Surat vs State on 4 May, 2011

Gujarat High Court
Surat vs State on 4 May, 2011
Author: Mr.S.J.Mukhopadhaya,&Nbsp;Honourable Mr.Justice Dave,&Nbsp;
   Gujarat High Court Case Information System 

  
  
    

 
 
    	      
         
	    
		   Print
				          

  


	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	


 


	 

SCA/2943/2008	 31	JUDGMENT 
 
 

	

 

IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
 

 


 

SPECIAL
CIVIL APPLICATION No. 2943 of 2008
 

With


 

SPECIAL
CIVIL APPLICATION No. 2890 of 2008
 

With


 

SPECIAL
CIVIL APPLICATION No. 2769 of 2008
 

With


 

SPECIAL
CIVIL APPLICATION No. 4506 of 2008
 

With


 

SPECIAL
CIVIL APPLICATION No. 2767 of 2008
 

With


 

SPECIAL
CIVIL APPLICATION No. 2789 of 2008
 

With


 

SPECIAL
CIVIL APPLICATION No. 5849 of 2008
 

With


 

SPECIAL
CIVIL APPLICATION No. 2891 of 2008
 

 
For
Approval and Signature:  
 
HONOURABLE
THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA  
			AND


 

HONOURABLE
MR.JUSTICE ANANT S. DAVE
 
 
=================================================

1

Whether
Reporters of Local Papers may be allowed to see the judgment
? Yes

2

To
be referred to the Reporter or not ? Yes

3

Whether
their Lordships wish to see the fair copy of the judgment
? No

4

Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ? No

5

Whether
it is to be circulated to the civil judge ? No

=================================================

SURAT
DISTRICT COOPERATIVE BANK LIMITED. & 1 – Petitioner(s)

Versus

STATE
OF GUJARAT & 2 – Respondent(s)

=================================================

Appearance :

MR
SN SHELAT, SR. ADVOCATE with MS VD NANAVATI, MR BS PATEL, MR NAVIN
PAHWA for M/S THAKKAR ASSOCIATES, MR BM MANGUKIYA, MR ASHISH H SHAH
and Ms NAYANA M PATEL, for Petitioners.

MR KAMAL TRIVEDI, ADVOCATE
GENERAL with MS SANGITA VISHEN, AGP for Respondent – STATE,
MR
SN SOPARKAR, SR. ADVOCATE with MR AMAR N BHATT for Respondent –

RESERVE BANK OF INDIA,                  									     MR PK JANI with
MS ARCHANA AMIN for Respondent -
NABARD. 

=================================================

CORAM
:

HONOURABLE
THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA

and

HONOURABLE
MR.JUSTICE ANANT S. DAVE

Date
: 04/05/2011
COMMON CAV JUDGMENT

(Per
: HONOURABLE THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA)

In
these cases, while the petitioners have challenged the validity of
the provisions of the Gujarat Co-operative Societies (Amendment) Act,
2008 [hereinafter referred to as “the Amending Act, 2008″],
sought for a declaration that Sections 67, 73, 73A, 74, 74D, 76, 81
and 81A of the Gujarat Co-operative Societies Act, 1961 [hereinafter
referred to as “the Principal Act”] as amended by the
Amending Act, 2008 are unconstitutional and invalid. Prayer has
also been made to set aside the guidelines dated 10.7.2007 and
29.4.2008 issued by the Reserve Bank of India [hereinafter referred
to as “the RBI”].

2. When
the matter was taken up on 10.8.2010, Mr SN Soparkar, learned senior
counsel appearing on behalf of the RBI, informed that both the
guidelines dated 10.7.2007 and 29.4.2008 issued by the RBI have been
substituted by fresh guidelines dated 18.6.2008 and all the
co-operative societies have been allowed to function as per their
Bye-laws.

3. An
affidavit is also filed on behalf of the 1st respondent –
State of Gujarat, which will be discussed in details at the
appropriate stage. In view of the stand taken in the affidavit filed
on behalf of the 1st respondent – State of Gujarat,
the learned counsel addressed the Court on the question of validity
of the following provisions :-

(i) Section 15 of the
Amending Act whereby Section 73A was inserted.

(ii) Section 18 of the
Amending Act whereby the proviso to Section 76 after existing proviso
was inserted.

4. In
view of the stand taken by the RBI that earlier guidelines dated
10.7.2007 and 29.4.2008 have been substituted by the subsequent
guidelines dated 18.6.2008 and that all the co-operative societies
have been allowed to function in terms with their Bye-laws, the
learned counsel for the parties have not pressed the prayer against
the earlier guidelines issued by the RBI.

5. Further,
in view of the affidavit filed by the 1st respondent, the
learned counsel for the petitioners had not raised nor argued the
question of validity of Sections 67, 73, 74, 74D, 81, 81A of the
Amending Act, 20008.

6. For
appreciation of the case, it is desirable to notice and refer to
Sections 15 of the Amending Act, 2008 whereby new Section 73A was
inserted in the Principal Act, and Section 18 of the Amending Act
whereby two provisos were inserted after the existing proviso to
Section 76 of the Principal Act, as reproduced hereunder :-

“15. In
the principal Act, after section 73, the following section shall be
inserted, namely :-

“73A. Freedom
for affiliation or disaffiliation with a federal society of choice,

– Notwithstanding anything contained in this Act or the rules for the
time being in force, the societies in the co-operative credit
structure shall be at liberty to affiliate or disaffiliate with any
federal society of its choice provided a resolution approving such
affiliation or disaffiliation with a federal society is passed in the
annual general meeting held for the purpose with three – fourth
majority of total members, and subject to the rules as may be
prescribed and the guidelines issued by the Reserve Bank of India.”

18. In
the principal Act, in Section 76, after the existing proviso, the
following proviso shall be added, namely :-

“Provided
further that the qualifications for appointment of the Chief
Executive Officer and the Directors of the Central Co-operative Banks
and the State Co-operative Bank shall be such, as may be determined
by the Reserve Bank of India from time to time.

Provided
also that the Registrar of the Co-operative Societies or the Board of
the Central Co-operative Banks or the State Co-operative Bank shall
remove, at the request of Reserve Bank, such Directors and Chief
Executive Officers who do not fulfill the criteria stipulated by
Reserve Bank. However, the existing elected Directors holding their
post as such Directors on the date of the commencement of the Gujarat
Co-operative Societies (Amendment) Act, 2008, shall continue to hold
their offices till the expiry of their current remaining term. ”

7. Mr
SN Shelat, learned senior counsel appearing on behalf of Surat
District Co-operative Bank Ltd. submitted that the writ petition
preferred by the said co-operative bank is limited to Section 15 of
the Amending Act, 2008 whereby Section 73A has been inserted.
Section 73A provides for freedom of affiliation and disaffiliation
with federal society of its choice. It
was submitted that there is no nexus with the object sought to be
achieved by granting freedom of affiliation to primary agriculture
co-operative society to affiliate with any district bank within the
State is violative of Article 14 of the Constitution of India being
arbitrary in character in view of the following :-

(i) The
provisions for liberty to the societies in the co-operative credit
structure to affiliate or disaffiliate with any federal society
destroy the very basis of the co-operative credit structure.

(ii) The thrust
of the co-operative movement is development of villagers, farmers at
village level. The primary societies are constituted to provide
promotion of agriculture in the rural area.

(iii) The
District Federal Bank provides finances to the said society so as to
enable both of them to provide for integrated rural development of
the area within which the District Co-operative Bank operates i.e. at
the district level.

(iv) The
primary agriculture societies are the members of the District
Co-operative Bank.

(v) Section 4
of the Gujarat Co-operative Societies Act, 1961 provides for
registration and it can refuse registration if it has adverse effect
upon any other society.

(vi) The object
is avoiding competition among primary societies within area so as to
enable the said society to provide co-operative facilities at the
village level.

(vii) Section 6
also provides a clue to the object of the co-operative movement,
namely, residence in the same town or village or in the same group of
villages for a society with unlimited liability.

(viii) Permitting
the societies to affiliate themselves with outside the district bound
to take adverse effect upon the District Bank to which it is to be
affiliated.

8. The learned
counsel submitted that the structure of the nationalized bank or
private bank cannot be brought into the co-operative sector because –

(a) area of
operation has to be limited i.e. at the village level.

(b) the object
is development of agriculture.

(c) thrifty
habits are to be promoted which have direct impact on the bank
functioning within the limited area.

9. He further
submitted that the farmers of primary co-operative society in Surat
district seeking affiliation at Kutch or Rajkot Bank can lead to the
following consequences :-

(a) The farmers
may have to travel outside the district which itself is opposed to
the co-operative principle.

(b) Those
District Bank may not have acquainted with the characteristic of
other region as regards availability of soil, irrigation facilities,
cropping pattern, marketing pattern and basic character of
inhabitants.

(c) It is not
likely to serve the basic object of the co-operative movement that is
uplifting of the rural economy if freedom of affiliation is granted
and is not likely to promote the co-operative movement.

10. In
support of the aforesaid submissions, the learned counsel referred to
the following extract from the Text Book “Rural Economic”
by Shri AR Patel and DP Khankhoje (Page 254) :-

“The
position of Central Co-operative Bank is of crucial importance in the
co-operative structure. They form an important link between the
State Co-operative Bank at the apex and the primary agricultural
credit societies at the base. The Maclagan Committee suggested that
the term “Central Bank” should be applied to all local
financing institutions directly financing the primary societies
“within an area sufficiently limited to allow them to exercise
also the duties of supervision and control over these societies”.
The Standing Advisory Committee on Agricultural Credit constituted
by the Reserve Bank recommended that as a general proposition, there
should be one Central Co-operative Bank for one district. This view
was also expressed by the Rural Credit Society Survey Committee. A
programme of rationalization of the Central Co-operative Banking
structure was taken up in the States during the Second Plan period
through a process of merger or amalgamation of uneconomic or weaker
units with a view to having one strong viable central bank in each
district. The process of reorganization is almost complete.

Central
banks are the intermediate agency between the primary credit
societies at the village level run by the agriculturists having no
touch with the money market and the State Co-operative Banks run
mainly from the metropolitan cities, having little direct association
with the countryside. This agency is closer to the primary societies
than an apex bank could be and affords opportunities to them for
influencing its policies to suit their requirement and enables them
to train themselves in sound banking principles and practices. The
Central Bank’s primary function is to mobilize the resources in the
district for financing its members to maximum extent possible in
addition to channeling the flow of funds from the State Co-operative
Banks.”

He
relied on the decision of a Division Bench of this Court in the case
Siddhpur Taluka Co-operative Purchase & Sales Union vs.
State of Gujarat
, reported in 2002 (2) GLR 1357,
wherein the Division Bench, after examining the scheme of the Act and
the relevant bye-laws, at para 17, observed that qualifications,
constitution and structure of the societies from State level down to
Taluka level are based on the territorial revenue areas of District
and Taluka.

11. Reference
was also made to the provisions of the National Bank for Agriculture
and Rural Development Act, 1981. The preamble of the said Act is
required to be considered. It is the Bank for Agriculture and Rural
Development for providing credit for the promotion of agriculture,
small scale industries and economic activities in rural areas with a
view to promote integrated rural development securing prosperity of
rural areas.

12. The learned
counsel also referred to the terms “central co-operative bank”,
“rural development” and “State co-operative bank”
as defined in Sections 2(d), 2(q) and 2(u) of the National Bank for
Agriculture and Rural Development Act, 1981. It was submitted that
Section 21 provides for function of the National Bank and Section
21(v)
provides for marketing activities at the village level. The
proviso to Section 22 enables the NABARD to make loans and advances
to the Central Co-operative Bank for a specified period in case of
calamities. It was submitted that the scheme of the Act, therefore,
recognizes the District Co-operative Bank to function within the
district.

He further
submitted that the provisions of the Bombay Co-operative Act, 1925
and the preamble to the said Act and that the said Act was repealed
and the Gujarat Co-operative Societies Act was amended.

13. Under the
2nd proviso to Section 76, as was inserted by Section 18
of the Amending Act, 2008, qualifications for appointment of the
Chief Executive Officer and the Directors of the Central Co-operative
Banks and the State Co-operative Bank, are ordered to be determined
by the RBI from time to time; the same has been challenged by the
learned counsel for the other petitioner on the following grounds :-

By inserting
the 2nd proviso, the State legislatures have abdicated its
essential legislative function of providing for qualification of the
Chief Executive Officer and Directors of the Central Co-operative
Banks and State Co-operative Bank in favour of the RBI and,
therefore, it is violative of Article 14 of the Constitution.

Even if it is
assumed, though not admitted, that such delegation was permissible,
the 2nd proviso requires to be read as applicable to those
Directors who are in receipt of any remuneration by way of salary or
reward and it cannot be applied to the officers who are not receiving
any remuneration. Such power vested in the RBI is excessive and
thereby unconstitutional being violative of Article 14 of the
Constitution.

The 2nd
proviso is violative of Article 19(1)(c) and (g) of the Constitution,
there being a freedom to form an association guaranteed under Article
19(1)(c)
upon which only the reasonable restriction can be imposed by
a legislation by the appropriate legislative authority as
contemplated under clause (4) of Article 19. The right to form an
association confers the right to determine the constitution of the
association and to organize and manage it through the representatives
elected by the members who have voluntarily associated themselves
into the Union. The sweep of the fundamental rights guaranteed under
Article 19 being very wide and being the fundamental right of a
citizen of a free country, it cannot be destroyed by the impugned 2nd
proviso inserted in Section 76 by Section 18 of the Amending Act,
2008 so as to destroy the very genesis of the association, which is
violative of Article 19 of the Constitution.

14. The learned
counsel for the petitioners would contend that the co-operative
movement by its very nature is a form of voluntary association where
individuals or their association unite for the purpose of promoting
economic interest of its members in accordance with the well
recognized co-operative principles as embodied in the 1st
Schedule to Multi State Co-operative Societies Act, 2002. The
co-operative principles visualize co-operative institutions as
democratic organization controlled by the members making elected
representative responsible and accountable to the members. The power
of the members of the co-operative society to conduct the affairs of
the society, having right of voting and participation in decision
making process being the basic power of a co-operative movement,
cannot be affected in the manner as prescribed under the 2nd
proviso to Section 76 of the Principal Act.

15. Mr Kamal
Trivedi, learned Advocate General appearing on behalf of the State
while submitted that there is always a presumption in favour of the
constitutional validity of any legislation, made the following
submissions :-

Article
19(1)(c)
of the Constitution of India guarantees freedom to all
citizens to form an association, but such freedom is always subject
to certain permissible restrictions imposed by law. According to
him, the main provisions are not violative of Article 19(1)(g) of the
Constitution since in case of an individual citizen to whom a right
to carry on a trade or business or pursue an occupation is guaranteed
under the said provisions and they do not not infringe the freedom of
any association. The validity of the legislative provisions which
seek to impose any restriction on the right guaranteed under Article
19(1)(g)
of the Constitution, is required to be decided by the
criteria laid down by clause (b) of Article 19. In the present case,
there being a rationale behind enactment of the said provisions and
has a nexus between the said provisions on one hand and the object
sought to be achieved by the said provisions on the other hand, the
same are also not violative of Article 14 of the Constitution.

Entry No. 32

in List – II of the 7th Schedule of the Constitution
relates to co-operative societies. Under the said Entry, the State
legislature is competent to make law with respect to the co-operative
societies as regards to incorporation, regulation and winding up etc.
Therefore, it is competent to enact the Amending Act, 2008 which
contains the impugned provisions which are in public interest and
regulatory in character.

16. The learned
Advocate General referred to the suggestions of the Task Force
constituted by the Government of India to suggest an action plan for
reviving rural co-operative credit institutions including legal
measures necessary for facilitating the said process, as also the
relevant recommendations of the Task Force for enactment of multi
co-operative law. Reliance was also placed on the Memorandum of
Understanding {“the MoU” for short) between the Central
Government, State Government and NABARD arrived on 21.12.2006 for
implementation of the package for revival of rural Co-operative
Credit Structure (CCS), comprising the State Co-operative Banks,
Central Co-operative Banks and Primary Agricultural Credit Societies
as per the consensus arrived at through serious of discussions by the
Central Government with the State Governments and the recommendations
made by the Vaidyanathan Committee on revival and reform of
Co-operative Credit Structure. They will be discussed at the
appropriate stage. It was contended that in view of the aforesaid
developments, the new provisions as contained in Sections 73A, 74D,
76, 67A and 81 have been brought into play by the Amending Act, 2008.

17. With regard
to each of the provisions, the learned Advocate General highlighted
the stand of the State Government, as noticed hereunder.

Regarding
Section 73A, he would contend that the apprehension of the
petitioners does not have any basis. Prior to enactment of Section
73A
, primary agricultural co-operative society had no choice in the
matter of availment of finance, more particularly, in the area of
rate of interest, availability of finance, etc. because it was
supposed to be affiliated with only one District Central Co-operative
Bank of the concerned district. On the contrary, the new provisions
seek to offer financial freedom of a greater degree which should not
be allowed to be viewed in a parochial fashion. Even otherwise, the
enactment of the provisions is very much in line of the Clauses 9.5.
9.6 and 9.7 of the MoU.

Earlier, many
a times primary agricultural co-operative societies had to suffer
because of inefficiency or weak financial position of the higher
tiers above them and some times because of the partisan approach
being adopted by the same. In view of the aforesaid amendment, the
higher tiers being otherwise supposed to be stronger in position,
will be confronted with an element of competition for remaining more
focused and competitive so as to see that the primary agricultural
co-operative societies remain wedded to them. Under the
circumstances, the liberty sought to be given to lower tiers of the
co-operative credit structure will not destroy the same as being
apprehended by the petitioners and, therefore, there is no question
of the said provision being violative of Articles 14, 19(1)(c) and
19(1)(g) of the Constitution.

With regard to
Section 76 which relates to appointment of officers and employees and
their conditions of service, he would contend that as per the revised
fit and proper criteria dated 18.3.2009, age limit and other
qualifications which were in picture with reference to the Directors
will be taken care of. The petitioners cannot have any grievance as
to the qualifications prescribed for the professional Directors
vis-a-vis of Chief Executive Officers including the criterion
relating to the age. Such aspects are of utmost requirement for any
organization being vibrant and efficient. Only with the fit and
proper persons appointed as Directors and Chief Executive Officer for
the District and/or State Co-operative Banks, such banks can succeed.
For improving the environment of the whole co-operative structure in
the State as well as the country in general and for the revival of
the rural co-operative credit environment in particular, such
measures should in fact be commended, which may re-invite confidence
of the people at large which is almost on the brink of eclipse.

18. In view of
the stand taken in the reply affidavit filed on behalf of the 1st
respondent – State of Gujarat, the counsel for the petitioners
had not pressed the challenge to Sections 74D(1)(1A) relating to
appointment of Custodian and conduct of elections, Section 67A
regarding writing off of bad debts and Section 81 with reference to
appointment of persons as Administrators for managing the affairs of
the society. Such prayer has not been made in view of the following
stand, as shown and quoted hereunder :-

“9.2 Re
: Provisions contained in section 74-D more particularly contained in
sub-section (1) and sub-section (1A) relating to appointment of
Custodian and conduct of elections.

(a) The
petitioners seek to challenge the said provisions on the supposition
that till today there are large number of cases where election
authority has failed to hold election before the expiry of the term
of the Managing Committee/Board of Directors and as a consequence,
co-operative societies have been constrained to file petitions for
direction to hold elections. Earlier, as per the judgment of this
Hon’ble Court, according to the petitioner, it was not permissible
for the authority to appoint a Custodian for a period of six months
after the expiry of the term of the Managing Committee/Board of
Directors and that too not without hearing the affected parties,
which aspects are now sought to be given a go0bey in the new
provisions. In view of this, according to the petitioners, the said
new provisions which mandate appointment of Custodian before the
expiry of the term of the Managing Committee/Board of Directors if a
new Committee of Management is, for any reason whatsoever, not
elected, within a term of two months within which election is
required to be held and the Committee is required to be constituted,
is violative of Article 14 of the Constitution.

(b) The
above stated premise adopted by the petitioners in challenging the
said provisions contained in Section 74-D of the Act is misconceived.
In fact, the petitioners should have appreciated that behind the
enactment of the said new provisions, the idea is to see that timely
elections are ensured before the expiry of the term of the earlier
body. This apart, earlier, Custodians used to carry on for a very
long time. However by restricting the said period, the State
interference in the management of co-operative societies for longer
period is reduced so as to have elected body in place. Such
provisions are not unknown so far as various Panchayats, Market
Committees and Municipal Corporations under the Gujarat Panchayats
Act, 1993, the Gujarat Agricultural Produce Market Committees Act,
1963 and under the BPMC Act, 1949, respectively, are concerned. This
apart, the enactment of the said provisions are also in line with
para 9.15 of the aforesaid MoU.

9.4 Re
: Provision contained in Section 67-A regarding writing off of Bad
Debts :

(a) The
petitioners’ challenge against the provisions of section 67-A is with
reference to the proviso containing provisions as regards ‘the
passing of the resolution in the General Meeting of the society by a
majority of total members of the society’ and ‘by a majority
of not less than 2/3rd of the members of the society
present and voting’. The petitioners want to read ‘or’ in place of
the aforesaid ‘and’ used in the said proviso, since according to
them, the provisions would be otherwise arbitrary.

(b) The
aforesaid stand of the petitioners is not in consonance with the
spirit for which Section 67-A came to be inserted. To take a
decision for writing off of Bad Debts of any Bank is a very serious
decision affecting the financial position of the Bank, for which
various pros and cons are required to be examined preferably by the
whole body of the society. It may so happen that even though the
debts are recoverable, attempt may be made to brand them as
irrecoverable for being written off against the Bad Debt Reserve
Fund. Thus, the said provision is to see that such a writing off
succeeds only in genuine cases for which there would be required a
larger number of members of the society approved the same.

(c) In
that view of the matter, the petitioners’ grievance referred to above
is not sustainable in law.

9.5 Re
: Provisions contained in section 81, more particularly with
reference to appointment of persons as Administrators for managing
the affairs of the society.

(a) The
petitioners seek to challenge the said provisions on the ground that
choice of Administrator is only from amongst the members of the
society or the officers of Co-operative Department of the State
Government and that as per the provisions of unamended section 81,
choice in this behalf was not confined to the said two categories
only, for it was very wide for which provision was made in Rule 37-A
of the Rules. It is the contention of the petitioners that there is
no rationale in restricting the appointment of the Administrator to
two categories as mentioned above and hence the said provisions are
violative of Articles 14 and 19 of the Constitution.

(b) The
above-stated perception of the petitioners in undertaking the
challenge against the insertion of the new provisions in section 81
of the Act is totally baseless inasmuch as the sole idea in amending
sub-clauses (I) and (ii) of clause (b) of section 81(1) of the Act
was to see that any Member of the Committee who has been removed
under the said section 81, is not appointed as an Administrator.
However the provisions of Rule 37-A of the Rules have been kept
intact and hence the apprehension of the petitioners that the choice
of the appointment of Administrator is now confined to the aforesaid
two categories pales into insignificance.

19. It appears
that the Government of India had set up a Task Force to suggest an
action plan for reviving rural co-operative credit institutions
including legal measures necessary for facilitating the said process
and the following references were made to the Task Force :-

1. To recommend
an implementable action plan for reviving the Rural Co-operative
Banking Institutions, taking into consideration, inter alia, main
recommendations made by various committees in this regard.

2. To suggest
an appropriate regulatory framework and the amendments which may be
necessary for the purpose in the relevant laws.

3. To make an
assessment of the financial assistance that the Co-operative Banking
Institutions will require for revival, the mode of such assistance,
its sharing pattern and phasing.

4. To suggest
any other measures required for improving the efficiency and
viability of Rural Co-operative Credit Institutions.

The Task Force
after careful examination of all records and recommendations of the
earlier Committees met several co-operators, officials, politicians
from all over the country and made certain recommendations. The
report was placed in public domain in the websites of the Government
of India, Reserve Bank of India and NABARD, which elicited responses
from a number of State Governments. In the Executive Summary
provided in the report dated 4.2.2005, the Task Force observed as
under :-

“5. The
Co-operative Credit Structure (CCS) is today impaired in governance,
managerial and financial fronts. Examples of impairment on
governance include non-conduct of elections for a long time, frequent
supersession of Boards, delay in audit, States intrusion in
administrative and financial management. The impairment of
management includes deputation of government officials to top
positions in many banks, setting up the common cadre system for PACS,
determination of staffing patten by States, interference in the
operational decision making of co-operatives, an ageing staff
profile, poor housekeeping and weak MIS. Apart from the above, even
the supervision and the prudential regulation of co-operative banks
is not as stringent as it is for commercial banks.

6. The
financial position of the system is weak and deteriorating. The
accumulated losses of PACS are estimated roughly on the basis of
available incomplete data at Rs.4,595 crore as on 31 March 2003. The
position of DCCBS is also equally unsatisfactory; with accumulated
losses aggregating Rs,4,401 crore and erosion in deposits being
Rs.3,100 crore. Due to such financial impairment, cooperatives have
been steadily losing their capacity to meet the rapidly growing
credit needs of agriculture. In the early 1990s, they accounted for
over 60 percent of the total institutional credit to agriculture,
while currently their share has fallen to about one-third. This
situation gives cause for serious concern.

38. Once
a State Government accepts to participate in the scheme and share its
financial liability, the concerned committees and dedicated teams
would be put in place. They will be responsible to get the required
Memorandum of Understanding (MoUs) signed between the various
parties, get the special audits conducted, assess the financial
support required, ensure issuance of the executive orders and
resultant amendments to byelwas of the co-operatives, recommend and
ensure flow of financial assistance. It is expected that the entire
scheme take about three years to implement in each State.”

The Task Force
also recommended the enactment of Model Co-operative Law by
observing, inter alia, as under :-

“5.25 While
some of the necessary changes can be implemented through Executive
Officer, under the existing State laws, formal legislation to repeal
or modify existing laws will be necessary. The Model Coop law,
suggested by the Brahm Prekash Committee, and endorsed by all recent
committees which have gone into this issue, is consistent with the
kind of regime, which we think is necessary for healthy functioning
of cooperatives as democratic, member-driver and self reliant
organizations.

5.25 Even
though several States have enacted new laws on this pattern, they
have not made much of an impact. In all these States, most societies
continue to operate under the regime of the extant CSAs, with hardly
any effort to enable or encourage existing societies to come under
the new law. Part of the reason is the absence of provisions in the
pre-existing law to permit and enable existing societies to come
under the new law. A stronger reason is, perhaps, the
non-availability of refinance to such cooperatives, registered under
the new Acts.”

A
copy of “Institutional, Legal and Regulatory Reforms”,
which is at Chapter V of the report of the Task Force has been
enclosed as Annexure – I to the reply affidavit.

The
Task Force suggested various options which were responded to by the
RBI by offering its comments which is at Annexure – II to the
reply affidavit field by the State. Thereafter, the MoU between the
Central Government, State Government and NABARD was arrived at on
26.6.2006 for implementation of the package for revival of rural
Co-operative Credit Structure (CCS), comprising the State
Co-operative Banks, Central Co-operative Banks and primary
agricultural credit societies and thereafter consensus arrived at
between the parties and the recommendations made by Vaidyanathan
Committee on revival and reform of CCS were noticed before singing
the MoU. The relevant extracts of the preamble of the MoU are
reproduced hereunder :-

“1. Whereas
it is considered necessary as a national priority to affirm the
following objectives for revival and restructuring of the rural
co-operative credit structure (CCS), comprising the State
Co-operative Banks (SICBs), Central Co-operative Banks (CCBs) and
Primary Agricultural Credit Societies (PACS) including LAMPS, MPCS
and FSS affiliated to CCBs on a sustainable basis :-

a. Efficient
delivery of financial services, including savings and loan products
as grassroots level in rural areas through the CCS with minimum
regulatory burden.

b. Ensuring
safety of public deposits accepted by the co-operative banking
system.

2. Whereas
it is considered necessary for achievement of the objectives that the
institutions comprising CCS :

i. are
democratic, well governed, professionally managed and audited.

ii. have
requisite autonomy in raising resources and deploying funds as also
in other operational matters connected therewith;

iii. undertake
financial activities as principal business and separately account for
and fund other activities, if undertaken, and that

iv. the
SICBs and CCBs are effectively regulated on par with other entities
accepting public deposits.”

20. Some
of the provisions of the MoU with regard to the obligations of the
1st respondent – State were set out at para 9 series
onwards, which are relevant for the present purpose and quoted
hereunder :-

‘9. The
State undertakes to bring in amendments to or incorporate a special
chapter in the Gujarat State Co-operative Societies Act, 1961 to give
effect to the reforms envisaged under the Package in respect of all
entities which are part of the CCS. Pending such amendments, the
State undertakes to issue an Ordinance under the powers conferred on
it under Article 213 of the Constitution of India to provide for the
following in respect of all entities which are part of the CCS :

9.1 ensuring
full voting membership rights to all depositors/borrowers in
cooperatives other than co-operative banks.

9.4 allowing
transition of any cooperative registered under the Gujarat State
Co-operative Societies Act, 1961, to the parallel Self Reliant
Cooperative Societies Act, when enacted and permitting cooperatives
under the Self Reliant Cooperative Societies Act to be members of
federal structures registered under the Gujarat Cooperative Societies
Act, 1961 and vice versa,

9.5 allowing
freedom to any cooperative in the CCS to affiliate or disaffiliate
with a federal structure of its choice.

9.6 allowing
freedom of entry and exit for any unit of CCS at any level with no
mandated restrictions of geographical boundaries for its operations.

9.7 withdrawing
any restrictive orders on financial matters like investments to be
made to cooperatives and permitting them to invest funds, subject to
the guidelines as may be prescribed by RBI,

9.14 Supersession
of the Board of the GSCB or a CCB by the RCS under any other clause
of the Gujarat State Co-operative Societies Act, 1961, shall be done
only in consultation with RBI. The Board of a PACS shall be
superseded by the RCS only under the following conditions :

9.14.1 if
a society incurs looses for three consecutive years, or

9.14.2 if
serious financial irregularities or frauds have been identified, or

9.14.3 if
there are judicial directives to this effect or there is perpetual
lack of quorum.

9.15 ensuring
timely elections before the expiry of the term of the existing Board
of any cooperative and within two months from the date of
supersession of any Board. Also ensuring that members of the Board
of PACS which has been superseded due to a reasons as in 9.14.1 and
9.14.2 above would not be entitled to contest again for a period of
at least three years after supersession.

9.18 removing
at the request of NABARD/RBI, director(s)/CEO(s) who do not fulfill
the fit and proper criteria stipulated by RBI in the case of GSCB and
CCBs.”

21. Taking
into consideration the aforesaid report and the MoU, the Amending
Act
, 2008 was enacted. Before the Act, the statement of object for
making important amendments were notified in the Extraordinary
Gujarat Government Gazette dated 8.10.2007 which reads as follows :-

“The
Government of India, based on Vaidyanathan Committee’s Report, has
announced revival package for co-operative societies to be
implemented through NABARD. As per the package, agricultural credit
sector i.e. Primary Agricultural Credit Co-operative Societies,
District Central Co-operative Banks and State Co-operative Banks and
State Co-operative Bank will get the benefit of the package for
compensating the losses in their balance sheet as on 31.3.2004
subject to certain conditions of Memorandum of Understanding (in
short “MoU”) signed by the Government of Gujarat with the
Central Government and NABARD. As per one of the conditions of the
said MoU, the State Government is required to amend the various
provisions of the Gujarat Co-operative Societies Act, 1961. An
undertaking has been given by the State Government to the Government
of India and NABARD in the said MoU that pending such amendments
(through Legislative Assembly) an Ordinance under Article 213 of
Constitution shall be issued to give effect to the reforms.

In
the Gujarat State, there are 7768 Primary Agricultural Credit
Co-operative Societies, 18 District Central Co-operative Bank and the
apex body namely, the Gujarat State Co-operative Bank in the three
tier agricultural credit sector which are likely to be benefited by
the revival package declared by the Government of India to be
implemented through the NABARD.

In
view of fact that the stage of special audit for the purpose is
almost completed so far and the State Government is likely to get the
share of the revival package of Rs.1106.58 crores from the Central
Government as per the sharing pattern, and as initial payment, the
NABARD will release seventy-five per cent of the entitled amount i.e.
around Rs.800 crores in the current financial year, if the condition
of legal reforms as per MoU as stated above is complied with. It is,
therefore, considered necessary to amend the Gujarat Co-operative
Societies Act, 1961.

The
following are some of important amendments considered necessary to be
made in the said Act as per the MoU signed by the Government of
Gujarat with the Central Government and NABARD :

(1) ensuring
full voting membership rights to all depositors/borrowers in
co-operatives other than co-operative banks,

(2) providing
autonomy to Co-operative Credit Structure in all financial and
internal administrative matters.

(3) Restricting
the State Government’s equity to a maximum of twenty-five per cent in
any co-operative at any level and limiting State participation in the
Committee of a co-operative bank to only one nominee and not to have
any State nominee on the Committee of any Primary Agricultural Credit
Co-operative Society. The State Government or a co-operative society
at any level wishing to reduce the State equity further would be free
to do so,

(4) allowing
freedom of any co-operative society in the co-operative credit
structure to affiliate or disaffiliate with a federal structure of
its choice and there would not be any restrictions of geographical
boundaries for its operations,

(5) allowing
freedom for investments to be made by co-operative societies and
permitting them to invest funds, subject to the guidelines as may be
prescribed by the Reserve Bank of India;

(6) permitting
any co-operative in all the three tiers freedom to take loans from
any RBI regulated financial institution, and refinance from NABARD or
any other refinancing agency directly and not necessarily with only
the federal tier to which it is affiliated;

(7) powers
taken from laying down guidelines for the purpose of payment of
dividend by Primary Agricultural Credit Co-operative Societies in
consultation with NABARD.

In
addition to above, the provisions are also made for exclusion of
defaulters from the voters list, provisions for maintaining Bad Deb
Reserve Fund and provisions for periodical inspection by the
Registrar of Co-operative Societies, financing bank and federal
societies. The provisions are also made for availing loan facility
to group of persons (self help groups) and for availing memberships
to such group also in the Society.

As
the Legislative Assembly of the State of Gujarat is not in session,
this Ordinance is promulgated to amend the said Act to achieve the
aforesaid objects.

 


 


 


Gandhinagar			NAWAL
KISHORE SHARMA
 


Dated
the 7th October, 2007	       Governor of Gujarat
 


 


 


By

order and in the name of the Governor of Gujarat,

DR.

AVINASH KUMAR,

Additional
Chief Secretary to Government”

From
the aforesaid statement of objects, it will be evident that taking
into consideration the fact that there are 7768 Primary Agricultural
Credit Co-operative Societies, 18 District Central Co-operative Banks
and the apex body, namely, the Gujarat State Co-operative Bank in the
three tier agricultural credit sector and to benefit them, the State
Government was likely to get share of the revival package of
Rs.1106.58 crores from the Central Government and as initial payment,
the NABARD will release 75% of the entitled amount i.e. around Rs.800
crores. Such amount could not have been received by the State
Government for the benefit of the three tier agricultural credit
sector, including 7768 Primary Agricultural Credit Co-operative
Societies apart from 19 District Central Co-operative
Banks and its apex body namely the Gujarat State Co-operative Bank,
if the Memorandum of Understanding signed between the Central
Government, the Government of Gujarat and the NABARD is not acted
upon and, therefore, the public in general were informed to derive
such benefit. As per the MoU, freedom was allowed to any
co-operative society in the co-operative credit structure to
affiliate or disaffiliate with a federal structure of their choice
and there would not be any restriction of geographical boundaries for
its operations. It additionally permitted any co-operative society
in all the three tiers freedom to take loan from any RBI regulated
financial institution and refinance from NABARD or any other
refinancing agency directly and not necessarily with only the federal
tier to which it is affiliated. Such decision was for the benefit of
all the co-operative societies in the co-operative credit structure
in all three tiers. The fund was generated from the Central
Government for distribution amongst the co-operative societies.
Therefor, much more advantages were given to the co-operative
societies including the petitioner – banks.

22. It
has been rightly pointed out by the learned Advocate General for the
State that prior to the enactment of the provisions of
Section 73A, Primary Agricultural Credit Co-operative Society had no
choice in the matter of availment of finance, more particularly in
the area of rate of interest, availability of finance, etc.
as it was to be affiliated with only one District Co-operative Bank.
In view of the fact that now the restriction has been lifted, under
Section 73A the financial freedom of a grater degree has been allowed
in favour of the co-operative societies including the petitioner –
banks.

23. Any
co-operative bank in three tier have freedom to take loan from any
RBI regulated financial institutions and refinance from NABAARD or
any other financial agency directly and not necessarily with only
federal tier to which it is affiliated. This happened only because
of the restriction lifted on the recommendations of the expert body
including the Task Force and the recommendations of the Vaidyanathan
Committee.

24. In view of
Section 73A, the monopoly of the federal society, namely the Gujarat
State Co-operative Bank now stands curtailed and the member –
cooperative societies have wides choice to avail benefit without any
restriction like payment of higher interest for taking loan and will
now not be deprived of loan on the ground that the federal society
have no money to grant loan.

25. The
Court normally does not interfere with the decisions of the expert
bodies, particularly if it involves regulation of economic activities
by different constituents. This will be evident from the decision
of the Supreme Court in the case of Bhavesh D. Parish vs.
Union of India
,
reported in AIR 2000 SC 2047, wherein the Supreme Court has observed
thus :

“23. it
was further submitted that the amendments were introduced after
taking into account the recommendations of successive committees,
appointed by the Bank and Government of India, which had studied the
functioning of these bodies. The question of restricting such
financial activity by unincorporated bodies, in a question of
economic policy as it involves regulation of economic activities by
different constituents. In such matters of economic policy, this
Hon’ble Court does not interfere with the decision of the expert
bodies which have examined the matter. The following observations of
this Hon’ble Court made in RK
Garg vs. Union of India,
1982(1) SCR 947 at 969 L (AIR 1981 SC 2138 at p.2147) are appropriate
:

“Another
rule of equal importance is that laws relating to economic activities
should be viewed with greater latitude than laws touching civil
rights such as freedom of speech, religion etc. It has been said by
no less a person that Holmes, J. that the Legislature should be
allowed some play in the joints, because it has to deal with complex
problem which do not admit of solution through any doctrinaire or
straight-jacket formula and this is particularly true in case of
Legislation dealing with economic matters, where, having regard to
the nature of the problems required to be dealt with greater play in
the joints has to be allowed to the Legislature. The Court should
feel more inclined to give judicial deference to legislative judgment
in the filed of economic regulation than in other areas where
fundamental human rights are involved. Nowhere has this admonition
been more felicitously expressed than in Morey vs. Doud [1957]
354 US 458 where Frankfurter, J. said in his imitable style :

“In
the utilities, tax and economic regulation cases, there are good
reasons for judicial self-restraint if not judicial deference to
legislative judgment. The Legislature after all has the affirmative
responsibility. The Courts have only the power to destroy, not to
reconstruct. When these are added to the complexity of economic
regulation, the uncertainty, the liability to error, the bewildering
conflict of the experts, and the number of times the Judges have been
overruled by events self-limitation can be seen to be the path to
judicial wisdom and institutional prestige and stability.”

26. In
the case of RK Garg vs. Union of India,
(1981)4 SCC 675, the Supreme Court observed that :-

“It
has been said by no less a person that Holmes, J. that the
Legislature should be allowed some play in the joints, because it has
to deal with complex problem which do not admit of solution through
any doctrinaire or straight-jacket formula and this is particularly
true in case of Legislation dealing with economic matters, where,
having regard to the nature of the problems required to be dealt with
greater play in the joints has to be allowed to the Legislature. The
Court should feel more inclined to give judicial deference to
legislative judgment in the filed of economic regulation than in
other areas where fundamental human rights are involved. Nowhere has
this admonition been more felicitously expressed than in Morey vs.
Doud [1957] 354 US 458 where Frankfurter, J. said in his imitable
style :

“In
the utilities, tax and economic regulation cases, there are good
reasons for judicial self-restraint if not judicial deference to
legislative judgment. The Legislature after all has the affirmative
responsibility. The Courts have only the power to destroy, not to
reconstruct. When these are added to the complexity of economic
regulation, the uncertainty, the liability to error, the bewildering
conflict of the experts, and the number of times the Judges have been
overruled by events self-limitation can be seen to be the path to
judicial wisdom and institutional prestige and stability.”

In
the said case, the Supreme Court further observed that :-

“The
Court must always remember that ‘legislation is directed to practical
problems, that the economic mechanism is highly sensitive and
complex, that many problems are singular and contingent, that laws
are not abstract propositions and do not relate to abstract units and
are not to be measured by abstract symmetry’; ‘that exact wisdom and
nice adaption of remedy are not always possible’ and that ‘judgment
is largely a prophecy based on meagre and interpreted experience’.
Every legislation particularly in economic matters is essentially
empiric and it is based on experimentation or what one may call trial
and error method and therefore it cannot provide for all possible
situations or anticipate all possible abuses. There may be crudities
and inequities in complicated experimental economic legislation but
on that account alone it cannot be struck down as invalid. The
courts cannot, as pointed out by the United States Supreme Court in
Secy. of Agriculture vs.
Central Roig Refining Co., 338 US 604 (1950),
be converted into tribunals for relief from such crudities and
inequities. There may even be possibilities of abuse, but that too
cannot of itself be a ground for invalidating the legislation,
because it is not possible for any legislature to anticipate as if by
some divine prescience, distortions and abuses of its legislation
which may be made by those subject to tis provisions and to provide
against such distortions and abuses. Indeed, howsoever great may be
the care bestowed on its framing, it is difficult to conceive of a
legislation which is not capable of being abused by perverted human
ingenuity. The Court must therefore adjudge the constitutionality of
such legislation by the
generality of its provisions and not by its crudities or inequities
or possibilities of abuse come to light, the legislature can always
step in and enact suitable amendatory legislation. That is the
essence of pragmatic approach which must guide and inspire the
legislature in dealing with complex economic issues.”

27. In view of
the aforesaid authoritative pronouncement of the Supreme Court, as we
find that the Amending Act, 2008, particularly Section 73A is based
on the recommendations of the Task Force constituted by the Central
Government which is based on the report of the Vaidyanathan Committee
and the MoU has been reached between the Government of Gujarat with
the Central Government and NABARD for providing freedom from
affiliation or disaffiliation with a federal society of choice to
avail the financial benefits out of the share of the revival package
of Rs.1106.58 crores received from the Central Government, such
policy and law cannot be held to be bad on mere presumption that it
may violate the right of the petitioner – banks as guaranteed
under Article 19(1)(c) or Article 19(1)(g) of the Constitution.

We have
noticed that the impugned provision is reasonable having nexus with
the object sought to be achieved and is in consonance with Article 14
of the Constitution. The said provision neither take away the right
of the petitioners, the freedom to form an association or union as
guaranteed under Article 19(1)(c) nor infringes freedom of any of the
petitioner – bank to carry on trade or business as guaranteed
under Article 19(1)(g) of the Constitution. On the contrary, the
Amending Act, 2008 is in furtherance to such right to practice trade
or business by any co-operative credit structures including primary
agricultural credit co-operative societies, Central Co-operative
Banks and the State Co-operative Bank, as defined under Section 73A
of the Gujarat Co-operative Societies Act, 1961, inserted by the
Gujarat Co-operative Societies (Amendment) Act, 2008.

28. So
far as the new provisos added after the existing proviso to Section
76
relating to qualifications for appointment of the Chief Executive
Officer and the Directors of the Central Co-operative Bank and the
State Co-operative Bank is concerned, under 2nd
proviso, the Reserve Bank of India has been empowered to determine
the same. Further, as per the 3rd
proviso, the Registrar of the Co-operative Societies or the Board of
the Central Co-operative Banks or the State Co-operative Bank is
required to remove, at the request of the Reserve Bank, such
Directors and Chief Executive Officers who do not fulfill the
qualification as may be prescribed by the Reserve Bank. However, the
existing elected Directors holding their post as such Directors on
the date of the commencement of the Gujarat Co-operative Societies
(Amendment) Act, 2008 have been allowed to hold their offices till
the expiry of their
current remaining term.

29. In normal
course, under the Banking Regulations Act, 1949, a banking Company is
required to include persons with professional or other experience
under Section 10A and is required to be managed by whole time
Chairman under Section 10B of the said Act. The Reserve Bank of
India has the power to appoint Chairman of the Board of Directors
appointed on a whole-time basis or a Managing Director under Section
10BB
. The provisions of Sections 10A and 10B override all other
laws, contracts, etc. as per Section 10D of the said Act.

It is true
that the said provisions are not directly applicable to the
co-operative banks, but we have noticed the power of the Reserve Bank
of India binding on the banking Companies to run a bank by qualified
professionals having expertise in the field which can be managed by a
whole-time Chairman.

30. The Banking
Regulation Act
, 1949 has been made applicable to the co-operative
banks under Part V of the said Act, by Act 23 of 1965 with effect
from 1.3.1966; once it was repealed and subsequently substituted by
Act 61 of 1981 with effect from 1.5.1982. Pursuant to Section 65,
the co-operative banks, co-operative credit societies, co-operative
societies,, primary agricultural credit societies, etc. dealing with
the banking activities have been brought within the meaning of
“banking Companies”. Since then, the Banking Regulation
Act
, 1949 is applicable and thereby the Reserve Bank of India has the
power to give direction under Section 35A in certain matters in the
public interest, in the interest of the banking policy, etc, as
quoted hereunder :-

“35A. Power
of the Reserve Bank to give directions, – (1) Where the
Reserve Bank is satisfied that –

(a) in
the public interest; or

(aa) in
the interest of banking policy; or

(b) to
prevent the affairs of any banking company being conducted in a
manner detrimental to the interests of the depositors or in a manner
prejudicial to the interests of the banking company; or

(c) to
secure the proper management of any banking company generally,

it
is necessary to issue directions to banking companies generally or to
any banking company in particular, it may, from time to time, issue
such directions as it deems fit, and the banking companies or the
banking company, as the case may be, shall be bound to comply with
such directions.

(2) The
Reserve Bank may, on representation made to it or on its own motion,
modify or cancel any direction issued under sub-section (1), and in
so modifying or cancelling any direction may impose such conditions
as it thinks fit, subject to which the modification or cancellation
shall have effect.”

31. Under
the aforesaid provisions, though the Reserve Bank of India has power
to issue certain directions in the public interest or in the interest
of the banking policy or to prevent the affairs of any banking
company being conducted in a manner detrimental to the interests of
the depositors, etc. but under the aforesaid provisions, it has not
been empowered to issue directions to prescribe qualifications for
appointment to the post of Directors or Chief Executive Officers,
etc. Therefore, when initially the Reserve Bank of India issued
guidelines on 10.7.2007 and 29.4.2008, the challenge was made on the
ground that the Reserve Bank of India has no jurisdiction to issue
such guidelines, as the power to frame law with regard to the
co-operative societies is vested in the State in view of Entry 32 in
List II of the 7th
Schedule of the Constitution. It was in this background that the
Reserve Bank of India recalled their earlier guidelines and for the
said reason, the challenge to the earlier guidelines dated 10.7.2007
and 29.4.2008 were not pressed.

32. As
the State Government has the power to frame law with regard to the
co-operative societies in view of Entry 32 in List II of the
7th Schedule,
taking into consideration the report of the Task Force based on the
recommendations of the Vaidyanathan Committee and in light of the
Memorandum of Understanding reached by the State Government with the
Central Government and NABARD, the State Government enacted the
Gujarat Co-operative Societies (Amendment) Act, 2008 and inserted the
2nd and 3rd
proviso below the existing proviso to Section 76 of the Gujarat
Co-operative Societies Act, 1961. By such amendment, the Reserve
Bank of India, an expert body, having knowledge with regard to the
qualifications and other experience required for professionals to
manage the business of the banking of a co-operative society, has
been empowered to determine such qualifications including experience
for appointment of Chief Executive Officer and Directors of the
Central Co-operative banks, State Co-operative Bank, etc.

33. It cannot
be said that the legislatures have abdicated its power. The
legislatures may not have to take note of all the relevant facts and
expertise to determine the qualifications as may be required and may
be required to be enhanced from time to time including the experience
for many professional posts of Chief Executive Officer and Directors
of a bank, namely, Central Co-operative Bank and the State
Co-operative Bank. Therefore, it is always open to ask an expert
body like Reserve Bank of India to determine such qualifications for
appointment of Chief Executive Officer and Directors of such
co-operative banks from time to time. If it is to be determined
taking into consideration the requirements of a co-operative bank, it
is always open to the legislatures to empower an expert body to
determine the same instead of fixing one time qualification by a
statute.

34. In
the case of Ram Krishna Dalmia vs. Justice Tendulkar,
reported in AIR 1958 SC 538, the Supreme Court held as follows :-

“(a) … … … … … … …

(b) that
there is always a presumption in favour of the constitutionality of
an enactment and the burden is upon him who attacks it to show that
there has been a clear transgression of the constitutional
principles;

(c) that
it must be presumed that the legislature understands and correctly
appreciates the needs of its own people, that its law are directed to
problems made manifest by experience and that its discriminations are
based on adequate grounds;

(d) that
the legislature is free to recognize degrees of harm and may confine
its restrictions to those cases where the need is deemed to be the
clearest;

(e) that
in order to sustain the presumption of constitutionality the court
may take into consideration matters of common knowledge, matters of
common report, the history of the times and may assume every state of
facts which can be conceived existing at the time of legislation;”

35. Therefore,
the presumption goes in favour of the constitutionality of the
enactment in question i.e. Section 76 of the Gujarat Co-operative
Societies Act, 1961 as made by Section 18 of the Amending Act, 2008
inserting provisos below the existing proviso to Section 76 of the
Principal Act. The petitioners who have challenged the said
provisions have failed to show that there has been any transgression
of the constitutional principles. No arbitrariness has been shown to
allege violation of Article 14 of the Constitution. The provisions
also do not interfere with the freedom of the banks to form an
association or to practice trade or business and thereby does not
infringe its rights guaranteed under Article 19(1)(c) or Article
19(1)(g)
of the Constitution. In absence of any merit, we uphold the
provisions as made in these cases, particularly Section 15 of the
Amending Act, 2008 whereby Section 73A of the Gujarat Co-operative
Societies Act, 1961 has been inserted and Section
18
of the Amending Act whereby two provisos below the existing
proviso to Section 76 has been inserted. In absence of any merit,
the writ petitions are dismissed, but there shall be no order as to
costs.

[S. J.

MUKHOPADHAYA, CJ.]

[ANANT
S. DAVE, J.]

sundar/-

   

Top

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

* Copy This Password *

* Type Or Paste Password Here *