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Board Of Directors Of Feroke Scb v. State & Others
Summary of the Opinion
Factual and Procedural Background
The appellant, Feroke Service Co-operative Bank Ltd., is the petitioner in O.P. No. 2014 of 1995. The appellant (a registered society functioning since 1942) challenged Ext. P5, a State Government notification exempting a proposed Karuvanthuruthy Service Co-operative Bank from clause (c) of sub-section (1) of Section 7 of the Kerala Co-operative Societies Act so that the proposed bank could be registered with Feroke Panchayat as its area of operation. The Single Judge dismissed the original petition, holding that the State Government had considered public interest in issuing Ext. P5 and that the matter was not fit for interference under Article 226 of the Constitution. The appellant sought to quash Ext. P5 and also sought a writ of mandamus directing respondents to sanction a proposal to open an evening branch at Feroke (Ext. P6). The writ appeal arises from the dismissal of that original petition.
Legal Issues Presented
- Whether Ext. P5, issued under Section 101 of the Kerala Co-operative Societies Act to exempt the proposed Karuvanthuruthy Service Co-operative Bank from clause (c) of Section 7(1), is valid notwithstanding the non-overlap requirement in Section 7(1)(c).
- Whether the Government's power under Section 101 can be exercised to enable registration of a new society whose area of operation would otherwise overlap with an existing society, or whether that power is limited by Section 7(1)(c).
- Whether Ext. P5 was issued without jurisdiction or as a colourable exercise of power (including any allegation of mala fides).
Arguments of the Parties
Appellant's Arguments
- Ext. P5 is patently violative of Section 7(1)(c) of the Act, which prevents overlap of area of operation between proposed and existing societies.
- The Registrar overlooked Section 7(1)(c) in recommending registration of the proposed bank.
- The Government's power under Section 101 can only be used to exempt an existing society from provisions of the Act where such exemption is necessary to remedy hardship or workability problems of that society; it cannot be used to permit registration of a new society within the area of an existing society.
- Ext. P5 is therefore without jurisdiction and amounts to a colourable exercise of power.
Respondents' Arguments
- Ext. P5 was issued under Section 101 of the Act and took into account the public interest involved; accordingly it cannot be attacked merely because it departs from Section 7(1)(c).
- The Government is empowered under Section 101 to exempt any society or class of societies from any provisions of the Act in the public interest.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Registrar, Co-op. Societies V.K Kunjambu ((1980) 1 SCC 340 : AIR 1980 S.C 350) | That a provision (Section 60 of the Madras Co-operative Societies Act) permits the State Government to relax occasional rigour of statutory provisions and to advance the objects of the Act by exempting a registered society from any provisions of the Act or directing modifications. | The Court relied on this authority by analogy to hold that Section 101 of the Kerala Act can be exercised to advance policy and objects of the Act and to safeguard public interest, and therefore Section 101 is not inherently limited or curtailed by Section 7(1)(c); but the power must not be exercised whimsically or arbitrarily. |
Court's Reasoning and Analysis
The court first set out the statutory framework. Section 7 empowers the Registrar to deny registration on specified grounds, including where the area of operation of the proposed society and that of an existing society of similar type would overlap (Section 7(1)(c)). The court then examined Section 101, which permits the Government, if satisfied that it is necessary in the public interest and for reasons to be recorded, to exempt any society or class of societies from any provision of the Act or to apply such provisions with specified modifications.
The court relied on the similarity between Section 101 of the Kerala Act and Section 60 of the Madras Act and the Supreme Court's interpretation in Registrar, Co-op. Societies v. V.K. Kunjambu that the comparable provision is intended to relax occasional rigour of statutory provisions to advance the Act's objects. From that analogy and authority the court concluded that the Government's power under Section 101 is wide enough to permit exemption from Section 7(1)(c) when overall public interest so requires.
The court balanced that breadth by emphasising a limit expressly stated in the opinion: the power under Section 101 cannot be exercised whimsically or arbitrarily and must be exercised only where public interest demands it. Applying these principles to the facts, the court accepted the Government's assessment (based on the Registrar's recommendation) that the appellant's area of operation was unwieldy and that the appellant often failed to serve Feroke Panchayat effectively; accordingly public interest necessitated exemption to enable registration of the proposed Karuvanthuruthy Service Co-operative Bank.
Because Ext. P5 was issued in public interest and there was no material indicating mala fides, the court found the Single Judge's dismissal of the original petition justified.
Holding and Implications
DISMISSED
Holding: The writ appeal is dismissed; Ext. P5 (the notification exempting the proposed Karuvanthuruthy Service Co-operative Bank from Section 7(1)(c)) was validly issued under Section 101 and the Single Judge was justified in dismissing the original petition.
Implications: The direct effect is that Ext. P5 stands and the proposed bank may be registered as contemplated by that notification. The court noted the Government's power under Section 101 is broad enough to relax Section 7(1)(c) for public interest but cautioned that such power must not be exercised whimsically or arbitrarily. With respect to the appellant's separate prayer for a writ of mandamus to sanction an evening branch as recommended in Ext. P6, the court expressed no opinion and stated the appellant is free to pursue available remedies. The opinion did not purport to establish a novel legal principle beyond its interpretation of the limits and scope of Section 101 in relation to Section 7(1)(c).
Pareed Pillay, C.J:— Appellant is the petitioner in O.P No. 2014 of 1995. Appellant-Feroke Service Co-operative Bank Ltd. filed the original petition to quash Ext. P5 notification. Learned Single Judge dismissed the original petition holding that the State Government has considered the question of Public interest in passing Ext. P5 notification and therefore this is not a case to be interfered with under Article 226 of the Constitution of India.
2. Appellant is a registered Society functioning from 1942 onwards. Contention of the appellant is that it has been functioning very well for all these years, that it has 18628 members at present and deposits of Rs. 4,78,00,000/-, that its working capital is Rs. 5,5200,000/- that loans have been advanced to members amounting to Rs. 5,24,00,000/- and that it is running on profit basis. As per Ext. P2 that Joint Register of Co-operative Societies, Kozhikode (3rd respondent) informed the appellant that a proposal was received in his office for formation of the Feroke Panchayat Service Co-operative Bank with the Panchayat area as its area of operation, and accepting the recognised policy of one Co-operative Bank for one Panchayat, the appellant was directed to take all necessary steps for excluding Feroke Panchayat area from the area of operation of the Bank and report compliance.
3. After receipt of Ext. P2 appellant passed a resolution on 16-5-1993 stating that the general body has expressed its anxiety regarding the proposal for registration of another society within the area of operation of the appellant-Society, which would weaken its functions and requested the third respondent to withdraw Ext. P2. It is thereafter that Ext. P5 notification was issued by the first respondent. In Ext. P5 it is stated that in public interest it has become necessary to exempt the proposed Karuvanthuruthy Service Co-operative Bank from the provisions of clause (c) of sub-section (1) of Section 7 of the Kerala Co-operative Societies Act so as to enable the Registrar for giving registration to the proposed bank in Feroke Panchayat. Accordingly the State Government exempted the proposed Karuvanthuruthy Service Co-operative Bank from Section 7(1)(c) of the Act. In the explanatory note it is stated that the Registrar of Co-operative Societies is of opinion that the appellant-Society with its area of operation comprising of Feroke, Cheruvannur and Nallalam Panchayats often failed to serve effectively the people of Feroke Panchayat as its present area of operation is too unwieldy and so the Registrar has recommended that the proposed Karuvanthuruthy Service Co-operative. Bank with the Feroke Panchayat as the area of operation can be given registration by exempting it from the provisions of Section 7(1)(c) of the Act.
4. The main contention of the appellant is that Ext. P5 is patently violative of Section 7(1)(c) of the Act. Section 7(1)(c) specifically states that the area of operation of the proposed society and the area of operation of another society of similar type should not overlap and if it does so proposed society cannot be registered by the Registrar. Appellant's contention is that this provision has been completely overlooked by the third respondent. According to the appellant, Government can exercise the powers under Section 101 of the Act only to exempt an existing society from the rigour of any of the provisions of the Act, when it cause any hardship to the working or workability of the society or creates any hurdle to its workability and that power cannot be exercised to enable the Registration of a new society in the area of operation of an already existing society. Ext P5 notification is assailed as one without jurisdiction and a colourable exercise of power.
5. Learned Government Pleader and counsel for the 4th respondent contended that the appellant's contention is devoid of merit as Ext. P5 notification which is issued under Section 101 of the Act has taken into account the public interest involved in the matter and therefore it cannot be assailed on the ground that it goes contra to what has been provided under Section 7(1)(c).
6. Section 7 empowers the Registrar to deny registration if he is satisfied.
i) that the application does not comply with the provisions of the Act and the Rules;
ii) that the objects of the proposed society are not in accordance with Section 4;
iii) that the area of operation of the proposed society and the area of operation of another society of similar type do not overlap;
iv) that the proposed bye-laws are contrary to the provisions of the Act and the Rules; and
v) that the proposed society does not comply with the requirements of sound business.
7. The proposed action of the Government is opposed chiefly on the ground that the Registrar has overlooked Section 7(1)(c).
8. Section 101 of the Act empowers the Government to exempt any society or any class of societies from any of provisions of the Act on the basis of public interest. Section 101 provides that the Government may, if they are satisfied that it is necessary to do so in the public interest by general or special order for reasons to be recorded, exempt any society or any class of societies from any of the provisions of the Act or direct that such provisions shall apply to such society or class of societies subject to such modifications as may be specified in the order. From a reading of Section 101 it can be discerned that the Government in order to safeguard public interest can exempt any society or any class of societies from any of the provisions of the Act. Section 60 of the Madras Co-operative Societies Act is similar to Section 101 of the Kerala Co-operative Societies Act. While dealing with Section 60 of the Madras Service Co-operative Societies Act in Registrar, Co-op. Societies V.K Kunjambu ((1980) 1 SCC 340 : AIR 1980 S.C 350) the Supreme Court held that the Section has been provided to relax the occasional rigour of the provisions of the Act and to advance the object of the Act. The Supreme Court further observed that Section 60 empowers the State Government to exempt a registered society from any of the provisions of the Act or to direct that such provision shall apply to such society with specified modification. As the power given to the Government under Section 101 of the Kerala Co-operative Societies Act can very well be exercised by the Government to advance the policy and objects of the Act and to safeguard public interest, it is not possible for us to hold that the power under Section 101 is in any way limited or curtailed by Section 7(1)(c) of the Act. As wide power is give to the Government under this Section taking into consideration the overall public interest it cannot be held that in a particular situation where public interest demands Section 7(1)(c) cannot be relaxed. However, we make it clear that the power under Section 101 cannot be used by the Government in a whimsical or arbitrary manner. Only in such cases where public interest demands that the said power can be exercised.
9. As the Government considered that in the working of the appellant Society it is unable to function effectively for the benefit of the people of Feroke Panchayat due to its unwieldy area of operation and as public interest necessitated exemption to the proposed Karuvanthuruthy Service Co-operative Bank from the provisions of Section 7(1)(c) Ext. P5 notification was issued under Section 101 of the Act. As that has been done in public interest and as there is no material to hold that this is actuated by mala fides we hold that the learned Single Judge was justified in dismissing the original petition.
10. The appellant has also sought for a writ of mandamus directing the respondents to sanction the proposal to open a Evening Branch at Feroke as recommended in Ext. P6. It is open to the appellant to pursue the remedies available to it in that regard. We express no opinion about it.
11. The writ appeal is dismissed.
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