TaxTMI 
TaxTMI 
2015 (3) TMI 1430
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....Raval, learned Senior Counsel led the arguments on behalf of the Appellant. Shri Tushar Mehta, Additional Solicitor General, Dr. Rajeev Dhawan, Shri Ashok Desai and Shri V. Giri, learned Senior Counsel, Shri Sanjay R. Hegde and Shri B.S. Patel, learned Counsel, led the arguments on behalf of the Respondents. 5. International Cooperative Alliance Statement on the Cooperative Identity was adopted in Manchester, United Kingdom on 23.09.1995. The 'cooperative' is defined as: A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. (Emphasis supplied) 6. The Statement also provides for 'values' on which cooperatives should model themselves, which reads as follows: Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others. (Emphasis supplied) 7. The Statement further provides f....
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....vely and strengthen the co-operative movement by working together through local, national, regional and international structures. 7th Principle: Concern for Community Co-operatives work for the sustainable development of their communities through policies approved by their members. (Emphasis supplied) 8. The cooperative movement in India started at the beginning of the 20th century. Though the movements were also based on some of the values and principles stated above, it appears that the cooperatives in India did not have effective autonomy, democratic functioning and professional management. The National Policy on Cooperatives announced by the Department of Agriculture and Cooperation, Ministry of Agriculture, Government of India adopted in March, 2002, is wholly based on the definition, values and principles stated above. 97th Amendment to the Constitution of India, in fact, gave a constitutional frame to this policy. 9. Apart from providing for the right to form cooperative societies to be a fundamental right Under Article 19 of the Constitution of India and insertion of Article 43B under the Directive Principles of State Policy on promotion of ....
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....th the State Governments have been held at several occasions and in the conferences of State Co-operative Ministers. A strong need has been felt for amending the Constitution so as to keep the co-operatives free from unnecessary outside interferences and also to ensure their autonomous organisational set up and their democratic functioning. 3. The Central Government is committed to ensure that the co-operative societies in the country function in a democratic, professional, autonomous and economically sound manner. With a view to bring the necessary reforms, it is proposed to incorporate a new Part in the Constitution so as to provide for certain provisions covering the vital aspects of working of co-operative societies like democratic, autonomous and professional functioning. A new article is also proposed to be inserted in Part IV of the Constitution (Directive Principles of State Policy) for the States to endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies. The proposed new Part in the Constitution, inter alia, seeks to empower the Parliament in respect of multi-State co-operative soci....
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....ich the direction and control of the management of the affairs of a society is entrusted to; (Emphasis supplied) * Article 243ZH(c) defines "cooperative society": 243ZH(c) "co-operative society" means a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State; * "Office bearer" is Under Article 243ZH(e): "243ZH(e) "office bearer" means a President, Vice-President, Chairperson, Vice-Chairperson, Secretary or Treasurer of a co-operative society and includes any other person to be elected by the board of any co-operative society: * Article 243ZJ provides for the number and term of members of the board and its office bearers: 243ZJ. (1) The board shall consist of such number of directors as may be provided by the Legislature of a State, by law: Provided that the maximum number of directors of a co-operative society shall not exceed twenty-one: Provided further that the Legislature of a State shall, by law, provide for the reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on board of every....
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....nsistent with the Constitution will be inoperative thereafter. Articles 43B and 243ZT are mandates to all the States and the competent authorities to structure cooperative societies as conceived in the Constitution of India, if not already there. Therefore, we have to see whether the Act, Rules or Bye-laws contain any provision for democratic functioning. 13. The first legislation on cooperative movement in India was the Cooperative Credit Societies Act, 1904 and, thereafter, the cooperative societies emerged in India as State sponsored/promoted institutions. The main objective was only credit intended to relieve the poor agriculturists from the clutches of moneylenders. The first urban cooperative credit society under the Act of 1904 was registered in Kanjivaram in erstwhile Madras province [Brief History of Urban Cooperatives" adapted from a paper by O.P. Sharma published on Reserve Bank of India website www.rbi.org.in/scripts/briefhistory.aspx]. The traits of democracy were present in the very first legislation through the principle "one man, one vote". Since the first legislation was limited to the credit societies, a new legislation was introduced 8 years later as "Cooperat....
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.... Constitution, there has to be a Board of elected representatives, which may be called Board of Directors or Governing Body or a Managing Committee, etc., to which the members entrust the direction and control of the management of the affairs of the society. That representative body selects one among the elected representatives as its Chairman or any other office bearer, as the case may be. Selection is the act of carefully choosing someone as the most suitable to be the leader or office bearer. Thus, there is a lot of difference between election of delegates/representatives to constitute a body and selection of a person by the body from amongst the elected members to be the leader. It is to be borne in mind that the management and control of the society is entrusted to the representative body, viz., the Board of Directors and that the Chairperson elected by the Board of Directors is the Chairperson of the society and not of the Board of directors. 18. In Bhanumati and Ors. v. State of Uttar Pradesh through its Principal Secretary and Ors. (2010) 12 SCC 1, the cooperative principles governing democratic institutions have been discussed in detail; no doubt while dealing with the ....
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....whom the co-sailors have no confidence. 21. If a person has been selected to an office through democratic process, and when that person looses the confidence of the representatives who selected him, those representatives should necessarily have a democratic right to remove such an office bearer in whom they do not have confidence, in case those institutions are viewed under the Constitution/statues as democratic institutions. 22. In Bhanumati case (supra), at paragraph-67, this Court elaborated on this principle: 67. Any head of a democratic institution must be prepared to face the test of confidence. Neither the democratically elected Prime Minister of the country nor the Chief Minister of a State is immune from such a test of confidence under the Rules of Procedure framed Under Articles 118 and 208 of the Constitution. Both the Prime Minister of India and Chief Ministers of several States heading the Council of Ministers at the Centre and in several States respectively have to adhere to the principles of collective responsibilities to their respective houses in accordance with Articles 75(3) and 164(2) of the Constitution. 23. In Pratap Chandra Mehta case (supra....
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.... cannot be silent. If the statute is silent or imprecise on the requirements under the Constitution, it is for the court to read the constitutional mandate into the provisions concerned and declare it accordingly. Article 243ZT has given a period of one year to frame/reframe the statues in consonance with Part IXB and thereafter, i.e., with effect from 12.01.2013, those provisions which are inconsistent with Part IXB, cease to operate. 26. Silence in Constitution and abeyance as well has been dealt extensively by Michael Foley in his celebrated work "The Silence of Constitutions". To quote from the Preface: Abeyances refer to those constitutional gaps which remain vacuous for positive and constructive purposes. They are not, in any sense, truces between two or more defined positions, but rather a set of implicit agreements to collude in keeping fundamental questions of political authority in a state of irresolution. Abeyances are, in effect, compulsive hedges against the possibility of that which is unresolved being exploited and given meanings almost guaranteed to generate profound division and disillusionment. Abeyances are important, therefore, because of their capac....
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....etation of Statues, Twelfth Edition, page-33]. " 4. According to Lord Mersey in Thompson (Pauper) v. Goold and Co. [[1910] A.C. 409]... "It is a strong thing to read into an Act or Parliament words, which are not there, and in the absence of clear necessity, it is wrong to do". In the case of cooperative societies, after the Ninety Seventh Amendment, it has become a clear or strong necessity to do the strong thing of reading into the legislation, the constitutional mandate of the cooperative societies to be governed as democratic institutions.... "The constitutional provisions have to be construed broadly and liberally having regard to the changed circumstances and the needs of time and polity"5. 29. Article 243ZT of the Constitution requires the laws relating to cooperative societies in force in States prior to the commencement of the Amendment Act to be in tune with and in terms of the constitutional concept and set up of cooperative societies. In fact, a period of one year has been provided in the Constitution from the commencement of the amendment for the required amendment or repeal by the competent legislature or by the competent authority, of laws which are incon....
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.... interest subject to the provisions of the Act or such act as shall hereafter take its place and to any rules which may be passed by the State Government in pursuance of the said Act and subject also to these Bye-Laws and/or any Bye-law which may be duly made by the Federation. 32. Thus, the entire administration, management and control of the Federation are vested in the Board of Directors as per the Bye-law. This is in terms of proviso to Section 73 of the Gujarat Cooperative Societies Act, 1961 (hereinafter referred to as "the Act"). The Section reads as follows: Section 73: Final authority of society - Subject to the provisions in this Act and the rules, the final authority of every society shall vest in the general body of the members in general meeting, summoned in such a manner as may be specified in the bye-laws: Provided that, where the bye-laws of a society provide for the election of delegates of such members, the final authority may vest in the delegates of such members elected in the prescribed manner, and assembled in general meeting. 33. The General Body of the first Respondent-Federation, in terms of Bye-law 13.1 comprises of the following: ....
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....ect of facilitating the operations of any such society, may be registered under this Act: Provided that it shall not be registered if, in the opinion of the Registrar, it is economically unsound, or its registration may have an adverse effect upon any other society, or it is opposed to, or, its working is likely to be in contravention of public policy. 38. A conjoint reading of all the provisions under the Act and the Bye-laws of the Society would clearly show that the functional authority of the first Respondent-Federation vests in the Board of Directors. The entire administration, management and control of the Federation is with the Board. Thus, the Board of Directors is bound to do all such acts and things as may be necessary for the proper management of the Federation. The Chairperson of the first Respondent is elected by the Board for a term of three years and after the 97th Amendment to the Constitution, the term is five years. When the post of Chairperson falls vacant, the Board is bound to elect a new Chairperson for the remaining term. The post of Chairperson may fall vacant on account of variety of reasons like resignation, death or cessation of membership in ....
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....the provisions of the Act, the Rules and the bye-laws, the Legislature obviously did not intend to provide for the removal of an office-bearer of a committee by way of passing of 'no-confidence' motion against him. 42. In Hindurao Balwant Patil and Anr. v. Krishnaro Pashuram Patil and Ors.AIR [1982 Bombay 216], the High Court of Bombay took the view that: 10...The Act, Rules and the bye-laws do no confer any right upon the members of the Board of Directors to remove the Chairman and the Vice-Chairman by passing a mere vote of no confidence. Therefore it will not be proper to confer such a wider power upon the board of directors by taking recourse to the doctrine of implied or inherent power. 43. In Jagdev Singh v. The Registrar. Co-operative Societies. Haryana and Ors. [AIR 1991 P and H 149], the Full-Bench of High Court of Punjab and Haryana held as follows: 22...the answer to the question posed in the beginning of the judgment, is that in absence of any provision in the Punjab Co-operative Societies Act, 1961, Rules and the Bye-laws made thereunder (as also in the Haryana Cooperative Societies Act, 1984, Rules and the Bye-laws made thereunder) for ....
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....ate of the order and such officer may stand disqualified accordingly. 46. The provision simply deals with removal for misconduct or persistent default/non-performance. A person with good conduct may still not earn the confidence of the people who selected him to the office. The very concept of cooperation is to work jointly towards the same end. Unless there is cooperativeness among the elected cooperators who constitute the Governing Body for achieving the object for which the society is constituted and for which those representatives are elected by the members entrusting them with the management of affairs of the society, there will be total chaos. Cooperation among the cooperators is the essence of democratic functioning of a cooperative society. If there is no democracy in a cooperative society, it ceases to be a cooperative society as conceived by the Constitution of India under the Ninety Seventh Amendment. 47. There is no quarrel with the well-settled proposition that a right to elect is not a fundamental right nor a common law right; it is a statutory right, and any question relating to election has to be resorted within the four corners of the Act as held by this Cou....
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....stion within the four corners of the statute. What does the Act say? 48. In the background of the constitutional mandate, the question is not what the statute does say but what the statute must say. If the Act or the Rules or the Bye-laws do not say what they should say in terms of the Constitution, it is the duty of the court to read the constitutional spirit and concept into the Acts.... "In so far as in its Act Parliament does not convey its intention clearly, expressly and completely, it is taken to require the enforcement agencies who are charged with the duty of applying legislation to spell out the detail of its legal meaning. This may be done either-(a) by finding and declaring implications in the words used by the legislator, or (b) by regarding the breadth or other obscurity of the express language as conferring a delegated legislative power to elaborate its meaning in accordance with public policy (including legal policy) and the purpose of the legislation"[Bennion on Statutory Interpretation by Francis Bennion, 6th Edition, p. 136]. 49. The conventional view is that the legislature alone makes the law. But as Bennion puts it: The truth is that co....
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....makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases. 52. In Rattan Chand Hira Chand v. Askar Nawaz Jung (Dead) by L.Rs. and Ors. [(1991) 3 SCC 67], this Court, at paragraph-17 of the judgment, has also dealt with the principles in following words: 17....The legislature often fails to keep pace with the changing needs and values nor is it realistic to expect that it will have provided for all contingencies and eventualities. It is, therefore, not only necessary but obligatory on the courts to step in to fill the lacuna. When courts perform this function undoubtedly they legislate judicially. But that is a kind of legislation which stands implicitly delegated to them to further the object of the legislation and to promote the goals of the society. Or to put it negatively, to prevent the frustration of the legislation or perversion of the goals and values of the society. So long as the courts keep themselves tethered to the ethos of the society and do not travel off i....