Landmark Supreme Court Judgment on Co-operative Society Registration: Detailed Analysis of Maharashtra Case
In a comprehensive judgment that will significantly impact the registration and functioning of Primary Agricultural Credit Co-operative Societies (PACCS) across Maharashtra, the Supreme Court of India recently delivered its verdict in Civil Appeal No. ______ of 2025 (@ SLP (Civil) No. 4090 of 2024). The 28-page judgment, pronounced on April 2, 2025 by a bench comprising Justice Vikram Nath and Justice Prasanna B. Varale, upheld the Bombay High Court’s decision to set aside the State Government’s order directing registration of certain co-operative societies. This detailed analysis examines the complex legal issues, arguments from both sides, and the court’s meticulous reasoning that led to this important decision affecting rural credit systems in Maharashtra.
Detailed Background of the Case
The case originated when Shri. Masaidevi Vividh Karyakari Sahakari Seva Sanstha Maryadit Warewadi (the appellant society) filed an application on January 13, 2023 before the Assistant Registrar seeking registration as a new Primary Agricultural Credit Co-operative Society (PACCS) in Warewadi, District Kolhapur. The application also requested permission to open a bank account for the proposed society.
A Scrutiny Committee constituted under the Government Resolution dated September 23, 2013 examined the proposal in depth and rejected it on April 13, 2023. The Committee provided 14 specific reasons for rejection, primarily focusing on:
- Failure to verify whether the proposed society’s area fell within an existing society’s jurisdiction
- Lack of documentation about members’ affiliations with other societies
- Absence of crop-wise cultivated area verification
- No undertaking from Kolhapur District Central Co-operative Bank regarding loan provisions
- Missing No-Objection Certificate from existing society
- Insufficient documentation about member-wise loans
- Lack of extracts from Crop Sowing Register and land records
- No clear opinion from officials about financial viability
- Unsubstantiated claims about providing Rs. 150 lakhs in agricultural loans
- Existing society’s financial non-viability making new registration inappropriate
The appellant society then appealed to the State Government under Section 152 of the Maharashtra Co-operative Societies Act, 1960. Respondent No. 6, a member of Salashi Vividh Karyakari Sahakari Seva Sanstha Maryadit Salashi (an existing society), got impleaded in the appeal proceedings.
On June 28, 2023, the Minister for Co-operatives allowed the appeal and directed registration of the appellant society, primarily accepting arguments about:
- The need for an independent society in a separate revenue village
- No objection from neighboring village society
- Potential to undertake 152 types of business activities beyond loans
- Hilly terrain making access to existing society difficult
- Undertaking to raise Rs. 5 lakhs share capital within 3 years
Respondent No. 6 challenged this order before the Bombay High Court, which allowed the petition on January 5, 2024, setting aside the State Government’s order. The present appeals before the Supreme Court challenged this High Court decision.
Detailed Arguments by the Appellants (Petitioners)
The appellants, through their senior counsel, advanced multiple detailed arguments before the Supreme Court:
“10.1 That the appellant is the first and only Co-operative society in the said Revenue Village, a fact that has been acknowledged by the Assistant Registrar as well.
10.2 That it is practically not possible for any society to have share capital of Rs. 5 lakhs at the time of applying for registration. In this regard, an undertaking had been submitted by the appellant-society that they would raise the required share capital of Rs. 5 lakhs within one to three years from the date of registration of society and the appellant has also undertaken the compliance of this term before this Court.
10.3 That the appellant-society has made a genuine effort to fulfil all the required documents at the time of filing the application for registration.
10.4 That the State in its Order clearly stated that there are multiple reasons which can destabilize the financial status of a Society, therefore, because of only one parameter i.e. loan distribution to the crops, the registration of the society cannot be denied.
10.5 That the respondent no. 6 does not have any locus-standi to challenge the Order passed by the State.
10.6 That the Society, of which present respondent no. 6 is a member, has already given a ‘No-Objection-Certificate’ to the present appellant-society and an individual member cannot take contrary stand to the society of which he is a member until and unless that society passes resolution to that effect.
10.7 That the High Court, on one hand, accepted that the petitioners therein did not hold any locus standi yet, on the other hand, allowed the Writ Petition filed by them.
10.8 That the chart indicating the population of each revenue village, submitted by the respondent no. 6, is as per the 2011 census and it cannot be ignored that the population in these villages must have grown in the past 13-14 years.
10.9 That any co-operative society can manage 152 kinds of businesses apart from giving loan. Therefore, it is unfair to ignore all others important aspects which helps a society to run successfully.
10.10 That the minimum number of the membership for registration of a new society is 75 and the present appellant-society has given the list of 150 members. Therefore, the appellant-society is very much ahead of the minimum required number of memberships.”
Detailed Arguments by the Respondents
The respondents countered these submissions with equally detailed arguments:
“11.1 That the eligibility for the purpose of registration cannot be isolated from the impact on an existing society, if any. The appellant herein has failed to satisfy the threshold criteria and conditions to establish its own viability.
11.2 That it is not open to the appellant to now seek to by-pass the expert Scrutiny Committee by contending for the very first time before this Court that the Committee was constituted without any authority and/or it lacks jurisdiction to scrutinize the appellant’s proposal for its registration as a PACCS.
11.3 That Scrutiny Committee’s Order shows its in depth examination of the appellants’ proposals and the Committee’s detailed findings which militate against the eligibility of the appellants for registration.
11.4 That the order passed by the State is ex-facie perverse and unsustainable as it has allowed the appellants’ registration without fulfilling the most basic and mandatory pre-requisites for registration.
11.5 That the respondent no. 6, being a member of an existing society, is vitally affected inasmuch as the registration of the appellant-society could lead to destabilizing the existing society and even lead to its closure.
11.6 That the performance of credit/loan disbursement of existing primary credit cooperative societies would show that even they are hardly in a position to achieve the minimum target fixed by the Government Resolution and, in such circumstances, establishment of any proposed Credit Cooperative Society in the adjacent village would have disastrous effect on the existing credit co-operative societies.
11.7 That the NOC relied upon by the appellant which is alleged to be given by the society, of which respondent no. 6 is a member, is unauthorised and there is no mention of it being issued to the appellant in record and proceedings of the abovementioned society.
11.8 That the appellant has approached this Court with unclean hands as it is obvious that the appellant has sought to artificially inflate its membership by showing dead persons so as to show a membership with larger land holdings in order to meet the viability criteria. This conduct shows the mala fides of the appellant.”
Court’s Detailed Analysis and Reasoning
The Supreme Court began its analysis by examining the relevant legal framework:
1. Statutory Provisions
The Court referred to Section 4 and Section 6 of the Maharashtra Co-operative Societies Act, 1960:
“4. Societies which may be registered:— A society, which has as its objects the promotion of the economic interests or general welfare of its members or of the public, in accordance with co-operative principles or a society established with the object of facilitating the operations of any such society, may be registered under this Act:
Provided that, no society shall be registered if it is likely to be economically unsound, or the registration of which may have an adverse effect on development’ of the co-operative movement, or the registration of which may be contrary to the policy directives which the State Government may, from time to time, issue.
6. Conditions of registration:
(1) No society, other than a federal society, shall be registered under this Act. Unless it consists of at least ten persons or such higher number of persons as the Registrar may, having regard to the objects and economic viability of a society and development of the Co-operative movement, determine from time to time for a class of societies (each of such persons being a member of a different family), who are qualified to be members under this Act, and who reside in the area of operation of the society:Provided that, a lift irrigation society consisting of less than ten but of five or more such persons may be registered under this Act.”
2. Government Resolutions
The Court examined two key Government Resolutions:
Government Resolution dated 23.09.2013:
“Condition No.4: The number of members (accounting members) of a newly registered primary agricultural credit cooperative should be at least 75.
Condition No. 5.: For the purpose of scrutiny of the proposal of primary agricultural credit cooperative society, committee will be formed as under mentioned for the purpose of inspection of financial ability.”
Government Resolution dated 14.02.2017:
“1) There should preferably be only one primary agricultural credit cooperative in a revenue village. However, in villages where there is scope for registration of more than one society, taking into account other criteria of economic viability, more than one society can be registered.
1A) A Scheduled Primary Agricultural Credit Co-operative Society before its registration; it must have a minimum of Rs.5 lakh share capital and it is essential to do so.”
3. Scrutiny Committee’s Findings
The Court gave significant weight to the Scrutiny Committee’s detailed rejection order, particularly noting:
“…the petitioner society fails to comply with the criteria of economic viability and state it would not be advisable to establish society of the same type and with the same purpose in the area of operation of an unprofitable working society”
4. State Government’s Approach
The Court critically analyzed the State Government’s decision to overturn the Committee’s order:
“25. In our considered opinion, the State, while deciding the appeal, completely ignored the basic criteria or the pre-requisite for the registration of society i.e. the economic viability of the society. The said criteria and pre-requisites had been laid down by the State itself through its various Government Resolutions. As such, it could not have taken a decision contrary to its own guidelines.”
5. Economic Viability Concerns
The Court emphasized this crucial aspect:
“27. However, the appellant had made such submissions without placing any supporting material on record before the Scrutiny Committee to show as to what kind of other 152 businesses the appellant-society would undertake and how the appellant-society is economically viable. Yet, the State accepted the hypothetical claim of the appellant-society. In our opinion, in doing so, the State has essentially ignored the aspect of economic viability.”
6. Documentation Deficiencies
The Court noted serious shortcomings:
“28. Admittedly, the Committee had found that there was nothing in the proposal submitted by the appellant-society to substantiate the conditions of financial health as provided in the Government Resolution dated 14.02.2017. There was merely a bald statement that the Kolhapur District Central Cooperative Bank is going to support the proposed appellant-society but, as noted by the Committee, there was no letter of undertaking that was attached to that effect.”
7. Consequences of Non-Viable Societies
The Court highlighted the larger implications:
“30. It may not be out of place to state that if a society is unable to comply with the pre-condition or pre-requisite in regard to the economic viability of the society, allowing the registration of such a society which might not even be able to function, it may adversely affect the members of the society and, ultimately, it would be frustrating the very object of the establishment of the said society.”
8. Committee’s Expert Role
The Court reinforced the importance of expert scrutiny:
“31. It must be noted that the constitution of the Committee and the examination of the proposal by the Committee is a vital part of the Policy Directives of the State Government which is required to be complied with conditions under Section 4 of the 1960 Act. Therefore, ignoring the findings of the Committee and allowing the registration of the society when the appellants have been unable to point out any perversity in the said findings shall lead to an unjustifiable interference in the Committee’s Order.”
9. Limits of Discretionary Power
The Court cautioned against arbitrary use of power:
“32. Further, it must be noted that the State Government may use its discretion for relaxation of conditions. However, such a discretion cannot be used to frustrate the very object of the Act. Such a power of relaxing the necessary pre-requisites could have been made only through the means of a Government Resolution and not at the whims of the State in an appeal which essentially led to by-passing the eligibility criteria set out by the Government through its multiple Resolutions.”
Final Decision and Conclusion
After this exhaustive analysis, the Supreme Court concluded:
“34. Therefore, considering all these aspects, we are unable to find any fault in the order passed by the High Court. The High Court of Judicature at Bombay has rightly allowed the petition and set aside the order passed by the State.
35. Accordingly, the appeals stand dismissed, and the impugned order of the High Court is upheld.”
The Court also disposed of any pending applications and made no order as to costs.
Broader Implications of the Judgment
This judgment has several important implications for co-operative societies in Maharashtra and potentially across India:
- Strengthening Regulatory Framework: The judgment reinforces the importance of adhering to statutory requirements and government resolutions in registering co-operative societies.
- Expert Committees’ Authority: It establishes that findings of properly constituted expert committees should not be lightly overturned by administrative authorities.
- Economic Viability as Key Criterion: The decision makes it clear that financial and economic viability is not just a formality but a fundamental requirement for registration.
- Limits on Discretionary Powers: The judgment sets boundaries on how government authorities can exercise discretionary powers in relaxing statutory conditions.
- Protection of Existing Societies: It recognizes the need to protect the interests of existing viable societies from being undermined by registration of non-viable new societies in their operational areas.
- Documentation Standards: The ruling emphasizes the importance of complete and proper documentation when applying for registration.
- Policy Consistency: The decision ensures that government policies and resolutions are implemented consistently rather than being bypassed through administrative discretion.
This comprehensive judgment serves as an important precedent for future cases involving registration of co-operative societies, particularly in the agricultural credit sector. It balances the need for expansion of rural credit facilities with the necessity of maintaining financial stability in the co-operative movement.
Petitioner Name: Shri. Masaidevi Vividh Karyakari Sahakari Seva Sanstha Maryadit Warewadi.Respondent Name: The State of Maharashtra & Ors..Judgment By: Justice Vikram Nath, Justice Prasanna B. Varale.Place Of Incident: Kolhapur, Maharashtra.Judgment Date: 02-04-2025.
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