Constitution’s 97th amendment not applicable to local cooperative societies: SC

PTI, Oct 19, 2022, 11:31 AM IST

New Delhi: The Supreme Court on Tuesday held that the Constitution (97th Amendment) Act, 2011, would not be applicable to the local cooperative societies but only to the multi-state cooperative societies and the societies within Union Territories.

The cooperative societies were conferred with a constitutional status by the 97th Amendment of the Constitution to ensure their effective management.

The top court said the basic principles of cooperation are that the members join as human beings and not as capitalists and the cooperative society is a form of organization wherein people associate together as human beings on the basis of equality for the promotion of the economic interest of its members.

A bench of Chief Justice of India UU Lalit, Justice S Ravindra Bhat and Justice J B Pardiwala allowed an appeal of the ‘Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd’ challenging a Calcutta High Court order.

The High Court had upheld a civil judge order holding a plea maintainable for the execution of the arbitration award restraining it from demolishing the almost 100-year-old dilapidated administrative building of the society, situated on Gariahat Road at Jodhpur Park of Kolkata.

“This appeal succeeds and is hereby allowed. The impugned judgment and order passed by the High Court is hereby set aside and it shall now be open to the appellant society to proceed further with its project of redevelopment in accordance with the resolutions passed by the general body from time to time.

“It is needless to clarify that the first priority should be given to demolishing the entire building as the same is in a dilapidated condition”, the apex court ordered.

The society was registered in the year 1945 and was formed for the purpose of providing housing to the employees of the West Bengal Secretariat and others in accordance with the bye-laws of the society.

The bench said that it is necessary to clarify that the constitutional validity of the 97th Constitution Amendment was challenged before the Gujarat High Court, which declared that the Constitution (97th Amendment) Act, 2011 inserting Part IXB containing the Articles 243ZH to 243ZT as ultra vires the Constitution of India.

It said that the verdict was of the Gujarat High Court to the top court which was upheld and the majority view declared that Part IXB of the Constitution of India would be operative only in so far as it concerned the multi-state cooperative societies both within the various states and in the Union Territories of India.

It said, “Thus, the Constitution (97th Amendment) Act, 2011 would not be applicable to the local co-operative societies, whereas the same would be applicable to the multi-state cooperative societies and the societies within the Union Territories”.

The bench said that it is of the view that the Calcutta High Court is not correct in saying that the Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd Society could not have entered into an agreement with a third party developer as the Act or the Rules do not provide for the same.

It said, “It is too much for the High Court to expect that all the members of the Appellant Society should on their own contribute and undertake the development of the new administrative building.” It added that in the background of the constitutional mandate, the question is not what the statute does say but what the statute must say.

“If the Act or the Rules or the bye-laws do not say what they should say in terms of the Constitution, it is the duty of the Court to read the constitutional spirit and concept into the Acts”, it added.

The bench said that the redevelopment of the property is necessitated in view of the fact that the building is in a dilapidated condition with the passage of time and a necessity cannot be termed as business.

“The appellant Society in such circumstances did not even require to carry out any amendment to the bye-laws or to include the ‘redevelopment of the buildings’ as one of the objects of the society before taking any decision to redevelop its property”, it said.

The bench said that merely because one single member of the society in minority disapproves of the decision taken by the society that cannot be the basis to negate the decision of the general body, unless it is shown that the decision was the product of fraud or misrepresentation or was opposed to some statutory prohibition.

“In the present case, the General Body took a conscious decision after due deliberations for many years to redevelop its property. Even with regard to the appointment of ‘Hi-Rise’ as the developer, the record shows that it was decided by the General Body of the Society after examining the relative merits of the proposals received from the developers”, it said.

It added that the cooperative movement is both a theory of life and a system of business and it is a form of voluntary association where individuals unite for mutual aid in the production and distribution of wealth upon principles of equity, reason and the common good.

“It stands for distributive justice and asserts the principle of equality and equity ensuring to all those engaged in the production of wealth a share proportionately commensurate with the degree of their contribution… The movement is thus a great cooperative movement”, it added.