Constitution (97th Amendment) Act, 2011 Is Not Applicable To Local Cooperative Societies, Applies To Multi-State Societies & Societies Within UTs: SC

The Supreme Court has clarified that the Constitution (97th Amendment) Act, 2011, inserting Part IXB, would not be applicable to the local co-operative societies, but will be applicable to the multi-state co-operative societies and the societies within the Union territories.

"...the Constitution (97th Amendment) Act, 2011 would not be applicable to the local co-operative societies, whereas the same would be applicable to the multi-State co-operative societies and the societies within the Union territories.", the bench of Chief Justice UU Lalit, Justice S. Ravindra Bhat, and Justice JB Pardiwala observed.

The constitutional validity of the 97th Constitution Amendment was challenged before the Gujarat High Court.

A Division Bench of the High Court, declared the Constitution (97th Amendment) Act, 2011 inserting Part IXB containing Articles 243ZH to 243ZT as ultra vires the Constitution of India for not taking recourse to Article 368(2) of the Constitution which provides for ratification by the majority of the State Legislatures.

The judgment of the Gujarat High Court was challenged before the Supreme Court which upheld, by majority, the view of the Gujarat High Court to the extent it struck down the entire of Part IXB of the Constitution.

However, the majority view declared that Part IXB of the Constitution of India would be operative only insofar as it concerned the multi-State co-operative societies both within the various States and in the Union territories of India.

Thus, the Court has now clarified that the Constitution (97th Amendment) Act, 2011 would not be applicable to the local co-operative societies, whereas the same would be applicable to the multi-State co-operative societies and the societies within the Union territories.

The Court made this observation while dealing with an appeal filed by the Co-operative Society registered under the West Bengal Co-operative Societies Act, 1940.

The Appellant society had entered into an agreement with Hi-rise for the purpose of demolition of old administrative building and for construction of the new administrative building.

One of the members of the Appellant Society started creating various hindrances in the way of the Appellant Society and somehow or the other did not allow the Appellant Society to go ahead with the project. The Board of the Appellant Society decided to remove that member-Respondent no.1 from the primary membership of the society on the ground of having been found acting in a manner prejudicial to the interest of the Appellant Society.

That member being aggrieved with the action taken by the Board of the Appellant Society, filed an appeal before the Registrar of the Co-operative Societies.

The decision of the Board of the Appellant Society expelling the member was set aside.

Respondent No. 1 herein filed a dispute case before the Registrar of the Co-operative Societies, West Bengal against the Appellant Society seeking to declare that all actions of the Board were illegal.

The Appellant Society in due compliance with the Award resolved by way of resolution taken in the AGM to terminate the work orders issued in favour of the Hi-Rise and refund the security deposit.

Respondent No.1 filed yet another Dispute Case challenging the said Resolution, inter-alia, on the ground that the Award had directed the Appellant Society to hold an "Special General Meeting" and not an "Annual General Meeting".

Being aggrieved, Hi-Rise filed Dispute Case seeking to inter alia injunct the Appellant Society from giving effect to the Resolution. Therein the Calcutta High Court remanded the matter to the Arbitrator for fresh hearing while directing both parties to maintain status quo.

The Joint Registrar, Co-operative Societies (Housing) accorded permission to the Appellant Society for the construction of Office-cum-Administrative Building pursuant to the Resolution.

Respondent No. 1 instituted the Arbitration Execution Case. The Civil Judge inter alia declared that the Execution Case was maintainable.

The Revision petition was dismissed by the High Court.

Advocate Joydeep Mazumdar appeared for the Appellant-Society whereas Advocate Soumo Palit appeared for Respondent No. 1.

The Supreme Court observed that merely because the terms and conditions of the development agreement are not acceptable to the Respondent No. 1, who could be said to be in minuscule minority cannot be the basis of not to abide by the decision of the overwhelming majority of the General Body of the Appellant Society.

The Court noted that the redevelopment of the property is necessitated in view of the fact that the building is in a dilapidated condition with passage of time.

The Court noted further "Suffice it to observe that so long as the Resolutions passed by the General Body of the Appellant Society are in force and not overturned by a forum of competent jurisdiction, the said decisions would bind the Respondent No. 1. He cannot be permitted to take a stand alone position but is bound by the majority decision of the General Body."

The Court noted that no individual member is going to gain anything from the redevelopment and that it is the society as an autonomous body that will gain something.

Therefore, the Court set aside the impugned Judgment and Order passed by the High Court.

Cause Title- The Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. v. Aloke Kumar & Anr.

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