TaxTMI 
TaxTMI 
2011 (9) TMI 998
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the provisions of A.P. Co-operative Societies Act, 1964 (hereinafter called `Act 1964'), and further G.O.Ms. No.10 Animal Husbandry, Dairy Development & Fisheries (Dairy-II) Department, dated 4.2.2006 and the consequential proceedings/orders of the Milk Commissioner and Registrar of Milk Co-operatives and the District Collectors concerned in these regards, are quashed. 2. Facts: A. The Government of Andhra Pradesh introduced an integrated milk project in the State with the assistance of the UNICEF, according to which, the rural surplus milk produced in the villages was transported to chilling centres and supplied to consumers of Hyderabad. A milk conservation plant/milk products factory was established at Vijayawada in 1969 as a part of the project. In the meanwhile, the Act 1964 came into force w.e.f. 1.8.1964. B. In years 1970-71, the Government of Andhra Pradesh set up an independent Dairy Development Department (hereinafter called the `Department') and intensive efforts were made by the Government to give a boost to the Department taking various measures. C. In year 1974, Andhra Pradesh Dairy Development Corporation Ltd. (here....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder the Act 1995. Many societies already registered under the Act 1964 also got themselves registered under the Act 1995. H. There had been some irregularities in getting the registration under the Act 1995 by certain societies registered under the Act 1964 and some of them did not execute the MoU. Thus, the Statutory Authority issued show cause notices to such societies under Section 4(3) of the Act 1995 on 29.11.2004 to show cause as to why their registration under the Act 1995 be not cancelled. I. Eight writ petitions were filed by 8 District Milk Unions challenging the said show cause notices before the High Court. The Federation filed original petition in various Co-operative Tribunals seeking dissolution of its societies under Section 40 of the Act 1995 as the statutory requirements had not been complied with. J. The Co-operative Tribunal vide its judgment and order dated 9.12.2004 dismissed the original petition against Visakha District Union on the premises that the Act 1995 had not mentioned about returns of assets and the Managing Director had no power to further delegate the power to some one to file the petition. K. The Legislative A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 4.2.2006. The High Court vide interim order dated 8.2.2006 stayed the operation of the Government Order dated 4.2.2006. Meanwhile, the Ordinance was converted into the Act. By the impugned judgment dated 1.5.2007, the High Court allowed the writ petitions. Hence, these appeals. Rival Submissions: 3. Shri R. Venkataramani, Shri S.S. Prasad, learned senior counsel appearing for the appellants have submitted that the impugned judgment and order are untenable as the Legislature is competent to amend the Act and while doing so the Legislature in its wisdom had rightly decided to treat the milk dairy co-operatives distinctly from all other kinds of societies. Thus, no grievance of discrimination could be raised. More so, there is no discrimination among the milk dairies, as all such dairies have been treated as a separate class. The amendment had not taken away any vested or statutory right of the writ petitioners by the impugned Act. Both the Acts i.e. Act 1964 as well as Act 1995 are based on the same set of the co-operative principles and serve different sectors of the co-operatives in different ways. Both the Acts co-exist and are not mutually conflicting. Therefore,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies as under the Act 1995 the government control was negligible. The societies under the Act 1995 "have to be self reliant". Thus, the Act assured such societies a complete autonomy. The Act 2006 was enacted on the recommendation of the House Committee which suggested remedial measures for effective functioning of the dairies in the State. It was so necessary to reconfirm the 3-tier structure e.g. apex society, central society and primary society as such a classification was not available under the Act 1995. The Statement of Objects and Reasons of the Act 2006 clearly provided for justification of amendment (impugned). Therefore, appeals deserve to be allowed and the impugned judgment and order of the High Court is liable to be set aside. 4. On the contrary, Mr. P.P. Rao, learned senior counsel, Mr. P. Venkat Reddy, Mr. Niranjan Reddy and Mr. S. Udaya Kr. Sagar, learned counsel appearing for the respondents have submitted that the Act 2006 suffered from vice of arbitrariness, and has taken away the accrued rights of the milk dairy co-operative societies. Act 2006 has given a hostile discrimination to milk dairy co-operative societies as no other kind of society i.e. Societ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iscrimination against dairy farms and milk producers without scientific or rational basis for such distinction-merely because the National Dairy Development Board distinctly deals with dairy activities, cooperatives dealing with such activities cannot form a separate and distinct class in so far as co-operative activity is concerned. (ii) The irregularities noted by the House Committee with regard to the Visakha Union, Prakasham Union are managerial lapses which are possible both under the `Act 1964' and the `Act 1995'. (iii) Non-compliance with the terms and conditions of the transfer agreements regarding business and service matters and irregularities noted in the audit reports and House Committee is possible both under the `Act 1995' and the `Act 1964'. (iv) The conclusion of the House Committee in respect of two of the district unions out of eight districts converted into `Act 1995' cannot be relevant material for any rational conclusion. (v) Both Section 2(e) of the `Act 1964' and Section 2(k) of the `Act 1995' enable formation of Apex Societies, Central Societies and Primary Societies. Exclusion of the Dai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m others left out of the group and that differentia must have a rational relation to the object sought to be achieved by the statute in question. Law also permits a classification even if it relates to a single individual, if, on account of some special circumstances or reasons applicable to him, and not applicable to others, that single individual may be treated as a class by himself. It should be presumed that legislature has correctly appreciated the need of its people and that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds. There is further presumption in favour of the legislature that legislation had been brought with the knowledge of existing conditions. The good faith on the legislature is to be presumed, but if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discrim....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of course, that freedom implies or involves a guaranteed right to recognition also." 12. In Smt. Damyanti Naranga v. The Union of India & Ors., AIR 1971 SC 966, this Court examined question related to the Hindi Sahitya Sammelan, a Society registered under the Societies Registration Act, 1860. The Parliament enacted the Hindi Sahitya Sammelan Act under which outsiders were permitted to become members of the Sammelan without the volition of the original members. This court while examining its validity held that any law altering the composition of the Association compulsorily will be a breach of the right to form association because it violated the composite right of forming an association and the right to continue it as the original members desired. The Court held as follows : "It is true that it has been held by this Court that, after an Association has been formed and the right under Art.19(1)(c) has been exercised by the members forming it, they have no right to claim that its activities must also be permitted to be carried on in the manner they desire. Those cases are, however, inapplicable to the present case. The Act does not merely regulate the administratio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not included in the literal meaning of Article 19(1)(c) but which are sought to be included therein as flowing therefrom i.e. every right which is necessary in order that the association brought into existence fulfils every object for which it is formed, the qualifications therefor, would not merely be those in clause (4) of Article 19, but would be more numerous and very different. Restrictions which bore upon and took into account the several fields in which the associations or unions of citizens might legitimately engage themselves, would also become relevant. Therefore, the freedom guaranteed under Article 19(1)(c) is not restricted merely to the formation of the association, but to the effective functioning of the association so as to enable it to achieve the lawful objectives. 15. In The Tata Engineering and Locomotives Co.Ltd. v. The State of Bihar & Ors., AIR 1965 SC 40, Constitution Bench of this Court held, that a fundamental right to form the association cannot be coupled with the fundamental right to carry on any trade or business. As soon as citizens form a company, the right guaranteed to them by Article 19(1)(c) has been exercised, and no restrain has b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....titution, should ordinarily be manifestly arbitrary. There must be a case of substantive unreasonableness in the statute itself for declaring the act ultra vires of Article 14 of the Constitution. (Vide: Ajay Hasia etc. v. Khalid Mujib Sehravardi & Ors. etc. AIR 1981 SC 487; Reliance Airport Developers (P) Ltd. v. Airports Authority of India & Ors., (2006) 10 SCC 1; Bidhannagar (Salt Lake) Welfare Assn. v. Central Valuation Board & Ors. AIR 2007 SC 2276; Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v. Srinivasa Resorts Limited & Ors. AIR 2009 SC 2337; and State of Tamil Nadu & Ors. v. K. Shyam Sunder & Ors. (2011) 8 SCALE 474). 18. In State of Andhra Pradesh & Anr. v. P. Sagar, AIR 1968 SC 1379, this Court examined the case as to whether the list of backward classes, for the purpose of Article 15(4) of the Constitution has been prepared properly, and after examining the material on record came to the conclusion that there was nothing on record to show that the Government had followed the criteria laid down by this Court while preparing the list of other backward classes. The Court observed as under: "Honesty of purpose of those who prepa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an understandable basis having regard to the object of the statute. The court will not question its validity on the ground of lack of legislative wisdom. Moreover, the classification cannot be done with mathematical precision. The legislature must have considerable latitude for making the classification having regard to the surrounding circumstances and facts. The court cannot act as a super-legislature...." 22. In State of Gujarat & Anr. v. Raman Lal Keshav Lal Soni & Ors., AIR 1984 SC 161, this Court while dealing with a similar issue observed as under: "......The legislature is undoubtedly competent to legislate with retrospective effect to take away or impair any vested right acquired under existing laws but since the laws are made under a written' Constitution, and have to conform to the do's and don'ts of the Constitution neither prospective nor retrospective laws can be made so as to contravene Fundamental Rights. The law must satisfy the requirements of the Constitution today taking into account the accrued or acquired rights of the parties today. The law cannot say twenty years ago the parties had no rights therefore, the requirements of the Cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....word `vest' is generally used where an immediate fixed right in present or future enjoyment in respect of a property is created. It is a "legitimate" or "settled expectation" to obtain right to enjoy the property etc. (Vide: Mosammat Bibi Sayeeda & Ors., etc. v. State of Bihar & Ors., etc., AIR 1996 SC 1936; Howrah Municipal Corporation & Ors. v. Ganges Rope Co. Ltd. & Ors., (2004) 1 SCC 663; and J.S. Yadav v. State of Uttar Pradesh & Anr., (2011) 6 SCC 570). 27. In the matter of Government of a State, the succeeding Government is duty bound to continue and carry on the unfinished job of the previous Government, for the reason that the action is that of the "State", within the meaning of Article 12 of the Constitution, which continues to subsist and therefore, it is not required that the new Government can plead contrary from the State action taken by the previous Government in respect of a particular subject. The State, being a continuing body can be stopped from changing its stand in a given case, but where after holding enquiry it came to the conclusion that action was not in conformity with law, the doctrine of estoppel would not apply. Thus, unless the act done by the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ciating the true intent of the legislature and/or the object sought to be achieved by enactment of the particular Act or for judging reasonableness of the classification made by such Act. 29. In M. Ramanathan Pillai v. State of Kerala & Anr., (1973) 2 SCC 650, this Court relied upon American Jurisprudence, 2d. at page 783 wherein it has been stated as under: "Generally, a State is not subject to an estoppel to the same extent as an individual or a private corporation. Otherwise, it might be rendered helpless to assert its powers in government. Therefore, as a general rule the doctrine of estoppel will not be applied against the State in its governmental, public or sovereign capacity." 30. In State of Kerala & Anr. v. The Gawalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. etc., (1973) 2 SCC 713, a similar view has been re-iterated by this Court observing as under: "We do not see how an agreement of the Government can preclude legislation on the subject. The High Court has rightly pointed out that the surrender by the Government of its legislative powers to be used for public good cannot avail the company or operate against the Government as equitable estoppel." Therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gal propositions. The recommendations of the House Committee and the Group of Ministers, are not based on relevant material as there was no investigation of all the co-operative societies either converted to or registered under the Act 1995. The House Committee had primarily been assigned the task to look into the three District Milk Unions namely, Visakha, Ongole and Chittoor which had been running partly on the government aids. Out of the said three milk unions, Visakha and Ongole converted under the Act 1995, while Chittoor remained under the Act 1964 throughout and the material on record reveal that it was under liquidation even prior to the constitution of the House Committee. There is nothing on record to show that the House Committee had considered either the functioning of other more than 3500 societies registered under the Act 1995, or consensus thereof arrived at by the Government, the Federation and the Unions at the meeting convened by the Chief Secretaries on 26.8.2003 alongwith other high officials of the co-operative section to solve the problems faced by the Government, the Federation and the Milk Unions within the framework of the Act 1995 and consistent with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r structure could be achieved by the Federation registering itself under the Act 1995 as decided at the meeting of cooperative milk unions convened by the Chief Secretary on 26.8.2003; and (d) even the Act 1964 does not treat Dairy Cooperatives as a separate class to be governed by a separate structure. As such from the stand point of structure and basic cooperative principles, all cooperative societies, are alike. The impugned provisions are arbitrary and violative of Article 14 as they deprived the Dairy Cooperative Societies of the benefit of the basic principles of cooperation. The amendments are contrary to the national policy on Cooperatives. They obstruct and frustrate the object of the development and growth of vibrant cooperative societies in the State. 37. After conversion into Mutually - Aided Societies under the Act 1995 with the permission of the Government as stipulated by Section 4 (3)(a), the cooperative societies originally registered under the Act 1964 cannot be treated as aided societies or societies holding the assets of the government or of the Federation. The Statement of Objects and Reasons itself shows that the government decided not to withdraw its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trar who has to approve the staffing pattern, service conditions, salaries etc. and his approval is required for taking some one from the Government on deputation, while under the Act 1995 the staff is accountable only to the society. Deputation etc. is possible only if a co-operative so desires. The size, term and composition of board fixed under the Act 1964 and the Registrar is the ultimate authority for elections etc. and he can also provide for reservations in the board. Under the Act 1995, the size, term and composition of the board depend upon bye-laws of the particular society. For admission and expulsion of a member, Registrar is the final authority under the Act 1964, while all such matters fall within the exclusive prerogative of the co-operative society under the Act 1995. The Government and other non-members may contribute share capital in the societies registered under the Act 1964, wherein members alone can contribute share capital in a society registered under the Act 1995. Mobilisation of funds of co-operative society is permissible only within the limits fixed by the Registrar under the Act 1964, while such mobilisation is permissible within the limits fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rative societies which is inconsistent with the national policy with regard to cooperative societies evolved in consultation and collaboration with the States which stands accepted by the State of A.P. and reflected in the Scheme of the Act 1995 which is based on the model law recommended by the Planning Commission of India. Thus, reverting back to the cooperative societies under the Act 1964 is a retrograding process by which the government would enhance its control of these societies registered under the Act 1995. They would be deprived not only of benefits under the said Act, but rights accrued under the Act 1995 would also be taken away with retrospective effect. 41. Cooperative law is based on voluntary action of its members. Once a society is formed and its members voluntarily take a decision to get it registered under the Act X, the registration authority may reject the registration application if conditions prescribed under Act X are not fulfilled or for any other permissible reason. The registration authority does not have a right to register the said society under Act Y or even a superior authority is not competent to pass an order that the society would be re....