Corporate responsibility and affirmative action for dalits

The big corporate houses have reached an agreement with the government to provide affirmative action to the scheduled castes and tribes in the industry. The move is short of reservations, and is a significant move towards the realisation of the demand of affirmative action in the private sector. Probably a first good step would be to statutorily outlaw discrimination in the private sector. Article 15 of the Constitution prohibits discrimination only by the State - a good deal of social diversity can be achieved in areas of private employment, housing, education etc. through a compensation-regime based on outlawing discrimination.


Haryana mulls affirmative action to protect girl child

The government of Haryana is planning to provide job quotas for women for teaching positions. This might be too little too late. Lot more needs to be done to check entrenched patriarchy than offer cash incentives for a girl child in Haryana. But by considering quotas for women in employment, at least the government is thinking.

Equal pay for both sexes - Delhi High Court case

Delhi High Court has disallowed differential pay for men and women employees who were doing similar kind of work, stating that it was a violation of the Equal Remuneration Act. Female workers appointed on a regular basis as “packers” along with their male counterparts at the Super Bazar in 1984, had pointed to a discrimination in pay, though they were doing similar work. The judgment affirms that the actual work done is material, not the designation of the employee.

IN THE HIGH COURT OF DELHI AT NEW DELHI


LPA 1052/2004


25.05.2005
Date of decision :25th May, 2005


THE COOPERATIVE STORE LTD (SUPER BAZAR)
.......Appellant

represented by Mr. B.L. Wali, Advocate


Versus

BIMLA DEVI and OTHERS ....... Respondents.

represented by Mr.Ashok Aggarwal with
Mr.Sangeet Bakshi, Advocates
CORAM:

Hon'ble Justice Dr. Mukundakam Sharma.
Hon'ble Ms. Justice Rekha Sharma.

1.Whether reporters of local papers may be allowed to see the Judgment?
2.To be referred to the Reporter or not?
3.Whether the judgment should be reported in the Digest?

Dr. Mukundakam Sharma, J :
CM 14102/2004
For the reasons stated in the application, delay of eleven days in filing the appeal is condoned. The application stands disposed of.
LPA 1052/2004
1.This appeal is directed against judgment and order dated 13th August 2004, passed by the learned single Judge in WP(C) No. 2794/89, whereby the order passed by the appellate authority on 6th March 1989 was set aside and order dated 13th May, 1988, pass
ed by the authority under the Equal Remuneration Act, 1976 was restored.
2.In order to properly appreciate the contentions raised before us, some reference to the facts leading to the filing of the present proceeding is required to be mentioned. The respondents herein are the ladies who are employed with the Cooperative Sto
re Limited/Super Bazar. According to them, they were working as packers from some time in 1978 and that subsequent thereto, by an order dated 8th October 1984, they were appointed to a regular pay scale with effect from 1st September 1984 as Packing Cl
aners. The grievance of the said respondents are that their male counterparts who were doing same or similar work were appointed in the pay scale of Rs.185-305-440 whereas they are being kept in the pay scale of Rs.150-240-360. They allege that they a
e being treated unfairly vis-a-vis their male counterparts insofar as their pay scales are concerned even though they are doing the same kind of work. This, they further allege, violates the provisions of the Equal remuneration Act, 1976.
3.Accordingly, a claim was filed by the respondents under Section 7(1)(b) of the Act. The said provision provides that the appropriate government shall appoint such officers not below the rank of a Labour Officer for the purpose of hearing and deciding
claims arising out of non-payment of wages at equal rates to men and women workers. Since the plea taken was non-payment of wages at equal rates to men and women workers of Cooperative Stores Limited, the said complaint filed by the respondents were
laced before the authority under the Act, who heard the parties and perused the evidence adduced by them. The said authority, on the basis of the pleadings of the parties, framed the following two issues for consideration:
(i) G€˜G€˜whether the issue involved in the plaint proceedings are sub judice before the HonG€™ble Supreme Court in CWP No.9161 of 1982 and if so, to what effect ? and
(ii) whether the applicants are entitled to relief sought for and if so, what directions are necessary in this regard ?G€™G€˜.
The authority held the first issue in the negative and, therefore, admittedly the said issue is set at rest by the said findings and does not arise for our consideration in this proceeding.
4.Therefore only the second issue falls for our consideration, in respect of which the authority recorded evidence of the parties and has given his findings and conclusions holding that the said claim of the respondents is justifiable. The authority no
ted that prior to October 1984, the remuneration that was being paid to men and women workers was the same because they were doing the same or similar work and that the difference in the pay scale of men and women workers was brought in only after thei
regularisation in October 1984. The authority under the Act recorded a finding that the nature of the work performed by men and women was the same and similar and it was held that respondent No.2 has failed to produce any evidence to show that nature
of the work performed by men and women workers was different. While recording the aforesaid findings, the case of Smt.Sujjan was highlighted by the primary authority. Though a lady, but she was included in the list of men workers and was getting hig
er remuneration. When it was shown that she was a lady it was held that she was wrongly designated as a male worker and thereafter her remuneration was reduced.
5.The explanation that was sought to be brought in by the Super Bazar was that the respondents herein were Packing Cleaners whereas the male workers are appointed as Packers. The authority, on appreciation of the evidence, recorded a finding that the nat
ure of work performed by the female and male workers, whether they are working as Packers or as Packing Cleaners, is the same and similar which they have been doing from 1978 onwards although upon regularisation of the services, the female workers were p
t in a lower scale than the male workers. In terms of the aforesaid findings the claim was allowed.
6.Being aggrieved by the said order the appellant herein filed an appeal which was heard by the appellate authority under the Act, designated as Joint Labour Commissioner. The learned appellate authority however allowed the appeal by order dated 6th Ma
rch, 1989 holding that the respondents are Packing Cleaners and not Packers and since there is a difference in their designation there could be a difference in the pay scale also. The aforesaid decision of the appellate authority was challenged by the
respondents before this Court by filing a writ petition which was registered as WP(C) 2794/1989. The learned single Judge considered the issue raised before him as to whether or not there is non-payment of wages at equal rates to men and women workers
and on appreciation of the entire facets of the issue, particularly in the light of the provisions of the Act and various conventions governing the field as also a decision of the Supreme Court, held that the nature of the work performed by the responde
ts was similar to the work performed by their male counterparts and it is only the designation which was the determining factor for fixing different pay scales, which, according to the learned single Judge, was not permissible both under the constitution
l scheme as well as under the provisions of the Act.
7.We have heard learned counsel appearing for the parties on this appeal. Our attention was also drawn to the provisions of the Act, the conventions and the decision referred to in the impugned judgment. The law on the subject is settled by the decisi
on of the Supreme Court in M/s.Mackinnon Mackenzie and Co. Ltd v. Audrey DG€™Costa and Another (1987) 2 SCC 469. In that case lady stenographers were given a lesser scale than male stenographers which was found by the Supreme Court as violative of the p
ovisions of the Act. In the present case also a scrutiny of the evidence on record would prove and establish that the designation of the female workers and male workers are different as the female counterparts are regularised with the designation G€˜G€˜Pa
king CleanersG€™G€˜, whereas, the male workers are designated as G€˜G€˜PackersG€™G€˜. A different designation would not empower the appellant herein to pay wages at different rates to men and women workers when it is established that they are doing almost the
ame and similar kind of work. The learned single Judge, on consideration of the evidence on record and also on appreciation of the findings recorded both by the authority under the Act and the appellate authority, found that the nature of work which wa
being performed by the respondents was similar to the work being performed by their male counterparts and, therefore, designation cannot be held to be the determining factor for fixing different pay scales if the nature of the work is the same, which is
more important than the designation. We find justification in the aforesaid findings recorded by the learned single Judge. Designation would be immaterial and irrelevant, if it is proved that both the categories are doing the same or similar work. Th
refore, as to whether or not the respondents were Packing Cleaners or Packers, they would still be entitled to the same pay scale as that of their male counterparts, when it is established from the records and evidence that they are doing similar nature
f work. We find no error or infirmity in the order of the learned single Judge. The said order also cannot be said to be unreasonable and, therefore, we find no reason to set aside the same. We accordingly uphold the order of the learned single Judge
nd dismiss this appeal, leaving the parties to bear their own costs.
CM 14100/2004
In view of the fact that the main appeal has been dismissed, this application seeking for interim relief is rendered infructuous and is dismissed accordingly.

(Dr.Mukundakam Sharma)
Judge



( Rekha Sharma)
Judge
25th May, 2005.

Hazards of ship breaking in Gujarat

The ship-breaking industry in Gujarat operates in the bleakest of safety facilities, poisonous waste from all over the world is dumped here. The problem was identified only after GreenPeace made noises about it. Sometime back, the Gujarat government refused to allow the 'Rainbow Warrior', the GreenPeace ship with the message of environmental justice, to anchor in Gujarat. The Supreme Court's intervention asking a ship illegally brought in for the purpose to return is timely.

Tribal Rights Bill - people against environment?

The proposed Scheduled Tribes (Recognition of Forest Rights Bill) has sparked a battle between environmentalists and tribal rights activists. Will the tribes destroy the forests? Will it be any worse than the corrupt 'management' by forest officers presently? What is the correct balance required?

SC sanction to ghettos

In a recent judgment, the Supreme Court gave its stamp of approval to housing societies restricting membership only to members of a particular religion. The judgment legitimises the ghettoisation of housing on communal lines. Coming when there are demands being made for diversity in the private sector and making private persons engaged in public activities to not discriminate against anyone on the grounds of sex, race, caste, place of birth, religion etc., the judgment can only be seen as regressive.


CASE NO.:
Appeal (civil) 1551 of 2000

PETITIONER:
Zoroastrian Co-operative Housing Society Limited and Another

RESPONDENT:
District Registrar Co-operative Societies (Urban) and Others

DATE OF JUDGMENT: 15/04/2005

BENCH:
B.N. AGRAWAL & P.K. BALASUBRAMANYAN

JUDGMENT:
J U D G M E N T


P.K. BALASUBRAMANYAN, J.


1. The Zoroastrian Co-operative Housing Society is a society
registered on 19.5.1926, under the Bombay Co-operative Societies Act,
1925. The Society applied to the Government of Bombay for acquisition
of certain lands in Ahmedabad District, then in the State of Bombay,
under the Land Acquisition Act, 1894 for the purpose of erecting houses
for residential use of its members and to further the aims and objects of
the Society. On the Government of Bombay agreeing to the proposal,
the Society entered into an agreement on 17.2.1928 with the
Government under Section 41 of the Land Acquisition Act. Certain
lands were acquired. From the lands thus acquired at its cost and given
to it, the Society allotted plots of land to the various members of the
Society in furtherance of the objects of the Society. On the re-
organization of States, the Society became functional in the State of
Gujarat and came within the purview of the Gujarat Co-operative
Societies Act, 1961. Section 169 of that Act, repealed the Bombay Co-
operative Societies Act, 1925 and in sub-section (2) provided that all
societies registered or deemed to be registered under the Bombay Act,
the registration of which was in force immediately before the
commencement of the Gujarat Act, were to be deemed to be registered
under the Gujarat Act. The Gujarat Act came into force on 1.5.1962.
Thus, the Society came to be regulated by the Gujarat Co-operative
Societies Act, 1961 (hereinafter referred to as 'the Act').

2. On the scheme of the Bombay Co-operative Societies Act
(hereinafter referred to as 'the Bombay Act'), the Society had applied for
registration in terms of Section 9 of that Act. The application was
accompanied by the proposed bye-laws of the Society. The Registrar of
Co-operative Societies, on being satisfied that the Society had complied
with the provisions of the Act and the Rules and that the proposed bye-
laws were not contrary to the Act and the Rules, granted registration to
the Society and its bye-laws and issued a certificate of registration in
terms of Section 11 of that Act. As per the bye-laws, the objects of the
Society were to carry on the trade of building, and of buying, selling,
hiring, letting and developing land in accordance with Co-operative
principles and to establish and carry on social, re-creative and
educational work in connection with its tenets and the Society was to
have full power to do all things it deemed necessary or expedient, for the
accomplishment of all objects specified in its bye-laws, including the
power to purchase, hold, sell, exchange, mortgage, rent, lease, sub-lease,
surrender, accept surrenders of and deal with lands of any tenure and to
sell by installments and subject to any terms or conditions and to make
and guarantee advances to members for building or purchasing property
and to erect, pull down, repair, alter or otherwise deal with any building
thereon. All persons who had signed the application for registration, are
original members by virtue of bye-law No.7. The said bye-law further
provided that other members shall be elected by the Committee of the
Society, provided that all members shall belong to the Parsi Community
subject to satisfying other conditions in that bye-law. Bye-law No. 21
provided for sale of a share held by a member but with previous sanction
of the Committee which had full discretion in granting or withholding
such sanction. It was also provided that until the transfer of a share is
registered, no right was acquired against the Society by the transferee,
and no claim against the transferor by the Society was also to be
affected. In short, the qualification for becoming a member in the
Society was that the person should be a Parsi and that the transfer of a
share to him had to have the previous sanction of the Committee of the
Society.

3. Some of the relevant provisions of the Bombay Act may
now be noticed. Under Section 3, the Registrar had the right to classify
all societies under one or other of the heads referred to in that Section.
Under Section 5 of that Act, a society which had as its object, the
promotion of economic interests of its members in accordance with
economic principles, may be registered under the Act with or without
limited liability. Section 6 placed restrictions on the interests of the
members of the society with limited liability. Section 6A enacted that
no person shall be admitted as a member of a society unless he was a
person competent to contract under Section 11 of the Indian Contract
Act. Section 7 stipulated the conditions for registration and provided
that no society could be registered under the Act which did not consist of
at least 10 persons who were qualified to be members of the society
under Section 6A and where the object of the society was the creation of
funds to be lent to its members, unless all persons forming the society
resided in the same town or village or in the group of villages or they
belonged to the same tribe, class or occupation, unless the Registrar
ordered otherwise and no person could be admitted to membership of
any such society after its registration unless the persons fulfilled the two
requirements as mentioned above. If the Registrar was satisfied that a
society has complied with the provisions of the Act and the Rules and
that its proposed bye-laws are not contrary to the Act or to the Rules,
under Section 10 he was to register the society and its bye-laws.
According to the Society, it had submitted its duly filled in application
under Section 9 of the Act accompanied by its bye-laws and the said
bye-laws have been approved and registered by the Registrar on being
satisfied that the proposed bye-laws were not contrary to the Act or to
the Rules.

4. After the Society was formed and registered as indicated
earlier, the Society got lands acquired by the State by invoking the Land
Acquisition Act, 1894. The Society entered into an agreement in that
behalf with the Government under Section 41 of the Act on 17.2.1928.
The said agreement recited that the Government of Bombay was
satisfied that the land should be acquired under the Land Acquisition Act
"for the purpose of erecting houses thereon". It was also stated that the
Government was satisfied that the acquisition of the land was needed for
the furtherance of the objects of the Society and was likely to prove
useful to the public and it consented to put in operation the provisions of
the Land Acquisition Act. An extent of 6 acres 12 guntas was thus
acquired and handed over to the Society, on the Society bearing the cost
of that acquisition. The Society in its turn allotted portions of the land to
its members for the purpose of putting up residential houses in the
concerned plots.

5. One of the members of the Society sold the plot in which he
had constructed a residential building, to the father of Respondent No.2
with the previous consent of the Committee of the Society. The father of
Respondent No.2 was also admitted to membership of the Society, he
being qualified for such admission in terms of the bye-laws of the
Society. After the rights devolved on Respondent No.2, consequent on
the death of his father, he became a member of the Society of his
volition. Thereafter, he applied to the Society for permission to demolish
the bungalow that had been put up and to construct a commercial
building in its place. The Society refused him permission stating that the
bye-laws of the Society did not permit commercial use of the land.
Thereafter, Respondent No.2 applied to the Society for permission to
demolish the bungalow and to construct residential flats to be sold to
Parsis. The Society acceded to the request of Respondent No.2, making
it clear that the flats constructed could only be sold to Parsis. It appears
that, earlier, the Society had written to the Registrar that it was
apprehending that certain members of the Society were proposing to sell
their bungalows to persons outside the Parsi community only with
commercial motive and in violation of clause 7 of the bye-laws. The
Registrar replied that any transaction of sale should be in accordance
with the bye-laws of the Society and any sale in violation of the bye-laws
would not be permitted, thus, stressing the sanctity of the bye-laws. On
20.7.1982, the Government of Gujarat had also issued a notification
declaring that persons or firms dealing with the sale and purchase of
lands and buildings, contractors, architects and engineers were
disqualified from being members of Co-operative Housing Societies.
Though, permission was given to Respondent No.2 as early as on
17.5.1988 for construction of residential flats in the land, to be sold only
to members of the Parsi community, he did not act on the permission for
a period of seven years. Apprehending that Respondent No.2 intended
to violate the bye-laws of the Society, the Society passed a resolution
reminding its members that in accordance with bye-law No.7, no person
other than a Parsi could become a new member of the Society and
informing the existing members of the Society that they could not sell
their plots or bungalows to any person not belonging to the Parsi
community. Respondent No.2 appears to have started negotiations with
Respondent No.3, a Builder's association, in violation of the restriction
on sale of shares or property to a non-Parsi. The Society, in that context,
filed a case before the Board of Nominees under the Act for an
injunction restraining Respondent No.2 from putting up any construction
in plot no.7 and from transferring the same to outsiders in violation of
bye-law No.7 without valid prior permission from the Society. Though,
initially an interim order of injunction was granted, the Board informed
the Society that the Society could not restrict its membership only to the
Parsi community and that membership should remain open for every
person. A clarification was also sought for from the Society as to why it
had refused permission to Respondent No.2 to transfer plot no.7
belonging to him. Subsequently, the Board of Nominees vacated the
interim order of injunction granted, inter alia, on the ground that the
construction of a block of residential flats would not create disturbance
and nuisance to the original members of the Society. Thereafter,
Respondent No.2 applied to the Society for permission to transfer his
share to Respondent No.3. The said application was rejected by the
Society, since according to it, the application was contrary to the Act,
Rules and the bye-laws of the Society. While the Society challenged the
order of the Board of Nominees before the Gujarat State Co-operative
Societies Tribunal, Respondents 2 and 3 challenged the rejection of the
request of Respondent No.2 to sell his plot to Respondent No.3, by way
of an appeal before the Registrar of Co-operative Societies under Section
24 of the Act. The Tribunal, in the revision filed by the Society, took the
view in an interim order that the bye-law restricting membership to
Parsis was a restriction on the right to property and the right to alienate
property and, therefore, was invalid in terms of Article 300A of the
Constitution of India. This order was challenged by the Society and its
Chairman before the High Court of Gujarat in Special Civil Application
No. 6226 of 1996. By judgment dated 16.1.1997, a learned Single Judge
of the Gujarat High Court dismissed the writ petition essentially holding
that the restriction in a bye-law to the effect that membership would be
limited only to persons belonging to the Parsi community, would be an
unfair restriction which can be validly dealt with by the appropriate
authorities under Section 24 of the Act and Rule 12(2) of the Rules. It
was also held that such a bye-law would amount to a restraint on
alienation and hence would be hit by Section 10 of the Transfer of
Property Act. The Society and its Chairman, challenged the said
decision before a Division Bench, in Letters Patent Appeal No. 129 of
1997. By judgment dated 23.7.1999, the said appeal was dismissed,
more or less, concurring with the reasoning and conclusion of the
learned Single Judge. The decision of the Division Bench of the Gujarat
High Court thus rendered, is challenged in this appeal by Special Leave.

6. Mr. Soli J. Sorabjee, learned Senior Counsel appearing for the
appellants contended that under Article 19(1)(c) of the Constitution of
India, Parsis had a fundament right of forming an association and that
fundamental right cannot be infringed by thrusting upon the association,
members whom it does not want to admit or against the terms of its bye-
laws. He submitted that the content of the right of association
guaranteed by Article 19(1)(c) of the Constitution of India has been
misunderstood by the High Court and the Authorities under the Act. He
also contended that there was nothing in the Act or the Rules which
precluded a society from restricting its membership to persons of a
particular persuasion, belief or tenet and the High Court was in error in
holding that membership could not be restricted to members of the parsi
community for whose benefit the very society was got registered.
Though, grounds based on Article 26 of the Constitution of India raised,
were not pursued, it was pointed out that under Article 29, the parsis had
the right to conserve their culture. It was submitted that bye-law No.7
was perfectly valid and so long as it did not violate anything contained in
the Act or the Rules, it could not be held to be invalid or unenforceable
and the society cannot be compelled to act against the terms of its bye-
laws. He also submitted that there was no absolute restraint on
alienation to attract Section 10 of the Transfer of Property Act and the
restraint, if any, was only a partial restraint, valid in law. There was
nothing illegal in certain persons coming together to form a society in
agreeing to restrict membership in it or to exclude the general public at
its discretion with a view to carry on its objects smoothly. Mr. Bobde,
learned Senior Counsel appearing for the contesting respondents,
Respondents 2 and 3, contended that Section 4 of the Act clearly
indicated that no bye-law could be recognized which was opposed to
public policy or which was in contravention of public policy in the
context of the relevant provisions in the Constitution of India and the
rights of an individual under the laws of the Country. A bye-law
restricting membership in a co-operative society, to a particular
denomination, community, caste or creed was opposed to public policy
and consequently, the Authorities under the Act and the High Court were
fully justified in rejecting the claim of the Society. Learned Senior
Counsel also contended that the High Court was right in holding that the
concerned bye-law operated as a restraint on alienation and such a
restraint was clearly invalid in terms of Section 10 of the Transfer of
Property Act. He submitted that a co-operative society stood on a
different footing from a purely voluntary association or a society
registered under the Societies Registration Act and in the context of
Sections 4 and 24 of the Act, the validity of the bye-laws of a society
had to be tested, notwithstanding the fact that the bye-laws had been
earlier approved by the Registrar of Co-operative Societies. Learned
Senior Counsel also contended that under Section 14 of the Act, the
Registrar had the power to call upon the Society to amend its bye-laws
and in that context, the Registrar could direct the Society to delete the
restriction placed on admission to membership by bye-law No.7 of the
bye-laws of the Society. In reply, Mr. Sorabjee pointed out that the
rights under Part III of the Constitution of India pertained to State action
and an individual could always join a voluntary association or a
cooperative society which placed certain restrictions on the right, he
might have otherwise enjoyed. There was also no substance in the
contention that public policy was being violated.

7. Before proceeding further, some of the relevant provisions of the
Gujarat Act may be noticed in a little detail. The Society though
originally registered under the Bombay Co-operative Societies Act, 1925
has to be deemed to be registered under the Gujarat Act by virtue of
Section 169 of the Gujarat Cooperative Societies Act, 1961. Section 2(2)
of the Act defines bye-laws as meaning, bye-laws registered under the
Act. Section 2(13) defines a member as meaning a person joining in an
application for the registration of a co-operative society which is
subsequently registered, or a person, duly admitted to membership of the
society after its registration. Section 4 of the Act, based on which
considerable arguments were raised before us, reads as follows:-
"4. Societies which may be registered.- A
society, which has as its object the promotion of
the economic interests or general welfare of its
members or of the public, in accordance with co-
operative principles, or a society established with
the object of facilitating the operations of any such
society, may be registered under this Act:
Provided that it shall not be registered if, in
the opinion of the Registrar, it is economically
unsound, or its registration may have an adverse
effect upon any other society, or it is opposed to,
or its working is likely to be in contravention of
pubic policy."

Section 6 insists that a society shall not be registered under the
Act unless it consists of at least ten persons not belonging to the same
family, who are qualified to be members under the Act and who reside
within the area of operation of the society. This shows that the members
of a family could not by themselves form into a society. There was no
such embargo on persons belonging to a community or sex forming
themselves into a cooperative society. Section 8 speaks of application
for registration and Section 9 speaks of registration. As noticed, the
Society was originally registered under the Bombay Act. Under Section
11 of the Act, the Registrar is given the power to decide certain
questions. The said Section reads:
"11. Power of Registrar to decide certain
questions.- When, any question arises whether for
the purpose of the formation, or registration or
continuance of a society or the admission of a
person as a member of a society under this Act a
person is an agriculturist or a non-agriculturist, or
whether any person is a resident in a town or
village or group of villages, or whether two or
more villages shall be considered to form a group,
or whether any person belongs to any particular
tribe, class or occupation, the question shall be
decided by the Registrar."

It may be noted that the power does not include the power
to decide whether the refusal to admit a particular member on the basis
that he is not qualified under the bye-laws is correct or not and the power
is conferred only to decide the eligibility of a person to be a member,
apparently in terms of the Act, the Rules and the bye-laws. Section 12
enables the Registrar to classify the societies. Section 13 provides that
an amendment of the bye-laws of a society had to be approved by the
Registrar before it could come into force. Section 14 of the Act confers
a power on the Registrar to direct an amendment of the bye-laws of a
society. The said Section reads as under:-
"14. Power to direct amendment of bye-
laws .- (1) If it appears to the Registrar that an
amendment of the bye-laws except in respect of
the name or objects of a society is necessary or
desirable in the interest of such society, he may
call upon the society, in the prescribed manner, to
make the amendment within such time as he may
specify.
(2) If the society fails to make the
amendment within the time so specified, the
Registrar after giving the society an opportunity of
being heard and with the prior approval of the
State Co-operative Council, may register the
amendment, and shall thereupon issue to the
society a copy thereof certified by him. With effect
from the date of the registration of the amendment
in the manner aforesaid, the bye-laws shall be
deemed to have been duly amended accordingly ;
and the bye-laws as amended shall be binding on
the society and its members."

Section 22 provides that subject to the provisions of Section 25,
no person shall be admitted as a member of a society unless he is an
individual, who is competent to contract, a firm, company, or any other
body corporate or a society registered under the Societies Registration
Act, 1860, a society registered, or deemed to be registered, under the
Act, the State Government, a local authority, or a public trust registered
under Bombay Public Trusts Act, 1950.

Section 23 deals with removal of a member in certain
circumstances. Section 24 speaks of open membership. Sub-Section (1)
thereof, which is of immediate relevance, reads as follows:-
"24. Open membership. (1) No society
shall, without sufficient cause, refuse admission to
membership to any person duly qualified therefor
under the provisions of this Act, the rules and bye-
laws of such society."

Be it noted that admission to membership could not be refused only to a
person who was duly qualified therefor under the Act, the Rules and the
bye-laws of such Society. In other words, the bye-laws are not given the
go-by in spite of the introduction of the concept of open membership as
indicated by the heading of the Section. Section 29 of the Act restricted
the right of a member other than the State Government or a society to
hold more than one fifth of the total share capital of the society. Section
30 places restriction on transfer of share or interest. It reads
"30. Restrictions on transfer of share or interest.-
(1) Subject to the provisions of section 29 and sub-
section (2) a transfer of, or charge on, the share or
interest of a member in the capital of a society shall be
subject to such conditions as may be prescribed.

(2) A member shall not transfer any share held by
him, or his interest in the capital or property of any
society, or any part thereof, unless.-

(a) he has held such share or interest for not
less than one year;

(b) the transfer or charge is made to the
Society, or to a member of the Society,
or to a person whose application for
membership has been accepted by the
Society; and

(c) the committee has approved such
transfer."

It can be seen that a restriction is placed on the right of a member to
transfer his share by sub-section (2) of Section 30 and the transfer could
be only in favour of the society or to a member of the society or to a
person whose application for membership has been accepted by the
society and the committee has approved such transfer. Section 31
provides for transfer of interest on death of a member. Even an heir or a
legal representative, had to seek and obtain a membership in the society,
before the rights could be transferred to him. The section also leaves a
right to the heir or legal representative to require the society to pay him
the value of the share or interest of the deceased member, ascertained as
prescribed. Section 32 of the Act provides that the share or interest of a
member in the capital of a Cooperative Society is not liable to
attachment. Under Section 36 of the Act, the society even has the power
to expel a member and unless otherwise ordered in special
circumstances by the Registrar, such expelled member does not have a
right of re-admission to membership. Sections 44 to 46 place
restrictions on transactions with non-members and the said transactions
were to be subject to such restrictions as may be prescribed. Under
Chapter V of the Act, any society duly registered under the Act would be
entitled to State aid. Under Section 73 of the Act, the final authority of
the society is to vest in the general body of the society, subject to it
being delegated in terms of the bye-laws of the society. The powers and
functions of the Committee in which the management of every society
vested, are dealt with in Section 74 of the Act.

8. The Gujarat Co-operative Societies Rules, 1965 was framed in
terms of the Act. Rule 12(2) provides that no Co-operative Housing
Society shall, without sufficient cause, refuse admission to its
membership, to any person duly qualified therefor under the provisions
of the Act and its bye-laws, to whom an existing member of such society
wants to sell or transfer his land or house and no such society shall,
without sufficient cause, refuse to give permission to any existing
member to sell or transfer his plot of land or house to another person
who is duly qualified to become a member of that society.

9. A peep into the history of the legislation brought in to govern the
co-operative movement in the country seems justified. The real first
legislation touching the co-operative movement was the Co-operative
Credit Societies Act, 1904. When that act came into being, there was no
other act in force under which an association or a society could be
formed for the purpose of promoting the economic interests of its
members in accordance with the well recognized co-operative principles,
though a co-operative society could be organized under the Indian
Companies Act, 1882. Lacuna was found in the working of that Act
especially in the development of rural credit. To remove the same, the
Cooperative Societies Act, 1912 was enacted. Under Section 4 of that
Act, a society which had as its object, the promotion of economic
interests of its members in accordance with economic principles, could
be registered under the Act. Under Section 6, no society could be
registered which did not consist of at least 10 persons above the age of
18 years and where the object of the society was the creation of funds to
be lent to its members unless such persons either resided in the same
town or village or in the same group of villages or they were members of
the same tribe, class, caste or occupation unless otherwise directed by
the Registrar of Co-operative societies. Section 14 placed restrictions on
the transfer of share or interest by a member and the transfer could be
made only to the society or to a member of the society. What is relevant
for our purpose is to notice that normally, the membership in a society
created with the object of creation of funds to be lent to its members,
was to be confined to members of the same tribe, class, caste or
occupation. The Co-operative Societies Act, 1912 continued in force
until the concerned States enacted laws for themselves. It was, thus,
that the Bombay Co-operative Societies Act, 1925 was enacted. We
have earlier noticed some of the relevant provisions of the Act and it is
not necessary to repeat them here. Under Section 72 of the Act, a
society registered either under the Co-operative Credit Societies Act,
1904 or the Co-operative Societies Act, 1912 was to be deemed to be
registered under the Act. What is required to be noticed is that in this
Act also, when the object of the society was the creation of funds to be
lent to its members, the membership had to be confined to persons
belonging to the same town or village or same group of villages or they
had to be members of the same tribe, class (originally it was caste) or
occupation unless the Registrar ordered otherwise. It was this Act,
under which the present appellant Society got itself registered, though it
later came to be governed by the Gujarat Co-operative Societies Act
which was subsequently enacted. We have already adverted to the
general provisions thereof but it may be relevant to notice here that
under Section 6, no society other than a federal society, could be
registered unless it consisted of at least 10 persons belonging to different
families and who resided in the area of operation of the society and no
society with unlimited liability could be registered unless all persons
forming the society, resided in the same town or village or in the group
of villages. Section 24 of the Act put restrictions in respect of
membership. Section 30 restricted the right of transfer and Section 31
the right of inheritance. Thus, running right through the relevant
enactments, is the concept of restricted membership in a co-operative
society. The concept of open membership referred to in Section 24 of
the Act has therefore to be understood in this background, especially
when we bear in mind that it only placed an embargo on refusal of
admission to membership to any person duly qualified therefor under the
provisions of the Act, the Rules and the bye-laws of the society.

10. It could be seen from the leaflet which is a part of Annexure
P-1 containing the bye-laws of the Society filed with the rejoinder, that
suggestions were made regarding the formation of co-operative housing
societies. The appellant is a housing society. It was stated that the
essential feature of every housing society was at least that its houses
formed one settlement in one compact area and the regulation of the
settlement rested in the hands of the managing committee of the society.
The problem involved in devising of model bye-laws which had to
combine rather opposite requirements is also seen explained. In the
suggestions for the promotion of a housing society the first essential is
said to be that there should be a bond of common habits and common
usage among the members which should strengthen their neighbourly
feelings, their loyal adherence to the will of the society expressed by the
committee's orders and their unselfish and harmonious working
together. In India, this bond was most frequently found in a community
or caste or groups like cultivators of a village. It is seen that the
appellant Society, more or less, adopted the model bye-laws prepared in
that behalf and by bye-law 7, the housing society confined its
membership to those of the Parsi community.


11. The cooperative movement, by its very nature, is a form of
voluntary association where individuals unite for mutual benefit in the
production and distribution of wealth upon principles of equity, reason
and common good. No doubt, when it gets registered under the
Cooperative Societies Act, it is governed by the provisions of the
Cooperative Societies Act and the Rules framed thereunder. In
Damyanti Naranga v. Union of India & Others (AIR 1971 SC 966),
this Court, discussing the scope of the right to form an association
guaranteed by Article 19(1)(c) of the Constitution of India, stated that
the right to form an association necessarily implies that the persons
forming the association have also the right to continue to be associated
with only those whom they voluntarily admit in the association. Any
law, by which members are introduced in the voluntary Association
without any option being given to the members to keep them out, or any
law which takes away the membership of those who have voluntarily
joined it, will be a law violating the right to form an association. Based
on this decision, it is contended on behalf of the Society that its members
have the right to be associated only with those whom they consider
eligible to be admitted and the right to deny admission to those with
whom they do not want to associate, cannot be interfered with by the
Registrar by imposing on them a member who according to them was
not eligible to be admitted. The argument on this basis is sought to be
met on behalf of the respondents by reference to another decision of this
Court in Daman Singh and others, etc. v. State of Punjab and others,
etc. (AIR 1985 SC 973). Therein, their Lordships, after referring to
Damyanti (supra), held that that decision had no application to the
situation before them. The position was explained in the following
words:-
"That case has no application whatever to
the situation before us. It was a case where an
unregistered society was by statute converted into
a registered society which bore no resemblance
whatever to the original society. New members
could be admitted in large numbers so as to reduce
the original members to an insignificant minority.
The composition of the society itself was
transformed by the Act and the voluntary nature of
the association of the members who formed the
original society was totally destroyed. The Act
was, therefore, struck down by the Court as
contravening the fundamental right guaranteed by
Art. 19(1)(f). In the cases before us we are
concerned with co-operative societies which from
the inception are governed by statute. They are
created by statute, they are controlled by statute
and so, there can be no objection to statutory
interference with their composition on the ground
of contravention of the individual right of freedom
of association."


It is emphasized that the principle recognized in the Damyanti's
case (supra) was not applicable to a co-operative society since it is a
creature of a statute, the Cooperative Societies Act and that the rights of
its members could be abridged by a provision in the Act. Regarding the
rights of an individual member, their Lordships have stated:
"Once a person becomes a member of a
cooperative society, he loses his individuality qua the
Society and he has no independent rights except those
given to him by the statute and the bye-laws."

12. 'Daman Singh's case (supra), in our view, is not an
answer to the claim of the Society that it had the right to decide with
whom it wants to associate or to deny membership to a person who was
not qualified to be one in terms of the bye-laws of the Society. The
effect of the observations in Daman Singh's case (supra), is only that
cooperative societies, from their very inception are governed by the
statute, the Cooperative Societies Act, that they are created by statute,
they are controlled by the statute and so, there can be no objection to
statutory interference with their composition or functioning and no merit
in a challenge to statutory interference based on contravention of the
individual right of freedom of association. As we understand the
statement of the law by this Court in Daman Singh's case, it only means
that the action of the Society in refusing membership to a person has to
be tested in the anvil of the provisions of the Act, the Rules and its bye-
laws. Be it noted that the bye-laws had already been approved on the
basis that it is consistent with the Act and the Rules. Even then, it may
be possible in a given case to point out that a particular bye-law was
against the terms of the Act or the Rules. Daman Singh does not
indicate that the Act, the Rules and the bye-laws for that matter, have to
be given the go-by, merely because the particular bye-law or action of
the Society may not accord with our concept of fairness or propriety in
terms of the rights available to an ordinary citizen. Therefore, in the
light of the observations in Daman Singh, what one has to search for, is
a provision in the Act or the Rules which prevails over bye-law No.7 of
the Society, confining membership in it, to only a person who is a Parsi.
Section 24 of the Act, no doubt, speaks of open membership, but Section
24(1) makes it clear that, that open membership is the membership of a
person duly qualified therefor under the provisions of the Act, the Rules
and the bye-laws of the Society. In other words, Section 24(1) does not
contemplate an open membership de hors the bye-laws of the Society.
Nor do we find anything in the Act which precludes a society from
prescribing a qualification for membership based on a belief, a
persuasion or a religion for that matter. Section 30(2) of the Act even
places restrictions on the right of a member to transfer his right. In fact,
the individual right of the member, respondent No.2, has got submerged
in the collective right of the Society. In State of U.P. and another v.
C.O.D. Chheoki Employees' Cooperative Society Ltd. and others,
(1997) 3 SCC 681, this Court after referring to Daman Singh's case
(supra) held in paragraph 16 that :
"Thus, it is settled law that no citizen has a
fundamental right under Article 19(1)(c) to become a
member of a Cooperative Society. His right is
governed by the provisions of the statute. So, the
right to become or to continue being a member of the
society is a statutory right. On fulfillment of the
qualifications prescribed to become a member and for
being a member of the society and on admission, he
becomes a member. His being a member of the
society is subject to the operation of the Act, rules and
bye-laws applicable from time to time. A member of
the society has no independent right qua the society
and it is the society that is entitled to represent as the
corporate aggregate. No individual member is
entitled to assail the constitutionality of the provisions
of the Act, rules and the bye-laws as he has his right
under the Act, rules and the bye-laws and is subject to
its operation. The stream cannot rise higher than the
source."


13. Section 4, on which reliance is placed, with particular
reference to its proviso, only speaks of denial of registration if, in the
opinion of the Registrar, the Society to be formed was economically
unsound, or its registration may have an adverse effect upon any other
Society, or it is opposed to, or its working is likely to be in contravention
of public policy. Prima facie, it may have to be said that public policy,
in the context of Section 4 of the Act, is the policy that is adopted by the
concerned Act and the Rules framed thereunder. The concept of public
policy in the context of the Cooperative Societies Act has to be looked
for under the four corners of that Act and in the absence of any
prohibition contained therein against the forming of a society for persons
of Parsi origin, it could not be held that the confining of membership as
was done by bye-law No.7, was opposed to public policy. When a
statute is enacted, creating entities introduced thereunder on fulfillment
of the conditions laid down therein, the public policy in relation to that
statute has to be searched for within the four corners of that statute and
when so searched for, one does not find anything in the Act which
prevents the Society from refusing membership to a person who does not
qualify in terms of bye-law No.7 of the Society.

14. Reliance was placed on Rule 12 of the Gujarat Cooperative
Societies Rules, 1965. Rule 12 deals with open membership and
provides in Rule 12(2) as follows:
"12. Open membership.-(1) ..
(2) No co-operative housing society shall
without sufficient cause, refuse admission to its
membership to any person, duly qualified therefor,
under the provisions of the Act, and its bye-laws to
whom an existing member of such society wants to
sell or transfer his plot of land or house and no
such society shall without sufficient cause, refuse
to give permission to any existing member thereof
to sell or transfer his plot of land or house to
another person who is duly qualified as aforesaid
to become its member."

Rule 12(2), as can be seen, provides only that, no person shall be
refused admission provided he is duly qualified under the Act and the
bye-laws of the society to be a member or permission for transfer
refused, if the proposed transferee is qualified to be a member. Here
again, the primacy given to the bye-laws of the society is in no manner
sought to be whittled down by reference to any public policy going by
the larger concept of that term and outside the Act. The decisions of the
Bombay High Court, the Gujarat High Court and the Madhya Pradesh
High Court relied on by learned counsel proceeded on the basis that if
any provision is made against the constitutional scheme of things like
confining membership in a Society to a caste, religion or creed, the same
would be opposed to public policy and hence unenforceable. The
question is whether such an approach is warranted when a statute
enacted in that behalf outlines the contours of the policy sought to be
enforced by the creation of bodies thereunder, being essentially
associations which are voluntary in nature.

15. Membership in a co-operative society only brings about a
contractual relationship among the members forming it subject of course
to the Act and the Rules. One becomes a member in a co-operative
society either at the time of its formation or acquires membership in it on
possessing the requisite qualification under the bye-laws of the society
and on being accepted as a member. It is not as if one has a
fundamental right to become a member of a co-operative society. But
certainly, if the application of one for membership, who is otherwise
qualified to be a member under the Act, Rules and the bye-laws of the
society, is rejected unreasonably or for frivolous reasons, the person may
be entitled to enforce his claim to become a member in an appropriate
forum or court of law. This is the effect of the decision in Jain
Merchants Co-operative Housing Society vs. HUF of Manubhai
(1995 (1) Gujarat Law Reporter 19) relied on by the High Court. The
said decision does not lay down a proposition, nor can it lay down a
proposition, that even a person who does not qualify to be a member in
terms of the bye-laws of a society can enforce a right to become a
member of that society. It is one thing to say that it is not desirable to
restrict membership in a society based solely on religion or sex but it is
quite different thing to say that any such voluntary approved bye-law
containing such a restriction could be ignored or declared
unconstitutional by an authority or a tribunal created under the Act itself.
Normally, the bye-laws of a society do not have the status of a statute
and as held by this Court in Co-operative Central Credit Bank Ltd.
vs. Industrial Tribunal, Hyderabad (AIR 1970 SC 245) bye-laws are
only the rules which governs the internal management or administration
of a society and they are of the nature of articles of association of a
company incorporated under the Companies Act. They may be binding
between the persons affected by them but they do not have the force of a
statute.

16. The validity of a bye-law, that too an approved bye-law, has to be
tested in the light of the provisions of the Act and the rules governing
co-operative societies. In so testing, the search should be to see whether
a particular bye-law violates the mandate of any of the provisions of the
Act or runs counter to any of its provisions or to any of the rules.
Section 24(1) of the Act only provides for open membership subject to a
person, aspiring to be a member, possessing the qualification prescribed
by the bye-laws. It is not an open membership dehors the qualification
prescribed by the bye-laws. When in Daman Singh this Court held that
when a co-operative society is governed by the appropriate legislation it
will be subject to the intervention made by the concerned legislation, it
only meant that a legislative provision in the Act can be introduced for
the purpose of eliminating a qualification for membership based on sex,
religion or a persuasion or mode of life. But so long as there is no
legislative intervention of that nature, it is not open to the court to coin a
theory that a particular bye-law is not desirable and would be opposed to
public policy as indicated by the Constitution. The Constitution no
doubt provides that in any State action there shall be no discrimination
based either on religion or on sex. But Part III of the Constitution has
not interfered with the right of a citizen to enter into a contract for his
own benefit and at the same time incurring a certain liability arising out
of the contract. As observed by the High Court of Bombay in
Karvanagar Sahakari Griha Rachana Sanstha Maryadit and others
vs. State (AIR 1989 Bombay 392) the members have joined the society
in accordance with the bye-laws and the members join a housing society
by ascertaining what would be the environment in which they will
reside. It is not permissible for the State Government to compel the
society to amend its bye-laws as it would defeat the object of formation
of the society. In that case, the society was constituted with the object
of providing peaceful accommodation to its members. Though there
may be circumstances justifying the State taking steps to meet shortage
of accommodation, it was not open to the State Government to issue a
direction to the Registrar of Co-operative Societies to direct a co-
operative society to make requisite amendments to their bye-laws and
grant permission to its members to raise multistoried constructions. In
appeal from that decision reported as State of Maharashtra and others
vs. Karvanagar Sahakari Griya Rachana Sanstha Maryadit and
others (2000 (9) SCC 295) this Court while dismissing the appeal
stated that it was clear that though a power was conferred on the
Registrar to direct amendment of the bye-laws of a society, yet the
paramount consideration is the interest of the society. So also, the
power of the State Government to issue directions in public interest,
could not be exercised so as to be prejudicial to the interest of the
society. In the view of this Court, what was in the interest of the society
was primarily for the society alone to decide and it was not for an
outside agency to say. Where, however, the government or the
Registrar exercised statutory powers to issue directions to amend the
bye-laws, such directions should satisfy the requirement of the interest of
the society. This makes it clear that the interest of the society is
paramount and that interest would prevail so long as there is nothing in
the Act or the Rules prohibiting the promotion of such interest. Going
by Chheoki Employees' Cooperative Society Ltd.,'s case, neither the
member, respondent No.2, nor the aspirant to membership, respondent
No.3 had the competence to challenge the validity of the bye-laws of the
Society or to claim a right to membership in the Society.

17. It appears to us that unless appropriate amendments are brought to
the various Cooperative Societies Acts incorporating a policy that no
society shall be formed or if formed, membership in no society shall be
confined to persons of a particular persuasion, religion, belief or region,
it could not be said that a society would be disentitled to refuse
membership to a person who is not duly qualified to be one in terms of
its bye-laws.

18. It can be seen from the bye-laws of the present Society that the
Society, more or less, adopted the model bye-laws made applicable to
the Bombay Presidency. The object of the Society as set out in bye-law
No.2 reads:
"2. The objects of the Society shall be to
carry on the trade of building, and of buying,
selling, hiring, letting and developing land in
accordance with Co-operative principles and to
establish and carry on social, re-creative and
educational work in connection with its tenets and
the Society was to have full power to do all things
it deems necessary or expedient for the
accomplishment of all objects specified in its bye-
laws, including the power to purchase, hold, sell,
exchange, mortgage, rent, lease, sub-lease,
surrender, accept surrenders of and deal with lands
of any tenure and to sell by installments and
subject to any terms or conditions and to make and
guarantee advances to Members for building or
purchasing property and to erect, pull down, repair,
alter or otherwise deal with any building thereon."

Under bye-law No.7, it was provided that members shall be elected by
the Committee provided that all members shall belong to the Parsi
community and on the conditions referred to in bye-law No.7.
Provision has been made providing for the contingency arising out of the
death of a member. Under bye-law No.21, it is provided that any share
held by a member could be sold in terms of the other relevant bye-laws
only with previous sanction of the Committee. The Committee is given
full discretion in granting or withholding such sanction. Of course, in
terms of the Act and the Rules, the refusal may be appealable before the
Authority under the Act and the Society may not be in a position to
argue that its decision is final. But that does not mean that the Authority
under the Act is competent to ignore the bye-law relating to qualification
to membership and direct the Society by exercising appellate or other
power, to admit a person to membership who is not qualified to be a
member, on the basis of its notion of public policy or fairness in dealing.
These approved bye-laws, clearly, confer power on the Committee to
reject the application for membership of a person who is not qualified in
terms of the bye-law concerned and this cannot be interfered with on the
basis of anything contained in the Act or the Rules. We are, therefore,
satisfied that by introducing a theory of what the court considers to be
public policy, a society registered under the Cooperative Societies Act,
cannot be directed to admit a member who is not qualified to be a
member in terms of its duly registered bye-laws.

19. It is true that it is very tempting to accept an argument that
Articles 14 and 15 read in the light of the preamble to the Constitution of
India reflect the thinking of our Constitution makers and prevents any
discrimination based on religion or origin in the matter of equal
treatment or employment and to apply the same even in respect of a co-
operative society. But, while being thus tempted, the Court must also
consider what lies behind the formation of co-operative societies and
what their character is and how they are to be run as envisaged by the
various Cooperative Societies Acts prevalent in the various States of this
Country. Running through the Cooperative Societies Act, is the theory
of area of operation. That means that membership could be denied to a
citizen of this Country who is located outside the area of operation of a
society. Does he not have a fundamental right to settle down in any part
of the country or carry on a trade or business in any part of the country?
Does not that right carry with it, the right to apply for membership in any
cooperative society irrespective of the fact that he is a person hailing
from an area outside the area of operation of the society? In the name of
enforcing public policy, can a Registrar permit such a member to be
enrolled? Will it not then go against the very concept of limiting the
areas of operation of cooperative societies? It is, in this context that we
are inclined to the view that public policy in terms of a particular entity
must be as reflected by the statute that creates the entity or governs it
and on the Rules for the creation of such an entity. Tested from that
angle, so long as there is no amendment brought to the Cooperative
Societies Acts in the various States, it would not be permissible to direct
the societies to go against their bye-laws restricting membership based
on its own criteria.

20. What is relied on to invoke the plea that the restriction of
membership is opposed to public policy is the proviso to Section 4 of the
Act. We have already quoted Section 4. For convenience, we extract
the proviso once again:-
"Provided that it shall not be registered if, in the
opinion of the Registrar, it is economically
unsound, or its registration may have an adverse
effect upon any other society, or it is opposed to,
or its working is likely to be in contravention of
pubic policy."


What is the public policy contemplated by the proviso, when the
formation and running of an association like a cooperative society is
governed by a law enacted for that purpose, the Cooperative Societies
Act, which recognizes the sanctity of the rights of the citizens coming
together, to impose restrictions on their own rights by making
appropriate provisions in the bye-laws of the society? Normally, that
policy has to be searched for within the confines of that statute. What
one has to bear in mind is that the statute reflects the policy of the
Legislature in respect of the subject matter dealt with thereunder. When
the Gujarat Cooperative Societies Act, 1961 was enacted, it could not be
taken that the Legislature was unaware of the fundamental rights of
citizens enshrined in Articles 19(1)(d) and (g) of the Constitution of
India. But the Legislation, in aid of the cooperative movement and in the
context of the rights available to citizens under Article 19(1)(c) of the
Constitution of India, imposes only certain restrictions as reflected by
the Act, the Rules and the Bye-laws of the particular society. The Acts
specifically gave sanctity to the bye-laws of a Society duly approved by
the authorities under the Act. The expression 'public policy' in the
context of Section 4 of the Act can be understood only as being opposed
to the policy reflected by the Cooperative Societies Act. As indicated in
Renusagar Power Co. Ltd. vs. General Electric Co. , 1994 Supp. (1)
SCC 644, the public policy underlying a statute has to be considered in
the context of the provisions of that statute. Therein, in the context of
the Foreign Exchange Regulation Act, 1973, it was held that any
violation of the provisions of that Act enacted in national economic
interest would be contrary to public policy and that would be the sense in
which it should be understood when used in Section 7(1)(b)(ii) of that
Act.

21. Under the Indian Contract Act, a person sui juris has the freedom
to enter into a contract. The bye-laws of a cooperative society setting
out the terms of membership to it, is a contract entered into by a person
when he seeks to become a member of that society. Even the formation
of the society is based on a contract. This freedom to contract available
to a citizen cannot be curtailed or curbed relying on the fundamental
rights enshrined in Part III of the Constitution of India against State
action. A right to enforce a fundamental right against State action,
cannot be extended to challenge a right to enter into a contract giving up
an absolute right in oneself in the interests of an association to be formed
or in the interests of the members in general of that association. This is
also in lieu of advantages derived by that person by accepting a
membership in the Society. The restriction imposed, is generally for
retaining the identity of the society and to carry forward the object for
which the society was originally formed. It is, therefore, a fallacy to
consider, in the context of cooperative societies, that the surrendering of
an absolute right by a citizen who becomes a member of that society,
could be challenged by the said member by taking up the position that
the restriction he had placed on himself by entering into the compact, is
in violation of his fundamental right of freedom of movement, trade or
right to settle in any part of the country. He exercises his right of
association when he becomes a member of a society by entering into a
contract with others regulating his conduct vis-`-vis the society, the
members constituting it, and submerging his rights in the common right
to be enjoyed by all and he is really exercising his right of association
guaranteed by Article 19(1)(c) of the Constitution of India in that
process. His rights merge in the rights of the society and are controlled
by the Act and the bye-laws of the society.

22. Entering into an association with others for forming a co-operative
society and subscribing to its bye-laws are matters of contract
voluntarily undertaken by a citizen. While considering an argument
that a provision in the bye-laws thus subscribed to by a member is
opposed to public policy, the court cannot forget another important
public policy as stated by Jessel, M.R. in Printing and Numerical
Registering Company v.s Sampson ( 1874-75 (Vol. 19) L.R. Equity
Cases 462):
"it must not be forgotten that you are not to extend
arbitrarily those rules which say that a given contract is
void as being against public policy, because if there is
one thing which more than another public policy
requires, it is that men of full age and competent
understanding shall have the utmost liberty of
contracting, and that their contracts when entered into
freely and voluntarily shall be held sacred and shall be
enforced by Courts of justice. Therefore, you have this
paramount public policy to consider  that you are not
lightly to interfere with this freedom of contract. Now,
there is no doubt public policy may say that a contract to
commit a crime, or a contract to give a reward to another
to commit a crime, is necessarily void. The decisions
have gone further, and contracts to commit an immoral
offence, or to give money or reward to another to commit
an immoral offence, or to induce another to do something
aginst the general rules of morality, though far more
indefinite than the previous class, have always been held
to be void. I should be sorry to extend the doctrine
much further."


23. In the context of the freedom of contract available to a
person and in the context of the right to form an association guaranteed
by Article 19(1)(c) of the Constitution of India, and the law governing
such an association, courts have to be cautious in trying to ride the
unruly horse of public policy in acceding to a challenge to a qualification
for membership in the bye-laws, not taboo under the Act and the Rules
themselves.

24. It also appears to us, that a person after becoming a member of a
Cooperative Society cannot seek to get out of the obligation undertaken
by him while becoming a member of such a Society by resort to the
principle of public policy based on constitutional protections given to an
individual as against State action. As noticed in Rodriguez vs. Speyer
Bros. (1919) A.C. 59 and Fender vs. Mildmay (1938) A.C. 1, the
considerations of public policy are disabling and not enabling. Observed
Lord Sumner in Rodriguez (Supra)":
"Considerations of public policy are applied to private
contracts or dispositions in order to disable, not to
enable. I never heard of a legal disability from which
a party or a transaction could be relieved because it
would be good policy to do so."

By invoking considerations of public policy, there appears to be no
justification in relieving a member of a Cooperative Society of the
obligations undertaken by him while joining it. The argument, therefore,
that Respondent No.2, herein, a member, should be relieved of the
obligation undertaken by him while joining the Society or becoming its
member or while seeking permission to put up a multi-storeyed
construction, should be relieved of the restriction, he has agreed to, on
the ground that the same might affect his fundamental rights guaranteed
by Article 19(1)(d) or (g) of the Constitution of India or that it offends
Article 300A of the Constitution.

25. Dealing with the validity of a restriction which prohibits
assignments of contractual rights which have the effect of bringing the
assignee into direct contractual relations with the other party to the
contract, the House of Lords held in Linden Gardens Trust Ltd. v.
Lenesta Sludge Disposal Ltd. and others, [1993] 3 All E.R. 417, that
the prohibition on the assignment including that of accrued rights of
action was not void as being contrary to public policy; since, a party to a
building contract could have a genuine commercial interest in seeking to
ensure that he was in contractual relations only with a person whom he
had selected as the other party to the contract and there was no public
need for the law to support a market in choses in action. The principle in
our view supports the position that a contractual restriction on whom to
admit as a member or with whom to associate, cannot be said to be
opposed to public policy.
26. It is true that in secular India it may be somewhat retrograde to
conceive of co-operative societies confined to group of members or
followers of a particular religion, a particular mode of life, a particular
persuasion. But that is different from saying that you cannot have a
co-operative society confined to persons of a particular persuasion,
belief, trade, way of life or a religion. A co-operative society is not a
state unless the tests indicated in Ajay Hasia are satisfied. There is no
case here that the appellant society satisfies the tests laid down by Ajay
Hasia so as to be considered to be a state within the meaning of Article
12 of the Constitution. The fundamental rights in Part III of the
Constitution are normally enforced against State action or action by
other authorities who may come within the purview of Article 12 of the
Constitution. It is not possible to argue that a person has a fundamental
right to become a member of a voluntary association or of a co-operative
society governed by its own bye-laws. So long as this position holds,
we are of the view that it is not possible, especially for a Registrar who
is an authority under The Co-operative societies Act, to direct a co-
operative society to admit as a member, a person who does not qualify to
be a member as per the bye-laws registered under the Act. Nor can a
Registrar direct in terms of Section 14 of the Act to amend the bye-laws
since it could not be said that such an amendment, as directed in this
case is necessary or desirable in the interests of the appellant society.
What is relevant under Section 14 of the Act is the interests of the
society and the necessity in the context of that interest. It is not the
interest of an individual member or an aspirant to a membership.

27. It is true that in the activities of a society, as envisaged by the bye-
laws, the society may acquire rights or incur obligations which may be
enforced. But the incurring of such an obligation or the acquiring of
such a right, cannot stand in the way of the right to form an association
guaranteed by Article 19(1)(c) of the Constitution available to the
members of the society who formed themselves into the appellant
Society. The position under The Bombay Co-operative Societies Act
under which the Society was originally formed was also no different as
can be seen from the relevant provisions of the Act. It, therefore,
appears to us to be not open to the Registrar or any other authority under
The Co-operative Societies Act to direct the Society to go against its
own bye-laws and to admit a person to membership as has been sought
to be done in this case.

28. The argument that public policy is as reflected by the
constitutional guarantees, which govern rights and obligations has to be
approached with caution. It will be easy for State Legislatures to
provide in their respective Co-operative Societies Acts that no society
could be formed or registered under the Act as confined to a group, a
sex, a religion or members of a particular persuasion or way of life. But
that is different from saying that in the name of open membership,
subject to its bye-laws contemplated by the relevant provisions of the
Act, a direction could be issued to ignore the bye-laws and to admit a
person who is not qualified to become a member. Moreover, what is
public policy in the context of a co-operative society got registered by
certain persons coming together and laying down a qualification for
membership in that society, is a question that has to be considered
essentially in the context of the availability of such a right in India to
form such associations and the absence of a prohibition in that behalf
contained in the Co-operative Societies Act and the Rules. In fact, the
Act and the Rules contemplate classification of a society and even there,
no prohibition has been indicated in respect of the confining of the
membership to a class of people. The decisions of the Bombay High
Court relied on by counsel for the respondent, in our view, have
proceeded on the basis of the concept of open membership without
giving adequate importance to the provision in the very section that the
open membership is subject to bye-laws of the society or the
qualification prescribed for membership in the society. In that context,
it is not possible to import one's inherent abhorrence to religious groups
or other groups coming together to form, what learned counsel for the
respondent called "ghettos". That is certainly an important aspect but
that is an aspect that has to be tackled by the legislature and not by the
authorities under the Act directing the co-operative society to go against
its own bye-laws or by the courts upholding such orders of the
authorities, based on presumed public policy when the Act itself does
not warrant it or sanction it.

29. Section 23 of the Contract Act provides that where consideration
and object are not lawful the contract would be void. But for Section 23
to apply it must be forbidden by law or it must of such a nature that it
would defeat the provision of any law or it is fraudulent or it involves or
implies injury to the person or property of another or the court regards it
as immoral or opposed to public policy. If we proceed on the basic
premise that public policy in relation to a co-operative society is to be
looked for within the four corners of the Act, the very enactment under
which the very society is formed, a bye-law that does not militate against
any of the provisions of the Act cannot be held to be opposed to public
policy unless it is immoral or offends public order. It cannot be said
that a person bargaining for membership in a Society or for coming
together with those of his ilk to form a society with the objects as set out
in the bye-laws subscribed to by him, can be considered to be doing
anything immoral or against public order. An aspirant to membership in
a co-operative society, is at arms length with the other members of the
society with whom he enters into the compact or in which he joins,
having expressed his willingness to subscribe to the aims and objects of
that society. In the context of Section 23 of the Contract Act, something
more than possible or plausible argument based on the constitutional
scheme is necessary to nullify an agreement voluntarily entered into by a
person. We have already quoted the relevant observations of Lord
Sumner in Rodriguez vs. Speyer Bros. (1919) A.C. 59). Here,
respondent No.2 became a member of the Society of his own volition
acquiring the rights and incurring the obligations imposed by the
approved bye-laws of the Society. It is not open to respondent No.2 to
approach the authorities for relieving him of his obligations attaching to
the acquisition of membership in the Society. It is also not open to the
authorities under the Act to relieve him of his obligations in the guise of
entering a finding that discrimination on the basis of the religion or sex
is taboo under the Constitution in the context of Part III thereof. As has
been held by this Court, he is precluded from challenging the validity of
the bye-laws relating to membership.

30. The above conclusion would lead us to the question whether there
is anything in The Gujarat Co-operative Societies Act and the Gujarat
Co-operative Societies Rules restricting the rights of the citizens to form
a voluntary association and get it registered under The Co-operative
Societies Act confining its membership to a particular set of people
recognized by their profession, their sex, their work or the position they
hold or with reference to their beliefs, either religious or otherwise. It is
not contended that there is any provision in the Gujarat Co-operative
Societies Act prohibiting the registration of such a co-operative society.
We have already referred to the history of the legislation and the concept
of confinement of membership based on residence, belief or community.
The concept of open membership, as envisaged by Section 24 of the Act
is not absolute on the very wording of that Section. The availability of
membership is subject to the qualification prescribed under the
provisions of the Act, the Rules and the bye-laws of such society. In
other words, if the relevant bye-law of a society places any restriction on
a person getting admitted to a co-operative society, that bye-law would
be operative against him and no person, or aspiring member, can be
heard to say that he will not be bound by that law which prescribes a
qualification for his membership.

31. In our view, the High Court made a wrong approach to the
question of whether a bye-law like bye-law No.7 could be ignored by a
member and whether the Authorities under the Act and the court could
ignore the same on the basis that it is opposed to public policy being
against the constitutional scheme of equality or non-discrimination
relating to employment, vocation and such. So long as the approved
bye-law stands and the Act does not provide for invalidity of such a bye-
law or for interdicting the formation of co-operative societies confined to
persons of a particular vocation, a particular community, a particular
persuasion or a particular sex, it could not be held that the formation of
such a society under the Act would be opposed to public policy and
consequently liable to be declared void or the society directed to amend
its basic bye-law relating to qualification for membership.

32. It is true that our Constitution has set goals for ourselves and one
such goal is the doing away with discrimination based on religion or sex.
But that goal has to be achieved by legislative intervention and not by
the court coining a theory that whatever is not consistent with the
scheme or a provision of the Constitution, be it under Part III or Part IV
thereof, could be declared to be opposed to public policy by the court.
Normally, as stated by this Court in Gheru Lal Parakh vs.
Mahadeodas Maiya and others (1959 Suppl. (2) SCR 406, the
doctrine of public policy is governed by precedents, its principles have
been crystalised under the different heads and though it was permissible
to expound and apply them to different situations it could be applied
only to clear and undeniable cases of harm to the public. Although,
theoretically it was permissible to evolve a new head of public policy in
exceptional circumstances, such a course would be inadvisable in the
interest of stability of society.

33. The appellant Society was formed with the object of providing
housing to the members of the Parsi community, a community
admittedly a minority which apparently did not claim that status when
the Constituent Assembly was debating the Constitution. But even then,
it is open to that community to try to preserve its culture and way of life
and in that process, to work for the advancement of members of that
community by enabling them to acquire membership in a society and
allotment of lands or buildings in one's capacity as a member of that
society, to preserve its object of advancement of the community. It is
also open to the members of that community, who came together to form
the co-operative society, to prescribe that members of that community
for whose benefit the society was formed, alone could aspire to be
members of that society. There is nothing in the Bombay Act or the
Gujarat Act which precludes the formation of such a society. In fact,
the history of legislation referred to earlier, would indicate that such
coming together of groups was recognized by the Acts enacted in that
behalf concerning the co-operative movement. Even today, we have
Women's co-operative societies, we have co-operative societies of
handicapped persons, we have co-operative societies of labourers and
agricultural workers. We have co-operative societies of religious
groups who believe in vegetarianism and abhore non-vegetarian food.
It will be impermissible, so long as the law stands as it is, to thrust upon
the society of those believing in say, vegetarianism, persons who are
regular consumers of non-vegetarian food. May be, in view of the
developments that have taken place in our society and in the context of
the constitutional scheme, it is time to legislate or bring about changes in
Co-operative Societies Acts regarding the formation of societies based
on such a thinking or concept. But that cannot make the formation of a
society like the appellant Society or the qualification fixed for
membership therein, opposed to public policy or enable the authorities
under the Act to intervene and dictate to the society to change its
fundamental character.

34. Another ground relied on by the Authorities under the Act and the
High Court to direct the acceptance of respondent No.3 as a member in
the Society is that the bye-law confining membership to a person
belonging to the Parsi community and the insistence on respondent No.2
selling the building or the flats therein only to members of the Parsi
community who alone are qualified to be members of the Society, would
amount to an absolute restraint on alienation within the meaning of
Section 10 of Transfer of Property Act. Section 10 of the Transfer of
Property Act cannot have any application to transfer of membership.
Transfer of membership is regulated by the bye-laws. The bye-laws in
that regard are not in challenge and cannot effectively be challenged in
view of what we have held above. Section 30 of the Act itself places
restriction in that regard. There is no plea of invalidity attached to that
provision. Hence, the restriction in that regard cannot be invalidated or
ignored by reference to Section 10 of the Transfer of Property Act.

35. Section 10 of the Transfer of Property Act relieves a transferee of
immoveable property from an absolute restraint placed on his right to
deal with the property in his capacity as an owner thereof. As per
Section 10, a condition restraining alienation would be void. The
Section applies to a case where property is transferred subject to a
condition or limitation absolutely restraining the transferee from parting
with his interest in the property. For making such a condition invalid,
the restraint must be an absolute restraint. It must be a restraint imposed
while the property is being transferred to the transferee. Here,
respondent No.2 became a member of the Society on the death of his
father. He subscribed to the bye-laws. He accepted Section 30 of the
Act and the other restrictions placed on a member. Respondent No.2
was qualified to be a member in terms of the bye-laws. His father was
also a member of the Society. The allotment of the property was made
to appellant in his capacity as a member. There was really no transfer of
property to respondent No.2. He inherited it with the limitations thereon
placed by Section 31 of the Act and the bye-laws. His right to become a
member depended on his possessing the qualification to become one as
per the bye-laws of the Society. He possessed that qualification. The
bye-laws provide that he should have the prior consent of the Society for
transferring the property or his membership to a person qualified to be a
member of the Society. These are restrictions in the interests of the
Society and its members and consistent with the object with which the
Society was formed. He cannot question that restriction. It is also not
possible to say that such a restriction amounts to an absolute restraint on
alienation within the meaning of Section 10 of the Transfer of Property
Act.

36. The restriction, if any, is a self-imposed restriction. It is a
restriction in a compact to which the father of respondent No.2 was a
party and to which respondent No.2 voluntarily became a party. It is
difficult to postulate that such a qualified freedom to transfer a property
accepted by a person voluntarily, would attract Section 10 of the Act.
Moreover, it is not as if it is an absolute restraint on alienation.
Respondent No.2 has the right to transfer the property to a person who is
qualified to be a member of the Society as per its bye-laws. At best, it is
a partial restraint on alienation. Such partial restraints are valid if
imposed in a family settlement, partition or compromise of disputed
claims. This is clear from the decision of the Privy Council in
Mohammad Raza v. Mt. Abbas Bandi Bibi, ALR 59 I.A. 236 and also
from the decision of the Supreme Court in Gummanna Shetty and
others v. Nagaveniamma, AIR 1967 SC 1595. So, when a person
accepts membership in a cooperative society by submitting himself to its
bye-laws and secures an allotment of a plot of land or a building in terms
of the bye-laws and places on himself a qualified restriction in his right
to transfer the property by stipulating that the same would be transferred
back to the society or with the prior consent of the society to a person
qualified to be a member of the society, it cannot be held to be an
absolute restraint on alienation offending Section 10 of the Transfer of
Property Act. He has placed that restriction on himself in the interests of
the collective body, the society. He has voluntarily submerged his rights
in that of the society.

37. The fact that the rights of a member or an allottee over a building
or plot is attachable and saleable in enforcement of a decree or an
obligation against him cannot make a provision like the one found in the
bye-laws, an absolute restraint on alienation to attract Section 10 of the
Transfer of Property Act. Of course, it is property in the hands of the
member on the strength of the allotment. It may also be attachable and
saleable in spite of the volition of the allottee. But that does not enable
the Court to hold that the condition that an allotment to the member is
subject to his possessing the qualification to be a member of the
cooperative society or that a voluntary transfer by him could be made
only to the society itself or to another person qualified to be a member of
the society and with the consent of the society could straight away be
declared to be an absolute restraint on alienation and consequently an
interference with his right to property protected by Article 300A of the
Constitution of India. We are, therefore, satisfied that the finding that
the restriction placed on rights of a member of the Society to deal with
the property allotted to him must be deemed to be invalid as an absolute
restraint on alienation is erroneous. The said finding is reversed.

38. In view of what we have stated above, we allow this appeal, set
aside the judgments of the High Court and the orders of the Authorities
under the Act and uphold the right of the Society to insist that the
property has to be dealt by respondent No.2 only in terms of the bye-
laws of the Society and assigned either wholly or in parts only to persons
qualified to be members of the Society in terms of its bye-laws. The
direction given by the authority to the appellant to admit respondent
No.3 as a member is set aside. Respondent No.3 is restrained from
entering the property or putting up any construction therein on the basis
of any transfer by respondent No.2 in disregard of the bye-laws of the
Society and without the prior consent of the Society.

39. The Writ Petition filed by the appellant in the High Court is
allowed in the above manner. The appellant will be entitled to its costs
here and in the court below.