# 14 (ADDL.) S.C.R. 1 AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v. B. NARASIMHA REDDY & ORS

- **Citation:** [2011] 14 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2011-09-02
- **Case number:** Civil Appeal No. 2188 of 2008
- **Bench:** P. Sathasivam, Dr. B.S. Chauhan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/14-addl-s-c-r-1-ap-dairy-development-corporation-federation-v-b-narasimha-reddy-27387
- **Pages:** 46

## Headnote

. Co-operative Societies:
A
B
c
Andhra Pradesh Mutually Aided Co-operative Societies
(Amendment) Act, 2006 - 2006 Amendment Act excluding
the milk dairy co-operative societies from the societies
covered by the 1995 Act and importing the fiction that such
qairies would be deemed to have been registered under the 0
1964 Act- Constitutional validity of the 2006 Amendment Act
- Held: By the Amendment Act, the extensive control of co·
operative societies by the Registrar under the Act 1964
became incompatible and inconsistent with the co-operative
principles which mandate ensuring democratic member E
control and autonomy and independence in the manner of
functioning of the co-operatives - It obstructed and frustrated.
the object of the development and growth of vibrant co·
operative societies in the State - Restrictions so imposed by
the 2006 Amendment Act, with retrospective effect, extending
over a decade and importinQ the fiction that all the dairy/milk F
co-operative societies shall be deemed to have been
excluded from the provisions of the 1995 Act and the societies
would be deemed to have been registered under the 1964 Act,
without giving any option to such societies suggest the
violation of Article 19(1)(c) and are not saved by clause (4)
G
of Article 19 - It is arbitrary and violative of Article 14 -
Reverting back to the co-operative societies under the Act
. 1964 is a retrograding process by which the government would
1
H
' i
2
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A enhance its control of these societies registered under the Act
1995 - They would be deprived not only of benefits under the
said Act, but rights accrued under the Act 1995 would a/so
be taken away with retrospective effect - Thus, the order
passed by the High Court that 2006 Amendment Act is
B unconstitutional, is upheld - Andhra Pradesh Mutually Aided
Co-operative Societies Act, 1995 - Andhra Pradesh Cooperative Societies Act, 1964.
Constitution of India, 1950:
C
Article 14 - Class legislation - Permissibility of - Held:
D
Article 14 forbids class legislation - However, it does not
forbid reasonable classification for the purpose of legislation
- Thus, class legislation is permitted in law provided the
classification is founded on an intelligible differentia.
Article 14 - Violation of - Held: Article 14 strikes at
arbitrariness because an action that is arbitrary, must
necessarily involve negation of equality - Doctrine of
arbitrariness is not restricted only to executive actions, but
E a/so applies to legislature -
There must be a case of
substantive unreasonableness in the statute itself for declaring
the act ultra vires of Article 14.
Article 19(1)(c) - Right to form associations or unions
under - Scope of $tatutory intervention - Held: Formation of
F the unions under Article 19(1)(c) is a voluntary act - Thus,
unwarranted/impermissible statutory intervention is not desired
- By statutory interventions, the State is not permitted to
change the fundamental character of the association or alter
the composition of the society itself - Encroachment upon
G associational freedom cannot be justified on the basis of any
interest of the Government - However, when the association
gets registered under the Co-operative Societies Act, it is
governed by the provisions of the Act and rules framed
thereunder - In case the association has an option/choice to
H
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
3
B. NARASIMHA REDDY
get registered under a particular statute, if there are more than A
one statutes operating in the field, the State cannot force the
society to. get itself registered under a statute for which the
society has not applied - Co-operative societies.
Administrative law - Doctrine of estoppel - Applicability 8
of, to policy decision - ·Held: State, being a continuing body
can be stopped from changing its stand in a given case, but
where after holding enquiry it came to the conclusion that
action was not in conformity with law, the doctrine of

## Text

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[2011] 14 (ADDL.) S.C.R. 1
AP. DAIRY DEVELOPMENT CORPORATION
FEDERATION
v.
B. NARASIMHA REDDY & ORS.
(Civil Appeal No. 2188 of 2008)
SEPTEMBER 2, 2011
[P. SATHASIVAM AND DR. B.S. CHAUHAN, JJ.]
. Co-operative Societies:
A
B
c
Andhra Pradesh Mutually Aided Co-operative Societies
(Amendment) Act, 2006 - 2006 Amendment Act excluding
the milk dairy co-operative societies from the societies
covered by the 1995 Act and importing the fiction that such
qairies would be deemed to have been registered under the 0
1964 Act- Constitutional validity of the 2006 Amendment Act
- Held: By the Amendment Act, the extensive control of co·
operative societies by the Registrar under the Act 1964
became incompatible and inconsistent with the co-operative
principles which mandate ensuring democratic member E
control and autonomy and independence in the manner of
functioning of the co-operatives - It obstructed and frustrated.
the object of the development and growth of vibrant co·
operative societies in the State - Restrictions so imposed by
the 2006 Amendment Act, with retrospective effect, extending
over a decade and importinQ the fiction that all the dairy/milk F
co-operative societies shall be deemed to have been
excluded from the provisions of the 1995 Act and the societies
would be deemed to have been registered under the 1964 Act,
without giving any option to such societies suggest the
violation of Article 19(1)(c) and are not saved by clause (4)
G
of Article 19 - It is arbitrary and violative of Article 14 -
Reverting back to the co-operative societies under the Act
. 1964 is a retrograding process by which the government would
1
H
' i
2
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A enhance its control of these societies registered under the Act
1995 - They would be deprived not only of benefits under the
said Act, but rights accrued under the Act 1995 would a/so
be taken away with retrospective effect - Thus, the order
passed by the High Court that 2006 Amendment Act is
B unconstitutional, is upheld - Andhra Pradesh Mutually Aided
Co-operative Societies Act, 1995 - Andhra Pradesh Cooperative Societies Act, 1964.
Constitution of India, 1950:
C
Article 14 - Class legislation - Permissibility of - Held:
D
Article 14 forbids class legislation - However, it does not
forbid reasonable classification for the purpose of legislation
- Thus, class legislation is permitted in law provided the
classification is founded on an intelligible differentia.
Article 14 - Violation of - Held: Article 14 strikes at
arbitrariness because an action that is arbitrary, must
necessarily involve negation of equality - Doctrine of
arbitrariness is not restricted only to executive actions, but
E a/so applies to legislature -
There must be a case of
substantive unreasonableness in the statute itself for declaring
the act ultra vires of Article 14.
Article 19(1)(c) - Right to form associations or unions
under - Scope of $tatutory intervention - Held: Formation of
F the unions under Article 19(1)(c) is a voluntary act - Thus,
unwarranted/impermissible statutory intervention is not desired
- By statutory interventions, the State is not permitted to
change the fundamental character of the association or alter
the composition of the society itself - Encroachment upon
G associational freedom cannot be justified on the basis of any
interest of the Government - However, when the association
gets registered under the Co-operative Societies Act, it is
governed by the provisions of the Act and rules framed
thereunder - In case the association has an option/choice to
H
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
3
B. NARASIMHA REDDY
get registered under a particular statute, if there are more than A
one statutes operating in the field, the State cannot force the
society to. get itself registered under a statute for which the
society has not applied - Co-operative societies.
Administrative law - Doctrine of estoppel - Applicability 8
of, to policy decision - ·Held: State, being a continuing body
can be stopped from changing its stand in a given case, but
where after holding enquiry it came to the conclusion that
action was not in conformity with law, the doctrine of estoppel
would not apply - Thus, unless the act done by the previous
Government is found to be contrary to the statutory provisions, C
unreasonable or against policy, the State should not change
its stand merely because the other politicai PfJrlY has come
into power - Estoppel - Doctrines.
On the commencement of the Andhra Pradesh D
Mutually Aided Co-operative Societies Act, 1995, the
existing Andhra Pradesh Dairy Development Co-operative
Societies registered under the Andhra Pradesh Cooperative Societies Act, 1964 could opt to be covered by
the 1995 Act with certain conditions. Some of the E
societies already registered under the 1964 Act committed
some irregularities in getting themselves registered under
the 1995 Act. The Statutory Authority were issued notices
to show cause as to why their registration under the 1995 ·
Act should not be cancelled. Eight District Milk Unions
F
filed writ petitions challenging the said show cause
notices. The Andhra Pradesh Dairy Development Cooperative Federation Ltd. filed original petition in various
Co-operative Tribunals seeking dissolution of the said
societies and the same was dismissed against 'V' District G
Union. Thereafter, a House Committee was constituted to
Investigate into the irregularities committed by two of the
District Unions who had got themselves registered under
the 1995 Act. The Committee submitted its report that the
said Unions had committed certain irregularities; and that H
4
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A the Act 1995 had adverse consequences on the dairy cooperatives, as it had broken down 3-tier structure. The
State Government constituted a Committee to consider
the recommendations of the House Committee. This
Committee recommended that dairy co-operatives be
B excluded from the purview of the Act 1995 and brought
back under the Act 1964 and be restored to 3-tier
structure. Pursuant to the said policy decision of the
Government, the order passed by the Co~opera·tive
Tribunal was challenged. Thereafter, the State
c promulgated the Ordinance No.2/2006 excluding the milk
dairy co-operative societies from the societies covered by
the 1995 Act and imported the fiction that such dairies
would be deemed to have been registered under the 1964
Act, with effect from the date of registration under the Act
0
1995. Government Order dated 4.2.2006 was issued to
give effect to such amendments. Various District Milk
Producers Co-operative Unions filed writ petitions
challenging Ordinance No.2/2006 and consequential
Government Order dated 4.2.2006. The High Court by an
interim order stayed the operation of the Government
E Order dated 4.2.2006. Meanwhile, the Ordinance was
converted into the Andhra Pradesh Mutually Aided Cooperative Societies (Amendment) Act, 2006. Thereafter,
the High Court allowed the writ petitions striking down
the provisions of the 2006 Act as unconstitutional and
F held that even if the 2006 Act is to be considered
constitutional, provisions providing that the Boards of
Directors appointed under the Andhra Pradesh Mutually
Aided Co-operative Societies Act, 1995 shall be deemed
to have been continued under the provisions of Andhra
G Pradesh Co-operative Societies Act, 1964, and that the
G.O.Ms. No.10 Animal Husbandry, Dairy Development &
Fisheries (Dairy-II) Department, dated 4.2.2006 and the
consequential proceedings/orders · of the Milk
Commissioner and Registrar of Milk Co-operatives and
H
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
5
8. NARASIMHA REDDY
the District Collectors are quashed. Therefore, the A
appellants filed the instant appeals.
Dismissing the appeals, the Court
HELD: 1. Article 14 forbids class legislation, however,
it does not forbid reasonable classification for the
B
purpose of legislation. Thus, it is permissible in law to
have class 'legislation provided the classification is
founded on an intelligible differentia which distinguishes
persons or things that are grouped together from others
left out of the group and that differentia must have a C
rational relation to the object sought to be achieved by
the statute in question. Law also permits a classification
even if it relates to a single individual, if, on account of
some special circumstances! or reasons applicable to
him, and not applicable to others, that single individual D
may be treated as a class by himself. It should be
presumed that legislature has correctly appreciated the
need of its people and that its laws are directed to
problems made manifest by experience and that its
discriminations are based on adequate grounds:There E
is further presumption in favour of the legislature that
legislation had been brought with the knowledge of.
existing conditions. The good faith on the legislature is
to be presumed, but if there is nothing on the face of the
law or the surrounding circumstances brought to the
F
notice of the court on which the classification may
reasonably be regarded as based, the presumption of
constitutionality cannot be carried to the extent of always
holding that there must be some undisclosed and
unknown reasons for subjecting certain individuals or G
corporations to hostile or discriminating legislation. The
law should not be irrational, arbitrary and unreasonable
in as much as there must be nexus to the object sought
to 'be achieved by it. [Para 8] [26-E-H; 27-A-C]
H
6
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A
Budhan Chaudhry & Ors. v. State of Bihar AIR 1955 SC
191: 1955 SCR 1045; Ram Krishna Dalmia v. Justice S.R.
TendolkB( & Ors. AIR 1958 SC 538:1959 SCR 279 - relied
on.
8
Harbilas Rai Bansal v. State of Punjab & Anr. AIR 1996
SC 857: 1995 (6) Suppl. SCR 178 - referred to.
2. Article 19(1)(c) guarantees to all citizens, the right
to form associations or unions of their choice voluntarily,
subject to reasonable restrictions imposed by law.
C Forma.tion of the unions under Article 19(1)(c) is a
voluntary act, thus, unwarranted/impermissible statutory
intervention is not desired. The right of the citizens to
form the association are different from running the
business by that association. Therefore, right of
D individuals to form a society has to be understood in a
completely different context. Once a co-operative society
is formed and registered, for the reason that co-operative
society itself is a creature of the statute, the rights of the
society and that of its members stand abridged by the
E provisions of the Act. The activities of the society are
controlled by the statute. Therefore, there cannot be any
objection to statutory interference with their composition
or functioning merely on the ground of contravention of
individual's right of freedom of association by statutory
F functionaries. [Paras 10, 16] [28-A; 31-C-E]
All India Bank Employees' Association v. National
Industrial Tribunal (Bank Disputes) Bombay & Ors. AIR 1962
SC 171: 1962 SCR 269; S. Azeez Basha & Anr. v. The
Union of India etc. AIR 1968 SC 662: 1968 SCR 833; D.A. V.
G College, etc.etc. v. State of Punjab & Ors. (1971) 2 SCC 269
- relied on.
H
Mis. Raghubar Dayal Jai Prakash v. The Union of India
& Anr. AIR 1962 SC 263: 1962 SCR 547; Smt. Damyanti
AP. .DAIRY DEVELOPMENT CORPORATION FEDERATION v.
7
B. NARASIMHA REDDY
Naranga v. The Union of India & Ors. AIR 1971 SC 966: 1971
A
(3) SCR 840; Daman Singh & Ors. v. State of Punjab & Ors.
AIR 1985 SC 973: 1985 (3) SCR 580; DharamDutt & Ors. v.
Union of India & Ors. (2004) 1 SCC 712: 1964 SCR 885; The
Tata Engineering and Locomotives Co. Ltd. v. The State of .
Bihar & Ors. AIR 1965 SC 40 - referred to.
B
3. Article 14 of the Constitution strikes at arbitrariness
becau.se .an action that is arbitrary, must necessarily
Involve negation of equality. This doctrine of arbitrariness
is not restricted only to executive actions, but also applies
to legislature. Thus, a party has to satisfy that the action
C
was reasonable, not done in unreasonable manner or
capriciously or at pleasure without adequate determining
principle, rational, and has been done according to reason
or judgment, and certainly does not depend on the will
alone. However, the action of legislature, violative of D
Article 14 of the Constitution, should ordinarily be
manifestly arbitrary. There must be a case of substantive
unreasonableness in the statute itself for declaring the act
ultra vires of Article 14 of the Constitution. [Para 17] (31F-H]
E
Ajay Hasia etc. v. Khalid Mujib Sehravardi & Ors. etc. AIR
1981 SC 487: 1981 (2) SCR 79; Reliance Airport Developers
(P) Ltd. v. Airports Authority of India & Ors. (2006) 10 SCC 1:
2006 (8) Suppl. SCR 398; Bidhannagar (Salt Lake) Welfare
F
Assn. v. Central Valuation Board & Ors. AIR 2007 SC 2276:
2007 (7) SCR 430; Grand Kakatiya Sheraton Hotel and
Towers Employees and Workers Union v. Srinivasa Resorts
Limited & Ors. AIR 2009 SC 2337: 2009 (3) SCR 668; State
of Tamil Nadu & Ors. v. K. Shyam Sunder & Ors. (2011) 8
SCALE 474 - relied on.
·
State of Andhra Pradesh & Anr. v. P. Sagar AIR 19~8 SC
1379:1968 SCR 565; Indra Sawhney II v. Union of India AIR
2000 SC 498: 1999 (5) Suppl. SCR 229; Harman Singh &
G
H
8
SUPREME COURT REPORTS (2011) 14 (ADDL.) S.C.R.
A Ors. v. Regional Transport Authority, Calcutta Region & Ors.
AIR 1954 SC 190: 1954 SCR 371; D. C. Bhatia & Ors. v.
Union of India & Anr. (1995) 1 SCC 104: 1994 (4 ) Suppl.
SCR 539; State of Gujarat & Anr. v. Raman Lal Keshav Lal
Soni & Ors. AIR 1984 SC 161:1983 (2) SCR 287; B.S. Yadav
B & Ors. v. State of Haryana & Ors. AIR 1981 SC 561: 1981
SCR 1024; Chairman, Railway Board & Ors. v. C. R.
Rangadhamaiah & Ors. AIR 1997 SC 3828: 1997 (3) Suppl.
SCR 63; Tulsi Das and Ors. vs. Government of A.P. & Ors.
AIR 2003 SC 43; National Agricultural Cooperative Marketing
C Federation of India Ltd. & Anr. v. Union of India & Ors. (2003)
5 SCC 23: 2003 (3) SCR 1 - referred to.
4. In the matter of Government of a State, the
succeeding Government is duty bound to continue and
carry on the unfinished job of the previous Government,
D for the reason that the action is that of the "State", within
the meaning of Article 12 of the Constitution, which
continues to subsist and therefore, it is not required that
the new Government can plead contrary from the State
action taken by the previous Government in respect of a
E particular subject. The State, being a continuing body can
be stopped from changing its stand in a given case, but
where after holding enquiry it came to the conclusion that
action was not in conformity with law, the doctrine of
estoppel would not apply. Thus, unless the act done by
F'
the previous Government is found to be contrary to the
statutory provisions, unreasonable or against policy, the
State should not change its stand merely because the
other political party has come into power. "Political
agenda of an individual or a political party should not be
G subversive of rule of law". The Government has to rise
above the nexus of vested interest and nepotism etc. as
the principles of governance have to be tested on the
touchstone of justice, equity and fair play. The decision
must be taken in good faith and must be legitimate. [Para
H 27] [36-A-E]
A.P. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
9
8. NARASIMHA REDDY
Onkar Lal Bajaj etc. etc. v. Union of India & Anr. etc. etc.
A
AIR 2003 SC 2562: 2002 (5) Suppl. SCR 605; State of
Karnataka & Anr. v. All India Manufacturers Organization &
Ors. AIR 2006 SC 1846: 2006 (1) Suppl. SCR 86; State of
Tamil Nadu & Ors. v. K. Sh yam Sunder & Ors. (2011) 8
SCALE 474 - relied on.
' .........
.
B
A. Manju/a Bhashini and Ors. v. Managing Director,
Andhra Pradesh Women's Cooperative Finance Corporation
Ltd. & Anr. (2009) 8 sec 431: 2009 (1 O) SCR 634; M.
Ramanathan Pillai v. State of Kera/a & Anr. (1973) 2 SCC
C
650: 197 4 (1) SCR 515; State of Kera/a & Anr. v. The
Gawalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. etc. (1973)
2 SCC 713: 1974 (1) SCR 671- referred to.
5. The Government has inherent power to promote
the general welfare of the people and in order to achieve
D
the said goal, the State is free to exercise its sovereign
powers of legislation to regulate the conduct of its
citizens to the extent, that their rights shall not stand
abridged. The co-operative movement by its very nature,
is a form of voluntary association where individuals unite
E
for mutual benefit in the production and distribution of
wealth upon principles of equity, reason and common
good. So, the basic purpose of forming a co-operative
society remains to promote the economic interest of its
members in accordance with the well recognised co-
•F
operative principles. Members of an association have the
right to be associated only with those whom they
consider eligible to be admitted and have right to deny
admission to those with whom they do not want to
associate. The right to form an association cannot be G
infringed by forced inclusion of unwarranted persons in
a group. Right to associate is for the purpose of enjoying
in expressive activities. The constitutional right to freely
associate with others encompasses associational ties
designed to further the social, legal and economic H
10
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A benefits of the members of the association. By statutory
interventions, the State is not permitted to change the
fundamental character of the association or alter the
composition of the society Itself. The significant
encroacllment upon associational freedom cannot be
B justified on the basis of any interest of the Government.
However, when the association gets registered under the
Co-operative Societies Act, it. is governed by the
provisions of the Act and rules framed thereunder. In case
the association has an option/choice to get registered
c under a particular statute, if there are more than one
statutes operating in the field, the State cannot force the
society to get itself registered under a statute for which
the society has not applied. [Para 31] [38-0-H; 39-A-C]
6.1 In the instant case, the recommendations of the
D House Committee and the Group of Ministers, were not
based on relevant material as there was no investigation
of all the co-operative societies either converted to or
registered under the Act 1995. The House Committee did
not recommend the amendment with retrospective effect,
E particularly, for the conversion of dairy co-operative
societies registered under the Act 1995 into societies
deemed to have been registered under the Act 1964. More
so, the Committee did not consider at all as to whether it
was permissible in law, to provide for such a course, so
F far as the societies initially registered under the Act 1995,
were concerned. [Paras 32, 33] [39-0-F; 40-B-C]
6.2 The restrictions so imposed by the Act 2006, with
retrospective effect, extending· over a decade and
G importing the fiction that the societies would be deemed
to have been registered under the Act 1964, without
giving any option to such societies suggest the violation
of Article 19(1){c) and are not saved by claus.e (4) of
Article 19 of the Constitution. It is by no means
conceivable, that the grounds on the basis of which
H
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
11
8. NARASIMHA REDDY
reasonable restrictions could be Invoked were available.
A
[Para 34] [40-D-E]
6.3 The impugned provisions have no nexus with the
object of enforcing the 3-tier structure inasmuch as the
1964 and the 1995 Acts, both permit registration of 8
Federations; the Act 1964 does not contain any express
provision providing for 3-tier structure; the object of
having a 3-tier structure could be achieved by the
Federation registering itself under the Act 1995 as
decided at the meeting of co-operative milk unions
convened by the Chief Secretary on 26.8.2003; and even
C
the Act 1964 does not treat Dairy Co-operatives as a
separate class to be governed by a separate structure.
As such from the stand point of structure and basic cooperative principles, all co-operative societies, are alike.
The impugned provisions are arbitrary and violative of D
Article 14 as they deprived the Dairy Co-operative
Societies of the benefit of the basic principles of cooperation. The amendments are contrary to the national
policy on Co-operatives. They obstruct and frustrate the
object of the development and growth of vibrant coE
operative societies in the State. [Para 36] [41-B-D]
6.4 After conversion into Mutually-Aided Societies
under the Act 1995 with the permission of the Government
as stipulated l>y Section 4(3)(a), the co-operative societies
F
originally registered under the Act 1964 cannot be treated
as aided societies or societies holding the assets of the
government or of the Federation. The Statement of
Objects and Reasons itself shows that the government
decided not to withdraw its own support suddenly. In
G
fact, there was no aid given by the State after conversion.
Chapter x·of the Act 1964 which empowers the Registrar
to recover dues by attactiment and sale of property and
execution of orders having· been expressly incorporated
1in the Act 1995 by Section 36, ttiereof there was no
H.
12
SUPREME COURT REPORTS [2011] 14(ADDL.) S.C.R.
A justification at all for the impugned Amendments. [Para
37] [41-E-G]
6.5 After the incorporation of the co-operative
principles in Section 4 of the A.P. Cooperative Societies
8 Act, 1964 read with Rule 2(a) of the A.P. Co-operative
Societies Rules, 1964, by Amendment Act No. 22 of 2001,
the extensive control of co-operative societies by the
Registrar under the Act 1964 has become incompatible
and inconsistent with the said co-operative principles
C which mandate ensuring democratic member control and
autonomy and independence in the manner of
functioning of the co-operatives. These two, namely,
extensive State control and ensuring operation of cooperative principles cannot be done at the same time.
[Para 38] [41-H; 42-A-C]
D
6.6 The comparative study of the statutory provisions
of the Act 1964 with that of Act 1995 makes it crystal clear
that Government has much more control over the cooperative societies registered under the Act 1964 and
E minimal under the Act 1995. Also the role of the Registrar
under the Act 1964 is much more than under the Act 1995
as under the Act 1964. [Para 39] [42-D-F]
6.7 The statement of objects and reasons of the Act
F 1995 clearly stipulate that State participation in the
financing and management of co-operatives in the past
had led to an unfortunate situation and the co-operative
societies were not governed/guided by the universally
accepted principles of co-operation. Thus, the purpose
· to enact the Act 1995 was to provide more freedom to
G conduct the affairs of the co-operative societies by its
members. Principles of co-operation as incorporated in
Section 3 and given effect to in the other provisions of
the Act 1995 permit better democratic functioning of the
society than under the Act 1964. Whereas the Act 1995
H
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
13
B. NARASIMHA REDDY
provides for State regulation to the barest minimum, the A
Act 1964 provides for extensive State control and
regulation of co-operative societies which is inconsistent
with the national poliC}' with regard to co-operative
societies evolved in consultation and collaboration with
the States which stands accepted by the State of A.P. and
B
reflected in the Scheme of the Act 1995 which is based
on the model law recommended by the Planning
Commission of India. Thus, reverting back tC" the cooperative societies 1mder the Act 1964 is a retrograding
process by which the government would enhance its c
control of these societies registered under the Act 1995.
They would be deprived not only of benefits under the
said Act, but rights accrued under the Act 1995 would
also be taken away with retrospective effect. [Para 40] [43H; 44-A-G]
D
6.8 Co-operative law is based on voluntary action of
its members. Once a society is formed and its members
voluntarily take a decision to get it registered under the
Act X, the registration authority may reject the registration
application if conditions prescribed under Act X are not E
fulfilled or for any other permissible reason. The
registration authority does not have a right to register the
said society under Act Y or even a superior authority is
not competent to pass an order that the society would ·
be registered under the Act Y. Such an order, if passed,
F
would be in violation of the first basic cooperative
principle that every action shall be as desired by its
members voluntarily. Introducing such a concept of
compulsion would violate Article 19(1)(c) of the
Constitution of India; It is not permissible in law to do G
something indirectly, if it is not permis~ible to be done
directly. [Para 41] [44-H; 45-A-C]
'
Sant Lal Gupta & Ors v. Modern Co-operative Group
Housing Society Ltd. & Ors:' JT 2010 (11) SC 273 - relied
H
on.
14
SUPREME COURT REPORTS (2011] 14 (ADDL.) S.C.R.
A
6.9 The 2006 Act had been enacted without taking
note of the basic principles of co-operatives Incorporated
in Section 3 of the Act 1995 which provide that
membership of a co-operative society would be voluntary
and shall be available without any political restriction.
B The co-operative society under the Act would be a
democratic organisation as its affairs would be
administered by persons elected or appointed in a
manner agreed by members and accountable to them.
[Para 42] [45-D-E]
c
6.10 The legislature has a right to amend the Act 1995
or repeal the same. Even for the sake of the argument, if
it is considered that legislature was competent to exclude
the milk cooperative dairies from the operation of the Act
1995 and such an Act was valid i.e. not being violative of
D Article 14 of the Constitution etc., the question does arise
as to whether legislature could force the society
registered under the Act 1995 to work under the Act 1964.
Importing the fiction to the extent that the societies
registered under the Act 1995, could be deemed to have
E been registered under the Act 1964 tantamounts to
forcing the members of the society to act under
compulsion/direction of the State rather than on their free
will. Such a provision is violative of the very first basic
principles of co-operatives. More so, the Act is vitiated by
F non-application of mind and irrelevant and extraneous
considerations. [Para 43] [45-F-H; 46-A]
Mosammat Bibi Sayeeda & Ors., etc. v. State of Bihar &
Ors., etc., AIR 1996 SC 1936: 1996 (1) Suppl. SCR 799;
G Howrah Municipal. Corporation & Ors. v. Ganges Rope Co.
Ltd. & ors. (2004) 1 sec 663; 2003 (6) Suppl. SCR 1212;
J.S. Yadav v. State of Uttar Pradesh & Anr. (2011) 6 SCC 570
- referred to.
H
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
15
B. NARASIMHA REDDY
Case Law Reference:
A
1955 SCR 1045
Relied on
Para 8
1959 SCR 279
Relied on
Para 8
1995 (6) SuppL SCR 178
Referred to
Para 9
B
1962 SCR 547
Referred to
Para 11
1971 (3) SCR 840
Referred to
Para 12
1985 (3) SCR 580
Referred to
Para 13
1964 SCR 885
Referred to
Para 14
c
AIR 1964 SC 40
Referred to
Para 15
1962 SCR 269
Relied on
Para 15
1968 SCR 833
Relied on
Para 15
D
(1971) 2 sec 269
Relied on
Para 15
1981 (2) SCR 79
Relied on
Para 17
2006 (8 ) Suppl. SCR 398 Relied on
Para 17
E
2007 (7 ) SCR 430
Relied on
Para 17
2009 (3)-,,SCR 668
Relied on
Para 17
(2011) 8 SCALE 474
Relied on
Para 17, 28
F
1968 SCR565
Referred to
Para 18
1999 (5) Suppl. SCR 229
Referred to
Para 19
1954 SCR 371
Referred to
Para 20
1994 (4) Suppl. SCR 539
Referred to
Para 21
G
1983 (2) SCR 287
Referred to
Para 22
1981 SCR 1024
Referred to
Para 23
1997 (3) Suppl. SCR 63
Referred to
Para 24
H
16
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A
AIR 2003 SC 43
Referred to
Para 24
2003 (3) SCR 1
Referred to
Para 25
1996 (1) Suppl. SCR 799
Referred to
Para 26
B
2003 (6) Suppl. SCR 1212 Referred to
Para 26
(2011) 6 sec 570
Referred to
Para 26
2002 (5) Suppl. SCR 605
Relied on
Para 27
2006 (1) Suppl. SCR 86
Relied on
Para 27
c
2009 (10) SCR 634
Referred to
Para 28
1974 (1) SCR 515
Referred to
Para 29
1974 (1) SCR 671
Referred to
Para 30
D
JT 2010 (11) SC 273
Relied on
Para 41
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2188 of 2008.
From the Judgment & Order dated 01.05.2007 of the High
E Court of Judicature, Andhra Pradesh at Hyderabad in Writ
Petition No. 2214 of 2006.
F
WITH
C.A. Nos. 2189-2212 & 4588 of 2008.
R. Venkataramani, S.S. Prasad, P.P. Rao, D. Mahesh
Babu, Savita Dhanda, Alto K. Joseph, Ramesh Allanki, C.K.
Sucharita, Nirada Das, Y. Rajagopala Rao, Vaismai Rao,
Hitendra Rath, Harsh Reddy, Utsav Sidhu, Filza Moonis,
G Apeksha Sharan, Y. Ramesh, P. Venkat Reddy, Anil Kumar
Tandale, Liz Mathew, Deep Kirti Verma, Niranjan Reddy, P.S.
Harsha Reddy, Sana A.R. Khan, (Mclm & Co.), T. Anamika,
Chandramohan Anisetty, S. Udaya Kr. Sagar, Bina Madhavan,
Rayjith Mark (for Lawyer's Knit & Co.) for the appreaing parties.
H
The Judgment of the Court was delivered by
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
17
B. NARASIMHA REDDY
DR. B.S. CHAUHAN, J. 1. All these appeals have been
A
preferred against the impugned judgment and order dated 1st
May, 2007 of the High Court of Judicature, Andhra Pradesh at
Hyderabad in Writ Petition No. 2214 of 2006, by which the High
Court has struck down the provisions of Andhra Pradesh
Mutually Aided Co-operative Societies (Amendment) Act, 2006
B
_(hereinafter called as 'Act 2006') as unconstitutional and further
declared that even if the Act 2006 is to be considered
constitutional, provisions providing that the Boards of Directors
appointed under the Andhra Pradesh Mutually Aided Co-
. operative Societies Act, 1995 (hereinafter called 'Act 1995') c
shall be deemed to have been continued under the provisions
of A.P. Co-operative Societies Act, 1964 (hereinafter called
'Act 1964'), and further G.O.Ms. No.10 Animal Husbandry,
Dairy Development & Fisheries (Dairy-II) Department, dated
4.2.2006 and the consequential proceedings/orders of the Milk
D.
Commissioner and Registrar of Milk Co-operatives and the
E>istrict Collectors concerned in these regards, are quashed.
2. Facts:
A. The Government of Andhra Pradesh introduced an
E
integrated milk project in the State with the assistance of the
UNICEF, according to which, the rural surplus milk produced
in the villages was transported to chilling centres and supplied
to consumers of Hyderabad. A milk conservation plant/milk
products factory was established at Vijayawada in 1969 as a
F
part of the project. In the meanwhile, the Act 1964 came into
force w.e.f. 1.8.1964.
B. In years 1970-71, the Government of Andhra Pradesh
set up an independent Dairy Development Department
(hereinafter called the 'Department') and intensive efforts were
G
made by the Government to give a boost to the Department
taking various measures.
C. In year 1974, Andhra Pradesh Dairy Development
Corporation Ltd. (hereinafter called the 'Corporation'), a
H
18
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A company under the Indian Companies Act, 1956, fully owned
by the State Government was constituted and the entire dairy
infrastructure and assets of the Department of the State stood
transferred to the said Corporation vide order dated 15.4.197 4.
The employees of the Department were absorbed in the
B Corporation. A huge amount has been contributed by the
Government from year 197 4 onwards to develop the dairy
produc~.
·
D. The Andhra Pradesh Dairy Development Cooperative
c Federation Ltd. (hereinafter called 'the Federation') was
registered as a Cooperative Society and all the assets and
dairy infrastructure were transferred to the Federation. The
State Government vide order dated 10.12.1980 permitted the
Federation to hand over the management of the respective units
D set up at the State expenses to the Societies subject to
conditions stipulated in the agreement. Mainly the terms
incorporated therein provided for transfer of assets on lease
basis, and the State to stand as a guarantor for the payment
of loan component and financial assistan~e etc.
E
E. The Government further permitted the Federation to
hand over the management of respective units and operation
hitherto to various societies with the right of procurement and
further dairy development activities such as manufacturinQ,
processing, feed mixing plants alongwith the concerned
F employees to the District Milk Producers Co-operative Unions
with effect from a mutually agreeable date.
F. During the years of 1991 and 1995, the benefits of
financial assistance rendered to the units by the State and the
G Central Governments had been very huge i.e. Rs.159.45 lakhs
and Rs. 729.97 lakhs.
G. On commencement of the Act 1995 into force, the
existing co-operative soCieties registered under the Act 1964
could opt to be covered by the Act 1995 with certain conditions,
H namely, the share capital from the Government, if any, had to
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
19
I
B. NARASIMHA REDDY [DR. B.S. CHAUHAN, J.]
I ~e returned and the societies should not accept any
A
) $overnment assistance, and further the societies had to enter
into the Memorandum of Understanding (hereinafter called the
MoU) for outstanding loans and guarantees or return of the
government assistance. These had been conditions precedent
for registration of a society under the Act 1995. A very large
B
number of new societies came into existence and were
registered under the Act 1995. Many societies already
registered under the Act 1964 also got themselves registered '
under the Act 1995.
H. There had been some irregularities in getting the
C
registration under the Act 1995 by certain societies registered
under the Act 1964 and some of them did not execute the MoU.
Thus, the Statutory Authority issued show cause notices to such
societies under Section 4(3) of the Act 1995 on 29.11.2004 to
sho~ cause as to why their registration under the Act 1995 be
D
not cancelled.
I. Eight writ petitions were filed by 8 District Milk Unions
challenging the said show cause notices before the High Court.
The Federation filed original petition in various Co-operative
E
Tribunals seeking dissolution of its societies under Section 40
of the Act 1995 as the statutory requirements had not been
complied with. ,
J. The Co-operative Tribunal vide its judgment and order
dated 9.12.2004 dismissed the original petition against
F
Visakha District Union on the premises that the Act 1995 had
not mentioned about returns of assets and the Managing
Director had no power to further delegate the power to some
one to file the petition.
K. The Legislative Assembly of the Andhra Pradesh vide
Resolution dated 8.2.2005 constituted a House Committee
consisting of its members belonging to different political parties
G
to investigate into irregularities committed by two of the eight
District Unions, namely, Visakha ·and Ongole (Prakasham)
H ·
20
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A Unions, who als.o got registered under the Act 1995. The
Committee submitted its report pointing out certain irregularities
by the said Unions. The Committee also opined that the Act
1995 had adverse consequences on the dairy co-operatives,
as it had broken down 3-tier structure, reduced the brand value
B of Vijaya Brand, created conflict in marketing structures,
weakened the financial position of some District Milk Unions
etc. and had broken down the common cadre of employees.
L. After considering the said report, the State Government
C constituted a Committee consisting of Ministers to consider the
recommendations of the House Committee vide order dated
23.8.2005. It was this Committee which recommended that
dairy co-operatives be excluded from the purview of the Act
1995 and so far as the dairy co-operatives are concerned, it
should be restored to 3-tier structure. Meanwhile, the order
D passed by the Co-operative Tribunal was challenged in the Writ
Petition No. 1420 of 2006 in pursuance to the policy decision
of the Government to exclude the dairy societies from the
purview of the Act 1995 and to bring th ~m back under the Act
1964.
E
M. The State promulgated the Ordinance No.2/2006
excluding the milk dairy co-operative societies from the
societies covered by the Act 1995 and imported the fiction that
such dairies would be deemed to have been registered under
F the Act 1964, with effect from the date of registration under the
Act 1995.
N. Government Order dated 4.2.2006 was issued to give
effect to such amendments and also to take care of transitional
position, particularly providing that District Collector would
G appoint the person in-charge under Section 32(7) of the Act
1964 to manage the affairs of all primary milk producers cooperative societies till further elections or until further orders,
so that affairs of th.ose societies would be managed properly.
H
0. Writ Petitions were filed before the High Court by
AP. DAIRY DEVELOPMENT CORPORATION FEDERATION v.
21
B. NARASIMHA REDDY [DR. B.S. CHAUHAN, J.]
various District Milk Producers Co-operative Unions
A
challenging Ordinance No.2/2006 and consequential
Government Order dated 4.2.2006. The High Court vide interim
order dated 8.2.2006 stayed the oper9tion of the Government
Order dated 4.2.2006. Meanwhile, the Ordinance was
converted into the Act. By the impugned judgment dated
B
1.5.2007, the High Court allowed the writ petitions.
·
Hence, these appeals.
Rival Submissions:
· 3. Shri R. Venkataramani, Shri S.S. Prasad, learned
senior counsel appearing for the appellants have submitted that
the impugned judgment and order are untenable as the
Legislature is competent to amend the Act and while doing so
c
the Legislature in its wisdom had rightly decided to treat the
0
milk dairy co-operatives distinctly from all other kinds of
societies. Thus, no grievance of discrimination could be raised.
More so, there is no discrimination among the milk dairies, as
all such dairies have been treated as a separate class. The
amendment had not taken away any vested or statutory right
of the writ petitioners by the impugned Act. Both the Acts i.e.
E
Act 1964 as well as Act 1995 are based on the same set of
the co-operative principles and serve different sectors of the
co-operatives in different ways. Both the Acts co-exist and are
F
not mutually conflicting. Therefore, the question of doubting the
validity of the ·Act 2006 merely on the ground of having
retrospective application coulc not arise. The members of the
management committee of the District Unions/writ petitioners
could again contest the election for the posts in their respective
society under the Act 1964. Appointment of persons in-charge
was merely a temporary/transitional phase to facilitate such
G
elections and, therefore, there was no violation of fundamental
rights of any of the writ petitioners. The High Court erred in
recording the finding that the Act 2006 stood vitiated on the
ground that it had breached promissory estoppel. The
· Government undoubtedly, had transferred the management of
H
22
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A the assets to the District Unions and as the said District Unions
would continue with such management of assets, there was no
question of breach of any of the promises made by the State.
Doctrine of promissory estoppal does not apply to legislature.
There was a rational nexus to enact the Act 2006 as a large
B number of the milk dairy societies did not enter into the MoU
as required under Section 4(4) of the Act 1995. Such
legislative action could not be termed as arbitrary and
warranting ~ttraction of the provisions of Article 14 of the
Constitution of India. There were valid reasons for excluding the
C milk/dairy societies from the provisions of the Act 1995. Dairy
industry being peculiar and having distinct characteristics
required State's moderation and intervention.