Read Time: 13 minutes

Synopsis

Upholding the 2011 amendment of Section 35(10)(cc) of the Delhi Co-operative Societies Act, the Delhi High Court recently held that there were no reasons for declaring the provisions of the 2003 Act to be “ultra-vires” as there were “no mala fide” and/or personal gain to anyone or the legislature in inserting it.

The division bench of Justice Manmohan and Justice Saurabh Banerjee held that the amendment carried out to Section 35(10)(cc) of the 2003 Act by the 2011 Amendment was “logical” and a “well-thought-off policy decision” taken in “larger public interest” which need not be interfered with.

The court stated that the petitioner had filed the present writ petition challenging Section 35(10)(cc) as it stood pursuant to the subsequent 2011 Amendment, only in the year 2014 without ever challenging the insertion of Section 35(10)(cc) per se after the introduction of the 2003 Act and the amendment thereto for the first time in the year 2004.

The petitioner was a member store of the Delhi Consumer Co-Operative Wholesale Store Ltd. (Society), which was registered in 1962 under the Bombay Co-operative Societies Act, 1912 and later under the Delhi Co-operative Societies Act, 1972, which was repealed by the 2003 Act.

As per the bye-law 22(a) of the Society, its Managing Committee consisted of nine members, out of which five members including the President, Vice-President, Secretary, and two members, were to be nominated by the Administrator of the Delhi Government and the remaining four members, were to be elected at the general meeting. The elections of the Managing Committee of the Society (Committee) were held after a gap of 27 years on June 24, 2001.

Despite various orders by the Co-ordinate Bench of the High Court, no elections were held since the Committee consisting of nine members had seven members nominated by the Delhi Government. The said dominance and control of the Society by the Delhi Government was flowing from Section 35(10)(cc) of the 2003 Act which permitted the Delhi Government to substitute the elected members with its nominees in proportion to the issued equity share capital held by it.

The petitioner, being aggrieved filed the present petition seeking a declaration of Section 35(10)(cc) of the 2003 Act as ultra vires and for passing directions to the Society and Delhi Government to conduct time-bound elections of the Committee within a period of three months based on membership records, primarily on the grounds that Section 35(10)(cc) of the Act not only usurped different powers of the Committee but also gave complete control to the Delhi Government and was against Section 30 and other provisions of the 2003 Act.

The Court observed that the repeal of the 1972 Act by the 2003 Act and the introduction of Section 35(10)(cc) vide the 2004 Amendment, were all carefully done after “proper scrutiny” to consolidate the law relating to cooperative societies with the sole objective of facilitating cumulative promotion, growth and development of different types of co-operative societies for economic betterment of all the members of the co-operative societies in particular and the society as a whole in general, as also to make the co-operative sector a viable economic movement. Thus, furthering growth in the fields of information technology, health, and education through the medium of cooperative societies.

It opined that “the insertion of Section 35(10)(cc) vide the Amendment Act proved to be a lifeline for the Society that was hitherto starving with hardly any business activity. Thus, no mala fide or personal gain could be attributed to any of the respondents or the legislature in incorporating the impugned Section 35(10)(cc) in the 2003 Act”.

The division bench noted that as the percentage of issued equity shares held by the Delhi Government and the percentage of members of the Committee to be nominated by it already stood introduced/changed/ proportionately increased way back in 2003, the only change vide the 2011 Amendment to Section 35(10)(cc), as challenged by the petitioner herein, was with respect to the increase of the percentage of members to be nominated to the Committee.

It also noted that the petitioner had not challenged the insertion of Section 35(10)(cc) in the 2003 Act vide the 2004 Amendment till the filing of the present writ petition, wherein it had sought to challenge a subsequent amendment carried out by the 2011 Amendment, thus, stated that the petitioner was guilty of delay, laches, and acquiescence.

“Amendment(s) made to an existing Statute cannot be modified, looked into, or set aside simply because the same is not viable or suitable to a party. Merely because the petitioner is losing emerging business/ economic opportunities is not sufficient for this Court to declare the amendment made to Section 35(10)(cc) of the 2003 Act by the 2011 Amendment as ultra vires without challenging the insertion thereof by the 2004 Amendment”, the court opined.

The Court further opined that any amendment of the present nature was not liable for interference by a Court of law, much less, when the same was within the parameters and not against public policy and there was a reasonable nexus of the said incorporation and amendment to Section 35(10)(cc) with the object of aiding public policy as it was able to sustain and aid the Society.

“The insertion of Section 35(10(cc) in the 2003 Act by the 2004 Amendment and the subsequent amendment thereof by the 2011 Amendment were both made after due deliberation and taking proper precaution at every level from time to time. It is trite law that as the cooperative societies, which from the inception are governed by the Statute, are created by the Statute and are controlled by the Statute, there can be no objection to statutory interference with their composition on the ground of contravention of the individual right of freedom of association”, the court observed.

Dismissing the present petition, the court held that there were no reasons for declaring the provisions of Section 35(10)(cc) of the 2003 Act to be ultra-vires as there was no mala fide and/ or personal gain to anyone or the legislature in inserting Section 35 (10)(cc) in the 2003 Act vide the 2004 Amendment and the later amendment thereto vide the 2011 Amendment.

Case Title: The Sudhar Sabha Consumer Co-operative Store Ltd. v. The Delhi Consumer Co-operative Wholesaler Store Ltd. & Ors.