Courts Should Not Sit Over Commercial Wisdom Of General Body Of Cooperative Society : Supreme Court

The Supreme Court observed that the Courts should not sit over the commercial wisdom of the General Body of the Cooperative Society as an Appellate Authority.

The bench of CJI UU Lalit, Justices S. Ravindra Bhat and JB Pardiwala observed that the Co-operative Society is to function democratically and the internal democracy of a society, including resolutions passed in accordance with the Act, the Rules, and the bye-laws have to be respected and implemented.

In this case, the Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. resolved to enter into an agreement with Hi-Rise for the purpose of demolition of old administrative building and for construction of the new administrative building. In a litigation that followed, the High Court in the impugned order held that (1) neither the Act nor the Rules permits the society to ask a third party to develop its building, more particularly when the party has a commercial interest in the same, and (2)The members on their own should have undertaken the commercial activity and that would have been in accordance with the co-operative spirit.

In appeal, the bench referred to the history of co-operative movement in India and also the 97th Amendment to the Constitution of India.

"We are of the view that the High Court is not correct in saying that the Appellant Society could not have entered into an agreement with a third party developer as the Act or the Rules do not provide for the same. It is too much for the High Court to expect that all the members of the Appellant Society should on their own contribute and undertake the development of the new administrative building", the bench observed.

The court also noted that the decision of the General Body of the Society to redevelop the subject property has not been challenged at all. While allowing the appeal, the court observed:

Not open to the Court to sit over the said wisdom of the General Body as an Appellate Authority

"Besides, no provision in the Co-operative Societies Act or the rules or any other legal provision has been brought to our notice which would curtail the right of the Society to redevelop the property when the General Body of the Society intends to do so. Essentially, that is the commercial wisdom of the General Body of the Society. It is not open to the Court to sit over the said wisdom of the General Body as an Appellate Authority. Merely because one single member in minority disapproves of the decision, that cannot be the basis to negate the decision of the General Body, unless it is shown that the decision was the product of fraud or misrepresentation or was opposed to some statutory prohibition. That is not the grievance made before us. In the present case, the General Body took a conscious decision after due deliberations for many years to redevelop its property. Even with regard to the appointment of the "Hi-Rise" as the Developer, the record shows that it was decided by the General Body of the Society after examining the relative merits of the proposals received from the developers."

 members join as human beings and not as capitalists

"The basic principles of co-operation are that the members join as human beings and not as capitalists. The Co-operative Society is a form of organization wherein persons associate together as human beings on the basis of equality for promotion of economic interest of its members. This movement is a method of doing the business or other activities with ethical base. "Each for all and all for each" is the motto of the co-operative movement. This movement not only develops latent business capacities of its members but produces leaders; encourages economic and social virtues, honesty and loyalty, becomes imperative, prospects of better life, obtainable by concerted effort is opened up; the individual realises that there is something more to be sought than mere material gains for himself. So, in fact, it being a business cum moral movement, and the success of the Co-operative Society depends upon the reality with which one of the members work for the achievement of its objects and purpose."

Co-operative Movement is both a theory of life and a system of business.

The entire legislative scheme goes to show that the Co-operative Society is to function democratically and the internal democracy of a society, including resolutions passed in accordance with the Act, the Rules, and the bye-laws have to be respected and implemented. The Co-operative Movement is both a theory of life and a system of business. It is a form of voluntary association where individuals unite for mutual aid in the production and distribution of wealth upon principles of equity, reason and common good. It stands for distributive justice and asserts the principle of equality and equity ensuring to all those engaged in the production of wealth a share proportionately commensurate with the degree of their contribution. It provides as a substitute for material assets, honesty and a sense of moral obligation and keeps in view the moral rather than the material sanction. The movement is thus a great Co-operative movement

Member has no independent rights except those given to him by the statute and bye-laws.

Once a person becomes a member of the Co-operative Society, he loses his individuality with the Society and he has no independent rights except those given to him by the statute and bye-laws. The member has to speak through the Society or rather the Society alone can act and speaks for him qua the rights and duties of the Society as a body.

Case details

Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. vs Aloke Kumar | 2022 LiveLaw (SC) 849 | S.L.P. (Civil) No. 506 of 2020 | 13 October 2022 | CJI UU Lalit, Justices S. Ravindra Bhat and JB Pardiwala

Counsel: Adv Joydeep Mazumdar for appellant, Adv Soumo Palit for respondent

Headnotes

Co-operative Societies - West Bengal Co-operative Societies Act, 1940 - It is not open to the Court to sit over the commerical wisdom of the General Body as an Appellate Authority. Merely because one single member in minority disapproves of the decision, that cannot be the basis to negate the decision of the General Body, unless it is shown that the decision was the product of fraud or misrepresentation or was opposed to some statutory prohibition -Co-operative Society is to function democratically and the internal democracy of a society, including resolutions passed in accordance with the Act, the Rules, and the bye-laws have to be respected and implemented. (Para 54)

Co-operative Societies - Once a person becomes a member of the Co-operative Society, he loses his individuality with the Society and he has no independent rights except those given to him by the statute and bye-laws. The member has to speak through the Society or rather the Society alone can act and speaks for him qua the rights and duties of the Society as a body. (Para 53)

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