Network Past Issues

Thumps Up For Cooperative Autonomy In High Courts
Sattwick Dey Biswas

Introduction

Autonomy is the right to self-governance. A cooperative is a voluntary autonomous association of persons or societies, functioning in the conformity with the conformity principles for the economic and social betterment of its member. Autonomy of a cooperative society arises from the freedom of association inherent in a free society and in India through our constitution’s Article 19 (1) (c) (Right to form association). The very freedom arises from our belief on autonomy of individual. Individual’s autonomy empowers individuals to be free to associate with others with his free will. Cooperative movements in India, like in many developing countries were initiated by state therefore members are like children on a see-saw under the supervision of parents i.e. state. Two cases of recent court judgments are discussed to understand how Courts of India have upheld the Principles of Cooperatives in their judgments. These cases are very latest ones, the first case was decided by Supreme Court of India on 2nd September, 2011 and the second case was decided by High Court of Kerala on 1st September, 2011.

Case of Andhra Pradesh
The case was at: The Supreme Court Of India
Decided On: 02.09.2011
Appellants: A.P. Dairy Development Corporation Federation
Vs. Respondent: B. Narasimha Reddy and Ors.
Hon'ble Judges: P. Sathasivam and B.S. Chauhan, JJ.
The case in brief is that Andra Pradesh State Legislature enacted a new law named “Andhra Pradesh Mutually Aided Cooperative Societies Act 1995” without repealing old law on cooperatives that is “Andhra Pradesh Cooperative Societies Act 1964” where process of migration was permitted from one law to another. The 1995 act is designed in such a way that the government Registrar can’t interfere into internal affairs of cooperatives.

 2006 Amendment Act of “Andhra Pradesh Mutually Aided Cooperative Societies Act 1995” states:
(a) All dairy cooperatives that were working as on that day under the 1995 Act would stand transferred to the 1964 Act;
(b) All dairy cooperatives would be treated as if they have always been under the 1964 Act;
(c) All dairy cooperatives would be treated as if they never existed under the 1995 Act; and
(d) Henceforth, no dairy cooperative would be registered under the 1995 Act.
The dairy cooperatives and Cooperative Development Foundation (CDF) filed writ petitions in the High Court challenging the constitutional validity of the 2006 Amendment Act and statutory validity of appointment of persons-in-charge by executive orders, the High Court was pleased to grant intern relief suspended the executive order.
On 1-5-07, Hon’ble Court declared that provisions of 2006 amendment act as a violation of Article 14 (Equality before law), and Article 19 (1) (c) (Right to form Association) of the constitution. Being aggrieved at and dissatisfied with the above judgment the state appeal to Supreme Court to quash the said judgment.
The apex court hold that cooperative by its nature is a form of voluntary association where individual unites for mutual benefit in production and distribution of upon the principles of equity, reason and common good. Formation of the unions under Article 19(1)(c) is a voluntary act, thus, unwarranted/impermissible statutory intervention is not desired. The Act as stated by Hon'ble Judges, P. Sathasivam and B.S. Chauhan, JJ. In their ruling state, “does not merely regulate the administration of the affairs of the Society, what it does is to alter the composition of the Society itself. The result of this change in composition is that the members, who voluntarily formed the Association, are now compelled to act in that Association with other members who have imposed as members by the Act and in whose admission to membership they had no say. Such alteration in the composition of the Association itself clearly interferes with the right to continue to function as members of the Association which was voluntarily formed by the original founders. Any law, by which members are introduced in the voluntary Association without any opinion being given to the members to keep them out, or any law which takes away the membership of those who have voluntarily joined it, will be a law violating the right to form an association.” The right to from association will be infringed by forced inclusion of a person unwanted by the incumbent members. Therefore by statutory intervention, the state is not permitted to change the fundamental character of association or alter the composition of association itself. Any significant encroachment upon associational freedom is registered under a statute the provision of the statute govern it. In case it has an option/ choice to be registered under a particular statute, if there is more than one statute operating in the field, the state can’t force the association to get itself registered under a statute for which it has not applied. Introducing an element of compulsion would violate Article 19 (1) (c) of the constitution.

The judgment goes on by saying, “The affairs of the co-operatives are to be regulated by the provisions of the Act 1995 and by the bye-laws made by the individual co-operative society. The Act 1995 provide for multiplicity of organisations and the statutory authorities have no right to classify the co-operative societies, while under the Act 1964 the Registrar can refuse because of non-viability, conflict of area of jurisdiction or for some class of co-operative. Under the Act 1964, it is the Registrar who has to approve the staffing pattern, service conditions, salaries etc. and his approval is required for taking someone from the Government on deputation, while under the Act 1995 the staff is accountable only to the society. Deputation etc. is possible only if a co-operative so desires.” Therefore both the Act clearly empower cooperatives own body to decide issues related to their own interest leaving state to oversee regulatory part to some extent. However, in line of 4th Principal of International Cooperative Alliance, “Autonomy and Independence” is in the hands of members of cooperative and cooperative only.

On “Autonomy and Independence,” the Hon’ble judges said, “Principles of co-operation as incorporated in Section 3 and given effect to in the other provisions of the Act 1995 permit better democratic functioning of the society than under the Act 1964. Whereas the Act 1995 provides for State regulation to the barest minimum, the Act 1964 provides for extensive State control and regulation of cooperative societies which is inconsistent with the national policy with regard to cooperative societies evolved in consultation…” Therefore for what so ever the state’s decision to enforce its will on cooperative is a violation of its previous stand and against the national model law recommended by the Planning Commission of India.

Though the legislation has right to amend or repeal any Act but to force the members of the cooperative to act under compulsion/direction of state rather on their own will would be violative of the very basic Principle of Cooperation when it process a cooperative registered under the 1995 Act to work under 1964 Act. Thus in this valued opinion of Apex Court the Act would be vitiated act only by non-application of mind but also by irrelevant and extraneous considerations.

Case of Kerala
The case was at: The High Court of Kerala
Decided On: 01-09-11
Appellants: Thomas K.F. Vs.
1. Kerala Co. Operative Milk Marketting
2. Director of Dairy Development
3. State of Kerala.
Hon'ble Judges: Justice P.N.Ravindran KCMMF (Kerala Cooperative Milk Marketing Federation) Ltd. was registered under Kerala Co-operative Societies Act 1969 (KCS) on 21-02-1980 and is the apex society of three Regional Cooperative Milk Producer Unions in state. About 2800 Primary Dairy Cooperative Societies with 800,000 dairy farmers are affiliated to them. The administration management and control of the Cooperative is vested in its Board of Directors (BOD) constituted as per its bye- laws.

In the year 2009, the Cooperative notified reduction in procurement of milk by affiliated RCMP unions in state due to economic reasons. The BOD of the Cooperative on 16-11-09 constituted a committee for that purpose. The committee headed by Dr. N.R. Unnithan in their report found "The actual cost of production is far in excess of the procurement price (Rs.18,63) fixed for cow milk (Fat3.5% and SNF 8.5%) in the stats-now,” and recommended to raise the selling price of milk at least by Rs. 5 per litre. After approval the BOD forwarded it to government with a request to take appropriate decision on the findings in the report. The government replied holding the report unofficial. The Board after considering various aspects at length resolved to increase the SP (selling price) of milk by Rs. 5/- per liter with effect from 11-05-11. The Registrar of Dairy Cooperatives (Director of Dairy Development, also known as Registrar) dissented to it on the ground of non-approval of the government.

It is contended by the petitions at Kerala High Court that the Registrar or government. don’t have the jurisdiction or authority to interfere with decision taken by the Cooperative as it is empowered to determine the same. On the other hand the contention made by the state is that Cooperative can only recommend an increase in support price but it can be only increased only with concurrence/ approval of the government. The Registrar is empowered under the provisions of the act and the rules to interfere with the decision taken by Cooperative. Moreover the government has the legislative competence to enact a law relating to price control under Entry 34 of List III of VII schedule to the constitution. It can issue executive instruction under Art 162 of the constitution to regulate SP of milk. The question arose for determination was whether Cooperative required prior approval of government to increase SP of milk. The Cooperative was formed pursuant to a tripartite entered into between State government, National Dairy Development Board and Indian Dairy Corporation. In that agreement ‘it is inter alia’ stipulated that state undertakes “not to take any action to restrict the power of cooperative institution to act in accordance with sound economic and financial practices , to fix their price of product etc. “ The bye-laws of the Cooperative empowers the Board to decide the pricing structure for dairy and allied products. Additionally, the court said, "In the instant case, the Dairy farmers in Kerala unfortunately were denied both - their legitimate right to fix the price and adopt appropriate marketing strategies - to realize the price. The net result is that the milk producer, who belongs to the poorest of the poor in the community is forced to sell his/her produce suffering a loss of around eight rupees per liter of milk compared to the actual cost he/she incurs."

Rule 180 of KCS stipulates that no society shall do way act which is not expressly provided for by the bye-laws of such society without previous express sanction of registration. The bye-laws empowering the board to decide on the procurement / sell to be paid for dairy products do not stipulate the previous sanction of the registrar. As election to the legislative assembly had been notified Cooperative decides to seek concurrence of EC and not the approval of government.

Rule 170 empower Registrar to rescind a resolution of Cooperative if it appears ultra vires the objects of Cooperative or against the provision or Act, Rules or bye-laws. The court said, “The interval between the successive revisions and the magnitude is often decided by the Government, an anomaly to the very concept of cooperative movement in the country.” The court in another place have said, “In my opinion the Government or the Registrar of Dairy Cooperative cannot regulate and control the working of a society in the exercise of the power conferred on them under the proviso to section 9 of the Act without taking into account the adverse economic impact that any regulatory measure adopted by the Government or Registrar of Dairy Co-operatives will have on the members of the society which in instant case is the Federation and Consequently on the members of the Primary Dairy Cooperative Societies, approximately 8,00,000 in number.” Here invocation of power does not arise. U/S(Under section)-9 of the act, the government and the Registrar can regulate and control the working of Cooperative for the economic and social betterment of the members and general public. S-66, 66A of the Act are in tune with the S-9 of the act. The materials on the record disclose that about 800,000 dairy farmers are not able to realize even the actual cost of production in existing price regime. The state has not enacted any price control laws so far or issues any executive order with Art 162 of Constitution. As held by apex court an un-announced law can not govern the rights of parties.

Therefore Hon’ble Court on 01-09-11 was pleased to quash the impugn order and declare that the state government and the Registrar have no right or authority to interfere with the decision taken by the cooperative to increase SP of milk.

Conclusion
Recent financial crisis has challenged the tendency to jump into the bandwagon of neoliberal orthodoxy. Cooperatives aspire for economic justice in times of such crisis. Hence, the autonomy of cooperative is a must not merely for the sake of compliance with cooperative ideology but more because cooperative action will not bear fruit until cooperative are free from external influence, including the state. As stated by Justice P.N.Ravindran, “…the successive revisions and the magnitude is often decided by the Government, an anomaly to the very concept of cooperative movement in the country.” Cooperative and state, both should work together by respecting full autonomy of the cooperative if they in right earnest as regard to cooperative development.
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The author can be contacted at : sattwickdeybiswas@yahoo.com