Bar On Credit Society Members Contesting Beyond 3 Terms Illegal: Kerala HC Strikes Down S.28 (2A) Of Co-operative Society Amendment Act 2023

The Kerala High Court has declared Section 28 (2A) of the Kerala Co-operative Society Amendment Act, 2023 as illegal, unconstitutional and against the principles of co-operative member control.Section 28 deals with the constitution of the Committee for the management of the affairs of the Society. Section 28 (2A) states that no member of a credit society shall be eligible for election to the committee for more than three consecutive terms. Section 28 (2A) was introduced by Act 9 of 2024 and it was notified and published in the Kerala Gazette on June 07, 2024.Justice N Nargaresh observed that Co-operative Societies that function in rural and urban areas depend upon the trustworthiness of their members and have to function democratically. The court held that the General body can incorporate conditions in the bye-laws of the Society on elections, but the State cannot impose arbitrary restrictions that affect the autonomy of Co-operative Societies. “Section 28(2A) added to the Kerala Co-operative Societies Act, 1969 by the Act 9 of 2024 therefore is irrational and manifestly arbitrary. Section 28(A) cannot stand the scrutiny of Article 14 of the Constitution of India. Section 28(2A) is therefore declared as illegal and unconstitutional.”The Court was considering a plea challenging sections 14AA, 28(2A), 32 (4), 33, 34A, 56, 57E and 64 alleging that the amendments would cause governmental interference in the day-to-day working of the co-operative societies. The plea stated that unreasonable restriction and arbitrary eligibility conditions in section 28 (2A) are against the right of the members to contest in elections which are integral for the functioning of a co-operative society. It was argued that all co-operative societies are alike and imposing such restrictions only on credit societies co-operative societies is violative of Article 14 of the Constitution. It was stated that the Constitutional (Ninety-Seventh) Amendment Act, 2011 by inserting 'Part IX B- The Co-operative Societies' was introduced in the Constitution to strengthen their autonomy and contribution to the State.The Court stated that the insertion of 'co-operative societies' by 97th Constitutional Amendment in Article 19 (1)(c) guarantees the freedom to form co-operative societies as a fundamental right. The Court stated that as per Article 43-B of the Constitution introduced by way of the 97th Amendment, the State now has a duty to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies. The Court thus observed that autonomous functioning would mean that members of the Society have the right to function without direct supervision or oversight. It observed that as per Article 243-ZI, the State has the power to intervene in the incorporation, regulation and winding up of Co-operative Societies based on the principles of voluntary formation, democratic member control, member-economic participation and autonomous functioning. It thus held that prescribing arbitrary eligibility restrictions affects the autonomous functioning of Co-operative Societies. The Court further stated that members of the Managing Committee have to make important administrative decisions concerning the of functioning of a Co-operative Society. It stated that longer experience of members would be more beneficial to the Co-operative Society. The Court went on to state that restrictions imposed by the State affect the autonomy and right of the General body of a Society to elect the best among its Members to the Managing Committee.Court said, “When the Legislature makes arbitrary rules regulating the conditions and qualifications for being elected to the Managing Committee of a Co-operative Society, that would indeed be an affront to the right of the members of the Society to run the Society in a democratic manner. It is to be noted that the credentials of Co-operative Societies, which are mostly functioning in rural and semi urban areas in Kerala, depend on the trustworthiness of the Members of the Managing Committee of the Societies.”The Court went on to state that it is up to the General Body of the Co-operative Societies to enact bye-laws to impose any conditions pertaining to elections and the State need not impose such restrictions.“ Even if functioning of such bodies are regulated by the Government through statutes, the State cannot interfere with the democratic functioning of such bodies imposing arbitrary conditions for eligibility to contest in elections”, added the Court. Further, the Court stated that there cannot be a presumption that members if elected continuously would develop any vested interest or will be incompetent. It noted that there are no such restrictions on any other democratic institutions like Parliament, State Legislatures or even in Local Self Government Institutions. The Court also pointed out that the restrictions imposed by way of Section 28 (2A) only pertain to Co-operative...

Bar On Credit Society Members Contesting Beyond 3 Terms Illegal: Kerala HC Strikes Down S.28 (2A) Of Co-operative Society Amendment Act 2023

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