Challenge To Cooperative Society's Membership Can Only Be Raised Before Cooperative Court, Not State: Bombay High Court

Justice Arun R. Pednekar of the Aurangabad bench observed that such a challenge does not lie under section 79A as State cannot pass any direction in public interest which contravenes Section 23 of the Act.

“If membership is granted to any person is in contravention of MCS Act and is thus disputed, then the same can be remeded only by filing a dispute under section 91 of MCS Act by giving proper notice to the aggrieved person and the same has to be done by adopting appropriate proceedings before the Cooperative Court ... The proceedings under section 79A are misconceived. As there can be no public interest direction under section 79A of MCS Act in contravention of section 23 of MCS Act, the writ petition is dismissed,” the court said.

Section 23 of the Act provides that a society shall not refuse membership to any qualified person without any sufficient cause. Section 79A provides that the state government can pass directions against the cooperative society in public interest.

The court dismissed a writ petition challenging membership of 1405 members of a co-operative society.

The petitioners are the office holders of the respondent Parner Taluka Sahakari Bank Limited. The bank is a corporative society under the Act.

The petitioners claimed that the bank illegally inducted 1405 members without following due procedure. The members were inducted only for the purpose of the election as they are favourable to the elected body, the court was told. The petitioners had filed several complaints before the Commissioner for Cooperation and Registrar, Co-operative Societies, Ahmednagar.

The Commissioner called for enquiry report from District Deputy Registrar, Cooperative Societies and Assistant Registrar, Cooperative Societies. In the enquiry report, Assistant Registrar said that 144 members did not sign the membership application or complete KYC. Hence, the Assistant Registrar recommended action under section 79A of the Act against the bank

The bank claimed that documentation of only 13 newly inducted members was not complete. The Commissioner declared that membership of 1392 members is legal and membership of only 13 members was invalid.

The petitioners’ revision petition before the Minister of Co-operation, Textile and Marketing Department was dismissed. Hence, they approached the high court.

The court said that the fact that all the membership applications were accepted in one day makes no difference as the applications were scrutinized and found to be valid by the Commissioner. The court further said that the resolution inducting 1405 new members could have only been challenged under section 91 of the Act.

Section 91 provides that any dispute relating to the constitution, elections, general meetings, or management of business of a society shall be referred to the co-operative Court.

The proviso to section 91 provides that refusal of membership by a society is not a dispute under section 91. Further any decision of the Registrar against which an appeal or revision lies is not a dispute for the purpose of the Section.

The petitioners contended that the resolution inducting members is appealable before the Registrar and hence is not a dispute within section 91.

The court rejected this contention observing that the proviso refers to only rejection of membership application in which an appeal is provided to the Registrar. There is no appeal provided before the Registrar against the grant of membership, the court noted.

The court relied on Prerna Nagari Sahkari Bank Limited v. Divisional Joint Registrar which said that the eligibility of membership can be challenged before the co-operative Court.

Therefore, the court said that if the membership granted to any person is in contravention of the Act then it can be remedied only by filing a dispute under section 91 of the Act.

The court further held that merely because Assistant Registrar reported that 144 members did not sign the membership form or did not comply with the KYC norms, is not sufficient to revert their membership. The commissioner has verified the entire record and held that the membership of 1392 members is legal and valid, the court observed.

Case no. – Writ Petition No. 5760 of 2022

Case Title – Sudam s/o. Ganpat Kothambire and Ors. v. State of Maharashtra and Ors.

Citation: 2023 LiveLaw (Bom) 87