Delhi High Court Rules: Section 35(10)(cc) of Delhi Co-operative Societies Act, 2003 by 2011 Amendment is not Ultra Vires

Delhi High Court Rules: Section 35(10)(cc) of Delhi Co-operative Societies Act, 2003 by 2011 Amendment is not Ultra Vires

The Delhi High Court by its division judges bench comprising of Justices Saurabh Banerjee and Manmohan, while holding that an amendment made to an existing Statute cannot be modified, looked into or set aside simply because the same is not viable or suitable to a party, observed that Section 35(10)(cc) of the Delhi Co- operative Societies Act, 2003 is not ultra-vires as there is no mala fide and/ or personal gain to anyone or the legislature in inserting Section 35 (10)(cc) vide the 2004 Amendment and the later amendment thereto vide the 2011 Amendment.

The factual matrix of the case was that a petition had been filed by a member store- The Sudhar Sabha Consumer Co-Operative Store Ltd., of the respondent Society-The Delhi Consumer Co-operative Wholesale Store Limited which was registered in the year 1962 under The Bombay Co-operative Societies Act, 1912 later under The Delhi Co-operative Societies Act, 1972 (repealed by The Delhi Co- operative Societies Act, 2003) with the principal object of doing wholesale and retail business in consumer goods as per their bye-laws. As per bye-law 22(a) of the Society, the petitioner’s Managing Committee consisted of nine members, out of which five members including the President, Vice-President, Secretary and two members, were to be nominated by the Administrator, third respondent - Delhi Government and the remaining four members, were to be elected at the general meeting.

The Society had more than 300 members contributing more than 75% of their issued equity share capital. Presently, 98 out of 200 registered member stores are reported to be active members. The elections of the Managing Committee of the Society were held after a gap of 27 years on June 24, 2001 and in 2002, a Show Cause Notice under Section 32 of the 2003 Act was issued by the second respondent Registrar to the Society, whereafter few primary member stores of the Society filed a petition which was disposed of with a direction to hold elections within a period of 8 weeks.

Subsequently, a similar writ petition was filed by another member of the Society was also disposed of by a Co-ordinate Bench, once again, with a direction to hold elections within 6 weeks.

Despite the aforesaid orders, no elections were held since the Committee consisting of nine members had seven members nominated by the Delhi Government. The said dominance and control of the Society by the Delhi Government was flowing from Section 35(10)(cc) of the 2003 Act which permitted the Delhi Government to substitute the elected members with its nominees in proportion to the issued equity share capital held by it.

Being aggrieved, the petitioner filed a writ petition seeking declaration of Section 35(10)(cc) of the 2003 Act as ultra vires and for passing of a writ of mandamus or any other writ or direction(s) to the Society and Delhi Government to conduct time bound elections of the Committee within a period of three months based on membership records along with any other relief/s against the Society, Registrar and the Delhi Government, primarily on the grounds that Section 35(10)(cc) of the 2003 Act not only usurped different powers of the Committee but also gave complete control to the Delhi Government and was against Section 30 and other provisions of the 2003 Act.

The Court after analyzing the chronological history, observed that the Preamble and Statement of Objects and Reasons of the 2003 Act clearly reflected that changing times required meaningful changes, which in turn, also required the legislature to carry out the requisite amendments in the future.

The Court opined that, “insertion of Section 35(10)(cc) vide the 2004 Amendment proved to be a lifeline for a Society that was hitherto starving with hardly any business activity. In light of the aforesaid, no mala fide or personal gain can be attributed to any of the respondents or the legislature in incorporating the impugned Section 35(10)(cc) in the 2003 Act.”

The Court noted that as the percentage of issued equity shares held by the Delhi Government and the percentage of members of the Committee to be nominated by it already stood introduced/ changed/ proportionately increased way back in the year 2003, the only change vides the 2011 Amendment to Section 35(10)(cc), as challenged by the petitioner, was with respect to the increase of percentage of members to be nominated to the Committee.

The Court remarked that the petitioner having not challenged the insertion of Section 35(10)(cc) in the 2003 Act vide the 2004 Amendment till the filing of the present writ petition, wherein it has sought to challenge a subsequent amendment carried out by the 2011 Amendment, the Court concluded that the petitioner was most certainly guilty of delay, laches and acquiescence.

The Bench held while also adding, “Merely because the petitioner is losing emerging business/ economic opportunities is not sufficient for this Court to declare the amendment made to Section 35(10)(cc) of the 2003 Act by the 2011 Amendment as ultra vires without challenging the insertion thereof by the 2004 Amendment.”

Noting that there was a reasonable nexus of the said incorporation and amendment to Section 35(10)(cc) with the object of aiding public policy as it was able to sustain and aid the Society, the bench observed that the insertion of Section 35(10(cc) in the 2003 Act by the 2004 Amendment and the subsequent amendment thereof by the 2011 Amendment were both made after due deliberation and taking proper precaution at every level from time to time.

The bench while referring to the judgment of the Supreme Court in Daman Singh and Others vs. State of Punjab and Others, the bench reaffirmed that a member in/ of a Society ceases to represent the self and has no individual existence, right, title or interest of its own as it is a part of a communion.

The Court was of the considered view that even the petitioner, despite repeated request, had been unable to show any activity done by it in the past decade, as the Society had hardly any miniscule active primary member stores that were carrying on business when the amendment to Section 35 (10)(cc) was carried out vide the 2011 Amendment, the Court ruled, “Having found so and admittedly as the Delhi Government is now having issued equity share capital of 95.4%, i.e. above ninety percent in the Society, this Court finds no reason for issuing any directions to either the Society or the Registrar to conduct elections to the Committee.”

Accordingly, the Court dismissed the petition.