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PETITIONER: SAHKARI SAMITIYAN VYAVASTHAPAKUNION ETC.

       Vs.

RESPONDENT: STATE OF RAJASTHAN & ORS.

DATE OF JUDGMENT:       01/03/1996

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. G.B. PATTANAIK (J)

CITATION:  JT 1996 (3)   292        1996 SCALE  (2)795

ACT:

HEADNOTE:

JUDGMENT:                             WITH              CIVIL APPEAL NOS. 4174-75 OF 1996        [Arising out of SLP (C) Nos. 14778-79 of 1995]                       J U D G M E N T K. Ramaswamy,J.      Leave granted in all the special leave petitions.      These appeals  arise from  the judgment and order dated May 9,  1991 passed in Writ Petition No.1018-20 of 1979 by a Division Bench  of the  Rajasthan High  Court. The facts are fairly not in dispute.      Paid Secretaries were recruited by the Rajasthan Credit Co-operative  Institutions   Cadre  Authority  Limited  [for short, the  ’Cadre  Authority  Society’]  constituted  under Section 4  [1] of  the Rajasthan Co-operative Societies Act, 1965 [for  short, the  ’Act’]. They  were appointed  in  the respective  District   Co-operative  Banks  initially  under Recruitment  and  Service  Conditions  of  the  Managers  of Agriculture Credit  Cooperative Societies  Rules, 1977 [1977 Rules] and  thereafter under  Agriculture Cooperative Credit Societies Service  Rules, 1969 [for short, the ’1969 Rules’] by the  Managers of  the District Cooperative Banks and were sought to  be  posted  to  the  Primary  Agriculture  Credit Cooperative Societies  [for  short,  the  ’PACS’]  fastening liability of  their salary  on the  PACS who have challenged the validity  of the constitution of Cadre Authority Society and also  the power  of the  Registrar  of  the  Cooperative Societies [for  short, the  ’Registrar] to  make  the  rules calling upon PACS to contribute to the Manager’s Salary Fund under Central  Cooperative Bank  Rules, 1969 [for short, the "Bank Rules"].  The Division  Bench has  held that the Cadre Authority Society  cannot be  registered  as  a  cooperative society under Section 4 of the Act, the Bank Rules are ultra vires the  powers of  the Registrar  under Rule  41  of  the Cooperative Societies Rules, 1966 [for short, the "Rules].      S/Shri R.K.  Jain, Rajiv  Dhavan and  Jitendra  Sharma, learned senior counsel appear for these Unions and Managers.

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Pending these appeals, pursuant to the permission granted by this Court,  the Government framed the Conditions of Service of  the  Managers/Assistant  Managers  of  the  Agricultural Credit Cooperative Societies Rules, 1995 and placed the same on record.  The appellants are not agreeable to those Rules. Consequently, the  learned counsel have contended that under Section  4   [1],  Cadre  Authority  Society  is  a  society regulating facilitation  of disbursement of the loans by the PACS in terms of cooperative movement for which PACS came to be registered  under the  Act. The  Cadre Authority  Society came to be registered pursuant to the recommendation made by Datey Committee which has gone into the credit structure and proper utilization  of the  loans to the agriculturists made available by  the State  Government and  distributed through the State  Central Cooperative  Credit Bank  to the District Societies who  in turn  distribute the  loans to  PACS.  For their  coordination,   supervision  and  proper  utilization thereof   the   Managers\Assistant   Managers   [hereinafter referred to  as the  paid Secretaries] are competent persons to work  as liaison  between the  PACS and their members and the District  Banks and  Central Bank.  The Registrar  under Rule 41  of the  Rules read with Section 147 [2] and Section 148 [2]  (xxx) of  the Act  is  empowered  to  regulate  the service conditions  of paid  Secretaries  and  to  prescribe qualifications. Consequently,  the Cadre  Authority  Society registered under Section 4(1) of the Act is a valid society. It is  also contended that the 1969 Rules prescribe the mode of recruitment,  method of  appointment and  control of  the Managers. Bank  Rules prescribe  the amounts  collected from PACS to pay their salaries. Therefore, the PACS are bound to contribute towards  the salary  and allowances  of the  paid Secretaries. Shri  Jitendra Sharma  further  contended  that they are  the members  of the  PACS and that, therefore, the PACS are  bound by  the Bank  Rules. Shri  Aruneshwar Gupta, learned counsel  appearing for  the State contended that the Registrar has  no power  to make Bank Rules nor has he power to  direct  the  PACS  to  contribute  for  the  salary  and allowances  of   the  paid   Secretaries.  The  High  Court, therefore, was  right in  recording  the  findings  in  that behalf.      The question, therefore, is: whether the appellants are right in  their contentions?  With a  view to appreciate the contentions, the  first question  that  arises  is:  whether Cadre Authority  Society  could  be  a  cooperative  society registered under  Section 4(1)  of the  Act. Section  4  [1] reads thus:      "4  [1].  Societies  which  may  be      registered  and   classified  under      this Act: Subject to the provisions      of this  Act, a Cooperative Society      which   has    its   objects    and      accordance  with   the  cooperative      principles,   or    a   cooperative      society established with the object      of facilitating  the operations  of      such societies,  may be  registered      under this Act".      The  marginal   note  indicates   that  the  classified societies are to be registered under the Act. Subject to the provisions of  the Act,  a cooperative society which has its object the  promotion of  the  economic  interests  of  "its members" in accordance with the cooperative principles, or a cooperative  society   established  with   the   object   of "facilitating the  operations of  such  societies",  may  be registered under  the  Act.  The  Cadre  Authority  Society,

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admittedly, does  not come under the first limb of Section 4 [1]. The  contention is  that since  the object of the Cadre Authority Society  is to  facilitate the  operations of  the PACS, it  is a  cooperative society egistered under the Act. In support  thereof, Sri  Jain placed  the model bye-laws as part of  the record.  The model bye-laws would indicate that membership of  a society  consists of A Class members, viz., individuals who  are above  the age  of 18 years and B Class members, viz.,  institutions who  are admitted as members of the society.  The institutions are lending societies. One of the objects  is to  recruit paid Secretaries to the District Cooperative Societies.  At this  stage, it  is necessary  to mention that  the cooperative structure is built upon three- tier system, viz., PACS consisting of individual members, at the grass-root  level within  the area  of operation of that society, the  District Cooperative Societies and the Central Cooperative Bank.  It is  not in  dispute that  the District Cooperative Societies  and the  Central Cooperative Bank got the  Cadre   Authority  Society   which  is  not  a  lending institution, registered  and the  paid Secretaries,  who are otherwise  a   third  agency,  recruited  by  it.  They  are appointed  by  the  Managers  of  the  District  Cooperative Societies and are transferred by them to the PACS within the area of  the operation  of  the  District  Bank.  It  would, therefore, be  clear that  it does  not come as a society to facilitate the PACS in funding them for disbursement of loan to the members of PACS.      The question is: whether the PACS are bound to take the services of the paid Secretaries? Rule 41 of the Rules reads thus:      "41.  Officers   and  employees  of      cooperative   societies.    -   [1]      Notwithstanding anything  contained      in  the   bye-laws  of  society  no      Cooperative society  shall  appoint      any person  as its  paid officer or      employee   in   any   category   of      service,  unless   he  possess  the      qualifications  and  furnishes  the      security if  so  specified  by  the      Registrar from  time to  time,  for      such category  of  service  an  the      society,  or   for  the   class  of      society to  which it  belongs.  The      conditions  of   service   of   the      employees of the societies shall be      as specified by the Registrar.      [2] No  co-operative society  shall      retain in  service any paid officer      or  employees,   if  he   does  not      acquire   the   qualifications   or      furnish the security as is referred      to in sub-rule [1] within such time      as the Registrar may direct.      [3] The  Registrar may  for special      reasons, relax  in respect  of  any      paid  officer   or  employee,   the      provisions of  this rule  in regard      to  the  qualifications  he  should      possess or  the security  he should      furnish.      [4] Where in the course of an audit      under Sec.68  or an  inquiry  under      Sec.70 or an inspection under 71 or      Section 72  it is  brought  to  the

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    notice of the Registrar that a paid      officer or servant of a Society has      committed  or  has  been  otherwise      responsible  for  misappropriation,      breach of  trust or  other offence,      in relation  to  the  society,  the      Registrar may,  if in  his opinion,      there  is   prima  facie   evidence      against  such   paid   officer   or      servant and  the suspension of such      paid   officer    or   servant   is      necessary on  the interest  of  the      society direct the committee of the      society pending  the  investigation      and  disposal  of  the  matter,  to      place or  cause to  be placed  such      paid  officer   or  servant   under      suspension from  such date  and for      such period  as may be specified by      him.      [5] On  receipt of a direction from      the Registrar  under sub-rule  [4],      the committee of the society shall,      notwithstanding  any  provision  to      the Contrary in the bye-laws, place      or cause  to  be  placed  the  paid      officer or servant under suspension      forthwith.      [6] The  Registrar may  direct  the      committee to  extend from  time  to      time the  period of  suspension and      the   paid   officer   or   servant      suspended shall  not be  reinstated      except with  the previous  sanction      of  the  Registrar  whose  decision      thereon shall be final.      [7]  If   the  committee  fails  to      comply with  the  direction  issued      under servant under suspension from      such date and for such period as he      may  specify   in  the   order  and      thereupon  the   paid  officer   or      servant, as  the case may be, shall      be under suspension."      It would  thus be  clear that  notwithstanding anything contained in  the bye-laws  of the  Society, PACS  shall not appoint any person as its paid officer or employee in any of the   categories    of   service    unless   the   concerned officer/employee   is    possessed   of    the    prescribed qualifications and  security specified  by the  Registrar is furnished in  that behalf  to the Society. The conditions of the service  of  the  employees  of  the  Society  shall  be specified by the Register. The Society would retain the paid officers or  employees only on fulfillment of the conditions prescribed by  the Registrar. The paid officers or employees are the  employees governed  by the  Act, Rules and the bye- laws  of   the  Society  over  which  the  Society  has  had disciplinary power and jurisdiction, subject to the control, supervision and directions of the Registrar.      Section 147  [2] of  the Act empowers the Government to authorise the  Registrar to  exercise their  power under the Act subject  to such conditions, if any, as may be specified in that  behalf in the notification. By virtue thereof, sub- section [2]  of Section  148 gives power to the Registrar to make rules.  Clause [xxx]  of the said sub-section [2] gives

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power to  the Registrar  to prescribe  qualifications  of  a Manager, Secretary,  Accountant or  any other  officer or an employees of the society and the conditions of their service including discipline  and control.  It would  thus be  clear that the Manager, Secretary, Accountant or any other officer or employee  shall be  of the  Society;  the  conditions  of service  including   discipline  and  control  shall  be  in accordance with  the rules  made by the Registrar under Rule 41 of  the Rules.  In  other  words,  the  Registrar,  as  a delegate  of   the  Government  is  empowered  to  prescribe qualifications of  the officers or employees of the Society, viz., PACS,  District Cooperative  Societies or  the Central Cooperative Bank,  as the  case may  be, and  the respective Societies require them to appoint the officers or employees, i.e., Manager, Secretary, Accountant or any other officer or employee over  whom they  have disciplinary  and controlling power. Under its own bye-laws, the respective Societies have the power  to make  appointment under  the rules made by the Registrar in that behalf.      The question,  therefore,  emerges:  whether  the  paid Secretaries appointed by the District Cooperative Societies, recruited and  controlled by the Cadre Authority Society are the officers  or employees of the Society, i.e., PACS? It is seen that there is a dichotomy in the operational structure. The Society  is a unit by itself with its members managed by the committee  elected under  the provisions of the Act, the Rules  and   the  bye-laws   for  specified  period.  It  is empowered to  have control  and to maintain discipline  over its officers  and  employees.  The  paid  Secretaries    are admittedly not  the officers appointed to the Society and by the Society.  They are  officers appointed  by the  District Cooperative Society  by its  Manager, ’Manager’  is  defined under the  1969 Rules  to mean  "the manager appointed under these rules  and who  shall  be  Chief  Executive  and  paid employee of  the   society. Manager  shall have  no relation with the   services  of the  Bank employees.  Due to getting salary   from the Managerial fund at Bank level he shall not be entitled  for any  benefits which are being given to Bank employees. And  Society shall  not  appoint  any  person  as Manager". A  paid Secretary  is not,  therefore,  a  Manager appointed by  the PACS. It is seen that the structure of the employees is  indicated in Section 148 [2] (xxx) as Manager, Secretary, Accountant  or any  other officer  or employee of the  society.   Therefore,   in   addition   to   the   said establishment, there  cannot be  any paid  Secretary to  the Society i.e.,  PAC. Obviously, therefore, the Societies have objected that  they cannot be fastened with the liability to contribute fund  under Bank  Rules for payment of the salary of  Surveillance   Officer   appointed   by   the   District Cooperative Society  and  to  be  controlled  by  the  Cadre Authority society.  lt would,  therefore, be clear that they are outside the scope of the Cadre of PACS.      The question,  then is:  whether  the  Registrar  as  a delegate of the Government, can make rules in that behalf or create a  fund under  the Bank  Rules? It  is seen  that the power under  Rule 41  is limited  only  to  prescribing  the qualifications and conditions of service of the officers and employees enumerated  in clause  (xxx) of sub-section [2] of Section 148.  He, therefore,  has no  power  to  make  rules governing appointment  of paid  Secretaries and  to create a fund under Bank Rules for payment of salaries to them and to fasten the  liability on  the PACS.  The Registrar travelled beyond the  power delegated  to him  under the  Act. We have come across  Section  69A  of  the  Maharashtra  Cooperative Societies Act which, as amended by the statute, gives such a

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power for  creation of  a Society  as recruitment  agency to make appointment of such recruited candidates to the Primary Cooperative  Societies  and  posting  them  to  the  primary societies.  Statute  also  fastened  the  liability  on  the primary societies  to contribute  certain percentage towards salary and  allowances of  such paid Secretaries. Making the Bank Rules  or the  creation of  a fund would, therefore, be beyond the  powers of  the Registrar under Rule 41 read with Section 148 [2] (xxx) of the Act. The High Court, therefore, was clearly  right in  its  findings  that  Cadre  Authority Society is  not a society registrable under Section 4 [1] of the Act and that the Registrar has no power under Rule 41 to make Bank Rules.      The contention  of Shri  Jitendra Sharma  that they are members of PACS under 1977 Rules cannot be given countenance for the  reason that  1977 Rules  stood superseded  by  1969 Rules.  Admittedly,  they  are  not  members  nor  are  they appointed as  officers or  employees of  the PACS.  When  we called upon  the counsel to produce any order of appointment given to  the paid  Secretaries  by  any  of  the  PACS,  he conceded that  he did  not have any such letters. Therefore, they cannot  be  declared  to  be  members  or  officers  or employees of  the PACS.  Thus considered, we are of the firm opinion that  the view  taken  by  the  High  Court  is  not vitiated by any error of law.      The  appeals  are  accordingly  dismissed  but  in  the circumstances, without costs.