An Analytical Study of the Bihar Co-operative Societies Act, 1935: Judicial Interpretations and Operational Dynamics

Introduction

The co-operative movement in India, envisioned as an instrument of socio-economic change, is governed by specific legislative frameworks at both central and state levels. In Bihar, the Bihar Co-operative Societies Act, 1935 (originally the Bihar and Orissa Co-operative Societies Act, 1935, hereinafter "the Act"), stands as the principal legislation regulating the formation, functioning, and winding up of co-operative societies. This article undertakes a scholarly analysis of the Act, drawing significantly upon judicial pronouncements from the Supreme Court of India and the Patna High Court, as well as the statutory provisions themselves. It aims to elucidate the operational dynamics of co-operative societies under this legal regime, focusing on key areas such as the role of the Registrar, dispute resolution mechanisms, service jurisprudence, and the amenability of these societies to writ jurisdiction.

I. Foundational Principles and Legislative Framework

A. Genesis and Objectives

The Bihar Co-operative Societies Act, 1935, was enacted "to consolidate and amend the law relating to Co-operative Societies in the States of Bihar and Orissa" (Chandrika Jha v. State Of Bihar And Others, Supreme Court Of India, 1983). The Preamble to the Act explicitly states its purpose: "to facilitate the formation, working and consolidation of co-operative societies for the promotion of thrift, self-help and mutual aid among agriculturists and other persons with common needs" (Chandrika Jha v. State Of Bihar And Others, 1983; Harakh Bhagat And Another v. Assistant Registrar, Co-Operative Societies, Barh And Others, Patna High Court, 1967). This foundational objective underscores the socio-economic philosophy underpinning the co-operative movement, emphasizing member participation and mutual benefit.

B. Core Tenets: Registration, Management, and Bye-Laws

The Act lays down a structured framework for the establishment and governance of co-operative societies. Section 7(1) provides that a society aiming to promote the common interests of its members in accordance with co-operative principles, or one established to facilitate such operations, may be registered under the Act (Chandrika Jha v. State Of Bihar And Others, 1983). Upon registration, as per Section 11, if the Registrar is satisfied with compliance with the Act and Rules and that the proposed bye-laws are not contrary thereto, the society becomes a body corporate with perpetual succession and a common seal (Sugauli Sugar Works (Private) Ltd v. Assistant Registrar, Cooperative Societies, Motihari Circle, Motihari And Others, Supreme Court Of India, 1962; Chandrika Jha v. State Of Bihar And Others, 1983).

The management of a registered society is vested in a managing committee, constituted in accordance with the Rules (Section 14(2) of the Act, as noted in Chandrika Jha v. State Of Bihar And Others, 1983). The bye-laws of the society play a crucial role in its internal governance, including defining the term of office for elected members and office-bearers of the managing committee (Section 14(3) of the Act, Chandrika Jha v. State Of Bihar And Others, 1983). The powers of the Board of Directors, as derived from the bye-laws, can include regulating staff strength, salaries, allowances, and service conditions, often with the approval of the Registrar ((1) Bihar State Co-Operative Land Development Bank, Ltd., And Another v. (2) Administrator, Bihar State Co-Operative Land Development Bank, And Another, Patna High Court, 2003).

II. The Pivotal Role of the Registrar

A. Supervisory and Regulatory Mandate

The Registrar of Co-operative Societies is endowed with extensive powers under the Act to supervise the working of societies (Harakh Bhagat And Another v. Assistant Registrar, Co-Operative Societies, Barh And Others, 1967). These powers range from registration (Section 11) to according sanctions for certain transactions, such as loans by a registered society to non-members (Section 16, Sugauli Sugar Works (Private) Ltd v. Assistant Registrar, Cooperative Societies, Motihari Circle, Motihari And Others, 1962). The Act also allows the Provincial (now State) Government to prescribe prohibitions and restrictions on transactions with non-members through rules (Section 17, Sugauli Sugar Works (Private) Ltd v. Assistant Registrar, Cooperative Societies, Motihari Circle, Motihari And Others, 1962).

B. Powers of Intervention: Supersession and Administration

In instances of mismanagement or other specified grounds, the Registrar has the power to supersede the managing committee of a society under Section 41 of the Act and appoint an Administrator (Brij Bihari Singh And Anr. v. The State Of Bihar & Another, Patna High Court, 1989; Harakh Bhagat And Another v. Assistant Registrar, Co-Operative Societies, Barh And Others, 1967). The appointment of an Administrator significantly alters the legal status and operational control of the society, with the Administrator typically exercising all powers of the Board of Directors (Rajendra Prasad Sah v. State Of Bihar And Others, Patna High Court, 2000). Such supersession was noted in the context of the Bihar State Co-operative Marketing Union Limited (BISCOMAUN) and the Land Development Bank (Brij Bihari Singh And Anr. v. The State Of Bihar & Another, 1989). The Administrator, often a government servant, is expected to act fairly and reasonably even while exercising statutory authority (Bihar State Co-Operative Marketing Union Limited Through Its Administrator v. The State Of Bihar And Others, Patna High Court, 1992). In extreme cases, the Registrar may even initiate proceedings for liquidating or dissolving societies (Section 44, Harakh Bhagat And Another v. Assistant Registrar, Co-Operative Societies, Barh And Others, 1967).

C. Adjudicatory Functions in Specific Contexts

Beyond general supervision, the Registrar is involved in specific adjudicatory or quasi-adjudicatory roles. For instance, amendments to the Act, such as those by Bihar Act 10 of 1944, empowered the Registrar to sanction financing banks to lend to agriculturists who are not members of registered societies, and member societies could act as agents for such financing banks subject to the Registrar's terms (Sugauli Sugar Works (Private) Ltd v. Assistant Registrar, Cooperative Societies, Motihari Circle, Motihari And Others, 1962, discussing amendments to Section 16). The State Government, under Section 66 of the Act, can make rules for various purposes, including prescribing procedures for amalgamation and division of societies (Harakh Bhagat And Another v. Assistant Registrar, Co-Operative Societies, Barh And Others, 1967). Rule 39 of the Bihar Co-operative Societies Rules, 1959, for example, dealt with compulsory amalgamation, a power exercised by Assistant Registrars (Harakh Bhagat And Another v. Assistant Registrar, Co-Operative Societies, Barh And Others, 1967).

III. Dispute Resolution under the Act

A. Section 48: Ambit of 'Touching the Business of the Society'

Section 48 of the Act is a cornerstone provision for dispute resolution, mandating that any dispute "touching the business of a registered society" among specified parties (members, past members, persons claiming through them, sureties, or between them and the society) shall be referred to the Registrar (Sugauli Sugar Works (Private) Ltd v. Assistant Registrar, Cooperative Societies, Motihari Circle, Motihari And Others, 1962). The interpretation of "touching the business of the society" has been a subject of judicial scrutiny. The Supreme Court, in cases like Cooperative Central Bank Ltd. and Others v. Additional Industrial Tribunal, Andhra Pradesh and Others (Supreme Court Of India, 1969), while interpreting a similar provision in the Andhra Pradesh Co-operative Societies Act, 1964, and referencing Deccan Merchants Cooperative Bank Ltd. v. Dalichand Jugraj Jain, held that disputes requiring alteration of service conditions embedded in bye-laws might fall outside the Registrar's purview under such clauses, belonging instead to an Industrial Tribunal. The scope of Section 48 was also central in Sugauli Sugar Works, where a dispute over commission and interest for sugarcane supply between a company and a society was referred to the Registrar, and its jurisdiction was upheld by the High Court, a matter later appealed to the Supreme Court (Sugauli Sugar Works (Private) Ltd v. Assistant Registrar, Cooperative Societies, Motihari Circle, Motihari And Others, 1962; Bihta Cooperative Development Cane Marketing Union Ltd., And Another v. Bank Of Bihar & Others, Supreme Court Of India, 1966).

B. Jurisdictional Contours: Registrar vis-à-vis Civil Courts and Other Tribunals

Section 57 of the Act complements Section 48 by barring the jurisdiction of Civil or Revenue Courts in respect of matters required to be referred to the Registrar (Krishna Chatterjee Defendant Set/ v. Shankar Prasad Gupta And Others Defendants Set/opposite Parties Set, Patna High Court, 2022). However, this bar is not absolute and depends on whether the dispute squarely falls within the ambit of Section 48. The Patna High Court in Krishna Chatterjee noted that Section 48 confers jurisdiction on the Registrar for disputes touching the business of a society, while Section 57 ousts civil court jurisdiction for such matters.

The Registrar's jurisdiction under Section 48 can also be affected by other special enactments. For instance, Section 16 of the Bihar Fish Jalkar Management Act, 2006, imposes a bar on interference by any Civil Court, Co-operative Registrar, and Revenue Court concerning disputes related to the settlement of Jalkars. This has been interpreted to oust the Registrar's jurisdiction under Section 48 of the Co-operative Societies Act in matters of Jalkar settlement (Sunil Sahni & Ors v. The State Of Bihar & Ors, Patna High Court, 2013; Kishore Sahni & Ors v. The State Of Bihar & Ors, Patna High Court, 2015).

C. Adjudication of Election Disputes

Elections within co-operative societies are governed by the Bihar Co-operative Societies Rules, 1959. Rule 21-X specifically provides for raising election disputes within 30 days from the declaration of the result, to be decided under Section 48 of the Act. The Patna High Court in Sita Ram Sah v. The State Of Bihar & Ors. (1994 SCC ONLINE PAT 321) clarified that the limitation period for an election petition runs from the date of declaration of the result, not from the date on which the certificate of election is furnished under Rule 21-U(4).

IV. Employment and Service Jurisprudence in Co-operative Societies

A. Appointments, Promotions, and Terminations: Judicial Scrutiny

Service matters within co-operative societies have frequently been litigated. Issues such as out-of-turn promotions, ad-hoc appointments, regularization, and termination of services have been subjected to judicial review. In Brij Bihari Singh And Anr. v. The State Of Bihar & Another (1989), the Patna High Court quashed orders cancelling out-of-turn promotions granted by the Board of Directors of co-operative societies (BISCOMAUN and Land Development Bank) after their supersession by Administrators, primarily on grounds of violation of principles of natural justice, as the petitioners were not given an opportunity to be heard. The court emphasized that non-supply of documents relied upon by the disciplinary authority vitiates the enquiry, citing Kashinath Dikshit v. Union of India.

Similarly, in Bihar State Co-Operative Marketing Union Limited Through Its Administrator v. The State Of Bihar And Others (1992), the termination of an ad-hoc appointee by the Administrator of BISCOMAUN was examined. While the court found the appointment itself to be illegal (being contrary to Staff Regulations and potentially violative of Articles 14 and 16 if BISCOMAUN were 'State'), it also scrutinized the termination process under Section 26 of the Bihar Shops and Establishment Act, remitting the matter for reconsideration of relief due to non-payment of one month's wages in lieu of notice.

The case of (1) Bihar State Co-Operative Land Development Bank, Ltd., And Another v. (2) Administrator, Bihar State Co-Operative Land Development Bank, And Another (2003) dealt with large-scale terminations of employees whose services were regularized years prior. The High Court upheld the learned Single Judge's decision to set aside these termination orders, noting that regularization orders that had stood for many years should not be disturbed lightly, especially when initial appointments, though perhaps irregular, were not deemed void ab initio.

The Act also contains provisions like Section 66B, which prescribes procedures for appointments. The Jharkhand High Court, in Employers In Relation To The M v. P.O.,Labour Court Dhanbad & An (Jharkhand High Court, 2009), referring to a Patna High Court decision (Teja Prasad v. The State of Bihar), held that appointments, including on a daily wage basis, made without following the procedure under Section 66B of the Bihar Co-operative Societies Act, 1935, were illegal and invalid.

B. The Question of 'State' and Amenability to Writ Jurisdiction

A significant area of litigation concerns whether co-operative societies are 'State' within the meaning of Article 12 of the Constitution of India, and thus amenable to writ jurisdiction under Article 226. The general rule, as affirmed by a Full Bench of the Patna High Court in Rajendra Prasad Sah v. State Of Bihar And Others (2000), is that a co-operative society like BISCOMAUN, when managed by its own committee, is not considered 'State' or an instrumentality thereof. This view has been reiterated in several cases (e.g., Abdul Wahid v. State Of Bihar, Patna High Court, 2011; Shivendra Kumar Singh v. The Muzaffarpur Central Co-Operative Bank Ltd., Patna High Court, 2013). A five-judge bench in The Organizer, Dehri C.D. & C.M. Union Ltd. v. The State of Bihar & Ors (2014 (1) P.L.J.R. 695) also held that a co-operative society lacking state funding, having an independent (though partly ex-officio) board, and not performing public functions, is not 'State' (cited in Birendra Singh v. The State Of Bihar & Ors, Patna High Court, 2016).

However, the legal status changes when a society's managing committee is superseded under Section 41 and an Administrator is appointed. In such circumstances, the society, acting through the Administrator (often a public servant), has been held to be amenable to writ jurisdiction (Rajendra Prasad Sah v. State Of Bihar And Others, 2000; Bihar State Co-Operative Marketing Union Limited Through Its Administrator v. The State Of Bihar And Others, 1992). Even if a society is not 'State', if it discharges public duties, courts have sometimes intervened, for example, to direct payment of retiral dues (Abdul Wahid v. State Of Bihar, 2011, referencing Hari Nandan Prasad v. State of Bihar). In cases where writ petitions are deemed not maintainable, parties are often directed to avail the alternative remedy of raising a dispute before the Registrar under Section 48 (Jieuri Primary Agriculture Credit Society (Pacs) ... v. The State Of Bihar..., Patna High Court, 2018).

V. Special Categories and Inter-Statutory Considerations

A. Apex Societies: Governance and Challenges

The Act and Rules govern a hierarchical structure of co-operative societies, including Primary Agricultural Credit Societies (PACS) at the base level, Central Societies (Vyapar Mandals) at the intermediate level, and Apex Societies like BISCOMAUN (Ramzan Ansari & Ors. v. The State Of Bihar & Ors., Patna High Court, 2009). BISCOMAUN, being an apex society, has frequently been the subject of litigation, particularly concerning its management, elections, and employment matters, as seen in numerous cited cases.

B. Multi-State Co-operative Societies: Jurisdictional Shifts

The operational area of a co-operative society can impact its governing legislation. If a society's area of operation extends to more than one state, it may fall under the purview of the Multi-State Co-operative Societies Act (currently the Act of 2002, previously 1984). Once a society partakes the nature of a Multi-State Co-operative Society, it is deemed registered under the central Act, and the State Registrar (e.g., Registrar Co-operative Societies, Bihar) may lose jurisdiction, with control vesting in the Central Registrar (Pragatishil Adarsh Sahakari Grih Nirman Samiti Ltd. & Anr v. The State of Bihar & Ors, Patna High Court, 2015, citing Bihar Rajya Sahkari Bhumi Vikas Bank Samiti Vs. The State of Bihar).

C. Interface with Other Specialized Legislations

As previously noted in the context of dispute resolution, the Bihar Co-operative Societies Act, 1935, may interact with other specialized statutes. The Bihar Fish Jalkar Management Act, 2006, for example, has been held to oust the Registrar's jurisdiction under Section 48 of the Co-operative Societies Act concerning settlement of Jalkars (Sunil Sahni & Ors v. The State Of Bihar & Ors, 2013; Kishore Sahni & Ors v. The State Of Bihar & Ors, 2015). Similarly, the interplay between the Co-operative Societies Act and the Industrial Disputes Act, 1947, was explored by the Supreme Court in Cooperative Central Bank Ltd. (1969), delineating jurisdictional boundaries based on the nature of the dispute.

VI. Note on Extraneous Reference Materials

Among the reference materials provided for this analysis, two cases, namely Motak Yadav @ Awadh Bihari & Ors v. State Of Bihar (Patna High Court, 2014) and Deo Narain Singh v. State Of Bihar (Patna High Court, 2010), appear to be of limited direct relevance to the Bihar Co-operative Societies Act, 1935. Motak Yadav is primarily a criminal appeal dealing with convictions under various sections of the Indian Penal Code, stemming from a dispute over water drainage leading to a fatal assault. Deo Narain Singh is an appeal against conviction under the Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985, focusing on procedural requirements like sealing of seized articles under Section 55 of the NDPS Act. While these cases reflect aspects of the justice delivery system in Bihar, their subject matter does not directly intersect with the legal framework governing co-operative societies, their management, dispute resolution, or other facets analyzed in this article based on the Bihar Co-operative Societies Act, 1935. Their inclusion in the provided list is acknowledged, but their substantive contribution to the specific topic of this article is minimal. The case of Uday Shankar Singh v. The State Of Bihar & Ors. (Patna High Court, 2003), concerning a no-confidence motion under the Bihar Panchayat Raj Act, 1993, while not directly about co-operative societies, offers analogous principles of procedural fairness and natural justice applicable to statutory bodies, which have been implicitly considered in the broader discussion of fair procedure.

VII. Conclusion

The Bihar Co-operative Societies Act, 1935, along with its rules and subsequent amendments, provides a comprehensive legal architecture for the co-operative sector in Bihar. Judicial interpretations over the decades have played a crucial role in shaping the understanding and application of its provisions. Key themes emerging from the case law include the extensive powers and responsibilities of the Registrar, the specific mechanisms for dispute resolution under Section 48 and their limitations, the complex jurisprudence surrounding service matters within co-operatives, and the nuanced question of their amenability to writ jurisdiction, particularly influenced by state intervention through supersession and appointment of administrators. The Act continues to be a vital piece of legislation, and its effective implementation, guided by judicial wisdom, remains critical for fostering a robust and principled co-operative movement that adheres to its foundational objectives of thrift, self-help, and mutual aid. The interplay with other statutes and the evolving nature of co-operative enterprises, including multi-state operations, present ongoing challenges and areas for legal development.