M. Narayanankutty v. Joint Registrar of Co-operative Societies (General), Civil Station Complex, Kannur; Pilathara Urban Co-operative Society Limited; C. Damodaran

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR** **MONDAY, THE 9TH DAY OF JANUARY 2017/19TH POUSHA, 1938** ## **WP(C).No. 41219 of 2016 (B)** **----------------------------** ## **PETITIONER :** **----------------------** **M.NARAYANANKUTTY, AGED 68 YEARS, S/O.K.KESHAVA KURUP, RESIDING AT SHOTTY, NEAR B.S.N.L. OFFICE, PAYYANNUR (P.O.), KANNUR DISTRICT - 671 121.** ## **BY ADV. SRI.JAWAHAR JOSE** ## **RESPONDENT(S):** **----------------------------** **1. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), CIVIL STATION COMPLEX, KANNUR - 670 001.** **2. THE PILATHARA URBAN CO-OPERATIVE SOCIETY LIMITED, PILATHARA (P.O.), KANNUR DISTRICT - 670 504.** **3. C.M.DAMODARAN, AGED 66 YEARS, S/O.KRISHNAN, RESIDING AT 'ANUNIMA', MANDOOR (P.O.), KANNUR DISTRICT-670 501.** ## ***ADDL.R4 IMPLEADED** ***ADDL.R4: THE STATE OF KERALA, REPRESENTED BY THE SECRETARY, CO-OPERATIVE DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM, PIN-695 001.** ***ADDL.R4 IS IMPLEADED AS PER ORDER DATED 09/1/2017 IN IA.NO.345/2017** **R1 & ADDL.R4 BY SPL.GOVT. PLEADER SRI.K.S.MOHAMMED HASHIM R2 BY ADVS. SRI.ASP.KURUP** **SRI.SADCHITH.P.KURUP R3 BY ADV. SRI.M.SASINDRAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 09-01-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **sts** **WP(C).No. 41219 of 2016 (B) ------------------------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS -------------------------------------P1 : TRUE COPY OF THE OBJECTIONS SUBMITTED BY THE PETITIONER. P2 : TRUE COPY OF THE JUDGMENT DATED 11-8-2016 IN WPC.NO.2667/2016. P3 : TRUE COPY OF THE ORDER DATED 9-12-2016 ISSUED BY THE 1ST RESPONDENT. P4 : TRUE COPY OF THE ELECTION NOTIFICATION DATED 19-12-2016. RESPONDENT(S)' EXHIBITS: NIL -----------------------------------------/TRUE COPY/ P.A.TO JUDGE** **sts** ## **P.B.SURESH KUMAR, J.** ## **= = = = = = = = = = = = = = =** ## **WP.(C).No.41219 of 2016-B.** **= = = = = = = = = = = = = = =** Dated this the 9[th] day of January, 2017. ## **J U D G M E N T** The petitioner seeks in this writ petition a declaration that Rule 16(4) of the Kerala Co-operative Societies Rules ('the Rules') is ultra vires the Kerala Co-operative Societies Act ('the Act'). The petitioner also seeks a writ of certiorari quashing Ext.P3 order of the first respondent on that basis. 2. The facts relevant are the following: The second respondent is a Co-operative Society registered under the Act. The petitioner is a member of the second respondent society ('the society'). The first respondent is the Joint Registrar of Co-operative Societies exercising the powers of the Registrar under the Act in relation to the affairs of the society. The third respondent preferred a representation before the first respondent, alleging that the petitioner is not a resident or is in occupation of land in the area of operation of the **WP.(C).No.41219/2016-B.** 2 society and therefore, he is not entitled to continue as a member of the society. The first respondent accepted the case set up by the third respondent and held that the petitioner is ineligible to continue as a member of the society. Ext.P3 is the order passed in this connection by the first respondent, in exercise of his powers under Rule 16(4) of the Rules. The petitioner does not seem to challenge the factual findings rendered by the first respondent in Ext.P3 order. Instead, Ext.P3 order is challenged by the petitioner on the ground that Rule 16(4) of the Rules is ultra vires the Act and therefore, void. 3. A counter affidavit has been filed by the society supporting Ext.P3 order. 4. Heard the learned counsel for the petitioner, the learned Special Government Pleader as also the learned counsel for the society. 5. The learned counsel for the petitioner contended that since the petitioner is admittedly a member of the society, if he does not satisfy the requirements of the bye-laws of the society as to the membership, he can be expelled from the society only in the manner provided for in Section 17 of the Act. **WP.(C).No.41219/2016-B.** 3 Relying on Section 17 of the Act, the learned counsel for the petitioner contended that a member of a society can be expelled only upon a resolution of the general body passed at a special meeting convened for the purpose by the votes of not less than two thirds of the total number of members present and voting. According to the learned counsel, the statute does not confer power on the State Government under Section 109 of the Act to frame rules in the nature of one contained in Rule 16(4) of the Rules and the same, therefore, is ultra vires the Act. The learned counsel elaborated the said contention, pointing out that the only provision in sub-section (2) of Section 109 of the Act dealing with the membership is clause (v) therein which confers power on the State Government to make rules only to prescribe qualifications and disqualifications of individuals who may be admitted as members of the societies. The learned counsel also contended that at any rate, Rule 16(4) of the Rules which is in conflict with the provisions contained in Section 17 of the Act can only be held to be ultra vires the Act. The learned counsel has placed reliance on the decision of the Apex Court in **Union of India v. S.Srinivasan** [(2012)7 SCC 683], in support of his **WP.(C).No.41219/2016-B.** 4 contentions. 6. I have anxiously considered the contentions put forward by the learned counsel for the petitioner. Since Ext.P3 order of the first respondent is challenged only on the ground that Rule 16(4) of the Rules, which is invoked for the purpose of passing the said order, is ultra vires the Act, the issue arising for consideration is whether the said case of the petitioner is correct. Section 16(1) of the Act dealing with the eligibility of individuals to become members of a society reads thus: “(1) No person shall be admitted as a member of a society except the following, namely:- (a) an individual- (i) Who has attained the age of eighteen years; Provided that this sub-clause shall not apply in the case of a society formed exclusively for the benefit of the students of any school or college. (ii) Who is not of unsound mind; (iii) Who is a resident within, or is in occupation of land in the are of operation of the society; (b) any other society; 27[(ba) local self government] (c) the Government; and (d) any body of persons, whether incorporated or not and whether or not established by or under any law, if such body is approved by the Government in this behalf by general or special order; **WP.(C).No.41219/2016-B.** 5 Provided that in a society formed for the promotion of the economic interest of its members through a specified activity no person other than who is likely to be benefited directly by such activity may be admitted as a member of such society unless such admission is permitted specifically by rules. Provided further that where a society is formed exclusively for the benefit of persons engaged in any particular industry, no person who is not an actual worker in the industry shall be admitted in excess of such percentage of the total membership of the society as may be prescribed. Provided also that the Coffee Board, the Rubber Board and any other statutory or non-statutory Board, committee or Corporation constituted for the purpose of the development of an industry, may be admitted as a member of a society engaged in marketing and processing of the products of the industry concerned and formed for the workers and growers of such industry, so however that no such Board, Committee or Corporation shall be admitted as a member of a Co-operative credit society. 28 [Provided also that in the case of hospital Co-operative societies, industrial and commercial establishments and other organisations registered under any other law may be admitted as members. **Explanation.--** For the purpose of this sub-section hospital Co-operative society means a society, the main object of which is to run a hospital or to conduct medical or paramedical courses or to run medical shops;]” ## It is evident from the said provision that only an individual who is **WP.(C).No.41219/2016-B.** 6 a resident within, or is in occupation of land in the area of operation of a society, is eligible to be admitted as a member of that society. Section 109 of the Act dealing with the power of the Government to make rules under the Act reads thus: ## “ - Section 109: Power to make rules. (1) The Government may, for the whole or any part of the State and for any class of societies, after previous publication, by notification in the Gazette, make rules 5 [either prospectively or retrospectively by] to carry out the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: (i) the applicant to whom the order refusing the registration of a society may be sent by the Registrar; (ii) the procedure and conditions for change in the form and extent of the liability of a society; (iii) the matters in respect of which a society shall or may make bye-laws; (iv) the procedure to be followed for amendment of byelaws by a society; (v) the qualifications or disqualifications of individuals who may be admitted as members of societies; (vi) the payment to be made and the interests to be acquired before the exercise of the right of membership; (vii) the appointment by a society of one of its members to represent and vote on its behalf at a meeting of another society of which it is a member; (viii) the maximum number of shares or portion of the share capital of a society which may be held by an individual member; **WP.(C).No.41219/2016-B.** 7 (ix) the procedure for the nomination of a person to whom the share or interest of a member on his death may be transferred or the value thereof may be paid; (x) the mode in which the value of a deceased members' share shall be ascertained; (xi) the election of members of the committee by the general body of a society; (xii) the requisitioning of a general body meeting of a society; (xiii) the remuneration payable to a new committee or administrator or administrators appointed by the Registrar under S.32 or S.33; (xiv) the qualifications or disqualifications for membership of the committee of a society; (xv) the qualifications of employees of societies; (xvi) the prohibition against officers of a society being interested in contracts with the society; (xvii) the matters connected with the direct and indirect partnership of the Government in societies; (xviii) the rate at which dividend may be paid by societies; (xix) the constitution of the Co-operative Education Fund, the payment to be made to the fund by a society out of its net profit and the mode of its investment; (xx) the mode of investment of funds of a society; (xxi) the objects of the reserve fund of a society and the mode of its investment; (xxii) the mode of disposal of the reserve fund of a society on its winding up; (xxiii) the extent to which and the conditions subject to which a society may receive deposits and loans; (xxiv) the restrictions on transaction by a society with non members' **WP.(C).No.41219/2016-B.** 8 (xxv) the restrictions on grant of loans by a society against its shares; (xxvi) the form and standards of fluid resources to be maintained by societies accepting deposits and granting cash credits; (xxvii) the procedure to be followed in proceedings before the Registrar, arbitrator or other person deciding disputes; (xxviii) the conditions subject to which the assets of a society shall vest in a liquidator and the procedure to be adopted in the winding up of a society; (xxix) the procedure for the recovery of amounts due or payable to a society; (xxx) the mode of making attachment before judgement; (xxxi) the manner of registering the address of a society; (xxxii) the account books and registers to be kept by a society, and power of the Registrar to call for any returns or to direct the accounts and books to be written up; (xxxiii) the manner of certification of entries in the books of a society and of copies of documents kept by it in the course of its business; (xxxiv) the statements and returns to be furnished by a society to the Registrar; (xxxv) the restrictions on persons appearing as legal practitioners; (xxxvi) the inspection of documents and the levy of fees for granting certified copies thereof; (xxxvii) procedure to be followed in, and the fees for, audit and arbitration under this Act; and (xxxviii) any other matter required or allowed by this Act; or be prescribed. (3) Every rule made under this section shall be laid as soon as may be after it is made before the Legislative Assembly while it is in session for a total period of fourteen days which may be **WP.(C).No.41219/2016-B.** 9 comprised in one session or in two successive sessions, and if before the expiry of the session in which it is so laid or the session immediately following the Legislative Assembly agree that the rule should be either modified or annulled, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be so however that any such modification or annulment shall be without prejudiced to the validity of anything previously done under that rule.” It is explicit from Section 109 of the Act that power has been conferred on the Government to make rules to carry out the purposes of the Act. The recitals in Sub section (2) of section 109 make it clear that the power conferred on the Government under the Act includes power to make rules even in relation to matters not specifically provided for in sub-section (2) of Section 109 of the Act, provided the same is necessary to carry out the purposes of the Act. The question, therefore, is whether Rule 16(4) of the Rules can be held to be one necessary for carrying out the purposes of the Act. Rule 16 of the rules reads thus: “Rule 16: Conditions to be complied with for admission for membership. (1) No person shall be admitted as a member of a society unless - (a) he has applied in writing in the form if any laid down by - the society; **WP.(C).No.41219/2016-B.** 10 (b) his application is approved by the committee of the society; (c) he has fulfilled all other conditions laid down in the Act, Rules and Bye-laws; (d) in the case of other societies or a body of persons, whether incorporated or not, and any statutory or non-statutory Board approved by the Government, Committee or Corporation constituted for the development of any industry the application membership shall be accompanied by a resolution authorising apply for such membership. (2) No person shall be eligible for admission as a member of a Society, if he,- (a) has not attained the age of 18 years; (b) is not a resident of or does not own or possess land within area of operation of the society, provided that this clause shall apply in the case of a society formed exclusively for the students of any School or College; (c) has applied to be adjudicated as an insolvent or is an undischarged insolvent: (d) has been sentenced for any offence, other than an offence political character or an offence not involving moral turpitude a period of five years has not elapsed from the date of expiry of the sentence; or (e) is a paid employee of the Society or of its financing Bank or any society for which it is the financing Bank, provided that restriction shall not apply to Co-operative Motor Transport Societies, Co-operative Workshops, Societies for the employees of Financing Banks, and Societies formed for benefit of actual workers; (f) has been surcharged under S.68 and a period of 3 years has elapsed since the payment of money or restoration of property directed in the said order of surcharge. **WP.(C).No.41219/2016-B.** 11 [(g) has been removed under Section 16A and a period of one year has not elapsed from the date of such removal; or (h) has been expelled under sub-section (1) of Section 17 and a period of one year has not elapsed from the date of such expulsion.] (3) Where a person already admitted to membership is seen to have been ineligible for membership at the time he was so admitted as a member or if subsequently becomes ineligible for membership the Committee of the Society may remove the person from membership after giving him an opportunity for making his representation if any, and the person concerned shall thereupon cease to be member of the society. (4) Where a member of a society becomes ineligible to continue as such, the Registrar may of his own motion or on a representation made to him by member of the society or by the financing Bank, by an order in writing declare that he has ceased to be a member of the society from the date of his order. The Registrar shall give such person an opportunity to state his objection, if any, to proposed action and if the person wishes to be heard, he shall be given an opportunity to be heard before passing an order as aforesaid.” Rule 16(4) of the Rules confers power on the Registrar to declare that a member of a society who is ineligible to continue as such has ceased to be a member of the society. When the statute prescribes eligibility criteria for individuals to become members of a society, a provision in the Rules conferring power on the **WP.(C).No.41219/2016-B.** 12 Registrar to consider the eligibility of a person to continue as a member a society cannot be said to be one which is not necessary for carrying out the purposes of the Act. The contention of the petitioner that the statute does not confer power on the Government to make rules in the nature of one contained in Rule 16(4) of the Rules, therefore, fails. 7. True, a rule made under a statute shall be in harmony with the provisions of the statute, if not, the rule is liable to be declared as ultra vires the Act. As indicated above, the contention of the petitioner is that Rule 16(4) of the Rules is in conflict with the provisions contained in Section 17 of the Act and therefore, the same is ultra vires the Act. Section 17 of the Act which deals with the expulsion of members reads thus : “Section 17: Expulsion of members. (1) Any member of a society, who has acted adversely to the interest of the society [or has failed to comply with the provisions of the byelaws], may be expelled upon a resolution of the general body passed at a special meeting convened for the purpose by the votes of not less than two-thirds of the total number of members present and voting at the meeting. (2) No member shall be expelled under sub-section (1) without being given an opportunity of making his representation. (3) A copy of the resolution expelling a member shall be communicated to the member within a period of fifteen days from the date of passing of the resolution. **WP.(C).No.41219/2016-B.** 13 [(4) The expulsion from membership may involve forfeiture of shares held by the member. (5) No member of the society who has been expelled under sub-section (1) shall be eligible for re-admission as a member of that society, for a period of one year from the date of such expulsion.]” Section 17 of the Act confers power on a society to expel a member who acts adverse to its interests or has failed to comply with the provisions of its bye-law. The procedure to be followed for expelling a member is also laid down in the Section. Expulsion of a member from a society for acting against the interests of the society or not complying with the provisions of the bye-laws of the society, has nothing to do with the eligibility of a member to continue as a member of the society. Only members who are eligible to continue as such, are liable to be expelled. Rule 16(4) of the Rules deals only with the eligibility of a person to continue as a member of the society. Section 17 of the Act and Rule 16 (4) of the Rules operate on different fields. This is clear from the fact that separate rules have been framed by the Government to give effect to the provisions contained in Section 17 of the Act. Rule 18 of the Rules deals with the procedure for expulsion of the members. When the provisions contained in Section 17 of the Act **WP.(C).No.41219/2016-B.** 14 and Rule 16(4) of the Rules are intended to operate on different fields, the question of conflict between the said provisions does not arise. The contention of the petitioner that Rule 16(4) of the Rules is in conflict with the provisions contained in Section 17 of the Act and therefore, the same is ultra vires the Act, also thus fails. The writ petition, in the circumstances, is without merits and the same is, accordingly, dismissed. _**Sd/-**_ **P.B.SURESH KUMAR, JUDGE.** _**Kvs/-**_ _**// true copy //**_