Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-007050-007051 – 2010 |
| Diary Number | 24490/2009 |
| Judge Name | HON’BLE MR. JUSTICE VIKRAM NATH |
| Bench | HON’BLE MR. JUSTICE VIKRAM NATH and HON’BLE MR. JUSTICE SANDEEP MEHTA |
| Concurring or Dissenting Judges | None |
| Precedent Value | Binding |
| Overrules / Affirms | Affirms statutory scheme of MSCS Act; overrules High Court judgment |
| Type of Law | Cooperative societies law; statutory interpretation |
| Questions of Law | Whether Section 103 of the Multi-State Cooperative Societies Act, 2002 transforms a State-registered society into a multi-State one upon State reorganisation? |
| Ratio Decidendi | Section 103’s deeming fiction applies only if the society’s objects, as set out in its bye-laws, extend to more than one State. Conversion requires examination of bye-laws; area of operation and member residence are irrelevant. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court | Statutory scheme of Sections 5, 10, 22 and 103 of the MSCS Act; principle that words must be read in context (Southern Electricity); clear distinction between “objects” and “area of operation.” |
| Facts as Summarised by the Court | A sugar-factory cooperative originally registered under the 1912 Act was reenacted by the UP Act, 1965; UP was bifurcated in 2000; the 2002 Central Act introduced Section 103; a 2006 joint meeting apportioned assets; UP issued a privatization ordinance in 2007; the High Court held automatic conversion; UP appealed. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts and cooperative registrars |
| Overrules | Division Bench, Allahabad High Court’s judgment dated 26 September 2008 in Writ Petitions Nos. 61489/2007 and 18556/2008 |
What’s New / What Lawyers Should Note
- Clarifies that Section 103’s deeming conversion applies only when a society’s objects extend to more than one State as per its bye-laws.
- Distinguishes between “objects” and “area of operation,” excluding the latter from Section 103’s reach.
- Holds that the residence or domicile of members is irrelevant in determining multi-State status.
- Reaffirms statutory scheme allowing voluntary conversion by bye-law amendment (Section 22) and direct registration (Section 5).
- Lawyers must scrutinize society bye-laws for objects—not just operational geography—when advising on applicability of the MSCS Act.
Summary of Legal Reasoning
- The MSCS Act’s long title and Section 5 target societies whose main objects serve members in more than one State.
- Section 10(2)(b) empowers multi-State societies to define their objects in bye-laws, which must satisfy Section 5(1)(a).
- Section 22 permits voluntary conversion by amending bye-laws to extend objects across States, subject to Central Registrar approval.
- Section 103’s deeming fiction applies only if, post-reorganisation, a society’s objects extend to multiple States; mere reorganisation is insufficient.
- Statutory construction requires reading Section 103 in context with Sections 5 and 10; “objects” cannot be replaced by “area of operation.”
- As the subject cooperative’s objects remained confined to Uttar Pradesh, Section 103 did not apply and the society remained under the State Act.
Arguments by the Parties
Petitioner (State of Uttar Pradesh)
- A 2006 joint meeting extinguished inter-State financial claims; Uttarakhand never exercised control over the mills.
- UP retains 95% of shareholding; the sugar mill has been non-operational since 2006.
- No notices under the 1984 or 2002 Acts required the society to re-register as multi-State.
- Section 103 must not be given an unduly expansive interpretation to avoid absurd results.
- Naresh Shankar Srivastava is distinguishable; the society’s operations did not extend into Uttarakhand.
Respondents (Shareholders)
- Post-reorganisation some members became residents of Uttarakhand, divesting UP’s competence under the State Act.
- Clause 3 of the society’s bye-laws lists both Tehsil Khatima (Uttarakhand) and Tehsil Pilibhit (UP) as operational areas.
- Section 103 applies where a society’s area of operation spans multiple States, thereby attracting the deeming fiction.
- The Central Act does not repeal the State Act but displaces it for societies covered by Section 103.
- Naresh Shankar Srivastava supports automatic conversion upon reorganisation.
Factual Background
Kisan Cooperative Sugar Factory Ltd. was originally registered under the 1912 Act and re-enacted by the UP Cooperative Societies Act, 1965. In 2000, UP was bifurcated into UP and Uttarakhand and, in 2002, Parliament enacted the MSCS Act with Section 103 providing a deeming mechanism. A 2006 joint meeting apportioned cooperative assets, and UP issued a privatization ordinance in 2007. Aggrieved shareholders challenged the State’s actions; the Allahabad High Court held that Section 103 automatically converted the society into a multi-State entity, prompting UP’s appeal to the Supreme Court.
Statutory Analysis
- Section 5(1)(a): Pre-condition for multi-State registration is that the society’s main objects serve members in more than one State.
- Section 10(2)(b): Bye-laws must expressly state the objects of the society.
- Section 22: Allows a State-registered cooperative society to convert itself into a multi-State society by amending its bye-laws, subject to Central Registrar approval.
- Section 103: Deems a cooperative society with pre-reorganisation objects confined to one State as multi-State only if reorganisation results in those objects extending across multiple States.
Alert Indicators
- ✔ Precedent Followed – Affirms the MSCS Act’s scheme that objects, not geography or member residence, determine multi-State status.
- 🔄 Conflicting Decisions – Reverses the Allahabad High Court’s judgment dated 26 September 2008 in Writ Petitions Nos. 61489/2007 and 18556/2008.