DAMAN SINGH & ORS. v. STATE OF PUNJAB & ORS.

A The Judgment of the Court was delivered by

CHINNAPPA REDDY, J. The opinion of the High Courts appears to be unanimous on the question of the validity of the relevant provisions of the Cooperative Societies Acts in force in their res- B pective States providing for the compulsory amalgamation of Co- operative Societies. The Full Benches of the High Courts of Andhra Pradesh, Karnataka, Punjab and Haryana and a Division Bench of the Patna High Court ('J have upheld the validity of such provisions. But litigants, particularly those who are in a position to command funds are rarely deterred by suca unanimity of judicial opinion. c So, several Co-operative Societies of Punjab have chosen to prefer appeals to this Court questioning the vires of sec. 13 (8) of the Punj1b Cooperative Societies Act which provides for the com- pulsory amalgamation of cooperative societies if it is necessary in . the interests of the cooperative societies. The questions raised are simple and straight and are capable of but single, straight forward answers. Unfortunately a large number of appeals have piled up in this court on these questions and we are told that a large number of writ petitions said to involve these or similar questions are pending in the various High Courts in the country awaiting the decision of this Court. We earnestly hope that this decision will put an end to this branch of the litigation and will serve to push forward the cooperative movement. We think it is I~ needless to refer to t11e nature and history of tl1e cooperative movement except to say that the promotion of the cooperative movement is one of the Directive principles of State Policy (sec Art.43 of the Constitution). As usual in these and such cases, the eounter-aflidavits, where they have been filed, leave much to be

F desired and are least helpful. But, as pointed out by us often enough, the vires of legislation is not to be decided on the basis of affidavits of underlings of the executive who can hardly be i\ described as authorised to speak for the legislature. But even from the meagre m1terial available to us from the record, it is

G (1). AIR 1978 AP.J21 (FB) AIR !978 KARNATAKA 148 (FB) 1976 Punjab Law Journal 302 (FB) AIR 1968 PATNA 211 There is also aQ excellent discussion by Vaidya, J. in ILR 1972 AP 1140.

H

DAMAN SINGHv. PUNJAB (Chinnappa Reddy, I.) 585 obvious that the provisions relating to amalgamation of A Cooperative Societies in different State, enactments were introduced pursuant to a policv decision arrived at an Alt India Conference. This is evident from the circumstance that these provisions were enacted by the variom State legislatures roughly at about the same time .. A reference to the p)Jicy decision at an All India Conference may be found in the Full Bench Judgments ·of the B Andhra Pradesh and K1rnatah High Courts. It is unnecessary to say more on this aspect of the case.

_The Punjab Co-operative Societies Act, 1961 which replaced the earlier Act was en1cted, so it is stated in the Statement of ,...-·· Objects and Reasons, "In pursuance of the policy of the C Government of India to simplify co-operative law and procedure in order to remove all bottleneck• in the way of development of co-operative movement in the country." It is further stated in the Statement of Objects and Reasons.

D "The important provisions, such as relating to change of liability, amalgaination of .rnc;eties, splitting up of societies, settlement of disputes and winding up of societies, etc. were found to be of .a dilatory and complicated nature, and, therefore, creating problems in the day to day working of the co-operative societies. Special care has, therefore, been taken to cut out all unnecessary delays particularly in registration of societies and the provisions to this effect have been simplified. Another approach influencing a change is to make the Cooperative Law comprehensive. Moreover consistent with our national policy to promote the organisatipn and growth of the co-operative Societies in the various fields of economic activity, more difficult and complicated forms of co- operative societies are to spring up as compared to Co-operative Credit Societies ............ ".

Section 2(c) defines "co-operativ,e society" as meaning "a G Society registered or deemed to be registered under this Act."· Chapter II (secs. 3 to 14) deals with registration of co-operative societies. In particuiar sec. 8 pr;scribes the conditions pre-requisite to registration and authorises the Registrar to register a society and its Bye laws if he is.saitsfied that the conditions are fulfilled, H Section 13 provides for the amalgamation, transfer of assets and

•

586 SUPREME COURT REPORTS ( 198 5] 3 S.C.R.

A · liabilities and division fo co-operative societies. While sec. 13(2) provides for voluntary amalgamation, Sec. 13 (8) provides for . compulsory amalgamation if the Registrar is satisfied that it is necenary in the interests of the co-operative societies. Sec. 13(9) (a) requires the Registrar to send a copy of the proposed order to the societies concerned and the creditors and sec. 13 (9) (b) requires IL the Registrar to consider the objections received from the societies • concerned or from any member or creditor of such societies.· Section 13 (l l) gives to the mem·ier or credita< who has objected to the proposed order under sub·sec. 9 the option of .withdrawing his share; deposits or loans as the case m1y be <>n an application to be made to the society to which his share, deposits or· ' Joans stand allocated by virtue of the order under sub-sec. 8 • within a period of 3() days from the ·date of such order. It is the· ,vires of these provisions, that is in question in these appeals and.it will be useful to extract at this juncture, sub-sections 8, 9, 10 and 11 of sec 13. of the Punjab Co-operative Societies Act. T.hey are as follows:...!... ·

"13.(1) ........................... (2) •••..•..••••••••••••••••.••

(3) ••••••..••.••.•..••.•..•.••

(4) •.••.•.••••••...•.••••....•

(5) ••••••.•••.••.••••..• ; •••.• .A • .(6) ..•..•.••..••.••••.••..•..• • ·~. (7) •.••••.•.•.••.•••..••••••••

(8) Where the Registrar is satisfied that it is necessary in the interest of the co-operative society or co-operative societies that-

(i) any co-operative society be divided to form two -y or more co-operative societies ; or

(ii) one or more co-operative societies be amal- n ~amated with any other co-operative society; or

'-

DAMAN SINGH v. PUNJAB ( Chinnappa Reddy, J.) 537

(iii) two or more co-operative societies be amal- A gamated to form a new co-operative society, then, notwithstanding anything hereinbefore contained, · the Registrar may, after consulting the financing institution, if any, provide for-

(a) the division of that co-operative society into two or II more co-operative societies : or

(b) the amalgamation of the society or societies-

(i) With any other co-operative society, or

(ii) to form a new co-operative society, with such constitution' including representation on the com- mittee, property rights, interests; liabilities, duties and obligations, as may be specified in the order.

(9) No order shall be made under sub-section (8), a unless-

(a) a copy of the proposed order has been sent under certificate of posting to the society•• or societies con- cerned and the creditors ;

(b) the Registrar has considered the objections received from the society or societies concerned or from any member ·or creditor of such society or societies within such period, being not less than fifteen days from the date of posting of the proposed order, as may be specified by the Registrar in this behalf in the pro- posed order.

(10) the Registrar may, after considering the objections referred to in sub-section (9), make such modification in the proposed order as he may deem fit and the order ·may contain such incidental, consequential and supplemental provisions as the Registrar may deem necessary to give effect to the same.

(II) A member or creditor who had objected to the pro- posed order under sub-section (9) shall have the option H

588 SUPREME COURT REPORTS [1985] 3 s,c.R.

of withdrawing his share, deposits or Joans as the case A may be, on an application which shall be made to the society to which his share, deposit or loan stands allocated by virtue of the order under sub-section(8) , within a period of thirty days of the date of such order. B (12) ..•........................... "

Chapter V of the Act deals with privileges of Cooperative Societies and in particular sec. 30 states,

c "The registration of a co· operative society shall render it a body corporate by the name under which it is regis- tered having perpetual succession and a common seal, and with power to hold property, enter into contract, institute and defend suits and other legal proceedings and to do all things necessary for the purposes for which it is con- D stituted."

The foremost submission of Shri M.K. Ramamurthi, learned counsel for the petitioners was that any Jaw providing for the • amalgamation of co-operative societies directly contravenes Art. 19 (1) (c) which guarantees to all citizens the right to form associations E or unions. According to Shri Ramamurthi, the right of a citiz:n to form a society or to be a member of a certain cooperative society is interfered with if the society of which he has becom" a member is amalgamated with another society consisting of members with whom he may not be assosiatcd. Article 31(A) (1) (c) furnishes F a complete answer to this submission. It provides that no law providing for the amalgamation of two or more corporations either in the public interest or in order to secure the proper management of any of the corporations shall be deemed to be void on the ground that it is inconsistent or takes away or abridges any of the rights conferred by Art14 or Art. 19. Shri Ramamurthi attempted to G cross the stile by arguing that co-operative societies were not corporations within the meaning of that expression in Art. 31-(A) (1) (c). According to him, the Constitution discloses a scheme which separates co-operative societies from Corporations, and 'never the twain shall meet'. To substantiate his subm'1ssion, he invited our attention to Entries 43 and 44 of List-I and Entry 32 of II List-H of tlJc SeveJ]th S9hedule to the Constituti<;>n. Ile also rea<;I

DAMAN SINGH v. PUNJAB (Chinnappa Reddy, J.) 589

out to us the Statement of Objects and Reasons and the Joint A Select Committee's report relating to the Constitution (Fourth Amendment) Act, 1955 by which clause (c) of Art .31-A(l) was introduced. His submission was that the legislative intent was merely to render legislation providing for amalgamation of com- panies and statutory corporations alone immune to challenge on the ground of conflict with the fundamental rights guaranteed by B Articles 14 and 19. According to him the protection afforded by Art. 31-A(l)(c) was not available and was never intended to be niade available to co-operative societies, since the expression 'corporations' did not comprehend co-operative societies in its expanse; · ·~· c We are·unable to find any justification for giving such a limi- ted or narrow interpretation to the expression 'corporations' occur- ring in Art. 31-A(ll (c). On the other hand, we think that the very requirement of public interest or proper management of the corpo- ration mentioned in Art. 31-A(l) \cl requires the expression to be given a broad interpretation since there can be no higher interest D than the public interest. We do not however desire to quibble with· rules of construction since we propose to examine what a 'corpora- tion' means and comprehends ordinarily and in the scheme of the Constitution.

E What is a corporation ? In Halsbury's Laws of England, 4th Edition, Volume 9, Paragraph 1201, it is said,

"A corporation may be defined as a body of persons (in the case of a corporation aggregate) or in office (in the case of a corporation sole) which is recognised by the law as F having a personality which is distinct from the separate personalities of the members of the body or the personality of the individual holder for the time being of the office in question." G A corporation aggregate has been defined in paragraph 1204 as, "A corporation of individuals united into one body under a special domination having perpetual succession under an artificial form, and vested by the policy of law with the capacity of acting in several respects as an individual, par- ticularly of takin$ and grantin$ property, of contracting ff

590 SUPREME COURT REPORTS [198 5] 3 S.C.R.

obligations and of suing and being sued, of enjoying privi- A leges and immunities in common and of exercising a varie· ty of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation or at any subsequent period of its existence." B This court in the Board of Trustees, Ayurl'edic and Unani Tibia College, Delhiv. the State of Delhi(') was!required to answer the ques- tion whether the Board of trustees which was originally registered under the Societies Registration Act, 1860 and a new Board of trustees which was incorporated by an Act of the legislature called c the Tibbia College Act, 1952 by which the old Board was dissolved and a new Board constituted were corporations. The court held that the old Board was not but the new Board was. Posing the question what is a corporation, the court answered it with the state- ments contained in Halsbury's Laws of England already extracted D by us and added,

"A corporation aggregate has therefore only one capa- city,namely, its corporate capacity. A corporation aggregate may be a trading corporation or a non-trading corporation. The usual examples of a trading corporation' are (I) char· E ter companies, (2) companies incorporated by special acts of Parliament, (3) companies registered under the Com- panies Act, etc. Non-trading corporations are illustrated by (1) municipal corporations, (2) district boards, (3) benevolent institutions, (4) universities etc. An essential element in the legal conception of a corporation is that its identity is continuous, that is, that the original member or members and his or their successors are one. In law tlie individual corporators, or members, of which it is com- posed are something wholly different from the corporation itself; for a corporation is a legal person just as much as an individual. Thus, it has been held that a name is essen· tial to a corporation ; that a corporation aggregate can, as a general rule, only act or express its will by deed under its common seal; that at the present day in England· a cor- poration is created by one or other of two methods,

H (I) [1962] SUPPL. 1, SCR)56

DAMAN SINGH v. PUNJAB (Chinnappa Reddy, I.) 59lc

namely, by Royal Charter of incorporation from the A Crown or by the authority of Parliament that is to say, by or by virtue of statute. There is authority of long stand- ing for saying that the essence of a co~poration consists in

(I) lawful authority of incorporation,

(2) the persons to be incorporated, , ' (3) a name by which the persons are incorporated,

(4) a place and C' (5) words sufficient in law to show incorporation. No particular words are necessary for the creation of a cor- poration : any expression showing an intention to incorpo- rate will be sufficient."

The court then noticed the various provisions of the Societies D Registration Act, 1860 which according to them contained no suffi- cient words to indicate an intention to incorporate but on the•con- trary contained provisions showing that. ther.e was an. absence of such intention. Therefore, they observed, "We have, therefore, come to the conclusion that the provisions aforesaid do not estab- lish the main . essential characteristic of a corporation aggregate, E namely, that of au intention to incorporate the society." Consider- ing next the question whether the new Board was a corporation, the court had no difficulty in answering the question with reference to sub-section 2 of section 3 which stated · that the Board shall be a ~ j)Ody corporate having perpetual succession and common seal and F f'Sball by the said name sue and be sued; The court observed, '.'Sub· '·section 2 of sec. 3 says in express terms that the new Board consti- tuted under the impugned Act is given a corporate status; in other words, the new Board is a corporation in the full sense of the - term." G We have already extracted sec. 30 of the Punjab Act which confers on every registered co-operative society the status of a body ., corporate having perpetual succession and a common seal, with power to hold property, enter into· contracts, institute and defend suits and other legal proceedings and to do all things necessary for !he purpose for which, it is constituted, There cannot, therefore, be

592 SUPREME COURT REPORTS [\985} 3 S.C.R. A the slightest doubt that a co-operative society is a corporation as commonly understood. Does the scheme of the Constitution make any difference 7 We apprehend not.

Entry 43 of List I of the Seventh Schedule is as follows ;

B "43. Incorporation, regulation and winding up of trad- ing corporations, including banking, insurance and finandal corporations but not including co-operative societies."

Entry 44 of the same list is as follows : ·

c "44. Incorporation, regulation and winding up of cor- porations, whether trading or not, with objects not confined . ·-r to one State, but not including universities."

Entry 32 of List II is as follows :

D "32. Incorporation, regulation and winding up of cor- porations, other than those specified in List I and universi- tiesincorporated trading, literature, scientific, religious and other societies and associations ; co-operative societies," ·

According to Mr. Ramamurthi the express exclusion of co- E operative societies in Entry 43 of List I and the express inclusion of co-operative societies in Entry 32 of List II separately and apart from but along with corporations other than those specified in list I and universities, clearly indicated that the constitutional scheme was designed to treat co-operative societies as institutions distinct from corporations. On the other hand one would think that th~---.;, F very mention of co-operative societies both in Entry 43 of List I and 'f Entry 32 of List II along with other corporations give an indication that the Constitution makers were of the view that co-operative societies were of the same genus as other corporations and all were corporations. In fact the very express exclusion of co-operative societies from Entry 43 of List I is indicative of the view that but G for such exclusion, co-operative societies would be comprehended within the meaning of expression "corporations".

The statement of Objects and Reasons of the Constitution (4th amendment) Act and the report of the Joint Select Committee relating thereto do not carri;Mr. Ramamurthi's argument any H

DAMAN SHIGH v. PUNJAB ( Chinnappa Reddy, J.) 593 further. The statement of Objects and Reasons says, in relation to A Art. 31 ·A (1) (c),

"The reforms in company law now under contempla- tion like the progressive elimination of the managing agency system, provision for the compulsory amalgamation of two or more companies in the national interest, the transfer of B an undertaking from one company to another, etc., require to be placed above challenge."

The report of the Joint Select Committee, is so far ·as it is '· relevant, says, c "In sub·clauses (c) and (d), the word "corp.orations" has been substituted for the word "companies" in order to cover statutory corporations as well as companies."

, According to Mr. Ramamurthi, the statement of Objects .and D Reasons and the report of the Joint Select Committee show that ini- tially it was proposed to give protection to legislation pertaining to amalgamation of companies only but later it was thought fit to extend the protection to statutory corp<;>rations also and therefore the expression "corporations" was substituted in the Act in the place of the expression "companies" which. liad been· mentioned in E the Bill. There is no substance in this submission. It was .obvi· ously thought by the Parliament that the protection should not be confirmed to companies only but should extend to all corpora- tions which would naturally include Statutory Corporations. The more generic expression "corporations" was used so that all com- panies, statutory corporations and the like may. be bropght in. ' F There is no indication that notwithstanding the use of the generic expression "corporations'', the expression was intended to ex- clude corporations other than companies and statutory corporations Parliament apparently chose the broader expression not with a view to limit the protection of the legislation relating to amalgamation G to any class of corporations but with a view to protect legislation pertaining to amalgamation of all classes of corporations·. ~

The answer to the principal question raised by Shri Rama· 1 murthi appears to us to be so plain as to merit, no further discus- H

594 SUPREME COURT REPORTS (198 SJ 3 s.c.tt A ·sion. We must however notice here Damyanti Naranga v. Union of India on which reliance was placed by the learned counsel on the basis that Art. 31-A (1) (c) did not afford any protection to s. 13(8), (9) etc. That case has ·no application whatever to the situation before us. It was a case where an unregistered society was by sta- tute converted ·into a registered society which bore no resemblance whatever 1to the original society. New members could be admitted in large numbers so as to reduce the original members to an insigni- ficant minority. The composition of the society itself was transfor- med by the Act and the voluntary nature of the association of the members who formed' -the original society was totally destroyed. The Act was, therefore, struck-down by the court as contravening the fundamental right guaranteed by Art. 19(1)(f). In the cases before us we are.concerned with co-operative. societies which from the inception are governed by statute. They are created by statute, there are controlled by statute and so, there can be no objection to statutory interference with their composition on the ground of con- D .traventi0n of the individual right of freedom of association.

The second submission of the learned counsel was that s. 13(8) .of the Punjab Co-operative Societies Act provided for amalgamation of ·Co-operative Societies if . the Registrar was satisfied that it was necessary to do so in the interest of the Co- E operative Societies ·whereas the Constitutional protection was :available ,only if the legislation was in the public interest or in order .to secure the ,proper management of any of the corpora- tions. According to the learned counsel the protection of Art. 31·A (!) (c) was, therefore, not available to s. 13 (8) of the .P,unjab Cooperative Societies Act as the interest of a Cooperative F Society may not necessarily be in the public interest or for the .pr~.er .management of the society. This submission is no more than a play with words. The very philosophy and concept of the .Cooperative movement is impregnated with the public in- terest and the amalgamation of Co-operative Societies when such amalgamation is in the interest of the Co-operative Societies is G · certainly in the public interest or can only be to secure the pro- per management of the societies. The argument of the learned counsel is an attempt at .hair-splitting and is rejected.

H (I) [1971] 3. S.C.R. 840.

DAMAN SiNGH v. PUNJAB (Chinnappa Reddy, '·' 595 The next submission of-the learned counsel was__ that s. 13 A (8), (9) and (JO) did not make express provision for the issue of notice to the members of the concerned Co-operative Societies and were, therefore, violative· of the principles of natural justice. He argued that in the absence of any provision, the rules of natural justice may be read into the provisions and notice to the members of the affected societies was imperative. Otherwise, he argued, B members of one society would be formed against .their will and without being heard to associate themselves with members of another society. We have no hesitation in rejecting this sub- mission also. Once a person becomes a member of a co-opera- tive society, he loses his individuality qua the society and he has' no -independent rights except those given to him by the statute c and the by-laws. He must act and speak through the &ociety·or rather, the society alone can act and speak for him qua rights or duties of the society as a -body, So if the statute which autho- rises compulsory amalgamation of cooperative societies provides for notice to the societies concerned, the requirement of natural D justice is fully satisfied. The notice to the society will be deemed as notice to all its member. That is why s. 13 (9) (a) Provides for the issue of notice to the societies and not to individual members. Section 13(9)(b), however, provides the members also with an opportunity to be heard if they desire to be heard. _Notice to individual members of a cooperative society, in our opinion, is opposed to the very status of a cooperative society as a body corporate and is, therefore, unnecessary. We do not consider it necessary to further elaborate the matter except to point out that a member who objects to the proposed amalgamation within the prescribed time is given, bys. 31(11), the option to walk-out, as it were, by withdrawing his share, deposits or loans as the case -F may be.

Another submission of the learned counsel was that the notification authorising the Assistant Registrar of Co-operative Societies to exercise all the powers of Registrar under the Act G could enable ~the Assistant Registrar to perform only such func- tions as the Registrar was authorised to perform under the Act as on the date of the notification. The Assistant Registrar would not be entitled to exercise the powers entrusted to the Registrar I H

5~6 SUPREME COURT RllJ'ORtS [1985) 3 s.c.t>..

A by amendment of the Act subsequent to the date of the notifi- cation unless a fresh notification was issued. We do not think that a fresh notification would be necessary where the Assistaut Regis· trar even ·initially was authorised generally to perform all the functions of a Registrar. A fresh notification would probably be necessary where the Assistant Registrar was authorised to perform B certain specified functions only of the Registrar. That is not claimed to be the situation here.

The final submission of Shri Ramamurthi was that several other questions were raised in the writ petition before the High ,_ c . Court but they were not considered. We attach no significance to this submission. It is not unusual for parties and counsel to ~ .I raise innumerable grounds in the petitions and memoranda of appeal etc., but, later, confine themselves, in the course of argu· ment to a few only of those grounds, obviously because the rest D of the grounds are considered even by them to be untenable. No party or counsel is thereafter entitled to make a grievance that the grounds not argued were not considered. If indeed any ground which was argued was not considered it should be open to the party aggrieved to draw the attention of the court making the order to it by filing a proper application for review or clarification. E The time of the superior courts is not to be wasted in enquiring into the question whether a certain ground to which no reference is found in the judgment of the subordinate court was argued before that court or not ?

Shri Arvind Kumar, learned counsel for one of the appel· F !ants very airily made a submission that Art. 31-A (1) (c) intro· duced by the Constitution (64th amendment) Act and s. 13(8) of the Punjab Co-operative Societies Act offended the Basic Struc- ture of the Constitution as they affected the dignity of the human being and were therefore void. We find overselves unable to appreciate how the dignity of a human being can even remotely G be said to be affected by the amalgamation of a cooperative society of which an individual is a member with another coopera- tive society. We expect counsel appearing in this court, particu- larly when they appear before the Constitution Bench, to avoid . H advancing such totally un~ustainable propositions, The time of

bAMAN SINGH v. PUNJAB ( Chinnappa Reddy, J.) 591

this court is public time and as the mountainous arrears show the A time is becoming increasingly dear and precious. We can only appeal to counsel to carefully examine with a greater sense of responsibilty the submission which they propose to make before actually advancing them in court. All the appeals are dismissed with costs which we quantify each Rs. 2,500 in each appeal. \ B

S.R. Appeals & Petitions dismissed. c

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