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TMI Blog2006 (9) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... a Larger Bench. Whether the decision of the five-Judge Bench of this Court in M. Thanikkachalam v. Madhuranthakam Agricultural Co-operative Society (2001) ILLJ 285 Mad, holding that no Writ will lie against a co-operative society is correct in law? Pursuant to the said order, the above question was referred to a Full Bench consisting of three Judges. The Full Bench took the view that it will be open only for a Bench of coequal strength to express an opinion doubting the correctness of the view taken by the earlier Bench of coequal strength, whereupon the matter may be placed for hearing before the Bench consisting of a quorum larger than the one which pronounced the decision laying down the law, the correctness of which is doubted. Consequently, the matter has been placed before this five-Judge Bench. 3. Before considering the question referred to the Bench, it will be useful to refer to the decision of M. Thanikkachalam's case (cited supra). It is seen from paragraph-11 of the aforesaid judgment that in view of difference of opinion, a Larger Bench was constituted to answer the question put forth as to whether the decision in R. Thamilarasan, etc. v. Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vide Rohtas Industries. If the terms of Contract and Employment Service Rules detrimental to the employees are found to be unconscionable, unfair, unreasonable, against public policy and public interest and against principle of distributive justice in the context of Parts III and IV of the Constitution, it would be violative of Article 14 of the Constitution (vide Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986) IILLJ 171 SC, can be instances. 61. It is also to be noted that this Court while exercising power under Article 226 of the Constitution, which is discretionary in nature, is a Court not being a Court of Appeal, more so, when alternative remedy is available under a particular statute, and when the Act and the Rules provide for so many safety measures, and when the discretionary power of this Court under Article 226 remains intact, we do not want to substitute our view that the Writ Petition against Co-operative Societies is maintainable in the garb of efficacious remedy as a matter of course, as discussed above. Unless the petitioner is able to show some special circumstances, and the fact that the Authorities concerned while passing orders have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cieties Act, 1983 (hereinafter for the sake of brevity referred to as the 'Act') is a private body or falls within the definition of the 'State' or ' local' or 'other authorities' under the control of the Government. A body or organisation which is an instrumentality or agency of the State or a company owned and controlled by the State are all included in the expression the 'State'. If it is found that the co-operative society falls within the latter category, there cannot be any hurdle in holding that such a body or organisation would undoubtedly be amenable to the writ jurisdiction under Article 226 of the Constitution. On the other hand, if it is found that the co-operative society is a private body, in that event it may have to be examined whether a writ petition would be maintainable or not and the extent to which such powers can be exercised. 6. The appellant in Writ Appeal (writ petitioner) challenges the action of demoting him from the rank of Manager to the rank of Clerk by the respondent-society (a Co-operative Agricultural Bank). Learned Counsel appearing for the appellant Mr. N.G.R. Prasad contended that applying the tests ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant factor... whether the corporation enjoys monopoly status which is State-conferred or State-protected (SCC p.508, para 15) (4). Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality (SCC p. 508, para 15) (5). If the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. (6). 'Specifically', if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government. (SCC p.510, para 18). The Court observed in paragraph-31 as follows: (SCC pp.131-32) 31. The tests to determine whether a body falls within the definition of 'State' in Article 12 laid down in Ramana with the Constitution Bench imprimatur in Ajay Hasia form the keystone of the subsequent jurisprudential superstructure judicially crafted on the subject which is apparent from a chronological consideration of the authorities cited. Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt of grant from the Government, but the respondent Bank is not one such. Ajay Hasia Test No. 3 No material is placed before us to show that the co-operative societies registered under the Act enjoy any monopoly status. The respondent Bank does not enjoy a monopoly status which is conferred, or protected by the State. It is not suggested that the societies to which loans are given by the respondent Bank are precluded from receiving loans from any other sources. Ajay Hasia Test No. 6 The sixth test too is inapplicable, inasmuch as this is not a case where the business carried on by respondent Bank was previously carried on by a department of the Government nor is it a case where the work of a department is transferred to the respondent. 9. We shall now proceed to examine whether the other three tests namely, 1, 4 5 are satisfied in this case. Ajay Hasia Test No. 1 According to the learned Advocate General the Government shareholding in the co-operative societies is ordinarily not more than 10%, which can be said to be negligible. There is another aspect to this test, which is emphasised by a Division Bench of the Patna High Court in H.N. Banker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; or 'for the purpose of proper management of the society'. Under Section 33(4)(a), the Registrar may nominate the entire Board and under Section 33(b)(ii) the Registrar may nominate one-third of the Board. Under Sub-section (7) the Government has power to appoint Managing Director to every apex society, every scheduled society and any other societies as may be notified by the Government. Section 34(6) confers power on the Registrar to pass suo motu order of removal from membership and under Section 35(1) the Registrar can remove any such member, who is holding certain financial interests as mentioned in Section 35. Under Section 68 Investment of Funds has to be made only with the approval of the Registrar and Section 72 prescribes the mode in which net profits of the society are to be distributed. It is not open to the society to distribute the entire net profit by way of dividends. Section 73 empowers the Registrar to make appointment of paid officers and servants, subject to Sections 74, 75, 76 and 77. Under Section 75 the State Government has the power to constitute common cadre of service in (i) scheduled co-operative societies, (ii) primary so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, the Rules and the Bye-laws. The Bye-laws made by the society as held by the Supreme Court do not have the force of law (See Co-operative Central Bank Limited v. Industrial Tribunal, Hyderabad (1969) IILLJ 698SC and B.K. Garad v. Nasik Merchants' Co-operative Bank Limited [1984] 1 SCR 767). They are in the nature of contract, terms of contract, between the society and its employees or between society and its members, as the case may be. Ajay Hasia Test No. 5 Whether the functions of the society are of public importance and closely related to governmental functions? There is no dispute that the dealings of the co-operative societies are mostly confined to its members and its membership consists of member societies, Government or individual members. It is not disputed before us that the operations of the respondent Bank are actually confined to its members only. The respondent Bank would not advance loan to a non-member whoever he is. The respondent Bank's main object is to raise funds to finance its members. It has its own funds. It is entitled to raise loans from scheduled banks and other agencies. Its members also make deposits with it. As per Ajay Hasia t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment Bank which is registered under the U.P. Co-operative Societies Act is a 'State' within the meaning of Article 12 of the Constitution. We may examine the position as involved in that case in some detail. The U.P. State Co-operative Land Development Bank is a registered society under the provisions of the U.P. Co-operative Societies Act. While holding it to be an instrumentality of the State, the Court took note of the fact that though registered as a co-operative society, it was constituted under the provisions of the U.P. Co-operative Land Development Bank Act, 1964. The Managing Director and the Chief General Manager of the Bank are officials of the State, who are at the helm of the affairs of the Bank. The service rules for the employees and the officers of the Bank were framed by the State Government in exercise of the powers under Section 30 of the U.P. State Co-operative Land Development Act, 1964. The rules are called the U.P. Co-operative Land Development Bank Rules, 1971, which laid down the conditions of service of the employees. The Institutional Service Boards constituted under Section 122 of the U.P. Co-operative Societies Act has also framed service rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State, the Bank may also issue debentures. To cap it all, the service conditions of the employees are governed by the statutory rules. 12. A reference was also made by the learned Counsel for the appellant to the decision of the Supreme Court in Anadi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudam (1989) IILLJ 324 SC. It has been held in the above said case that the college in question which was managed by a trust registered under the Bombay Trusts Act was amenable to writ jurisdiction and a direction could be issued to the institution to make the payment of arrears of salary and other benefits to the teacher. It is, further, held that if a private body discharges a public duty it would be amenable to writ jurisdiction. Paragrpah 17 of the judgment has been particularly referred to, which reads as under: (SCC p.699) There, however, the prerogative writ of mandamus is confined only to public authorities to compel performance of public duty. The 'public authority' for them means every body which is created by statute - and whose powers and duties are defined by statute. So government departments, local authorities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, is not devoid of any public character. So are the service conditions of the academic staff.... The service conditions of the academic staff are, therefore, not purely of a private character. It has superadded protection by university decisions creating a legal right-duty relationship between the staff and the management. When there are existence of this relationship, mandamus cannot be refused to the aggrieved party. In paragraph 12 it has been held that no writ would issue where dismissal was not in violation of any statutory provision. No reinstatement could be ordered. 13. In Federal Bank Limited v. Sagar Thomas (2004) ILLJ 161 SC, the Supreme Court explained and distinguished the decision in Anadi Mukta's case (cited supra). In that case, the 1st respondent who was working as a Branch Manager in the appellant Bank was chargesheeted and ultimately awarded punishment of dismissal. The 1st respondent challenged his dismissal by filing a writ petition before the High Court. A preliminary objection to the maintainability of the writ petition was taken by the appellant Bank saying that it is a private bank and not a 'State' or its 'agency' or &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be complied with by all concerned, including the private companies. For example, there are certain legislations like the Industrial Disputes Act, the Minimum Wages Act, the Factories Act or for maintaining proper environment, say the Air (Prevention and Control of Pollution) Act, 1981 or the Water (Prevention and Control of Pollution) Act, 1974, etc., or statutes of the like nature which fasten certain duties and responsibilities statutorily upon such private bodies which they are bound to comply with. If they violate such statutory provisions a writ may certainly be issued for compliance with those provisions. For instance, if a private employer dispenses with the services of its employee in violation of the provisions contained under the Industrial Disputes Act, in innumerable cases the High Court interfered and has issued writ to the private bodies and the companies in that regard. But, the difficulty in issuing a writ may arise where there may not be any non-compliance with or violation of any statutory provision by the private body. In that event, the writ may not be issued at all. Other remedies as may be available, may have to be resorted to. 14. Learned Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Counsel for the appellant to the decision of the Supreme Court in A. Umarani v. Registrar, Co-operative Societies (2004) IIIL LJ780 SC , where S.B. Sinha, J. speaking for the Bench observed as follows: (SCC p.129) Although we do not intend to express any opinion as to whether the cooperative society is a 'State' within the meaning of Article 12 of the Constitution of India, but it is beyond any cavil of doubt that the writ petition will be maintainable when the action of the cooperative society is violative of mandatory statutory provisions. In this case, except the nodal centre functions and supervisions of the cooperative society, the State has no administrative control over its day-to-day affairs. The State has not created any post nor could it do so on its own. The State has not borne any part of the financial burden. It was, therefore, impermissible for the State to direct regularisation of the services of the employees of the cooperative societies. Such an order cannot be upheld also on the ground that the employees allegedly served the cooperative societies for a long time. Thus, the question as to whether the co-operative Society is a 'S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w or not to follow bye-laws, it would be inherently arbitrary and may very likely give rise to discriminatory treatment. A society which is a 'State', has to act in conformity with Article 14 of the Constitution and for that reason it would be made to follow bye-laws. The Bench also held that the bye-laws made by a so-operative society do not have the force of law, and hence, where a society cannot be characterized as a 'State' the service conditions of its employees governed by bye-laws cannot be enforced through a writ petition. The Bench further held that even if a society cannot be characterised as a 'State' within the meaning of Article 12, even so a writ would lie against it to enforce a statutory public duty which an employee is entitled to enforce against a society. In such a case, it is unnecessary to go into the question whether the society is being treated as a 'person' or 'an authority' within the meaning of Article 12 of the Constitution. What is material is the nature of the statutory duty placed upon it and the Court will enforce such statutory duty. 17. Learned Advocate General mainly placed reliance on a recent decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lms Limited v. Union of India AIR 2005 SC 2677 where the question was whether the Cricket Control Board of India is a 'State' within the meaning of Article 12. It was held that applying the principles laid down by the seven-Judge Bench in Pradeep Kumar Biswas Case it would be clear that the facts established do not cumulatively show that the Board is financially, functionally or administratively dominated by or is under the control of the Government. Thus the little control that the Government may be said to have on the Board is not pervasive in nature. Such limited control is purely regulatory control and nothing more. Assuming for argument's sake that some of the functions do partake the nature of public duties or State actions, they being in a very limited area of the activities of the Board, would not fall within the parameters laid down in Pradeep Kumar Biswas case. Even otherwise assuming that there is some element of public duty involved in the discharge of the Board's functions, even then, as per the judgment in Pradeep Kumar Biswas case, that by itself would not suffice for bringing the Board within the net of 'other authorities' for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the world. While the Indian public may be the beneficiary of the activities of the Institute, it certainly cannot be said that ICRISAT owes a duty to the Indian public to provide research and training facilities. In Praga Tools Corporation v. C.V. Imanual (supra) this Court construed Article 226 to hold that the High Court could issue a writ of mandamus 'to secure the performance of a public or statutory duty in the performance of which the one who applies for it has a sufficient legal interest'. The Court also held that: SCC p.589. para 6) An application for mandamus will not lie for an order of reinstatement to an office which is essentially of a private character nor can such an application be maintained to secure performance of obligations owed by a company towards its workmen or to resolve any private dispute. (See Sohan Lal v. Union of India [1957] 1 SCR 738. Thus, even though a Writ under Article 226 of the Constitution can lie against a 'person' if it performs a public function or discharges a public or statutory duty, no application for mandamus will lie for an order of reinstatement to an office which is essentially of a private character nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and the bye-laws of the society, a claim for transfer of interest was required to be made within a stipulated time and as no claim for transfer of the interest of the appellant's father had been made in time, the flat in question was already reallotted and the society would make payment of the amounts made after deduction in accordance with law. Challenging the action of the Special Officer, the appellant field a writ petition before the High Court, which came to be allowed by the learned single Judge. But, the Division Bench in appeal reversed the judgment. The Supreme Court allowing the appeal held that Section 87 of the W.B. Co-operative Societies Act deals with a member's right of ownership and Sub-section (3) of the said Section makes it abundantly clear that a plot of land or a house or an apartment in a multi-storeyed building shall constitute a heritable and transferable immovable property within the meaning of any law for the time being in force provided that notwithstanding anything contained in any other law for the time being in force, such heritable and transferable immovable property shall not be partitioned or subdivided for any purpose whatsoever. In term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso be 'an authority' within the meaning and for the purpose of Article 226 of the Constitution. In such a situation, an order passed by a society in violation of the bye-laws can be corrected by way of writ petition. (ii) Applying the tests in Ajay Hasia it is held that the respondent society carrying on banking business cannot be termed as an instrumentality of the State within the meaning of Article 12 of the Constitution. (iii) Even if a society cannot be characterised as a 'State' within the meaning of Article 12 of the Constitution, even so a writ would lie against it to enforce a statutory public duty cast upon the society. In such a case, it is unnecessary to go into the question whether the society is being treated as a 'person' or 'an authority' within the meaning of Article 226 of the Constitution and what is material is the nature of the statutory duty placed upon it and the Court will enforce such statutory public duty. Although it is not easy to define what a public function or public duty is, it can reasonably said that such functions are similar to or closely related to those performable by the State in its sovereign capacit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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