advocate General K. Gopalakrishna Kurup, the State argued: * The right to contest an election is a statutory right, not a fundamental right, and can be regulated by the legislature. * The term limit was introduced to curb vested interests, prevent mismanagement, and address financial irregularities observed in credit societies where individuals held positions for extended periods. * The amendment is a reasonable restriction aimed at ensuring good governance and protecting depositors' interests. * The legislature is empowered under Article 243-ZK to provide procedures and guidelines for co-operative society elections. * There was no hostile discrimination in applying the limit to credit societies, given their specific financial functions and susceptibility to irregularities.

Respondents' Contentions (Original Petitioners)

Senior Counsel George Poonthottam and other lawyers for the respondents (various co-operative society members and office-bearers) argued: * The amendment is unreasonable and curtails the fundamental right to form and manage co-operative societies. * It undermines the principles of autonomous functioning and democratic member control. * The restriction is arbitrary, lacks an intelligible differentia, and discriminates against credit societies without a rational basis. * Experienced members being re-elected is beneficial, and concerns about vested interests should be addressed by the society's general body through bye-laws.

High Court's Rationale for Upholding the Amendment

The Division Bench, in a detailed judgment authored by Justice Amit Rawal , systematically addressed the grounds on which the Single Bench had invalidated Section 28(2A).

Nature of Right to Contest Elections

The Court heavily relied on established legal principles that the right to elect and the right to be elected are not fundamental rights or common law rights but are purely statutory rights .

"The pith and substance of the findings extracted above, leaves no manner of doubt that the right to stand as a candidate and contest election is not a common law right but a special right created by a statute and can be only exercised on the conditions laid down by the statute. It is not a fundamental right as observed by the Single Bench much less to be violative of directive principles as per Article 43B of the Constitution of India, PART IV, Directive Principles of State Policy."

The Court cited several Supreme Court judgments, including Javed and Others v. State of Haryana (2003 (8) SCC 369) and Jyoti Basu and Others v. Debi Ghosal and Others ((1982) 1 SCC 691), to reinforce this point.

Legislative Wisdom and Public Interest

The Bench emphasized that the legislature, in its wisdom, introduced the amendment to address "unhealthy practices" and prevent the "misuse of power" arising from prolonged tenures in credit societies, which handle significant public funds.

"In order to prevent the misuse of the power the legislature in the wisdom caused an amendment by introduction of sub Section 2A of Section 28 Act barring a member of Society to contest the election if he or she had been the member of the Society for three terms with an aim to eliminate unhealthy practice which is resultant of abnormal long continuance of a particular person in the same office."

The Court observed that numerous cases of surcharge proceedings under Section 68 of the Act and even criminal cases, including those involving money laundering, had been initiated against office-bearers of co-operative societies due to financial irregularities.

Autonomous Functioning and Democratic Control

While acknowledging the constitutional principles of autonomous functioning (Article 243-ZI) and democratic control (Article 43-B), the Court found that these do not preclude the State legislature from imposing reasonable regulations on elections to ensure accountability and good governance. The term limit was viewed as such a regulatory measure.

No Arbitrariness or Discrimination

The Division Bench disagreed with the Single Bench's finding that the amendment was arbitrary or discriminatory (violating Article 14). It held that the classification of credit societies for this term limit was reasonable given their unique role in handling public deposits and extending loans, and the history of mismanagement in some such institutions. The objective of ensuring financial probity and preventing entrenchment of power was deemed a legitimate state interest.

The Court distinguished the Gujarat High Court's decision in Pravinsinh Indrasinh Mahida v. State of Gujarat , stating it dealt with active exclusion of certain societies, which was different from the general regulatory nature of the term limit in the present case.

Decision and Implications

The Division Bench concluded that the Single Judge erred in striking down Section 28(2A). The Court stated:

"As an upshot of findings, we set aside the findings of the learned Single Judge from paragraphs 36 to 56 viz-a-viz striking down the provisions of Section 28(2A) of the Act."

Consequently, all thirty-three writ appeals filed by the State of Kerala were allowed.

This judgment re-establishes the three-consecutive-term limit for committee members in credit co-operative societies across Kerala. It is expected to have a wide-ranging impact on the leadership and election dynamics within these crucial financial institutions, potentially leading to greater rotation in management and aiming to foster more transparent and accountable governance.