Case Note & Summary
The litigation arose from a challenge by Primary Agriculture Credit Cooperative Societies (PACS) to the validity of the Rajasthan Credit Co-operative Institutions Cadre Authority Limited (Cadre Authority Society) and to the Central Cooperative Bank Rules, 1969, which required PACS to contribute to a Manager's Salary Fund for paid secretaries. Paid Secretaries were recruited by the Cadre Authority Society, constituted under Section 4(1) of the Rajasthan Co-operative Societies Act, 1965, appointed by Managers of District Co-operative Banks, and sought to be posted to PACS with salary liability fixed on PACS. The PACS contended that the Cadre Authority Society could not be registered as a cooperative society and that the Registrar lacked power to make rules compelling salary contributions. A Division Bench of the Rajasthan High Court, by judgment dated May 9, 1991 in Writ Petition No.1018-20 of 1979, held that the Cadre Authority Society could not be registered under Section 4 of the Act and that the Bank Rules were ultra vires the Registrar's power under Rule 41 of the Rajasthan Co-operative Societies Rules, 1966. The Unions of Managers and paid secretaries appealed. Pending appeals, the State Government framed the Conditions of Service of the Managers/Assistant Managers of the Agricultural Credit Cooperative Societies Rules, 1995, but the appellants did not accept them. Before the Supreme Court, the appellants argued that the Cadre Authority Society facilitated the operations of PACS and was thus valid under the second limb of Section 4(1); that the Registrar had power under Rule 41 read with Sections 147(2) and 148(2)(xxx) to regulate service conditions and prescribe qualifications; and that PACS were bound to contribute to salaries. The State argued that the Registrar had no such power and the High Court was correct. The Supreme Court examined Section 4(1) and observed that the Cadre Authority Society admittedly did not fall under the first limb relating to promotion of economic interests of members in accordance with cooperative principles. The second limb covered societies established to facilitate operations of such societies, but facilitation contemplated lending or funding support; the Cadre Authority Society merely recruited paid secretaries who were a third agency, appointed by District Co-operative Societies and posted to PACS, without being a lending institution. The Court noted the three-tier cooperative structure of PACS, District Co-operative Societies, and Central Co-operative Bank, and found that the Cadre Authority Society did not facilitate PACS in funding them for loan disbursement. Regarding rule-making power, the Court analysed Rule 41 and Section 148(2)(xxx) and held that the Registrar could prescribe qualifications and service conditions only for officers or employees of each society, and that the society itself had disciplinary and controlling power. The Court found a dichotomy: paid secretaries were not appointed by PACS but by the District Cooperative Society through its Manager; the 1969 Rules defined Manager as the Chief Executive and paid employee of the society, and provided that the society shall not appoint any person as Manager. A paid secretary was not a Manager appointed by PACS. Section 148(2)(xxx) listed Manager, Secretary, Accountant or any other officer or employee of the society; there could be no additional paid secretary to the PACS. Consequently, PACS could not be fastened with liability to contribute to the salary fund for persons appointed and controlled by the District Cooperative Society and Cadre Authority Society. The provided text ends before the final operative order, but the court's reasoning supported the High Court's findings that the Cadre Authority Society was not validly registered and the Bank Rules were ultra vires.
Headnote
A) Cooperative Society - Registration and Validity - Section 4(1) Rajasthan Co-operative Societies Act, 1965 - A society registered under the second limb of Section 4(1) must facilitate the operations of cooperative societies such as funding or disbursement of loans; a Cadre Authority Society that only recruits paid secretaries and does not lend money does not qualify. Held that the Cadre Authority Society was not a valid cooperative society. B) Administrative Law - Delegated Legislation - Ultra Vires Rule-Making by Registrar - Sections 147(2), 148(2)(xxx) Rajasthan Co-operative Societies Act, 1965 and Rule 41 Rajasthan Co-operative Societies Rules, 1966 - The Registrar's power to prescribe qualifications and conditions of service is limited to officers and employees of each society; the Registrar cannot create a separate cadre authority to recruit employees for other societies or compel primary societies to contribute to salary fund. Held that the Central Cooperative Bank Rules, 1969 to the extent they forced PACS to contribute were ultra vires. C) Labour Law - Employer-Employee Relationship - Paid Secretaries Not Employees of PACS - Section 148(2)(xxx) Rajasthan Co-operative Societies Act, 1965 and 1969 Rules - Since paid secretaries were appointed by District Cooperative Society's Manager and not by PACS, they were not Manager, Secretary, Accountant or other officer/employee of PACS; PACS could not be compelled to retain or pay them. Held that paid secretaries were outside the scope of Section 148(2)(xxx).
Issue of Consideration
Whether Cadre Authority Society could be registered as a cooperative society under Section 4(1) of the Rajasthan Co-operative Societies Act, 1965; whether the Registrar had power under Rule 41 read with Sections 147(2) and 148(2)(xxx) to make Central Cooperative Bank Rules, 1969 compelling PACS to contribute to salaries of paid Secretaries; whether paid Secretaries were officers/employees of PACS
Law Points
- Section 4(1) of Rajasthan Co-operative Societies Act
- 1965 requires society to have objects in accordance with cooperative principles or to facilitate operations of such societies
- Cadre Authority Society merely recruits paid secretaries and does not facilitate lending operations
- Registrar's rule-making power under Section 148(2)(xxx) extends only to officers/employees of the concerned society
- paid Secretaries appointed by District Cooperative Societies are not officers of PACS
- PACS cannot be compelled to contribute to salary fund under Central Cooperative Bank Rules
- 1969
