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the Co-operative Societies Act, 1912
Section 23 in the Co-operative Societies Act, 1912
Article 19(1)(c) in The Constitution Of India 1949
Section 22 in the Co-operative Societies Act, 1912
Section 9 in the Co-operative Societies Act, 1912

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Bombay High Court
The Talmakiwadi Co-Operative ... vs The Divisional Joint Registrar, ... on 9 November, 1999
Equivalent citations: 1999 (1) BomCR 393
Author: A Savant
Bench: A Savant



ORDER
 

A.V. Savant, J.

1. Heard all the learned Counsel; Shri Dharmaraj for the petitioner-society, Shri Jadhav Assistant Government Pleader for respondent Nos. 1 and 2 and Shri Bhadrashete for respondent No. 3.

2. This petition is filed by the Talmakiwadi Co-operative Housing Society Ltd. (for short "the Society"). The society has been duly registered in accordance with the provisions of the Maharashtra Co-operative Societies Act, 1960 (for short "Societies Act"). It has challenged two orders namely the order dated 7th September, 1995 passed by the Deputy Registrar, Co-operative Societies respondent No. 2 and the appellate order dated 26th April, 1996 passed by the Divisional Joint Registrar, respondent No. 1 dismissing the society's appeal. In the result, the order dated 7th September, 1995 passed by the second respondent has been confirmed. Under the order dated 7th September, 1995 the second respondent has directed the society to amend its bye-laws. The order has been passed in exercise of the power vested in him under section 14(2) of the Societies Act. A few facts necessary to appreciate the controversy may be stated.

3. The society claims to have been registered under the erstwhile Bombay Co-operative Society Act, 1925 some time in April, 1941. It is a Housing Society and it has 10 buildings at Javji Dadaoji Marg, Tardeo, Mumbai. The 10 buildings have 240 tenements. Under the bye-laws of the society initially registered, bye-law No. 7 dealing with membership required that the members to be elected by the Committee to be the members of the society should belong to Kanara Saraswat community. Bye-law No. 7 read as under :

"Bye-law No. 7: All persons who have signed the application for registration are original members. Other members shall be elected by the committee provided that all members shall belong to the Kanara Saraswat community."

4. Under the impugned orders it has been directed that the petitioner society should amend bye-law No. 7 so as to delete the requirement of a member belonging to the Kanara Saraswat community. Under the amendment, as directed, it has been provided that: (a) a person who is competent to enter into contract under the Indian Contract Act, 1872 would be eligible to become a member subject to his fulfilling certain requirements; (b) a minor or a person of unsound mind, inheriting share or interest of the society may be eligible for admission through his guardian or legal representative subject to certain conditions being fulfilled and (c) the admission to a person as a member of the society was to be subject to the approval of the Collector of the District if the society had been given land by the Government. The point to be emphasised is that the requirement of a member belonging to the Kanara Saraswat community was dispensed with under the amended bye-law. The reason given in the impugned order why amendment was considered necessary is as under:

"As the old bye-law No. 7 is contradictory to the provisions of section 22(1) of Maharashtra Co-operative Societies Act."

Thus a Co-operative Housing Society in a cosmopolitan city like Mumbai is directed to amend bye-law No. 7 dealing with membership which had required that a member must belong to the Kanara Saraswat community. It is the legality of this order that is challenged before me in the present petition.

5. In the light of the submissions advanced by the learned Counsel before me, the following points arise for my consideration.

i) Whether the petitioner-Society can claim the fundamental right guaranteed under Article 19(1)(c) of the Constitution of India, namely, the right to form associations or unions and whether the impugned orders adversely affect such a right, if available to the petitioner society.?

ii) Whether insistence on the requirement that the applicant must belong to the Kanara Saraswat community to be eligible to become a member of the society is permissible under the scheme of the provisions of the Societies Act and whether the mere fact that the applicant does not belong to the said community is a sufficient cause within the meaning of sub-section (1) of section 23 of the Societies Act to refuse admission to membership of the society.

iii) Whether the power under section 14(2) of the Act has been exercised lawfully while passing the impugned orders.

6. Before answering the above question, some more facts need to be stated. The fourth respondent Taranath Invally was admitted as a member of the society in January, 1991. He belongs to the Kanara Saraswat community. In July, 1994, he gave notice to the society of his intention to transfer the shares in respect of his flat to the husband of the third respondent Smt. Amita Mehta. Neither respondent No. 3 nor her husband Shri Haresh Mehta belong to Kanara Saraswat community. On 31st July, 1994, the Managing Committee of the society rejected the proposal of the fourth respondent for transfer of his shares to the husband of the third respondent. This Resolution passed by the Managing Committee on 31st July, 1994 was confirmed by the General Body of the society in its meeting held on 14th August, 1994. The fourth respondent, therefore, complained to the second respondent Deputy Registrar-about the arbitrary action on the part of the society in refusing to accept the transfer on the ground that the transferee did not belong to Kanara Saraswat community. On 21st October, 1994 the second respondent wrote to the Chairman of the society pointing out that it was necessary and desirable in the interest of the society to amend the bye-laws of the society as indicated in the attached statement. The statement indicated that existing bye-law No. 7 proposed amended bye-law and the reason for the amendment which I have reproduced above. The notice was issued to the Chairman in accordance with the provisions of sub-section (1) of section 14 of the Act read with sub-rule (1) of Rule 13 of the Maharashtra Co-operative Societies Rules, 1961 (for short the 1961 Rules).

7. On 26th November, 1994, the Advocate for the society wrote to the second respondent pointing out that the bye-laws of the society were duly approved when the society was registered in the year 1941 and that the society was not willing to accept the proposed amendment and disputed the validity of the action proposed under the letter dated 21st October, 1994. On 4th September, 1995, the second respondent petitioner of society again wrote to the Chairman of the society referring to the earlier correspondence and pointing out that the wording of bye-law No. 7 was "contradictory to the provisions of section 22(1) of M.C.S. Act, 1960". The Registrar observed that it was necessary and in the interest of the society to amend the said bye-law. It was further observed that refusal to transfer the shares to Haresh Mehta or his transferee respondent No. 3 on a communal basis would be wholly unjustified. The second respondent, therefore, indicated that he would be required to pass an order which must not support the communal approach.

8. On 7th September, 1995, second respondent passed the impugned order. He referred to two Government circulars dated 6th February, 1986 and 8th August, 1990. Circular dated 6th February, 1986 refers to the fact that a committee was appointed for suggesting model bye-laws for all the Co-operative Housing Societies and the Committee had prepared the model bye-laws which were available with the Department. It was pointed out that in accordance with the provisions of the Societies Act, certain amendments may be necessary in the bye-laws of the societies in conformity with the model bye-laws. In the circular dated 8th August, 1990, it was emphasised that there was a need to have uniform model bye-laws for the Co-operative Housing Societies to ensure uniformity of action and towards achieving this object, the model bye-laws should be adopted by the societies. Making a reference to the said circulars, the Deputy Registrar concluded that it was necessary to delete the requirement that a person must belong to Kanara Saraswat community to be eligible to become a member of the petitioner society. Accordingly, an order has been passed in exercise of his powers under section 14(2) directing that the bye-laws should be amended. As stated earlier, this order has been confirmed in appeal that was filed by the society.

9. The first question which arises for my consideration is whether the petitioner society can claim a fundamental right to form an association under Article 19(1)(c) of the Constitution. It becomes necessary to consider this aspect since Shri Dharmaraj appearing for the society has strenuously urged that the petitioner society has a fundamental right to form an association as guaranteed by Article 19(1)(c). Counsel went on to contend that such a right to form an association includes the right to continue to form an association on the same lines on which the society was originally formed. Article 19(1) guarantees to every citizen certain fundamental rights and sub-clause (c) deals with the right to form associations or unions. Clause (4) of Article 19 makes it clear that nothing in sub-clause (c) of Clause (1) shall affect the operation of any existing law, insofar as it imposes, or prevent the State from making any law imposing, in the interest of sovereignity and integrity of India or pubic order, or morality, reasonable restrictions on the exercise of a right conferred by the said sub-clause. I am not concerned with the rest of the Article. The submission proceeds on the footing that if the society was duly registered in April, 1941 under the provisions of the erstwhile Bombay Co-operative Societies Act, 1925, by virtue of the provisions of section 166(2) of the 1960 Act, the society shall be deemed to have been registered under the 1960 Act. There can be no controversy about this aspect of the matter. The point, however, is whether a corporate sole, like the petitioner society, can claim the fundamental right to form an association guaranteed to a citizen under Article 19(1)(c) of the Constitution. Section 36 of the Societies Act makes it clear that registration of the society confirms upon it a status of a corporate body by name under which it is registered. It has a perpetual succession and common seal with power to acquire, hold and dispose of the property, to enter into contracts to institute and defend suits and other legal proceedings and to do all such things as are necessary for the purpose for which it is constituted. There is thus no controversy that the society is a corporate body. The question whether a corporate body like the petitioner society can claim a fundamental right which is available to the citizen under Article 19(1)(c) of the Constitution has been considered by the Apex Court. I will make a reference to some of the decided cases.

10. In In Municipal Committee, Amritsar and another etc. v. The State of Punjab and others, , a question arose whether the Municipal Committee could claim fundamental rights guaranteed by Article 19. The rights claimed were under Article 19(1)(b) namely to assemble peacefully and without arms and under Article 19(1)(d) namely to move freely within the territory of India. Dealing with Writ Petition No. 295 of 1968 filed by the Municipal Committee, Amritsar challenging the orders passed by the Deputy Commissioner, Amritsar in connection with the Cattle Fair that was intended to be held, the Apex Court held that the Municipal Committee was not a citizen within the meaning of Art 19. The Municipal Committee was, therefore, not entitled to claim protection of any of the fundamental rights under Article 19.

11. In Bennett Coleman and Co. Ltd. and others v. Union of India and others, , the Constitution Bench of the Apex Court was considering the grievance of the share-holders of the Company regarding violation of their fundamental right. Relying upon its earlier decision in R.C. Cooper, v. Union of India, Bank Nationalisation Case , the Apex Court held in para 22 of its judgment at pages 114-115 that the share holder of the company was entitled to protection of Art. 19. Individual's right as a share holder was not lost by reason of the fact that he was share-holder of the company. While emphasising the right of an individual share-holder under Article 19(1)(a), it was emphasised that the presence of the company as a petitioner did not bar grant of relief to the share holders.

12. The Apex Court again considered the question which directly arose in the case of The Divisional Forest Officer v. Bishwanath Tea Co. Ltd., . It was held that a juristic person such as a Corporation was not entitled to any fundamental right guaranteed under Article 19. The sole petitioner before the High Court in that case was the company namely Bishwanath Tea Co. Ltd. It was a company incorporated under the Companies Act and it claimed right under Art. 19(1)(g) which claim was upheld by the High Court. Apex Court held that the company, not being a citizen, was not entitled to complain of breach or violation of the provisions of Article 19(1)(g). A reference was made to certain earlier decisions in para 7 of the Judgment at page 1372 and I find it convenient to reproduce the said observations.

"7. But we would first address ourselves to the question of law. Art 226 confers extraordinary jurisdiction on the High Court to issue high prerogative writs for enforcement of the fundamental rights or for any other purpose. Undoubtedly, the respondent contended that its fundamental right under Article 19(1)(g) to carry on trade has been violated. The High Court overlooked the well settled legal position that a juristic person such as a Corporation is not entitled to any of the freedoms guaranteed by Article 19. The respondent was the sole petitioner in the High Court. It is a company incorporated under the Companies Act. The fundamental right claimed under Article 19(1)(g) is to practice any profession or carry on any occupation, trade or business. The respondent (company) contended that it had a right to carry on its trade or business of cultivating and raising a tea garden and as part of it to cut timber and remove the same from the leased area without the payment of royalty and that insistence upon payment of royalty unsupported by law is an unreasonable restriction denying the fundamental right guaranteed to the respondent. Art 19(1)(g) guarantees the fundamental freedom to a citizen. The respondent not being a citizen was not entitled to complain of breach or violation of fundamental right under Article 19(1)(g), (See State Trading Corporation of India Ltd. v. The Commercial Tax Officer, Vishakhapatnam), and (Tata Engineering and Locomotive Co. v. State of Bihar), . However, the shareholders of a company can complain of infringement of their fundamental rights. See Bennett Coleman and Co. v. Union of India, . Such is not the case pleaded. Therefore, the writ petition on the allegation of infringement of fundamental right under Article 19(1)(g) at the instance of respondent company alone was not maintainable."

In the result the appeal filed by the Divisional Forest Officer was allowed and judgment of the High Court was set aside and the petition filed by the company was dismissed.

13. In view of this settled legal position, I have no hesitation in coming to the conclusion that the petition filed by the sole petitioner before me-

society- which is a corporate sole cannot allege violation of the fundamental right under Article 19(1)(c). While the Constitution guarantees certain rights to "persons", certain other rights are guaranteed only to the citizens. A Co operative Society, not being a citizen cannot claim the fundamental right guaranteed under Article 19(1)(c) of the Constitution. There is thus no sub stance in the first contention of Shri Dharmaraj that the society is entitled to complain of violation of its fundamental right as a result of passing of impugned orders by respondent Nos. 1 and 2. Shri Bhadrashete for respondent No. 3 is justified in contending that no such fundamental right is avail able to a Co-operative Society and hence the impugned orders cannot be faulted on the ground of the alleged violation of the fundamental right under Article 19(1)(c) of the Constitution. In view of this conclusion, my answer to the first contention is that the petitioner society which is the sole petitioner in this petition cannot complain of the alleged violation of fundamental right under Article 19(1)(c). The second aspect of the first question, namely, whether the impugned orders affect such a fundamental right does not, therefore, survive for my consideration since the society has no such fundamental right under Art. 19(1)(c) of the Constitution. My answer to the first question is, therefore, in the negative.

14. In view of my answer to the first question, the second question assumes importance. The question now is whether insistence on the requirement that the applicant must belong to Kanara Saraswat community to be eligible to become a member of the petitioner society is permissible under the scheme of the provisions of the Societies Act and whether the mere fact that the applicant does not belong to the said community is a sufficient cause within the meaning of sub-section (1) of section 23 of the Societies Act to refuse admission to membership of the society. It is necessary, at this stage, to consider some of the provisions of the Co-operative Societies Act as also the bye-laws of the society. The Preamble to the Act says that the Act has been enacted with a view to providing for the orderly development of the Co-operative movement in the State in accordance with the directive principles of State Policy enunciated in the Constitution of India. Under section 2(16) of the Act, a Housing Society has been defined to mean a society, the object of which is to provide its members with open plots for housing, dwelling houses or flats, or if open plots, the dwelling houses or flats are already acquired, to provide its members common amenities and services. Section 4 of the Act provides that a society, which has as its objects the promotion of the economic interests or general welfare of its members or of the public, in accordance with co-operative principles or a society established with the object of facilitating the operations of any such society, may be registered under the Act. I will deal with the objects of the petitioner society at a later stage.

15. Section 9 of the Societies Act provides that if the Registrar is satisfied that a proposed society has complied with the provisions and the rules, or any other law for the time being in force, or policy directives issued by the State Government under section, 4 and that its proposed bye-laws are not contrary to the Act or the rules, he may register the society and its bye-laws. Section 13 of the Act deals with the procedure to voluntarily amend the bye-laws. I am concerned with section 14 where the Registrar exercises his powers to direct amendment of the bye-laws. Relevant rule is Rule 13 which lays down the manner for exercise of the power under section 14 of the Act. It may incidentally be mentioned that under Rule 10 of the said 1961 Rules, a housing society has been classified into three Sub- clauses viz. (i) Tenant Ownership Housing Society, a society where land is held either on leasehold or free hold basis by the societies and houses are owned or are to be owned by members; (ii) Tenant-Co-partnership Housing Society which holds both land and building either on lease hold or free hold basis and allot them to their members; and (iii) Other Housing Societies such as a Housing Mortgage Societies and House Construction Societies. There is no controversy before me that the petitioner society falls in the second category and is a tenant co-partnerdhip housing society.

16. Section 22 of the Societies Act which falls in Chapter III deals with "members and their rights and liabilities". The relevant portion reads as under:

"22. Person who may become member:-

(1) Subject to the provisions of section 24, no person shall be admitted as a member of society except the following, that is to say:

(a) an individual, who is competent to contract under the Indian Contract Act, 1872,

(b) a firm, company or any other body corporate constituted under any law for the time being in force, or a society registered under the Societies Registration Act, 1860;

(c) a society registered, or deemed to be registered under this Act;

(d) the State Government or the Central Government;

(e) a local authority;

(f) a public trust registered under any law for the time being in force for the registration of such trusts:

Provided that, the provisions of clause (a) shall not apply to an individual seeking admission to a society exclusively formed for the benefit of students of a school or college:

Provided further that, subject to such terms and conditions as may be laid down by the State Government by general or special order, a firm or company may be admitted as a member only of society which is a federal or urban society or which conducts or intends to conduct an industrial undertaking.

Provided also that, any firm or company, which is immediately before the commencement of this Act, a member of a society deemed to be registered under this Act, shall have, subject to the other provisions of this Act, the right to continue to be such member on and after such commencement."

Section 23 dealing with "Open membership", in so far as it is relevant reads as under:

23. Open membership: (1) No society shall, without sufficient cause, refuse admission to membership to any person duly qualified therefor under the provisions of this Act and its bye-laws.

(1-A).....

(2).....

(3).....

(4).....

17. A bare reading of the above provisions of the Act makes it clear that while registering a housing society also, care has to be taken to ensure that there is compliance with the object of promotion of economic interests or general welfare of its members or of the public in accordance with the cooperative principles. Under section 9 the Registrar can ensure compliance with the provisions of the Act and Rules as also the policy directives issued by the State Government. He has further to ensure that the proposed bye-laws are not contrary to the provisions of the Act or Rules. Section 22 makes it clear that a person who is competent to enter into contract is eligible to become a member of the society. Proviso to sub-section (1) carves out certain exception with which I am not concerned. Section 23 dealing with the concept of open membership makes it clear that no society shall without sufficient cause, refuse admission to membership to any person duly qualified therefor under the provisions of the Act and bye-laws. When a reference is made to the "Act' under sub-section (1) of section 23, it will take in its sweep the provisions mentioned above viz; sections 4, 9 and 22. A reference to "bye-laws", in sub-section (1) of section 23 would obviously mean such of the bye-laws as are not inconsistent with the provisions of the Act. Under section 72 of the Act, the final authority of the society vests in the General Body of the Members in the general meeting summoned in such a manner as may be specified in the bye-laws. The bye-laws which are registered under section 9 must necessarily conform to the provisions of the Act and must not be contrary thereto. Before coming to the bye-laws of the petitioner society, I must mention that the bye-laws cannot be inconsistent with the provisions of the statute. It is well settled that a bye-law of a co-operative society framed in pursuance of the provisions of the Act, cannot be held to be a law or to have a force of law. Bye-laws of the Co-operative Society are in the nature of Articles of Association of the company incorporated under the Companies Act. They may be binding between the persons affected by them, but they do not have the force of a statute. This has been held by the Apex Court in the case of Co-operative Central Bank Ltd. and others v. Additional Industrial Tribunal, Andhra Pradesh, Hyderabad and others, . The relevant observations are to be found in para 10 of the judgment at page 252. This position was reiterated by the Apex Court in Babaji Kondaji Garad v. Nasik Merchants Co-operative Bank Ltd., Nasik, reported at . The relevant observations are to be found at page 780 where referring to the earlier decision in the case of Co-operative Central Bank Ltd. (supra), the Apex Court declared that the bye-laws are neither statutory in character nor do they have the statutory flavour so as to be raised to the status of law. If, therefore, there was any conflict between a statute and the subordinate legislation like the bye-law, it did not require elaborate reasoning to state that the statute prevails over the subordinate legislation and the bye-law which is not in conformity with the statute has to be ignored. In order to give effect to the statutory provisions, the statutory provision has precedence and must be complied with. It is, therefore, well settled that bye-laws can never be inconsistent with the provisions of the Act. I have already referred to the scheme of the provisions of the Act and in particular to sections 4, 9, 22 and 23. Admittedly, the third respondent or her husband was a person competent to enter into contract under the Indian Contract Act, 1872 and fulfilled all the requirements of sub-section (1) of section 22 to be eligible to become a member. The society could not refuse admission to the third respondent or her husband who were duly qualified under the provisions of the Act. The society, however, took shelter under bye-law No. 7 and that has been pleaded as sufficient cause within the meaning of sub-section (1) of section 23. While no bye-law can override the provisions of the Act, it becomes necessary to make a brief reference to the bye-laws of the society as well.

18. Bye-law No. 2 sets out the objects of the society and it is necessary to reproduce the same.

2. The objects of the society shall be to carry on the trade of building, and of buying, selling, hiring, letting and developing land in accordance with co-operative principles and to establish and carry on social, recreative and educational work in connection with its tenants and the society shall have full power to do all things it deems necessary or expedient for the accomplishment of the objects specified in its bye-laws, including the powers to purchase, hold, sell, exchange, mortgage, rent, lease, sub-lease, surrender, accept surrenders, of and deal with lands of any tenure and to sell by installments and subject to any terms or conditions and to make and guarantee advances to members for building or purchasing property and to erect, pull down, repair, alter or otherwise deal with any building thereon.

The objects are not confined to members of any particular community leave alone the Kanara Saraswat community. It is a usual housing society and there is nothing in the object clause so as to indicate that the objects can be achieved only if the membership is confined to Kanara Saraswat community. Housing problem is common to the citizens of this metropolis. It makes no difference whether one belongs to Kanara Saraswat community or some other community or even religion. It is only when we come to bye-law No. 7 that we find that a specific reference to Kanara Saraswat community is made. Bye-law No. 7 reads as under :

"All persons who have signed the application for registration are original members. Other members shall be elected by the Committee provided that all members shall belong to the Kanara Saraswat Community. Two adverse votes are sufficient to exclude an applicant. Every person shall pay Re. 1/- on applying for admission for which he shall receive a copy of the bye-law. In cases where the application is refused the entrance fee shall be returned."

19. If the requirement that a person must belong to Kanara Saraswat community is held to be inconsistent with the scheme of the provisions of sections 4, 9, 22 and 23 of the Act, it must follow that insistence that a person must belong to Kanara Saraswat community to be eligible to become a member of the petitioner society is ultra vires the said provisions of the Act. Bye-law No. 7 in so far as it insists on every member belonging to Kanara Saraswat community would, therefore, be contrary to the scheme of the said provisions and would be liable to be struck down as ultra vires the said provisions. Let me, however, consider the question as to whether the failure to comply with the requirement of belonging to Kanara Saraswat community is sufficient cause within the meaning of sub-section (1) of section 23.

20. The question is whether the bye-laws of a co-operative housing society can insist on restricting its membership to persons belonging to a particular community, faith or even religion? In a cosmopolitan city like Mumbai where every one talks of economic liberalisation if not golbalisation, this question arises quite often. I would make a brief reference to some of the decisions where a similar question arose for consideration and the courts have frowned upon such an attitude of restricting the membership to a particular caste, community or even religion. In Maharashtra Brahman Sahakari Bank Ltd. Indore and another v. State of Madhya Pradesh and others. Misc. Petition No. 626 of 1973 decided on 6th November, 1979. Indian Co-operative Cases 1960-1990 Volume III page 1, a Division Bench of Madhya Pradesh High Court considered the question as to whether the order of Registrar passed under section 12 of the Madhya Pradesh Co-operative Societies Act, 1960, which is pari materia with section 14 of the Maharashtra Act, directing the society to make its membership open to all communities was violative of the rights of the society under Article 19(1)(c) to form an association. As the name of the petitioner Bank suggested, under bye-law No. 10 of the Society, the petitioner Bank's membership was confined only to the Maharashtrian Brahmins. It is true that the Reserve Bank of India had, after inspection, advised the petitioner Bank to follow the principle of open membership by suitably amending the bye-laws. The Bank having objected to such an amendment, Registrar passed the order on 19th April, 1973 directing amendment of the bye-laws in exercise of his powers under section 12(2) of the M.P. Act. The learned Chief Justice G.P. Singh who spoke for the Court observed that one of the important principles of co-operation was an open door policy. Relying upon the Full Bench decision of Madhya Pradesh High Court in C.F.S. Ltd., Lilakari v. State of M.P., 1974 M.P.L.J. 1 at page 9, the learned Chief Justice observed that the principle of open membership would mean that there was no bar for membership on the ground of caste, sex, religion or political affinity. A reference was made to the decision of the Apex Court in Smt. Damyanti Naranga v. Union of India, and it was held that there was no substance in the contention of the Bank that the order of the Registrar directing, amendment of the bye-laws violated the fundamental right of the petitioner under Article 19(1)(c) of the Constitution. The question as to whether a Co-operative Society can claim the fundamental right under section 19(1)(c) of the Constitution did not arise for consideration before the Madhya Pradesh High Court in the case of Maharashtra Brahman Sahakari Bank Ltd. Nevertheless, emphasising the principle of open membership, it was held that the order passed by the Registrar directing amendment of the bye-laws did not violate the petitioner's fundamental right under section 19(1)(c) of the Constitution.

21. In Zoroastrain Co-operative Housing Society Ltd. and another v. District Registrar, Co-op. Societies (Urban) and others, , a learned Single Judge of Gujarat High Court M.S. Parikh, J., was called upon to consider the question of validity of the bye-law of the society restricting the membership to Parsis and imposing a condition that the member cannot alienate property to a non-Parsi. Parikh, J., held that restriction based on religion, race or caste contained in a bye-law, on the member's right in a co-operative housing society to transfer his membership coupled with his right to alienate his interest in the immoveable property would be bad in law. The concept of membership as envisaged in section 24 of Gujarat Act read with Rule 12(2) of the Gujarat Rules, would take within its sweep, right of a person of being a member of a society to be considered fairly and without artificial restriction or without any social, political racial or religious discrimination. Thus, it was held that such an unfair restriction would be unreasonable and can be legitimately dealt with by the appropriate authorities under section 24 of the Act read with Rule 12(2) of the Rules. Like the case before me, in the Gujarat case as well, the petitioner society was registered under the Bombay Co-operative Societies Act, 1925 with the object of constructing houses for its members and the bye-laws restricted the membership to Parsis. Both the societies were registered under the erstwhile Bombay Co-operative Societies Act, 1925 and may have adopted the same model bye-laws. Parikh, J., made a reference to two Division Bench judgments of Gujarat High Court in (i) Jain Merchants Co-op. Housing Society Ltd. v. H.U.F. of Manubhai, 1995(1) 36 Guj. L.R. 19 and (ii) Amreli District Co-operative Sale and Purchase Union v. State of Gujarat, 1984(2) 25 Gujarat L.R. 1244. In the said two Division Bench decisions, Gujarat High Court had rejected the contention that the society had a absolute or unfettered right to admit, deny or refuse membership to any person. In fact, it was held that the right to be considered for being a member of the society has been recognised by bye-law and such consideration would always mean a fair consideration and, therefore, refusal of membership on flimsy and cavalier ground has always been open to challenge in courts. It is held that there is a right to be considered for being a member and the consideration means a fair consideration, which is implicit in the very nature of things that membership cannot be refused or denied at pleasure and in case the membership is refused on any flimsy or cavalier ground, the matter can be agitated before the Court of law.

22. The learned Single Judge of Gujarat High Court made a reference to the provisions of section 10 of the Transfer of Property Act dealing with the conditions regarding alienation and held that section 10 provides that where property is transferred subject to a condition or limitation absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, such a condition would be void- It was, therefore, held that the condition imposed by bye-law on a member that he cannot alienate the property to a non Parsi would be prima facie illegal. Reliance was placed on the provisions of Article 300A of the Constitution under which it is provided that no person shall be deprived of his property save by authority of law. A reference was also made to the decision of the Apex Court in Ramesh Himmatlal Shah v. Harsukh Jadhavji Joshi, where it has been held that a flat in a tenant co-partnership society is liable to be attached and sold in execution of the decree against the member in whose favour or for whose benefit the same has been sic. allotted. Relying upon certain decisions of the Apex Court and of the Gujarat High Court, the learned Single Judge came to the conclusion that the restriction in the bye-laws based on religion, race or caste on the member's rights in a co-operative housing society to transfer his membership coupled with his right to alienate the interest in the immoveable property would be bad in law.

23. I will now refer to some of the decisions of the Apex Court having a bearing on the second point framed for my consideration viz. whether insistence in the bye-laws of the petitioner society that a person must belong to the Kanara Saraswat community to be eligible to become its members, can be justified. In para 17 above, I have already referred to the decision of the Apex Court in Co-operative Central Bank Ltd. and others v. Additional Industrial Tribunal, Andhra Pradesh, Hyderabad and others, . Dealing with the provisions of the Andhra Pradesh Co-operative Societies Act, of 1964, Apex Court held that bye-laws of the Co-operative Society framed in pursuance of the provisions of the Act cannot be held to be law or to have the force of law. The bye-laws that are contemplated by the Act can be merely those which govern the internal management business or administration of a society. They are in the nature of Articles of Association of a company incorporated under the Companies Act. They are binding between the persons affected by them, but they do not have the force of a statute. The observations to this effect are to be found in para 10 of the report at page 252. This view has been reiterated in Babaji Kondaji Garad's case (supra) referred to in para 17 above.

24. In Ramesh Himmatlal Shah v. Harsukh Jadhavji Joshi, , the Apex Court was considering the question as to whether a fiat in a tenant co-partnership housing society registered under the Maharashtra Co-operative Societies Act can be attached and sold in execution of a decree against the allottee. This Court had taken a view that such a flat cannot be attached and sold in execution of the decree against the allottee. See 1974(76) Bom.L.R. 375. Reversing the decision of this Court, the Apex Court held that the flat in a tenant co-partnership housing society registered under the Maharashtra Act was liable to attachment and sale in execution of a decree against the member in whose favour or for whose benefit the same has been allotted by the society. The right to occupy the flat of such a type assumes significant importance and acquires under the law the stamp of transferability in furtherance of the interest of commerce. In absence of clear and unambiguous legal provisions to the contrary, it will not be in public interest nor in the interest of commerce to impose a ban on saleability of these flats by a tortuous process of reasoning. The prohibition, if intended by the legislature, must be in express terms. The Apex Court also considered the restrictions in section 29(2) of the Maharashtra Act that a member may not transfer his interest in the property prior to one year and that the transfer should be made to an existing member of the Society or to a person whose application for membership has been accepted by the Society. However, the Apex Court held that there was nothing to show that contravention of such a bye-law like bye-law No. 710 in Ramesh H. Shah's case would make the assignment void under the Act. In the light of ratio of this decision, one wonders what would happen if the flat of a member of the petitioner society who belongs to Kanara Saraswat community was attached in execution of a decree against him and was sold to a person who does not belong to Kanara Saraswat community. In my view, having regard to the ratio of the decision of the Apex Court in Ramesh H. Shah's case, the provisions in bye-law No. 7 cannot disentitle the auction purchaser from purchasing the property in execution of the decree. If there is an absolute prohibition against the transfer of a right to occupy the flat or even transfer of a share, bye-law No. 7 would be void and bad in law and cannot prevent a person who does not belong to Kanara Saraswat community from acquiring the interest in such a flat as a result of the execution of the decree obtained against the member of the society.

25. In Smt. Damyanti Naranga v. Union of India, , the Apex Court was considering the extent of a right to form an association under Article 19(1)(c) of the Constitution. In the context of provisions of Hindi Sahitya Sammelan Act, 1962, it was held that the right to form an association necessarily implies that the persons forming association also have a right to continue to be associated with only those whom they voluntarily admit in the association. Any law by which the members are introduced in the voluntary association without any option being given to the members to keep them out or any law which takes away membership of those who have voluntarily joined it will be violating the right to form an association. I may hasten to add that the decision in Smt. Damayanti Narang's case has been explained by a later Constitution Bench decision in Daman Singh and others etc. v. State of Punjab and others, . In para 9 of the judgment in Daman Singh's case at page 979, the Apex Court dealing with Smt. Damayanti Narang's case observed as under :

9. The answer to the principal question posed by Shri Ramamurthi appears to us to be so plain as to merit no further discussion. We must however notice here Damyanti Naranga v. Union of India, on which reliance was placed by the learned Counsel on the basis that Article 31-A(1)(c) did not afford any protection to section 13(8)(9) etc. That case has no application whatsoever to the situation before us. It was a case where an unregistered society was by statute converted into a registered society which bore no resemblance whatsoever to the original society. New members could be admitted in large numbers so as to reduce the original members to an insignificant minority. The composition of the society itself was trans formed by the Act and the voluntary nature of the association of the members who formed the original society was totally destroyed. The Act was, therefore, struck down by the Court as contravening the fundamental right guaranteed by Art. 19(1)(f).

In the cases before us we are concerned with co-operative societies which from the inception are governed by statute. They are created by statute, they are controlled by statute and so, there can be no objection to statutory interference with their composition on the ground of contravention of the individual right of freedom of association.

It is clear from the concluding portion of para 9 reproduced above that in case of a co-operative society which, from the inception, is governed by statute, there can be no objection to the statutory interference with their composition on the ground of contravention of the individual right of freedom of association.

26. Shri Bhadrashete appearing for the third respondent invited my attention to some of the provisions of the Co-operative Societies Act and Rules in support of his contention that insistence on the requirement that the applicant must belong to Kanara saraswat community to be eligible to become a member of the petitioner society was wholly impermissible under the scheme of the provisions of the Act and Rules. Counsel further contended that failure on the part of the applicant to satisfy the said criterion cannot amount to a sufficient cause within the meaning of sub-section (1) of section 23 of the Act to justify refusal to admit a person as member of the petitioner society. I have already referred to the scheme of sections 4 and 9 of the Act dealing with the society which may be registered and the procedure for registration. Section 4 contemplates that the society may have as one of its objects the promotion of the economic interests or general welfare of its members or of the public in accordance with the co-operative principles. Section 9 dealing with the registration requires the Registrar to be satisfied that the proposed bye-laws are not contrary to the provisions of the Act and Rules. Sections 22, 23 and 24 deal with who can be a member having regard to the principles of open membership. Broadly speaking, an individual who is competent to enter into a contract under the Indian Contract Act, 1872, is eligible to become a member; subject of course, to certain exceptions carved out in section 22 itself. Under section 23 refusal to admit a person who is duly qualified under the provisions of the Act and bye-laws to be a member must be supported by sufficient cause, I have already come to the conclusion that bye-law cannot over ride the provisions of the Act and bye-law cannot impose restriction which is ultra vires the statute. Therefore reference to "bye-laws" at the end of sub-section (1) of section 23 must be construed as bye-law which is a valid bye-law and which is not ultra vires the provisions of the Act.

27. Another aspect to which I wish to make a reference is that there is no logic or rationale in insisting that a person must belong to Kanara Saraswat community to be a member of the petitioner society. If one looks to the objects of the society, in bye-law No. 2, there is no nexus between this requirement stipulated in bye-law No. 7 with the objects stipulated in bye-law No. 2 of the society. I have already reproduced bye-law No. 2 in para 18 above. The objects of the petitioner society are to carry on the trade of building, and of buying, selling, hiring, letting and developing land in accordance with cooperative principles. There is nothing in the object clause to suggest that the said objects can be achieved only if the member belongs to Kanara saraswat community. I find it difficult to accept that if some of the members of the petitioner society did not belong to Kanara Saraswat community, this will in any way defeat the objects of the society.

28. Yet another aspect which requires to be considered in the context of validity of bye-law No. 7 is that the original member may be belonging to Kanara Saraswat community, but his wife may not belong to Kanara Saraswat community; she may be a Hindu or may not be a Hindu. What would happen after the death of the original member who had nominated his wife to be the sole heir in respect of his flat? Can it be said that merely because the wife does not belong to Kanara Saraswat community, she would not be entitled to become a member of the society? In my view, answer must be in the negative. I have already referred to the Apex Court decision in the case of Ramesh H. Shah (supra) where it has been categorically held that a fiat in a tenant co-partnership housing society like the petitioner society under the Maharashtra Act is liable to attachment and sale in execution of a decree against the member in whose favour or for whose benefit the same has been allotted by the society. What happens if, at an auction sale, a flat belonging to the judgment debtor who belongs to the Kanara Saraswat community is purchased by an auction purchaser who does not belong to Kanara Saraswat community. In view of the law laid down by the Apex Court in Ramesh H. Shah's case (supra) can it be suggested that the auction purchaser will not be eligible to become a member of the petitioner society merely because he does not belong to Kanara Saraswat community? In my view, answer must be in the negative. I am only illustrating some of the situations which may be arising quite frequently in a city like Mumbai where there is still an acute shortage of housing accommodation.

29. Shri Jadhav, the learned A.G.P. contended that having regard to the provisions of sections 4, 9, 22 and 23 of the Co-operative Societies Act, it is impermissible for the petitioner society to insist by way of a bye-law like bye-law No. 7 that the member must belong to Kanara Saraswat community. He, therefore contended that the mere fact that the applicant does not belong to the said community would not be a sufficient cause within the meaning of sub-section (1) of section 23 of the Act to justify refusal to admit a person as a member of the petitioner society.

30. In the light of the above discussion, I have no hesitation in coming to the conclusion that insistence in bye-law No. 7 of the petitioner society that the applicant must belong to Kanara Saraswat community to be eligible to become a member of the society is impermissible and ultra vires the scheme of the provisions of sections 4, 9, 22 and 23 of the Act. It must consequently follow that the mere fact that the third respondent did not belong to Kanara Saraswat community was not a sufficient cause within the meaning of sub-section (1) of section 23 of the Societies Act to justify refusal to admit her as a member of the society. The second point framed above is answered accordingly.

31. The third point is whether the power under section 14(2) of the Act has been exercised lawfully while passing the impugned orders. The petitioner society seeks to challenge the concurrent findings recorded by the two authorities below. There is no irrationality or perversity in the impugned orders. Principles of natural justice have been complied with. The petitioner society had been given an opportunity of being heard. The orders are reasoned orders. Having regard to the objects of the petitioner society as enumerated in bye-law No. 2, it would be in the interest of the society to permit even a person other than those who belong to Kanara Saraswat community to be its member. If the petitioner society insists on maintaining old bye-law No. 7, it would be obviously impermissible in the scheme of the provisions of sections 4, 9, 22 and 23 of the Act. It would, therefore, follow that the order for amendment of the bye-laws is in the interest of the petitioner society and is consistent with the principle of open membership enshrined under section 23 of the Act.

32. In this view of the matter, there is no substance in any of the contentions raised by Shri Dharamraj. Therefore, my answers to the three points framed in para 5 above are as under :

i) The petitioner society cannot claim the fundamental right guaranteed under Article 19(1)(c) of the Constitution of India namely right to form associations or unions. Since the petitioner society cannot claim any such a right there is no question of the impugned orders affecting adversely such a right.

ii) The insistence on bye-law No. 7 on the requirement that the applicant must belong to Kanara Saraswant community to be eligible to become a member of the petitioner society is wholly impermissible under the Act and is ultra vires the scheme of the provisions of sections 4, 9, 22 and 23 of the Maharashtra Cooperative Societies Act, 1960. Consequently, the mere fact that the applicant like the third respondent does not belong to Kanara Saraswant community is not a "sufficient cause" within the meaning of sub-section (1) of section 23 of the Act to justify refusal to admit such a person to the membership of the society.

iii) There is no illegality or irrationality in the exercise of powers by respondent Nos. 1 and 2 while passing the impugned orders.

33. There is thus no substance in the writ petition which is accordingly dismissed.

34. Rule is discharged, there will, however, be no order as to costs.

35. Petition dismissed.