1985 (4) TMI 322 - SC - Indian Laws

Punjab Cooperative Societies Act Section 13(8) upheld allowing compulsory amalgamation without violating fundamental rights

The SC dismissed appeals challenging Section 13(8) of the Punjab Cooperative Societies Act permitting compulsory amalgamation of cooperative societies. ... Validity of Compulsory Amalgamation Provisions - Section 13(8) of the Punjab Cooperative Societies Act, which allows for the compulsory amalgamation of cooperative societies - Contravention of the Article 19 (1) (c) which guarantees to all citizens the right to form associations or unions - Meaning of word 'co-operative society' - Interpretation to the expression 'corporations' - HELD THAT:- 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 hair- splitting and is rejected. Once a person becomes a member of a co- operative 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. 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. 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. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court were:- Whether the provisions of the Punjab Cooperative Societies Act, particularly section 13(8), authorizing compulsory amalgamation of cooperative societies, violate the fundamental right guaranteed under Article 19(1)(c) of the Constitution, which protects the right to form associations or unions.- Whether cooperative societies qualify as 'corporations' within the meaning of Article 31-A(1)(c) of the Constitution, thereby attracting constitutional protection for laws providing for their amalgamation.- Whether the phrase 'in the interest of the cooperative societies' in section 13(8) satisfies the constitutional requirement of 'public interest' or 'proper management' as stipulated in Article 31-A(1)(c).- Whether the procedural safeguards under sections 13(8), (9), (10), and (11) of the Punjab Cooperative Societies Act comply with the principles of natural justice, particularly regarding notice and hearing to members of the societies affected by compulsory amalgamation.- Whether the delegation of powers to the Assistant Registrar of Cooperative Societies to exercise the powers of the Registrar under the Act, including those introduced by subsequent amendments, is valid without a fresh notification.- Whether any other grounds raised but not argued before the High Court warrant consideration.- Whether the provisions impugned offend the Basic Structure of the Constitution by affecting human dignity.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Violation of Article 19(1)(c) by compulsory amalgamation provisionsLegal framework and precedents: Article 19(1)(c) guarantees the right to form associations or unions. However, Article 31-A(1)(c) provides that laws relating to amalgamation of corporations for public interest or proper management shall not be invalidated on grounds of inconsistency with Articles 14 or 19. The Court examined the scope of this protection and whether it extends to cooperative societies.Court's interpretation and reasoning: The Court rejected the contention that compulsory amalgamation infringes the right to form associations. It held that cooperative societies are statutory bodies created and regulated by law, and members have no independent rights outside the statute and by-laws. The Court distinguished the instant case from precedent where an unregistered society was transformed into a registered one, altering its composition and destroying the voluntary nature of association.Key findings and application: The Court held that since cooperative societies are statutory entities, statutory interference with their composition, including amalgamation, does not violate Article 19(1)(c). The protection under Article 31-A(1)(c) applies, and the compulsory amalgamation provisions are constitutionally valid.Treatment of competing arguments: The argument that cooperative societies are not corporations (and hence not protected under Article 31-A(1)(c)) was addressed in detail under Issue 2.Conclusion: The compulsory amalgamation provisions do not violate the fundamental right to form associations.Issue 2: Whether cooperative societies are 'corporations' under Article 31-A(1)(c)Legal framework and precedents: The Court referred to authoritative definitions of 'corporation' from Halsbury's Laws of England and prior Supreme Court decisions. A corporation is a legal person distinct from its members, with perpetual succession and capacity to sue, hold property, and enter contracts.Court's interpretation and reasoning: Section 30 of the Punjab Cooperative Societies Act explicitly confers on registered cooperative societies the status of a body corporate with perpetual succession and common seal. The Court held that cooperative societies satisfy the essential characteristics of corporations.The constitutional scheme was analyzed, particularly Entries 42, 43, and 44 of List I and Entry 32 of List II of the Seventh Schedule, which separately deal with corporations and cooperative societies. The Court found that the exclusion of cooperative societies from certain entries was intended for legislative distribution of powers between the Union and States, not to exclude cooperative societies from the concept of corporations.Key findings and application: The Court concluded that cooperative societies are corporations within the meaning of Article 31-A(1)(c) and thus laws relating to their amalgamation attract constitutional protection.Treatment of competing arguments: The argument that 'corporations' in Article 31-A(1)(c) was intended to cover only companies and statutory corporations was rejected. The Court emphasized the broad legislative intent to protect all corporations, including cooperative societies.Conclusion: Cooperative societies are corporations for the purposes of Article 31-A(1)(c).Issue 3: Whether 'in the interest of the cooperative societies' satisfies the constitutional requirement of 'public interest' or 'proper management' under Article 31-A(1)(c)Court's interpretation and reasoning: The Court held that the concept of cooperative movement is inherently linked with public interest. Amalgamation in the interest of cooperative societies necessarily aligns with public interest or proper management. The argument that the phrase is narrower than constitutional requirements was dismissed as mere hair-splitting.Conclusion: The phrase 'in the interest of the cooperative societies' satisfies the constitutional test of public interest or proper management.Issue 4: Compliance with principles of natural justice regarding notice and hearingLegal framework: Sections 13(8) to (11) of the Punjab Cooperative Societies Act provide for notice to the societies concerned and creditors, consideration of objections, and an option for objecting members or creditors to withdraw their share, deposits, or loans.Court's interpretation and reasoning: The Court rejected the submission that individual members must be given direct notice. It reasoned that once a person becomes a member, he loses individuality qua the society and acts through the society as a corporate body. Notice to the society is deemed notice to all members. Moreover, members have the opportunity to be heard and the option to withdraw their interests if they object.Conclusion: The procedural safeguards satisfy natural justice; individual notice is unnecessary and contrary to the corporate nature of cooperative societies.Issue 5: Validity of delegation of powers to Assistant Registrar without fresh notificationCourt's reasoning: The Court held that if the Assistant Registrar was initially authorized generally to perform all functions of the Registrar, no fresh notification is required to empower him to exercise powers introduced by subsequent amendments. Fresh notification would only be necessary if the delegation was limited to specific functions.Conclusion: The delegation is valid without a fresh notification.Issue 6: Consideration of other unargued groundsCourt's reasoning: The Court observed that parties often raise multiple grounds but later argue only a few. Grounds not argued are deemed abandoned and courts are not obliged to consider them. If a party believes a ground argued was overlooked, it may seek review or clarification.Conclusion: No grievance arises for grounds not argued or considered below.Issue 7: Alleged violation of Basic Structure of the ConstitutionCourt's reasoning: The submission that the provisions offend the Basic Structure by affecting human dignity was rejected as wholly unsustainable. The Court emphasized responsible advocacy and public time considerations.Conclusion: No violation of Basic Structure arises from the provisions.3. SIGNIFICANT HOLDINGS- 'There cannot, therefore, be the slightest doubt that a co-operative society is a corporation as commonly understood.' (para 10)- '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.' (para 19)- 'Once a person becomes a member of a co-operative 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.' (para 20)- 'Notice to the society will be deemed as notice to all its member.' (para 20)- 'The compulsory amalgamation provisions do not violate the fundamental right to form associations.' (para 18)- 'The protection afforded by Art. 31-A(1)(c) was not intended to be limited to companies or statutory corporations but to all corporations including co-operative societies.' (para 17)- 'No violation of the Basic Structure of the Constitution arises by reason of the provisions impugned.' (para 23)- The Court dismissed all appeals with costs, quantifying costs at Rs. 2,500 each.