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Friday, November 25, 2016

Whether the members of the Managing Committees of co-operative societies (against whom proceedings under Section 107 of the Gujarat Co- operative Societies Act, 1961 are pending) have a right to participate in the election process of an Agricultural Produce Marketing Committee constituted under the Gujarat Agricultural Produce Markets Act, 1963. VINESHKUMAR MAVJIBHAI PARMAR Vs. DETHALI GOPALAK VIVIDH KARYAKARI SAHAKARI MANDALI LTD. AND ORS.

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                       CIVIL APPEAL NO(s).3888 OF 2015


MANDALI LTD. AND ORS.                  ...Respondent(s)


                      CIVIL APPEAL NO(s). 3889 OF 2015
                      CIVIL APPEAL NO(s). 3890 OF 2015
                      CIVIL APPEAL NO(s). 3891 OF 2015
                      CIVIL APPEAL NO(s). 3892 OF 2015
                      CIVIL APPEAL NO(s). 3893 OF 2015
                      CIVIL APPEAL NO(s). 3894 OF 2015
                      CIVIL APPEAL NO(s). 3896 OF 2015

                               J U D G M E N T
Chelameswar, J.
1.    All these eight appeals are preferred by the unsuccessful  respondents
in various special civil applications (writ petitions under Article  226  of
the Constitution) before the High Court of Gujarat at Ahmedabad disposed  of
by a common judgment dated 17.3.2015.
2.    Whether  the  members  of  the  Managing  Committees  of  co-operative
societies (against whom proceedings under Section 107  of  the  Gujarat  Co-
operative Societies Act, 1961 are pending) have a right  to  participate  in
the  election  process  of  an  Agricultural  Produce  Marketing   Committee
constituted under the Gujarat Agricultural Produce Markets Act,  1963.   The
two  enactments  mentioned  above  are  referred  to  hereinafter  as   “the
3.    The facts leading to the present litigation:
      Sec. 9 of the MARKETS ACT contemplates the establishment of a  “Market
Committee” for every “market  area”.  Both  expressions  are  defined  under
Section 2(xiii) and 2 (xiv)[1].
      Section 10 of the MARKETS ACT declares market committees to be  bodies
corporate  with  perpetual  succession  and  a  common  seal.   Section   11
stipulates that every market committee shall consist of 17  members  falling
into 5 categories.  Section 11(1)(i)  stipulates  that  eight  agriculturist
members shall be elected by an electoral college consisting of  the  members
of  the  managing  committees  of  the  “co-operative  societies  dispensing
agricultural credit” (hereafter CREDIT SOCIETIES) in the market area.
      Section 11(1)(i) of the MARKETS ACT reads as follows:

“eight  agriculturists  who  shall  be  elected  by  members   of   managing
committees of co-operative  societies  (other  than  co-operative  marketing
societies and milk produce co-operative societies)  dispensing  agricultural
credit in the market area;”

4.    The activity of co-operative societies in  the  State  of  Gujarat  is
regulated by the SOCIETIES ACT. Section 107 of the  SOCIETIES  ACT  provides
for the liquidation and winding up of the societies  functioning  under  the
Act. Section 107(1) authorises  the  Registrar  to  pass  an  interim  order
directing a cooperative society to be wound up for any one  of  the  reasons
specified in clauses (a), (b) and (c) of  Section  107(1).   Sub-Section(3),
thereof authorises the Registrar to pass a  final  order  after  granting  a
hearing to the society against which an interim order  under  sub-Section(1)
is made. Such a final order could be  one  either  finally  winding  up  the
society by confirming the  interim  order  or  vacating  the  interim  order
passed earlier, whichever is appropriate in law having regard to  the  facts
and circumstances of the case.

5.    In exercise of the power  under  Section  107  of  the  SOCIETIES  ACT
proceedings were initiated by the Registrar[2] against  eleven  Co-operative
societies (established for the purpose of  dispensing  agricultural  credit)
operating in the market area of a market committee known  as  SIRPUR  market
committee, the details of which are not necessary for the present purpose.

6.    We are concerned with only eight of the eleven co-operative  societies
mentioned above. Admittedly, with reference to each of the  said  eight  co-
operative societies, interim orders  were  passed  initially  under  Section
107(1)[3] of the SOCIETIES ACT directing them to be wound up.  Subsequently,
final orders directing the winding up of each one of  the  said  cooperative
societies were also passed.  The said  orders  were  challenged  before  the
Appellate authority.    The  matters  eventually  reached  the  High  Court,
complete details of the litigation may not be necessary except to  say  that
the High Court had set aside the final orders with a  further  direction  to
the Registrar to  conduct  an  inquiry  afresh  under  Section  107  of  the
SOCIETIES ACT and  pass  appropriate  final  orders.   Admittedly  the  said
enquiry is pending.

7.    Elections to the SIRPUR market committee fell due in  the  year  2015.
A voters list (under Rule 7  of  the  Gujarat  Agricultural  Produce  Market
Rules, 1965) came to be prepared consisting the names of the members of  the
managing  committee  of  the   above-mentioned   8   cooperative   societies
(alongwith other societies) operating within the market area of  the  SIRPUR
market committee.

8.    In view of the pendency of  the  liquidation  proceedings,  objections
for the inclusion of the names of the members of the managing committees  of
the 8 cooperative societies were raised.   Objections  were  upheld  by  the
proceedings dated 26.2.2015 of the  Additional  Registrar  and  Co-operation
Officer (Market), Patan, directing the deletion of the names of the  members
of  the  managing   committee   of   the   above-mentioned   8   cooperative
societies[4]. Operative portion of the order dated 26.2.2015 w.r.t.  one  of
the 8 societies reads;
“I, Mr. H.G. Rawal, Authorized  Officer  &  Co-operation  Officer  [Market],
Patan & in exercise of the powers conferred in me and as per the  provisions
of the Gujarat Agriculture Produce Market Committee  Act,  1963  and  Market
Committee Rules, 1965 allow the  application  by  the  objector  Mr.  Parmar
Vineshkumar Mavjibai and Prajapati  Manishbai  Khemabhai  for  deleting  the
names of the Managing Committee members of the Shri  Kalyana  Group  Gopalak
Vividh Karyakari Sahkari Mandali Ltd. at Kalyana, Taluka Siddhpur  from  the
Agriculturist constituency voters  list  and  accept  the  just  and  proper
objections raised, and in the voters list Sr. 259 to 279  voters  names  are
ordered to be deleted.  The said  orders  will  be  subject  to  the  orders
passed  by  the  Hon.  High  Court  and  Additional  Registrar[Appeal],  Co-
operative society, Gujarat State, Gandhinagar.
                     [S.G. Rawal]
                               Additional Registrar &
                             Co-operation Officer [Market]

9.    Aggrieved by such a decision, the members of  the  managing  committee
of the said society filed special civil applications  invoking  Article  226
of the Constitution of India.  By the judgment impugned  in  these  appeals,
the special civil application was allowed setting aside the  orders  of  the
Additional Registrar dated 26.2.2015.

10.   We are informed that the facts relating to the other 7  societies  are
substantially similar.

11.   It is argued by the appellant;
Since the 8 societies in question are in the  process  of  being  wound  up,
they ceased to be CREDIT SOCIETIES within the meaning  of  Section  11(1)(i)
of the MARKETS ACT because their activities are limited  under  Section  110
of the SOCIETIES ACT i.e., the business of  the  societies  can  be  carried
only so far as may be  necessary  for  the  beneficial  winding  up  of  the
society. It is, therefore,  submitted  that  the  members  of  the  managing
committees of these 8 societies would be disentitled  to  be  voters  at  an
election for the agricultural market committee.
      According to the appellants, permitting the members  of  the  managing
committees of CREDIT SOCIETIES which are in the process of being  wound  up,
to participate in the election process and elect  agriculturist  members  to
the market committees, would be inconsistent with the spirit of the  MARKETS
ACT, in view of the  declaration  contained  in  Section  108(2)[5]  of  the

It is, therefore, submitted that the High Court erred  in  interfering  with
the orders of the Registrar directing the  deletion  of  the  names  of  the
members of the managing committees of the 8 societies from the voters  list.

12.   None appears for anyone of the respondents.

13.   The  purpose  of  the  establishment  of  the  market  committees  was
examined and explained by this Court in M.C.V.S.  Arunachala  Nadar  v.  The
State of Madras & Others, AIR 1959 SC 300.  A  constitution  bench  of  this
court made an elaborate inquiry into the legislative history of the  subject
and held that:
“The object of such legislation is to protect the  producers  of  commercial
crops from being exploited by the middlemen and  profiteers  and  to  enable
them    to    secure    a     fair     return     for     their     produce”
                                                 (See Para 6)

14.   For achieving the said  purpose,  market  committees  are  constituted
under  the  laws  made  by  the  legislatures  of  various   States   giving
representation  considered  appropriate  by  the  concerned  legislature  to
various classes of persons who have an interest in achieving the purpose  of
the market committees.
15.   The legislature of the  State  of  Gujarat  thought  it  fit  to  give
representation  under  the  MARKETS  ACT  to  5  classes  of  persons:   (i)
agriculturists,   (ii)   traders   holding   general    licences[6]    (iii)
representatives of the cooperative marketing societies[7] (iv)  a  nominated
member by the concerned local authority[8]  within  whose  jurisdiction  the
“principal market yard” is situated and (v) two  nominated  members  of  the
State Government.

16.   Of the above-mentioned 5 classes of members, the first  three  classes
consist of elected members and  the  later  two  are  of  nominated.   Three
distinct electoral colleges are  created  under  sub-clause  (i),  (ii)  and
(iii) of Section 11(1) for electing the 3 classes of elected members.
      “Section 11. Constitution of market committee –
(1)  Every market committee shall consist of the following members namely:-

(i)  eight agriculturists who  shall  be  elected  by  members  of  managing
committees of  co-operative  societies  other  than  co-operative  marketing
societies and milk produce co-operative  societies  dispensing  agricultural
credit in the market area;

(ii) four members to be  elected  in  the  prescribed  manner  from  amongst
themselves by the traders holding general licenses;

(iii) two representatives of the Co-operative  marketing  societies  situate
in the market area and holding general licenses, to be elected from  amongst
the members (other than nominal, associate or sympathizer members)  of  such
societies by the members of the managing committees of such societies:

Provided that where  the  number  of  co-operative  marketing  societies  so
situate does not exceed two, only one representative shall be so elected.”

17.   While the elected representatives to the  market  committee  belonging
to classes (ii) and (iii) mentioned above are required to be members of  the
concerned electoral college, the Act does not insist upon  such  requirement
w.r.t. those who are to be elected under the class (i) mentioned above.   In
other words, the members of the market committee belonging  to  the  1st  of
the abovementioned 5 classes need not be members of  the  electoral  college
which elects them.

18.    The  right  to  elect  ‘agriculturists’  to  a  market  committee  is
conferred under Section 11 of the MARKETS ACT  upon  the  electoral  college
consisting of members of the managing committees  of  cooperative  societies
operating in the  market  area  which  are  dispensing  agricultural  credit

19.   The reason for the above, as we understand, is  that  those  who  seek
election under the category of agriculturists  belong  to  a  very  nebulous
class, whereas the persons falling under classes (ii)  and  (iii)  mentioned
above  can  be  identified  with  certainty  based  upon   public   records.
Therefore, the legislature, in its  wisdom,  though  it  fit  to  create  an
electoral college which, by virtue of its  very  activity,  would  be  in  a
better position to identify  agriculturists  eligible  to  contest  for  the
membership of a market committee.  By the very nature of the office held  by
them,  members  of  the  managing  committees  of   “cooperative   societies
dispensing agricultural credit” would have an opportunity to  interact  with
the agriculturists.

20.   The pendency of the liquidation proceedings  in  law[9],  compels  the
elected members of the managing committee (OFFICERS of the Society) of a co-
operative society to hand over the custody and control of all  the  property
and assets, etc. of the society to the liquidator  appointed  under  Section
107(1) of the SOCIETIES ACT.  According to  the  appellants,  the  necessary
implication flowing therefrom is that the members of the managing  committee
of a society facing liquidation proceeding are debarred from anyway  dealing
with the affairs of their society.   Therefore,  they  should  also  not  be
permitted to exercise the right to participate in the election of  a  market

21.   The powers of the liquidator are  specified  under  Section  110,  the
details of which may not be necessary except to state  that  the  liquidator
virtually becomes the caretaker manager of the society whose winding  up  is
impending. At the same time it  is  equally  important  to  note  that  Sec.
108(3)(b)[10] stipulates that the officers[11] of  the  cooperative  society
vacate their offices only on the passage of the final order of  winding  up.
Obviously, they continue to be the office  bearers  but  are  disabled  from
enjoying certain rights  attached  to  the  office  and  performing  certain
functions to be performed by the holders of the office

22.   The rights and functions of the OFFICERS  of  a  co-operative  society
are many. Some of them are created by the statute under which the office  is
created. Others could be the creation of  subordinate  legislation  (in  the
context of the  present  case,  even  the  byelaws  of  the  society).   The
existence or lack of such rights and functions depend upon  the  scheme  and
tenor of the SOCIETIES ACT and the subordinate legislation made  thereunder.
Such rights and functions are put an end to only by  the  operation  of  law
i.e., the SOCIETIES ACT.

23.   Apart from that, nothing prevents the legislature from  conferring  by
another law additional rights or functions on a  person  holding  an  office
created under the SOCIETIES ACT.

24.   The legislature of  Gujarat  by  Section  11(1)  of  the  MARKETS  ACT
conferred on the OFFICERS of a  class  of  CREDIT  SOCIETIES  an  additional
function of electing members of the  market  committees.  Such  function  is
neither conferred on the OFFICERS of all  the  societies  functioning  under
the SOCIETIES ACT nor such  function  includes  the  right  to  elect  every
member of  the  concerned  market  committee.   Such  a  function  obviously
creates a right in the officers of the societies.  Such  a  statutory  right
could not be taken away in the absence of any express authority of law.

25.   The Gujarat legislature expressly provided  under  the  SOCIETIES  ACT
for the curtailment of certain rights of the officers  of  societies  facing
liquidation proceedings.  It must be remembered that at  the  same  time  it
also declared that such OFFICERS cease to be the  officers  of  the  Society
only when a final order of winding up is passed.  In a  given  case  if  the
Registrar after an  appropriate  enquiry  following  the  interim  order  of
winding decides not to finally wind up the  society,  the  OFFICERS  of  the
society would once again be entitled to exercise all the  rights  associated
with it and perform all the functions attached  to  the  office.  Therefore,
merely because  the  officers  of  CREDIT  SOCIETY  facing  liquidation  are
disabled from enforcing certain rights attached to  the  office  or  perform
certain obligations appended to the office, it does not  necessarily  follow
that they are disabled from performing every function entrusted  by  law  to
such office.

26.   We now deal with the submission  that  the  society  ceased  to  be  a
CREDIT SOCIETY in view of the pendency of the winding up proceedings.

27.   We  are  of  the  opinion  that  the  phrase  “co-operative  societies
dispensing agricultural credit in the market area” in  Section  11(1)(i)  of
the MARKETS ACT is only descriptive of the purpose for which  the  societies
are established.  Section  11(1)(i)  cannot  be  construed  as  imposing  an
incessant obligation of “dispensing agricultural credit” in order to  enable
the members of the managing committee of CREDIT SOCIETIES to participate  in
the election to the market committee. The obligation, if any,  to  “dispense
agricultural credit” arises under the bye-laws of  the  society  subject  of
course to the availability of funds and various other  factors.  We  are  of
the opinion that the above quoted words are only descriptive  of  the  class
of society  the  members  of  whose  managing  committees  are  entitled  to
participate in the election of the market committee. It is obvious from  the
language of the sub-section that there can exist more than one class of  co-
operative societies functioning under the  Act.   The  very  fact  that  the
legislature  took  care  to  expressly  exclude  members  of  the   managing
committees  of  two  classes  of  societies  i.e.  “Co-operative   Marketing
Societies” and “Milk Produce Co-operative Societies”,  definitely  indicates
that there can exist more than one class  of  societies  –  apart  from  the
common knowledge.

28.   Section 4[12] of the SOCIETIES ACT contemplates that  societies  could
be registered for different purposes.  They are  –  “the  promotion  of  the
economic interests of its members or  general  welfare  of  its  members  or
economic interest of the general welfare of the public”.
29.    Since  Section  11(1)(i)  of  the  MARKETS  ACT  is  establishing  an
electoral college for the election of a certain  class  (agriculturists)  of
members of the market committees, the legislature thought it fit  that  only
the members of the  managing  committees  of  those  co-operative  societies
which have a nexus  to  agricultural  activity  should  be  members  of  the
electoral college.

30.   The submission of the appellant that Section 11(1)(i) imposes a  legal
obligation that the members of the managing committees  of  only  those  co-
operative societies which are currently dispensing  agricultural  credit  in
the market area are entitled to participate in the electoral process of  the
concerned  market  committee  (in  other  words,  the  phrase  “co-operative
societies dispensing agricultural  credit”  is  indicative  of  the  current
activity of the societies but not the  purpose  for  which  the  society  is
established), would lead to various difficult questions:
(i)   What is the period to  which  the  currency  of  such  activity  would
relate to?  Whether the activity should be current when the voters’ list  is
prepared or the activity should continue even on the date of voting?

(ii)  Whether credit societies which do  not  dispense  agricultural  credit
for a certain  period  of  time  because  of  either  paucity  of  funds  or
borrowers are debarred from  “dispensing  agricultural  credit”  because  of
some legal prohibition or any other reason operating  temporarily  cease  to
be societies whose objective is to provide agricultural credit?

31.   Credit Societies against which there is an ‘interim order’ of  winding
up are temporarily debarred from dispensing agricultural credit,  by  virtue
of the operation of law.  The embargo imposed by such interim order  may  or
may not fructify into  a  final  order  of  winding  up.  (We  have  already
discussed this aspect of the matter at para 21 supra).  On the face of  such
possibility  of  the  society   resuming   its   activity   of   “dispensing
agricultural  credit”  -  to  debar  its  managing  committee  members  from
discharging their statutory  obligation  under  the  MARKETS  ACT  would  be
productive of public mischief.  Such an interpretation of the  statute  must
be avoided.

32.   For the above reasons, we  do  not  see  any  merit  in  the  appeals.
Therefore, the appeals are dismissed.

                                                      (J. Chelameswar)

                                        (Prafulla C. Pant)
New Delhi;
November 16, 2016

            Section 2 (xiii)  “market  area”  means  any  area  declared  or
deemed to be declared to be a market area under this Act;

           Section  2(xiv)  “market  committee”  means  a  market  committee
established or deemed to be established under this Act;
[2]       Section 2(17)  of the Gujarat Co-operative Societies Act,  1961  -
“Registrar” means a person appointed to be  the  Registrar  of  Co-operative
Societies under this Act; and includes to the extent of the  powers  of  the
Registrar conferred on any other person under  this  Act,  such  person  and
includes an Additional or Joint Registrar;
[3]   Section 107 Winding up – (1) [Except as  otherwise  provided  in  sub-
section (1A) if the Registrar, –-
      (a) after an inquiry has been held under section 86, or an  inspection
has been made under any of the provisions of sub-section (8) of section  84,
section 87 or section 88 or on  the  report  of  the  auditor  auditing  the
accounts of the society, or]
      (b) on receipt of an application made upon  a  resolution  carried  by
three-fourths of the members of a  society  present  at  a  special  general
meeting called for the purpose, or
            (c) of his own motion, in the case of a society which –
            (I)  has not commenced working, or
            (ii) has ceased working, or
            (iii)      possesses shares of members  deposits  not  exceeding
five hundred rupees, or
             (iv)  has  ceased  to  comply  with  any   conditions   as   to
registration and management in this act or [the rules or the bye-laws, or]
            (v)  has failed to comply with any directions issued under  sub-
section (1) of Section 160 or such directions as modified under  sub-section
(2) of that section.]
            is of the opinion that a society ought to be wound  up,  he  may
make an interim order directing it to be wound up.

[4]        We take the facts of the first respondent society in Civil
Appeal No. 3891/2015 as representative facts of the 8 appeals.
[5]        See F/N 9 infra
[6]    Section 2(ix) – “licence” means a licence  granted  under  section  6
or, as the case may be, a general or special licence granted  under  section
[7]    Section 2(v) –  “co-operative  marketing  society”  means  a  society
registered or deemed  to  be  registered  as  such  under  the  Gujarat  Co-
operative Societies Act, 1961 (Guj. X of 1962), and engaged in the  business
of  buying  or  selling  of  agricultural  produce  or  of   possessing   of
agricultural produce and holding a licence;
[8]    Section 2(xi) – “local authority” means –
      a  corporation  constituted  under  the  Bombay  Provincial  Municipal
Corporation Act, 1949 (Bom. LIX of 1949); or
      a municipality constituted or deemed to be constituted under –
      the Bombay District Municipal Act, 1901 (Bom. III of  1901),  or  that
Act as adapted and applied to the Saurashtra area; or
      the Bombay Municipal Boroughs Act, 1925 (Bom. XVIII of 1925), or  that
Act as adapted and applied to the Saurashtra area or that Act as applied  to
the Kutch area; or
           (c) a village panchayat constituted or deemed to  be  constituted
under the Bombay Village Panchayats Act, 1959 (Bom. III of 1959), or a  gram
panchayat or nagar panchayat constituted under the  Gujarat  Panchayat  Act,
1961 (Guj. VI of 1962);
[9]        Section 108.   Appointment of Liquidator - (1)  When an interim
or final order is made under Section 107 for the winding up of a society,
the Registrar may, in accordance with the rules appoint a person to be the
liquidator of the society, and fix his remuneration.
       (2) Where an interim order is made the officers of the society  shall
hand over to the liquidator the custody and control  of  all  the  property,
effects and actionable claims to which the  society  is  or  appears  to  be
entitled, and of all books, records and other documents  pertaining  to  the
business of the society and, shall have no access to any of them.
[10]      108 (3) When a final order is made confirming the Interim, order,
the officers of the society
            xxx        xxx        xxx        xxx
      (b)  shall vacate their offices and while winding up order remains in
force the general body of the society shall not exercise any powers.
[11]     Section 2(14) of the SOCIETIES ACT. –  “officers”  means  a  person
elected or appointed by a society to any office of  such  society  according
to its bye-laws; and includes a chairman,  vice-chairman,  president,  vice-
president, managing director, manager, secretary, treasurer, member  of  the
committee, and any other person elected or appointed  under  this  Act,  the
rules or the bye-laws, to give directions in regard to the business of  such
[12]     Section 4. Societies which may be  registered.—  A  society,  which
has as its object  the  promotion  of  the  economic  interests  or  general
welfare of its members or of the  public, in  accordance  with  co-operative
principles, or as society established with the object  of  facilitating  the
operations of any such society, may be registered under this Act.


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