Summary
A Scrutiny Committee constituted under Maharashtra Government Resolutions rejected proposals to register new primary agricultural credit co-operative societies as not economically viable; the Minister for Co-operatives allowed the promoters' appeals under Section 152 and directed registration, relaxing the Rs. 5 lakh share-capital requirement on an undertaking. The Bombay High Court set the State's orders aside and the Supreme Court affirmed: economic viability is a statutory pre-requisite under the proviso to Section 4 read with Section 6 of the Maharashtra Co-operative Societies Act, 1960, the State cannot in appeal depart from eligibility criteria it has itself laid down by Government Resolution, and the objector's lack of locus does not prevent a court from correcting a patently illegal order.
Issues
- Whether economic viability is a pre-requisite for registration of a co-operative society under the Maharashtra Co-operative Societies Act, 1960 and the Government Resolutions dated 23.09.2013 and 14.02.2017.
- Whether the State, in an appeal under Section 152 of the 1960 Act, could ignore the Scrutiny Committee's findings on financial viability and relax the minimum share-capital condition on the applicant's undertaking.
- Whether an individual member of an existing society lacking locus standi could maintain a writ petition against the State's order directing registration.
Provisions considered
- Section 4 (proviso), Maharashtra Co-operative Societies Act, 1960The proviso bars registration of a society likely to be economically unsound, whose registration may adversely affect the co-operative movement, or which is contrary to State policy directives. Read with Section 6, it makes economic viability a basic condition of registration; the Scrutiny Committee and its examination of proposals are part of the State's policy directives that must be complied with under this section. (¶¶ 13, 17, 20, 31)
- Section 6(1), Maharashtra Co-operative Societies Act, 1960Permits the Registrar to fix a higher minimum membership for a class of societies having regard to their objects and economic viability and the development of the co-operative movement; read conjointly with Section 4 as confirming that economic viability is a pre-requisite for registration. (¶¶ 13, 17)
- Section 152, Maharashtra Co-operative Societies Act, 1960The appeal provision under which the promoters challenged the Scrutiny Committee's rejection before the State; the Minister's order allowing the appeal and directing registration was found to have ignored the viability criteria. (¶¶ 4, 5, 25)
Held
- A conjoint reading of the proviso to Section 4 and Section 6(1) of the 1960 Act makes it clear that economic viability is a pre-requisite for registration of a society. Condition 5 of the Government Resolution dated 23.09.2013 sets up a Scrutiny Committee specifically to inspect the financial ability of a proposed society, and criterion 1A of the Resolution dated 14.02.2017 requires a minimum share capital of Rs. 5 lakh before registration. (¶¶ 15, 16, 17, 18, 19, 22)
- The Scrutiny Committee rightly rejected the proposal: the applicant produced nothing to substantiate the financial-health conditions, only a bald statement that the district central co-operative bank would support it without any letter of undertaking, and the claim that the society could run 152 kinds of business was hypothetical and unsupported by material. The State, in allowing the appeal on the basis that the existing society had not objected, completely ignored the economic-viability pre-requisite laid down in its own Resolutions and could not take a decision contrary to its own guidelines. (¶¶ 23, 24, 25, 26, 27, 28, 29)
- Registering a society that cannot meet the viability pre-condition and may not even be able to function would harm its members and frustrate the object of its establishment. The constitution of the Committee and its examination of the proposal are a vital part of the State's policy directives under Section 4; ignoring its findings without any perversity being shown is an unjustifiable interference with the Committee's order. (¶¶ 30, 31)
- The State may relax conditions of registration, but such discretion cannot be used to frustrate the object of the Act. Once eligibility standards have been set by Government Resolution, any relaxation (such as waiving the Rs. 5 lakh share-capital requirement on an undertaking to raise it within one to three years) can only be introduced by a subsequent Government Resolution, not at the State's whim in an individual appeal which bypasses the criteria. (¶ 32)
- An objection to the locus standi of the writ petitioner (a member of an existing society) does not restrain the High Court or the Supreme Court from interfering where the State's order suffers from patent illegality requiring correction. (¶ 33)
Result
Appeals dismissed; the High Court's common order dated 05.01.2024 setting aside the State's orders directing registration of the appellant-societies is upheld. Pending applications disposed of; no order as to costs.