M J Antony: Bye-laws supreme in coop laws

OUT OF COURT

The first legislation on cooperative societies was passed exactly a century ago, but the several laws passed by the states since then have been riddled with controversies.

The latest case to be decided by the Supreme Court was at the instance of an 80-year-old housing society, which had to fight back the new passion for commercialisation.

It won its point, and the Supreme Court overruled the decision of the cooperative authorities and the Gujarat High Court, in Zoroastrian Cooperative Housing Society Ltd vs Dist Registrar.

The bone of contention was the bye-law that restricted the membership of the cooperative society to Parsis only.

Although originally all members were Parsis, the son of one of the deceased members wanted to sell the bungalow he inherited to a non-Parsi builder to raise a multi-storeyed commercial complex.

The society did not permit it. However, the cooperative tribunal of Gujarat took the view that the restriction based on community was unconstitutional because it violated the right to property and the right to alienate property.

The society went up in appeal to the Gujarat High Court, which upheld the tribunal's view. Therefore, it moved the Supreme Court.

More constitutional challenges were raised in the Supreme Court. Can a particular community based on religion, belief, or region bar others from buying property of the society members? The fundamental rights to form association, freedom to manage religious affairs, and minority rights were advanced.

It was argued that restricting membership in a cooperative society to a particular denomination, community, caste or creed was opposed to public policy.

The Supreme Court did not think so. It gave the society vast powers in this field. According to it, unless the law itself imposes such prohibition, such restriction would not violate the Constitution.

The state will decide what is public policy. While testing public policy, the court warned that the "courts have to be cautious in trying to ride the unruly horse of public policy in acceding to a challenge to a qualification for membership in the bye-laws."

Although the Constitution grants equality to all citizens in several articles in the fundamental rights chapter, courts should not fall into the "temptation" to apply them to the area of operation of the cooperative societies.

That means that membership of a cooperative society could be denied to a citizen who is located outside the area of operation of a society.

Therefore, "as long as there is no amendment brought to the Cooperative Societies Acts in various states, it would not be permissible to direct the societies to go against their bye-laws restricting membership based on its own criteria."

It is presumed that when a person becomes a member of a society, he surrenders some of his rights to it. His rights are "submerged" in the common benefits to be enjoyed by all.

Thus, he submits to the cooperative law and the bye-laws. Then he cannot turn around and challenge the very rules he had submitted to, the judgment emphasised.

It also rejected the arguments based on the Transfer of Property Act (restriction on alienation of property) and the Contract Act (freedom to enter into a contract).

Thus, the bye-laws of a society can rigidly restrict the membership to persons of particular vocation, a particular community, a particular persuasion or a particular sex.

Problems may still arise when a member sells his freehold property to a person who does not qualify for membership. The sale might be recognised by other laws, but the buyer could be denied membership of the society.

He would not have voting rights or other benefits enjoyed by the members. This is an area of law which is not yet clear. In some cities like Delhi, the law in this field has been in a limbo for years and the buyers have been denied access to the benefits of membership.

Perhaps the law-makers have no easy answers to the questions such transactions throw up and leave things to the age-old axiom, possession is nine- tenths of the law.