Neutral Citation No. - 2025:AHC:16847-DB

AFR

Reserved

Court No. 3

Case :- WRIT - C No. - 6744 of 2019

Petitioner :- The Mechanical Department Primary And Another

Respondent :- Union Of India And Another

Counsel for Petitioner :- Satyawan Shahi,Shashi Ranjan

Srivastava,Sri Shashi Nandan(Senior Advocate)

Counsel for Respondent :- A.S.G.I.,Adya Prasad Tewari,Gaurav

Gautam,Ramesh Chandra Pandey,Sanjeev Kumar,Sheo Shankar

Tripathi

Hon'ble Anjani Kumar Mishra,J.

Hon'ble Jayant Banerji,J.

(Per: Hon’ble Jayant Banerji, J.)

1.The array of parties in this petition is as follows:-

“1. The Mechanical Department Primary Co-operative Bank

Limited, North Eastern Railway, Gorakhpur through its

Secretary Mr. Balwant Kumar Shahi.

2.Mr. Balwant Kumar Shahi son of Late Prasiddh Narain

Shahi Secretary, The Mechanical Department Primary Co-

operative Bank Ltd., North Eastern Railway, Gorakhpur.

……………..PETITIONERS

VERSUS

1.Union of India through Secretary, Ministry of

Agriculture & Co-operative, Government of India, New Delhi.

2.Central Registrar, Co-operative New Delhi/Joint

Secretary, Government of India Krishi Bhawan New Delhi.

3.Reserve Bank of India through its Manager, 8-9 Vipin

Khand, Gomti Nagar, Lucknow.

..………..RESPONDENTS.”

2.This writ petition has been filed seeking the following reliefs:-

“I.Issue a writ, order or direction in the nature of certiorari

quashing impugned order dated 26.12.2018 passed by Central

Registrar, Co-operative New Delhi/Joint Secretary Government

of India Krishi Bhawan, New Delhi/respondent no.2 (Annexure

no.20 to the writ petition).

II.Issue a writ, order or direction in the nature of

mandamus commanding Central Registrar, Co-operative New

Delhi/Joint Secretary, Government of India, Krishi Bhawan,

New Delhi/respondent no.2 to treat the petitioners’ bank

registration in Multi State Co-operative Societies Act, 2002.”

3.The petitioner No. 1

1

is stated to have been registered under

the Cooperative Societies Act, 1912

2

on 31.5.1919 bearing

registration No. 275 and at that point of time, the petitioner-bank

was named “The Mechanical Department Credit Society Ltd.

Gorakhpur”. It is stated that time to time, necessary amendments

were made in the years 1962-1966. Again amendment was done on

3.5.1973 by the Central Registrar Co-operative Societies, U.P.

Lucknow, whereby the name of the petitioner-bank became

Mechanical Department Primary Co-operative Bank Ltd. In 1982,

the Reserve Bank of India granted licence to the petitioner-bank

under Section 23 read with Section 56(p) of the Banking Regulation

Act, 1949

3

to open an office at Izzat Nagar, District Bareilly apart

from Gorakhpur for working and functioning of the petitioner-bank.

4.The petitioner-bank has sought to demonstrate its being

subjected to regulatory control under the Multi-State Cooperative

Societies Act, 1984

4

by the respondent no.2 by stating that a letter

dated 14.3.1997 was sent by the Registrar of the Cooperative

Societies, U.P. Lucknow to the Joint Secretary/Central Registrar on

the subject of prior approval of supersession of governing body of

the petitioner-bank under Section 48 of the Act, 1984; a reminder

letter dated 31.3.1997 was again issued. Thereafter, the respondent

no.2, Central Registrar issued a letter dated 2.4.1997 to the Registrar

Cooperative Societies, U.P. conveying his approval to initiate action

against the Board of Directors of the petitioner-bank under Section

1petitioner-bank

2Act, 1912

3B.R. Act

4Act, 1984

2 of 39

48 of the Act, 1984. By an order dated 10.4.1997, the respondent

no.2, Central Registrar superseded the petitioner-bank and appointed

a Board of Administrators comprising of three administrators to

administer the affairs of the petitioner-bank. The petitioner-bank

then filed a writ petition No. 43087 of 1998 which was disposed of

by a judgment and order dated 18.1.1999.

5.It is stated that it was held by this Court in the aforesaid writ

petition of 1998 that the Board of Administrators was legally put in

office; it was directed, inter alia, that the existing Board of

Administrators, which would be functioning only till such time the

newly elected Board of Directors was constituted by the close of the

month of February 1999, shall merely manage day to day affairs of

the petitioner-bank and shall not take any policy decision and shall

also not make any fresh appointments; the Chief Mechanical

Engineer, North Eastern Railway, Gorakhpur as well as the Central

Registrar were directed to ensure that the elections to constitute new

Board of Directors take place and existing Board of Administrators

is relieved of its responsibilities positively by the end of February,

1999.

6.The Additional Commissioner/Additional Registrar,

Cooperative, U.P. Lucknow wrote a letter dated 9.5.2017 to the

Secretary of the petitioner-bank in respect of an order dated

13.4.2017 passed by this Court in Contempt Application(Civil) No.

1573 of 2017 to state that in respect of Writ Petition No. 60894 of

2016 filed by the petitioner-bank, consequent to the direction passed

in that writ petition, the Joint Commissioner and Joint Registrar,

Gorakhpur Division had submitted a report by means of a letter

dated 30.01.2017 stating that in his office in the registration register,

the Mechanical Department Cooperative Credit Society Ltd,

Gorakhpur was registered on 31.5.1919 at sl. no. 275; that the

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registration No. 275 pertaining to the petitioner-bank the Mechanical

Department Primary Cooperative Bank Ltd., North Eastern Railway,

Gorakhpur was not registered on 3.5.1973; that by a letter dated

31.1.2017, pursuant to the order of the High Court, the matter was

disposed of earlier by the Commissioner/ Registrar; that the

petitioner-bank was intimated about the developments by another

letter dated 27.4.2017, a copy of which was enclosed alongwith that

letter.

7.It is stated that on one hand in its own order of 14.3.1997, the

Registrar, Cooperative Societies states that the Mechanical

Department Primary Cooperative Bank Ltd. (petitioner no.1) must

be dissolved, while on the other hand the letter dated 9.5.2017 was

issued stating that the petitioner-bank does not appear to be

registered at sl. no. 275 on 3.5.1973.

8.An order dated 9.8.2017 was passed by the Lucknow branch

of the Reserve Bank of India, whereby within fifteen days the

payment counter running at Samastipur, Bihar was directed to be

stopped and membership granted by the petitioner-bank in other

States was directed to be cancelled. This order was challenged

before this Court by the petitioner-bank by way of Writ-C No. 38808

of 2017 which came to be disposed of by an order dated 21.3.2018

on the terms agreed by the counsel for the parties in which the

petitioner-bank’s application under the provisions of Multi-State

Cooperative Societies Act, 2002

5

was directed to be considered

afresh on the basis of original registration in 1919 under the

provisions of the Act, 1912. The petitioners were directed to produce

an extract of the register showing their registration as a Credit

society. The Reserve Bank of India was also directed to consider the

petitioner’s request for grant of licence after registration under the

5Act, 2002

4 of 39

provisions of the Act, 2002 expeditiously. The order dated 21.3.2018

of this Court is quoted below:-

“Heard Mr. Shashi Nandan, learned Senior Advocate with Mr.

Satyawan Shahi, learned counsel for the petitioners, Mr.

Ramanand Pandey, learned Addl. Chief Standing Counsel for

respondents-State, Mr. Vikas Budhwar, learned counsel for

respondent no.4, Mr. Gyan Prakash, learned counsel for

respondent no.2 and Mr. A.P. Tiwari, learned counsel for the

intervener.

The writ petition is directed against the order dated 9.8.2017

issued by respondent no.4-Reserve Bank of India. The relevant

portion of the order, impugned in the present writ petition, reads

thus:

"4-के न्द्रीय टैफकब की 16.-loC2Nl05:AHNl09 जून, 2017 की अनुशंसा

के अनुसार आपके बैंक को uni-state बैंक में convert दिकया जाना है।

8TflFRNvlaWl0:597l05aAl1ATAlWCl0NlPDlRhlNnlMA0clDel15 05:p

के भीतर Samastipur, Bihar d3lyUlBWel8R:elRed3 lNAOH BlNvloH5

NB:AlD40:SwTlNB3lT,Al8ualBAjapld3l0.(m)lUvGvlNvlM5A:lNnlGK

D5kaTAlNvl0:BkTlNB3I

5. इसके अश्चितरिरक्त उपरोक्त के संबंध में आपसे अपेश्चि<त है दिक बैंक अपने

bye-laws का amendment करवाए तथा RCS, Lucknow Del8:dv5:

के प1ात उसकी एक प्रश्चित भारतीय रिरजव> बैंक, लखनऊ को यथाशीघ्र

M5A:lNB3I"

The letter of the Reserve Bank of India also takes a note

that the petitioners Society is not registered with the

Central Registrar of Co-operative Societies under the

provisions of the Multi-State Cooperative Socialites Act,

2002 (for short 'Act, 2002'). In view thereof, the

petitioners have also prayed for a direction to the Central

Registrar (respondent no.2) to continue to keep their

Society as Multi-State Cooperative Society and issue

necessary registration certificate under the provisions of

the Act, 2002.

In this backdrop, we have heard learned counsel for the parties

and with their assistance gone through the entire materials placed

before us.

It is not in dispute that the petitioners were initially registered as

Credit Society under the provisions of the U.P. Cooperative

Societies Act, 1912. We have also perused the Register produced

by Mr. Ramanand Pandey, learned Addl. Chief Standing Counsel

for the State, which supports the petitioners' case that they were

registered in 1919 as "Mechanical Department Credit Society

Ltd." The entry in the Register at Serial No. 275 also shows that

in 1962, revised bye-laws of the Society were registered and

some amendment was also registered on 3.2.1966. It is not clear

from the entry in the Register as to what amendment was

registered in 1966.

5 of 39

According to the petitioners, in 1973, the name of their Society

was changed as "The Mechanical Department Primary Co-

operative Bank Ltd." and the certificate to that effect was issued

by the Central Registrar, Co-operative Societies, U.P. Lucknow

on 3.5.1973. Unfortunately, the original registration certificate

dated 3.5.1973 is, according to the petitioners, misplaced. In

other words, they are not in a position to produce original

registration certificate dated 3.5.1973 as a Co-operative Bank.

Mr. Pandey, learned Addl. Chief Standing Counsel, submits that

even in their record, such a certificate is not available.

Be that as it may, the petitioners since May, 1973 are functioning

as a Co-operative Bank and they claim that the employees of the

North Eastern Railway, not only in the State of U.P. but in the

States of Uttarakhand and Bihar, are also members. Their total

membership is 18,933, who are employees of the North Eastern

Railway and East Central Railway. According to the petitioners,

577 employees of the Railways are not residents of the State of

Uttar Pradesh. For their convenience, according to the petitioners,

they opened a pay counter/recovery counter at Samastipur, which

falls in the State of Bihar. The petitioners Bank has total deposits

of Rs.56,73,49,000/-. The petitioners Bank is run and managed

by an elected Board of Directors and they cater the need of only

their members, who are also employees of the Railways. We may

also make a reference to the license issued by the Reserve Bank

of India dated 12.5.2010 and the license dated 5.3.1982

(Annexure-2 collectively), which show that the Reserve Bank of

India in exercise of the powers conferred by Section 23 read with

Section 56 (p) of the Banking Regulation Act, 1949, authorized

the petitioners Bank to open an office at Izzat Nagar, District

Bareilly subject to conditions mentioned in the office letter dated

5.3.1982. It further appears from the license dated 12.5.2010 that

the petitioners Cooperative Society was granted license under

Section 22 (1) read with Section 56 (a) of the Banking Regulation

Act, 1949.

We may also observe that the parties have agreed for this order in

view of the fact that the petitioners Co-operative Society was

initially registered in 1919 as Credit Society and thereafter since

1973, they have been functioning as a Bank without interruption

and for its employees, who are all employees of the Railways and

there is no allegations of whatsoever nature about functioning of

the Bank. We may also notice that the Central Registrar under the

provisions of the Act, 2002 refused the petitioners' registration

only on the ground that they could not and did not produce the

registration certificate dated 3.5.1973 of the Mechanical

Department Primary Co-operative Bank Ltd.

The intervener has not disputed that the petitioners Society was

registered under the provisions of the U.P. Cooperative Societies

Act, 1912 and initially they were registered as Credit Society, and

since May 1973, they have been working as a Co-operative Bank.

In this backdrop, counsel for the parties have agreed for the order

that we propose to pass. We, therefore, dispose of this petition by

the following order:

6 of 39

The Central Registrar, Cooperative Societies, under the

provisions of the Act, 2002, shall proceed to consider the

petitioners' application afresh on the basis of original registration

in 1919 under the provisions of the U.P. Cooperative Societies

Act, 1912 and pass appropriate orders within a period of four

weeks from the date of receipt of this order. The petitioners are

directed to produce an extract of the Register, showing their

registration under the provisions the U.P. Cooperative Societies

Act, 1912 as the Credit Society. It is needless to mention that the

respondent no.2-Central Registrar shall not insist for original

registration certificate dated 3.5.1973 bearing No.275. After the

registration under the provisions of the Act, 2002, it is open to the

petitioners to approach the Reserve Bank of India for obtaining

their permission to open new place of business in and outside the

State of Uttar Pradesh. Till the license as contemplated under

Section 23 read with Section 56 of the Banking Regulation Act,

1949 is issued by the Reserve Bank of India, the petitioners shall

not operate/run their counter in and outside the State of Uttar

Pradesh except at its head office at Gorakhpur and at its Branch at

Izzat Nagar in district Bareilly, as mentioned in the registration

certificate. We direct the respondent no.2-Central Registrar to

consider the petitioners' application within the stipulated time.

We also observe that the Reserve Bank of India shall also

consider the petitioners' request for issuance of license after their

registration under the provisions of the Act, 2002 expeditiously.

We direct the petitioners to produce a copy of this order along

with all necessary documents before respondent no.2-Central

Registrar within one weeks from today.

The petition is, accordingly, disposed of.

9.By an order dated 20.4.2018, the respondent no.2 rejected the

application of the petitioner-bank for registration under the Act,

2002.

10.Challenging the order dated 20.4.2018 passed by the

respondent no.2, the petitioners filed a writ petition bearing Writ-C

No. 16029 of 2018 which was disposed of by an order dated

12.10.2018 after setting aside the order dated 20.4.2018. The order

passed by this Court is quoted below :-

“Heard Mr. Shashi Nandan, learned Senior Advocate, with Mr.

Satyawan Shahi and Mr. Shashi Ranjan Srivastava, Advocates,

for the petitioners and Mr. Ajay Singh, learned counsel for the

respondent - Union of India.

This writ petition impugns the order dated 20.04.2018 passed by

the second respondent, rejecting the petitioners' application/claim

for registration of their Society under the provisions of the Multi-

State Cooperative Societies Act, 2002 (for short 'Act, 2002'). This

7 of 39

order has been passed in pursuance of the order passed by this

Court dated 21 March 2018 in Writ-C No. 38808 of 2017. By this

order, the petitioners were allowed to make an application afresh,

on the basis of the original registration in 1919 under the

provisions of the U.P. Cooperative Societies Act, 1912 for their

registration under the provisions of the Act, 2002. The Central

Registrar, Cooperative Societies, rejected the petitioners'

application, observing that the petitioners do not have members

in more than one State, as contemplated by Section 5 of the said

Act. He also observed that the petitioner Society did not produce

any materials in support of their case. Learned Senior Counsel for

the petitioners, submits that the petitioners were not heard by the

Central Registrar, Cooperative Societies before passing the

impugned order. This submission has not been disputed by

counsel for the respondents. That being so and considering the

observations made in the impugned order, in particular

paragraphs 3 and 4 thereof, we propose to dispose of this writ

petition by order which, counsel appearing for both sides, have

consented for. Hence, we dispose of this writ petition by the

following order:

The order dated 28.04.2018, impugned in the present writ

petition, is set aside. The matter is remanded to the Central

Registrar, Cooperative Societies, to decide afresh. Petitioners are

allowed to produce a list of their members with their addresses in

support of the case that they have members in more than one

State and that "area of operation" is outside State also, from

where persons are admitted as their members. The Central

Registrar shall consider the petitioners' case in the light of

materials produced by them and after granting them an

opportunity of being heard, on merits in accordance with law,

within a period of two months from the date of receipt of this

order. Petitioners are directed to produce a copy of this order

alongwith a copy of the writ petition and annexures before the

Central Registrar, within a period of two weeks from today.

With these observations, the petition is disposed of.”

11.The petitioners submitted a detailed representation to the

respondent no.2 on 22.10.2018 alongwith a list of members of the

petitioner-bank in the State of Uttar Pradesh, Bihar and Uttarakhand.

Thereafter by means of the impugned order dated 26.12.2018, the

respondent no.2 has once again rejected the claim of petitioners.

12.It is contended by the learned counsel for the petitioners that

the impugned order dated 26.12.2018 has been passed by the

respondent no.2 in utter disregard of the judgment dated 12.10.2018,

passed by this Court in Writ-C No. 16029 of 2018; that the judgment

dated 21.3.2018 passed in Writ-C No. 38808 of 2017 has attained

8 of 39

finality and the respondent no.2 is bound to proceed strictly in

accordance with the detailed directions given in the judgment dated

21.3.2018; that the petitioner-bank is working under the Act, 2002;

that the only question for adjudication before the respondent no.2

was whether the petitioner-bank is functioning in one State or not,

which issue was not considered at all by it. Under the circumstances,

it is prayed that the impugned order dated 26.12.2018 passed by the

Central Registrar Cooperative, New Delhi be set aside.

13.Primarily, the questions that would arise for considerations

are:-

(1)Whether the objects of the petitioner-bank were not

confined to one State, and if so, since when?

(2)Whether the petitioner-bank has demonstrated its

registration under the Act, 2002?

(3)Whether the circular of the Reserve Bank of India

can legally mandate prior permission of Reserve Bank of

India by the petitioner-bank for seeking revision of its by-

laws by amendment?

Consideration of Question Nos. 1 & 2

14.It appears from the record of this petition that respondent no.2,

by its order dated 24.7.2007 (Annexure No. 9 to the writ petition),

appointed a returning officer to conduct the elections of the Board of

Directors of the petitioner Co-operative Bank in exercise of power

conferred upon him under Rule 19 of the Multi-State Cooperative

Societies Rules, 2002

6

. In the order, the respondent no.2 had

observed that the returning officer may decide the question of

disqualification, inter-alia, under Section 43(2)(a) read with Section

45 of the Act, 2002. This is not denied in the counter affidavit.

6MSCS Rules, 2002

9 of 39

15.Annexure-10 to the writ petition is a letter dated 29.8.2007

issued by the respondent no.2 to the District Magistrate, Samastipur

Bihar. In this letter, it has been stated that the petitioner-bank is

registered under Act, 2002 and Rules, 2002. It was mentioned that

the members of the petitioner-bank are Railway employees of North

Eastern Railway and the branches of the bank are spread in Izatnagar

(Bareilly), Lucknow, Gonda, Varanasi, Gorakhpur, Samastipur,

Sonpur etc. The District Magistrate was requested to provide

accommodation to the Returning Officer in the Government Guest

House/Circuit House, Samastipur.

16.There is another letter of the Director (Cooperative),

Department of Agriculture and Cooperative, Ministry of Agriculture,

Government of India dated 2.4.1997 (Annexure no. 14 to the writ

petition) addressed to the Registrar Co-operative Societies, U.P.

Lucknow conveying the approval of the Central Registrar to initiate

action against the Board of Director of the petitioner-bank under

Section 48 of the Act, 1984 apparently in exercise of powers under

Section 4(2) read with Section 3(c) of the Act, 1984. Moreover, by

an order dated 10.4.1997 (Annexure no. 15 to the writ petition), the

Registrar Cooperative Societies, U.P. Lucknow, exercising powers of

the Central Registrar under a notification dated 16.9.1985,

superseded the committee of management of the petitioner-bank

under the provisions of Section 48(1) of Act, 1984 and appointed a

Board of Administrators of three persons which was challenged in a

writ petition as mentioned above.

17.The Reserve Bank of India also permitted the petitioner-bank

to open an office at Izzatnagar in Bareilly in exercise of powers

under Section 23 read with Section 56(p) of the B.R. Act.

18.In the impugned order dated 26.12.2018, the respondent no. 2

has observed that the existing by-laws of the petitioner-bank are

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registered under the State Act in the year 1973 and that the

petitioner-bank has not produced any document evidencing that its

by-laws had been amended at any time by the Central Registrar.

19.At this stage, it is pertinent to look into the laws enacted from

time to time governing multi-state cooperative societies. The Act,

1912 was enacted by the Governor General of India in Council

which received the assent of the Governor General on 1 March 1912

and was promulgated by publication in the Gazette of India dated

9.3.1912 to facilitate formation of the cooperative societies for the

promotion of thrift and self-help among agriculturists and artisans

and persons of limited means, and for that purpose to amend the law

relating to Cooperative Societies. The Act, 1912 extended to the

whole of British India having provisions for registration of such

societies, rights and liabilities of members, duties and privileges of

registered societies, their inspection, dissolution, and delegation of

powers to the local government for the whole or any part of the

province, and for any registered societies or class of such societies to

make rules for carrying out the purposes of the Act, 1912. Section 18

of the Act, 1912 provided that registration of a society shall render it

a body corporate by the name under which it is registered, with

perpetual succession and a common seal, and with power to hold

property, to enter into contracts, to institute and defend suits and

other legal proceedings and to do all things necessary for the

purpose of its constitution. Section 39 to 42 pertained to dissolution/

cancellation of registration of a society.

20.The petitioner society was apparently registered in 1919 in

Uttar Pradesh

7

under the provisions of the Act, 1912, which Act, as

stated, extended to the whole of British India.

7Earlier called the United Provinces.

11 of 39

21.The Multi-Unit Cooperative Societies Act, 1942

8

, received the

assent of the Governor General on 2-3-1942 and was published in

the Gazette of India in Part IV dated 7.3.1942. The preamble of this

Act read ‘An Act to provide for the incorporation, regulation and

winding up of cooperative societies with objects not confined to one

province’. The Act, 1942 extended to the whole of British India and

applied to all cooperative societies with objects not confined to one

province incorporated before the commencement of the Act, 1942,

under the Cooperative Societies Act, 1912, or, under any other Act

relating to cooperative societies in force in any province, and to all

cooperative societies with objects not confined to one province to be

incorporated after the commencement of the Act, 1942. The

Statements of Objects and Reasons of the Act, 1942 were as follows-

“Multi-unit co-operative societies, that is to say co-operative

societies operating over more than one province, are

'corporations' within the meaning of entry 33 in List I of the

Seventh Schedule of the Government of India Act, 1935, and the

legislative and executive jurisdiction in respect of their

incorporation, regulation and winding up is exclusively Central.

Any provisions of the Co-operative Societies Act, 1912, or of the

Provincial Co- operative Acts which might purport to vest

executive jurisdiction in respect of such multi-unit societies in

provinces can have no valid basis. It is therefore, necessary to

legislate for the incorporation, regulation and winding up of co-

operative societies operating over more than one province.

2. The Bill applies to the multi-unit societies the existing

legislation applicable to societies operating within a single

province. It will apply to all multi-unit societies irrespective of

the nature of their work. Provision has been made to enable the

Government to appoint a Central Registrar but as the number of

mult-unit societies in existence at present is small, it is proposed

to entrust the functions of the Central Registrar to the Provincial

Registrars until the growth in the numbers of multi-unit societies

make the appointment of a Central Registrar necessary. Powers

of inspection and audit of the branch offices of a multi-unit

society will also be vested in the Registrars of the Provinces

where such branch offices are situated, and they will also have

the power to call for such returns and information from the

branches of multi-unit societies as they can call for from single-

unit societies registered by them.”

8Act, 1942

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22.Sections 2, 3 and 5 of the Act, 1942, as they originally stood,

read as follows-

“2. Co-operative societies to which this Act applies registered

before commencement of this Act- (1) A co-operative society to

which this Act applies which has been registered in any province

under the law relating to co-operative societies in force in that

province shall be deemed in any other province to which its

objects extend to be duly registered in that other province under

the law there in force relating to co-operative societies, but shall,

save as provided in sub-sections (2) and (3), be subject for all the

purposes of registration, control and dissolution to the law

relating to co-operative societies in force for the time being in the

province in which it is actually registered.

(2) Where any such co-operative society has established before

the commencement of this Act or establishes after the

commencement of this Act a branch or place of business in a

province other than that in which it is actually registered, it shall,

within six months from the commencement of this Act or the date

of establishment of the branch or place of business, as the case

may be, furnish to the Registrar of Co-operative Societies of the

province in which such branch or place of business is situated a

copy of its registered by-laws, and shall at any time it is required

to do so by the said Registrar submit any returns and supply any

information which the said Registrar might require to be

submitted or supplied to him by a co-operative society actually

registered in that province.

(3) the Registrar of Co-operative Societies of the province in

which a branch or place of business such as is referred to in sub-

section (2) is situated may exercise in respect of that branch or

place of business any powers of audit and of inspection which he

might exercise in respect of a co-operative society actually

registered in the province.

“3. Co-operative societies to which this Act applies registered

after commencement of this Act. (1) A society which might, if

its objects were confined to one province, be registered as a co-

operative society in any province under the law relating to co-

operative societies in force in that province, shall,

notwithstanding that its objects are not confined to the province

in which its principal place of business is to be situated, be

deemed for the purposes of registration as a co- operative society

to be situated wholly in that province, and may be registered by

the Registrar of Co-operative Societies of that province in

accordance with the law relating to co-operative societies for the

time being in force in that province, and if so registered shall be

deemed in any other province to which its objects extend to be

duly registered in that other province under the law there in force

relating to co-operative societies but shall, save as provided in

sub-sections (2) and (3), be subject for all the purposes of

registration, control and dissolution to the law relating to co-

operative societies in force for the time being in the province in

which it is actually registered.

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(2) Where any such co-operative society establishes a branch or

place of business in a province other than that in which it is

actually registered, it shall within six months from the date of

establishment of the branch or place of business furnish to the

Registrar of Co-operative Societies of the province in which such

branch or place of business is situated a copy of its registered by-

laws, and shall at any time it is required to do so by the said

Registrar submit any returns and supply any information which

the said Registrar might require to be submitted or supplied to

him by a co-operative society actually registered in that province.

(3) The Registrar of Co-operative Societies of the province in

which a branch or place of business such as is referred to in sub-

section (2) is situated may exercise in respect of that branch or

place of business any powers of audit and of inspection which he

might exercise in respect of a co-operative society is actually

registered in that province.

……………..

5.Penalty for failure to furnish information required

under this Act.- If any co-operative society fails to furnish the

information which it is required to furnish by or under sub-

section (2) of Section 2 or sub-section (2) of Section 3, or to

submit any return required to be submitted under either of those

sub-sections, the society, and any officer or member of the

society responsible for the failure, shall each be liable to fine

which may extend to fifty rupees, and the registration of the

society may, at the discretion of the Registrar of Co-operative

Societies of the province in which the society is actually

registered, be cancelled.”

23.The appointment and powers of Central Registrar of the

cooperative societies was specified in Section 4. Section 5 dealt with

penalty. Section 6 delegated power to the Central Government to

make rules by notification in the official Gazette for carrying into

effect the provisions of the Act, 1942.

24.As a result of reorganization of States, certain cooperative

societies which had their objects confined to one state only became

multi-unit cooperative societies. Section 5A was inserted in the Act,

1942 by the States Reorganization Act, 1956 which provided for

reconstitution and reorganization of such multi-unit cooperative

societies as Intra-State cooperative societies and for the formation of

new cooperative societies and the transfer thereto of the assets and

liabilities of such multi-unit cooperative societies.

14 of 39

25.The stand of the petitioner-bank is that they have a branch in

Samastipur, which is in the State of Bihar, and also branch in the

State of Uttarakhand. It is pertinent to mention here that Bihar

became a separate State well before the Act, 1942 came into force.

Therefore, given that the Act, 1942 was enacted for incorporation,

regulation and winding up of Cooperative Societies operating over

more than province, as such the petitioner-bank could only be

covered under the Act, 1942 subject to its demonstrating that its

‘objects’ were not confined to one State.

Only in such a case, the petitioner-Bank in terms of the

deeming clause in Section 2 of the Act, 1942 would be deemed to be

duly registered in the province of Bihar under the law there in force

relating to Cooperative Societies, and, consequently, for the purpose

only of registration, control and dissolution, the petitioner-bank can

then claim to be covered under the law relating to Cooperative

Societies in force for the time being in the province in which it was

actually registered, that is, the State of Uttar Pradesh. However, the

proviso in sub-section (1) of Section 2 specified that for other

purpose, namely for furnishing to the Registrar of the Cooperative

Societies of the province in which a branch or place of business is

situated, which is other than that in which it is actually registered, a

copy of its registered by-laws, returns and supply any information

that the said Registrar may require to be submitted or supplied to

him by a Cooperative Society actually registered in that province, in

terms of sub-sections (2) and (3) thereof.

26.After the States Reorganisation Act, 1956, the Cooperative

Societies (U.P. Amendment) Act, 1956 [U.P. Act No.X of 1957]

9

was

passed by the Uttar Pradesh Legislature and assented to by the

President on March 7 and published in the U.P Gazette,

Extraordinary, dated March 12, 1957. The express purpose of this

9Amendment Act, 1956

15 of 39

Act as reflected in its preamble was to amend the Act, 1912. Under

Section 2 of the Amendment Act, 1956, inter alia, under Sections

11-A, 11-B, 11-C, 11-D, 11-E and 11-F were added after the existing

Section 11 of the Act, 1912. The amendments were made to attune

the Act, 1912 to bring it in line with the requirements of the State of

Uttar Pradesh. Thereafter, of course, in exercise of the State’s

legislative right under Entry 32 of List II of the Seventh Schedule to

the Constitution, the U.P. Cooperative Societies Act, 1965

10

was

enacted. The Act, 1912 in its application to Uttar Pradesh then stood

repealed

11

.

27.In the Act, 1942, Sections 5-A and 5-B were inserted by

Section 105 of the States Reorganisation Act, 1956 with effect from

1.11.1956. Section 105 of the States Reorganisation Act, 1956 reads

as under:-

“105. Amendment of Act 6 of 1942.―In the Multi-Unit Co-

operative Societies Act, 1942 (6 of 1942), after section 5,

the following sections shall be inserted, namely:―

“5A. Transitional provisions regarding certain co-

operative societies affected by reorganisation of

States.―(1) Where by virtue of the provisions of Part

II of the States Reorganisation Act, 1956, any co-

operative society which, immediately before the Ist

day of November, 1956, had its objects confined to

one State becomes, as from that day, a multi-unit co-

operative society, it shall be deemed to be a co-

operative society to which this Act applies and shall

be deemed to be actually registered in the State in

which the principal place of business of the co-

operative society is situated.

(2) If it appears to the Central Registrar of Co-

operative Societies necessary or expedient that any

such society should be reconstituted or reorganised in

any manner or that it should be dissolved, the Central

Registrar may, with the approval of the Central

Government, place before a meeting of the general

body of the society held in such manner as may be

prescribed by rules made under this Act, a scheme for

the reconstitution, reorganisation or dissolution of the

society, including proposals regarding the formation

10U.P. Act, 1965

11By Section 134 of the U.P. Act, 1965

16 of 39

of new co-operative societies and the transfer thereto

of the assets and liabilities of that society.

(3) If the scheme is sanctioned by a resolution passed

by a majority of the members present at the said

meeting, either without modifications or with

modifications to which the Central Registrar agrees,

he shall certify the scheme and upon such

certification, the scheme shall, notwithstanding

anything to the contrary contained in any law,

regulation or bye-law for the time being in force, be

binding on all the societies affected by the scheme, as

well as the shareholders and creditors of all such

societies.

(4) If the scheme is not sanctioned under sub-section

(3), the Central Registrar may refer the scheme to

such Judge of the appropriate High Court as may be

nominated in this behalf by the Chief Justice thereof,

and the decision of that Judge in regard to the scheme

shall be final and shall be binding on all the societies

affected by the scheme as well as the shareholders

and creditors of all such societies.

Explanation.―In this sub-section “appropriate High

Court” means the High Court within whose

jurisdiction the principal place of business of the

multi-unit co-operative society is situated.

5B. Power to delegate.―The Central Government

may, by notification in the Official Gazette, direct

that any power or authority exercisable by the

Central Registrar of Co-operative Societies under this

Act shall, in relation to such matters and subject to

such conditions as may be specified in the direction,

be exercisable also by such Registrar of Co-operative

Societies of a State or by such officer subordinate to

the Central Government or to a State Government as

may be specified in the notification.”.

28.Thereafter, Section 5-A of the Act, 1942 was amended by the

Multi-Unit Cooperative Societies (Amendment) Act, 1962 by

Section 2 of the Amendment Act, 1962, which is quoted below:-

“2.Amendment of Section 5A.- In Section 5A of the

Multi-unit Co-operative Societies Act, 1942 (6 of 1942)

(hereinafter referred to as the principal Act),-

(i) in sub-section (2), for the words "including

proposals, regarding the formation of new co-

operative societies and the transfer thereto of the

17 of 39

assets and liabilities of that society", the following

shall be substituted, namely:-

"including proposals regarding, -

(a) the formation of new co-operative societies

and the transfer thereto, in whole or in part, of

the assets and liabilities of that society; or

(b) the transfer, in whole or in part, of the

assets and liabilities of that society to any

other co-operative societies in existence

immediately before the date of that meeting of

the general body.";

(ii) after sub-section (4), the following sub-section

shall be inserted, namely:-

"(4A) Notwithstanding anything contained in

this section, where a scheme under sub-section

(2) includes any proposal regarding the

transfer of the assets and liabilities of any co-

operative society to any other existing co-

operative society referred to in clause (b)

thereof, the scheme shall not be binding on

that existing society or the shareholders and

creditors thereof, unless the proposal

regarding such transfer is accepted by the

existing society by a resolution passed by a

majority of the members present at a meeting

of its general body."

29.In the year 1984, the Act, 1984 was enacted and promulgated,

the application of which was provided in Section 2 thereof which

reads as follows-

“2. Application.- This Act shall apply to-

(a) all co-operative societies, with objects not confined to one

State, which were incorporated before the commencement of this

Act.

(i) under the Co-operative Societies Act, 1912, or

(ii) under any other law relating to co-operative societies

in force in any Statute or in pursuance of the Multi-unit

Co-operative Societies Act, 1942

and the registration of which has not been cancelled before such

commencement; and

(b) all multi-State Co-operative Societies,”

18 of 39

30.Clause (k) of Section 3 of the Act, 1984 defined “multi-State

co-operative society” as meaning a society registered or deemed to

be registered under the Act, 1984 and included a national co-

operative society.

31.In the Act, 1984, which repealed the Act, 1942, a cooperative

bank was defined as Multi-state Cooperative Society which

undertakes banking businesses.

32.Under Section 4 of the Act, 1984, the appointment and powers

of a Central Registrar were specified. Section 5 provided which

Multi-State Cooperative Society could be registered under the Act.

The application for registration was to be made under Section 6, and

Section 7 provided for the registration of such Society. Section 8

dealt with issuance of registration certificate by the Central

Registrar.

33.Section 17 of the Act, 1984 provided for the cases in which

the registration certificate of a multi-State cooperative societies

could be cancelled. Section 52 provided multi-State cooperative

societies to be body corporate on their registration, by the name

under which it was registered, 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 purpose for which it was constituted.

Chapter IX provided for winding up of multi-State cooperative

societies, appointment of liquidator and his powers and disposal of

assets. Under this Chapter, the Central Registrar was empowered to

cancel registration of a multi-State cooperative society after

considering the report of the liquidator and it was provided that on

such cancellation, the society would stand dissolved.

34.Under Chapter XII of Act, 1984, matters pertaining to

Societies which become Multi-State Cooperative Societies

19 of 39

consequent upon reorganisation of States were referred to. Section

95, which fell under this Chapter, provided that Co-operative

societies functioning immediately before reorganisation of States

which had its objects confined to one State became as from that day,

a multi-State co-operative society, it would be deemed to be a multi-

State co-operative Society registered under the corresponding

provisions of the Act, 1984. The power of the Central Registrar and

sanctioning of a scheme for reconstitution or reorganization of any

such society, etc. are provided for in this Section.

35.It is important to note that in the Act, 1984, Section 103 saved

existing multi-State cooperative societies. Section 103 read as

follows:-

“103. Savings of Existing multi-State co-operative societies.-

(1) Every multi-State co-operative society existing immediately

before the commencement of this Act which has been registered

under the Cooperative Societies Act 1912 or under any other Act

relating to cooperative societies in force, in any State or in

pursuance of the provisions of the Multi-unit Co-operative

Societies Act, 1942, shall be deemed to be registered under the

corresponding provisions of this Act and the bye-laws of such

society shall, in so far as they are not inconsistent with the

provisions of this Act, or the rules, continue to be in force until

altered or rescinded.

(2) All appointments, rules and orders made, all notifications and

notices issued and all suits and other proceedings instituted under

any of the Acts referred to in sub-section (1) shall, in so far as

they are not inconsistent with the provisions of this Act, be

deemed to have been respectively made, issued and instituted

under this Act, save that an order made cancelling the registration

of a multi-State co-operative society shall be deemed, unless the

society has already been finally liquidated, to be an order made

under Section 77 for its being wound up.”

Therefore, the petitioner-bank being registered under the Act,

1912 and on demonstrating that it would be deemed to be registered

under Section 2 of the Act, 1942 could be deemed to be registered

under the corresponding provisions of the Act, 1984 in view of the

aforesaid Section 103 and, consequently, its by-laws, insofar as they

20 of 39

were not inconsistent with the provisions of the Act, 1984, or the

rules, would continue to be in force until altered or rescinded.

36.It is pertinent to mention here that till the time the Act, 1942

held sway, that is to say till the time of its repeal by the Act, 1984,

for all the purposes of registration, control and dissolution, the

cooperative societies whose objects were not confined to one State

would have been subject to the law relating to cooperative societies

for the time being in force in the province/State in which it was

actually registered, that is, the State of Uttar Pradesh. Therefore, till

the repeal of the Act, 1942 by the Act, 1984 the provisions of the

Act, 1912 as amended by the Amendment Act, 1956, and after its

repeal by the U.P. Act, 1965, the provisions of the U.P. Act, 1965,

with regard to such multi State Cooperative Societies, continued to

operate and cover all the matters for purposes of registration, control

and dissolution.

37.The Act, 2002 came into force on 19.8.2002. A cooperative

bank was defined as meaning a Multi-State Cooperative Society

which undertakes banking business. A Multi-State Cooperative

Society is defined under clause (p) of Section 3 of the Act, 2002 to

mean a society registered or deemed to be registered under that Act

and to include a national cooperative society and a federal

cooperative.

38.Various sections of Chapter II of the Act, 2002 provide for the

appointment and powers of a Central Registrar and the registration

of Multi-State Cooperative Societies. A Multi-State Cooperative

Society shall be rendered a body corporate on its registration by the

name under which it is registered having perpetual succession and

common seal, and with power to acquire and hold and dispose of

property, both movable and immovable, enter into contract, institute

and defend suits and other legal proceedings and to do all things

21 of 39

necessary for the purposes for which it is constituted and, shall, by

the said name, sue or be sued; it provides for amendment of by-laws

of a Multi-State Cooperative Society and its coming into operation

and its registration by the Central Registrar. Section 21 provides for

cancellation of registration certificate of Multi-State Cooperative

Societies in certain cases. Chapter X provides for winding up of

Multi-State Cooperative Societies, appointment of arbitrators and his

powers; disposal of assets; power of Central Registrar to order the

registration of the Multi-State Cooperative Society to be cancelled

and on such cancellation that society shall stand dissolved. Section

103 under Chapter XIII provides that the Co-operative society

functioning immediately before reorganisation of States which had

its objects confined to one State becomes, as from that day, a multi-

State co-operative society, it shall be deemed to be a multi-State co-

operative society registered under the corresponding provisions of

this Act. It also provides power of the Central Registrar, of

preparation of a scheme for reconstitution and reorganization of such

societies, etc..

39.Section 126 is the repeal and saving clause of the Act, 2002.

This provision reads as under:-

“126. Repeal and saving.— (1) The Multi-State Co-operative

Societies Act, 1984 (51 of 1984) is hereby repealed.

(2) Without prejudice to the provisions contained in the General

Clauses Act, 1897 (10 of 1897) with respect to repeals, any

notification, rule, order, requirement, registration, certificate,

notice, decision, direction, approval, authorisation, consent,

application, request or thing made, issued, given or done under

the Multi-State Co-operative Societies Act, 1984 (51 of 1984)

shall, if in force at the commencement of this Act, continue to be

in force and have effect as if made, issued, given or done under

the corresponding provisions of this Act.

(3) Every multi-State co-operative society, existing immediately

before the commencement of this Act, which has been registered

under the Co-operative Societies Act, 1912 (2 of 1912) or under

any other Act relating to co-operative societies in force, in any

State or in pursuance of the provisions of the Multi-unit Co-

operative Societies Act, 1942 (6 of 1942), or the Multi-State Co-

22 of 39

operative Societies Act, 1984 (51 of 1984), shall be deemed to be

registered under the corresponding provisions of this Act, and the

bye-laws of such society shall, insofar as they are not inconsistent

with the provisions of this Act, or the rules, continue to be in

force until altered or rescinded.

(4) All appointments, rule and orders made, all notifications and

notices issued and all suits and other proceedings instituted under

any of the Acts referred to in sub-section (1) shall, insofar as they

are not inconsistent with the provisions of this Act, be deemed to

have been respectively made, issued and instituted under this Act,

save that an order made cancelling the registration of a multi-

State co-operative society shall be deemed, unless the society has

already been finally liquidated, to be an order made under section

86 for its being wound up.

(5) The provisions of this Act shall apply to—

(a) any application for registration of a multi-State co-

operative society;

(b) any application for registration of amendment of bye-

laws of a multi-State co-operative society,

pending at the commencement of this Act and to the

proceedings consequent thereon and to any registration

granted in pursuance thereof.

(6) Save as otherwise provided in this Act, any legal proceeding

pending in any Court or before the Central Registrar or any other

authority at the commencement of this Act shall be continued to

be in that Court or before the Central Registrar or that authority

as if this Act had not been passed.”

40.Therefore, under Section 126 of the Act, 2002, the deemed

registration provided for in Section 103 of the Act, 1984 continues to

be in force and has the effect as if made, issued, given or done under

the corresponding provisions of the Act, 2002.

Moreover, under sub-section (3) of Section 126, the covered

cooperative society would be deemed to be registered under the

corresponding provisions of the Act, 2002 and the bye-laws of such

society shall, insofar as they are not inconsistent with the provisions

of the Act, 2002, or the rules, continue to be in force until altered or

rescinded.

Under sub-section (5) of Section 126 of the Act, 2002, the

provisions of the Act, 2002 apply to -

23 of 39

(a) any application for registration of a multi-State cooperative

society;

(b) any application for registration for amendment of bye-laws

of a multi-State cooperative society,

pending at the commencement of the Act, 2002 and to the

proceedings consequent thereon and to any registration granted in

pursuance thereof.

Finally, under sub-section (6) of Section 126, save as

otherwise provided in the Act, 2002, any legal proceeding pending in

any court or before the Central Registrar or any other authority at the

commencement of the Act, 2002 shall be continued to be as if the

Act, 2002 had not been passed.

41.It is evident from the above that the aspect of registration of

the petitioner-Bank, as a Multi-State Cooperative Society, that was

originally registered in 1919 could not have been in issue in view of

the provisions of the Act, 1912, as well as Section 2 of the Act, 1942

subject to its demonstrating that its objects were not confined to one

province/State and the date from which its objects so provided.

Further, in such a case its registration could not have been an issue,

given the provisions of Section 103 of the Act, 1984, and, also the

provisions of Section 126 of the Act, 2002.

42.An application for registration of a multi-State cooperative

society is different from an application for registration of

amendment of its by-laws including change of name of a multi-State

cooperative society. The previous proceedings and developments

may now be viewed in the backdrop of the orders of this Court dated

21.3.2018 passed in Writ-C No.38808 of 2017 and dated 12.10.2018

passed in Writ-C No.16029 of 2018.

24 of 39

43.The respondent no. 2 in paragraph nos. 6 and 8 of its counter

affidavit has stated as follows:

“6. That in reply to para 6 & 7 of the Writ Petition it is

submitted that the amendment of bye-laws dated 3.5.1973

has been registered under the U.P. State Cooperative

Societies Act, 1966 which is the State Cooperative Act and

not under the Multi Unit Act, 1942 which was the Central

legislation existing at that time. Multi Unit Act, 1942 has

been succeeded by MSCS Act, 1984 and subsequently by

MSCS Act, 2002. and the jurisdiction of the U.P.

Cooperative Societies Act extends to State of U.P. only and

not beyond that and no further amendments to the bye-laws

have taken place thereafter. As per the existing bye-law no.

3(i) of the Bank, definition of "Act" has been given as "Act'

means U.P. Cooperative Societies Act 1965 (Act XI of 1966)

as amended from time to time and under bye-law no 3(ix)

defines "Registrar" as “Registrar means the person for the

appointed as Registrar of Cooperative Societies under

Section 3 of the Act” which means the U.P. Act.

8. That in reply to para 13 to 19 of the petition it is submitted

that the bye-laws of the Bank have been registered under the

U.P. Cooperative Societies Act and the jurisdiction of the

said Act extends to State of U.P. only and not beyond that

and no further amendments to the bye-laws have taken place

thereafter. Therefore the Bank is not authorized to admit

members from States outside Uttar Pradesh”

As far as the averments in the counter affidavit relate to the

law regarding registration of a society, they are not based on a proper

appreciation of the law in force from time to time. As stated above,

in view of the provision of Section 2 sub-section (1) of the Act, 1942

for all the purposes of registration, control and dissolution, a Multi-

State Cooperative Sociality was subject to the law relating to

cooperative societies in force for the time being in the province, that

is, the State in which it was actually registered. Before the Act, 1984

came into force repealing the Act, 1942, the provisions of the Act,

1912, as subsequently amended by the Amendment Act, 1956 and

thereafter, at present the provisions of U.P. Act, 1965, govern the

25 of 39

aspects of registration, control and dissolution of the Multi State

Cooperative Society. Therefore, the amendments in the by-laws of

the petitioner-Bank that were purportedly made in 1973, in so far as

they refer to the provisions of the U.P. Act, 1965 and the rules made

thereunder, were required to be registered in accordance with law in

force in the State of Uttar Pradesh at the relevant time, which is the

U.P. Act, 1965.

44.It would be pertinent to refer to the observations of the

Supreme Court in the case of Apex Cooperative Bank of Urban

Bank of Maharashtra & Goa Ltd. Vs. Maharashtra State

Cooperative Bank Ltd. and others

12

which are as under:

“28. …………. Under the Multi-Unit Act if a society had

objects not confined to one State then such a society was

deemed to be registered even in other States, but for purposes

of registration, control and dissolution it was the State law

where it was first registered which continued to operate.

Thus, after the enactment of the Multi-Unit Act it became clear

that even though a society may be deemed registered under the

Multi-Unit Act, but for purposes of registration, control and

dissolution it continued to be bound by the law relating to

cooperative societies for the time being in force in the State in

which it was first registered. More importantly, after the

enactment of the Multi-Unit Act, the Cooperative Societies

Act, 1912 only dealt with cooperative societies confined to one

Province. Societies with objects not confined to one Province

were deemed registered under the Multi-Unit Act.”

(emphasis supplied)

45.The petitioners state that in the year 1973, the name of their

society was changed to “Mechanical Department Primary

Cooperative Bank Limited” and the certificate to that effect was

issued by the Central Registrar, Cooperative Societies, U.P.,

Lucknow on 3.5.1973. But, admittedly, the original registration

certificate dated 3.5.1973 and a list of amendments that may have

been carried out in the by-laws of the society are not available.

12(2003) 11 SCC 66

26 of 39

Though the petitioners claim to have members of the State of Bihar,

it has not been demonstrated by them that they were granted licence

by the Reserve Bank of India to open an office at Samastipur in

Bihar. There is no material to conclusively demonstrate from the

record that the ‘object’ of the petitioner-society were not confined to

one State. A perusal of the order dated 21.3.2018 passed by this

Court in Writ-C No.38808 of 2017 indicates that it was passed on

the concessions made by the learned counsel for the respondents.

Apparently, such concessions were made on behalf of the

respondents by the learned counsel on matters of law and that too

without specific instructions from the concerned respondent and as

such may not bind the respondents

13

.

46.The other order dated 12.10.2018 passed by this Court in Writ-

C No.16029 of 2018 was also passed on the basis of consent of the

learned counsel for the parties. No finding with regard to the aspect

of registration of the petitioner-bank or grant of licence by the

Reserve Bank of India in respect of another State, was returned by

the Court.

47.It is pertinent to mention here that in the by-laws of the

petitioner-bank that is Annexure-1 to the writ petition in clause 2, the

area of operation is stated to extend over the whole railway system

worked by North Eastern Railway including places where the North

Eastern Railway may have offices. The registered office is stated to

be at Gorakhpur. Under clause 5, the membership eligibility is of all

permanent employees of the Mechanical Engineering Department,

North Eastern Railway, temporary employees of the Mechanical

Engineering Department working against permanent posts and have

more than one year’s service, etc.

13See Himalayan Cooperative Group Housing Society vs. Balwan Singh (2015) 7 SCC 373

(paragraphs 22, 27, 32)

27 of 39

In the order of the Central Registrar dated 20.4.2018 which

was passed pursuant to the order of 21.3.2018 passed in Writ-C

No.38808 of 2017, it is reflected that information had been sought

by the Authority from the Railway Board regarding names of the

divisions falling under North Eastern Railway along with details of

the districts where the offices of these divisions are located. The

Railway Board, in its response, informed that the North Eastern

Railway has its Headquarter at Gorakhpur and has three divisions,

Lucknow Division, Izzatnagar Division and Varanasi Division,

which have their offices at Lucknow, Bareilly and Varanasi

respectively. The aforesaid order of 20.4.2018 of the Central

Registrar was set aside in the order of 12.10.2018 in Writ-C

No.16029 of 2018. In its representation dated 22.10.2018 moved

before the Central Registrar, the petitioner-bank stated that the three

divisions of the North Eastern Railway cover the State of U.P., parts

of Bihar and Uttarakhand. The North Eastern Railway system’s map

and printout of the relevant page of the website of North Eastern

Railway, and, list of current membership in three States of U.P.,

Uttarakhand and Bihar, were enclosed with the representation as

evidence.

48.However, the aforesaid evidence stated to be filed, though

may be suggestive of the area of operation of the petitioner-bank

being not confined to one State, is not conclusive proof, particularly

in view of the aforesaid information received from the Railway

Board by the Central Registrar. Moreover, for want of any certified

copy or admitted copy of the by-laws or of the amendments to the

by-laws duly registered, no conclusion regarding the area of

operation or objects of the petitioner-bank being not confined to one

State, can be drawn.

Even the submission on behalf of the petitioners that the State

of Uttarakhand, that was formed pursuant to the Uttar Pradesh

28 of 39

Reorganisation Act, 2000, included the areas to which the operation

of the petitioner-bank extends, can be sustained by demonstrating

either deemed registration under the Act, 1942 or that its objects

extended to any area within the State of Uttarakhand. This, as also

stated hereinafter, the petitioner-bank has failed to demonstrate.

49.As discussed above, to avail of the benefit of the deeming

clause under Section 2 of the Act, 1942, it was for the petitioners to

have demonstrated by placing cogent evidence that its 'objects' were

not confined to one State. This, unfortunately, they have failed to do.

As such, the aspect of their registration as a Multi State Cooperative

Society on the basis of the aforesaid deeming clause in the Act,

1942, or on the basis of Section 103 of the Repealed Act, 1984, or

even on the basis of Section 126 of the Act, 2002, has not been

demonstrated. Therefore, for want of such a deemed registration, the

petitioner-bank was required to demonstrate that it was otherwise

registered as a Multi State Cooperative Society which too it has

failed to do. Though this Court is conscious of the fact that several

orders have been passed by the Central Registrar and there are

decisions of the writ Court giving directions, inter alia, to the

Central Registrar with regard to conduct of elections of the

petitioner-society, the fact remains that the aspect of registration or

deemed registration under the Act, 2002 was required to be

demonstrated by the petitioner-bank in this petition, which it has not

done. That is not to say that previous directions of the Central

Registrar regarding supersession of the Committee of Management

and on matters pertaining to elections of the petitioner-bank would

be rendered non est. We make it clear that the order passed by the

Central Registrar, which is impugned and which is based on the

Circular of the Reserve Bank of India is under consideration and,

therefore, the present judgment.

29 of 39

The two questions stand answered accordingly.

Consideration of Question No. 3

50.The third question is, ‘Whether the circular of the Reserve

Bank of India can legally mandate prior permission of Reserve Bank

of India by the petitioner-bank for seeking revision of its by-laws by

amendment?’

51.The Supreme Court in the case of Pandurang Ganpati

Chaugule Vs. Vishwasrao Patil Murgud Sahakari Bank

Limited

14

was considering the applicability of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002

15

to cooperative banks. The Parliament’s

competence to amend Section 2(c) of the SARFAESI Act by adding

sub-clause (iva) – a multi-State cooperative bank, was also

questioned. The issue that arose was whether the definition of

‘banking company’ contained in Section 5(c) of the B.R. Act covers

cooperative banks registered under the State law and also multi-state

cooperative societies under the Act, 2002. The Supreme Court

considered the following questions:

“(1) Whether ‘co-operative banks’, which are co-operative

societies also, are governed by Entry 45 of List I or by Entry

32 of List II of the Seventh Schedule of the Constitution of

India, and to what extent?

(2) Whether ‘banking company’ as defined in Section 5(c) of

the BR Act, 1949 covers co-operative banks registered under

the State Co-operative Laws and also multi-State co-

operative societies?

(3)(a) Whether co-operative banks at the State level and

multi-State level are ‘banks’ for applicability of the

SARFAESI Act?

(3)(b) Whether provisions of Section 2(c) (iva) of the

SARFAESI Act on account of inclusion of multi-State co-

14(2020) 9 SCC 215

15SARFAESI Act

30 of 39

operative banks and notification dated 28.1.2003 notifying

cooperative banks in the State are ultra vires?”

52. While considering the aforesaid questions, the Supreme Court

in Pandurang Ganpati Chaugule (supra) observed as follows:-

“87.It is apparent that “incorporation, regulation and winding

up” of the cooperative societies are covered under Schedule VII

List II Entry 32 of the Constitution of India, whereas “banking” is

covered by List I Entry 45. Thus, aspect of “incorporation,

regulation and winding up” would be covered under List II Entry

32. However, banking activity of such cooperative

societies/banks shall be governed by List I Entry 45. The said

banks are governed and regulated by legislation related to List I

Entry 45, the BR Act, 1949 as well as the Reserve Bank of India

Act under Entry 38 of List I. In the matter of licensing and doing

business, a deep and pervasive control is carved out under the

provisions of the BR Act, 1949 and banking activity done by any

entity, primary credit societies, is a bank and is required to submit

the accounts to Reserve Bank of India, and there is complete

control under the aforesaid Act. For activity of banking, these

banks are governed by the legislation under List I Entry 45. Thus,

recovery being an essential part of the banking, no conflict has

been created by providing additional procedures under Section 13

of the Sarfaesi Act. It is open to the bank to adopt a procedure

which it may so choose. When banking in pith and substance is

covered under List I Entry 45, even incidental trenching upon the

field reserved for the State under Entry 32 List II is permissible.

88.There can be various aspects of an activity. The

cooperative societies may be formed under the provisions of the

State Cooperative Acts. The State law provides for

“incorporation, regulation and winding up” under List II Entry

32, a membership registration, and other matters can be governed

by List II Entry 32, and, at the same time, the aspects relating to

the banking, licensing, accounts, etc. can be covered under Entry

45 List I.

89. In State of W.B. v. Kesoram Industries Ltd. [State of W.B. v.

Kesoram Industries Ltd., (2004) 10 SCC 201] , a Constitution

Bench considered the aspects' theory and considered the field of

taxation under Lists I and II and opined that there might be

overlapping in fact, but there would be no overlapping in law.

Simply because the methodology or mechanism adopted for

assessment and quantification is similar, the two taxes cannot be

said to be overlapping. It was held that Entries 52, 53, and 54 are

not heads of taxation. The field of taxation is covered by Entries

49 and 50 of List II. It was held that the same transaction might

involve two or more taxable events in its different aspects.

Merely because the aspects overlap, such overlapping does not

detract from the distinctiveness of the aspects. There was no

question of conflict solely on account of two aspects of the same

transaction being utilised by two legislatures for two levies. The

Court held: (SCC p. 330, para 141)

31 of 39

“141. As held in Goodricke Group Ltd. [Goodricke Group

Ltd. v. State of W.B., 1995 Supp (1) SCC 707], which we

have held as correctly decided, this Court has noted the

principle of law well established by several decisions that

the measure of tax is not determinative of its essential

character. The same transaction may involve two or more

taxable events in its different aspects. Merely because the

aspects overlap, such overlapping does not detract from

the distinctiveness of the aspects. In our opinion, there is

no question of conflict solely on account of two aspects of

the same transaction being utilised by two legislatures for

two levies both of which may be taxes or fees or one of

which may be a tax and the other a fee falling within two

fields of legislation respectively available to the two.”

90. The legislation and entries are to be considered in pith and

substance is the settled principles of law, and incidental trenching

is permissible. Thus, we are of the opinion that Section 2(c)(iv)

(a) of the Sarfaesi Act and the Notification dated 28-2-2003

cannot be said to be ultra vires. They are within the ken of

Schedule VII List I Entry 45 to the Constitution of India.”

52.1.While considering Article 243-ZL incorporated in the

Constitution by the 17

th

Amendment, the Supreme Court observed as

follows:-

“94.The third proviso to Article 243-ZL(1) clarifies that in case of

a cooperative society carrying on the business of banking, the

provisions of the BR Act, 1949 shall also apply besides the State

Act. The fourth proviso to clause (1) of Article 243-ZL also

contains an exception with respect to multi-State cooperative

society carrying on the business of banking, the provisions of this

clause shall have the effect as if for the words “six months”, had

been substituted by words “one year.” Thus, the constitutional

provision itself makes a distinction between a cooperative bank

and other cooperative societies and applied law enacted under

Schedule VII List I Entry 45. It set at rest any controversy

concerning the applicability of the BR Act, 1949 to banks run by

cooperative societies. It also makes it clear that such banks are

governed by Schedule VII List I Entry 45.”

52.2.While considering its decision in the case of Virendra Pal

Singh vs. Registrar of Cooperative Societies

16

, the Supreme Court

observed as follows:-

“101. In the aforesaid decision, it was held that under the U.P.

Cooperative Societies Act, the State was competent under List II

Entry 32 to deal with incorporation, regulation and winding up of

cooperative banks. However, the main aspect of the activity of

16(1980) 4 SCC 109

32 of 39

the cooperative bank relating to banking was covered by the BR

Act, 1949, and the Reserve Bank of India Act, which legislations

are related to Schedule VII List I Entries 45 and 38. The aspects

of “incorporation, regulation and winding up” are covered under

Schedule VII List II Entries 32. In our opinion, the activity of

banking by such bankers is covered by List I Entry 45

considering the doctrine of pith and substance, and also

considering the incidental encroachment on the field reserved for

the State is permissible.

102.The concept of regulating non-banking affairs of society

and regulating the banking business of society are two different

aspects and are covered under different Entries i.e. List II Entry

32 and List I Entry 45, respectively. The law dealing with

regulation of banking is traceable to List I Entry 45 and only

Parliament is competent to legislate. Parliament has enacted the

Sarfaesi Act. It does not intend to regulate the incorporation,

regulation, or winding up of a corporation, company, or

cooperative bank/cooperative society. It provides for recovery of

dues to banks, including cooperative banks, which is an essential

part of banking activity. The Act in no way trenches on the field

reserved under List II Entry 32 and is a piece of legislation

traceable to List I Entry 45. The decision in Virendra Pal Singh

[Virendra Pal Singh v. Registrar of Coop. Societies, (1980) 4

SCC 109 : 1980 SCC (L&S) 516] has been rendered regarding

service regulations. It does not apply to the instant case

concerning the regulation of “banking” covered under List I

Entry 45. The Court did not deal with the aspect of the regulation

of banking in the said decision as it was not required to be

decided. Thus, the ratio of the decision operates in a different

field. Moreover, the U.P. Cooperative Services Act was saved on

the ground of incidental trenching on the subject of another List

i.e. Entry 45 List I, which is permissible.”

52.3.While recording its disagreement on findings recorded on

various aspects by a three Judge Bench of the Supreme Court in

Greater Bombay Coop. Bank Ltd. vs. United Yarn Tex (P) Ltd.

17

,

the Supreme Court observed as follows:-

“120. ………………… The cooperative banks are doing the

banking business, it could not be said to be an incidental activity

but main and only activity. We are unable to subscribe to the view

taken in Greater Bombay Coop. Bank Ltd. [Greater Bombay

Coop. Bank Ltd. v. United Yarn Tex (P) Ltd., (2007) 6 SCC 236]

as the provisions were not correctly appreciated.

121. The reason is given in Greater Bombay Coop. Bank Ltd.

[Greater Bombay Coop. Bank Ltd. v. United Yarn Tex (P) Ltd.,

(2007) 6 SCC 236] that comprehensive machinery is provided in

the State Act, could not have come in the way of Parliament

enacting a law as to recovery within the purview of “banking” in

17(2007) 6 SCC 236

33 of 39

List I Entry 45 as the same is its essential part. Even incidental

trenching upon other fields cannot invalidate legislation. Equally

futile is the argument that Parliament did not amend Section 5(c)

of the BR Act, 1949; in fact, Parliament did so under Section

56(a) concerning its application to cooperative banks. A large

number of provisions added in Chapter V by way of amending

Section 56 cannot be ignored and set at naught. The extensive

amendments made in Part V of the BR Act, 1949, have to be

given full effect. In case cooperative banks are kept outside the

purview of the BR Act, 1949, and other legislation under Entry

45 and the RBI Act, no licence can be granted, and they cannot

do banking as that is not permissible without compliance of

various provisions as provided in the BR Act, 1949. They would

have to close down and stop the business forthwith.

122. The cooperative banks, which are governed by the BR Act,

1949, are involved in banking activities within the meaning of

Section 5(b) thereof. They accept money from the public,

repayable on demand or otherwise and withdrawal by cheque,

draft, order or otherwise. Merely by the fact that lending of

money is limited to members, they cannot be said to be out of the

purview of banking. They perform commercial functions. A

society shall receive deposits and loans from members and other

persons. They give loans also, and it is their primary function.

Thus, they are covered under “banking” in List I Entry 45.”

52.4.While considering its judgment in Apex Coop. Bank of

Urban Bank of Maharashtra and Goa Limited vs. Maharashtra

State Coop. Bank Ltd.

18

in which the question arose concerning the

licensing of cooperative societies by Reserve Bank of India to carry

on banking business under the provisions of the Banking Regulation

Act, 1949, the Supreme Court observed :-

“133. In Apex Coop. Bank of Urban Bank of Maharashtra & Goa

Ltd. [Apex Coop. Bank of Urban Bank of Maharashtra & Goa

Ltd. v. Maharashtra State Coop. Bank Ltd., (2003) 11 SCC 66]

the question arose concerning licensing of cooperative societies

by Reserve Bank of India to carry on banking business under the

provisions of the BR Act, 1949. It was held that cooperative

banks, which are not State cooperative banks or Central

cooperative banks or primary cooperative banks as defined in

Section 56(cci) of the BR Act, 1949, were not eligible for

licensing. The grant of licence by Reserve Bank of India to

cooperative banks, which were not registered under the Multi-

State Cooperative Societies Act, 1984, was not justified. The

powers of Reserve Bank of India under the Multi-State

Cooperative Societies Act were exercisable only for cooperative

banks, not to any other cooperative societies not doing business

of banking. It was opined: (SCC p. 82, para 25)

18(2003) 11 SCC 66

34 of 39

“25. Another aspect which must be noticed is that in the

Constitution of India, the subject pertaining to

cooperative societies is in the State List i.e. Schedule VII

List II Entry 32. The Union List has Schedule VII List I

Entry 44 which deals with corporations. In this case we

are not concerned with the validity of a Central

legislation and thus do not deal with that aspect. For

purpose of the judgment we will take it that a cooperative

society with objects not confined to one State would fall

within the term corporation, and thus a Central

legislation may be saved. However, from the

constitutional provisions it is clear that matters pertaining

to cooperative societies are in the State List. Thus, many

States have enacted laws relating to cooperative societies.

We have not seen other Acts. However, as this case

concerns a society in Maharashtra, the Maharashtra

Cooperative Societies Act was shown to us. Significantly,

this law does not define a cooperative society. It did not

need to, as a society registered under it would be

automatically covered. The need to define a cooperative

society arises only in a Central legislation which does not

cover all cooperative societies and thus needs to indicate

to which society it applies.”

52.5.Finally, the Constitution Bench of the Supreme Court

answered the reference as follows:-

“142.1. (1)(a) The cooperative banks registered under the State

legislation and multi-State level cooperative societies registered

under the MSCS Act, 2002 with respect to “banking” are

governed by the legislation relatable to Schedule VII List I Entry

45 of the Constitution of India.

142.1. (b) The cooperative banks run by the cooperative societies

registered under the State legislation with respect to the aspects

of “incorporation, regulation and winding up”, in particular, with

respect to the matters which are outside the purview of Schedule

VII List I Entry 45 of the Constitution of India, are governed by

the said legislation relatable to Schedule VII List II Entry 32 of

the Constitution of India.

142.2. (2) The cooperative banks involved in the activities related

to banking are covered within the meaning of “banking

company” defined under Section 5(c) read with Section 56(a) of

the Banking Regulation Act, 1949, which is a legislation relatable

to List I Entry 45. It governs the aspect of “banking” of

cooperative banks run by the cooperative societies. The

cooperative banks cannot carry on any activity without

compliance of the provisions of the Banking Regulation Act,

1949 and any other legislation applicable to such banks relatable

to “banking” in List I Entry 45 and the RBI Act relatable to

Schedule VII List I Entry 38 of the Constitution of India.

35 of 39

142.3. (3)(a) The cooperative banks under the State legislation

and multi-State cooperative banks are “banks” under Section 2(1)

(c) of the Securitisation and Reconstruction of Financial Assets

and Enforcement of Security Interest Act, 2002. The recovery is

an essential part of banking; as such, the recovery procedure

prescribed under Section 13 of the Sarfaesi Act, a legislation

relatable to Schedule VII List I Entry 45 to the Constitution of

India, is applicable.

142.4. (3)(b) Parliament has legislative competence under

Schedule VII List I Entry 45 of the Constitution of India to

provide additional procedures for recovery under Section 13 of

the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 with respect to

cooperative banks. The provisions of Section 2(1)(c)(iv-a), of the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002, adding “ex abundanti

cautela”, “a multi-State cooperative bank” is not ultra vires as

well as the Notification dated 28-1-2003 issued with respect to

the cooperative banks registered under the State legislation.”

53.In the instant case, however, it is pertinent to note that the Act,

1984 as well as the extant Act, 2002 were enacted in purported

exercise of power by the Parliament under Entry 44 List-I of

Schedule VII of the Constitution of India.

54.In view of the judgment of the Supreme Court in Pandurang

Ganpati Chaugule (supra), in which the provisions in Part-V of the

B.R. Act were referred to in extenso, that is, the provisions in

Section 56, which provides for the application of the B.R. Act to

cooperative banks, the Supreme Court observed that as per the

provisions of the B.R. Act, no business can be done by any

cooperative society without obtaining a licence from the Reserve

Bank of India. The raison-d’etre of cooperative banks being the

business of banking, the same is dependent and governed by the

Reserve Bank of India Act as well as the B.R. Act, which

legislations are under, respectively, Entry 38 and Entry 45 of List-I

of the Seventh Schedule of the Constitution of India.

55.There cannot be any cavil that the circulars of the Reserve

Bank of India have statutory force. In the background of the

36 of 39

aforesaid position of law, the impugned order of the Central

Registrar dated 26.12.2018 relying upon the provisions of the

Circular of the Reserve Bank of India in its Circular dated 2.7.2018

would have to be viewed.

56.It is noted that the order of the Reserve Bank of India dated

09.08.2017, which was challenged in Writ-C No.38808 of 2017 by

the petitioners, was not quashed by this Court in its judgment dated

21.3.2018, but the petition was disposed of in terms of the directions

given therein based on consent of the counsel for the respondents.

The subsequent order of the Central Registrar dated 20.4.2018 was

passed declining issuance of certificate of registration to the

petitioner-bank. Its challenge in Writ-C No.16029 of 2018 by the

petitioners was successful and the order of the Central Registrar

dated 20.4.2018 was set aside on the consent of counsel for the

respondents. However, the order dated 09.08.2017 passed by the

Reserve Bank of India remained intact.

57.By the impugned order of the Central Registrar dated

26.12.2018 want of prior permission (No Objection Certificate) for

revision in the area of operation, as mandated by the Reserve Bank

of India in its circular dated 2.7.2012, was taken as a ground for

refusal of both registration and issuance of certificate of registration,

under the Act, 2002.

58.A perusal of the counter affidavit filed on behalf of the

Reserve Bank of India reflects that the financial condition of the

petitioner-bank is poor. In the supplementary counter affidavit, it has

been stated by the Reserve Bank of India that the petitioner-bank

was not financially sound and well managed bank as per the criteria

laid down by the Reserve Bank of India. Its net worth was Rs.10.09

crores as against the minimum requirement of Rs.50 crores as per

paragraph 1.6 of Master Circular No.DCBR.LS.

(PCB)MC.No.16/07.01.000/2015-16 dated 1.7.2015. The petitioner-

37 of 39

bank was accordingly informed. Repeated time was granted to the

petitioner-bank by the Reserve Bank of India for getting itself

registered before the Central Registrar, but the same was not done.

Therefore, the petitioner-bank was required to convert the bank to a

Uni-State Cooperative Bank and present the same for consideration.

Accordingly, the petitioner-bank was advised by the Reserve Bank

of India to ensure closure of its payment counter at Samastipur

(Bihar) within 15 days and cancel the memberships given by the

petitioner-bank in the other States. It has been noted above that the

direction dated 9.8.2017 issued by the Reserve Bank of India to the

petitioner-bank, which was challenged in Writ-C No.38808 of 2017,

was not quashed by this Court. It still holds the field.

Therefore, particularly since the petitioner-bank has also not

demonstrated its financial status to be in accordance with the

requirements of the Reserve Bank of India as laid down in its

Circular mentioned aforesaid, given the fact that the provisions of

the BR Act are applicable to the petitioner-bank, we find no error in

the letter dated 9.8.2017 issued by the Reserve Bank of India. The

directions given in the letter dated 9.8.2017 are upheld.

59.As regards compliance by the petitioner-bank of the

requirement of the Reserve Bank of India in its circular for obtaining

its prior approval (No Objection Certificate), the Central Registrar is

justified in relying on that circular for refusal of the registration of

the amendments to the by-laws. As noted above, both the Act, 2002

as well as the Reserve Bank of India Act are legislations made in

exercise of authority vested in the Parliament under Entry 44 and

Entry 38, respectively, of List-I of the Seventh Schedule of the

Constitution of India.

60.The circular of the Reserve Bank of India having statutory

force and in view of the deep and pervasive control of the Reserve

Bank of India on cooperative banks, given the provisions of the B.R.

38 of 39

Act, even if the circular incidently trenches on the provisions of the

Act, 2002, (in the present case the registration of the amendments to

the by-laws), the same is permissible keeping in view the

observations of the Supreme Court in the case of Pandurang

Ganpati Chaugule (supra).

61.Under the circumstances, it is open for the petitioner-bank to

move for registration of the amendments to its by-laws as Uni-State

Cooperative Bank after due prior approval (No Objection) of the

Reserve Bank of India in terms of its circular/s in force. As regards

any investments/deposits made with the petitioner-bank by any

member of the petitioner-bank belonging to any State other than

Uttar Pradesh, the same shall be dealt with by the petitioner-bank

strictly in accordance with the directions of the Reserve Bank of

India. The Reserve Bank of India is directed to take such steps and

pass such directions as it deems fit with all expedition.

62.Subject to the above observations, this writ petition is

dismissed.

Order Date :- 10.02.2025

sfa//SK/A.V. Singh

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