REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.    3493              OF 2009 (Arising out of SLP (C) No. 13290 of 2008)

PRALHAD & ORS.     … APPELLANTS

VERSUS

DEORAO & ORS.         … RESPONDENTS

WITH CIVIL APPEAL NO.      3494            OF 2009

(Arising out of SLP (C) No. 15898 of 2008)

STATE OF MAHARASHTRA & ORS. …APPELLANTS

VERSUS  

DEORAO & ORS.              …RESPONDENTS

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. These  appeals  are  directed  against  a  judgment  and  order  dated  

6.5.2008 passed by a Division Bench of the High Court of Judicature at  

Bombay bench at Aurangabad in Writ Petition No. 1056 of 2006 whereby  

and whereunder the Writ Petition filed by the first respondent herein was  

allowed.

3. Respondent  No.  3  is  a  society  registered  under  the  Maharashtra  

Cooperative Societies Act, 1960 (for short, “the Act”).  It was registered  

on or about 4.12.1991.  The State of Maharashtra is said to have been  

holding share capital of Rs.26 lakhs therein.  Its contribution is said to be  

running into several crores of rupees.  No effort, however, was made for  

running and managing its affairs for a long time.  As no action had been  

taken for the said purpose, no share was collected and no meeting was  

held.   

4. On or about 6.6.1995, the State of Maharashtra appointed a first  

Committee to manage the affairs of the society consisting of 13 persons  

for a period of three years.  The said Committee is also said to have taken  

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no step for effective functioning of the said cooperative society.  No plant  

and machinery was acquired nor any other step was taken for erection of  

the mill.  The term of the said Committee was extended by an order dated  

6.7.1998 upto 3.6.2000.  It was continued till 2002.   

5. The  Assistant  Registrar,  Cooperative  Society,  Vasamat  was  

thereafter appointed as an Administrator.  It is stated that some plants and  

machinery had been purchased in the year 2000 but they had been lying  

idle.  Theft of articles belonging to the society had also taken place on  

several occasions.  Indisputably, since 1994 no election was held.  It is  

stated  that  on  or  about  23.12.2004,  a  Special  General  Meeting  was  

convened  wherein  a  request  was  made  to  the  State  to  grant  financial  

assistance.  A request was also made to appoint an Administrative Board.  

It was furthermore resolved that no election be held unless the respondent  

No.  3  –  cooperative  society  becomes  functional.   Pursuant  thereto,  a  

proposal was forwarded to the Director of Handloom, Nagpur which in  

turn was sent to the Department of Textile of the State of Maharashtra on  

or about 18.1.2005.  

6. The State Government sanctioned a sum of Rs.544 lakhs towards  

erection of the spinning mill as the Government share capital.  

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7. First Respondent filed a Writ Petition before the High Court, which  

was marked as Writ Petition No. 1056 of 2006, inter alia, for a direction  

upon  the  respondent  No.5  herein  to  conduct  election  of  the  Board  of  

Directors of the Society within a fixed time frame.  The said writ petition  

was subsequently amended and a further prayer was added for quashing  

and setting aside an order dated 29.6.2007 passed by the respondent No. 6  

herein appointing a nominated Board of Administrators of the Society till  

19.6.2009.   

8. Indisputably, the State of Maharashtra during pendency of the said  

Writ Petition issued a Government Order dated 27.06.2007, which was  

not produced before the High Court.    However, after the judgment was  

reserved, the State had produced before us a copy of the said order dated  

27.6.2007 issued by the Desk Officer, Cooperation Marketing & Textile  

Department,  Government  of  Maharashtra,  which  is  to  the  following  

effect:

“No. : Spinning  Mill  1407/PK69/Tex.1(V)  Mantralaya, Mumbai  –  32,  Dt.  27.06.2007

Sub: Appointment of Administrative Board to  the Rokdeshwar Sahakari Soot Girni Ltd.  Basamathnagar.

Ref.: Your  letter  No.  Desk-6(4)A/Soot  Giri/7641/2007 dated 11th May 2007.

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The  Administrative  Board  appointed  by  the  State  Government  vide  order  dated  04.10.2005  to  the  Rokdeshwar  Sahakari  Soot  Girni Ltd., Basantnagar is hereby dissolved, and  in  exercise  of  powers  u/s  157  of  the  Maharashtra  Cooperative  Societies  Act,  1960  the  State  Government  has  appointed  Administrative Board of following persons, who  are  eligible  for  appointment  as  Administrator,  for a period of 2 years i.e. till 19.06.2009.

“Sr.  No.

Name Address

1. Shri Prahlad Ramrao  Rakhude

R/o Aral Tal.  Basmat District  Hingoli.

2. Shri Chandrakant @  Rajendra Ramakant  Navghere  

R/o Vabhulgaon,  Tal. Basmat, Dist.  Hingoli.

3. Shri Rajesh @ Raju  Niranjan Ingole.

R/o Kurunda, Tal.  Basmat Dist.  Hingoli.

4. Shri Kaluram Devji  Kurunde

R/o Sirli, Tal.  Basmat Dist.  Hingoli

5. Shri Chandramuni  Namdev Mhaske.

R/o Chikhli, Tal.  Basmat Dist.  Hingoli”

2. An amount of Rs.1.50 Lakhs was given to  soot Girni by Purna Sahakari Sakhar Karkhana  for  purchase of shares of Soot Girni  however,  the said amount was taken back by members of  purna S.S.K. Ltd.  Now it is the responsibility of  new Administrative Board to  see that  the  said  

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amount of Rs.1.50 lakhs is transferred back to  soot Girni.”

The Director of Textiles, Government of Maharashtra, respondent  

No.  6  herein,  thereafter  issued an order  on  or  about  29.6.2007,  which  

reads as under:

“In  exercise  of  powers  under  Section  78(1)(a)(ii) of the Maharashtra Coop. Societies  Act,  1960  and  in  exercise  of  powers   under  Maharashtra  Government,  Agriculture  and  Cooperation  Department,  Mumbai,  Govt.  Resolution  No.  CSG/1071/C3  dated  22.3.1972  and  in  exercise  of  powers  under  Government  Resolution  No.  CSL-1493/1162/CR-47/15-C  dated  7.8.1993 of  Government  of  Maharashtra  Cooperation  and  Textile  Department  and  in  accordance  with  Government  order  dated  27.6.2007, I, Vijay Kavare, Director Textile and  Addl.  Registrar  Coop.  Societies,  Maharashtra  State, Nagpur, hereby appoint an Administrative  Board of five members in supersession of earlier  Board  of  Directors  appointed  to  the  Rokadeshwar,  Sahakari  Soot  Girni  Maryadit,  Vasmatnagar, Hingoli as per Government order  dated 4.10.2005 and order dated 5.6.2006 of the  Directorate. In accordance with the order dated  27.6.2007 of the State Government in exercise  of powers under Section 157 of the Maharashtra  Coop.  Societies  Act,  1960  the  term  of  the  Administrative Board shall be till 19.6.2009.

“Sr.  No.

Name Address

1. Shri Prahlad Ramrao R/o Aral Tal.  

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Rakhude Basmat District  Hingoli.

2. Shri Chandrakant @  Rajendra Ramakant  Navghere  

R/o Vabhulgaon,  Tal. Basmat, Dist.  Hingoli.

3. Shri Rajesh @ Raju  Niranjan Ingole.

R/o Kurunda, Tal.  Basmat Dist.  Hingoli.

4. Shri Kaluram Devji  Kurunde

R/o Sirki, Tal.  Basmat Dist.  Hingoli

5. Shri Chandramuni  Namdev Mhaske.

R/o Chikhli, Tal.  Basmat Dist.  Hingoli”

Administrative  Board  shall  exercise  all  the  powers of the Board of Directors as per the by- laws  of  the  Spinning  Mill  and  they  shall  discharge their duties under the supervision of  Directorate.  It is the responsibility of the newly  appointed administrative board to persuade the  members of the Purna Coop. Sugar Factory to  secure redeposit  Rs.150.00 lacs amount, which  was withdrawn, by the said members of Purna  Sakhar Karkhana from the Spinning Mill.”

9. By reason of the impugned judgment, the High Court quashed the  

said  order  dated  29.6.2007  directing  the  appellants  herein  to  hold  the  

election of the said Society.  

10. Appellants are, thus, before us.

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11. Mr. Shekhar Naphade, learned Senior Counsel appearing on behalf  

of  appellants  would  contend  that  the  High  Court  committed  a  serious  

error  in  passing  the  impugned  judgment  insofar  it  failed  to  take  into  

consideration  that  as  in  terms  of  Section  157  of  the  Act,  the  State  

Government  has  the  legislative  power  to  exempt  societies  from  the  

provisions  thereof,  the question of applicability of Section 73 (1A) (b)  

thereof does not arise.  It was urged that the power conferred by Section  

157 being a power of delegated legislation, the State of Maharashtra was  

entitled to exercise the same at any point of time and unless and until the  

same was declared to be ultra vires, the directions to hold elections could  

not have been issued.  

12. Dr. R.R. Deshpande,  learned counsel  appearing on behalf  of the  

respondents, however, supported the impugned judgment.  

13. The Act was enacted to consolidate and amend the law relating to  

cooperative societies in the State of Maharashtra.  It was enacted with a  

view  to  providing  for  the  orderly  development  of  the  co-operative  

movement in the State  of Maharashtra in accordance with the relevant  

directive  principles  of  State  policy  enunciated  in  the  Constitution  of  

India. Chapter VI of the Act provides for property and fund of Societies.  

Chapter VII thereof provides for management of Societies.  Section 72  

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mandates that the final authority of every society shall vest in the general  

body of members in general meeting, summoned in such a manner as may  

be  specified  in  the  by-laws.   Section  73  of  the  Act  provides  that  the  

management  of  every society shall  vest  in  a  committee,  constituted  in  

accordance with the Act, the rules and by-laws, which shall exercise such  

powers  and  perform  such  duties  as  may  be  conferred  or  imposed  

respectively  by  the  Act,  the  rules  and  the  by-laws  framed thereunder.  

Section  73  (1AB)  makes  the  members  of  the  Committee  jointly  and  

severally responsible for all the decisions taken by the committee during  

its  term relating  to  the  business  of  the  society.   Sub-Section  (1A)  of  

Section 73 of the Act, however, provides for a non-obstante clause.  It  

reads as under:-

“(1A) Notwithstanding  anything  contained  in  this  Act,  the  rules  made  thereunder  or  in  the  bye-laws of any society or class of societies,--

(a) the  first  general  meeting  of  a  society shall  be convened within three months  from the  date  of  its  registration  to  appoint  a  provisional  committee  and  to  transact  other  business as may be prescribed.  The term of the  members of such provisional committee shall be  for a period of one year from the date on which  it  has  been  first  appointed  or  till  the  date  on  which a regular committee is duly constituted in  accordance with the provisions  of  the rules  or  bye-laws  made  under  this  Act,  whichever  is  earlier; and all the members of such provisional  committee  shall  vacate  office  on  the  date  of  

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expiry of such period or such constitution of the  committee.

(b) notwithstanding  anything  contained  in  clause  (a),  the  provisional  committees for the Co-operative Sugar Factories  and Co-operative Spinning Mills and such other  class of societies, as the State Government may,  by  special  or  general  order,  in  the  Official  Gazette,  specify  in  this  behalf,  shall  be  appointed  by  the  State  Government;  and  the  members thereof shall  hold office for a period  of three years, which period may be extended by  one year,  at  a time, so however that,  the  total  period  shall  not  exceed  five  years,  in  the  aggregate:

Provided that, the State Government shall  have the power to change or reconstitute  such  committee or, any or all members thereof at its  discretion even before the expiry of the period  for  which  a  member  or  members  were  nominated thereon:

Provided  further  that,  the  member  or  members  assuming  office  on  such  change  or  reconstitution of the committee shall hold office  for  the  period  for  which  the  provisional  committee has been appointed under this clause.

(c) pending the first constitution of the  committee  of  a  society,  the  provisional  committee  of  the  society  shall  exercise  the  powers and perform the duties of the committee  of such society as provided in this Act, the rules  and bye-laws and make necessary arrangements  for holding election of the committee, before the  expiry of its term.”

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Section 157 of the Act, however, empowers the State by general or  

special order to exempt any society or class of societies other than co-

operative credit structure entity from any of the provisions of Act, or of  

the rules  made thereunder,  and/or  to direct  that  such provisions  would  

apply to such society or class of societies other than co-operative credit  

structure  entity  with  such  modifications  not  affecting  the  substance  

thereof  as  may  be  specified  therein.   The  proviso  appended  thereto,  

however, provides that no order to the prejudice of any society shall be  

passed, without an opportunity being given to such society to represent its  

case.  

14. The Act was evidently enacted for the purpose of giving effect to  

the cooperative movement.  It based on a constitutional policy.   

Clauses (b) and (c) of Article 39 of the Constitution of India read  

as under:

“39. Certain  principles  of  policy  to  be  followed  by  the  State.—The  State  shall,  in  particular, direct its policy towards securing—

(a) ……….

(b) that  the  ownership  and  control  of  the  material  resources of the community are so distributed as best  to subserve the common good;

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(c) that the operation of the economic system does not  result  in  the  concentration  of  wealth  and  means  of  production to the common detriment;”

The preamble of the Act clearly shows that the same was enacted  

with a view to give effect to the provisions contained in Part IV of the  

Constitution of India.  Indisputably, the State is empowered under the Act  

to issue a general or special order directing exemption from application of  

the provisions of the Act.  It must, however, be done in an exceptional  

situation.   An  order  by  the  State  providing  for  a  power  of  delegated  

legislation must be exercised in the manner laid down therein.  An order  

in  terms  of  Section  157  of  the  Act  must  be  issued  in  terms  of  the  

provisions contained in Article 162 of the Constitution of India.  

15. Mr. Naphade submitted that while considering a similar provision,  

a Division Bench of this Court in The Registrar of Co-operative Societies,  

Trivandrum & Anr. vs. K. Kunjabmu & ors. [(1980) 1 SCC 340], held as  

under:

“12. The policy of the Act is there and so are  the  guidelines.  Why  the  legislation?  “To  facilitate  the  formation  and  working  of  Cooperative  Societies.”  Cooperative  Societies,  for what purpose? “For the promotion of thrift,  self-help  and  mutual  aid.”  Amongst  whom?  “Amongst agriculturists and other persons with  common economic  needs.”  To what  end?  “To  bring  about  better  living,  better  business  and  

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better  methods  of  production.”  The  objectives  are  clear,  the  guidelines  are  there.  There  are  numerous  provisions  of  the  Act  dealing  with  registration of societies, rights and liabilities of  members,  duties  of  registered  societies,  privileges  of  registered  societies,  property and  funds  of  registered  societies,  inquiry  and  inspection,  supersession  of  committee  of  societies, dissolution of societies, surcharge and  attachment,  arbitration,  etc.  We  refrain  from  referring to the details of the provisions except  to say that they are generally designed to further  the  objectives  set  out  in  the  preamble.  But,  numerous  as  the  provisions  are,  they  are  not  capable of meeting the extensive demands of the  complex  situations  which  may  arise  in  the  course  of  the  working  of  the  Act  and  the  formation and the functioning of the societies.  In fact, the too rigorous applications of some of  the provisions of the Act may itself occasionally  result in frustrating the very objects of the Act  instead of advancing them. It is to provide for  such situations that the Government is invested  by  Section  60  with  a  power  to  relax  the  occasional  rigour  of  the provisions  of  the Act  and to advance the objects of the Act. Section  60 empowers the State Government to exempt a  registered society from any of the provisions of  the  Act  or  to  direct  that  such  provision  shall  apply  to  such  society  with  specified  modifications.  The  power  given  to  the  government under Section 60 of the Act is to be  exercised  so  as  to  advance  the  policy  and  objects of the Act, according to the guidelines  as may be gleaned from the preamble and other  provisions which we have already pointed out,  are clear.”

16. The State of Maharashtra before the High Court as also before us  

did  not  bring  on  record  any  material  to  show  as  to  under  what  

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circumstances the said power was exercised.  The necessity to exercise  

the said power has not been disclosed.  Exercise of such power, however,  

indisputably is a conditional one.  The proviso appended to Section 157  

mandates an opportunity of being heard. There is nothing on record to  

show that such an opportunity was provided.  We fail to understand as to  

why the copy of the Government Order as such is not available.  In whose  

name the Government Order was issued is not known.  Such a power is  

not  to  be  exercised  only  for  the  purpose  of  continuation  of  the  

Administrator for a period longer than the one specified under the Act.  If  

the intention and purpose of the State was merely to keep the affairs of  

the society under its control, it could have done so only for the maximum  

period specified under the Act.  It was bound to hold election within the  

maximum period  provided for  therein.   It  in  the  name of exercising  a  

special power could not have sought to achieve indirectly what it could  

not have done directly.  We do not see any reason as to why such a drastic  

power had to be taken recourse to during pendency of the Writ Petition.  

Had  before  the  High  Court  the  said  order  been  produced,  the  first  

respondent herein could have even questioned the validity thereof on any  

ground other than the one urged before the High court.  

17. In view of the fact that we are satisfied that the purported order  

passed by the State under Section 157 of the Act was not in accordance  

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with law, in our opinion, no case has been made out for interference with  

the impugned judgment.  These appeals are dismissed accordingly with  

costs.  Counsel fee in each case assessed at Rs.50,000/-.

.……………………………….J. [S.B. Sinha]

...…………………………..…J.   [Cyriac Joseph]

NEW DELHI; MAY 12, 2009

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