Section 128A Karnataka Co-Operative Societies Act Unconstitutional; Societies’ Power To Recruit, Transfer & Disciplinary Action Cannot Be Taken Away: Karnataka HC

The Karnataka High Court has struck down Section 128-A of the Karnataka Cooperative Societies Act of 1959 which empowers the Registrar to completely take away the right of a co-operative society to recruit, transfer or hold a disciplinary enquiry against its employees, by holding that it is ultra vires the Constitution of India.

In that context, the Bench of Justice Anant Ramanath Hegde observed that, "Section 128-A on its plain reading would also suggest that the Registrar is competent to frame Regulations transferring an employee of a co-operative society from one co-operative society to another co-operative society. In such an event, it amounts to changing the master of an employee who is transferred from one co-operative society to another. Such transfer would be absolutely illogical given the fact that different co-operative societies may have different types of business and work culture. Such a wide power violates the protection of autonomous functioning and democratic control which is enjoined in Article 43-B of the Constitution of India and sought to be achieved through Article 19(1)(c). Viewed from this angle, the impugned provision cannot be said to be a reasonable restriction on the fundamental right conferred under Article 19(1)(c) of the Constitution of India."

The Court was examining petitions from several Primary Co-operative Societies and their members or office bearers, challenging the constitutionality of Section 128-A of the Karnataka Co-operative Societies Act, 1959, as introduced by Amendment Act No. 27/2023 on July 27, 2023. This provision, which grants extensive powers to the Registrar, was contested on the grounds that it infringed on rights guaranteed under Article 19(1)(c) of the Constitution.

Petitioners argued that the fundamental right to form a co-operative society encompasses essential aspects of its management, including the recruitment, transfer, and disciplinary actions of employees. They claimed that removing these rights violated their constitutional freedoms and that the provision gave excessive, unchecked power to the Registrar, making it arbitrary and unconstitutional.

In contrast, respondents contended that a co-operative society, as a non-citizen entity, cannot claim a violation of fundamental rights. They argued that while forming a co-operative society is a fundamental right, it is exercised once the society is established. The right to manage employees, including recruitment and disciplinary actions, was not covered under Article 19(1)(c). Respondents also argued that the State could impose reasonable restrictions under Article 19(4) of the Constitution and that the autonomy of a co-operative society does not preclude state control over employee management.

The key issue before the Court was whether the fundamental right to form a co-operative society under Article 19(1)(c) extends beyond its formation and registration to include the rights to recruit, transfer, and discipline employees.

The High Court held that:

a. The right to form a co-operative society which is a fundamental right under Article 19(1)(c) of Constitution of India, within its fold includes right to recruit, transfer the employees of a co-operative society and to initiate disciplinary action against its employees.

b. The State is competent to impose reasonable restrictions on the fundamental right to form a co-operative society and even on the matters relating recruitment, transfer, and disciplinary action against the employees of a co-operative society. However, the State cannot completely prohibit or take away the right of a co-operative society to recruit, transfer, and to initiate disciplinary action on its employees.

c. Section 128-A of the Act of 1959 which empowers Registrar to completely take away the right of a co-operative society to recruit, transfer or hold disciplinary enquiry against its employees is ultra vires the Constitution of India. 

Cause Title: Uppinangady Co-operative Agricultural Society Ltd. & Ors. vs The State of Karnataka & Ors.

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