CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 206 , 2861 , 250 , 320 , 1607 , 3548 , 379 , 769 1280 of , 979 and 1476-1483 Of 1985.
From the Judgments and Orders dated 10.1.79 , 28.9.79 , P 16.1.79 , 26.4 79 , 27.9.79 , 15.1.79 , 8.1.79.19.4.79 , of the Punjab and Haryana High Court in C.W.P. Nos. 4327/78 , 3430/79 , 4713/78 , 4937/78 , 1345/79 , 3217/79 , 5121/78 , 24/78 , 5195/18 , 4340/78 , 4613178 , 4793178 , 41J3/78 , 4386/78 , 4545/18 , 4585/18 and 1257/79. G
M.K. Ranamurthi , R.C. Pathak , Arvind Kumar , Mrs. Laxmi Arvind , Miss K. V. Lalitha , Arun Madan , Sarwa Mitter , Manoj Swarup and Miss Lalita Kohli , for the appearing Appellants.
M.S. Gujral , S.K. Bagga , Swaraj Kaushal , R.S. Sodhi and M.P. Jha , for the appearing Respondents.
The Judgment of the Court was delivered by
CHINNAPPA REDDY , J. The opinion of the High Courts appears to be unanimous on the question of the validity of the relevant provisions of the Cooperative Societies Acts in force in their respective States providing for the compulsory amalgamation of Cooperative Societies. The Full Benches of the High Courts of Andhra Pradesh , Karnataka , Punjab and Haryana and a Division Bench of the Patna High Court (1) have upheld the validity of such provisions. But litigants , particularly those who are in a position to command funds arc rarely deterred by such unanimity of judicial opinion. 11 So , several Co-operative Societies of Punjab have chosen to prefer appeals to this Court questioning the vires of sec. 13 (8) of the Punjab Cooperative Societies Act which provides for the compulsory amalgamation of cooperative societies if it is necessary in the interests of the cooperative societies. The questions raised are simple and straight and are capable of but single , straight forward answers. Unfortunately a large number of appeals have piled up in this court on these questions and we are told that a large number of writ petitions said to involve these or similar questions are pending in the various High Courts in the country awaiting the decision of this Court. We earnestly hope that this decision will put an end to this branch of the litigation and will serve to push forward the cooperative movement We think it is needless to refer to the nature and history of the cooperative movement except to say that the promotion of the cooperative movement is one of the Directive principles of State Policy (see Art.43 of the Constitution)- As usual in these and such cases , the counter-affidavits , where they have been filed , leave much to be desired and are least helpful. But , as pointed out by us often enough , the vires of legislation is not to be decided on the basis of affidavits of underlings of the executive who can hardly be described as authorised to speak for the legislature. But even from the , meagre material available to us from the record , it is (1). AIR 1978 AP 121 (FB)
1976 Punjab Law Journal 302 (FB)
There is also an excellent discussion by Vaidya , J. in ILR 1972 AP 1140. Obvious that the provisions relating to amalgamation of Cooperative Societies in different State , enactments were introduced pursuant to a policy decision arrived at an All India Conference. This is evident from the circumstance that these provisions were enacted by the various State legislatures roughly at about the same time.A reference to the policy decision at an All India Conference may be found in the Full Bench Judgments of the Andhra Pradesh and Karnataka High Courts. It is unnecessary to say more on this aspect of the case.
The Punjab Co-operative Societies Act , 196t which replaced the earlier Act was enacted , so it is stated in the Statement of Objects and Reasons , "In pursuance of the policy of the Government of India to simplify co-operative law and procedure in order to remove all bottlenecks in the way of development of co-operative movement in the country." It is further stated in the Statement of Objects and Reasons.
"The important provisions , such as relating to change of liability , amalgamation of societies , splitting up of societies , settlement of disputes and winding up of societies , etc. were found to be of a dilatory and complicated nature , and , therefore , creating problems in the day to day working of the co-operative societies. Special care has , therefore , been taken. to cut out all unnecessary delays particularly in registration of societies and the provisions to this effect have been simplified. Another approach influencing a change is to make the Cooperative Law comprehensive. Moreover consistent with our national policy to promote the organisation and growth of the co-operative Societies in the various fields of economic activity , more difficult and complicated forms of co operative societies are to spring up as compared to Cooperative Credit Societies.. "
Section 2(c) defines "co-operative society" as meaning "a Society registered or deemed to be registered under this Act." Chapter II (secs. 3 to 14) deals with registration of co-operative societies. In particular sec. 8 prescribes the conditions pre-requisite to registration and authorises the Registrar to register a society and its Bye laws if he is satisfied that the conditions are fulfilled , Section 13 provides for the amalgamation , transfer of assets and liabilities and division of co-operative societies. While sec. 13(2) provides for voluntary amalgamation , Sec. 13 (8) provides for compulsory amalgamation if the Registrar is satisfied that it is necessary in the interests of the cooperative societies. Sec. 13(9) (a) requires the Registrar to send a copy of the proposed order to the societies concerned and the creditors and sec. 13 (9) (b) requires the Registrar to consider the objections received from the societies concerned or from any member or creditor of such societies. Section 13 (11) gives to the member or creditor Who has objected to the proposed order under sub-sec. 9 the option of withdrawing his share , deposits or loans as the case may be on an application to be made to the society to which his share , deposits or loans stand allocated by virtue of the order under sub-sec. 8 within a period of 30 days from the date of such order. It is the vires of these provisions , that is in question in these appeals and it will be useful to extract at this juncture , sub-sections 8 , 9 , 10 and 11 of sec 13 of the Punjab Co-operative Societies Act. They are as a follows:-
(6)
(8) Where the Registrar is satisfied that it is necessary in the interest of the co-operative society or cooperative societies that-
(i) any co-operative society be divided to form two or
more co-operative societies; or
(ii) one or more co-operative societies be amalgamated
with any other co-operative society; or
(iii) two or more co-operative societies be
amalgamated to form a new co-operative society , then ,
notwithstanding anything herein before contained , the
Registrar may , after consulting the financing
institution , if any , provide for-
(a) the division of that co-operative society into two or n more co-operative societies: or
(b) the amalgamation of the society or societies-
(i) With any other co-operative society , or
(ii) to form a new co-operative society , with
such constitution including representation on the
committee , property rights , interests ,
liabilities , duties and obligations , as may be
specified in the order.
(9) No order shall be made under sub-section (8)
, unless-
(a) a copy of the proposed order has been sent
under certificate of posting to the society or
societies concerned and the creditors;
(b) the Registrar has considered the objections
received from the society or societies concerned or
from any member or creditor of such society or
societies within such period , being not less than
fifteen days from the date of posting of the proposed
order , as may be specified by the Registrar in this
behalf in the pro posed order.
(10) the Registrar may , after considering the
objections referred to in sub-section (9) , make such
modification in the proposed order as he may deem fit
and the order may contain such incidental ,
consequential and supplemental provisions as the
Registrar may deem necessary to give effect to the
same.
(11) A member or creditor who had objected to the
pro posed order under sub-section (9) shall have the
option
of withdrawing his share , deposits or loans as the
case may be , on an application which shall be made to
the society to which his share , deposit or loan stands
allocated by virtue of the order under sub-section(8) ,
within a period of thirty days of the date of such
order
Chapter V of the Act deals with privileges of Cooperative Societies and in particular sec. 30 states
"The registration of a co-operative society shall
render it a body corporate by the name under which it
is registered having perpetual succession and a common
seal , and with power to hold property , enter into
contract , institute and defend suits and other legal
proceedings and to do all things necessary for the
purposes for which it is constituted."
The foremost submission of Shri M.K. Ramamurthi , learned counsel for the petitioners was that any law providing for the amalgamation of co-operative societies directly contravenes Art. 19 (1) (c) which guarantees to all citizens the right to form associations or unions. According to Shri Ramamurthi , the right of a citizen to form a society or to be a member of a certain cooperative society is interfered with if the society of which he has become a member is amalgamated with another society consisting of members with whom he may not be associated. Article 31(A) (I) (c) furnishes a complete answer to this submission. It provides that no law providing for the amalgamation of two or more corporations either in the public interest or in order to secure the proper management of any of the corporations shall be deemed to be void on the ground that it is inconsistent or takes away or abridges any of the rights conferred by Art l l or Art. 19. Shri Ramamurthi attempted to cross the stile by arguing that co-operative societies were not corporations within the meaning of that expression in Art. 31-(A) (I) (c). According to him , the Constitution discloses a scheme which separates co-operative societies from Corporations , and ’never the twain shall meet’. To substantiate his submission , he invited our attention to Entries 43 and 42 of List-I and Entry 32 of list-II of the Seventh Schedule to the Constitution. He also read Out to us the Statement of Objects and Reasons and the Joint Select Committee’s report relating to the Constitution (Fourth Amendment) Act , 195S by which clause (c) of Art.31A(1) was introduced. His submission was that the legislative intent was merely to render legislation providing for amalgamation of companies and statutory corporations alone immune to challenge on the ground of conflict with the fundamental rights guaranteed by Articles 14 and 19. According to him the protection afforded by Art. 31-A(l)(c) was not available and was never intended to be made available to co-operative societies , since the expression ’corporations’ did not comprehend co-operative societies in its expanse.
We are unable to find any justification for giving such a limited or narrow interpretation to the expression ’corporations’ occurring in Art. 31-A(I) (c). On the other hand , we think that the very requirement of public interest or proper management of the corporation mentioned in Art. 31-A(l) (c) requires the expression to be given a broad interpretation since there can be no higher interest than the public interest. We do not however desire to quibble with rules of construction since we propose to examine what a ’corporation’ means and comprehends ordinarily and in the scheme of the Constitution.
What is a corporation ? In Halsbury’s Laws of England , 4th Edition , Volume 9 , Paragraph 1201 , it is said ,
"A corporation may be defined as a body of persons (in
the case of a corporation aggregate) or in office (in
the case of a corporation sole) which is recognised by
the law as having a personality which is distinct from
the separate personalities of the members of the body
or the personality of the individual holder for the
time being of the office in question."
A corporation aggregate has been defined in paragraph
1204 as , "A corporation of individuals united into one
body under a special domination having perpetual
succession under an artificial form , and vested by the
policy of law with the capacity of acting in several
respects as an individual , particularly of taking and
granting property , of contracting
obligations and of suing and being sued , of enjoying
privileges and immunities in common and of exercising a
variety of political rights , more or less extensive ,
according to the design of its institution , or the
powers conferred upon it , either at the time of its
creation or at any subsequent period of its existence."
This court in the Board of Trustees , Ayurvedic and Unani Tibia College , Delhi v. the State of Delhi(1) was required to answer the question whether the Board of trustees which was originally registered under the Societies Registration Act , 1860 and a new Board of trustees which was incorporated by an Act of the legislature called the Tibbia College Act , 1952 by which the old Board was dissolved and a new Board constituted were corporations. The court held that the old Board was not but the new Board was. Posing the question what is a corporation , the court answered it with the statements contained in Halsbury’s Laws of England already extracted by us and added ,
"A corporation aggregate has therefore only one
capacity , namely , its corporate capacity.A
corporation aggregate may be a trading corporation or a
non-trading corporation. The usual examples of a
trading corporation are (1) character companies , (2)
companies incorporated by special acts of Parliament ,
(3) companies registered under the Companies Act , etc.
Non-trading corporations are illustrated by (1)
municipal corporations , (2) district boards , (3)
benevolent institutions , (4) universities etc. An
essential element in the legal conception of a
corporation is that its identity is continuous , that
is , that the original member or members and his or
their successors are one. In law the individual
corporators , or members , of which it is composed are
something wholly different from the corporation itself;
for a corporation is a legal person just as much as an
individual. Thus , it has been held that a name is
essential to a corporation , that a corporation
aggregate can , as a general rule , only act or express
its will by deed under its common seal; that at the
present day in England a corporation is created by one
or other of two methods , (1) [1962] SUPPL. 1. SCR 156
namely , by Royal Charter of incorporation from the
Crown or by the authority of Parliament that is to say
, by or by virtue of statute. There is authority of
long standing for saying that the essence of a
corporation consists in
(1) lawful authority of incorporation ,
(2) the persons to be incorporated ,
(3) a name by which the persons are incorporated ,
(4) a place and
(5) words sufficient in law to show incorporation. No
particular words are necessary for the creation of a
corporation : any expression showing an intention to
incorporate will be sufficient."
The court then noticed the various provisions of the Societies Registration Act , 1860 which according to them contained no sufficient words to indicate an intention to incorporate but on the contrary contained provisions showing that there was an absence of such intention. Therefore , they observed , "We have , therefore , come to the conclusion that the provisions aforesaid do not establish the main essential characteristic of a corporation aggregate , namely , that of an intention to incorporate the society." Considering next the question whether the new Board was a corporation , the court had no difficulty in answering the question with reference to sub-section 2 of section 3 which stated that the Board shall be a body corporate having perpetual succession and common seal and shall by the said name sue and be sued. The court observed , "Subsection 2 of sec. 3 says in express terms that the new Board constituted under the impugned Act is given a corporate status; in other words , the new Board is a corporation in the full sense of the term. "
We have already extracted sec. 30 of the Punjab Act which confers on every registered co-operative society the status of a body corporate having perpetual succession and a common seal , with power to hold property , enter into contracts , institute and defend suits and other legal proceedings and to do all things necessary for the purpose for which it is constituted. There cannot , therefore , be the slightest doubt that a co-operative society is a corporation as commonly understood. Does the scheme of the Constitution make any difference ? We apprehend not.
Entry 43 of List I of the Seventh Schedule is as follows:
trading corporations , including banking , insurance
and financial corporations but not including co-
operative societies."
Entry 44 of the same list is as follows:
corporations , whether trading or not , with objects
not confined to one State , but not including
universities.
Entry 32 of List II is as follows:
corporations , other than those specified in List I and
universities incorporated trading , literature ,
scientific , religious and other societies and
associations; co-operative societies ,"
According to Mr. Ramamurthi the express exclusion of co-operative societies in Entry 43 of List [ and the express inclusion of co-operative societies in Entry 32 of List II separately and apart from but along with corporations other than those specified in list I and universities , clearly indicated that the constitutional scheme was designed to treat co-operative societies as institutions distinct from corporations. On the other hand one would think that the very mention of co-operative societies both in Entry 43 of List I and Entry 32 of List II along with other corporations give an indication that the Constitution makers were of the view that co-operative societies were of the same genus as other corporations and all were corporations. In fact the very express exclusion of co-operative societies from Entry 43 of List I is indicative of the view that but for such exclusion , co-operative societies would be comprehended within the meaning of expression "corporations".
The statement of Objects and Reasons of the Constitution (4th amendment) Act and the report of the Joint Select Committee relating thereto do not carry Mr. Ramamurthi’s argument any further. The statement of Objects and Reasons says , in relation to Art. 31-A (1) (c) ,
"The reforms in company law now under
contemplation like the progressive elimination of the
managing agency system , provision for the compulsory
amalgamation of two or more companies in the national
interest , the transfer of an undertaking from one
company to another , etc. , require to be placed above
challenge."
The report of the Joint Select Committee , is so far as it is relevant , says ,
"In sub-clauses (c) and (d) , the word
"corporations" has been substituted for the word
"companies" in order to cover statutory corporations as
well as companies."
According to Mr. Ramamurthi , the statement of Objects and Reasons and the report of the joint Select Committee show that initially it was proposed to give protection to legislation pertaining to amalgamation of companies only but later it was thought fit to extend the protection to statutory corporations also and therefore the expression "corporations" was substituted in the Act in the place of the expression "companies" which had been mentioned in the Bill. There is no substance in this submission. It was obviously thought by the Parliament that the protection should not be confirmed to companies only but should extend to all corporations which would naturally include Statutory Corporations. The more generic expression "corporations" was used so that all companies , statutory corporations and the like may be brought in. There is no indication that notwithstanding the use of the generic expression "corporations" , the expression was intended to exclude corporations other than companies and statutory corporations Parliament apparently chose the broader expression not with a view to limit the protection of the legislation relating to amalgamation to any class of corporations but with a view to protect legislation pertaining to amalgamation of all classes of corporations.
The answer to the principal question raised by Shri Ramamurthi appears to us to be so plain as to merit , no further discus sion. We must however notice here Damyanti Naranga v. Union of India on which reliance was placed by the learned counsel on the basis that Art. 31-A (1) (c) did not afford any protection to s. 13(8) , (9) etc. That case has no application whatever to the situation before us. It was a case where an unregistered society was by statute converted into a registered society which bore no resemblance whatever to the original society. New members could be admitted in large numbers so as to reduce the original members to an insignificant minority. The composition of the society itself was transformed by the Act and the voluntary nature of the association of the members who formed the original society was totally destroyed. The Act was , therefore , struck-down by the court as contravening the fundamental right guaranteed by Art. l9(1)(f). In the cases before us we are concerned with co-operative societies which from the inception are governed by statute. They are created by statute , there are controlled by statute and so , there can be no objection to statutory interference with their composition on the ground of contravention of the individual right of freedom of association.
The second submission of the learned counsel was that s.13(8) of the Punjab Co-operative Societies Act provided for amalgamation of Co-operative Societies if the Registrar was satisfied that it was necessary to do so in the interest of the Co-operative Societies whereas the Constitutional protection was available only if the legislation was in the public interest or in order to secure the proper management of any of the corporations. According to the learned counsel the protection of Art. 31-A (1) (c) was , therefore , not available to s. 13 (8) of the Punjab Cooperative Societies Act as the interest of a Cooperative Society may not necessarily be in the public interest or for the proper management of the society. This submission is no more than a play with words. The very philosophy and concept of the Cooperative movement is impregnated with the public interest and the amalgamation of Co-operative Societies when such amalgamation is in the interest of the Co-operative Societies is certainly in the public interest or can only be to secure the proper management of the societies. The argument of the learned counsel is an attempt at hairsplitting and is rejected. (1) [1971] 3. S.C.R. 840.
The next submission of the learned counsel was that s. 13 A (8) , (9) and (10) did not make express provision for the issue of notice to the members of the concerned Cooperative Societies and were , therefore , violative of the principles of natural justice. He argued that in the absence of any provision , the rules of natural justice may be read into the provisions and notice to the members of the affected societies was imperative. Otherwise , he argued , 13 members of one society would be formed against their will and without being heard to associate themselves with members of another society. We have no hesitation in rejecting this submission also. Once a person becomes a member of a cooperative society , he loses his individuality qua the society and he has no independent rights except those given to him by the statute and the by-laws. He must act and speak through the society or rather , the society alone can act and speak for him qua rights or duties of the society as a body , So if the statute which authorises compulsory amalgamation of cooperative societies provides for notice to the societies concerned , the requirement of natural justice is fully satisfied. The notice to the society will be deemed as notice to all its member. That is why s. 13 (9) (a) Provides for the issue of notice to the societies and not to individual members. Section 13(9)(b) , however , provides the members also with an opportunity to be heard if they desire to be heard. Notice to individual members of a. cooperative society , in our opinion , is opposed to the very status of a cooperative society as a body corporate and is , therefore , unnecessary. We do not consider it necessary to , further elaborate the matter except to point out that a member who objects to the proposed amalgamation within the prescribed time is given , by s. 31(11) , the option to walk-out , as it were , by withdrawing his share , deposits or loans as the case may be.
Another submission of the learned counsel was that the notification authorising the Assistant. Registrar of Cooperative Societies to exercise all the powers of Registrar under the Act could enable the Assistant Registrar to perform only such functions as the Registrar was authorised to perform under the Act as on the date of the notification. The Assistant Registrar would not be entitled to exercise the powers entrusted to the Registrar by amendment of the Act subsequent to the date of the notification unless a fresh notification was issued. We do not think that a fresh notification would be necessary where the Assistant Registrar even initially was authorised generally to perform all the functions of a Registrar.A fresh notification would probably be necessary where the Assistant Registrar was authorised to perform certain specified functions only of the Registrar. That is not claimed to be the situation here.
The final submission of Shri Ramamurthi was that several other questions were raised in the writ petition before the High Court but they were not considered. We attach no significance to this submission. It is not unusual for parties and counsel to raise innumerable grounds in the petitions and memoranda of appeal etc. , but , later , confine themselves , in the course of argument to a few only of those grounds , obviously because the rest of the grounds are considered even by them to be untenable. No party or counsel is thereafter entitled to make a grievance that the grounds not argued were not considered. If indeed any ground which was argued was not considered it should be open to the party aggrieved to draw the attention of the court making the order to it by filing a proper application for review or clarification. The time of the superior courts is not to be wasted in inquiring into the question whether , a certain ground to which no reference is found in the judgment of the subordinate court was argued before that court or not ?
Shri Arvind Kumar , learned counsel for one of the appellants very airily made a submission that Art. 31-A (1) (c) introduced by the Constitution (64th amendment) Act and s. 13(8) of the Punjab Co-operative Societies Act offended the Basic Structure of the Constitution as they affected the dignity of the human being and were therefore void. We find overselves unable to appreciate how the dignity of a human being can even remotely be said to be affected by the amalgamation of a cooperative society of which an individual is a member with another cooperative society. We expect counsel appearing in this court , particularly when they appear before the Constitution Bench , to avoid advancing such totally unsustainable propositions , The time of this court is public time and as the mountainous arrears show the time is becoming increasingly dear and precious. We can only appeal to counsel to carefully examine with a greater sense of responsibility the submission which they propose to make before actually advancing them in court. All the appeals are dismissed with costs which we quantify each Rs. 2,500 in each appeal. S.R. Appeals & Petitions dismissed.