Retrospective co-operative reclassification was struck down for arbitrariness, impairment of autonomy, and violation of constitutional association rights.

Retrospective amendment excluding dairy and milk co-operative societies from the Mutually Aided Co-operative regime and deeming them registered under the older law was held to lack rational nexus with the stated objective and to impermissibly impair associational autonomy. The Court treated the compulsory reclassification as arbitrary and discriminatory, violating Articles 14 and 19(1)(c). It also held that while retrospective legislation is not per se invalid, it cannot unreasonably take away accrued rights or survive when manifestly arbitrary. Promissory estoppel could not save an otherwise unconstitutional measure, and the transitional persons-in-charge arrangement could not validate the reclassification.

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Issues: (i) Whether the amendment excluding dairy and milk co-operative societies from the Mutually Aided Co-operative regime and deeming them to have been registered under the older co-operative law was arbitrary, discriminatory and violative of Articles 14 and 19(1)(c) of the Constitution of India. (ii) Whether the retrospective change, together with the transitional government order appointing persons-in-charge, could be sustained despite objections based on vested rights and promissory estoppel.

Issue (i): Whether the amendment excluding dairy and milk co-operative societies from the Mutually Aided Co-operative regime and deeming them to have been registered under the older co-operative law was arbitrary, discriminatory and violative of Articles 14 and 19(1)(c) of the Constitution of India.

Analysis: The classification created by the amendment was found to lack a rational nexus with the stated object of restoring a three-tier structure or protecting public interest. The record did not show that dairy societies formed a separate class for the purpose of the legislation, nor that the older statute was inherently more effective for safeguarding assets or ensuring better governance. The Court treated the retrospective deeming provision as a substantial interference with the autonomy of societies that had voluntarily chosen registration under the later statute. It held that statutory compulsion forcing such societies back into the earlier regime altered their character and burdened their associational freedom without sufficient constitutional justification.

Conclusion: The amendment was held to be unconstitutional as arbitrary and violative of Articles 14 and 19(1)(c), and the challenge on this ground failed against the respondents.

Issue (ii): Whether the retrospective change, together with the transitional government order appointing persons-in-charge, could be sustained despite objections based on vested rights and promissory estoppel.

Analysis: The Court held that retrospective legislation may be permissible in principle, but not when it unreasonably takes away accrued rights or operates in a manifestly arbitrary manner. It further held that promissory estoppel cannot prevent the State from exercising legislative power in the public interest, but that principle could not save an enactment otherwise unconstitutional. The transitional order was considered only in the context of the larger statutory scheme and could not validate the impermissible retrospective reclassification of the societies. The Court therefore found no basis to uphold the impugned measures on these grounds.

Conclusion: The challenge to the retrospective deprivation of accrued rights and the associated transitional arrangement was upheld, and the respondents succeeded on this issue.

Final Conclusion: The impugned legislative and executive measures were not sustained, and the High Court's decision striking them down was left undisturbed.

Ratio Decidendi: A retrospective legislative classification that compels voluntary co-operative societies to shift to a different statutory regime, without a rational nexus to the object pursued and in a manner that impairs their accrued rights and autonomy, is unconstitutional under Articles 14 and 19(1)(c).

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