SC on 97th CAA : Vipul case and issue of recall

By I C Naik

Can members of cooperative societies recall a member(s) of the managing committee by passing a no confidence motion in a duly requisitioned general body meeting of members? Presently no such provisions exist. Imagine an eventuality that the State Cooperative Election Authority refuses to concede to such a motion passed by a convincing majority accepting the plea [of the ousted managing committee ] of absence of a statutory provision in the State Cooperative Societies Law and refuses to hold elections to constitute a new Committee, as that is now with the S C E A. Should that society necessarily get entangled in to a protracted litigation ending up in the Apex Court, with a lost purpose?

In a recent order of 19th March 2015, while upholding the ouster of a Chairman of the country’s largest Dairy Cooperative namely Gujarat Cooperative Milk Marketing Federation Limited [popularly brand “Amul”] having lost the confidence of a majority board members, the Apex Court, appears to have affixed its seal on its far reaching consequences on the Indian Cooperatives. In that context the Division Bench has carved the Judiciary’s constitutional mandate to tackle the missing legislative intent in the language used in the legislation enacted to give effect to the constitutional mandates.

The Apex Court has recognized the democratic right of members of cooperative societies to recall the entire managing committee, should the majority of the members so decide with No confidence motion against the committee passed by not less than 50% of its membership in a democratic manner. [Para 46 of the Order] As of now cooperative societies feel helpless once a committee is in place for five years.

Strident confidence of the beleaguered Chairman’s counsels on the apparent absence of a provision in cooperative laws or Bye-Laws permitting the Board to pass a no confidence motion, against the Chairman has been assertively upturned by the Bench with amazing stress on the changed functioning of Indian cooperatives, thanks to the Indian Constitution recognizing the new AVTAR of cooperatives that the Indian Parliament has in a historical move crafted under 97CAA.

The Apex Court candidly acknowledged that 97CAA gave a constitutional frame to the National Policy on Cooperatives adopted by the Government of India in March, 2002. The Order of the Court takes note of the fact that this National Policy was entirely based on the definition, values and principles stated in the International Cooperative Alliance Policy Statement on the Cooperative Identity. The Bench however noted its displeasure on the fact that the cooperatives in India did not have effective autonomy, democratic functioning and professional management.

Succinctly summing up the essence of the Statement of Objects and Reasons of the amendment that it gave a clear picture as to the need to strengthen the democratic basis and provide for a constitutional status to the cooperative societies, the Bench went all the way to reproduce the entire Statement in the order. The essence of the 97CAA (which came into effect on 12.01.2012) is that “ it represents the constitutional aspirations on the concept of cooperative societies “ the Bench observed.

The reproduction in the order of Article 43B as also a large part of the text of “Part IXB: The Cooperative Societies” and full text of the 7 International co-operative principles, in the 40 page order reinforces the view that the Apex Court indeed saw a very high value in the sanctity of 97CAA.

At Para 12 of the order we find the affirmation by the Bench namely “..by 12.01.2013, all laws on cooperative societies were bound to be restructured in consonance with the Ninety Seventh Amendment of the Constitution of India and, in any case, any provision in the Act or Rules or Bye-laws otherwise inconsistent with the Constitution will be inoperative thereafter and adds that “we have to see whether the Act, Rules or Bye-laws contain any provision for democratic functioning.” Is this not a rebuke in sophisticated words to the State Legislatures failing to uphold the sanctity of the Indian Cooperative Federalism!!!

Recalling the first legislation on cooperative movement in India viz the Cooperative Credit Societies Act, 1904 the Bench notes at Para 13 “The traits of democracy were present in the very first legislation through the principle “one man, one vote”.” At Para 14 a reference is made to the Government of India Act of 1919 (Montague Chelmsford Reforms),” whereby “cooperation became a provincial subject which gave a further impetus to the movement” and by 2002, National Policy on Cooperatives was announced.

At Para 15 of the order the Supreme Court surmises that the cooperative societies having been conferred a constitutional status by the 97CAA, the whole concept of cooperatives has undergone a major change. Drawing a parallel the Bench recalls constitutional amendments made two decades ago with a view to give to the panchayats and municipalities constitutional status so that they function as vibrant democratic units of self-government.

Para 16 of the order carries an extremely relevant observation on the emerging course of cooperatives that “ Democratic principles have all through been recognized as one of the cooperative principles though the constitutional affirmation of those principles came only in 2012 ”(by 97CAA).

Throwing light on how a management structure is created through a robust democratic process of Election in cooperative societies, in Para 17 the Bench brought Chairman’s status in lime light. “It is to be borne in mind that the management and control of the society is entrusted to the representative body, viz., the Board of Directors and that the Chairperson elected by the Board of Directors is the Chairperson of the society and not of the Board of directors.”

In subsequent Para 18 and 19 the Bench touches upon the Democratic Principles and importance of members’ confidence in the cooperative society’s Chairman, making extensive references to 3 similar cases decided by the Apex Court in 2010, and 2011.In all those case the cooperative principles governing democratic institutions have been discussed by the Supreme Court in detail; no doubt the Apex Court was dealing with the Panchayati Raj institutions but the basic democratic principles governing both the institutions, enjoying the constitutional status, are the same.

At Para 20 listing the host of cardinal dimensions of the cooperative principles – democracy, equity, equality and solidarity democratic accountability, mutual trust, fairness, impartiality, unity or agreement of feeling among the delegates, cooperativeness, the Bench is quite assertive that “A body built on such principles cannot be led by a captain in whom the co-sailors have no confidence.”

In an unsophisticated way in Paragraphs 21 the Bench presents a case for the most obvious adherence to the democratic principles where Constitution/Statute recognizes an institution as a democratic institution. And that is “If a person has been selected to an office through democratic process, and when that person looses the confidence of the representatives who selected him, those representatives should necessarily have a democratic right to remove such an office bearer in whom they do not have confidence”

In Paragraphs 22-24 the Bench reverts to the same 3 cases which came up before the Apex Court in 2010 and 2011 in which the Apex Court had held the view as stated in Para 21.

In Para 25 raising a question quite pertinent to the heart of the matter before the Bench namely “What about a situation where there is no express provision regarding no confidence?” the Bench has literally answered the question before it in these words. “Once the cooperative society is conferred a constitutional status, it should rise to the constitutional aspirations as a democratic institution. So, it is for the respective legislative bodies to ensure that there is democratic functioning. When the Constitution is eloquent, the laws made there under cannot be silent. If the statute is silent or imprecise on the requirements under the Constitution, it is for the court to read the constitutional mandate in to the provisions concerned and declare it accordingly.

At Para 28 the above view is re-emphasized; “Where the Constitution has conceived a particular structure on certain institutions, the legislative bodies are bound to mould the statutes accordingly. Despite the constitutional mandate, if the legislative body concerned does not carry out the required structural changes in the statutes, then, it is the duty of the court to provide the statute with the meaning as per the Constitution. ……………..“In the case of cooperative societies, after the Ninety Seventh Amendment, it has become a clear or strong necessity to do the strong thing of reading into the legislation, the constitutional mandate of the cooperative societies to be governed as democratic institutions. … “The constitutional provisions have to be construed broadly and liberally having regard to the changed circumstances and the needs of time and polity. “

At Para 29 of the order, as if the attention of the State Legislatures is being drawn to a key constitutional imperative the Bench records “In fact, a period of one year has been provided in the Constitution from the commencement of the amendment for the required amendment or repeal by the competent legislature or by the competent authority, of laws which are inconsistent with Part IXB. As a corollary, the Constitution enables the competent legislature or authority to suitably amend the existing provisions in their laws in tune with the constitutional mandate. Thereafter, in case there continues to be silence in the Act or Bye-laws, the court will have to read the constitutional requirements into the existing provisions.”

Paragraphs 30 to 37 are devoted to analyze the relevant provisions of Gujarat cooperative society Act and Bye laws of the Gujarat Cooperative Milk Marketing Federation Limited which points at the Board of Directors being the body responsible to manage the federation’s affairs constituted by the General Body as per democratic principles and procedure as laid down in the Act and Bye Laws.

At Para 38 the Bench sums up what was observed in Para 30 to 37;” A conjoint reading of all the provisions under the Act and the Bye-laws of the Society would clearly show that the functional authority of the first respondent-Federation vests in the Board of Directors. The entire administration, management and control of the Federation is with the Board. Thus, the Board of Directors is bound to do all such acts and things as may be necessary for the proper management of the Federation. The Chairperson of the first respondent is elected by the Board for a term of three years and after the 97th Amendment to the Constitution, the term is five years. When the post of Chairperson falls vacant, the Board is bound to elect a new Chairperson for the remaining term. The post of Chairperson may fall vacant on account of variety of reasons like resignation, death or cessation of membership in the Board, operation of Section 76B of the Act, i.e., removal by the Registrar on account of persistent default or misconduct.

At Para 39 there is an acknowledgment that the removal by no confidence is not expressly provided in the Bye-laws. Neither is there any such provision in the Act or Rules. The Bench expressed a deep anxiety to looking forward to the provision for democratic functioning in the Act, Rules or Bye-laws. In that the Apex Court undertook the quest for an answer to the question “What about a situation where there is no express provision regarding no confidence?

In Paras 40 to 43 of the Order we can see the Lawyers of beleaguered Chairman leisurely pointing out with full confidence that various judgments of several High Courts of States like Andhra Pradesh [1975] Maharashtra [1982], Punjab and Haryana [1991] Kerala [2002] refused to accept that if a statute was silent about “No Confidence Motion” Chairman can nevertheless be removed by passing No Confidence motion.

The winds of change brought about by 97CAA can be very well observed in the response of the Bench to these lawyers recorded in Para 44 of the order reproduced verbatim: “It may be seen that all these decisions dealt with the pre-Ninety Seventh Amendment status of the cooperative societies. The amendment providing constitutional status to the societies has brought out radical changes in the concept of cooperative societies. Democratic functioning and autonomy have now become the core constitutional values of a cooperative society. Such societies are to be registered only if they are founded on cooperative principles of democracy, equality, equity and solidarity.”

Provision in Section 76B of the Gujarat Act to remove the Chairman on the grounds of misconduct or persistent non-performance etc was put forth by the Chairman’s Counsel being the sole option was rejected by the Apex Court emphasizing on the criticality of the continued confidence of the electorate ; “A person with good conduct may still not earn the confidence of the people who selected him to the office. The very concept of cooperation is to work jointly towards the same end. Unless there is cooperativeness among the elected cooperators who constitute the Governing Body for achieving the object for which the society is constituted and for which those representatives are elected by the members entrusting them with the management of affairs of the society, there will be total chaos. Cooperation among the cooperators is the essence of democratic functioning of a cooperative society. If there is no democracy in a cooperative society, it ceases to be a cooperative society as conceived by the Constitution of India under the Ninety Seventh Amendment.[Paragraph 46]

In Paragraphs 47 the Bench reproduced [Para 8 of Jyoti Basu and others v. Debi Ghosal and others, (1982) 1 SCC 691 observations by the Apex Court pertinent to matter of removal of elected representatives. The Bench observes; “There is no quarrel with the well-settled proposition that a right to elect is not a fundamental right nor a common law right; it is a statutory right, and any question relating to election has to be resorted within the four corners of the Act” But more important is (Para 48) a proposition by the Bench that “in the background of the constitutional mandate, the question is not what the statute does say but what the statute must say. If the Act or the Rules or the Bye-laws do not say what they should say in terms of the Constitution, it is the duty of the court to read the constitutional spirit and concept into the Acts.”

As regards role of the judges in the interpretation of statutes and ascertaining legislative intentions the Bench has drawn on the wisdom of the following International legal luminaries.

Francis Alan Roscoe Bennion (2 January 1923 – 28 January 2015) was a barristerin the United Kingdom] called Bennion
John Francis Donaldson, Baron Donaldson of Lymington, PC, QC(6 October 1920–31 August 2005) was a senior British judge] called Donaldson J.
Walter Berns, Walter Berns (May 3, 1919 – January 10, 2015) was an American constitutional lawand political philosophy professor. In his book ‘Government by lawyers and judges’, Commentary, June, 1987
Sir Peter Benson Maxwell (1817–1893), Chief Justice of the Supreme Court of the Straits Settlementsfrom 1867 to 1871: see Former Recorders and Chief Justices of the Straits Settlements, Colony of Singapore and State of Singapore. Supreme Court of Singapore (12 February 2010).
Alfred Thompson “Tom” Denning, Baron Denning, (23 January 1899 – 5 March 1999), commonly known as Lord Denning, was an English lawyer and judge.

They have illustrated with immense clarity how the Courts should tackle the legislations’ deficiencies in giving effect to the Constitutional imperatives.

At Para 49 the Bench observes that “The conventional view is that the legislature alone makes the law. But as Francis Alan Roscoe Bennion puts it: “The truth is that courts are inescapably possessed of some degree of legislative power. Enacted legislation lays down rules in advance. The commands of Parliament are deliberate prospective commands. The very concept of enacted legislation postulates an authoritative interpreter who operates ex post facto. No such interpreter can avoid legislating in the course of exercising that function. It can be done by regarding the breadth or other obscurity of the express language as conferring a delegated legislative power to elaborate its meaning in accordance with public policy (including legal policy)”

At Para 50 quoting Donaldson J the Bench concurs with the views ; “The duty of the courts is to ascertain and give effect to the will of Parliament as expressed in its enactments. In the performance of this duty the judges do not act as computers into which are fed the statues and the rules for the construction of statues and from whom issue forth the mathematically correct answer. The interpretation of statutes is a craft as much as a science and the judges, as craftsmen, select and apply to the appropriate rules as the tools of their trade. They are not legislators, but finishers, refiners and polishers of legislation which comes to them in a state, requiring varying degrees of further processing.”

At para 51 taking recourse to the case decided in pre-independence era [1949] 2 All ER 155 by Lord Denning the Bench quotes: “Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity… A judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of the Parliament, and he must do this not only from the language of the statue, but also from a consideration of the social conditions which gave rise to it and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give “force and life” to the intention of the legislature. A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases.”

The Apex Court has an occasion to deal with these principles in 1991 (3 SCC 67) and the Bench quoted paragraph-17 of that judgment in Paragraph 52 of its order. ,

“17. … The legislature often fails to keep pace with the changing needs and values nor is it realistic to expect that it will have provided for all contingencies and eventualities. It is, therefore, not only necessary but obligatory on the courts to step in to fill the lacuna. When courts perform this function undoubtedly they legislate judicially. But that is a kind of legislation which stands implicitly delegated to them to further the object of the legislation and to promote the goals of the society, or to put it negatively, to prevent the frustration of the legislation or perversion of the goals and values of the society. So long as the courts keep themselves tethered to the ethos of the society and do not travel off its course, so long as they attempt to furnish the felt necessities of the time and do not refurbish them, their role in this respect has to be welcomed.”

At Para 53 the Apex Court has pronounced the law as it should be in every State as regards removal of the office bearers before expiry of the term. This Para is reproduced verbatim. “The cooperative society registered under the Central or the State Act is bound to function as a democratic institution and conduct its affairs based on democratic principles. Democratic functioning on democratic principles is to be reflected in the respective Acts or Rules or Bye-laws both on the principle and procedure. If not, it is for the court to read the democratic principles into the Act or Rules or Bye-laws. If a procedure is prescribed in any Act or Rule or Bye-law regarding election of an office bearer by the Board, as defined under Article 243ZH(b) of the Constitution of India, and for removal thereof, by way of a motion of no confidence, the same procedure has to be followed. In case there is no express provision under the Act or Rules or Bye-laws for removal of an office bearer, such office bearer is liable to be removed in the event of loss of confidence by following the same procedure by which he was elected to office.

In Para 54 Apex Court winds up the controversy with following pronouncements

The Apex Court has declared the law regarding the democratic set up of a Cooperative Society
It will be permissible to remove an elected office bearer through motion of no confidence,
Since in many States, the relevant statutes have not carried out the required statutory changes in terms of the constitutional mandate, we feel it just and necessary to lay down certain guidelines.

Apex Court also clarified that these guidelines are open to be appropriately modified and given statutory shape by the competent legislature/authority.

The Bench also expressed concerns to lack of uniformity with regard to the procedure and process regarding motion of no confidence in panchayati raj in States. “Majority of the States provide for two years and a gap of another one year in case one motion of no confidence is defeated. Panchayati Raj Act, 1994 provides for a protection of two years and one year. In view of this practice local self-governments prevailing in many of the States as above, the Apex Court directed that in the case of cooperative societies registered under any Central or State law,

A motion of no confidence against an office bearer shall be moved only after two years of his assumption of office.
In case the motion of no confidence is once defeated, a fresh motion shall not be introduced within another one year.
A motion of no confidence shall be moved only in case there is a request from one-third of the elected members of the Board of Governors/Managing Committee of the cooperative society concerned.
The motion of no confidence shall be carried in case the motion is supported by more than fifty per cent of the elected members present in the meeting.

Let us hope, the order does not start getting branded as judicial overreach by the politicians having interest in maintaining the status quo i.e. to reap the benefits of avoidable political or bureaucratic interference in the management of the affairs of cooperative Societies.

As a rule, every solution to a problem gives a birth to a new more important question.