Co-option and Reservations: Constitutional mandates

By I C Naik

Management of every cooperative society is vested in the Board of Directors called managing committees in most housing societies. The Constitution (97th Amendment) Act 2011 (97th C A )  inserted an exclusive  “Part IXB Cooperative Societies” in the Constitution of India, comprising Article 243ZH to Article 243ZT (both inclusive)  brought in force from 14 February 2013.

Article 243ZI mandates all the State legislatures to adhere to provisions of Part IXB,  in all  of their enactments regulating Cooperative Societies: It reads thus

“Subject to the provisions of this Part, the Legislature of a State may, by law, make provisions with respect to the incorporation, regulation and winding up of co-operative societies…….”

Any inconsistent provision in any State / Centre Cooperative Laws stands superseded by a provision in Part IXB.. Unfortunately, such supersession will still need a stamp of the Apex Court as its order is a law binding all courts of India (Art. 141). Such protracted litigations discourage managements of cooperative societies taking affront to the State Authorities violating the constitutional mandate. Apex Court’s recent order against the Chairman of Gujarat Cooperative Milk Marketing Federation Limited Mr. Vipul Chaudhary is an example of this [ the S  C order dated March 19, 2015 [(2015) 42 SCD 494].

The Apex Court upheld a majority Board resolution expressing no confidence in its Chairman despite the fact that no provision existed in bye-laws or in Law to move a motion of “No Confidence”. The Bench interpreted the Statute on the touch stone of Constitutional imperative that Cooperative Society having been given Constitutional Status to function on democratic principles, the persons who installed the Chairman through a democratic process of voting, ought to have a constitutional right to oust him in a democratic manner, if he loses the confidence of majority members of the board. At Para 48 the Apex Court concludes : “In the background of the constitutional mandate, the question is not what the statute does say but what the statute must say. If the Act or the Rules or the Bye-laws do not say what they should say in terms of the Constitution, it is the duty of the court to read the constitutional spirit and concept into the Acts.”

In an earlier part of the order at Para 28 the Apex Court has set a tone leading to the above conclusion, where it observes: “Where the Constitution has conceived a particular structure on certain institutions, the legislative bodies are bound to mould the statutes accordingly. Despite the constitutional mandate, if the legislative body concerned does not carry out the required structural changes in the statutes, then, it is the duty of the court to provide the statute with the meaning as per the Constitution.”

Now therefore let us  ascertain if reservations of 3 seats (Cast Based 1+ 2 for women) and co-option of “Experts” both represent constitutional mandates. Assuming it is so, let’s run through relevant Clauses and Provisos of that Article to validate the assumption. Next step is to find out if  the amended provisions of the MCS Act 1960 do recognize that both stand at par in terms of its adherence by the cooperative societies. Our enquiry is whether the reservation of 2 seats to represent women members and 1 seat to represent the members belonging to S C /S T is a constitutional mandate and whether the same is exactly the case in respect of the Expert Directors as well.  If it is established beyond doubt, then we have to examine if the both these mandates are provided in the MCS Act 1960. The Constitutional provisions for the composition and strength of a managing committee are to be found at one place in Article 243ZJ, the relevant portion thereof is reproduced below :

243ZJ. (1) The board shall consist of such number of directors as may be provided by the Legislature of a State, by law:

Provided that the maximum number of directors of a co-operative society shall not exceed twenty-one:

Provided further that the Legislature of a State shall, by law, provide for the reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on board of every co-operative society consisting of individuals as members and having members from such class or category of persons.

(2) ……….

(3) The Legislature of a State shall, by law, make provisions for co-option of persons to be members of the board having experience in the field of banking, management, finance or specialization in any other field relating to the objects and activities undertaken by the co-operative society, as members of the board of such  society:

Provided that the number of such co-opted members shall not exceed two in addition to twenty-one directors specified in the first proviso to clause (1):

Provided further that such co-opted members shall not have the right to vote in any election of the co-operative society in their capacity as such member or to be eligible to be elected as office bearers of the board:

The State Legislature enacted the Maharashtra Cooperative Societies (Amendment) Act 2013 in force w.e.f. 14 2 2013 and inter alia inserted/amended/substituted Sections 73AAA, 73B and 73 C in the MCS Act 1960 with regard to composition of the managing committee of a Cooperative Society .

Sub-section 1 of 73AAA reads:

(1) The Committee shall consist of such number of members as may be provided in the by-laws:

Provided that, the maximum number of members of the committee shall not exceed twenty-one:

As regards expert directors in the MCS Act 1960 a systematic approach is found in defining it (Clause 11-A of Section 2) as “expert director” means a person having experience in the field of banking, management, finance and includes a person having specialization in any other field relating to the objects and activities undertaken by the concerned society;

Sub-section 2 of Section 73AAA provides “The Committee may co-opt “expert directors” relating to the objects and activities undertaken by the society:

Provided that, the number of expert directors shall not exceed two, in addition to the maximum twenty-one members of the committee as specified in first proviso of sub-section (1):

One Proviso to this sub-section reads:

Provided also that, such expert directors shall not have the right to vote at any election of the society and shall not be eligible to be elected as office bearers of the committee.

Section 73B and 73C mandate reservation of 5 seats i.e. 3 cast based seats and 2 for women constituency. Cast based 3 Seats are inconsistence with Constitutional mandate of 1 seat and hence societies may reserve 1 seat only.

Sub-section 2 of Section 73AAA is inconsistent with Article 243ZJ about co-option of expert directors. The constitutional provision vide Clause 3 of Article 243ZJ is that the Legislature of a State “shall by law, make provisions for co-option of persons to be members of the board “ Same language is used for mandating reservation of 3 seats. When the Constitution directs the State to enact a Law the State cannot leave to the sweet will of the Society to implement it. Just like reservations of 3 seats co-option of two expert directors is also a must.

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