Legitquest :: Judgement Details

Pantheerankavu Service Co-op.bank Ltd. & Others v. State Of Kerala Represented By Its Secretary Department Ofco-operation & Others

(High Court Of Kerala)

Writ Appeal No. 2344 Of 2015 In Wp(C). 5148 Of 2015 | 16-03-2016

Ashok Bhushan, C.J.

1. These six Writ Appeals have been filed against the common judgment dated 13.10.2015 delivered in a bunch of Writ Petitions. Writ Petition No.4949 of 2015 was treated as the leading Writ Petition by the learned Single Judge for referring the facts and pleadings. Writ Appeal No.2441 of 2015 arising out of Writ Petition No.4949 of 2015 is being treated as the leading Writ Appeal and it shall be sufficient to refer to the facts and pleadings in W.A. No.2441 of 2015 for deciding all these Writ Appeals. The parties shall be referred to as described in Writ Petition No.4949 of 2015.

2. Writ Petition No.4949 of 2015 giving rise to Writ Appeal No.2441 of 2015 was filed by five Writ Petitioners who were all Primary Agricultural Credit Banks. The first petitioner, Perumanna Service Co-operative Bank was registered on 24.02.1966 which is a Class I Special Credit Bank under the Madras Co-operative Societies Act, 1932 which was enforced in Malabar area. Second petitioner, Olavanna Service Co-operative Bank was registered on 26.03.1918 having its area of operation in five Wards of Olavanna Grama Panchayat. The third petitioner, Nanminda Co-operative Rural Bank Ltd., was registered on 31.07.1946 as a Class I Special Credit Bank. The fourth petitioner, Mannur Service Co-operative Bank, is a Class I category Bank registered on 04.11.1955 with an area of operation in Kadalundi Grama Panchayat. The fifth petitioner, Kuruvattoor Service Co-operative Bank was registered on 04.01.1968. All the petitioners being Credit Banks/Societies were carrying on their business in the respective areas of operation in the District of Kozhikode. The second respondent, Karassery Service Co-operative Bank (for short, the KSCB) was registered under the Kerala Co-operative Societies Act, 1969 (hereinafter referred to as the 1969 Act) on 22.09.1994 as a Primary Agricultural Credit Co-operative Bank. The area of operation of KSCB was the Karassery Panchayat, in Kozhikode District.

3. In Kozhikode Taluk there are 46 Service Cooperative Banks functioning. The KSCB got its bye-laws amended which was approved by the Joint Registrar by his Order dated 30.04.2004 permitting the KSCB to give D Class membership within the whole area of Kozhikode Taluk, who can avail loan, make deposit and stand as surety for availing loan. The KSCB enrolled 30000 D Class members out of which 28000 members were granted loans. On 29.03.2012, the General Body of the KSCB passed a resolution to request the Government to formally issues orders extending its area of operation in the whole of Kozhikode Taluk to help and assist the D Class members in the area. The KSCB also sent a representation dated 26.06.2012 to the State Government. Two beneficiary Societies of the KSCB, viz., Integrated Development Centre, Thamarassery and Ramanattukara Grama Nirmana Samithi filed W.P(C) No.17686 of 2012 in the High Court pleading that the first petitioner therein is the Society registered under the 1969 Act and functioning in Thamarassery, Kozhikode whereas the second petitioner is an Organisation rendering service in the matter of empowering women who were living below poverty line. According to them they are receiving funds for all the activities from KSCB. However, because of location of KSCB distant away from theplace of operation, they are facing difficulties, they prayed for a direction to the Government to consider the resolution dated 29.03.2012 and representation dated 25.06.2012 submitted bythe KSCB. The Writ Petition was disposed of on 07.08.2012 directing the Secretary to Government, Co-operation Department to consider the representation dated 25.06.2012 submitted by the KSCB within a period of two months from the date of receipt of the copy of the judgment. The State Government considered the resolution and the representation in pursuance of the judgment dated 07.08.2012 and issued an Order dated 16.01.2013 in exercise of the powers under Section 101 of the 1969 Act, by which the KSCB was exempted from the provision of Section 7(1)(c) of the 1969 Act so as to enable the KSCB to open sub centres at Thamarassery and Ramanattukara in Kozhikode District. Ramanattukara Service Co-operative Bank challenging the order dated 16.01.2013 filed W.P(C) No.3379 of 2013 which was disposed of by this Court on 05.02.2013 directing the Joint Registrar to consider the representation. The Joint Registrar by Order dated 27.03.2013 rejected therepresentation of the KSCB. The beneficiaries and members of the KSCB being not satisfied with the Order dated 16.01.2013 in so far as it declined extension of operational area of the KSCB to the entire of Kozhikode Taluk, filed W.P(C) No.4510 of 2013 which was disposed by this Court on 11.03.2013 recording the undertaking of the KSCB that a fresh resolution will be passed and forwarded to the State Government which was directed bythis Court to consider the resolution in accordance with law expeditiously. The General Body of the KSCB passed a fresh resolution dated 23.03.2013 and forwarded to the Government for consideration.

4. The Calicut City Service Co-operative Bank which was functioning in the Municipal area of Kozhikode filed W.P(C) No.1066 of 2013 alleging inter alia that the KSCB was attempting to open new Sub Centres/new Branches in its area of operation. The Writ Petition was disposed of on 19.08.2013 directing (i) that the KSCB shall not open any Sub Centre/Branch in the area of operation of other Societies other than what is permitted by the Government under Section 7(1) (c). It shall be open for the Government to consider the resolution passed by the KSCB in the event the same being brought to the notice of the Government and shall be considered in accordance with the procedure prescribed after hearing all the affected parties including the petitioners therein.

5. Another writ petition, W.P(C)No.11900 of 2013 filed by the Ramanattukara Service Co-operative Bank making similar allegation was disposed of by this Court on 04.07.2013, whereby this Court noticed that it is open for the Government to relax the condition specified in Section 7(1)(c) also. However, this Court directed the KSCB to limit their operation in the Sub Centres only for the purpose of accepting amount from the members of the Integrated Development Centre, Thamarassery and Ramanattukara Grama Nirmana Samithi. In pursuance of the judgment of this Court dated 19.08.2013 in W.P(C) No.10666 of 2013 all the parties were called for hearing on 18.10.2013 regarding extension of operational limits of the KSCB to the entire Kozhikode Taluk. Hearing was conducted by the Secretary to Government, Co-operation Department and hearing note dated 25.10.2013 was issued containing the contention of parties and the recommendations made. The hearing note recommended for making the area of operational limit of the KSCB as Kozhikode Taluk exercising the powers under Section 101 by relaxing the provisions of Section 7(1)(c). The State Government issued an order dated 06.12.2013 referring to the hearing date 18.10.2013 conducted in obedience of the judgment dated 19.08.2013 in W.P(C) No.10666 of 2013 taking the view that extending the area of operation of the KSCB as to the entire Kozhikode Taluk will call for obstruction to the smooth functioning of other Cooperative Societies functioning at present and request of the KSCB cannot be considered. It was further observed that application if any submitted by the KSCB for changing the Sub Centres sanctioned to the KSCB at Thamarassery and Ramanattukara as permanent branches, the same should be considered and necessary orders could be issued.

6. Order dated 06.12.2013 came to be challenged by five beneficiary Societies of the KSCB and three individuals and Koduvally Block Panchayat by means of W.P(C) No.6630 of 2014. Writ Petition No.2406 of 2014 was also filed by the Ramanattukara Service Co-operative Bank challenging the order dated 06.12.2013 by which permission to establish two Branches were granted. Both Writ Petitions came up to be disposed of by judgment dated 14.08.2014 by this Court. This Court held that by the hearing note dated 25.10.2013 submitted by the Deputy Secretary to Government and countersigned by the Secretary recommended for extending the area of operation of KSCB to the entire Kozhikode Taluk and Ext.P9 Order dated 06.12.2013 being contrary to the said hearing note deserves to be set aside. The High Court set aside the order dated 06.12.2013 and the State was directed to pass fresh orders after affording opportunity of being heard to all parties in the light of the recommendation dated 16.05.2013 of the Registrar of Co-operative Societies. By communication dated 16.05.2013, the Joint Registrar had recommended for grant of exemption to the KSCB by extending its area of operation to whole of the Kozhikode Taluk. In pursuance of the judgment dated 14.08.2014, detailed order has been issued by the State Government on 16.01.2015 after hearing all the parties by which the State Government decided to grant exemption to the KSCB from Section 7(1)(c) regarding its area of operation by extending the area of operation to the entire Kozhikode Taluk except the Corporation limit. Operative portion of Order dated 16.01.2015 is as follows:

Government examined this matter in detail. It is seen that extending the area of operation of the Karassery Service Co-operative Bank to the entire Kozhikode Taluk will be beneficial to the general public. Likewise, considering the anxiety of the opposite parties, the Government by granting exemption from Rule 7(1)c) under Rule 101 ordered that the area of operation of the Karassery Service Co-operative Bank is extended over the entire Kozhikode Taluk except the areas in the Corporation limit. The Registrar of Co-operative Societies should take further action in the matter.

7. A Notification dated 02.02.2015 which was published in the Kerala Gazette dated 03.02.2015 was also issued by the State Government in exercise of its powers under Section 101 of the 1969 Act which Notification (last two paragraphs) is as follows:

... And Whereas in compliance with the order of the Honble High Court, the hearing was held by the Secretary to Government, Department of Co-operation in Government and the Government are satisfied that it is necessary in the public interest to extend the area of operation of the Karassery Service Co-operative Bank, as part of diversification and expansion of the activities, to the erstwhile Kozhikode Taluk, stood as on 16th January, 2013 i.e., the date of issuance of G.O (P) No.9/2013/Co-op., dated 16th January, 2013 except the whole areas covered within the Kozhikode Corporation area in Kozhikode Corporation area in Kozhikode District. Now, THEREFORE, in exercise of the powers conferred by Section 101 of the Kerala Co-operative Societies Act, 1969 (21 of 1969), the Government of Kerala hereby exempt the Karassery Service Co-operative Bank Ltd. No.D2628 in Kozhikode District, from the provisions of clause (c ) of subsection (1) of Section 7 of the said Act so as to enable the said Bank to extend its area of operation to the erstwhile Kozhikode Taluk stood as on 16th January, 2013, except the area covered within the Kozhikode Corporation in Kozhikode District. By Order of the Governor,

V.BOOSHAN,

Additional Secretary to Government

(Secretary-in-charge)

8. The five Service Co-operative Banks working in different areas of Kozhikode Taluk had filed the Writ Petition praying for the following reliefs:

i) Call for records leading to issue Exts.P8 and P11 and quash the same by issuing a writ of certiorari or any appropriate writ order or direction.

ii) declare that the second respondent society cannot overlap the area of operation of the petitioners banks in violation of Section 2(oaa) r/w Rule 7(1)(c).

iii) Grant such other relief as this Honourable Court may deem fit and proper in the circumstances of the case.

9. In the Writ Petition counter affidavit was filed by the State Government supporting its order dated 16.01.2015 (Ext.P8) and Notification dated 02.02.2015 (Ext.P11). The counter affidavit pleaded that the KSCB was permitted to have D Class members in whole of the Kozhikode Taluk which order was also issued in exercise of the powers under Section 101 of the 1969 Act. It was pleaded that amendment brought by Act 1 of 2000 in the definition 2(oaa) of the 1969 Act shall not be applicable to Societies and Banks which were in existence prior to the commencement of Act 1 of 2000.

10. The KSCB also filed a detailed counter affidavit referring to the entire sequence of events from the registration till issuance of the Order dated 16.01.2015 by the Government. Copies of different Orders passed by the Government as referred to above and the orders of this Court in different Writ Petitionsincluding the amended bye-laws were brought on record. The KSCB pleaded that the State has also exercised powers under Section 101 while permitting the KSCB to enroll D Class members in the entire Kozhikode Taluk and pursuant to it, the KSCB has already granted loans to 28000 D Class members who have been facing real difficulties in servicing their loans. The KSCB extended various services to its A Class members as well as D Class members, various services of public interest to help the common people and agriculturists and downtrodden were undertaken by the Society. Various schemes and activities which extended different benefits by the KSCB have been detailed in paragraphs 16 and 17 of the counter affidavit which shall be referred to later. The KSCB supported the order of the Government and contended that the Order has been passed in public interest after giving opportunity to all the parties. The Order passed by the State Government is in exercise of thepower under Section 101 after considering all the aspects of the matters.

11. We have heard Shri P.Ravindran, learned Senior Advocate, Shri T.A. Shaji, learned Senior Advocate, Shri P.C.Sashidharan, Shri George Poonthottam, Shri M.M.Monaye, Shri V.G.Arun, Advocates, appearing for the appellants in theseWrit Appeals. Shri D.Somasundran, learned Special Government Pleader appeared for the State Government and Shri Devan Ramachandran, learned Senior Advocate assisted by Shri Ajith Krishnan appeared for the second respondent.

12. Learned counsel for the appellants in support of the Writ Appeals contends: Various conditions under Section 7 including sub-section (1)(c) provides that the area of operation of the proposed society and the area of another Society of similar type do not overlap, is applicable at the time of registration of Societies and once a Society is registered, provision of Section 7 exhausts itself and there is no occasion to exercise any power under Section 101 of the Act for granting exemption from any provision of Section 7 of the Act. Section 7 is attracted only at the time of registration of the Society and is no longer available after registration. Thus power cannot exercised by the Stateregarding the area of operation of the Societies. Most of theappellant Societies are registered long ago prior to the registration of the KSCB. Area of operation of appellant Societies as well as the KSCB is confined to a Panchayat and the area of operation of the KSCB cannot be extended so as to overlap with the area of operation of the appellants Society. Section 2(oaa) defines Primary Agricultural Credit Society as a Service Co-operative Bank, a Farmers Service Co-operative Bank and a Rural Bank, the principal object of which is to undertake agricultural credit activities and having its area of operation confined to a Village, Panchayat or a Municipality. The KSCB being a Primary Agricultural Credit Society, its area of operation cannot go beyond the Panchayat, i.e., the Karassery Panchayat. When Section 2(oaa) the 1969 Act specifically provides the area of operation of Primary Agricultural Credit Society as to a Village, Panchayat or Municipality, exemption granted to KSCB is contrary to co-operative principle enumerated in the second Schedule to 1969 Act. One of the co-operative principles being co-operation among co-operatives is breached. The State Government could not have exercised its power under Section 101 without hearing the affected Societies, i.e., the appellants who are working in the Kozhikode Taluk and whose activities shall be affected by extension of the area of operation of the KSCB.This Court by order dated 19.08.2013 in W.P(C) No.10666 of 2014 filed by the Calicut City Co-operative Society has directedthe State to pass order after hearing all the affected parties including the petitioners. The said order of the Court clearly obliged the State to hear all the affected parties and the order dated 16.01.2015 having been passed in violation of the principles of natural justice deserves to be set aside on this ground alone. There is no public interest involved in extending the area of operation of the KSCB. Extension of area has been sought by the KSCB only for its private interest and for interest of business which in no manner can be said to serve any public interest. There being no public interest, exercise of power under Section 101 deserves to be set aside. The State while passing the Order dated 16.01.2015 has not applied its mind to the relevant factors for exercise of power under Section 101 and the Order dated 16.01.2015 does not give any reason for the order. Order of the State thus deserves to be set aside.

13. Learned Government Pleader refuting the submissions of the learned counsel for the appellants contended that the State in issuing Order dated 16.01.2015 has consideredall the relevant factors and detailed reasons given in the order itself indicate that the State after due application of mind has passed the Order. It is submitted that the State was satisfied that public interest is involved in extending the area of operation of the KSCB. The Registrar had already permitted the KSCB on 30.03.2004 to have D Class members throughout the Kozhikode Taluk in consequence of which the KSCB has enrolled about 30000 members who are spread over whole of Kozhikode Taluk. Members and beneficiaries of the KSCB were facing great difficulties in servicing their loans and other benefits by taking journey of 20 to 30 kms for availing the benefits and repayment of loans and there being request not only from the KSCB but from large number of beneficiaries, the State found it in public interest to grant exemption under Section 101 with regard to the area of operation. Section 101 empowers the State to grant exemptionfrom any provisions of the Act. Section 7(1)(c) which refers to area of operation of the Society, which can very well be exempted after registration of the Society and there is no illegality in exercising the power under Section 101 of the 1969 Act even after registration of the Society. Section 7(1) is only a direction to the Registrar to take into consideration the various factors including Section 7(1)(c) which does not confer any right to the Society. The State in exercise of the power under Section 101, exercised the delegated legislative power which does not require giving any personal hearing, since in exercise of the delegated legislative power, principles of natural justice are not attracted. Ground to challenge the delegated legislation is verylimited and unless the petitioners show that the action ismanifestly arbitrary, the Order of the State cannot be interfered. It is further contended that in view of the Constitutional amendment made under Article 19(1)(c), insertion of Article 43B and provision inserted in Part IXB by the 97th Constitutional Amendment Act 2011, right of Co-operative Societies are much extended. This Court vide its various judgments has already laid down the ratio, that power under Section 101 can be exercised with regard to Section 7(1)(c) of the 1969 Act. It is contended that Government being satisfied that the grant of exemption is in public interest has exercised its power.

14. Shri Devan Ramachandran, leaned Senior Advocate appearing for the KSCB opposing the submissions of the learned counsel for the petitioners contends that the KSCB is a Class I Super Grade Credit Society, area of operation as originally registered was Karassery Panchayat but in the year 2004, the Joint Registrar, Kozhikode issued an order on 30.03.2004 approving the amendment of bye-laws which enabled the KSCB to offer Class D membership to the persons residingwithin erstwhile Kozhikode Taluk. The KSCB is having over 30000 members who are all residing out side Karassery Panchayat but within Kozhikode Taluk. The KSCB has granted loans and various facilities to 28000 such D Class members. The byelaws of the KSCB permit offering membership to any person residing in the Kozhikode Taluk for all purposes. The KSCB has been operating and offering its services including acceptance of deposits and providing loans to persons of the entire Kozhikode Taluk since 2004. The KSCB has been extending various beneficial schemes, loan on concessional rate to agriculturists, vegetable growers, milk societies, hence it was the beneficiaries of the petitioners, who after resolution taken by the KSCB to extend its area of operation to Kozhikode Taluk has come up in the High Court seeking a direction for extension of the area of operation of the KSCB. Series of petitions filed in this Court by the beneficiaries of the KSCB clearly indicate that large number of beneficiaries and persons who have availed benefits from the KSCB were contending before the Government to extend the area of operation and larger public interest was preserved by extending area of operation of the KSCB. Petitioners are challenging the decision of the State Government extending the area of operation on the ground that on the account of the apprehension that its operation and business would be threatened by competition from the KSCB. Rivals in business has no right to challenge and the Writ Petition at the instance of the petitioners are not maintainable. Petitioners have no locus to challenge the exemption with regard to the area of operation of the KSCB and the Writ Petition is liable to be thrown on this ground alone. There is no violation of the principles of natural justice in passing the order by the State Government since all the affected parties were heard which is clear from the hearing note dated 25.10.2013 brought on record by the KSCB as Ext.R2(l). It is stated that under orders of this Court hearing was to be given to the affected parties to the Writ Petition which having been done, there cannot be said any violation of the principles of natural justice. It is contended that the State in exercise of the power under Section 101, its delegated legislative power is not required to give hearing to any person affected by such delegated legislation. Order passed by the State Government is a de tailed order considering every factor. Relevant reasons for grant of exemption under Section 101, having been given, the order cannot be said to be an unreasoned order and the contention raised by the petitioners that order does not give any reason is wholly incorrect on the face of it. The State having already exercised powers under Section 101 in favour of the KSCB at earlier two point of time, i,e., (i) by permitting amendment of the bye-laws to have D Class members to the whole of Kozhikode Taluk and (ii) when it permitted the KSCB to open two sub Centres at Thamarassery and Ramanattukara. The KSCB has already extended benefit in the whole of Kohikode Taluk and extension of area of operation was in consonance with the service and benefits already extended. The performance of the KSCB was a performance which was the first Bank to obtain ISO certificate. Referring to paragraphs 16 and 17 learned counsel submitted that details of its activities which arebeneficial to the public are enumerated therein and reasons noticed by the State Government in its order dated 16.01.2015 in paragraphs 20 to 23 supports and justifies the order of the State Government.

15. Learned counsel for the parties have referred to and relied on various judgments of this Court and the Apex Court which shall be referred to in detail while considering the submissions.

16. From the Submissions of the parties and pleadings on record, the following issues arise for consideration in this batch of Writ Appeals:

(1) Whether the petitioners have locus standi to challenge the Order dated 16.01.2015 and Notification dated 02.02.2015

(2) Whether power under Section 101 of the 1969 Act cannot be exercised by the State for giving exemption in the area of operation as referred to in Section 7(1)(c) of the 1969 Act with regard to a Co-operative Society already registered

(3) Whether the Order dated 16.01.2015 and Notification dated 02.02.2015 deserve to be set aside on the ground of violation of the principles of natural justice since petitioners were not heard before passing the Order

(4) Whether the order of the High Court dated 14.08.2014 passed in W.P(C) No.6300 of 2014 obliged the State to hear all the Primary Agricultural Credit Co-operative Societies in Kozhikode Taluk and the order passed under Section 101 of the 1969 Act without hearing them deserves to be set aside

(5) Whether the Order dated 16.01.2015 and Notification dated 02.02.2015 can be said to have been passed in public interest

(6) Whether the order dated 16.01.2015 and Notification dated 02.02.2015 can be said to be orders and action taken after due application of mind and can be said to be Orders and Notification containing cogent reasons

(7) Whether the judgment of the learned Single Judge dismissing the Writ Petitions deserves to be set aside in these Writ Appeals

ISSUE No. 1 :

17. Learned counsel for the 2nd respondent has challenged the locus standi of the petitioners to file the writ petition challenging Ext.P8 order and Ext.P11 notification. The 2nd respondent submits that the petitioners have no genuine grievance which can be adjudicated in writ proceedings. The mere fact that the area of operation of 2nd respondent has been extended to the entire Kozhikode Taluk in no manner affect the functioning of the petitioners Banks in their respective area of operation. The petitioners cannot be heard in saying that the 2nd respondent should not be allowed to carry on its activity in their area of operation. The petitioners cannot claim any monopoly for carrying out the activities in the area of operation. The 2nd respondent cannot enroll members who are already members of the petitioner Societies. It is well settled that a business rival has no right to challenge the rival in trade. Learned counsel for the 2nd respondent has relied on the judgment of the Apex Court in Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed and others [AIR 1976 SC 578 [LQ/SC/1975/540] ]. In the aforesaid case the question was whether a rival in trade and an owner of an existing cinema theatre is an aggrieved person within the meaning of Rule 8A of the Bombay Cinema Rules, 1954 entitling him to invoke the certiorari jurisdiction of the High Court for quashing the order granting a No Objection Certificate under Rule 6 of the Bombay Cinema Rules, 1954. In the above context the Apex Court had laid down that the existing Cinema owner cannot be said to be a person aggrieved since he does not have any substantive justifiable right on a rival in the Cinema trade.

Following was stated in paragraph 41 :

41. The Act and the Rules do not confer any substantive justiciable right on a rival in cinema trade, apart from the option, in common with the rest of the public, to lodge an objection in response to the notice published under Rule 4. The appellants did not avail of this option. He did not lodge any objection in response to the notice, the due publication of which was not denied. No explanation has been given as to why he did not prefer any objection to the grant of the No-Objection- Certificate before the District Magistrate or the Government. Even if he had objected before the District agistrate, and failed, the Act would not give him a right of appeal. Section 8A of the Act confers a right of appeal to the State Government, only on any person aggrieved by an order of a licensing authority refusing to grant a license, or revoking or suspending any licence under Section 8. Obviously, the appellant was not a "person aggrieved" within the contemplation of Section 8A

The Apex Court itself in the said judgment has held that the expression aggrieved person denotes an elastic and to an extent an elusive concept and it cannot be confined within the bounds of a rigid, exact and comprehensive definition. In the context of the aforesaid case wherein it was held that a rival in Cinema has no right to challenge grant of licence to another Cinema house.

18. The above case is clearly distinguishable from the present case. Present is a case where petitioners Co-operative Societies have been registered with an area of operation and by orders Ext.P8 and P11, the area of operation of 2nd respondent has been extended, consequence of which is that, the area of operation of petitioner Societies overlaps with the area of operation of 2nd respondent. Whether in the present state of circumstances the petitioners can challenge the order passed bythe State in exercise of power under Section 101 of the Kerala Co-operative Societies Act, 1969 is the question in the present case. The concept of locus standi has to be looked into in the context of expending horizon of locus standi. The Apex Court in Fertilizer Corporation Kamgar Union(Regd.), Sindri and others. v. Union of India and others [(1981) 1 SCC 568] [LQ/SC/1980/458] speaking through Justice Krishna Iyer laid down following in paragraph 48

24. If a citizen is no more than a wayfareror officious intervener without any interest or concern beyond what belongs to any one of the 60 million people of this country, the door of the court will not be ajar for him. But, if he belongs to an organisation which has special interest in the subject matter, if he has some concern deeper than that of a busybody, he cannot be told off at the gates, although whether the issue raised by him is justiciable may still remain to be considered. I, therefore, take the view that the present petition would clearly have been permissible under Article 226.

19. The petitioners cannot be said to be busy bodies or strangers to the issues which they have raised by means of the writ petitions. The petitioners have also challenged the order of the State Government on the ground that it has been passed in violation of the principles of natural justice and they had right to be heard in the matter. They further contended that Section 101 of the Co-operative Societies Act, 1969 does not confer the State of Kerala with any power to extend the area of operation of an existing Co-operative Societies. In the context of the facts of the present case and issues raised by the petitioners the writ petitions filed by them cannot be thrown out on the ground of locus standi and we are of the view that the submission raised by the petitioners have to be examined on merits. Thus issue No. 1 is decided in favour of the petitioners.

ISSUE No.2 :

20. Before we proceed to consider the issues it is necessary to look into the statutory scheme of the Kerala Co-operative Societies Act, 1969 and the relevant provisions of the Act. Section 7 contains a heading registration. Section 7 (1) is relevant and is quoted as below :

7. Registration:- (1) If the Registrar is satisfieda) that the application complies with the provisions of this Act and the rules;

b) that the objects of the proposed society are in accordance with Section 4;

c) that the area of operation of the proposed society and the area of operation of another society of similar type do not overlap;

d) that the proposed bye-laws are not contrary to the provisions of this Act and the rules; and

e) that the proposed society complies with the requirements of sound business;

he may register the society and its bye-laws within a period of ninety days from the date of receipt of the application.

The above provision indicate that if the Registrar is satisfied that the conditions mentioned in sub-clauses (a) to (e) are fulfilled, Registrar can register the Society and its bye laws. Sub Section (c) deals with the area of operation which provides that Registrar has to ensure that the area of operation of the proposed society and the area of operation of another society of similar type do not overlap. The key words in Section 7(1)(c) is that the area of operation of another Society of similar type. Thus the area of operation is relevant with regard to a similar type Society. Section 12 relates to amendment of bye laws of a society. Section 12(2) which is relevant is quoted as below :

12. Amendment of bye-laws of a Society:- (1) xx xx

(2) The provisions of Section 7 specifying the conditions to be satisfied before registration of bye-laws of society by the Registrar shall, mutatis mutandis, apply also to the registration of amendments to bye-laws;

Provided that the Registrar shall before registering an amendment of any bye-law consult

(a) The State Co-operative Union if the bye-laws to be amended are that of an apex society or a central society; or

(b) the circle Co-operative union if the bye-laws that are to be amended are that of any other society; and

(c) the financing bank if the society is indebted to the financing bank.

Section 12(2) provides that the conditions which were required to satisfy the registration of the bye-laws shall mutatis mutandis apply to the registration of amendments to bye-laws. The statutory scheme is clear that when a Society is registered with an area of operation, its amendment of bye-laws with regard to area of operation cannot be permitted, if its area of operation overlaps with the area of operation of any other similar type of Society. Section 101 contained in Chapter 16(Miscellaneous) contains a heading power to exempt Society. Section 101 is quoted as below :

101. Power to exempt societies:- 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 this 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.

A plain reading of Section 101 indicates that the Government, if they are satisfied that (i) it is necessary to do so in the public interest (ii) by general or special orders, iii) for reasons to be recorded, exempt any society or any class of society from any of the provisions of this Act or direct that such provision shall apply to such society or class of society subject to such modification as may be specified in the order. The power of exemption given to the Government is a power of delegated legislation on fulfillment of the conditions mentioned therein. The guidelines for exercise of power of delegated legislation is inherent in statutory provision itself. In the above context reference to a judgment of the Apex Court in The Registrar of Co-operative Societies and another v. Kunjambu and others [AIR 1980 SC 350 [LQ/SC/1979/474] ] is relevant. In the Malabar area prior to enforcement of Kerala Co-operative Societies Act, 1969 the enactment in force was Madras Co-operative Societies Act, 1932. Section 60 of the Madras Co-operative Societies Act, 1932 is a provision pari materia to Section 101. It is useful to refer to Section 60 of 1932 Act which has been quoted in paragraph 11 of the judgment which is to the following effect :

11. Let us now turn to Section 60 of the Madras Cooperative Societies Act, 1932 whose vires is in question and which is as follows:

Section 60: The State Government may, by general or special order, exempt any registered society from any of the provisions of this Act or may direct that such provisions shall apply to such society with such modifications as may be specified iin the order.

The provision is a near Henry VIII clause. But to give it a name is not to hang it. We must examine the preamble, the scheme and other available material to see if there are any discernible guidelines. Sure the Co-operative Societies Act is a welfare legislation. Its preamble proclaims:

Where it is expedient further to facilities the formation and working of co-operative societies for the promotion of thrift, self-help and mutual aid among agriculturists and other persons with common economic needs so as to bring about better living, better business and better methods of production and for that purpose to consolidate and amend the law relating to cooperative societies in the State of Madras.

21. In the above case challenge was raised against Section 60 in a writ petition and this Court struck down the provision on the ground of unconstitutional delegation of legislative power. The judgment was appealed and the Apex Court after examining the scheme of Section 60 as well as the policy of the Act held that too rigorous application of some of the provisions of the Act may itself occasionally result in frustrating the very object of the Act instead of advancing them. Hence it is to provide for such situations that the Government is invested by Section 60 with a power to relax the occasional rigour of the provisions of the Act. Following was observed in paragraph 12

12. XX XX In fact, the too rigorous applications of some of the provisions of the Act may itself occasionally result in frustrating the very objects of the Act instead of advancing them. It is to provide for such situations that the Government is invested by Section 60 with a power to relax the occasional rigour of the provisions of the Act and to advance the objects of the Act. 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 modifications. The power given to the Government under Section 60 of the Act is to be exercised so as to advance the policy and objects of the Act, according to the guidelines as may be gleaned from the preamble and other provisions which we have already pointed out, are clear.

22. The submission which has been pressed by learned counsel for the petitioners is that even if it is assumed that at the time of registration of a Co-operative Society the State can exercise power under Section 101 for extending the area of operation, after registration of the Society no exemption can be granted from the provisions of Section 7(1)(c) by exercise of power under Section 101. It is contended that, after registration, the power given under Section 7(1)(c) to ensure that the area of operation does not overlap, exhaust itself. Hence, thereafter exemption in area of operation is neither contemplated nor warranted. When the power of exemption given to the State under Section 101 is a power given in a widest term and does not admit any qualification, if the power can be exercised before or at the time of registration of Society under Section 7, there is no reason to presume that said power cannot be exercised after the registration of the Society. Section 7(1) (c) is a provision which lays down a condition that the area of operation of a similar type of Society shall not overlap and when the Society is registered in compliance of condition under Section 7(1)(c), whether at any subsequent stage such area of operation cannot be changed or modified is the question to be answered. Section 12(2) which provides for amendment of bye-laws asnoted above clearly contemplates that the provision of Section 7 specifying the condition to be satisfied for registration of bye-laws, the Registrar shall mutantis mutandis apply to the registration of amended bye-laws. The question of amendment of bye-laws shall arise only after registration of the Society and its bye-laws. The condition of not overlapping the area of operation of two societies being part of Section 7(1)(c), the said condition by virtue of Section 12(2) shall also apply for amendment of bye-laws. Hence the above Section 12(2) clearly indicates that even after registration, the condition as mentioned in Section 7(1)(c) is applicable, if the Society wants to amend its bye-laws by changing the area of operation. Thus the Act itself contemplates the applicability of Section 7(1) even after registration of the bye-laws. Hence there is no inhibition in exercise of power under Section 101 by the State after registration of the Society.

23. A Division Bench of this Court while considering Section 7(1)(c) in context of Section 101 in Feroke Service C o - o perative Bank Ltd. v. State of Kerala [1995 (2) KLT 404] has held that the power under Section 101 in any way is not limited or curtailed by Section 7(1) of the Act. Following was observed in paragraph 6:

6. Section 101 of the Act empowers the Government to exempt any society or any class of societies from any of the 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 S.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 S.101 of the Kerala Co-operative Societies Act. While dealing with S.60 of the Madras Service Co-operative Societies Act in Registrar, Co-operative Societies v. K. Kunjambu (AIR 1980 SC 350 [LQ/SC/1979/474] ) 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 S.60 empowers the State Government to exempt a registered society from any of the provisions of the Act or to direct that such provisions shall apply to such society with specified modification. As the power given to the Government under S.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 S.101 is in anyway limited or curtailed by S.7(1) (c) of the Act. As wide power is given to the Government under this Section taking into consideration the overall public interest itcannot be held that in a particular situation where public interest demands S.7(1)(c) cannot be relaxed. However, we make it clear the power under S.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.

24. In view of the foregoing discussion we are of the view that the submission of petitioners that the power under Section 101 cannot be exercised with regard to a Society already registered cannot be accepted. Even after registration of the Society, if public interest demands and there are cogent reasons, the power of exemption under Section 101 can be exercised. More over no such limitation can be read in the wide power given under Section 101 which does not contain any limitation except to the conditions mentioned therein. Thus the above submission of learned counsel for the petitioners cannot be accepted.

ISSUES 3 AND 4 :

25. The above issues being inter connected are taken together. The submission which has been pressed by learned counsel for the petitioners is that the order dated 16.01.2015 and notification dated 02.02.2015 deserve to be set aside on the basis of violation of principles of natural justice. Two submissions have been advanced in support of the above i.e., a) the petitioners who are functioning within their alloted area of operation in Kozhikode Taluk were required to be heard before taking any decision regarding granting exemption to 2nd respondent Society with regard to its area of operation which is being extended to the entire Kozhikode Taluk. The petitioners shall be adversely affected by permitting the 2nd respondent Society to operate in the area of operation which is already alloted to the petitioners and passing of the order by the State granting exemption violates the principles of natural justice. b) this Court in W.P.(C) No. 6300 of 2014 decided on 14.08.2014 had directed the State to pass fresh orders after hearing all the affected parties and passing of the order by the State without hearing the petitioners who were also affected parties violates the directions of this Court dated 14.08.2014.

26. The power of granting exemption under Section 101 given to the State is a delegated legislation. The delegation of power to the State under Section 60 of Madras Co-operative Societies Act, 1932 has been upheld by the Apex Court in The Registrar of Co-operative Societies and another v. Kunjambu and others (supra) which provision was pari material to Section 101. The notification issued by the State in exercise of delegated legislation under Section 101, which is a species of delegated legislation, and not an executive order. It is true that the delegated subordinate legislation can be questioned on any of the ground on which any plenary legislation can be questioned. But it is well settled that subordinate legislation cannot be questioned on the principles of natural justice. The Apex Court in Indian Express Newspapers (Bombay) Private Ltd and others v. Union of India and others [(1985) 1 SCC 641] [LQ/SC/1984/332] has laid down the following in paragraph 78 :

78. That subordinate legislation cannot be questioned on the ground of violation of principles of natural justice on which administrative action may be questioned has been held by this Court in The Tulsipur Sugar Co.Ltd. v. Notified Area Committee, Tulsipur, Rameshchandra Kachardas Porwal v. State of Maharashtra and in Bates V.Lord Hailsham of St.Marylebone. A distinction must be made between delegation of a legislative function in the case of which the question of reasonableness cannot be enquired into and the investment by statute to exercise particular discretionary powers. In the latter case the question may be considered on all grounds on which administrative action may be questioned, such as, nonapplication of mind, taking irrelevant matters into consideration, failure to take relevant matters into consideration, etc., etc. On the facts and circumstances of a case, a subordinate legislation may be struck down as arbitrary or contrary to statute if it fails to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statute or, say, the Constitution. This can only be done on the ground that it does not conform to the statutory or constitutional requirements or that it offends Article 14 or Article 19(1)(a) of the Constitution. It cannot, no doubt, be done merely on the ground that it is not reasonable or that it has not taken into account relevant circumstances which the Court considers relevant.

27. Further in State of Punjab v. Tehal Singh and others [2002 (2) SCC 7 [LQ/SC/2002/3 ;] ">[2002 (2) SCC 7 [LQ/SC/2002/3 ;] [LQ/SC/2002/3 ;] ">[2002 (2) SCC 7 [LQ/SC/2002/3 ;] ">[2002 (2) SCC 7 [LQ/SC/2002/3 ;] [LQ/SC/2002/3 ;] [LQ/SC/2002/3 ;] ] following was laid down by the Apex Court in paragraph 9 :

9. Once it is found that the power exercisable under Ss.3 and 4 of the Act respectively is legislative in character, the question that arises is whether the State Government, while exercising that power, the rule of natural justice is required to be observed It is almost settled law that an act legislative in character primary or subordinate, is not subjected to rule of natural justice. In case of legislative act of legislature, no question of application of rule of natural justice arises. However, in case of subordinate legislation, the legislature may provide for observance of principle of natural justice or provide for hearing to the resident of the area before making any declaration in regard to the territorial area of a Gram Sabha and also before establishing a Gram Sabha for that area. We have come across many enactments where an opportunity of hearing has been provided for before any area is excluded from one Gram Sabha and included it in different Gram Sabhas or a local authority. However, it depends upon the legislative wisdom and the provisions of an enactment. Where the Legislature has provided for giving an opportunity of hearing before excluding an area from a Gram Sabha and including it in another local authority or body, an opportunity of hearing is sine qua non and failure to give such an opportunity of hearing to the residents would render the declaration invalid. But where the Legislature in its wisdom has not chosen to provide for any opportunity of hearing or observance of principle of natural justice before issue of a declaration either under S.3 or S.4 of the Act, the residents of the area cannot insist for giving an opportunity of hearing before the area where they are residing is included in another Gram Sabha or local authority. In Rameshchandra Kachardas Porwal and Others v. State of Maharashtra (supra), this Court held as thus: "In one of the Bihar cases it was further submitted that when a market yard was disestablished at one place and established at another place, it was the duty of the concerned authority to invite and hear objections. Failure to do so was a violation of the yard at one place and establishing it elsewhere was therefore, bad. It was objections before a "market area" was declared under the Act, so should objection be invited and heard before a market yard was established at any particular place. The principles of natural justice demanded it. We are unable to agree. We are here not concerned with the exercise of a judicial or quasi judicial function where the very nature of the function involves the application of the rules of natural justice, or of an administrative function affecting the rights of persons, wherefore, a duty to act fairly. We are concerned with legislative activity; we are concerned with the making of a legislative instrument, the declaration by notification of the Government that a certain place shall be a principal market yard for a market area, upon which declaration certain statutory provisions at once spring into action and certain consequences prescribed by statute follow forthwith. The making of the declaration, in the context, is certainly an act legislative in character and does not oblige the observance of the rules of natural justice."

28. A perusal of the Scheme under Section 101 does not indicate that legislation contemplated any notice or opportunity to existing Societies before exercising any power to grant exemption to any other registered society. In the context of giving notice to two existing societies while granting exemption under Section 101 a learned Single Judge in W.P.(C) No. 14721 of 2014 decided on 04.02.2015 (Kunniyode Ksheera Vyavasaya Sahakarana Sangham Ltd. v. State of Kerala and others) has held that there is no necessity to put on notice in granting exemption. In paragraph 3 it is quoted as below :

3. There is no necessity to put Kunniyode Ksheera Vyvasaya Sahakarana Sangham Ltd. On notice while granting exemption from the provisions of the Act to another Society {see Kunju Kunju v. State of Kerala and others [1971 KLT 350]}. Much was argued on the basis of Ext.P3 letter of the Deputy Director, Dairy Development to contend that the opening of a new Society will not be conducive to the interest of the petitioner Society. But I find that Ext.P4 report of the Dairy Extension Officer who is a personnel of the Dairy Department of the area has very much recommended for the registration of a new Milk Society. The government cannot be faulted with in relying on Ext.P4 report of the Dairy Extension Officer in granting exemption from the provisions of the Act in order to start a new Society in Ward No.XI of Karode Grama Panchayt. After all eight other wards of Karode Grama Panchayat still continue within the area of operation of the petitioner Society. I am not prepared to hold that the power under Section 101 of the Act has been exercised in a perverse or whimsical manner by the government as to warrant interference under Article 226 of the Constitution of India.

29. Now we come to the orders passed by this court, violation of which is sought to be raised by the petitioners on the ground that under the order of this Court the State was obliged to issue notice to all the existing societies in the Kozhikode Taluk. In this context a reference is made to the judgment of this Court dated 19.08.2013 in W.P.(C) No.10666 of 2013. The said writ petition was filed by the Calicut City Service Co-operative Bank challenging the order dated 16.01.2013 of the State by which the 2nd respondent was permitted to open two sub centres one each at Thamarassery Panchayat and Ramanattukara Panchayat. The writ petition was disposed of on 19.08.2013 by issuing directions in paragraph 6 which is quoted as below :

6. Having regard to the aforesaid factual situation, I am of the view that this writ petition can be disposed of as follows :

i) The 2nd respondent shall not open any subcentres/ branches in the area of operation of other societies other than what is permitted by the Government under Section 7(1)(c) of the Act.

ii) It shall be open for the Government to consider Ext.R3 (e) resolution in the event of the same being brought to the notice of the Government and which shall be considered and disposed of in accordance with he procedure prescribed, after hearing all the affected parties including the petitioner.

30. After the said order of this Court parties were called for hearing on 18.10.2013 by hearing note dated 25.10.2013. Recommendation was made to grant exemption under Section 101 from Section 7(1)(c) with regard to extension of area of operation of 2nd respondent to the entire Kozhikode District, the Registrar vide its order dated 16.05.2013 has also recommended for exemption. The State issued order dated 16.01.2013 rejecting the request but granted liberty to apply sub Centres to Full branches.

31. The judgment dated 16.12.2013 was challenged in W.P.(C) No.6630 of 2014 in which writ petition this Court passed a judgment on 14.08.2014 setting aside the order dated 16.12.2013 and directed the Government to consider the matter afresh after affording opportunity of being heard to all parties in the light of the recommendation dated 16.12.2013. It is useful to refer to the directions dated 14.08.2014 which directions were as follows :

4. Heard. A perusal of Ext.P8 shows that what has been recommended by the Deputy Secretary who heard the parties was that the request could be granted. However, in Ext.P9 which is the formal order issued on the basis of Ext.P8, the request has been rejected. Exts.P8 and P9 are ir variance with each other. Therefore, Ext.P9 cannot be sustained. Though contentions have been advanced before me with respect to the merits of the case pleaded by each of the parties, I consider it unnecessary to consider the issue on merits since it is for the first respondent in WPC 6330/2014, to consider all the contentions. For the purpose, it is necessary that the matter is reconsidered. Ext.P9 cannot be sustained since it is at variance with Ext.P8.

For the above reasons Ext.P9 is set aside. The first respondent is directed to consider the matter afresh after affording an opportunity of being heard to all the parties, in the light of Ext.P7. Orders shall be issued on the above basis, as expeditiously as possible and at any rate within a period of six weeks of the date of receipt of a copy of this judgment.

32. The last order of the Court thus directed the State to consider the matter afresh after affording an opportunity of being heard to all the parties. The said direction clearly meant for hearing all the parties who were parties to the proceedings. After the aforesaid order dated 14.08.2014 the State heard the parties on 10.12.2014. Various parties who were heard, their names have been noted in paragraph 4 of the judgment. The order of the State dated 16.01.2015 (Ext.P8) was thus passed after hearing the parties. None of the parties in W.P(C) Nos.2406 and 6630 of 2014 are complaining before us that they were not heard in breach of WA No.2344 of 2015 and conn. Cases -:47:- direction dated 14.08.2014. The order dated 16.01.2015 thus cannot be faulted on the ground that the said order was passed without hearing the parties to the proceedings. Thus we do not see any violation of the direction dated 14.08.2014 in so far as hearing of the parties to the proceedings is concerned. In view of the above, the order dated 16.01.2015 and notification dated 02.02.2015 cannot be said to be in violation of principles of natural justice.

ISSUE Nos. 5 and 6 :

33. Issue Nos. 5 and 6 relate to the merits of the order passed by the State dated 16.01.2015 and consequential notification dated 02.02.2015. The challenge is on the ground that the order has not been passed in public interest and there is no application of mind to the relevant factors while passing the order. It is further contended that the order does not contain any reason. For appreciating the aforesaid submission it is necessary to look into the order dated 16.01.2015 itself. As noted above, after passing of the resolution by general body of the 2nd respondent dated 29.03.2012 for requesting the Government to formerly issue orders extending its area of operation to the entire Kozhikode Taluk. The cause was taken by two beneficiary societies i.e. Integrated Development Centre, Thamarassery and Ramanattukara Grama Nirmana Samithi, Ramanattukara by filing W.P.(C) No. 17686/2012 in which writ petition a direction was issued by the High Court on 07.08.2012 directing the State to consider the same and take a decision. It is relevant to note that the 2nd respondent Society was registered with the area of operation, as Karassery Panchayat. The 2nd respondent society has 537 A Class members in the Panchayat. The Registrar by order dated 30.03.2004 permitted amendment of bye laws permitting the 2nd respondent to enroll B Class members in the whole area of Kozhikode Taluk.

34. In the Kerala Co-operative Societies Rules, Rule 57 provides that no Society shall enter into any transaction with a person other than a member unless the bye laws of the society permit it for the purpose or previous sanction of the Registrar has been obtained by the Society. Rule 57 reads as follows :

57. Transactions with non-members:- Subject to the provisions under Ss.58 and 59, no society shall enter into any transaction with a person other than a member unless

(a) the bye-laws of the society permit it for the purpose; or

(b) the previous sanction of the Registrar has been obtained by the society.

35. The Registrar has already permitted the Society by order dated 30.03.2004 to enroll members i.e. D Class members who shall have no voting right but who are entitled to be extended the loan facility and who shall be entitled to give deposit to the society and shall stand surety to any other loan. It is pleaded that the 2nd respondent Society has enrolled 30,000 D Class members in the whole of Kozhikode Taluk out of which 28,000 members have extended with loan facility. It was basically the members who availed the benefit from the 2nd respondent Society of loan and other facility had taken up the cause with the State Government for exempting the area of operation of 2nd respondent from Karassery Panchayat only and to extend it to the entire Kozhikode Taluk. After the directions of the High Court dated 07.08.2012 when the prayer for granting exemption was not considered, but a direction was made that the2nd respondent may be permitted to open two sub centres. The matter was again taken by the beneficiaries and members of 2nd respondent in W.P.(C) No.4510 of 2013 which was disposed of on 11.03.2014 permitting the 2nd respondent to pass fresh resolution and directing the Government to consider. There cannot be any dispute that the power under Section 101 has to be exercised in a public interest and not on any private interest. Whether the order dated 16.01.2015 was passed on public interest or it was only for a private interest is the main question to be considered and answered.

36. The order dated 16.01.2015, Ext.P8 needs to be noted in detail. The case put up by the beneficiary societies of the 2nd respondent is noted in paragraphs 5 to 10. The case of those who opposed the 2nd respondent is also been noted in paragraphs 11 and 12. The activities of 2nd respondent which have been noticed in the order is noted in paragraphs 15, 16 and 17 which are quoted below:

15) Certain specialties of Karassery Bank is explained atthe time of hearing which is as under; In the year 2000-2001 computerization was implemented in Kozhikode District first. Using the Software of Shama Rao Vithal Co-operative Bank (Mumbai), the largest Co-operative Bank in India. Thereby all latest banking can be done smoothly. The banking services like RIGS, NEFT, Demand Draft, Western Union Money Transfer, IFCO-TOKYO, General Insurance, Railway Reservation System (IRCTC), and Free Mobile facility to members under CUG Scheme are being rendered correctly and time bound manner. In the year 2006, the only primary service co. operative bank which installed the full-fledged ATM is the Karassery Bank itself. Mobile Banking facility is extended to the customers.

16) They enrolled all the students in the main schools in Kozhikode Taluk in SSB. This enable them to take loan for their higher studies after LP, UP, HS, and HSS. For improving the paddy cultivation, loan upto Rs.1 lakh without interest was granted to the paddy cultivators. For encouraging the cultivation of vegetables interest free loan of Rs.20,000 was granted to a farmer, for setting up vegetable-flower garden in the Schools free financial aid of Rs.10,000/- is granted to each schools, Free Agricultural Training Classes are conducted through Agricultural Club of the Bank in association with Dr.M.S. Swaminathan Foundation in every month. Moreover, first in India NABARD has given a loan of Rs.12.5 Crores to a primary co-operative Bank. By utilizing the above money granted loans to a total of 4416 families under JLG (Joint Liability Group), a group consist 4 families, at a lower interest rate. Loan was granted to 686 families under 25 Milk Societies in Kozhikode Taluk at a lower interest rate for purchasing cows. For self-employment computer, Photostat, Autorickshaw, stitching machine etc. are distributed to women. Loan was granted to the indigent persons in 14 Block-Grama Panchayaths in Kozhikode Taluk. Given a Bolero Jeep free of cost to an organization namely Grace Palliative to consult the patients bedridden. A mobile freezer was given free of cost to keep the dead body of the deceased till the relatives come. Conducting free dialysis unit in association with N.C. Hospital at Mukkom. It is here alone dialysis is extended to the patients without collecting any money. All the poor persons come to Mukkom are given lunch. If coupons are collected from the Bank, food will be given from the hotels being engaged by the Bank. Conducting for the last years the scheme Starvation free Mukkom.

17) Continuously for the last 18 years the Bank has given dividend @ 15% and 20%. For the last two years giving dividend upto 25%. A monthly pension of Rs.1000/- is giving to persons having A Class membership in the Bank for a term of 20 years and completed 60 years of age. The selected indigent homeless in the nearby panchayats of the Bank are given houses constructed. Free spectacle distribution, free medical camp, free text book to school students, distribution of umbrella, pension to the weaker etc. are given.

The reasons which impelled the State to grant exemption has been noted in paragraphs 22 to 24 which are to the following effect :

22) Karassery Service Co. operative Bank is having limited number of branches in Karassery Panchayat is having a deposit and working capital of Rs.300 Crores each. But there are technical inconveniences in utilizing the above sum in this small area of operation in a useful manner. The Karassery Service Co. operative Bank has got permission to issue D Class membership in the entire Kozhikode Taluk, to accept deposits and to sanction loans as per the byelaw provision. As such about 28,000 loans are given by the Bank in Kozhikode Taluk. Therefore, extending the area of operation as Kozhikode is only technical. The Registrar of Co. operative Societies has recommended that without causing any harm to the functioning of other service co. operrative banks the Karassery Service Co. operative Bank is to grant loan upto Rs.25 lakhs particularly the housing loans, for utilizing the excess money in a useful manner it is seen that extension of the area of operation of the bank which is at present having nominal members in the Kozhikode Taluk itself will be beneficial to the common man.

23. The area of operation of the main service co-operative Bank which opposes the sanctioning of extension of area of operation of the Karassery Service Co-operative Bank as entire Kozhikode Taluk is within the Kozhikode Corporation. Moreover, while many other service co-operative banks are functioning in good condition in the Corporation limits, that in 2003 Calicut City Service Co-operative Bank was given the area of operation as Kozhikode Corporation invoking the powers vested in the government under Rule 101 by granting exemption from 7(1) (c). Thereby, the parties present for the hearing informed, this was not affected the functioning of the other Banks in any manner. Likewise, the anxiety of the opposite parties are also to be considered. During the course of evidence, representatives of the societies and organisations working in different fields in various places in Kozhikode Taluk were participated and requested to grant sanction to extend the area of operation of the Karassery Bank over the entire Kozhikode Taluk. This it is seen upon public interest.

24. Government examined this matter in detail. It is seen that extending the area of operation of the Karassery Service Cooperative Bank to the entire Kozhikode Taluk will be beneficial to the general public. Likewise, considering the anxiety of the opposite parties, the Government by granting exemption from Rule 7(1) (c) under Rule 101 ordered that the area of operation of the Karassery Service Co-operative Bank is extended over the entire Kozhikode Taluk except the areas in the Corporation limit. The Registrar of Co-operative Societies should take further action in the matter.

37. The facts which have been noticed in the order of the State Government as noticed above clearly indicates that the activities of the 2nd respondent Society which have been noticed were activities benefiting the public in general, i.e. D class members spread through out the Kozhikode Taluk. As noted above, the 2nd respondent Society had already been permitted to enroll D Class members throughout the Kozhikode Taluk and 28,000 members who have been taken benefit from the Society were already spread over throughout the Taluk who were facing difficulty in travelling from 25 to 30 Kms for servicing their loan and the State was satisfied that the facts brought before the State sufficiently disclose public interest. Thus the submission of the petitioners that the order was passed only for private interest of 2nd respondent cannot be accepted. The public interest due to functioning of the 2nd respondent has been noted in detail and appreciated by the State while forming an opinion that present is a case for granting exemption to the 2nd respondent Society from its area of operation which shall serve the public interest.

38. The submissions of learned counsel for the petitioners that the order does not disclose any reason and the order does not show that the State has applied its mind to relevant factors are to be rejected. The reasons for passing the order have already been noted above and certain relevant extract of the order has already been quoted to dispel the submission of petitioners that the order does not contain any reason. As noted above, two preconditions for exercise of power under Section 101 are; public interest and reasons to be recorded which are two para meters for application of mind by the State while coming to a conclusion whether the case deserves exercise of power under Section 101. The State having adverted to both the above subjects i.e. public interest and the reasons, we do not think that the order is suffering from any of the short comings as pointed out by learned counsel for the petitioners.

39. The scope and ambit of Section 101 of 1969 Act has come up for consideration before this Court in several cases. In some cases, the power to grant exemption under Section 101 in context of area of operation as referred to in Section 7(1)(c) has also come up for consideration. It is relevant to refer to few cases of this Court on the above subject.

40. The first case which is to be noted is Kunju Kunju v. State of Kerala [1971 KLT 350]. In the above case a Society was registered in an area of operation which was included for the time being in favour of a former society. The facts of the case has been noted in paragraph 2 of the judgment, which is extracted as below :

2. The petitioner society has been conducting its activities in the Shertallai taluk also and had included the said area as part of the area of its operation in its bye laws. At that time there was no separate cooperative land mortgage bank functioning in Shertallai taluk. A committee appears to have been constituted by the residents of the Shertallai taluk with the 3rd respondent as its convener for the purpose of organising a separate land mortgage bank for Shertallai taluk and getting it registered under the Kerala Cooperative Societies Act, 1969 (hereinafter referred to as the Act). The 3rd respondent applied to the Registrar for sanction under S.6 of the Act for the registration of the proposed society. That application was rejected by the Registrar by an order passed on 11th May 1970 on the ground that the Bank if formed cannot work as a viable unit. An appeal was thereupon filed by the 3rd respondent before the State Government under S.83(1) of the Act challenging the said order passed by the Registrar and it is on that appeal that the State Government has passed the impugnedproceedings evidenced by Ext. R1. The Government after examining the relevant aspects has taken the view that the establishment of a primary land mortgage bank in Shertallai taluk which is a very backward area, would help the people of the locality by providing adequate funds for the improvement of their land and cultivation and that such a step would be consistent with the all India policy to have the primary land mortgage bank established at taluk level. It was also found by the Government that there was no valid ground whatever for regarding the proposal to establish the new society in Shertallai as objectionable from any relevant view point.

41. The challenge was made by the former society. One of the submissions raised was that registration has been given in violation of the principles of natural justice. The challenge was repelled by learned Single Judge holding that no legal right of the Society can be said to have been effected by grant of registration to another society to function in the locality which for the time being was included in the area of operation of former society. It was further held that there was no obligation on the part of State to afford hearing to the Society. In the above case delivered by learned Single Judge, Section 7(1)(c) was not noticed. In a subsequent judgment a view was expressed with regard to the correctness of judgment in Kunju Kunjus case (supra) since it did not refer to Section 7(1)(c). A Division Bench of this Court in Kasaragod Co-operative Land Mortgage Bank v. State of Kerala & others [1976 KLT 437] had occasion to consider the correctness of the judgment in Kunju Kunjus case. The Division Bench approving the view taken by learned Single Judge in Kunju Kunjus case (supra) has observed that the fact that the learned Single Judge did not expressly refer to Section 7(1)(c) of the Kerala Co-operative Societies Act, 1969 does not distract from the correctness of the decision. It was held that there was ample authority to direct registration of the Society in the area of operation of a former Bank.

42. A learned Single Judge of this Court in Pampadi Rural Co-op. Housing Society v. Joint Registrar [1986 KLT 921] had occasion to consider the ambit and scope of Section 101 in context of Section 7(1)(c) of the Act, which was challenged by the etitioner on the ground that the new Society is going to be registered covering its area of operation. The constitutional validity of Section 101 was also questioned before the Court. The learned Single Judge in the above context held that the power to exempt is necessary power given to Government which power is also hedged by several conditions. Exemption can be granted only in public interest on reasons to be recorded. Following observation was made in paragraphs 4 and 5 :

4. It is well known that the working of a statute may create problems or difficulties unanticipated at the time of the enactment of a legislation. It is necessary that sufficient enabling provisions are made to get over such problems and difficulties. To seek a legislative cure, is necessarily a time consuming process. Emergent situations would require speedy action. Such situations may be of diverse characters. It will be virtually impossible if a legislative amendment is to be sought for, for tiding over such situations, when public interest would justify a departure fro m the existing provisions. The power to exempt is a necessary power. The possibility of its abuse has to be provided for. Conferring power on the Government itself is one way of checking the abuse. Even the exercise of power by the Government is hedged in by conditions. The exemption can be granted only if public interest demands the same. Yet another safeguard is that the reasons have to be recorded when any such order is issued. These provisions give sufficient protective cover to S.101 when it is assailed on the ground of violation of Art.14 of the Constitution. The fact that similar provisions have been in existence for many decades, is also aa indication not necessarily conclusive of the reasonableness and necessity of such a provision. I repel the contention that S.101 has the vice of uncanalised and arbitrary power.

5. The reasons given in support of Ext. P1 are rational and relevant. The growing housing problem arising out of fast urbanisation of the country, is of a serious proportion. This is so in developed and developing countries. This State also is no exemption to the general phenomenon. The housing activities have therefore to be treated separately and specially. Even in relation to the organisation of Cooperative Societies, a special treatment would be justified in this area. Cooperative venture would certainly play a dominant and dynamic role in solving the grave and acute housing problems. A body like the Life Insurance Corporation, has also expressed its views on the question. That is a body whose views are of value, in the light of its association with such housing ventures all over the country. Its expertise arising out of the intimate contact with construction works for which it supplies substantial funds, is also an important and relevant material, which could be properly taken note of by any decision making authority. The order has been passed on an advertence to the relevant materials and after considering the recommendation of the Registrar of Cooperative Societies. The order is perfectly legal and valid in the above circumstances.

The writ petition was dismissed upholding the order of the State Government granting exemption.

43. In Feroke Service Co-operative Bank Ltd v. State of Kerala and others [1995 (2) KLT 404] also the challenge was against the notification issued under Section 101 by the State. It was contended that the order violates all provisions of Section 7(1)(c). It was noticed in paragraph 3 in following words :

3. The main contention of the appellant is that Ext. P5 is patently violative of S.7(1)(c) of the Act. S.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. Appellants contention is that this provision has been completely overlooked by the third respondent. According to the appellant, Government can exercise the powers under S.101 of the Act only to exempt an existing society from the rigour of any of the provisions of the Act, when it causes 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.

Rejecting the submission following was laid in paragraphs 6 and 7 :

6. S.101 of the Act empowers the Government to exempt any society or any class of societies from any of the provisions of the Act on the basis of public interest. S.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 S.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. S.60 of the Madras Cooperative Societies Act is similar to S.101 of the Kerala. Cooperative Societies Act. While dealing with S.60 of the Madras Service Cooperative Societies Act in Registrar, Cooperative Societies v. K. Kunjambu (AIR 1980 SC 350 [LQ/SC/1979/474] ) 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 S.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 S.101 of the Kerala Cooperative 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 S.101 is in anyway limited or curtailed by S.7(1)(c) of the Act. As wide power is given 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 S.7(1)(c) cannot be relaxed. However, we make it clear the power under S.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.

7. 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 Cooperative Bank from the provisions of S.7(1)(c) Ext. P5 notification was issued under S.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.

44. Another Division Bench judgment of this Court reported in Nachimuthu M. and another v. State of Kerala and others [2011(1) KLJ 784] is to the point. Before the Division Bench one of the issues raised was as to whether the Governments power to grant exemption under Section 101 of the 1969 Act is circumscribed or restricted by Section 7(1)(c) of the Act. The question has been noticed in paragraph 2 of the judgment which is to the following effect :

2. The question:

Is the general power of the Government to grant exemption under S.101 of the Co - operative Societies Act, 1969 circumscribed or restricted by the provisions contained in subclause (c) of sub-section (1) of S.7 of the Act

To put it differently;

Can the Government exempt a new Society from any of the provisions of the Act and allow it to carry on the same or similar activity or business of another existing Society in a particular area, in derogation of the powers of the Registrar under S.12(5) of the Act

The above question has cropped up for consideration in the following scenario.

45. In the above case the appellant Co-operative Society(Muthalamada East Ksheera Vyavasaya Co-operative Society Ltd.) was a registered Society which was engaged in the business of procurement and sale of milk with an area of operation in Ward Nos. 2 to 8 and 10 to 14 in Muthalamada Grama Panchayat. Ward No.9 was allotted to another registered society engaged in the same activity. Some of the residents/inhabitants in Ward No.11 were not happy with the service and facilities made available to them. Therefore they wanted to form a new society in that area and for this purpose they approached the authorities concerned. The Deputy Director, Dairy Development issued a communication to the appellant informing that necessary steps be taken to delink Ward No.11 from its area of operation, so that a new dairy development society can be allowed to be established. In response to the communication, the appellant objected the proposal. However, the Government after considering the request made by the residents, issued an order under Section 101 granting exemption. Writ Petition was filed by the appellant challenging the order of the Government which writ petition was dismissed. The judgment of learned Single Judge was challenged in appeal. The Division Bench upheld the power of the Government to grant exemption as per Section 101 of the 1969 Act. Following was observed in paragraph 14 :

14. Undoubtedly the Government is vested with wide discretionary power in the matter of grant of exemption as is evident from the statutory provision. In The Registrar of Co - operative Societies and Another v. V. K. Kunjambu and Others, 1980 KHC 24 : 1980 KLT 112 [LQ/SC/1979/474] : AIR 1980 SC 350 [LQ/SC/1979/474] : 1980 (1) SCC 340 [LQ/SC/1979/474] : 1980 (2) MLJ 17 (SC) : 1980 (2) SCR 260 [LQ/SC/1979/474] the Apex Court had occasion to consider the validity of S.60 of the Madras Co - operative Societies Act (Act 6 of 1932) which is pari materia to S.101 of the Act. Their Lordships observed that S.60 is a near Henry VIII clause. But to give it a name is not to hang it. We must examine the preamble, the scheme and other available material to see if there are discernible guidelines. The Court observed that the Co - operative Societies Act being a welfare legislation the thrust should always be to advance the policy and objects of the Act. The Court held thus: In fact the too rigorous applications of some of the provisions of the Act may itself occasionally result in frustrating the very objects of the Act instead of advancing them. It is to provide for such situations that the Government is vested by S.60 with a power to relax the occasional rigour of the provisions of the Act and to advance the objects of the Act.

46. The Division Bench also had occasion to consider Section 12 of the Act. It was contended by the appellant that for amendment of bye-laws they were also entitled to be consulted. The said contention was repelled. Following was observed by the Division Bench in paragraph 18 :

18. We are afraid, the above contention is wholly misconceived. It has been noticed that S.12 deals with amendment of bye - laws of a society. Sub-section (5) of S.12 deals with contingencies where the Registrar if satisfied, proposes to alter the area of operation of a society for the purpose of improving the services rendered by it. S.101 operates in a totally different contingency or situation. It deals with power of the Government to grant exemption in public interest. As has been held by the Apex Court in Kunjambu (supra) the Government is vested with powers to relax the occasional rigour of the provisions of the Act and to advance its object in public interest.

47. The Division Bench while upholding the power of Government to grant exemption under Section 101 with reference to Section 7(1)(c) made following observations in paragraph 21 :

21. Learned counsel submits that the appellant had been denied an opportunity of being heard as provided under Sub Section (6) of S.12 of the Act. It is true that sub-section (6) empowers the Registrar to register the amendment of bye law as required by him If the society fails to make the amendment within the time specified under sub-section (5) of S.12 of the Act. Sub-section (5) postulates that Registrar shall order such amendment after giving the society an opportunity for making representations in response to the proposal made by the Registrar. The contention of the appellant appears to be that though Ext. P2 reply was sent to the Deputy Director in response to Ext. P1 communication sent by him on May 25, 2009, Ext. P3 order was issued by the Government within three weeks therefrom without giving the appellant an opportunity to be heard. We have already held that sub-sections (5) and (6) of S.12 of the Act operate in totally different fields. Ext. P3 order was issued by the Government in exercise of its power under S.101 of the Act and also to obviate the legal impediment, if any, that may ensue under S.7(1)(c) of the Act if a new society is allowed to be established in the area where the appellant is now operating.

48. Sri.P. Ravindran, learned Senior counsel for the appellants has placed reliance on the judgment of a learned Single Judge reported in Quilon Taluk L.C. & T Co-op. Society v. State of Kerala [1989 (1) KLT 350]. In the above case the petitioner Co-op. Society was registered having an area of operation over the entire Quilon Taluk except the area covered by Anchalummoodu N.E.S. Block. The 4th respondent and the petitioner society were undertaking labour contract including construction work within its area of operation. In the year 1980 the State relaxed the rules and permitted the 4th respondent society to undertake labour contract even outside the jurisdiction of its area of operation for a period of two years. Subsequently the State Government issued Ext.P2 order granting exemption to 4th respondent relaxing its area of operation. The said order was challenged by the petitioner. The petitioner challenged the order issued by the State under Section 101 on the ground that the order was not passed in public interest. It was contended that the power under Section 101 can be exercised only in public interest. The learned Single Judge accepted the said contention and held that the fact that a particular society is running at a loss is not to be a ground to invoke the power under Section 101. Following observation was made in paragraph 6 of the judgment:

6. By Ext. P3 the Government gave sanction to 4th respondent to take up work up to Rs. 20 lakhs within the Quilon District. The consequence is that 4th respondent society which has its area of operation limited to the area covered by Anchalummoodu N.E S. Block is allowed to have its activities through out the Quilon District. The reason given in the order for extending 4th respondents area of operation is that its activities are very much limited, are not extending to its entire capacity of Rs. 20 lakhs, they are compelled to limit their activities to lesser amounts and consequently they are running at a loss. The so called difficulty that is felt by 4th respondent alone has been mentioned in Ext. P3 as the ground for exempting them from the area of operation fixed in their bye laws. This order is sought to be supported by relying on S.101 of the Act. As per that Section the Government are given power inter alia to exempt any society or class of societies from any of the provisions of the Act if they are satisfied that it is necessary so to do in the public interest. It means that for exercising the power under S.101 of the Act, the Government must be satisfied that there is necessity to invoke the provisions of that Section in the public interest. Public interest cannot be the interest of a particular society. The fact that a particular society is running at a loss is no ground to invoke the powers under S.101 of the Act. Nor can that be treated as a ground for exempting it from the provisions of the Act in public interest. From Ext. P3 no public interest is discernible. Conversely Ext. P3 makes mention of a particular interest of 4th respondent alone. That particular interest can seldom be a ground for granting the exemption. The private interest of a particular society cannot be considered as a public interest. As far as the case on band is concerned the impugned order has the effect of undermining the orderly development of the cooperative movement. It has resulted in creating unhealthy competition between the petitioner society and 4th respondent society.

49. The learned Single Judge has also made an observation in paragraph 7 of the judgment that for registration of a society the Registrar has to be satisfied that area of operation of the proposed society and area of operation of another society of similar type does not overlap. It was further observed by learned Single Judge that the Government cannot exercise power under Section 101 in a manner to nullify a condition, the compliance of which is mandatory for a Society to come into existence. Following observation was made by learned Single Judge in paragraph 7 :

7. S.7(1) of the Act lays down five conditions to be satisfied for a society to get registration. One of the conditions is that the area of operation of the proposed society and the area of operation of another society of similar type should not overlap. This condition is a condition precedent for a cooperative society to come into existence. A cooperative society which has come into existence after complying with the above conditions cannot be allowed to violate the same. The power of the Government under S.101 should not be exercised in such a manner as to nullify the very condition, the compliance of which is mandatory for a society to come into existence. The power of the Government cannot be exercised to defeat such a salutary condition. The provisions contained in R.181 of the Rules on which reliance has been made in the counter affidavit has no application either. In this view of the matter, I hold that the order, Ext. P3, granting exemption to the 4th respondent society from its area of operation fixed under the bye laws is illegal.

50. In so far as the ratio of judgment as discernible from paragraph 6 that power under Section 101 can only be exercised if there is public interest which is the express requirement of Section 101 and has been reiterated in several judgments of this Court as noted above, there cannot be two opinions.

51. However, the view of learned Single Judge as contained in paragraph 7 is not in conformity with the earlier Division Bench judgment in Feroke Service Co-operative Bank Ltd v. State of Kerala and others (supra) where exemption was granted from conditions as enumerated in Section 7 (1)(c). More over the observation of learned Single Judge that conditions of Section 7 (1)(c) cannot be allowed to be exempted in exercise of power under Section 101, is not in accordance with the scheme of the Act. Section 101 does not contain any exception so as to prohibit the State from exercising the power of exemption with regard to any society from any provisions of the Act. Section 7(1)(c) cannot be said to be an exception. As noted above, the Division Bench in Feroke Service Co-operative Bank Ltd v. State of Kerala and others (supra) has held that Section 101 is in no way limited or curtailed by Section 7(1)(c) of the Act. Thus the observation of learned Single Judge in Quilon Taluk L.C. & T. Co.op. Society (supra) in paragraph 7 cannot be followed. The second judgment relied on by Sri.Ravindran, is Feroke Service Co-operative Bank Ltd v. State of Kerala and others (supra) case, which has already been noticed by us as above.

52. Sri.Monaye has placed reliance on Antony Pattakulangara v. E.N. Appukuttan Nair [2013 (3) KHC 726], which was a case of election to a Primary Agricultural Co-operative Credit Society defined under Section 2(oa) of the Act. In the election one seat was reserved for depositor. It was contended that the Primary Agricultural Credit Society cannot reserve one seat for depositor which can be done only by primary credit society. On the facts of the above case the Court held that the factual position as noted in the judgment clearly proved that the society fulfilled the qualification of primary credit society and hence election from one seat for depositor was upheld. Following was stated in paragraph 5 and 6(relevant portion) :

5. Going by the factual position as stated above, it was the duty of the Registrar to order alteration of classification of Society in terms of powers conferred on him under Note (ii) of Rule 15 of the Rules which is not so far done. Probably the Registrar of Societies never bothered to find out the operations of the Society to justify retention of the identity and that is why the Society continues to retain the registration originally obtained. In any case what we notice from seconds proviso to Section 2(oa) is that as and when the society ceases to be a Primary Agricultural Credit Society it shall loose that identity irrespective of whether the Registrar has made changes or not. As noted by us above, the procedure to be followed is for the Registrar on information whether obtained by himself or through any other source about the operation of the Society disentitling it to continue to retain its registration in the category obtained by it should change it and issue fresh certificate of registration which is not done in this case.

6. In view of the findings as above, we have to declare that the Society is required to have a member elected to the Managing Committee from the constituency reserved for depositors under Section 28(1C) of the Act. ........ The above case has no application in the facts of the case.

53. Sri.V.G. Arun has relied on the judgment of learned Single Judge in W.P.(C) No.23615 of 2008 (Board of Directors of the Mukkom v. Joint Registrar of Co-operative Society). In the above case the area of operation of the 2nd petitioner was the Mukkom Panchayat and area of operation of the 2nd respondent was the Karassery Panchayat. The 2nd respondent had purchased an item of property having an extent of 18.80 cents which falls in the area of operation of 2nd petitioner. Government issued an order granting exemption from Section 7(1)(c) as sought for by the 2nd respondent which was under challenge. The learned Single Judge has noticed the scope of Section 101. Learned Single Judge has quashed the order of Government holding that the order was passed essentially in private interest of 2nd respondent which cannot be a basis for exercise of power under Section 101. Following was observed in paragraph 14 :

14. Adverting to the various clauses in Exts.R2(a) and R2 (b) bye-laws of the second petitioner and the second respondent respectively, it can be seen that their objects include provisions for collecting the produce of the members for sale, for purchase etc. and there can be no ground to state that the second petitioner does not have, as its objects, the marketing of agricultural produce. Ext.P10 does not show that the second respondent has purchased any item of property other than the 18.980 cents which it purchased for housing its head office, which purpose was recognized in Ext.P4 judgment as one not impinching Section 7(1)(c) of the Act. Beyond that, the request in Ext.P10 does not reflect anything other than the second respondents commercial interests, which essentially are its private interests.

The above judgment is thus clearly distinguishable and does not help the petitioners in the present case.

54. In the above view of the matter we are of the opinion that the State Government did not commit any error in exercise of power under Section 101 which power is exercised on relevant consideration on public interest and on the basis of cogent reason as are reflected in the order 16.01.2015 and the consequential notification dated 02.02.2015. The impugned orders, are thus well within the four corners of Section 101 and cannot be faulted.

ISSUE No.7 :

55. The learned Single Judge had elaborately considered the submissions of the parties and facts of the case. The question of public interest has been considered in paragraphs 67 and 68 in detail and learned Single Judge did not find any illegality in Ext.P8 order and Ext.P11 proceeding so as to warrant interference in exercise of writ jurisdiction under Article 226. The learned Single Judge made following observations in paragraphs 67 and 68 :

67. In Exhibit P8 order of the Government, it has taken into account the performance of the second respondent Bank and also the public interest it has been serving with its what is said to be stellar performance. Adverting to those observations in Exhibit P8, the learned Counsel for the second respondent, without much contradiction, has further elaborated on the issue. He has submitted that the Bank has taken special care of the student community, apart from extending interestfree loans to the farmers, including vegetable growers. The Bank, in the interest of the farmers, is said to have made an arrangement with Dr.M.S.Swaminathan Foundation to train the farmers. It is said to be the only Bank to receive assistance from NABARD, thereby giving easy financial assistance and loans to 4416 families under the Joint Liability Group Scheme. Its services include loans at a very low interest rate of 4%; interest-free loans to women; loans to extremely poor persons for constructing dwelling house; ambulance and other services, including dialysis facility for the indigent patients as part of its palliative care; and benefits in the nature of old-age pension, to name a few, according to the learned counsel.

68. The second respondent is said to be the first Bank to obtain an ISO Certification. It has long back been fully computerised extending the state-of-the-art banking facilities to its customers, including ATM facility, being the first in the Co-operative sector. The second respondent further boasts of offering pension of 1000/- per month to all its class-A members who have completed 60 years of age. It is said to have hardly any defaults, with a working capital and deposits over 350 Crores, capable of being utilized for the benefit of a larger population.

56. Before we conclude one aspect of the matter need to be noted. Consequent to the exemption granted under Section 101 of the Act the area of operation of 2nd respondent Society has been extended to the entire Kozhikode Taluk. The area of operation having been extended, it is open for the 2nd respondent to open new branches/offices as per the norms fixed by the Registrar from time to time. The 2nd respondent being a Primary Agricultural Credit Society is fully covered by Rule 178A as existing on date which has to be complied with by the 2nd respondent for opening any branches/offices. We thus observe that for opening new branches/offices the 2nd respondent has to obtain sanction as contemplated by Rule 178A. For ready reference Rule 178A reads as under :

178A Opening of Branches.- The Kerala State Co-operative Bank, the Kerala State Co-operative Agricultural and Rural Development Bank, District Co-operative Banks, Primary Agricultural Credit Societies, Service Co-operative Banks, Primary Agricultural and Rural Development Banks, Urban Banks and Farmers Service Co-operative Banks shall submit application for opening offices in the name of Regional Office, Zonal Office, Branch Office, Sub Office or Extension Centre as per the norms fixed by the Registrar from time to time, and every such application shall be accompanied by a chalan receipt for the remittance of fees calculated at the rates given below:

Name of the BankRate of fee

i) Kerala State Co-operative Bank/Kerala State Co-operative Agriculturaland Rural Development Bank andDistrict Co-operative Banks.Rs.10,000 for each branch

ii) Primary Agricultural Credit Societies/Service Co-operative Banks, Primary branchAgricultural and Rural DevelopmentBanks, Farmers Service Co-operative

Banks and Urban Banks.Rs.5,000 for each

-

Provided that such amount shall not be refunded to the applicant bank irrespective of the fact that whether sanction is accorded or not.

57. Learned Single Judge did not find the present case as a fit case to exercise jurisdiction under Article 226 of the Constitution of India. No illegality was found in exercise of power under Section 101, hence all the writ petitions were dismissed. In view of the foregoing discussions we do not find any ground to interfere with the judgment of learned Single Judge in exercise of the appellate jurisdiction.

In the result, subject to the observations as made above regarding opening of new branches/offices, all the Writ Appeals are dismissed. Parties shall bear their own costs.