Multi-State Cooperative Societies Act, 2002 — Ss. 5, 22, 103 — State Reorganisation — Deemed conversion — “Objects” of cooperative society — “Area of operation” — Distinction — Cooperative society originally registered under State Act — Reorganisation of erstwhile State of Uttar Pradesh — High Court holding society deemed to be multi-State cooperative society under S.103 — Supreme Court holding that S.103 does not provide automatic conversion — Deeming fiction attracted only when objects of society extend to more than one State — Area of operation and residence of members irrelevant — Where objects confined to one State after reorganisation, society continues to be governed by State Act — High Court judgment set aside — Writ petitions dismissed.

Multi-State Cooperative Societies Act, 2002 — Ss. 5, 22, 103 — State Reorganisation — Deemed conversion — “Objects” of cooperative society — “Area of operation” — Distinction — Cooperative society originally registered under State Act — Reorganisation of erstwhile State of Uttar Pradesh — High Court holding society deemed to be multi-State cooperative society under S.103 — Supreme Court holding that S.103 does not provide automatic conversion — Deeming fiction attracted only when objects of society extend to more than one State — Area of operation and residence of members irrelevant — Where objects confined to one State after reorganisation, society continues to be governed by State Act — High Court judgment set aside — Writ petitions dismissed.

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B. ANALYSIS OF FACTS

1. The subject cooperative society, a cooperative sugar factory, was originally registered under the Cooperative Societies Act, 1912, later governed by the Uttar Pradesh Cooperative Societies Act, 1965.

2. In 2000, the erstwhile State of Uttar Pradesh was reorganised into the States of Uttar Pradesh and Uttarakhand under the U.P. State Reorganisation Act, 2000.

3. The Multi-State Cooperative Societies Act, 2002 came into force thereafter, containing Section 103, a deeming provision relating to cooperative societies affected by State reorganisation.

4. The appellant-State undertook steps for restructuring and privatisation of certain cooperative sugar mills, including the subject society, treating it as a State cooperative society.

5. Shareholders of the cooperative society filed writ petitions before the Allahabad High Court contending that, by virtue of State reorganisation and Section 103 of the Central Act, the society had automatically acquired the status of a multi-State cooperative society, thereby divesting the State Government of authority.

6. The High Court accepted this contention, holding that Section 103 was attracted and that the society stood converted into a multi-State cooperative society, rendering the actions of the State Government without jurisdiction.

7. Aggrieved, the State of Uttar Pradesh approached the Supreme Court.

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C. ANALYSIS OF LAW

1. Scheme of the Multi-State Cooperative Societies Act, 2002

The Court examined the statutory framework of the Central Act and noted:

• Section 5(1) mandates that a society can be registered as a multi-State cooperative society only if its principal objects serve the interests of members in more than one State.

• Section 22 expressly provides a mechanism for voluntary conversion of a State cooperative society into a multi-State cooperative society by amendment of bye-laws.

• Section 103 provides for conversion by operation of law in limited circumstances arising out of State reorganisation.

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2. Meaning of “Objects” and its Legal Significance

The Court held that:

• The term “objects” refers to the primary purposes of the society as reflected in its bye-laws.

• Section 10 of the Central Act clearly distinguishes between:

  • Objects of the society, and

  • Area of operation.

• Therefore, it is impermissible to substitute or equate “area of operation” with “objects” while applying Section 103.

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3. Scope of Deemed Conversion under Section 103

The Court authoritatively ruled that:

• Section 103 does not provide for automatic or universal conversion of all State cooperative societies upon State reorganisation.

• The deeming fiction applies only if, after reorganisation, the objects of the society extend to more than one State.

• The residence or domicile of members, and incidental procurement activities, have no bearing on the application of Section 103.

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4. Error in the High Court’s Approach

The Court found that:

• The High Court failed to examine the bye-laws and objects of the cooperative society.

• It wrongly proceeded on the assumption that territorial spread of activities or residence of members was sufficient to attract Section 103.

• Such interpretation was contrary to the scheme, structure, and language of the Central Act.

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5. Application to the Present Case

• The appellant-State consistently asserted that the objects of the society were confined to one State.

• The private respondents did not dispute this assertion in their pleadings.

• In the absence of objects extending to more than one State, Section 103 was held inapplicable.

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D. DECISION / OPERATIVE PART

1. The Supreme Court held that Section 103 of the Multi-State Cooperative Societies Act, 2002 does not result in automatic conversion of a State cooperative society into a multi-State cooperative society upon State reorganisation.

2. It was held that:

   • Only societies whose objects extend to more than one State attract the deeming fiction.

   • The subject cooperative society continued to be governed by the State Act.

3. The judgment dated 26.09.2008 passed by the Allahabad High Court was set aside.

4. The civil appeals were allowed, and the writ petitions were dismissed.