IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 23615 of 2008(J)
1. BOARD OF DIRECTORS OF THE MUKKOM
... Petitioner
2. THE MUKKOM SERVICE CO-OPERATIVE BANK
Vs
1. THE JOINT REGISTRAR OF CO-OPERATIVE
... Respondent
2. THE KARASSERY SERVICE CO-OPERATIVE
3. THE STATE OF KERALA, REPRESENTED BY
4. THE REGISTRAR OF CO-OPERATIVE SOCIETIES
For Petitioner :SRI.KRB.KAIMAL (SR.)
For Respondent :SRI.P.RAVINDRAN (SR.)
The Hon'ble MR. Justice THOTTATHIL B.RADHAKRISHNAN
Dated :30/09/2008
O R D E R
THOTTATHIL B. RADHAKRISHNAN, J.
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W.P.(C).No.23615 of 2008-J
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Dated this the 30th day of September, 2008.
JUDGMENT
1.The second petitioner and the second respondent
are service co-operative banks registered under
the Kerala Co-operative Societies Act, 1969,
hereinafter referred to as the “Act”. The area of
operation of the second petitioner is the Mukkam
panchayat limits and the area of operation of the
second respondent is the Karassery panchayat
limits, going by the averments in paragraph 1 of
the writ petition. The second petitioner
originally had Thiruvampady, Kodiyathur and
Karassery panchayat limits also within its area
of operation and later, Karassery panchayat was
earmarked as the area of operation of the second
respondent and Thiruvampady and Kodiyathur
panchayat limits became the area of operation of
Thiruvampady Service Co-operative Bank and
WP(C)23615/2008 -: 2 :-
Kodiyathur Service Co-operative Bank. The second
petitioner was registered in 1956 under the Act
and the second respondent, in 1995.
2.The second respondent purchased an item of
property having an extent of 18.980 cents in
Thazhekkode amsom which falls within the area of
operation of the second petitioner. The first
respondent Joint Registrar accorded sanction for
such purchase. The second petitioner’s challenge
to that was repelled by the Division Bench as per
Ext.P4 judgment holding that the area of
operation is a concept different from
establishment of an administrative office and
therefore, the second respondent cannot be
prevented from establishing its head office
within that piece of land despite the fact that
it is within the area of operation of the second
petitioner. It was accordingly held that the
establishment of the head office of the second
respondent within the area of operation of the
second petitioner would not violate Section 7(1)
WP(C)23615/2008 -: 3 :-
(c) of the Act. The Bench made it clear that by
establishing such head office, the second
respondent shall not canvass any business from
the area of the second petitioner and to that
extent, prohibition under Section 7(1)(c) would
certainly apply.
3.In the meanwhile, on 1-3-2006, the first
respondent rejected the request of the second
respondent for amending its bye-laws to include
2.15.980 acres of land also within its area of
operation which extent would also include the
18.980 cents purchased by the second respondent
to house its head office.
4.Ext.P9 evidences that the Government wrote to the
Registrar of Co-operative Societies on 20-4-2007
stating that in view of Ext.P4 judgment holding
that the establishment of the head office of the
second respondent within the area of operation of
the second petitioner would not violate Section 7
(1)(c), no exemption from the operation of that
WP(C)23615/2008 -: 4 :-
provision is required for such purchase. After
that communication dated 20-4-2007, the President
of the second respondent made Ext.P10 request to
the Government supported by the Board’s
Resolution No.XIV dated 28-4-2007 requesting that
the second respondent may be granted exemption
from the provisions of Section 7(1)(c) of the Act
in relation to 2 acres 15.980 cents lying
adjacent to 18.980 cents purchased earlier and on
which the head office stands. Acting on Ext.P10
and overruling the contentions of the second
petitioner, the Government issued Ext.P14 order
dated 4-7-2008 granting exemption from Section 7
(1)(c) of the Act, as sought for by the second
respondent. This is under challenge.
5.In its gist, the contentions in support of the
writ petition are that the second petitioner and
second respondent are primary agricultural credit
societies, having defined areas of operations and
being societies of the similar type, there can be
no overlapping of the areas of operation and that
WP(C)23615/2008 -: 5 :-
such principle has been completely ignored while
passing the impugned Ext.P14 order and that the
request for exemption stood rejected as per
Ext.P9 and in the absence of a specific provision
conferring a power of review, Ext.P14 order ought
not to have been issued acting on Ext.P10
application for review of the decision contained
in Ext.P9; and that in view of Ext.P4 judgment,
the parties are categorically held to the
situation that the permission granted to the
second respondent to house its head office in the
area of operation of the second petitioner is on
the condition that the second respondent shall
not carry on any business activities from the
area of operation of the second petitioner and to
that extent, the provision in Section 7(1)(c)
would certainly apply.
6.The second respondent, in its counter affidavit,
contends that Ext.R2(a) and R2(b), the respective
bye-laws of the second petitioner and the second
respondent, would show that D Class members of
WP(C)23615/2008 -: 6 :-
both the societies are spread over in different
parts of Kozhikode taluk and therefore, there
would virtually be no meaning in saying that the
transactions are to be confined within a
particular area and still further that the
proposal is to have an outlet for transporting
agricultural produce and the marketing complex
and the head office are to be housed in the land
in question, while there is no bus stand at
Karassery, in the area of operation of the second
respondent. It is also contended that the
principle laid down by the Division Bench in
Ext.P4 judgment governs the situation only as
regards the applicability of Section 7(1)(c) and
it does not, in any manner, impair the power of
the Government to grant exemption to the second
respondent from the provision of Section 7(1)(c)
and still further that the impugned order of
exemption is a controlled one, inhibiting the
second respondent from doing any activities in
banking in the area of operation of the second
petitioner.
WP(C)23615/2008 -: 7 :-
7.Section 7(1)(c) of the Act requires that the area
of operation of a society and the area of another
society of similar type do not overlap. There is
no controversy that the second petitioner and the
second respondent are societies of similar type.
It is also not in dispute that the land in
question falls within the area of operation of
the second petitioner.
8.Section 101 of the Act provides that the
Government may, if they are satisfied that it is
necessary to do so in public interest, by general
or special order, for reasons to be recorded,
exempt any society or any class of societies from
any of the provisions of the Act or direct that
such provisions shall apply to such society or
class of societies subject to such modification
as may be specified in the order. The power of
the Government under Section 101 to grant
exemption having been held to be constitutionally
valid in Pampady Rural Co-op. Housing Society v.
WP(C)23615/2008 -: 8 :-
Joint Registrar [1986 KLT 921], it was laid down
in Joint Registrar v. M.R.Cherian and others
[1994 (1) KLJ 603] that the modification that may
be made in exercise of power under Section 101
should be confined to alteration of such
character which keeps the policy of the Act in
tact. While the learned senior counsel appearing
for the petitioners referred to the judgment in
Q.T.L.C.& T.Co-op. Society v. State of Kerala
[1989 (1) KLT 350] laying down that public
interest cannot be the interest of a particular
society and that private interest of a particular
society cannot be considered as a public
interest, the learned senior counsel appearing
for the second respondent referred to the
judgment of the Division Bench in Feroke Service
Co-op. Bank Ltd. v. State of Kerala [1995 (2) KLT
404] holding that the power under Section 101 is,
in no way, limited or curtailed by Section 7(1)
(c) of the Act and in view of the wide power
given to the Government under Section 101, it
cannot be held that in a particular situation
WP(C)23615/2008 -: 9 :-
where public interest demands, Section 7(1)(c)
cannot be relaxed, though the power under Section
101 cannot be used by Government in a whimsical
or arbitrary manner and could be exercised only
in such cases where public interest demands the
exercise of such power.
9.The learned senior counsel appearing for the
petitioners argued that Ext.P10 is essentially an
application for review of the decision contained
in Ext.P9 and that it does not contain any reason
for granting exemption which could be taken
cognizance of, for the purpose of exercise of
power under Section 101 of the Act and that the
reasons stated in Ext.P12; in particular, the
nature and lie of the property and the matters
relating to the availability of road and river
frontage etc., are not matters reflected in
Ext.P10, wherein all that is stated is that the
exemption is required for providing legal
protection for the building that is proposed to
be put up. It is also, pithily, pointed out that
WP(C)23615/2008 -: 10 :-
no public interest is ever demonstrated by the
facts of the case in hand which, at the best,
shows only a commercial interest of the second
respondent, which is only its private interest
and that the Government have acted in excess of
authority under Section 101 of the Act.
10.The learned senior counsel appearing for the
second respondent argued that the availability of
power under Section 101 is beyond dispute and it
has been fairly established that public interest
is a concept that takes into consideration
different aspects and that the requirement of
movement of agricultural produce and other
materials are matters of public interest,
particularly when the entire area of operation
of the second respondent is without any bus stand
and access for appropriate movement of goods. He
accordingly pointed out that the Government have
rightly exercised the authority. It was further
argued that the pleadings in the writ petition do
not disclose that the impugned decision has, on
WP(C)23615/2008 -: 11 :-
facts, in any manner, impaired the existing
activities of the petitioners and no case of
injustice is, thus, demonstrated, warranting
interference in exercise of jurisdiction under
Article 226 of the Constitution of India.
11.The power under Section 101 of the Act, as
enunciated in Feroke Service Co-op. Bank Ltd.
(supra), was rendered taking note of the decision
of the Apex Court in Registrar, Co-operative
Societies v. K.Kunjambu {AIR 1980 SC 350) laying
down that provision for such relaxation is made
to enable the Government to relax the occasional
rigour of the provisions of the Act and to
advance the object of the Act. The Division Bench
laid down as follows:
“As the power given to the Government
under S.101 of the Kerala Co-operative
Societies Act can very well be exercised
by the Government to advance the policy
and objects of the Act and to safeguard
public interest, it is not possible for usWP(C)23615/2008 -: 12 :-
to hold that the power under S.101 is in
any way limited or curtailed by S.7(1)(c)
of the Act. As wide power is given to the
Government under this Section taking into
consideration the overall public interest
it cannot be held that in a particular
situation where public interest demands
S.7(1)(c) cannot be relaxed. However, we
make it clear the power under S.101 cannot
be used by the Government in a whimsical
or arbitrary manner. Only in such cases
where public interest demands that the
said power can be exercised.”
12.Considering the scope of Section 101 of the Act,
it was laid down in Q.T.L.C.& T.Co-op. Society
(supra) as follows:
“As per that Section the Government
are given power inter alia to exempt any
society or class of societies from any of
the provisions of the Act if they are
satisfied that it is necessary so do to
in the public interest. It means that for
exercising the power u/s.101 of the act,
the Government must be satisfied that
there is necessity to invoke theWP(C)23615/2008 -: 13 :-
provisions of that Section in the public
interest. Public interest cannot be the
interest of a particular society. The
fact that a particular society is running
at a loss is no ground to invoke the
powers u/s.101 of the Act. Nor can that
be treated as a ground for exempting it
from the provisions of the Act in public
interest.”
13.Dilating on Section 7(1) of the Act, it was
further laid down in Q.T.L.C.& T.Co-op. Society
(supra) as follows:
“S.7(1) of the Act lays down five
conditions to be satisfied for a society
to get registration. One of the conditions
is that the area of operation of the
proposed society and the area of operation
of another society of similar type should
not overlap. This condition is a condition
precedent for a co-operative society to
come into existence. A co-operative
society which has come into existence
after complying with the above conditions
cannot be allowed to violate the same. The
WP(C)23615/2008 -: 14 :-
power of the Government u/s. 101 should
not be exercised in such a manner as to
nullify the very condition, the compliance
of which is mandatory for a society to
come into existence. The power of the
Government cannot be exercised to defeat
such a salutary condition.”
14.Adverting to the various clauses in Exts.R2(a)
and R2(b) bye-laws of the second petitioner and
the second respondent respectively, it can be
seen that their objects include provisions for
collecting the produce of the members for sale,
for purchase etc. and there can be no ground to
state that the second petitioner does not have,
as its objects, the marketing of agricultural
produce. Ext.P10 does not show that the second
respondent has purchased any item of property
other than the 18.980 cents which it purchased
for housing its head office, which purpose was
recognized in Ext.P4 judgment as one not
impinching Section 7(1)(c) of the Act. Beyond
that, the request in Ext.P10 does not reflect
WP(C)23615/2008 -: 15 :-
anything other than the second respondent’s
commercial interests, which essentially are its
private interests. Though Ext.P14 states that the
agricultural marketing complex could be put up
with funds provided by NABARD, such funds cannot
be utilized beyond the area of operation of a
society. The statements in Ext.P14 regarding the
road, river, bus stand etc. relatable to the
land, are not part of the materials reflected in
Ext.P10. It is not in dispute that the area of
operation of the second petitioner, at the time
of its registration in 1956, was spread over the
area of four panchayats, Mukkam, Thiruvampady,
Kodiyathur and Karassery and later, Thiruvampady
and Kodiyathur became the area of operation of
Thiruvampady Service Co-operative Bank and
Kodiyathur Service Co-operative Bank on their
formation and Karassery became the area of
operation of the second respondent. As
discernible from the preamble of the Act, the
enactment is made with a view to provide for the
orderly development of the Co-operative sector in
WP(C)23615/2008 -: 16 :-
the State of Kerala. Competition between co-
operative societies of same type, on account of
the overlapping of their areas of operations
cannot be held conducive for the orderly
development of co-operative movement. This is the
solemn object of Section 7 of the Act as held in
Q.T.L.C.& T.Co-op. Society (supra), wherein it
has been categorically laid down that the
legislative direction contained in Section 7
cannot be nullified or defeated by the
Government. This does not necessarily mean that
Section 7(1)(c), in any manner, curtails the
power under Section 101. That is why the Division
Bench said in Feroke Service Co-op. Bank Ltd.
(supra) that the power under Section 101 is wide
and the Government can relax, in a particular
situation, even the provisions contained in
Section 7(1)(c), on taking into consideration the
overall public interest, however that such power
can be exercised only in cases where public
interest demands. With this in view, it cannot
but be held that the impugned decision has been
WP(C)23615/2008 -: 17 :-
rendered in violation of the interest of the
second petitioner and has been made not on any
ground referable to public interest but solely on
the basis of the private interest of the second
respondent. The impugned action is contrary to
the basic principles of co-operation which ought
to be the guiding beacon in exercise of power
under Section 101 of the Act because equity,
social justice and economic development as
envisaged by the directive principles of State
Policy of the Constitution of India are the
objects sought to be achieved by the enactment of
the legislation in hand; for the orderly
development of the co-operative sector in the
State, by organizing the co-operative societies
as self governing, democratic institutions, going
by the preamble to the Act.
For the aforesaid reasons, the impugned order is
contrary to law and has been issued in excess of
authority under Section 101 of the Act and is,
therefore, unconstitutional and void. It is
WP(C)23615/2008 -: 18 :-
declared so. Resultantly, this writ petition is
allowed quashing Ext.P14. No costs.
THOTTATHIL B. RADHAKRISHNAN,
Sha/290908 JUDGE.