Supreme Court endorses Cooperative Principles and says
Protection under Articles 14 and 19 is available to Cooperatives
[Supreme Court’s judgment of 2nd September 2011 in Andhra Pradesh Dairy Cooperatives case:
A note on from Rama Reddy, Hyderabad]
Dear friends of cooperatives,
1. These are the days of the Reddy Brothers of Karnataka, Jagan & Kiran Reddys of Andhra Pradesh, etc. More than proverbial twice, I asked myself whether it was the right time for Rama Reddy of Hyderabad to get into circulation. Since I have to share with you a significant event on a subject of mutual interest to you and me, there is no escape from writing a note, after a long time, for your perusal. I hope that it will be informative and interesting. If it is not so, my apologies to you for taking some of your precious time.
2. My training in and practice of Journalism have not changed my thought process much; on most occasions, my narrations will be in chronological frame. I am an avid reader of print media and a keen viewer of electronic media. However, it is of not much help when I start to write a news story. Your level of tolerance has to be quite high when you read my notes.
3. This is once again a story of “Goliath and Davids”. In this story, the Government of Andhra Pradesh is “Goliath” and Dairy Cooperatives in Andhra Pradesh are “Davids”. All-powerful governments rarely learn lessons from experiences and, therefore, ordinary citizens have to teach them tirelessly the same lessons repeatedly.
4. NT Rama Rao (NTR) never thought of himself as a social and political animal like you and me; he thought of himself as a divine incarnation, who takes birth on this planet once in a millennium. As the Chief Minister of Andhra Pradesh, he was in the habit of granting boons occasionally. In 1995, he saw to it that the State Legislature enacted a new liberal cooperative law, without repealing the old regressive law on cooperatives. The old law is titled “Andhra Pradesh Cooperative Societies Act 1964” (henceforth the 1964 Act) and the new law is titled “Andhra Pradesh Mutually Aided Cooperative Societies Act 1995” (henceforth the 1995 Act). The new law is also known as the MACS Act. The new law was one of those few boons that NTR granted to the ordinary mortals like you and me. He, thus, sown a seed that sprouted to start a significant change in the course of cooperative history in the country. On similar lines, state legislatures enacted liberal and parallel laws in eight other states.
5. Thrift Cooperatives and Dairy Cooperatives flourished and continue to flourish under the 1995 Act. Most of the thrift cooperatives are newly registered under the 1995 Act and most of the dairy cooperatives have migrated from the 1964 Act to the 1995 Act. The process of migration is permissible under the law.
6. The Congress Party, under the leadership of YS Rajasekhara Reddy (YSR), won the 2004 General Election and formed the Council of Ministers, YSR as the Chief Minister. For two full years, the Congress Government explored all possible executive actions to replace the elected boards of the eight District Dairy Unions, which were working in the 1995 Act, by its party nominees. Finally, it realised that no provision in the 1995 Act allows the Government and/or the Registrar to take such step. The 1995 Act is designed in such a way that a mutually aided cooperative has to always have an elected board accountable to its general body.
7. YSR almost succeeded in creating an image for himself as a messiah of all people – poor and rich, illiterate and literate, weak and strong, powerless and powerful, backward and forward, etc. Under the guise of being a messiah, he was, in fact, building an empire for himself and his only son, Jagan. He had a coterie of selected rich, clever and influential persons who were being helped, left and right, by him by transfer of public resources – material and financial – to them. It was not in his nature to tolerate the existence of any individual or institution that was not amenable to him. The autonomous functioning of dairy cooperatives, particularly district dairy unions, was not to his liking.
8. On 2nd February 2006, the YSR Government amended the 1995 Act. The 2006 Amendment stated:
(a) All dairy cooperatives that were working as on that day under the 1995 Act would stand transferred to the 1964 Act;
(b) All dairy cooperatives would be treated as if they have always been under the 1964 Act;
(c) All dairy cooperatives would be treated as if they never existed under the 1995 Act; and
(c) Henceforth, no dairy cooperative would be registered under the 1995 Act.
9. The same night, by executive orders, the Government appointed District Collectors as persons-in-charge (one may say “administrators” or “special officers”) of all eight district dairy unions. In turn, the District Collectors appointed thousands of small and big government employees as persons-in-charge of more than 3500 village dairy societies, in the place of elected boards. The same night, all these government employees assumed charge of their additional assignments. The YSR Government thought that it was a clever step forward to get the Congress Party members into the boards of dairy cooperatives.
10. When dairy cooperatives and Cooperative Development Foundation (CDF) filed writ petitions in the High Court challenging the constitutional validity of the 2006 Amendment Act and statutory validity of appointment of persons-in-charge, the High Court suspended the executive orders, as an interim relief. In effect, the elected boards continued to be in office.
11. After prolonged hearings, on and off, spread over 15 months, on 1st May 2007, the High Court declared all provisions of the 2006 Amendment Act as violative of Article 14 (equality before law) and Article 19(1)(c) (right to form associations) of the Constitution. Thus, the dairy cooperatives continued to function under the 1995 Act, with their own elected boards. YSR was not an ordinary mortal; he was a messiah. The State Government filed an appeal in the Supreme Court with a plea to quash the judgment of the High Court.
12. The process of admitting, hearing and disposing the Government appeal is a separate story in itself. One may have to write a separate note on that process. For the present, let us confine to the final result. On 2nd September 2011, the Supreme Court delivered the judgment. The Supreme Court said that it found no reason to intervene in the judgment of the High Court, which had declared all provisions of the 2006 Amendment Act as unconstitutional. The essence of the Supreme Court’s judgment would be found in the reasons it gave in support of its conclusion.
13. For the first time since 26th January 1950, Republic Day, the day from which the Constitution of India came into force, the Supreme Court emphatically speaks of voluntary association, principles of cooperation, voluntary action, free will, etc in respect of cooperatives. The Supreme Court judgment states:
(a) The cooperative, by its very nature, is a form of voluntary association where individuals unite for mutual benefit in the production and distribution of wealth upon the principles of equity, reason and common good. Therefore, the basic purpose of forming a cooperative remains to promote the economic interest of its members in accordance with the well-recognised Principles of Cooperation.
(b) 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 be associated.
(c) The right to form an association will be infringed by forced inclusion of persons unwanted by the incumbent members of an association. Right to associate is for enjoying in expressive activities. The constitutional right to freely associate with others encompasses associational ties designed to further the social, legal and economic benefits of the members of the association.
(d) By statutory interventions, the State is not permitted to change the fundamental character of the association or alter the composition of the association itself. Any significant encroachment upon associational freedom cannot be justified based on any interest of the Government.
(e) However, when an association is registered under a statute, the provisions of that statute govern it. In case the association has an option/choice to be registered under a particular statute, if there are more than one statutes operating in the field, the State cannot force the association to get itself registered under a statute for which the association has not applied.
(f) The very existence of a Cooperative is based on voluntary action of its members. Once a cooperative is formed and its members voluntarily take a decision to get it registered under the X Act, the registration authority may reject the application for registration if conditions prescribed under the X Act are not fulfilled. The registration authority does not have a right to register the said applicant-cooperative under the Y Act. Even an authority, which is superior to the registering authority, is not competent to pass an order that the applicant-cooperative would be registered under the Y Act. Such an order, if passed, would be in violation of the first Principle of Cooperation, which states that its members should voluntarily approve every action of a Cooperative. Introducing an element of compulsion would violate Article 19(1)(c) of the Constitution. It is not permissible under the Constitution or any law to do something indirectly, if it is not permissible to be done directly.
(g) The Legislature has a right to amend the 1995 Act or repeal the same. Even, for the sake of an argument, if it were considered that the Legislature was competent to exclude the Dairy Cooperatives from the operation of the 1995 Act and such an Act was valid i.e. not being violative of Article 14 of the Constitution, etc, the question would arise as to whether the Legislature could force a Cooperative registered under the 1995 Act to work under the 1964 Act. Importing the fiction to the extent that the Cooperatives registered under the 1995 Act could be deemed to have been registered under the 1964 Act would be tantamount to forcing the members of the Cooperative to act under compulsion/direction of the State rather than on their free will. Such a provision would be violative of the very first basic Principle of Cooperation, which states that its members should voluntarily approve every action of a Cooperative. More so, the Act would be vitiated not only by non-application of mind but also by irrelevant and extraneous considerations.
14. It is time for cooperatives and their members, whether working in the regime of the old regressive cooperative law or in the regime of the new liberal cooperative law, to identify provisions in the said laws. which militate against the Concept and Principles of Cooperation, and advocate for their deletion and/or modification both in the Legislature and in the Judiciary.
15. During my active professional career in the field of cooperation, voluntarism and local governance, I have had the opportunity to go through most of the High Court of Andhra Pradesh and Supreme Court of India judgments that dealt with the subject of cooperation. Almost none have touched the widely accepted definition of cooperative and/or the principles of cooperation. It means that the contesting parties before the courts did not feel the necessity to bring them to the notice of the courts. It is strange that the courts have been adjudicating the disputes relating cooperatives without giving a serious thought to the definition of cooperative and/or the principles of cooperation.
16. In my view, cooperatives, labour unions, societies, associations, public trusts, etc, whether registered or unregistered, are the most appropriate and potent instruments in the hands of the powerless and the dispossessed to protect and promote their legitimate interests through collective action.
17. It will, certainly, be rude on my part to say that the communication ends here. I will be happy to hear from you. If you are interested in the full text of this note, please let me know. I will respond at the earliest.
All the best,
Rama Reddy of Hyderabad
(formerly of Cooperative Development Foundation, Warangal, Andhra Pradesh)
