Cooperative movement in India is an appropriate and potent instrument in the hands of the powerless and the dispossessed to protect and promote their legitimate interests through collective action. Originally, the Cooperative Acts enacted in different states and the Central Government comprised regressive laws which were inconsistent with the concept of protection of mutual rights by the cooperative members. Mr. Rama Reddy of Hyderabad did a pioneering work in this field which resulted in enactments of several liberal laws in different states and by the Central government (known as Multi State Cooperative Act). However, old regressive acts and statutes are still in force in many states.
The case of Andhra Pradesh government is squarely different. Its government during the tenure of N.T. Rama Rao as Chief Minister enacted a liberal cooperative law. But the old regressive law remained on the statute books. Later the administration in the era of Y.S. Rajasekhara Reddy (YSR) as the Chief Minister tried to undo the enactment of the earlier administration using the lacunae of existence of the old cooperative law.
Supreme Court in a landmark judgement has undone that unholy act of the AP government. Mr. Rama Reddy, the pioneer in this area, has described the events and prepared a summary of the judgment. A report summarised from and based on the notes of Mr. Reddy is presented hereunder.
THE CASE HISTORY
In 1995, NT Rama Rao enacted a new liberal cooperative law, without repealing the old regressive law on cooperatives. The old law is titled “Andhra Pradesh Cooperative Societies Act 1964” (henceforth the 1964 Act) and the new law is titled “Andhra Pradesh Mutually Aided Cooperative Societies Act 1995” (henceforth the 1995 Act). The new law is also known as the MACS Act. It sowed a seed that sprouted to start a significant change in the course of cooperative history in the country. On similar lines, state legislatures enacted liberal and parallel laws in eight other states.
Thrift Cooperatives and Dairy Cooperatives flourished and continued to flourish under the 1995 Act. Most of the thrift cooperatives are newly registered under the 1995 Act and most of the dairy cooperatives have migrated from the 1964 Act to the 1995 Act. The process of migration is permissible under the law.
The Congress Party, under the leadership of YSR, won the 2004 General Election and formed the Council of Ministers with YSR as Chief Minister. For two full years, the Congress Government explored all possible executive actions to replace the elected boards of the eight District Dairy Unions, which were working under the 1995 Act, by its party nominees. Finally, it realised that no provision in the 1995 Act allows the Government and/or the Registrar to take such a step. The 1995 Act is designed in such a way that a mutually aided cooperative has to always have an elected board accountable to its general body. Such autonomous functioning of dairy cooperatives, particularly district dairy unions, was not acceptable to the YSR administration. It became an irritant for the then Chief Minister and his later actions relating to cooperatives were the consequence of the frustration on the subject.
On 2nd February 2006, the YSR Government amended the 1995 Act. The 2006 Amendment stated:
(a) All dairy cooperatives that were working as on that day under the Act would stand transferred to the 1964 Act;
(b) All dairy cooperatives would be treated as if they have always been under the 1964 Act;
(c) All dairy cooperatives would be treated as if they never existed under the 1995 Act; and
(c) Henceforth, no dairy cooperative would be registered under the 1995 Act.
The same night, by executive orders, the Government appointed District Collectors as persons-in-charge (one may say “administrators” or “special officers”) of all eight district dairy unions. In turn, the District Collectors appointed thousands of small and big government employees as persons-in-charge of more than 3500 village dairy societies, in place of elected boards. The same night, all these government employees assumed charge of their additional assignments. The YSR Government thought that it was a clever step forward to get the Congress Party members into the boards of dairy cooperatives.
When dairy cooperatives and Cooperative Development Foundation (CDF) filed writ petitions in the High Court challenging the constitutional validity of the 2006 Amendment Act and statutory validity of appointment of persons-in-charge, the High Court suspended the executive orders, as an interim relief. In effect, the elected boards continued to be in office.
After prolonged hearings, on and off, spread over 15 months, on 1st May 2007, the High Court declared all provisions of the 2006 Amendment Act as violative of Article 14 (equality before law) and Article 19(1)(c) (right to form associations) of the Constitution. Thus, the dairy cooperatives continued to function under the 1995 Act, with their own elected boards. The State Government filed an appeal in the Supreme Court with a plea to quash the judgment of the High Court.
THE JUDGEMENT
On 2nd September 2011, the Supreme Court delivered the judgment. The Supreme Court said that it found no reason to intervene in the judgment of the High Court, which had declared all provisions of the 2006 Amendment Act as unconstitutional. The essence of the Supreme Court’s judgment would be found in the reasons it gave in support of its conclusion. A significance of this judgement is that the Supreme Court emphatically speaks of voluntary association, principles of cooperation, voluntary action, free will, etc. in respect of cooperatives. The relevant and salient features of the judgement are noted hereunder:
(a) The cooperative, by its very nature, is a form of voluntary association where individuals unite for mutual benefit in the production and distribution of wealth upon the principles of equity, reason and common good. Therefore, the basic purpose of forming a cooperative remains to promote the economic interest of its members in accordance with the well-recognised Principles of Cooperation.
(b) Members of an association have the right to be associated only with those whom they consider eligible to be admitted and have right to deny admission to those with whom they do not want to be associated.
(c) The right to form an association will be infringed by forced inclusion of persons unwanted by the incumbent members of an association. Right to associate is for enjoying inexpressive activities. The constitutional right to freely associate with others encompasses associational ties designed to further the social, legal and economic benefits of the members of the association.
(d) By statutory interventions, the State is not permitted to change the fundamental character of the association or alter the composition of the association itself. Any significant encroachment upon associational freedom cannot be justified based on any interest of the Government.
(e) However, when an association is registered under a statute, the provisions of that statute govern it. In case the association has an option/choice to be registered under a particular statute, if there is more than one statute operating in the field, the State cannot force the association to get itself registered under a statute for which the association has not applied.
(f) The very existence of a Cooperative is based on voluntary action of its members. Once a cooperative is formed and its members voluntarily take a decision to get it registered under the X Act, the registration authority may reject the application for registration if conditions prescribed under the X Act are not fulfilled. The registration authority does not have a right to register the said applicant-cooperative under the Y Act. Even an authority, which is superior to the registering authority, is not competent to pass an order that the applicant-cooperative would be registered under the Y Act.
Such an order, if passed, would be in violation of the first Principle of Cooperation, which states that its members should voluntarily approve every action of a Cooperative. Introducing an element of compulsion would violate Article 19(1)(c) of the Constitution. It is not permissible under the Constitution or any law to do something indirectly, if it is not permissible to be done directly.