Decided on January 07,2003



- (1.) COOPERATION among cooperatives is one of universally accepted cooperative principles. (See Karve Commission on Cooperative Principles - Report unanimously adopted in the Vienna Cooperative Congress in 1966). The statutory scheme and scope of cooperation between the District Cooperative Bank and the Primary Cooperative Societies in the respective revenue district, under the Kerala Cooperative Societies Act, 1969 is the subject matter of dispute in these cases.
(2.) CONSTITUTIONAL validity of the Kerala Cooperative Societies (Amendment) Act, 2002 (Act 3 of 2002), hereinafter called the Amendment Act is the challenge in these Original Petitions. The petitions were originally filed at a time the Kerala Cooperative Societies (Amendment) Ordinance, 2002 (6 of 2002) was promulgated. The Ordinance came into effect from 4.5.2002, and the Act is given retrospective effect from that date. The impugned amendments pertain to (1) restoration of the status of District Cooperative Banks with membership open to any type of primary societies and federal and central societies having head quarters in the respective districts, as it stood prior to Act 15 of 1997; (2) the consequential amendment on the cessation of nominal or associate members in the case of primary societies; (3) the concept of active membership introduced as per Act 1 of 2000 with effect from 1.1.2000 being dropped; (4) deemed membership given to primary societies which had ceased to be members on the commencement of Act 15 of 1997 and provision for application for membership in the case of nominal or associate members enrolled after 3.6.1997; (5) cessation of the Committee in office of the District Cooperative Banks with effect from 4.5.2002. The main arguments advanced by the petitioners : (1) The amendment is ultra vires the Constitution of India, infracting Art.14 and 19(l)(c) and (g). (2) The legislation takes away the benefit of the judgment of this Court in O.P. 29277/2001 and connected cases and the judgments following the said Division Bench judgment wherein the Court declared that the Committee of the respective District Cooperative Banks will be entitled to continue for a term of 5 years. (3) Even after changing the definition of District Cooperative Bank, it was not necessary to dethrone the existing committee before its term; instead the existing committees could have been requested to constitute new committees on the basis of the amended provision. It was also contended that the said provision under S.7(l)(c) of the Amendment Act does not find a slot in the parent Act and therefore, cannot be treated as part of Amendment Act. (4) The concept of active membership having been introduced with a purpose, it should not have been dropped, atleast without experimenting it for some time. (5) Deemed membership is against the very concept of membership which is to be granted only on application. That is a function of the respective society and the legislature is incompetent to provide deemed membership. District Cooperative Bank - its statutory position and purposes : Promotion of Cooperative movement is prescribed as a Directive Principle of State Policy under Art.43 of the Constitution of India. The purpose of the Kerala Cooperative Societies Act, 1969, hereinafter called the KCS Act as set out in the preamble is to provide for the orderly development of the cooperative sector in the State by organising the cooperative societies as self governing democratic institutions to achieve the objects of equity, social justice and economic development, as envisaged in the Directive Principles of State Policy of the Constitution of India. For such orderly development of the cooperative sector in the State, State partnership is an accepted principle in cooperative movement, ever since the report of the All India Rural Credit Survey Committee submitted in 1954, known as Gorwala Committee Report - named after its Chairman, Sri. A.D. Gorwala. At the apex level, the partnership was recommended to be direct, i.e., the State Government directly contributing to the share capital of the cooperative institutions at the apex level concerned, the district level through apex institutions and at the primary level indirectly. Thus evolved the concept of a central cooperative bank in each revenue district as a financing bank of primary cooperative societies. Under the National Bank for Agriculture and Rural Development (NABARD) Act, Central Cooperative Bank means the principal cooperative society in a district in a State, the primary object of which is the financing of other cooperative societies in that district. All the facilities provided by the NABARD by way of financial assistance to cooperative societies are routed through the State Cooperative Bank and the Central Cooperative Bank. The District Cooperative Bank in each district was treated as the Central Cooperative Bank in that district. S.2(d) of the KCS Act defines a Central Society as a society having jurisdiction over one or more revenue districts, but not the whole State as its area of operation and having as its members only other societies and declared as such by the Registrar or the Government.
(3.) TRUE, going by the nature of activity, primary societies have their own federal set up - Federal Cooperative Society. But, financing is through the Central Cooperative Bank in the district, namely, the District Cooperative Bank. That is why financing bank is defined under S.2(j) of the KCS Act as a Cooperative Society having as its members only other cooperative societies and the main object of which is to raise money and lend the same to its members. The very purpose of the registration of the central society, namely, the District Cooperative Bank is to facilitate the operations of primary societies, among other ancillary objects, as can be gathered from S.4 of the Kerala Cooperative Societies Act. S.8A of the Act provides for affiliation of every primary cooperative society to a central society. S.16 contemplates the membership of primary societies in other societies. Chapter VI of the KCS Act deals with State aid to cooperative societies. S.42 provides for direct partnership of Government in societies and S.43 with indirect partnership by providing money to a society for the purchase of shares in other societies with limited liability. S.44(2) provides that an apex society shall establish a fund called Principal State Partnership Fund with the money provided by the Government under S.43 and utilise the Fund for the purpose of (a) directly purchasing shares in other societies with limited liability or (b) providing moneys to a central society to enable that society to purchase shares in other societies with limited liability primary societies or (c) making payments to the Government in accordance with the provisions of Chapter VI. Under S.45, a central society provided with money by an apex society from the Principal State Partnership Fund is to establish a Fund called Subsidiary State Partnership Fund. The said Subsidiary State Partnership Fund is to be utilised for the purpose of purchasing shares in primary societies or making payments to the apex society. For the purpose of Chapter VI of the KCS Act, Central Society is the District Cooperative Bank in each revenue district.;

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