UTIAR PRADESH CO-OPERATIVE FEDERATION versus THE STATE OF U.P. & ORS.

Citation: [1973] 3 S.C.R. 402 · Decided: 19-01-1973 · Supreme Court of India · Bench: S.M. SIKRI · Disposal: Case Allowed

Judgment (excerpt)

402 
UTIAR PRADESH CO-OPERATIVE FEDERATION 
A 
v. 
THE STATE OF U.P. & ORS. 
January 19, 1973 
[S. M. SIKRI, C.J., A, N. RAY, D. G. PALEKAR, M. H. BEG AND 
S. N. DWIVEDI, JJ.J 
U.P. Cooperative Societies Act, 1965 (Prior to amendment by U.P. 
Act No. 1 of 1972) & Rules-Stt.:te Government power 
to 
nomintile 
upfo 2/3rds of total number of .menibers of the committee of the 
managemenr. 
U.P. Cooperative Societies Rules 1968-Reduction- of share 
capital 
u~less a member is removed acco;ding to Rules share clipit(,ll not affect-
ed.-Shares ke,pt in ~ecurity remained in specie-No reduction of share 
capitc .. l. 
The petitioner challenged the order passed by the U.P. State GoVi:rn-
·ment ·an 26-1-1971 
nominating 2/3rds of the total number of members 
of the committee of the management of the petitioner purp6rting to act 
under section 34 of the U .P. Cooperative Societies Act, 
1965. The 
subscribed paid up capital 
of 
the 
Federation 
o,n 
30-6-1969 
was 
Rs. 34. 04 lakhs. 
Of this, the Slate Government owned shares of the 
value of Rs. 20 lakhs. The percentage of the State Government in the 
share holding was 58. 75%. 
The State Government's contention 
was 
that the membership of some co-operative bank had 
been 
U!rmioated 
a!Dd. thel'efore the share capital was 
reduced 
by Rs. 53,000/-. The 
State Government also contended that another member. 
District 
C.o-
operative Federation, Saharanpur retired Rs. 50,000/- out of his share 
capital with the Federation. The State Government, therefore, claimed 
that its share holding had gone to 60% and, thel'efore, 
had 
a right 
under s. 34 to nominate its nominees to .the comqiittee of the manage-
ment. 
The petitioner challenged the order on the 
ground 
that 
the 
condition precedent of the State Government holding 60% of the sh-ares 
in the share capital of the Federation was :not fulfilled. 
It also raised 
several other grounds including tbe constitutional validity of Sec. 34 
of the Act. 
Allowing the writ petition, 
HELD : (i) The p'rovisions of the Act and Rules indicate that the 
co-operative banks did not cease to be the members. as there Was no 
resolution removing the b3!1>ks from membership. Rule 
3 2 
indicates 
that there is no reduction of share capital as the shares of the bank& 
were not transferred to any other pel'son. The shares· still stood in the 
name of the co-operative banks and the share capital was not reducod 
by Rs. 53,000/-. 
[408H; 409A-CJ 
B 
c 
D 
E 
F 
G 
H 
t
U.P. CO·OPERATIVE FEDERATION .v. U.P. STATE (Ray,].) 40,3 
A 
(ii) Saharanpur District Cooperatiye Federation was still a member, 
8 
as it was no't removed from membeTship. 
It share mQOCy cannot . be 
taken out of share capital fund god treated as security money. The 
shares were not kept in security. 
Even if the shares were in se~ity, 
the shares remained in specie. The share capital of the petitioner. was 
not reduced by Rs. 50,000/·. [409F-H; 410A--C] 
(iii) As the shares in both the cases were still part of the 
share 
capitlll, the State Government was not justified to exercise right ilnder 
section 34 of the Act. 
[410D-F] 
ORIGINAL/CIVIL APPELLATE JURISDICTION : Writ Petition 
C 
No. 243 of 1971 and Civil Appeal No. 592 of 1972. 
D 
E 
Writ Petition No. 243 of 1971 
Petition 11nder Article 32 of the Constitution of India for the 
enforcement of fundamental rigbts and Civil Appeal No. 592 of 
1972. 
Appeal py a special leave from the judgment and order dailed 
December 8, 1970 of the Allahabad High Court Civil Misc. Writ 
No. 4700. 
A. K. Sen, A. P. Singh Chauhan, V. C. Prashar and Dluiram 
Pal Singh Chauhan, for the petitioner .and appellant. 
C. K. Daphtary, B. Sen and 0. P. Rana, for respondents Nos. 
1-4, 10-11 (in W.P. No. 243) and respondents Nos. 1 & 2 (in 
F 
C.A. No. 592). 
The Judgment of the Court was delivered by 
RAY, J.-The Civil Appeal is by 
special leave from the 
judgment dated 8 December, 1970 of llhe High Court at Allahabad 
G 
dismissing the petition of the appellants. The appellants in 'the 
Allahabad High Court impeac!ted the first order dated 19 Sep-
tember, 1970 passed under section 34 of the Uttar Pradesh Co-
operative Societ.ies Act, 1965 referred to as the Act nominating 
two-thirds o( the total number of members of the committee of 
management of the Uttar Pradesh Co-operative Federation. The 
H 
apiJellants are the Uttar, Pradesh Co:operative Peileration. itd., 
Luckn9w referred to as the .Federation and.Veerpal Singh w)!O are 
both also· the

Excerpt shown. Read the full judgment & AI analysis in Lexace.