2025 INSC 436
SUPREME COURT OF INDIA
(HON’BLE
VIKRAM NATH, J. AND HON’BLE PRASANNA B. VARALE, JJ.)
SHRI.
MASAIDEVI VIVIDH KARYAKARI SAHAKARI SEVA SANSTHA MARYADIT WAREWADI
Appellant
VERSUS
STATE
OF MAHARASHTRA & ORS.
Respondent
Civil Appeal No._____ 4669_______OF 2025 (@ Slp (Civil)
No. 4090 of 2024) With Civil Appeal No.__________Of 2025 (@ Slp (Civil) No.
6551/2024) Civil Appeal No.__________Of 2025 (@ Slp (Civil) No. 6086/2024) Civil
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5345/2024) Civil Appeal No.__________Of 2025 (@ Slp (Civil) No. 5315/2024) Civil
Appeal No.__________Of 2025 (@ Slp (Civil) No. 7714/2024) Civil Appeal
No.__________Of 2025 (@ Slp (Civil) No. 7722/2024) Civil Appeal No.__________Of
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(Civil) No. 6222/2024) Civil Appeal No.__________Of 2025 (@ Slp (Civil) No.
5564/2024) Civil Appeal No.__________Of 2025 (@ Slp (Civil) No. 5027/2024) Civil
Appeal No.__________Of 2025 (@ Slp (Civil) No. 5312/2024) Civil Appeal
No.____________Of 2025 (@ Slp (Civil) No. 6275/2024) Civil Appeal
No.____________Of 2025 (@ Slp (Civil) No. 5314/2024)-Decided on 02-04-2025
Civil
Maharashtra
Co-operative Societies Act, 1960, Section 4
and 6 – Registration of society -
Challenge to the order –
Locus standi - Held that the State,
while deciding the appeal, completely ignored the basic criteria or the
pre-requisite for the registration of society i.e. the economic viability of
the society - The said criteria and pre-requisites had been laid down by the
State itself through its various Government Resolutions - As such, it could not
have taken a decision contrary to its own guidelines - There was absolutely no
material on record before the Committee to show that the appellant-society was
in a position to comply with the pre-requisites as referred to in the
Government Resolution dated 14.02.2017 - The Committee had, therefore, rightly
rejected the application for registration - In the present case, by relaxing
the pre-requisite condition relating to financial viability, the State allowed
the registration of the society, which in our opinion, resulted in nothing but
frustrating the very object of the Act - With respect to the locus standi of
the respondent no. 6, such an argument by the appellants shall not restrain
interference by this Court or the High Court in the matter when there is patent
illegality in the State's order which requires interference by the Courts of
law – Held that unable to find any fault in the order passed by the High Court
which allowed the petition and set aside the order passed by the State.
(Para
25, 32 to 34)
JUDGMENT
Prasanna B. Varale,
J;-Leave
granted.
2. The challenge in the present
appeals is to the common order dated 05.01.2024 in Writ Petition No. 8654/2023
and 42 other connected matters, whereby the High Court of Judicature at Bombay
allowed the petitions preferred by the respondent no. 6 herein and in other
connected matters and set aside the orders passed by the State of Maharashtra directing
registration of the appellant-societies.
3. For the sake of brevity and as
the legal issue involved is the same, we are referring to the facts of the W.P.
No. 8654 of 2023 resulting into SLP (C) No. 4090 of 2024. The factual
background is that on 13.01.2023, the appellant-society herein filed an
application to the Respondent-Assistant Registrar for getting permission for
registration of proposed society as a new Primary Agricultural Credit
Co-operative Society (hereinafter 'PACCS'), as well as for opening a bank
account. A scrutiny was done by the Scrutiny Committee (hereinafter
'Committee') wherein the application filed by the appellant-society was
rejected on 13.04.2023. The reasons given by the Committee for rejection of
application are reproduced below:
"1.
The District Deputy Registrar and Divisional Joint Registrar, Kolhapur have not
verified and ascertained as to whether the Revenue village of the aforesaid
proposed society is within the purview of the existing society.
2. The
information as to whether the Promoters - members of the proposed society are the
members of other existing societies or not, has not
been verified and submitted.
3. The
Chief Promoter has not verified and ascertained crop-wise cultivated area of
the Promoters - members in the proposed society as mentioned in the Crops
Sowing Register.
4. The
Kolhapur District Central Cooperative Bank has not given undertaking in respect
of providing loan as per it's Crop-Loan Policy, to the Promoters - members of
the proposed society or has not annexed the Undertaking to the effect that
apart from the Kolhapur District Central Co-operative Bank, other Nationalised
Banks or other Financial Institutions are going to provide loan to the proposed
society.
5. The
existing Credit Co-operative Society for the Revenue village of the proposed Society, has not issued No-objection certificate to the
proposed Society for registration.
6. The existing
Society has not submitted information about memberwise loans provided to the
members to be transferred to the proposed Society.
7. The
extracts of entries from the Crops Sowing Register and 7/12 extract in respect
of the lands of the Promoters - members included in the Registration Proposal,
have not been annexed to the Proposal for Registration. Therefore, the probable
distribution of loan proposed by the Society cannot be ascertained.
8. The Chief
Promoter has not submitted alongwith the proposal, the information as to whether
the Promoters - members to be included in the proposed society are included in
other existing society or not.
9. The
self-explanatory opinion of the Divisional Joint Registrar, District Deputy Registrar
and Taluka Assistant Registrar, Co-operative Societies, Kolhapur, as to whether
said society shall be financially viable after registration or not has not been
submitted.
10. The
Chief Promoter of the proposed Society, on the basis of the certificate issued by
the Gaon Kamgar Talathi, has certified that agricultural loan of the
approximate amount of more than Rs. 150.00 lakhs will be provided however, he
has not enclosed with the proposal, the documents in support of providing the
said loan and the documents for verification thereof and therefore, it cannot be
ascertained that after registration, the proposed society will be able to
provide loan of the amount of more than Rs. 150.00 lakhs.
11. The
loan provided by the existing society within the area of operation of the
proposed society is less than the amount of Rs. 150.00 lakhs and therefore,
existing society itself is not financially viable. Therefore, it would not be appropriate
to allow registration of another society of the same type with same objectives
within the area of operation of the existing society which itself is not
financially viable.
12. On
the basis of the documents in the Registration Proposal, the Assistant Registrar,
Co-operative Societies, Tal. Shahuwadi, under his letter dated 11.04.2023, has
appraised that the proposed society will not be financially viable and therefore,
as per the instructions mentioned in the Government Resolution, it would not be
appropriate to grant permission for registration of the said society.
13. Though
the caveat has been filed in respect of the registration of the proposed
society, as the society is not complying with the criteria mentioned in the
Government Resolution dated 23.09.2013 and as the said proposal is not
financially viable, the proposal of the aforesaid proposed Society has been rejected
and therefore, the question to give an opportunity of hearing to the Caveator
at the level of the Scrutiny Committee, does not arise at all.
14. Thus,
it is found that the existing society itself is not financially viable.
Therefore, it would not be appropriate- to allow registration of another
society of the same type with same objectives within the area of operation of the
existing society which itself is not financially viable. Hence, considering the
aforesaid aspects and on perusing the documents in the proposal, it does not
appear that after registration, the proposed society will be financially viable
in future. Similarly, as per the instructions mentioned in the Government Resolution,
as the proposed society is not complying with the financial criteria required
for the registration thereof, it is unanimously resolved that the registration proposal
should be rejected."
4. Being aggrieved by the order
of the Committee, the appellant-society preferred an appeal under Section 152
of the Maharashtra Co-operative Societies Act, 1960 (hereinafter 'the 1960
Act') before the State. Respondent No.6 herein, who is a member of Salashi
Vividh Karyakari Sahakari (Vikas) Seva Saunstha Maryadit Salashi, a registered co-operative
society having its jurisdiction in Salashi and Warewadi, District Kolhapur, got
himself impleaded as a respondent-party in the appeal proceedings.
5. The Minister, Co-operatives,
on behalf of the State, vide its order dated 28.06.2023, allowed the appeal
filed by the appellant herein and, thereby, set aside the Order dated 13.4.2023
passed by the Committee. It was also directed to the Respondent-Assistant
Registrar to register the appellant-society. The reasoning given for allowing
the appeal is reproduced below:
"The
applicant-society has primarily sought an independent development society for
its independent revenue village, based on the directives in the Government
Decision and its amendment that there should be only one primary agricultural
credit society in an independent revenue village. The Primary Agricultural
Credit society of the neighbouring village of the applicant-society has not
objected to the proposal of the applicant-society. It does not happen and the
ratio of risk assets to capital also does not decrease. The applicant-society
has argued that as per the lending policy of the bank, the loan can be provided
as per the norms. Moreover, the applicant-society has asserted that as per the
policy of the Central Government, the applicant-society can do about 152. types of business other than loan distribution and thereby
become profitable. It cannot be said that it is wrong. Apart from this, it
cannot be denied that the applicant-society can allocate loans by taking loans
from self-funds and other banks as well...........
As the village
of the applicant-society is hilly area and there is no adequate transportation
facility, it is difficult and troublesome to take membership of a society
established in another village and go to that village to avail the services of
the society. Also Primary Agricultural Credit Institutions in neighbouring
villages are also applicants seem unable to avail the services of the society.
Therefore, the government decision based on the decision dated 16.01.2015 that
a new agricultural credit society can be registered in a separate revenue
village; the applicant submits that, the proposal for registration filed by the
society is reasonable and proper........
However,
the intervening-applicant has not submitted any figures showing that the cash
value of the existing society or the ratio of risk assets to the capital would
decrease after the registration of the applicant society.......
The
Respondent no.4 viz The Assistant Registrar has checked the records in his
office that there is no registered primary agricultural credit society in the
independent revenue village where the applicant-society has jurisdiction.
Therefore, a report has been given while submitting the proposal of. the applicant-society to the senior office that the
registration of the applicant-society will not adversely affect the financial
condition of the working primary agricultural credit society. Adequate
contradiction has not been made by the intervention-applicant.......
This
means that the registration the applicant-society will not adversely affect any
existing society. Also, within 3 years from the date of registration of the
applicant- society, share capital of Rs.5/- lakhs and the applicant-society is
ready to give a guarantee to start a new business in one year."
6. Aggrieved by the order of the
State, the respondent no. 6 herein filed a Writ Petition before the High Court
of Judicature at Bombay praying to set aside the order dated 28.06.2023 passed
by the State.
7. The High Court, vide the impugned common order, allowed the appeal of the
respondent no. 6 herein and observed the following:
"9.
I have perused the impugned order. The Petitioners were intervenors before the
State Government. Neither the issue of locus standi of the Petitioners was
raised before the State Government nor the State Government recorded finding in
the impugned order/s that the Petitioners do not have any right to object to
the registration of the contesting Respondents as multipurpose co-operative
societies. The only contention which was raised was that due to registration of
the proposed societies there will not be any adverse impact on the financial
condition of the existing societies.
10.
Considering the facts and circumstances and in view of the findings recorded by
the scrutiny committee, I am inclined to accept the submission that the
Petitioners who are neither existing co-operative societies
or members of the existing co-operative societies lack locus standi to challenge
the impugned orders.
11. As
regards merits, the scrutiny committee who is in the form of expert body after
scrutinising the documents filed in support of the application/s made by the
contesting Respondents has recorded the specific finding that the. proposed societies would not be financially viable. The scrutiny
committee has further held that the proposed societies do not fulfil the
requisite financial parameters laid down in the Government Resolution dated 23
September 2013. There is no finding in the impugned order/s that the findings recorded
by the scrutiny committee are perverse.
12.
Apart from the above, as per, the Government Resolution dated 14 February 2017
it is necessary for the proposed societies to have share capital of Rs.5 Lakhs
at the time of applying for registration. It appears from the impugned order/s
that the said condition is also relaxed on the basis of undertaking of the
contesting Respondents that they would raise the share capital of Rs. 5 Lakhs
within one/three years from the date of registration of the society.
13. Considering
the overall facts and circumstances, the order/s impugned cannot be allowed to
stand as the same are contrary to proviso to Section 4 of the Maharashtra
Cooperative Societies Act. 14. The Petitions are allowed. The order/s impugned
in the present Petitions are set aside. All consequential actions are set
aside"
8. Feeling aggrieved and
dissatisfied with the impugned order passed by the High Court, the appellants
are before us.
9. We have heard the learned senior
counsels and counsels for the parties and perused the material on record.
10. The arguments advanced by the
learned Senior Counsel for the appellants are summarised hereunder:
10.1 That the appellant is the
first and only Co-operative society in the said Revenue Village, a fact that
has been acknowledged by the Assistant Registrar as well.
10.2 That it is practically not
possible for any society to have share capital of Rs. 5 lakhs at the time of
applying for registration. In this regard, an undertaking had been submitted by
the appellant-society that they would raise the required share capital of Rs. 5
lakhs within one to three years from the date of registration of society and
the appellant has also undertaken the compliance of this term before this
Court.
10.3 That the appellant-society
has made a genuine effort to fulfil all the required documents at the time of
filing the application for registration.
10.4 That the State in its Order
clearly stated that there are multiple reasons which can destabilize the
financial status of a Society, therefore, because of only one parameter i.e.
loan distribution to the crops, the registration of the society cannot be
denied.
10.5 That the respondent no. 6
does not have any locus-standi to challenge the Order passed by the State.
10.6 That the Society, of which
present respondent no. 6 is a member, has already given a
'No-Objection-Certificate' to the present appellant-society and an individual
member cannot take contrary stand to the society of which he is a member until
and unless that society passes resolution to that effect.
10.7 That the High Court, on one
hand, accepted that the petitioners therein did not hold any locus standi yet,
on the other hand, allowed the Writ Petition filed by them.
10.8 That the chart indicating
the population of each revenue village, submitted by the respondent no. 6, is
as per the 2011 census and it cannot be ignored that the population in these
villages must have grown in the past 13-14 years.
10.9 That any co-operative society
can manage 152 kinds of businesses apart from giving loan. Therefore, it is
unfair to ignore all others important aspects which helps a society to run
successfully.
10.10 That the minimum number of
the membership for registration of a new society is 75 and the present
appellant-society has given the list of 150 members. Therefore, the
appellant-society is very much ahead of the minimum required number of
memberships.
11. Per contra, the arguments
advanced by the learned Senior Counsels and counsels for the respondents are
stated as below:
11.1 That the eligibility for the
purpose of registration cannot be isolated from the impact on an existing
society, if any. The appellant herein has failed to satisfy the threshold
criteria and conditions to establish its own
viability.
11.2 That it is not open to the
appellant to now seek to by-pass the expert Scrutiny Committee by contending
for the very first time before this Court that the Committee was constituted
without any authority and/or it lacks jurisdiction to scrutinize the
appellant's proposal for its registration as a PACCS.
11.3 That Scrutiny Committee's
Order shows its in-depth examination of the appellants' proposals and the
Committee's detailed findings which militate against the eligibility of the appellants
for registration.
11.4 That the order passed by the
State is ex-fade perverse and unsustainable as it has allowed the appellants'
registration without fulfilling the most basic and mandatory pre-requisites for
registration.
11.5 That the respondent no. 6,
being a member of an existing society, is vitally affected inasmuch as the
registration of the appellant-society could lead to destabilizing the existing
society and even lead to its closure.
11.6 That the performance of
credit/loan disbursement of existing primary credit cooperative societies would
show that even they are hardly in a position to achieve the minimum target
fixed by the Government Resolution and, in such circumstances, establishment of
any proposed Credit Cooperative Society in the adjacent village would have
disastrous effect on the existing credit co-operative societies.
11.7 That the NOC relied upon by the
appellant which is alleged to be given by the society,
of which respondent no. 6 is a member, is unauthorised and there is no mention of
it being issued to the appellant in record and proceedings of the
abovementioned society.
11.8 That the appellant has
approached this Court with unclean hands as it is obvious that the appellant
has sought to artificially inflate its membership by showing dead persons so as
to show a membership with larger land holdings in order to meet the viability
criteria. This conduct shows the mala fides of the appellant.
12. Before delving into the
analysis of the facts of the case, we find it pertinent to mention the relevant
provisions of the 1960 Act and the Government Resolutions dated 23.09.2013 and
14.02.2017.
13. Chapter II of the 1960 Act
deals with the registration wherein Section 4 and Section 6 are the specific
relevant provisions for the purpose of this matter and are reproduced as below:
"4.
Societies which may be registered:— A society, which has as its objects the
promotion of the economic interests or general welfare of its members or of the
public, in accordance with co-operative principles or a society established
with the object of facilitating the operations of any such society, may be registered
under this Act-Provided that, no society shall be registered if it is likely to
be economically unsound, or the registration of which may have an adverse
effect on development' of the co-operative movement, or the registration of
which may be contrary to the policy directives which the State Government may,
from time to time, issue.
6.
Conditions of registration:-
(1) No
society, other than a federal society, shall be registered under this Act,. Unless it consists of at least ten persons or such higher
number of persons as the Registrar may, having regard to the objects and
economic viability of a society and development of the Cooperative movement,
determine from time to time for a class of societies (each of such persons
being a member of a different family), who are qualified to be members under
this Act, and who reside in the area of operation of the society:
Provided
that, a lift irrigation society consisting of less than ten but of five or more
such persons may be registered under this Act.
[Emphasis
supplied]
14. Now, it will be useful to
refer to the Government Resolutions to which reference is made in the impugned
judgment of the Hight Court.
15. The Government Resolution
dated 23.09.2013, which has been produced as Annexure P-l before us, sets out
the newly revised criteria for registration of PACCS and the revised condition
nos. 4 and 5 read as follows:
"Condition
No.4: The number of members (accounting members) of a newly registered primary
agricultural credit cooperative should be at least 75.
Condition
No. 5.: For the purpose of scrutiny of the proposal of
primary agricultural credit cooperative society, committee will be formed as
under mentioned for the purpose of inspection of financial ability."
16. The Government of Maharashtra
issued another Government Resolution dated 14.02.2017, in furtherance of which
the Government Corrigendum was issued, and it reads as follows:
"1)
There should preferably be only one primary
agricultural credit cooperative in a revenue village. However, in villages
where there is scope for registration of more than one society, taking into
account other criteria of economic viability, more than one society can be
registered. 1A) A Scheduled Primary Agricultural Credit Co-operative Society
before its registration; it must have a minimum of Rs. 5 lakh share capital and
it is essential to do so.
[Emphasis
supplied]
17. A conjoint reading of Section
4 and condition No.l of Section 6 of the 1960 Act makes it very clear that the
economic viability of the society is a pre-requisite or basic condition for
grant of registration to the society.
18. Further, condition No. 5 of the
Government Resolution dated 23.09.2013 makes it unambiguous that a Scrutiny
Committee was to be set up/established specifically for the purpose of
inspection of financial ability of a prospective society.
19. Additionally, Criteria 1A of
the Government Resolution dated 14.02.2017, further clarifies the said prerequisite
of economic viability of the societies by explicitly stating that a minimum of
Rs. 5 lakhs share capital is to be maintained by applicant society.
20. It is in the backdrop of the
above referred provisions of the 1960 Act as well as the Government Resolutions
that we have to peruse the order of the Scrutiny Committee which examined the proposal
of the appellant-societies for registration.
21. The Committee in the opening part
of its minutes records as follows:
"...to
scruitinize the registration proposal of this scheduled society and to check
the financial capability..."
22. This supports the
respondents' contention that it was the duty of the Committee to check the financial
capability of the appellant-societies and it was an expert Committee set up specifically
to check the eligibility criteria of the applicant societies.
23. We have already referred to
the reasons assigned by the Scrutiny Committee for rejection of the application
in earlier part of this judgment at Paragraph 3. The Paragraphs 4, 10 and 11 of
the Committee's order therein noted the findings of the Committee with regard to
the appellant-society not meeting the financial requirements in the form of a
lack of bank guarantee, lack of documents to support provision of bank loan
etc. It was in furtherance of these specific findings that the Committee in
clear words noted that:
"the petitioner society fails to comply with the criteria of
economic viability and state it would not be advisable to establish society of
the same type and with the same purpose in the area of operation of an
unprofitable working society"
24. Thereafter, the State while
deciding the appeal seems to be impressed by the appellant's submission that
the registration of the proposed society is not adversely affecting the
existing society as there was no objection raised by the existing society.
25. In our considered opinion,
the State, while deciding the appeal, completely ignored the basic criteria or
the pre-requisite for the registration of society i.e. the economic viability
of the society. The said criteria and pre-requisites had been laid down by the
State itself through its various Government Resolutions. As such, it could not
have taken a decision contrary to its own guidelines.
26. It will not be out of place
to state that the State was much impressed by the submissions advanced on
behalf of the appellant-society that any Cooperative Society can manage 152
kinds of businesses apart from giving loans.
27. However, the appellant had
made such submissions without placing any supporting material on record before
the Scrutiny Committee to show as to what kind of other 152 businesses the
appellant-society would undertake and how the appellant-society is economically
viable. Yet, the State accepted the hypothetical claim of the appellant-society.
In our opinion, in doing so, the State has essentially ignored the aspect of
economic viability.
28. Admittedly, the Committee had
found that there was nothing in the proposal submitted by the appellant-society
to substantiate the conditions of financial health as provided in the Government
Resolution dated 14.02.2017. There was merely a bald statement that the Kolhapur
District Central Cooperative Bank is going to support the proposed
appellant-society but, as noted by the Committee, there was no letter of
undertaking that was attached to that effect.
29. Thus, it is apparent that
there was absolutely no material on record before the Committee to show that
the appellant-society was in a position to comply with the pre-requisites as
referred to in the Government Resolution dated 14.02.2017. The Committee had,
therefore, rightly rejected the application for registration.
30. It may not be out of place to
state that if a society is unable to comply with the pre-condition or prerequisite
in regard to the economic viability of the society, allowing the registration
of such a society which might not even be able to function, it may adversely affect
the members of the society and, ultimately, it would be frustrating the very
object of the establishment of the said society.
31. It must be noted that the constitution
of the Committee and the examination of the proposal by the Committee is a
vital part of the Policy Directives of the State Government which is required
to be complied with conditions under Section 4 of the 1960 Act.
Therefore, ignoring the findings
of the Committee and allowing the registration of the society when the
appellants have been unable to point out any perversity in the said findings
shall lead to an unjustifiable interference in the Committee's Order. 32.
Further, it must be noted that the State Government may use its discretion for
relaxation of conditions. However, such a discretion
cannot be used to frustrate the very object of the Act. Such a power of
relaxing the necessary pre-requisites could have been made only through the
means of a Government Resolution and not at the whims of the State in an appeal
which essentially led to by-passing the eligibility criteria set out by the
Government through its multiple Resolutions. Once such an eligibility standard
has been set out by the Government, the only proper route to introduce any
alteration or relaxation of these conditions would have been through a
subsequent Government Resolution. In the present case, by relaxing the
pre-requisite condition relating to financial viability, the State allowed the
registration of the society, which in our opinion, resulted in nothing but
frustrating the very object of the Act.
33. Lastly, with respect to the locus
standi of the respondent no. 6, such an argument by the appellants shall not
restrain interference by this Court or the High Court in the matter when there
is patent illegality in the State's order which requires interference by the
Courts of law.
34. Therefore, considering all
these aspects, we are unable to find any fault in the order passed by the High
Court. The High Court of Judicature at Bombay has rightly allowed the petition
and set aside the order passed by the State.
35. Accordingly, the appeals
stand dismissed, and the impugned order of the High Court is upheld.
36. Pending application(s), if
any, shall be disposed of accordingly.
37. No order as to cost.
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