REPCO Bank: Madras High Court Holds Nominal/ Associates- B Class Members Ineligible To Vote/ Contest In Delegate Elections

The Madras High Court has disposed of a batch of writ petitions filed by candidates challenging the election notice issued by the returning officer of Repatriates Co-operative Finance and Development Bank Ltd (REPCO Bank).

The grievance of the candidates was that the notice issued for elections to the post of delegates of the respondent society had B Class Nominal or Associate members as voters while only Ordinary A-Class Repatriate members are allowed to vote in terms of Section 26 of the Multi-State Co-operative Societies Act, 2002.

The election process commenced with the notice issued on 7th January, followed by the final voters' list published on 13th January. On 25th January, the final list of candidates contesting the elections were published after inviting nominations and scrutinising them. The elections are scheduled to be held on 6th February.

The question to be answered, as framed by the bench of Justice S.M Subramaniam was whether interference in the election process is warranted at this stage, and if yes, on what grounds should it be effected.

After referring to Section 25 of the 2002 Act that mentions about the persons eligible for becoming members of cooperative societies, the court noted that the subsequent Section 26 of the Act clearly remarks that nominal/ associate members can be admitted in a multi-state cooperative society if there is a corresponding provision in its bye-laws.

However, Section 26 is clear about such Nominal/ Associate members not being entitled to subscribe the shares of the society to have any such interest in the management including the right to vote, right to contest in elections or participate in the General Body Meeting etc. Therefore, the court held as below:

"Pertinently, Section 26 of the Act stipulates that a Multi State Co-operative society may, if provided in its by-law, admit a person as nominal associate member. Therefore, the choice is given to a Multi State Co-Operative Society either to provide bye-law for admission of nominal or associate member or to admit only ordinary members under Section 25 of the Act... Such nominal or associate member of the society shall not have the right to vote, elect as a director of the board or participate in the general body meetings..."

"As per above provision (Section 26), nominal or associate members of the society do not possess the right to vote or elect a director of the board or participate in the general body meeting. Therefore, any bye-law, either amended or pre-amended, conferring any right to the nominal or associate member of the society for right to vote or to participate in the election is directly in violation of Section 26 of the Act...Thus, the respondents (REPCO Bank) have no right to permit any nominal or associate members of the Society to vote or to contest in the election or to participate in the general body meeting. Even the Central Registrar (of Cooperative Societies) does not have the power to issue any amendment certificate in violation of Section 26 of the Act and the Act will prevail over any such amendment or approval of the amendment in any by the Central Registrar."

The petitioner stated that 'A' class members are the repatriates and the society itself was registered for the welfare of such repatriates. Another argument of the petitioner was that bye-law no. 4 of the society lays down that there are Ordinary Members or A-Class Members and Nominal/ Associate or B Class Members. Clause 13 of the bye-laws further stipulates that A-Class members will have the right to vote for Delegate elections to the General Body Meeting and contest elections. It does not permit B-Class members to vote in the elections or contest the elections as candidates.

According to the petitioners, the election notice issued now allows B- Class members to vote in the elections which is a clear cut violation of bye-laws. The petitioners also argued that the effected amendment has kept the two classes, i.e., Ordinary members and Nominal/ Associate members separate and the Nominal/ Associate members still do not have the right to vote or contest in Delegate Elections. Therefore, as far as B Class Members are concerned, they are still governed by the same provisions like that in the pre-amended bye-laws.

Accepting the argument of petitioners, the court noted that there has been no merger of A Class members and B Class members in the amended Bye-Laws. Even otherwise, Section 26 of the Parent Act bars bringing about such homogeneity in the character of members as far as the rights of those members are concerned, the court added.

With respect to the pre amended and amended bye-laws, the criteria of those who can become Ordinary/ A Class Members in bye-law no. 4 has been altered to include Clause (b) that contemplates the addition of individual non-repatriates, who are competent to contract under Section 11 of the Indian Contract Act.

"Admittedly, the amended bye-law no.4 is not under challenge, despite the fact that the amendment was effected in the year 2019. Even in respect of the challenges made, the same has not reached any finality. Thus, it is left open to the parties to challenge the amended bye-law no.4 before the competent authority under the Act and thereafter before the competent Forum or Court...As far as the present election is concerned, the amended bye-law no.4 would be applicable and in respect of bye-law No.5, the amendment was not accepted by the Registrar and therefore the bye-law No.5( talks about nominal members as given in section 26 of the parent act), with reference to the nominal or associates members- 'B' Class Member, remains as same and such 'B' class members shall not be permitted to vote or contest in the elections."

The court disposed of the writ petitions accordingly and directed that only Ordinary members-A Class Members must be permitted to vote in the upcoming elections for choosing delegates. Nominal/ Associate members-B Class Members won't be permitted to vote or contest in the elections. As far as A Class Members are concerned, the amended Clause 4 of the bye-laws in 2019 will be applicable.

Case Title: S.Anthonydoss v. Union of India & Ors & Connected Matters

Case No: W.P.No.1776, 1859, 1969 of 2022, WMP.Nos.1935, 1936, 2005, 2009, 2130 & 2131 of 2022

Citation: 2022 LiveLaw (Mad) 46

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