Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No. 7050-7051 of 2010 |
| Diary Number | 24490/2009 |
| Judge Name | HON’BLE MR. JUSTICE VIKRAM NATH |
| Bench |
|
| Precedent Value | Binding on all courts interpreting the MSCSA 2002 |
| Overrules / Affirms |
|
| Type of Law | Statutory interpretation of the Multi-State Cooperative Societies Act, 2002 |
| Questions of Law | Does Section 103 of the MSCSA 2002 ipso jure convert every State-registered cooperative society into a multi-State society upon State reorganization, or must its objects—as defined in the bye-laws—extend to more than one State? |
| Ratio Decidendi | The Court held that Section 103, by its terms and in light of Sections 5 and 10, applies only where a cooperative society’s main objects—reflected in its bye-laws—operate in more than one State; mere reorganization or cross-State operations or member residence does not suffice. ‘Objects’ and ‘area of operation’ are distinct concepts. Conversion by operation of law under Section 103 is triggered only if bye-laws reveal objects spanning multiple States. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon |
|
| Facts as Summarised by the Court |
|
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts interpreting the Multi-State Cooperative Societies Act, 2002 |
| Persuasive For | High Courts addressing State reorganization and cooperative society jurisdiction |
| Overrules | Division Bench, Allahabad High Court’s judgment in Civil Miscellaneous Writ Petitions Nos. 61489/2007 & 18556/2008 (auto-conversion under S.103) |
| Distinguishes | Naresh Shankar Srivastava v. State of UP, (2009) 16 SCC 157 |
| Follows | Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108 |
What’s New / What Lawyers Should Note
- Clarifies that Section 103 MSCSA 2002 does not automatically convert State-registered cooperative societies into multi-State societies upon reorganization.
- Emphasises the legal distinction between a society’s “objects” (bye-laws) and its “area of operation”; only objects control Section 103’s application.
- Confirms that members’ residence or domicile across States is irrelevant to deeming conversion.
- Provides that conversion by operation of law under Section 103 arises only if bye-laws reveal objects serving members in more than one State.
- Advises practitioners to review and, if necessary, amend bye-laws when assessing applicability of the Central Act in reorganization scenarios.
Summary of Legal Reasoning
- Statutory Scheme: Examined MSCSA’s long title, Sections 5 (registration preconditions), 10 (bye-laws and objects), 22 (voluntary conversion) and 103 (deeming clause).
- Definition of “Objects”: “Objects” not defined in statute; derived from Sections 5 and 10 requiring bye-laws to set out objects serving members in more than one State.
- Distinction of Concepts: “Objects” (Section 103) and “area of operation” (Section 10(2)(a)) are separate; Section 103 must be read with Section 5’s objects-based test.
- Contextual Interpretation: Adopted contextual approach (Southern Electricity) to avoid absurd results; refused to read “area of operation” into “objects.”
- Application: Section 103 applies only where bye-laws show objects spanning two or more States; where objects remain confined to one State, State Act continues to govern.
Arguments by the Parties
Petitioner (State of Uttar Pradesh)
- A 2006 joint settlement between UP and Uttarakhand settled all inter-State claims; Uttarakhand never asserted control over the sugar mills.
- The High Court conflated “area of operation” with “objects”; society’s operations and objects were confined to UP.
- No notices issued by Central Registrar requiring registration under the MSCSA; UP retains 95% shareholding.
- MSCSA’s deeming clause must be interpreted to avoid absurd results; reorganization alone cannot trigger Section 103.
Respondents (Shareholder-Petitioners)
- Post-reorganization, shareholders reside in Uttarakhand; cane procurement spanned Uttarakhand.
- Bye-laws include operations in Tehsil Khatima (Nainital, Uttarakhand), thus objects extend to two States.
- Section 103 should be read to capture “area of operation,” enabling automatic conversion.
- Reliance on Naresh Shankar Srivastava v. State of UP for automatic conversion under Section 103.
Factual Background
- Kisan Cooperative Sugar Factory Ltd., registered under the Uttar Pradesh Cooperative Societies Act, 1965, operated a sugar mill at Majhola, District Pilibhit.
- The U.P. State Reorganization Act, 2000 bifurcated Uttar Pradesh, creating Uttarakhand; the Multi-State Cooperative Societies Act, 2002 introduced Section 103.
- UP Government decided to privatize several unviable cooperative sugar mills; affected shareholders filed writ petitions under Article 226.
- The Allahabad High Court held that, by operation of Section 103, the societies became multi-State and UP’s actions were without jurisdiction.
Statutory Analysis
- Section 5(1)(a) MSCSA 2002: No multi-State society unless its main objects serve members in more than one State.
- Section 10(2)(b): Bye-laws may specify “objects” separately from “area of operation.”
- Section 22: A State-registered society may convert into a multi-State society by amending bye-laws and extending jurisdiction.
- Section 103: Deeming fiction triggered by parliamentary State reorganization, but only if society’s objects were originally confined to one State and, post-reorganization, extend to more than one.
- Interpretation Principle: Contextual reading and avoidance of absurd results; cannot substitute “area of operation” for “objects.”
Alert Indicators
- ✔ Precedent Followed – Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill (2012) 2 SCC 108
- 🚨 Breaking Precedent – Overturns Allahabad High Court’s finding of automatic conversion under Section 103 when objects remain confined to one State