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PETITIONER:

SAHKARI SAMITIYAN VYAVASTHAPAKUNION ETC.

Vs.

RESPONDENT:

STATE OF RAJASTHAN & ORS.

DATE OF JUDGMENT: 01/03/1996

BENCH:

RAMASWAMY, K.

BENCH:

RAMASWAMY, K.

G.B. PATTANAIK (J)

CITATION:

JT 1996 (3) 292 1996 SCALE (2)795

ACT:

HEADNOTE:

JUDGMENT:

WITH

CIVIL APPEAL NOS. 4174-75 OF 1996

[Arising out of SLP (C) Nos. 14778-79 of 1995]

J U D G M E N T

K. Ramaswamy,J.

Leave granted in all the special leave petitions.

These appeals arise from the judgment and order dated

May 9, 1991 passed in Writ Petition No.1018-20 of 1979 by a

Division Bench of the Rajasthan High Court. The facts are

fairly not in dispute.

Paid Secretaries were recruited by the Rajasthan Credit

Co-operative Institutions Cadre Authority Limited [for

short, the 'Cadre Authority Society'] constituted under

Section 4 [1] of the Rajasthan Co-operative Societies Act,

1965 [for short, the 'Act']. They were appointed in the

respective District Co-operative Banks initially under

Recruitment and Service Conditions of the Managers of

Agriculture Credit Cooperative Societies Rules, 1977 [1977

Rules] and thereafter under Agriculture Cooperative Credit

Societies Service Rules, 1969 [for short, the '1969 Rules']

by the Managers of the District Cooperative Banks and were

sought to be posted to the Primary Agriculture Credit

Cooperative Societies [for short, the 'PACS'] fastening

liability of their salary on the PACS who have challenged

the validity of the constitution of Cadre Authority Society

and also the power of the Registrar of the Cooperative

Societies [for short, the 'Registrar] to make the rules

calling upon PACS to contribute to the Manager's Salary Fund

under Central Cooperative Bank Rules, 1969 [for short, the

"Bank Rules"]. The Division Bench has held that the Cadre

Authority Society cannot be registered as a cooperative

society under Section 4 of the Act, the Bank Rules are ultra

vires the powers of the Registrar under Rule 41 of the

Cooperative Societies Rules, 1966 [for short, the "Rules].

S/Shri R.K. Jain, Rajiv Dhavan and Jitendra Sharma,

learned senior counsel appear for these Unions and Managers.

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Pending these appeals, pursuant to the permission granted by

this Court, the Government framed the Conditions of Service

of the Managers/Assistant Managers of the Agricultural

Credit Cooperative Societies Rules, 1995 and placed the same

on record. The appellants are not agreeable to those Rules.

Consequently, the learned counsel have contended that under

Section 4 [1], Cadre Authority Society is a society

regulating facilitation of disbursement of the loans by the

PACS in terms of cooperative movement for which PACS came to

be registered under the Act. The Cadre Authority Society

came to be registered pursuant to the recommendation made by

Datey Committee which has gone into the credit structure and

proper utilization of the loans to the agriculturists made

available by the State Government and distributed through

the State Central Cooperative Credit Bank to the District

Societies who in turn distribute the loans to PACS. For

their coordination, supervision and proper utilization

thereof the Managers\Assistant Managers [hereinafter

referred to as the paid Secretaries] are competent persons

to work as liaison between the PACS and their members and

the District Banks and Central Bank. The Registrar under

Rule 41 of the Rules read with Section 147 [2] and Section

148 [2] (xxx) of the Act is empowered to regulate the

service conditions of paid Secretaries and to prescribe

qualifications. Consequently, the Cadre Authority Society

registered under Section 4(1) of the Act is a valid society.

It is also contended that the 1969 Rules prescribe the mode

of recruitment, method of appointment and control of the

Managers. Bank Rules prescribe the amounts collected from

PACS to pay their salaries. Therefore, the PACS are bound to

contribute towards the salary and allowances of the paid

Secretaries. Shri Jitendra Sharma further contended that

they are the members of the PACS and that, therefore, the

PACS are bound by the Bank Rules. Shri Aruneshwar Gupta,

learned counsel appearing for the State contended that the

Registrar has no power to make Bank Rules nor has he power

to direct the PACS to contribute for the salary and

allowances of the paid Secretaries. The High Court,

therefore, was right in recording the findings in that

behalf.

The question, therefore, is: whether the appellants are

right in their contentions? With a view to appreciate the

contentions, the first question that arises is: whether

Cadre Authority Society could be a cooperative society

registered under Section 4(1) of the Act. Section 4 [1]

reads thus:

"4 [1]. Societies which may be

registered and classified under

this Act: Subject to the provisions

of this Act, a Cooperative Society

which has its objects and

accordance with the cooperative

principles, or a cooperative

society established with the object

of facilitating the operations of

such societies, may be registered

under this Act".

The marginal note indicates that the classified

societies are to be registered under the Act. Subject to the

provisions of the Act, a cooperative society which has its

object the promotion of the economic interests of "its

members" in accordance with the cooperative principles, or a

cooperative society established with the object of

"facilitating the operations of such societies", may be

registered under the Act. The Cadre Authority Society,

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admittedly, does not come under the first limb of Section 4

[1]. The contention is that since the object of the Cadre

Authority Society is to facilitate the operations of the

PACS, it is a cooperative society egistered under the Act.

In support thereof, Sri Jain placed the model bye-laws as

part of the record. The model bye-laws would indicate that

membership of a society consists of A Class members, viz.,

individuals who are above the age of 18 years and B Class

members, viz., institutions who are admitted as members of

the society. The institutions are lending societies. One of

the objects is to recruit paid Secretaries to the District

Cooperative Societies. At this stage, it is necessary to

mention that the cooperative structure is built upon three-

tier system, viz., PACS consisting of individual members, at

the grass-root level within the area of operation of that

society, the District Cooperative Societies and the Central

Cooperative Bank. It is not in dispute that the District

Cooperative Societies and the Central Cooperative Bank got

the Cadre Authority Society which is not a lending

institution, registered and the paid Secretaries, who are

otherwise a third agency, recruited by it. They are

appointed by the Managers of the District Cooperative

Societies and are transferred by them to the PACS within the

area of the operation of the District Bank. It would,

therefore, be clear that it does not come as a society to

facilitate the PACS in funding them for disbursement of loan

to the members of PACS.

The question is: whether the PACS are bound to take the

services of the paid Secretaries? Rule 41 of the Rules reads

thus:

"41. Officers and employees of

cooperative societies. - [1]

Notwithstanding anything contained

in the bye-laws of society no

Cooperative society shall appoint

any person as its paid officer or

employee in any category of

service, unless he possess the

qualifications and furnishes the

security if so specified by the

Registrar from time to time, for

such category of service an the

society, or for the class of

society to which it belongs. The

conditions of service of the

employees of the societies shall be

as specified by the Registrar.

[2] No co-operative society shall

retain in service any paid officer

or employees, if he does not

acquire the qualifications or

furnish the security as is referred

to in sub-rule [1] within such time

as the Registrar may direct.

[3] The Registrar may for special

reasons, relax in respect of any

paid officer or employee, the

provisions of this rule in regard

to the qualifications he should

possess or the security he should

furnish.

[4] Where in the course of an audit

under Sec.68 or an inquiry under

Sec.70 or an inspection under 71 or

Section 72 it is brought to the

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notice of the Registrar that a paid

officer or servant of a Society has

committed or has been otherwise

responsible for misappropriation,

breach of trust or other offence,

in relation to the society, the

Registrar may, if in his opinion,

there is prima facie evidence

against such paid officer or

servant and the suspension of such

paid officer or servant is

necessary on the interest of the

society direct the committee of the

society pending the investigation

and disposal of the matter, to

place or cause to be placed such

paid officer or servant under

suspension from such date and for

such period as may be specified by

him.

[5] On receipt of a direction from

the Registrar under sub-rule [4],

the committee of the society shall,

notwithstanding any provision to

the Contrary in the bye-laws, place

or cause to be placed the paid

officer or servant under suspension

forthwith.

[6] The Registrar may direct the

committee to extend from time to

time the period of suspension and

the paid officer or servant

suspended shall not be reinstated

except with the previous sanction

of the Registrar whose decision

thereon shall be final.

[7] If the committee fails to

comply with the direction issued

under servant under suspension from

such date and for such period as he

may specify in the order and

thereupon the paid officer or

servant, as the case may be, shall

be under suspension."

It would thus be clear that notwithstanding anything

contained in the bye-laws of the Society, PACS shall not

appoint any person as its paid officer or employee in any of

the categories of service unless the concerned

officer/employee is possessed of the prescribed

qualifications and security specified by the Registrar is

furnished in that behalf to the Society. The conditions of

the service of the employees of the Society shall be

specified by the Register. The Society would retain the paid

officers or employees only on fulfillment of the conditions

prescribed by the Registrar. The paid officers or employees

are the employees governed by the Act, Rules and the bye-

laws of the Society over which the Society has had

disciplinary power and jurisdiction, subject to the control,

supervision and directions of the Registrar.

Section 147 [2] of the Act empowers the Government to

authorise the Registrar to exercise their power under the

Act subject to such conditions, if any, as may be specified

in that behalf in the notification. By virtue thereof, sub-

section [2] of Section 148 gives power to the Registrar to

make rules. Clause [xxx] of the said sub-section [2] gives

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power to the Registrar to prescribe qualifications of a

Manager, Secretary, Accountant or any other officer or an

employees of the society and the conditions of their service

including discipline and control. It would thus be clear

that the Manager, Secretary, Accountant or any other officer

or employee shall be of the Society; the conditions of

service including discipline and control shall be in

accordance with the rules made by the Registrar under Rule

41 of the Rules. In other words, the Registrar, as a

delegate of the Government is empowered to prescribe

qualifications of the officers or employees of the Society,

viz., PACS, District Cooperative Societies or the Central

Cooperative Bank, as the case may be, and the respective

Societies require them to appoint the officers or employees,

i.e., Manager, Secretary, Accountant or any other officer or

employee over whom they have disciplinary and controlling

power. Under its own bye-laws, the respective Societies have

the power to make appointment under the rules made by the

Registrar in that behalf.

The question, therefore, emerges: whether the paid

Secretaries appointed by the District Cooperative Societies,

recruited and controlled by the Cadre Authority Society are

the officers or employees of the Society, i.e., PACS? It is

seen that there is a dichotomy in the operational structure.

The Society is a unit by itself with its members managed by

the committee elected under the provisions of the Act, the

Rules and the bye-laws for specified period. It is

empowered to have control and to maintain discipline over

its officers and employees. The paid Secretaries are

admittedly not the officers appointed to the Society and by

the Society. They are officers appointed by the District

Cooperative Society by its Manager, 'Manager' is defined

under the 1969 Rules to mean "the manager appointed under

these rules and who shall be Chief Executive and paid

employee of the society. Manager shall have no relation

with the services of the Bank employees. Due to getting

salary from the Managerial fund at Bank level he shall not

be entitled for any benefits which are being given to Bank

employees. And Society shall not appoint any person as

Manager". A paid Secretary is not, therefore, a Manager

appointed by the PACS. It is seen that the structure of the

employees is indicated in Section 148 [2] (xxx) as Manager,

Secretary, Accountant or any other officer or employee of

the society. Therefore, in addition to the said

establishment, there cannot be any paid Secretary to the

Society i.e., PAC. Obviously, therefore, the Societies have

objected that they cannot be fastened with the liability to

contribute fund under Bank Rules for payment of the salary

of Surveillance Officer appointed by the District

Cooperative Society and to be controlled by the Cadre

Authority society. lt would, therefore, be clear that they

are outside the scope of the Cadre of PACS.

The question, then is: whether the Registrar as a

delegate of the Government, can make rules in that behalf or

create a fund under the Bank Rules? It is seen that the

power under Rule 41 is limited only to prescribing the

qualifications and conditions of service of the officers and

employees enumerated in clause (xxx) of sub-section [2] of

Section 148. He, therefore, has no power to make rules

governing appointment of paid Secretaries and to create a

fund under Bank Rules for payment of salaries to them and to

fasten the liability on the PACS. The Registrar travelled

beyond the power delegated to him under the Act. We have

come across Section 69A of the Maharashtra Cooperative

Societies Act which, as amended by the statute, gives such a

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power for creation of a Society as recruitment agency to

make appointment of such recruited candidates to the Primary

Cooperative Societies and posting them to the primary

societies. Statute also fastened the liability on the

primary societies to contribute certain percentage towards

salary and allowances of such paid Secretaries. Making the

Bank Rules or the creation of a fund would, therefore, be

beyond the powers of the Registrar under Rule 41 read with

Section 148 [2] (xxx) of the Act. The High Court, therefore,

was clearly right in its findings that Cadre Authority

Society is not a society registrable under Section 4 [1] of

the Act and that the Registrar has no power under Rule 41 to

make Bank Rules.

The contention of Shri Jitendra Sharma that they are

members of PACS under 1977 Rules cannot be given countenance

for the reason that 1977 Rules stood superseded by 1969

Rules. Admittedly, they are not members nor are they

appointed as officers or employees of the PACS. When we

called upon the counsel to produce any order of appointment

given to the paid Secretaries by any of the PACS, he

conceded that he did not have any such letters. Therefore,

they cannot be declared to be members or officers or

employees of the PACS. Thus considered, we are of the firm

opinion that the view taken by the High Court is not

vitiated by any error of law.

The appeals are accordingly dismissed but in the

circumstances, without costs.