Full Judgment Text
2025 INSC 1427
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).7050-7051 OF 2010
THE STATE OF UTTAR PRADESH THROUGH
PRINCIPAL SECRETARY & ORS. …APPELLANT(S)
VERSUS
MILKIYAT SINGH & ORS. ETC. …RESPONDENT(S)
J U D G M E NT
VIKRAM NATH, J.
TABLE OF CONTENTS
FACTUAL MATRIX: ..........................................................................3
ISSUE BEFORE THIS COURT: ..........................................................6
Whether, by virtue of Section 103 of the Multi-State Cooperative
Societies Act, 2002, the subject cooperative society, though originally
registered under the statute enacted by the appellant-State, stands
transformed into a multi-State cooperative society on account of the
State reorganization? .......................................................... 7
SUBMISSIONS ON BEHALF OF APPELLANT-STATE: ..........................7
SUBMISSIONS ON BEHALF OF RESPONDENTS: .............................. 11
Signature Not Verified
ANALYSIS AND DISCUSSION: ......................................................... 13
Digitally signed by
SONIA BHASIN
Date: 2025.12.15
16:19:17 IST
Reason:
I. Enactment and Scheme of Central Act: ..................... 14
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 1 of 29
a.) Understanding the term ‘object’ ................................................ 16
b.) Creation of “multi-State” cooperative society under the Central Act
..................................................................................................... 18
c.) Scope of “deemed conversion” under Section 103 of Central Act 19
d.) Difference between “objects” and “area of operation” of the society
..................................................................................................... 21
e.) Principles for application of conversion by operation of law under
Section 103 of Central Act ............................................................. 22
II. Whether subject co-operative society in the present case is multi-
State cooperative society or not? .................................. 24
a.) Contention of the Parties .......................................................... 24
b.) Decision of High Court ............................................................. 25
c.) Averments of Parties before this Court ...................................... 25
d.) Subject cooperative society is not multi-State cooperative society
..................................................................................................... 26
CONCLUSION: ................................................................................ 27
1. The present appeals assail the common judgment dated
th
26 September, 2008, passed by the Division Bench of the High
1
Court of Judicature at Allahabad , in Civil Miscellaneous Writ
Petition Nos. 61489 of 2007 and 18556 of 2008. By the
impugned judgment, the High Court allowed the writ petitions
and held that the cooperative societies in question could not be
1
Hereinafter, referred to as “High Court”.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 2 of 29
treated as State cooperative societies so as to attract the
legislation enacted by the State, and that consequent to the
reorganisation of the erstwhile undivided State, they had
attained the character of multi-State cooperative societies.
FACTUAL MATRIX:
2. Brief facts, relevant for the disposal of the present case, are
narrated hereinbelow: -
2.1. A cooperative sugar factory, namely Kisan Cooperative
Sugar Factory Limited, having its registered office at Majhola,
District Pilibhit, Uttar Pradesh (hereinafter referred to as “ the
cooperative society ”), was originally registered under the
provisions of the erstwhile Cooperative Societies Act, 1912. The
private respondents herein, who were the writ-petitioners before
the High Court, are shareholders of the said cooperative society.
2.2. In the year 1965, the appellant-State enacted the Uttar
Pradesh Cooperative Societies Act (hereinafter, “ State Act ”)
whereby the earlier Cooperative Societies Act, 1912 stood
repealed and was substituted by the State Act.
2.3. In 2000, the U.P. State Reorganization Act, 2000
(“ Reorganisation Act ”) came into force, by which the erstwhile
State of Uttar Pradesh was bifurcated into the present State of
Uttar Pradesh and the newly created State of Uttarakhand. At
that time, the Multi-State Cooperative Societies Act, 1984
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 3 of 29
governed cooperative societies. Subsequently, in 2002, the
Multi-State Cooperative Societies Act, 2002 (“ Central Act ”) was
enacted, repealing the 1984 Act and consolidating the law
relating to cooperative societies whose operations extended
beyond a single State.
2.4. The Central Act incorporated a deeming clause under
Section 103, in terms of which certain cooperative societies,
consequent upon the reorganisation of the State, would be
treated as multi-State cooperative societies. By virtue of this
legal fiction, such societies, though originally registered under
the State Act, would fall within the ambit and application of the
Central Act.
2.5. Consequent to the enforcement of the Reorganisation Act,
a joint meeting was held on 24th May, 2006 between the officials
of the States of Uttar Pradesh and Uttarakhand for determining
and finalising the apportionment of assets and liabilities of
public sector undertakings and cooperative institutions.
Thereafter, the appellant-State undertook a series of measures
regarding the restructuring and privatization of cooperative
sugar mills which had become financially unviable. In the
succeeding year, the appellant-State took a policy decision in
principle to proceed with the privatization and sale of several
cooperative sugar mills and directed that the said process be
carried out through the Department of Disinvestment.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 4 of 29
2.6. Thereafter, on 7 August 2007, the appellant-State issued
the U.P. Cooperative Societies (Amendment) Ordinance, 2007
(No. 21 of 2007), empowering the State Government to transfer
cooperative sugar mills to entities in which the State held the
majority shareholding, where such mills were found to be
financially unviable.
2.7. Aggrieved thereby, Civil Miscellaneous Writ Petition No.
61489 of 2007 came to be instituted under Article 226 of the
Constitution before the High Court by four individuals,
(respondent nos. 1 to 4 in Civil Appeal No. 7050 of 2010) one
among whom was a member and shareholder of the subject
cooperative society. The writ petitioners questioned the action
of the appellant-State in proceeding to privatise the cooperative
society. It was contended that upon the enactment of the
Reorganisation Act, the appellant-State had ceased to possess
any authority under the State Act and, consequently, lacked the
competence to undertake the impugned measures.
2.8. Subsequently, in the year 2008, one Mumtaz Ali
(respondent no. 1 in Civil Appeal No. 6071 of 2010), a
shareholder of the second cooperative society, instituted Civil
Miscellaneous Writ Petition No. 18556 of 2008 under Article 226
of the Constitution before the High Court, challenging the
proposed privatization on identical grounds as those urged in
the earlier writ petition.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 5 of 29
th
2.9. By a common judgment dated 26 September, 2008, the
High Court allowed the writ petitions. It rejected the objection
as to the locus of the writ petitioners, who were shareholders of
the cooperative society, to maintain the challenge. The High
Court held that Section 103 of the Central Act, being a deeming
provision, was fully attracted to the facts of the case and,
therefore, the cooperative society had acquired the character of
a multi-State cooperative society. Consequently, only the Union
Government could exercise authority in respect of such society.
On this reasoning, the High Court declared all steps taken by
the appellant-State in relation to the cooperative society to be
without jurisdiction and non est in law, for want of legislative
competence and absence of any authority of law.
3. Aggrieved by the said common judgment, the State has
approached this Court.
4. We have heard the learned Senior Counsel for the
appellant-State. When the matter was taken up for hearing on
th
12 November, 2025, no one appeared on behalf of the
contesting respondents (the writ petitioners before the High
Court) in both the connected appeals. As the respondents have
already filed their counter-affidavit dated 13 August 2010, we
proceed to decide the appeal on merits.
ISSUE BEFORE THIS COURT:
5. The issue involved in the present appeals is:
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 6 of 29
Whether, by virtue of Section 103 of the Multi-State
Cooperative Societies Act, 2002, the subject
cooperative society, though originally registered under
the statute enacted by the appellant-State, stands
transformed into a multi-State cooperative society on
account of the State reorganization?
SUBMISSIONS ON BEHALF OF APPELLANT-STATE:
6. Shri Rana Mukherjee, learned senior counsel for the
appellant-State, strenuously assailed the judgment of the High
Court contenting, inter alia : -
6.1. that on 24th May, 2006 a joint meeting was held between
the representatives of the Governments of the appellant-State
and the State of Uttaranchal (now Uttarakhand) to settle the
distribution of assets and liabilities of public sector
undertakings and cooperative entities pursuant to the
reorganisation. The meeting was also attended by
representatives of the cooperative sugar mill associations of
both States. It was agreed that no outstanding financial claims
would remain between the two States in respect of shares in the
cane/sugar mill societies, the book value of such shares having
become nil or negative. This decision effectively concluded all
inter-State financial issues concerning cooperative sugar mills.
Hence, it was implicit that the State of Uttarakhand was
exercising no control over the said mills, including the subject
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 7 of 29
cooperative society. In addition, the appellant-State owned, and
still continues to own, 95% of the shares of the subject
cooperative society.
6.2. that the High Court committed a grave error in rejecting
the objection as to locus standi of the writ-
petitioners/shareholders. The High Court failed to consider
that, much like a company limited by shares, the shareholders
of a cooperative society may reside beyond the territorial limits
of the State in which the society is registered. Owing to the
reorganisation of the erstwhile State, some members who
originally belonged to undivided Uttar Pradesh had incidentally
become residents of Uttaranchal/Uttarakhand. Such persons,
even if dissatisfied, could not have questioned the actions taken
under the State Act, particularly when the State of Uttarakhand
had never asserted any claim or control over the cooperative
sugar mills in question, despite the fact that the principal
investments had been made by the State of Uttar Pradesh.
6.3. that the High Court erroneously relied on the submissions
of the learned ASG that the Central Act was applicable. It failed
to appreciate that Section 103 had no application to the subject
cooperative society since it continues to function within the
territorial limits of the appellant-State and remains registered
under the State Act. Any finding to the contrary proceeds on a
misreading of the scope and applicability of the Central Act.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 8 of 29
6.4. that, even as on date, neither the Registrar of Cooperative
Societies under the 1984 Act (now repealed) nor under the
Central Act has, for over twenty-five years, issued any notice or
taken any step requiring the subject cooperative society to seek
registration under, or to comply with the provisions of, the
Central Act.
6.5. that another vital aspect which deserves due consideration
is that the sugar mills in question have remained non-
operational since 2006. This circumstance further reinforces
the submission that the value of the shares held by the private
contesting respondents has, for all practical purposes, become
nil.
6.6. that it is a settled principle that the law must be applied
in a manner that avoids absurd results, and that deeming
provisions cannot be given an unduly expansive interpretation
without considering their nature, scope and legislative intent.
The High Court ought to have examined whether the
interpretation placed by it on Section 103 of the Central Act
would lead to an irrational or untenable outcome, which the law
mandates must be avoided. The construction adopted by the
High Court, therefore, results in an erroneous application of the
deeming clause under Section 103.
6.7. that reliance placed by the private respondents on the
judgment of this Court in Naresh Shankar Srivastava v.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 9 of 29
2
State of Uttar Pradesh , is misconceived. The said decision
has no application to the present case, as it is clearly
distinguishable on facts. In Naresh Shankar Srivastava
( supra ), the cooperative societies were found to be operating in
both the States of Uttar Pradesh and Uttarakhand. In contrast,
in the instant case, the subject cooperative society as well as its
operations are confined exclusively to the State of Uttar
Pradesh, including the sugar mill in question.
6.8. that the finding of the High Court, in so far as it holds that
the writ petitions could be maintained at the behest of certain
shareholders who, post-reorganisation, came to reside in the
State of Uttaranchal (now Uttarakhand), and further that the
provisions of the 2002 Act, particularly Section 103(2), stood
attracted so as to divest the State Government of its authority
to legislate and amend the governing law in respect of such
societies in which the State of Uttar Pradesh continues to hold
majority shareholding, is wholly untenable.
Shri Mukherjee, learned Senior Counsel, therefore urged
that the present appeal deserves to be allowed and the
impugned judgment of the High Court be set aside.
2
(2009) 16 SCC 157.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 10 of 29
SUBMISSIONS ON BEHALF OF RESPONDENTS:
7. Since none appeared on behalf of the private respondents
(writ petitioners before the High Court), we have perused the
counter-affidavit dated 13th August, 2010 filed on their behalf,
wherein the following submissions have been urged: -
7.1. That after the enactment of the Reorganisation Act, 2000
by Parliament, the appellant-State stood divested of all
authority exercisable under the State Act, inasmuch as, post-
reorganisation, certain member-shareholders (including some
writ petitioners) came to reside in the State of Uttarakhand and
sugarcane procurement was being carried out from growers
situated in Uttarakhand.
7.2. that under Clause 3 of the bye-laws of the society, its area
of operation includes Tehsil Khatima in District Nainital,
Uttarakhand as well as Tehsil Pilibhit in Uttar Pradesh.
Consequently, since the operations extend beyond one State,
the society must be treated as a multi-State cooperative society
by operation of Section 103 of the Central Act.
7.3. that a cooperative society can be deemed to be registered
as a multi-State cooperative society only when, pursuant to
reorganisation, its area of operation falls in more than one State.
The expression ‘objects’ in Section 103 of the Central Act must
therefore be read as referring to the territorial area of operation.
Otherwise, despite reorganisation resulting in the society
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 11 of 29
operating across two States, it would continue to be governed
by the State Act, thereby conferring extra-territorial application
upon a State enactment, which is neither permissible nor
workable.
7.4. That the Central Act does not repeal the State Act. The
State Act continues to govern cooperative societies operating
exclusively within Uttar Pradesh. The Central Act, by virtue of
its deeming clause, applies only to those societies whose area of
operation extends to both Uttar Pradesh and Uttarakhand, and
to such societies alone the State Act ceases to apply.
7.5. that the legal position regarding the status of cooperative
societies after the reorganisation of a State is no longer open to
doubt. This Court in Naresh Shankar Srivastava ( supra ) has
categorically held that Section 103 of the Central Act
(corresponding to Section 95 of the repealed Act) addresses the
situation where, due to reorganisation, a cooperative society
whose activities were earlier confined to the undivided State
thereafter extends its objects to more than one State. In such
circumstances, the society shall, by virtue of the deeming
provision, be treated as a multi-State cooperative society
registered under the provisions of the Central Act.
On the aforesaid premises, the private respondents, in
their counter-affidavit, have urged that the present appeals
preferred by the appellant-State be dismissed.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 12 of 29
ANALYSIS AND DISCUSSION:
8. We have given thoughtful consideration advanced at bar,
and have gone through the material placed on record.
9. The present appeals present an unusual situation
concerning the interpretation of a law enacted by Parliament
and whether its ambit extends to a corporate body originally
registered under a State legislation. While there is no dispute as
to legislative competency, the narrow issue that falls for our
consideration is whether, on the reorganisation of the erstwhile
unified State of Uttar Pradesh, the subject cooperative society
has assumed the character of a multi-State cooperative society.
If the answer is in the affirmative, no interference with the
judgment of the High Court would be warranted. Conversely, if
the question is answered in the negative, it would then be
necessary to examine the legal position in the context of the
facts of the present case.
10. According to the private respondents (the writ petitioners
before the High Court), upon the reorganisation and division of
the erstwhile State of Uttar Pradesh by virtue of the
Reorganisation Act, 2000 into the present States of Uttar
Pradesh and Uttarakhand, the subject cooperative society, by
operation of Section 103 of the Central Act, acquired the deemed
status of a multi-State cooperative society, and consequently,
the provisions of the State Act ceased to apply to it.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 13 of 29
11. On the other hand, the appellant-State contends that
Section 103 of the Central Act has no application to the subject
cooperative society, as all its principal activities, including the
operation of the sugar mill and the source of its business,
continued to remain within the territorial limits of the State of
Uttar Pradesh, even after the reorganisation. Consequently, the
deeming provision under Section 103 would not be attracted,
and the society would continue to be governed by the State Act
under which it was originally registered.
12. Since the controversy before us turns entirely on the
construction of Section 103 of Central Act (corresponding to
Section 95 of the repealed 1984 Act), it becomes necessary to
extract the relevant part of the provision, which reads thus: -
“103. Cooperative societies functioning immediately
before reorganisation of states- (1) Where, by virtue of the
provisions of Part II of the State Reorganisation Act, 1956 (37
of 1956) or any other enactment relating to reorganisation of
states, any cooperative society which immediately before the
day on which the reorganisation takes place, had its objects
confined to one state becomes, as from that day, a multi-state
cooperative society, it shall be deemed to be a multi-state
cooperative society registered under the corresponding
provisions of this Act and the bye-laws of such society shall,
in so far as they are not inconsistent with the provisions of
this Act, continue to be in force until altered or rescinded.
. . . ”
I. Enactment and Scheme of Central Act:
12.1. The Multi-State Cooperative Societies Act, 2002 was
enacted by the Parliament with the following long title: -
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 14 of 29
“ An Act to consolidate and amend the law relating to
cooperative societies, with objects not confined to one State
and serving the interests of members in more than one State,
to facilitate the voluntary formation and democratic
functioning of cooperatives as people’s institutions based on
self-help and mutual aid and to enable them to promote their
economic and social betterment and to provide functional
autonomy and for matters connected therewith or incidental
thereto. ”
Therefore, the Central Act came to be enacted by the
Parliament to address the requirements of India’s federal
structure, where it was considered necessary to make a special
provision governing cooperative societies whose activities were
not confined to a single State and which catered to members
spread across more than one State.
12.2. Section 5 deals with the circumstances in which a multi-
State cooperative society may be registered. It reads as follows:
-
“5. Multi-state cooperative societies which may be
registered- (1) No multi-state cooperative society shall be
registered under this Act, unless,
(a) its main objects are to serve the interests of members in
more than one state; and
(b) its bye-laws provide for social and economic betterment
of its members through self-help and mutual aid in
accordance with the cooperative principles.
. . . ”
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 15 of 29
Section 5 is couched in negative terms and sets out two
pre-conditions for registration as a multi-State cooperative
society. First, the primary object of the society must be to serve
the interests of its members in more than one State. Second, its
bye-laws must provide for the social and economic
advancement of its members through self-help and mutual aid
in accordance with cooperative principles.
12.3. The expression “multi-State cooperative society” in Section
3(p) means a society that has been registered or is deemed to be
registered under the Act, and includes a national cooperative
society as well as a federal cooperative. Likewise, the term
“member” under Section 3(n) refers to a person who joins in the
application seeking registration of a multi-State cooperative
society and also includes anyone admitted to membership
thereafter in accordance with the provisions of the Act, the
Rules, and the bye-laws.
a.) Understanding the term ‘object’
12.4. Section 9 declares that registration of a multi-State
cooperative society confers upon it the status of a body
corporate. As the expression “object” is not defined under either
the Central Act or the State Act, its meaning must be gathered
from a holistic reading of the enactments.
12.5. Section 10 stipulates the requirements relating to the bye-
laws of a multi-State cooperative society and reads as follows: -
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 16 of 29
“10. Bye-laws of multi-state cooperative societies- (1)
Every multi-state cooperative society may make its bye-laws
consistent with the provisions of this act and the rules made
thereunder.
(2) In particular, and without prejudice to the generality
of the foregoing power, such bye-laws may provide for all
or any of the following matters, namely:
(a) the name, address and area of operation of the society;
(b) the objects of the society;
(c) the services to be provided to its members;
(d) the eligibility for obtaining membership;
. . .”
( emphasis supplied )
Section 10 makes it clear that a multi-State cooperative
society has the discretion to frame its bye-laws covering any of
the matters specified in sub-section (2) of that provision. In
particular, Section 10(2)(b) enables such societies to
incorporate, in their bye-laws, provisions relating to their
objects.
12.6. Thus, a conjoint reading of Section 5(1)(a) and Section
10(2)(b) makes it evident that once a society seeks registration
as a multi-State cooperative society and prescribes its objects
in the bye-laws, such objects must necessarily satisfy the
mandate of Section 5(1)(a), namely, that its main objective
should be to serve the interests of members in more than one
State.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 17 of 29
b.) Creation of “multi-State” cooperative society under the
Central Act
12.7. The issue that next falls for determination is the true
import of Section 5(1)(a) of the Central Act, which stipulates that
the principal object of the society must be to serve the interests
of its members in more than one State. The question is whether
the provision is satisfied merely because the members are
drawn from two different States, or whether it contemplates
that the society must, in substance, serve the interests of its
members in more than one State, irrespective of their place of
residence. If the former construction is adopted, the judgment
of the High Court may not warrant scrutiny. However, if the
latter construction is to be preferred, it will have to be examined
whether the subject cooperative society satisfies the conditions
necessary to be treated as a multi-State cooperative society.
12.8. Section 22 acknowledges the authority of a cooperative
society to transform itself into a multi-State cooperative society.
The material portion of the provision is extracted below: -
“22. Conversion of a cooperative society into a multi-state
cooperative society- (1) A cooperative society may, by an
amendment of its bye-laws, extend its jurisdiction and
convert itself into a multi-state cooperative society :
Provided that no such amendment of bye-laws of a
cooperative society shall be valid unless it has been registered
by the Central Registrar.
. . . ”
( emphasis supplied )
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 18 of 29
Section 22, therefore, confers the power upon a
cooperative society originally registered under a State
enactment to transform itself into a multi-State cooperative
society. The provision recognizes and enables such conversion
from a State cooperative society to a multi-State cooperative
society.
12.9. Accordingly, a multi-State cooperative society may come
three distinct ways First
into existence in . , a society may seek
registration directly under Section 5 of the Central Act. Second ,
a cooperative society constituted under a State Cooperative
Societies Act, as in the present case, may seek conversion into
a multi-State cooperative society under Section 22 of the
Central Act. The third mode, which forms the fulcrum of the
present controversy, is the statutory deeming mechanism under
Section 103. This mode of deemed conversion will be examined
in detail in the succeeding portion of this judgment.
c.) Scope of “deemed conversion” under Section 103 of
Central Act
12.10. Section 103(1) of the Central Act (extracted supra )
provides for the conversion of a cooperative society registered
under a State Cooperative Societies Act into a multi-State
cooperative society. The provision is attracted when Parliament
enacts a law for the reorganisation of a State. The second
requirement is that the cooperative society must have had its
objects confined to ‘one State’. The expression “one State” refers
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 19 of 29
to the erstwhile undivided State which stands bifurcated into
two or more States upon such reorganisation.
12.11. The understanding urged on behalf of the private-
respondents, which found favour with the High Court, is that
the enactment of a statute reorganising a State ipso jure
converts a cooperative society with objects confined to the
erstwhile State into a multi-State cooperative society.
12.12. We are not persuaded by the interpretation of Section
103 as propounded by the private-respondents and accepted by
the High Court. It is a settled principle of statutory construction
that a provision cannot be construed in isolation to fit a
particular factual situation. As held by a three-Judge Bench of
this Court in Southern Electricity Supply Co. of Orissa Ltd.
3
v. Sri Seetaram Rice Mill , the words in a statute must
necessarily draw their meaning from the context and the
scheme of the enactment and cannot be interpreted in isolation.
12.13. Section 103 of the Central Act, therefore, cannot be
construed in isolation. Section 5(1) makes it explicit that no
multi-State cooperative society can be registered unless its
primary objects are to serve the interests of members in more
than one State. The expression “more than one State” does not
qualify or relate to the residence or domicile of the members, as
defined under Section 3(n). In other words, the geographical
3
(2012) 2 SCC 108.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 20 of 29
location or residence of the members is wholly irrelevant for
determining whether a cooperative society attains the status of
a multi-State cooperative society.
12.14. The expression “more than one State” in Section 5
pertains to the principal objects of the cooperative society. Thus,
unless the primary objects of the society operate in, and extend
to, more than one State, registration as a multi-State
cooperative society under the Central Act is impermissible.
Consequently, the society is required to frame its bye-laws in
terms of Section 10(2)(b) so as to reflect such objects.
12.15. The scheme of the Central Act, as analysed above,
expressly contemplates that a cooperative society may amend
its bye-laws and extend its area of operation, thereby converting
itself into a multi-State cooperative society in terms of Section
22(1). The extension of jurisdiction in this manner necessarily
postulates amendment of the bye-laws relating to the objects of
the society framed under Section 10(2), pursuant to which such
conversion may be effected.
d.) Difference between “objects” and “area of operation” of
the society
12.16. Section 103 uses the expression “object of the
society” being confined to one State. The provision does not
advert to the “area of operation”. Significantly, Section 10(2) of
the Central Act draws a clear distinction between the two by
separately referring to each for the purposes of framing bye-
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 21 of 29
laws. Therefore, when Section 103 specifically employs the
expression “object of the society”, the plain and natural
meaning of that expression must be given effect to, and it would
not be permissible, by interpretative process, to substitute or
read into it the concept of “area of operation.”
12.17. This position stands reinforced by Section 5(1)(a),
which mandates that a society seeking registration as a multi-
State cooperative society must have its objects located in more
than one State. Section 5 does not refer to the “area of
operation”. Consequently, for the purposes of invoking Section
103, it is wholly irrelevant whether the area of operation of the
subject society spans more than one State. The enquiry
contemplated under Section 103 is limited to the objects of the
society. If, after reorganisation, the objects are traceable to more
than one State, Section 103 would apply; if they are confined to
one State, it would not.
e.) Principles for application of conversion by operation of
law under Section 103 of Central Act
12.18. Conversion by operation of law under Section 103 of
the Central Act must, therefore, be understood in the overall
framework of the Act. Upon reorganisation of a State by
Parliamentary enactment, not every cooperative society
functioning in the erstwhile undivided State would
automatically stand converted into a multi-State cooperative
society. For determining whether the conversion under Section
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 22 of 29
103 has taken place, the bye-laws of such society, particularly
those dealing with its objects, would have to be examined. This
inquiry necessarily becomes fact-specific and would vary from
case to case. If the bye-laws reveal that the objects of a
cooperative society extend to districts which now fall in two
different States after reorganisation, Section 103 would apply
and such a society would, by legal fiction, stand converted into
a multi-State cooperative society.
12.19. However, where the objects of the cooperative society
stand confined to only one State after reorganisation,
irrespective of which of the bifurcated States it falls in, Section
103 of the Central Act would have no application. In such a
case, the society would continue to be regulated by the State
Cooperative Societies Act under which it was originally
registered.
12.20. Accordingly, Section 103 of the Central Act would
operate only where the objects of the society extend to more
than one State. A conjoint reading of Section 103 and Section 5
of the Central Act makes it abundantly clear that the domicile
or residence of the members is irrelevant for determining
whether a society attains the status of a multi-State cooperative
society. Further, by expressly enabling conversion under
Section 22 through amendment of bye-laws and enlargement of
jurisdiction, the Central Act itself recognises that a cooperative
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 23 of 29
society whose objects are confined to a single State cannot be
treated as a multi-State cooperative society.
II. Whether subject co-operative society in the present case
is multi-State cooperative society or not?
13. From the foregoing discussion, the statutory scheme
under the Central Act stands clarified. What now remains is the
task of applying this legal position to the facts of the present
case.
a.) Contention of the Parties
13.1. This matter stems from two writ petitions filed before the
High Court challenging the actions of the appellant-State
pertaining to the acquisition/ privatisation of the subject
cooperative society. The writ petitioners (now private-
respondents) had contended that upon reorganisation of the
erstwhile State, the subject cooperative society automatically
acquired the status of a multi-State cooperative society by
operation of Section 103 of the Central Act. In their rejoinder
filed before the High Court, the private-respondents specifically
asserted that the activities of the subject cooperative society
extended across two States, namely the appellant-State and the
State of Uttarakhand, thereby bringing it within the sweep of
Section 103 of the Central Act.
13.2. These writ petitions were resisted by the appellant-State
(respondent before the High Court) on several grounds. First, it
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 24 of 29
was contended that the writ petitioners lacked locus standi to
maintain the petitions. Second, it was urged that the provisions
of the Central Act were inapplicable to the facts of the present
case.
b.) Decision of High Court
13.3. The Division Bench of the High Court mainly allowed the
writ petitions after declining to accept the contention of the
appellant-State (respondent therein) regarding the locus standi
of the writ petitioners to question the actions of the State.
Further, the impugned judgment does not advert to the merits
of the matter, particularly the bye-laws of the cooperative
society insofar as they relate to the objects of the society.
13.4. The High Court, upon a plain reading of Section 103 of the
Central Act, rejected the contention that the subject cooperative
society could continue to retain the character of a State
cooperative society after reorganisation. It proceeded on the
premise that, by operation of law, the society acquired the
status of a multi-State cooperative society and its earlier status
stood displaced.
c.) Averments of Parties before this Court
13.5. The interpretation accorded to the Central Act by the High
Court does not align with the construction placed by us in the
preceding paragraphs. Ordinarily, having clarified the correct
legal position, we would proceed to apply it to the factual matrix
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 25 of 29
and conclude whether interference with the High Court’s
judgment is warranted. However, the matter assumes a distinct
complexion as the impugned judgment does not adequately
advert to the merits concerning the bye-laws or the objects of
the cooperative society. It therefore becomes necessary for us to
independently examine the submissions canvassed in the
present appeals.
13.6. The writ petitioners (now the private-respondents) urged
before the High Court that the territorial operation of the subject
cooperative society extends to both States. According to them,
a cooperative society whose field of operation spans more than
one State would, by virtue of Section 103 of the Central Act,
necessarily acquire the status of a multi-State cooperative
society. It was further asserted that during the crushing season
2005-06, nearly half of the sugarcane supplied to the mill was
procured from cultivators located in the newly created State of
Uttarakhand.
d.) Subject cooperative society is not multi-State
cooperative society
13.7. The appellant-State has consistently refuted this
assertion. It is specifically urged in the grounds of appeal that
the subject cooperative society was engaged in the manufacture
of sugar entirely within the territorial limits of the appellant-
State. The appellant-State has further submitted that the High
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 26 of 29
Court has erroneously conflated the expressions “area of
operation” and “objects of the society”.
13.8. As regards the interpretation advanced by the appellant-
State, it is noteworthy that the private-respondents, in their
counter-affidavit, have not disputed the distinction between the
“area of operation” and the “objects” of a society. Their stand is
only that the area of operation extends to two States and hence
Section 103 applies. The counter-affidavit is completely silent
on the crucial aspect of the society’s objects and does not deny
the appellant-State’s assertion that the objects were confined to
a single State. Since the High Court has also not dealt with this
issue, we proceed on the footing that the appellant-State’s
position, being that the objects were limited to one State, stands
admitted.
14. As we have already clarified, Section 103 of the Central Act
is attracted only where the objects of the cooperative society
extend to more than one State. Consequently, we are unable to
accept the submission of the private-respondents that merely
because the area of operation of the society spans across two
States, the same would render it a multi-State cooperative
society.
CONCLUSION:
15. In light of our discussion, in the foregoing paragraphs, we
summarise our conclusions as under:
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 27 of 29
A. Section 103 of the Multi-State Cooperative Societies Act,
2002 does not, by itself, confer an automatic or deemed
status of a multi-State cooperative society upon every
society registered under a State Cooperative Societies Act
merely because the parent State has undergone
reorganisation.
B. The applicability of Section 103 requires a factual enquiry
in each case as to whether the objects of the society extend
to more than one State. If the objects are found to span
more than one State, the deeming fiction under Section
103 will operate and the society would be treated as a
multi-State cooperative society. If the objects remain
confined to only one State, the status of the society will
remain unchanged.
C. It would be erroneous to undertake an enquiry into the
area of operation of a society for the purposes of Section
103, when the provision itself mandates an examination
only of the objects of the society. Read with Section 5, it
becomes evident that Section 103 is attracted only where
the objects of the society extend to more than one State. It
is only in such situation that the society would, by
operation of law, be treated as a multi-State cooperative
society.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 28 of 29
D. The residence or domicile of the members of the
cooperative society has no bearing on determining whether
the society is a multi-State cooperative society.
E. Section 5 of the Multi-State Cooperative Societies Act,
2002 mandates that a society may be registered as a multi-
State cooperative society only when its principal objects,
as reflected in its bye-laws, serve the interests of members
in more than one State. It is, therefore, a pre-condition
that the objects span more than one State.
th
16. Accordingly, the judgment dated 26 September, 2008,
passed by the Division Bench of the High Court of Judicature
at Allahabad in Civil Miscellaneous Writ Petitions Nos. 61489 of
2007 and 18556 of 2008 is hereby set aside.
17. Consequently, the present appeals stand allowed, and
both the writ petitions are dismissed.
18. Pending application(s), if any, are disposed of.
………………………………………..J.
[VIKRAM NATH]
………………………………………..J.
[SANDEEP MEHTA]
NEW DELHI
DECEMBER 15, 2025
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 29 of 29
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).7050-7051 OF 2010
THE STATE OF UTTAR PRADESH THROUGH
PRINCIPAL SECRETARY & ORS. …APPELLANT(S)
VERSUS
MILKIYAT SINGH & ORS. ETC. …RESPONDENT(S)
J U D G M E NT
VIKRAM NATH, J.
TABLE OF CONTENTS
FACTUAL MATRIX: ..........................................................................3
ISSUE BEFORE THIS COURT: ..........................................................6
Whether, by virtue of Section 103 of the Multi-State Cooperative
Societies Act, 2002, the subject cooperative society, though originally
registered under the statute enacted by the appellant-State, stands
transformed into a multi-State cooperative society on account of the
State reorganization? .......................................................... 7
SUBMISSIONS ON BEHALF OF APPELLANT-STATE: ..........................7
SUBMISSIONS ON BEHALF OF RESPONDENTS: .............................. 11
Signature Not Verified
ANALYSIS AND DISCUSSION: ......................................................... 13
Digitally signed by
SONIA BHASIN
Date: 2025.12.15
16:19:17 IST
Reason:
I. Enactment and Scheme of Central Act: ..................... 14
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 1 of 29
a.) Understanding the term ‘object’ ................................................ 16
b.) Creation of “multi-State” cooperative society under the Central Act
..................................................................................................... 18
c.) Scope of “deemed conversion” under Section 103 of Central Act 19
d.) Difference between “objects” and “area of operation” of the society
..................................................................................................... 21
e.) Principles for application of conversion by operation of law under
Section 103 of Central Act ............................................................. 22
II. Whether subject co-operative society in the present case is multi-
State cooperative society or not? .................................. 24
a.) Contention of the Parties .......................................................... 24
b.) Decision of High Court ............................................................. 25
c.) Averments of Parties before this Court ...................................... 25
d.) Subject cooperative society is not multi-State cooperative society
..................................................................................................... 26
CONCLUSION: ................................................................................ 27
1. The present appeals assail the common judgment dated
th
26 September, 2008, passed by the Division Bench of the High
1
Court of Judicature at Allahabad , in Civil Miscellaneous Writ
Petition Nos. 61489 of 2007 and 18556 of 2008. By the
impugned judgment, the High Court allowed the writ petitions
and held that the cooperative societies in question could not be
1
Hereinafter, referred to as “High Court”.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 2 of 29
treated as State cooperative societies so as to attract the
legislation enacted by the State, and that consequent to the
reorganisation of the erstwhile undivided State, they had
attained the character of multi-State cooperative societies.
FACTUAL MATRIX:
2. Brief facts, relevant for the disposal of the present case, are
narrated hereinbelow: -
2.1. A cooperative sugar factory, namely Kisan Cooperative
Sugar Factory Limited, having its registered office at Majhola,
District Pilibhit, Uttar Pradesh (hereinafter referred to as “ the
cooperative society ”), was originally registered under the
provisions of the erstwhile Cooperative Societies Act, 1912. The
private respondents herein, who were the writ-petitioners before
the High Court, are shareholders of the said cooperative society.
2.2. In the year 1965, the appellant-State enacted the Uttar
Pradesh Cooperative Societies Act (hereinafter, “ State Act ”)
whereby the earlier Cooperative Societies Act, 1912 stood
repealed and was substituted by the State Act.
2.3. In 2000, the U.P. State Reorganization Act, 2000
(“ Reorganisation Act ”) came into force, by which the erstwhile
State of Uttar Pradesh was bifurcated into the present State of
Uttar Pradesh and the newly created State of Uttarakhand. At
that time, the Multi-State Cooperative Societies Act, 1984
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 3 of 29
governed cooperative societies. Subsequently, in 2002, the
Multi-State Cooperative Societies Act, 2002 (“ Central Act ”) was
enacted, repealing the 1984 Act and consolidating the law
relating to cooperative societies whose operations extended
beyond a single State.
2.4. The Central Act incorporated a deeming clause under
Section 103, in terms of which certain cooperative societies,
consequent upon the reorganisation of the State, would be
treated as multi-State cooperative societies. By virtue of this
legal fiction, such societies, though originally registered under
the State Act, would fall within the ambit and application of the
Central Act.
2.5. Consequent to the enforcement of the Reorganisation Act,
a joint meeting was held on 24th May, 2006 between the officials
of the States of Uttar Pradesh and Uttarakhand for determining
and finalising the apportionment of assets and liabilities of
public sector undertakings and cooperative institutions.
Thereafter, the appellant-State undertook a series of measures
regarding the restructuring and privatization of cooperative
sugar mills which had become financially unviable. In the
succeeding year, the appellant-State took a policy decision in
principle to proceed with the privatization and sale of several
cooperative sugar mills and directed that the said process be
carried out through the Department of Disinvestment.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 4 of 29
2.6. Thereafter, on 7 August 2007, the appellant-State issued
the U.P. Cooperative Societies (Amendment) Ordinance, 2007
(No. 21 of 2007), empowering the State Government to transfer
cooperative sugar mills to entities in which the State held the
majority shareholding, where such mills were found to be
financially unviable.
2.7. Aggrieved thereby, Civil Miscellaneous Writ Petition No.
61489 of 2007 came to be instituted under Article 226 of the
Constitution before the High Court by four individuals,
(respondent nos. 1 to 4 in Civil Appeal No. 7050 of 2010) one
among whom was a member and shareholder of the subject
cooperative society. The writ petitioners questioned the action
of the appellant-State in proceeding to privatise the cooperative
society. It was contended that upon the enactment of the
Reorganisation Act, the appellant-State had ceased to possess
any authority under the State Act and, consequently, lacked the
competence to undertake the impugned measures.
2.8. Subsequently, in the year 2008, one Mumtaz Ali
(respondent no. 1 in Civil Appeal No. 6071 of 2010), a
shareholder of the second cooperative society, instituted Civil
Miscellaneous Writ Petition No. 18556 of 2008 under Article 226
of the Constitution before the High Court, challenging the
proposed privatization on identical grounds as those urged in
the earlier writ petition.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 5 of 29
th
2.9. By a common judgment dated 26 September, 2008, the
High Court allowed the writ petitions. It rejected the objection
as to the locus of the writ petitioners, who were shareholders of
the cooperative society, to maintain the challenge. The High
Court held that Section 103 of the Central Act, being a deeming
provision, was fully attracted to the facts of the case and,
therefore, the cooperative society had acquired the character of
a multi-State cooperative society. Consequently, only the Union
Government could exercise authority in respect of such society.
On this reasoning, the High Court declared all steps taken by
the appellant-State in relation to the cooperative society to be
without jurisdiction and non est in law, for want of legislative
competence and absence of any authority of law.
3. Aggrieved by the said common judgment, the State has
approached this Court.
4. We have heard the learned Senior Counsel for the
appellant-State. When the matter was taken up for hearing on
th
12 November, 2025, no one appeared on behalf of the
contesting respondents (the writ petitioners before the High
Court) in both the connected appeals. As the respondents have
already filed their counter-affidavit dated 13 August 2010, we
proceed to decide the appeal on merits.
ISSUE BEFORE THIS COURT:
5. The issue involved in the present appeals is:
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 6 of 29
Whether, by virtue of Section 103 of the Multi-State
Cooperative Societies Act, 2002, the subject
cooperative society, though originally registered under
the statute enacted by the appellant-State, stands
transformed into a multi-State cooperative society on
account of the State reorganization?
SUBMISSIONS ON BEHALF OF APPELLANT-STATE:
6. Shri Rana Mukherjee, learned senior counsel for the
appellant-State, strenuously assailed the judgment of the High
Court contenting, inter alia : -
6.1. that on 24th May, 2006 a joint meeting was held between
the representatives of the Governments of the appellant-State
and the State of Uttaranchal (now Uttarakhand) to settle the
distribution of assets and liabilities of public sector
undertakings and cooperative entities pursuant to the
reorganisation. The meeting was also attended by
representatives of the cooperative sugar mill associations of
both States. It was agreed that no outstanding financial claims
would remain between the two States in respect of shares in the
cane/sugar mill societies, the book value of such shares having
become nil or negative. This decision effectively concluded all
inter-State financial issues concerning cooperative sugar mills.
Hence, it was implicit that the State of Uttarakhand was
exercising no control over the said mills, including the subject
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 7 of 29
cooperative society. In addition, the appellant-State owned, and
still continues to own, 95% of the shares of the subject
cooperative society.
6.2. that the High Court committed a grave error in rejecting
the objection as to locus standi of the writ-
petitioners/shareholders. The High Court failed to consider
that, much like a company limited by shares, the shareholders
of a cooperative society may reside beyond the territorial limits
of the State in which the society is registered. Owing to the
reorganisation of the erstwhile State, some members who
originally belonged to undivided Uttar Pradesh had incidentally
become residents of Uttaranchal/Uttarakhand. Such persons,
even if dissatisfied, could not have questioned the actions taken
under the State Act, particularly when the State of Uttarakhand
had never asserted any claim or control over the cooperative
sugar mills in question, despite the fact that the principal
investments had been made by the State of Uttar Pradesh.
6.3. that the High Court erroneously relied on the submissions
of the learned ASG that the Central Act was applicable. It failed
to appreciate that Section 103 had no application to the subject
cooperative society since it continues to function within the
territorial limits of the appellant-State and remains registered
under the State Act. Any finding to the contrary proceeds on a
misreading of the scope and applicability of the Central Act.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 8 of 29
6.4. that, even as on date, neither the Registrar of Cooperative
Societies under the 1984 Act (now repealed) nor under the
Central Act has, for over twenty-five years, issued any notice or
taken any step requiring the subject cooperative society to seek
registration under, or to comply with the provisions of, the
Central Act.
6.5. that another vital aspect which deserves due consideration
is that the sugar mills in question have remained non-
operational since 2006. This circumstance further reinforces
the submission that the value of the shares held by the private
contesting respondents has, for all practical purposes, become
nil.
6.6. that it is a settled principle that the law must be applied
in a manner that avoids absurd results, and that deeming
provisions cannot be given an unduly expansive interpretation
without considering their nature, scope and legislative intent.
The High Court ought to have examined whether the
interpretation placed by it on Section 103 of the Central Act
would lead to an irrational or untenable outcome, which the law
mandates must be avoided. The construction adopted by the
High Court, therefore, results in an erroneous application of the
deeming clause under Section 103.
6.7. that reliance placed by the private respondents on the
judgment of this Court in Naresh Shankar Srivastava v.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 9 of 29
2
State of Uttar Pradesh , is misconceived. The said decision
has no application to the present case, as it is clearly
distinguishable on facts. In Naresh Shankar Srivastava
( supra ), the cooperative societies were found to be operating in
both the States of Uttar Pradesh and Uttarakhand. In contrast,
in the instant case, the subject cooperative society as well as its
operations are confined exclusively to the State of Uttar
Pradesh, including the sugar mill in question.
6.8. that the finding of the High Court, in so far as it holds that
the writ petitions could be maintained at the behest of certain
shareholders who, post-reorganisation, came to reside in the
State of Uttaranchal (now Uttarakhand), and further that the
provisions of the 2002 Act, particularly Section 103(2), stood
attracted so as to divest the State Government of its authority
to legislate and amend the governing law in respect of such
societies in which the State of Uttar Pradesh continues to hold
majority shareholding, is wholly untenable.
Shri Mukherjee, learned Senior Counsel, therefore urged
that the present appeal deserves to be allowed and the
impugned judgment of the High Court be set aside.
2
(2009) 16 SCC 157.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 10 of 29
SUBMISSIONS ON BEHALF OF RESPONDENTS:
7. Since none appeared on behalf of the private respondents
(writ petitioners before the High Court), we have perused the
counter-affidavit dated 13th August, 2010 filed on their behalf,
wherein the following submissions have been urged: -
7.1. That after the enactment of the Reorganisation Act, 2000
by Parliament, the appellant-State stood divested of all
authority exercisable under the State Act, inasmuch as, post-
reorganisation, certain member-shareholders (including some
writ petitioners) came to reside in the State of Uttarakhand and
sugarcane procurement was being carried out from growers
situated in Uttarakhand.
7.2. that under Clause 3 of the bye-laws of the society, its area
of operation includes Tehsil Khatima in District Nainital,
Uttarakhand as well as Tehsil Pilibhit in Uttar Pradesh.
Consequently, since the operations extend beyond one State,
the society must be treated as a multi-State cooperative society
by operation of Section 103 of the Central Act.
7.3. that a cooperative society can be deemed to be registered
as a multi-State cooperative society only when, pursuant to
reorganisation, its area of operation falls in more than one State.
The expression ‘objects’ in Section 103 of the Central Act must
therefore be read as referring to the territorial area of operation.
Otherwise, despite reorganisation resulting in the society
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 11 of 29
operating across two States, it would continue to be governed
by the State Act, thereby conferring extra-territorial application
upon a State enactment, which is neither permissible nor
workable.
7.4. That the Central Act does not repeal the State Act. The
State Act continues to govern cooperative societies operating
exclusively within Uttar Pradesh. The Central Act, by virtue of
its deeming clause, applies only to those societies whose area of
operation extends to both Uttar Pradesh and Uttarakhand, and
to such societies alone the State Act ceases to apply.
7.5. that the legal position regarding the status of cooperative
societies after the reorganisation of a State is no longer open to
doubt. This Court in Naresh Shankar Srivastava ( supra ) has
categorically held that Section 103 of the Central Act
(corresponding to Section 95 of the repealed Act) addresses the
situation where, due to reorganisation, a cooperative society
whose activities were earlier confined to the undivided State
thereafter extends its objects to more than one State. In such
circumstances, the society shall, by virtue of the deeming
provision, be treated as a multi-State cooperative society
registered under the provisions of the Central Act.
On the aforesaid premises, the private respondents, in
their counter-affidavit, have urged that the present appeals
preferred by the appellant-State be dismissed.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 12 of 29
ANALYSIS AND DISCUSSION:
8. We have given thoughtful consideration advanced at bar,
and have gone through the material placed on record.
9. The present appeals present an unusual situation
concerning the interpretation of a law enacted by Parliament
and whether its ambit extends to a corporate body originally
registered under a State legislation. While there is no dispute as
to legislative competency, the narrow issue that falls for our
consideration is whether, on the reorganisation of the erstwhile
unified State of Uttar Pradesh, the subject cooperative society
has assumed the character of a multi-State cooperative society.
If the answer is in the affirmative, no interference with the
judgment of the High Court would be warranted. Conversely, if
the question is answered in the negative, it would then be
necessary to examine the legal position in the context of the
facts of the present case.
10. According to the private respondents (the writ petitioners
before the High Court), upon the reorganisation and division of
the erstwhile State of Uttar Pradesh by virtue of the
Reorganisation Act, 2000 into the present States of Uttar
Pradesh and Uttarakhand, the subject cooperative society, by
operation of Section 103 of the Central Act, acquired the deemed
status of a multi-State cooperative society, and consequently,
the provisions of the State Act ceased to apply to it.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 13 of 29
11. On the other hand, the appellant-State contends that
Section 103 of the Central Act has no application to the subject
cooperative society, as all its principal activities, including the
operation of the sugar mill and the source of its business,
continued to remain within the territorial limits of the State of
Uttar Pradesh, even after the reorganisation. Consequently, the
deeming provision under Section 103 would not be attracted,
and the society would continue to be governed by the State Act
under which it was originally registered.
12. Since the controversy before us turns entirely on the
construction of Section 103 of Central Act (corresponding to
Section 95 of the repealed 1984 Act), it becomes necessary to
extract the relevant part of the provision, which reads thus: -
“103. Cooperative societies functioning immediately
before reorganisation of states- (1) Where, by virtue of the
provisions of Part II of the State Reorganisation Act, 1956 (37
of 1956) or any other enactment relating to reorganisation of
states, any cooperative society which immediately before the
day on which the reorganisation takes place, had its objects
confined to one state becomes, as from that day, a multi-state
cooperative society, it shall be deemed to be a multi-state
cooperative society registered under the corresponding
provisions of this Act and the bye-laws of such society shall,
in so far as they are not inconsistent with the provisions of
this Act, continue to be in force until altered or rescinded.
. . . ”
I. Enactment and Scheme of Central Act:
12.1. The Multi-State Cooperative Societies Act, 2002 was
enacted by the Parliament with the following long title: -
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 14 of 29
“ An Act to consolidate and amend the law relating to
cooperative societies, with objects not confined to one State
and serving the interests of members in more than one State,
to facilitate the voluntary formation and democratic
functioning of cooperatives as people’s institutions based on
self-help and mutual aid and to enable them to promote their
economic and social betterment and to provide functional
autonomy and for matters connected therewith or incidental
thereto. ”
Therefore, the Central Act came to be enacted by the
Parliament to address the requirements of India’s federal
structure, where it was considered necessary to make a special
provision governing cooperative societies whose activities were
not confined to a single State and which catered to members
spread across more than one State.
12.2. Section 5 deals with the circumstances in which a multi-
State cooperative society may be registered. It reads as follows:
-
“5. Multi-state cooperative societies which may be
registered- (1) No multi-state cooperative society shall be
registered under this Act, unless,
(a) its main objects are to serve the interests of members in
more than one state; and
(b) its bye-laws provide for social and economic betterment
of its members through self-help and mutual aid in
accordance with the cooperative principles.
. . . ”
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 15 of 29
Section 5 is couched in negative terms and sets out two
pre-conditions for registration as a multi-State cooperative
society. First, the primary object of the society must be to serve
the interests of its members in more than one State. Second, its
bye-laws must provide for the social and economic
advancement of its members through self-help and mutual aid
in accordance with cooperative principles.
12.3. The expression “multi-State cooperative society” in Section
3(p) means a society that has been registered or is deemed to be
registered under the Act, and includes a national cooperative
society as well as a federal cooperative. Likewise, the term
“member” under Section 3(n) refers to a person who joins in the
application seeking registration of a multi-State cooperative
society and also includes anyone admitted to membership
thereafter in accordance with the provisions of the Act, the
Rules, and the bye-laws.
a.) Understanding the term ‘object’
12.4. Section 9 declares that registration of a multi-State
cooperative society confers upon it the status of a body
corporate. As the expression “object” is not defined under either
the Central Act or the State Act, its meaning must be gathered
from a holistic reading of the enactments.
12.5. Section 10 stipulates the requirements relating to the bye-
laws of a multi-State cooperative society and reads as follows: -
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 16 of 29
“10. Bye-laws of multi-state cooperative societies- (1)
Every multi-state cooperative society may make its bye-laws
consistent with the provisions of this act and the rules made
thereunder.
(2) In particular, and without prejudice to the generality
of the foregoing power, such bye-laws may provide for all
or any of the following matters, namely:
(a) the name, address and area of operation of the society;
(b) the objects of the society;
(c) the services to be provided to its members;
(d) the eligibility for obtaining membership;
. . .”
( emphasis supplied )
Section 10 makes it clear that a multi-State cooperative
society has the discretion to frame its bye-laws covering any of
the matters specified in sub-section (2) of that provision. In
particular, Section 10(2)(b) enables such societies to
incorporate, in their bye-laws, provisions relating to their
objects.
12.6. Thus, a conjoint reading of Section 5(1)(a) and Section
10(2)(b) makes it evident that once a society seeks registration
as a multi-State cooperative society and prescribes its objects
in the bye-laws, such objects must necessarily satisfy the
mandate of Section 5(1)(a), namely, that its main objective
should be to serve the interests of members in more than one
State.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 17 of 29
b.) Creation of “multi-State” cooperative society under the
Central Act
12.7. The issue that next falls for determination is the true
import of Section 5(1)(a) of the Central Act, which stipulates that
the principal object of the society must be to serve the interests
of its members in more than one State. The question is whether
the provision is satisfied merely because the members are
drawn from two different States, or whether it contemplates
that the society must, in substance, serve the interests of its
members in more than one State, irrespective of their place of
residence. If the former construction is adopted, the judgment
of the High Court may not warrant scrutiny. However, if the
latter construction is to be preferred, it will have to be examined
whether the subject cooperative society satisfies the conditions
necessary to be treated as a multi-State cooperative society.
12.8. Section 22 acknowledges the authority of a cooperative
society to transform itself into a multi-State cooperative society.
The material portion of the provision is extracted below: -
“22. Conversion of a cooperative society into a multi-state
cooperative society- (1) A cooperative society may, by an
amendment of its bye-laws, extend its jurisdiction and
convert itself into a multi-state cooperative society :
Provided that no such amendment of bye-laws of a
cooperative society shall be valid unless it has been registered
by the Central Registrar.
. . . ”
( emphasis supplied )
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 18 of 29
Section 22, therefore, confers the power upon a
cooperative society originally registered under a State
enactment to transform itself into a multi-State cooperative
society. The provision recognizes and enables such conversion
from a State cooperative society to a multi-State cooperative
society.
12.9. Accordingly, a multi-State cooperative society may come
three distinct ways First
into existence in . , a society may seek
registration directly under Section 5 of the Central Act. Second ,
a cooperative society constituted under a State Cooperative
Societies Act, as in the present case, may seek conversion into
a multi-State cooperative society under Section 22 of the
Central Act. The third mode, which forms the fulcrum of the
present controversy, is the statutory deeming mechanism under
Section 103. This mode of deemed conversion will be examined
in detail in the succeeding portion of this judgment.
c.) Scope of “deemed conversion” under Section 103 of
Central Act
12.10. Section 103(1) of the Central Act (extracted supra )
provides for the conversion of a cooperative society registered
under a State Cooperative Societies Act into a multi-State
cooperative society. The provision is attracted when Parliament
enacts a law for the reorganisation of a State. The second
requirement is that the cooperative society must have had its
objects confined to ‘one State’. The expression “one State” refers
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 19 of 29
to the erstwhile undivided State which stands bifurcated into
two or more States upon such reorganisation.
12.11. The understanding urged on behalf of the private-
respondents, which found favour with the High Court, is that
the enactment of a statute reorganising a State ipso jure
converts a cooperative society with objects confined to the
erstwhile State into a multi-State cooperative society.
12.12. We are not persuaded by the interpretation of Section
103 as propounded by the private-respondents and accepted by
the High Court. It is a settled principle of statutory construction
that a provision cannot be construed in isolation to fit a
particular factual situation. As held by a three-Judge Bench of
this Court in Southern Electricity Supply Co. of Orissa Ltd.
3
v. Sri Seetaram Rice Mill , the words in a statute must
necessarily draw their meaning from the context and the
scheme of the enactment and cannot be interpreted in isolation.
12.13. Section 103 of the Central Act, therefore, cannot be
construed in isolation. Section 5(1) makes it explicit that no
multi-State cooperative society can be registered unless its
primary objects are to serve the interests of members in more
than one State. The expression “more than one State” does not
qualify or relate to the residence or domicile of the members, as
defined under Section 3(n). In other words, the geographical
3
(2012) 2 SCC 108.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 20 of 29
location or residence of the members is wholly irrelevant for
determining whether a cooperative society attains the status of
a multi-State cooperative society.
12.14. The expression “more than one State” in Section 5
pertains to the principal objects of the cooperative society. Thus,
unless the primary objects of the society operate in, and extend
to, more than one State, registration as a multi-State
cooperative society under the Central Act is impermissible.
Consequently, the society is required to frame its bye-laws in
terms of Section 10(2)(b) so as to reflect such objects.
12.15. The scheme of the Central Act, as analysed above,
expressly contemplates that a cooperative society may amend
its bye-laws and extend its area of operation, thereby converting
itself into a multi-State cooperative society in terms of Section
22(1). The extension of jurisdiction in this manner necessarily
postulates amendment of the bye-laws relating to the objects of
the society framed under Section 10(2), pursuant to which such
conversion may be effected.
d.) Difference between “objects” and “area of operation” of
the society
12.16. Section 103 uses the expression “object of the
society” being confined to one State. The provision does not
advert to the “area of operation”. Significantly, Section 10(2) of
the Central Act draws a clear distinction between the two by
separately referring to each for the purposes of framing bye-
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 21 of 29
laws. Therefore, when Section 103 specifically employs the
expression “object of the society”, the plain and natural
meaning of that expression must be given effect to, and it would
not be permissible, by interpretative process, to substitute or
read into it the concept of “area of operation.”
12.17. This position stands reinforced by Section 5(1)(a),
which mandates that a society seeking registration as a multi-
State cooperative society must have its objects located in more
than one State. Section 5 does not refer to the “area of
operation”. Consequently, for the purposes of invoking Section
103, it is wholly irrelevant whether the area of operation of the
subject society spans more than one State. The enquiry
contemplated under Section 103 is limited to the objects of the
society. If, after reorganisation, the objects are traceable to more
than one State, Section 103 would apply; if they are confined to
one State, it would not.
e.) Principles for application of conversion by operation of
law under Section 103 of Central Act
12.18. Conversion by operation of law under Section 103 of
the Central Act must, therefore, be understood in the overall
framework of the Act. Upon reorganisation of a State by
Parliamentary enactment, not every cooperative society
functioning in the erstwhile undivided State would
automatically stand converted into a multi-State cooperative
society. For determining whether the conversion under Section
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 22 of 29
103 has taken place, the bye-laws of such society, particularly
those dealing with its objects, would have to be examined. This
inquiry necessarily becomes fact-specific and would vary from
case to case. If the bye-laws reveal that the objects of a
cooperative society extend to districts which now fall in two
different States after reorganisation, Section 103 would apply
and such a society would, by legal fiction, stand converted into
a multi-State cooperative society.
12.19. However, where the objects of the cooperative society
stand confined to only one State after reorganisation,
irrespective of which of the bifurcated States it falls in, Section
103 of the Central Act would have no application. In such a
case, the society would continue to be regulated by the State
Cooperative Societies Act under which it was originally
registered.
12.20. Accordingly, Section 103 of the Central Act would
operate only where the objects of the society extend to more
than one State. A conjoint reading of Section 103 and Section 5
of the Central Act makes it abundantly clear that the domicile
or residence of the members is irrelevant for determining
whether a society attains the status of a multi-State cooperative
society. Further, by expressly enabling conversion under
Section 22 through amendment of bye-laws and enlargement of
jurisdiction, the Central Act itself recognises that a cooperative
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 23 of 29
society whose objects are confined to a single State cannot be
treated as a multi-State cooperative society.
II. Whether subject co-operative society in the present case
is multi-State cooperative society or not?
13. From the foregoing discussion, the statutory scheme
under the Central Act stands clarified. What now remains is the
task of applying this legal position to the facts of the present
case.
a.) Contention of the Parties
13.1. This matter stems from two writ petitions filed before the
High Court challenging the actions of the appellant-State
pertaining to the acquisition/ privatisation of the subject
cooperative society. The writ petitioners (now private-
respondents) had contended that upon reorganisation of the
erstwhile State, the subject cooperative society automatically
acquired the status of a multi-State cooperative society by
operation of Section 103 of the Central Act. In their rejoinder
filed before the High Court, the private-respondents specifically
asserted that the activities of the subject cooperative society
extended across two States, namely the appellant-State and the
State of Uttarakhand, thereby bringing it within the sweep of
Section 103 of the Central Act.
13.2. These writ petitions were resisted by the appellant-State
(respondent before the High Court) on several grounds. First, it
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 24 of 29
was contended that the writ petitioners lacked locus standi to
maintain the petitions. Second, it was urged that the provisions
of the Central Act were inapplicable to the facts of the present
case.
b.) Decision of High Court
13.3. The Division Bench of the High Court mainly allowed the
writ petitions after declining to accept the contention of the
appellant-State (respondent therein) regarding the locus standi
of the writ petitioners to question the actions of the State.
Further, the impugned judgment does not advert to the merits
of the matter, particularly the bye-laws of the cooperative
society insofar as they relate to the objects of the society.
13.4. The High Court, upon a plain reading of Section 103 of the
Central Act, rejected the contention that the subject cooperative
society could continue to retain the character of a State
cooperative society after reorganisation. It proceeded on the
premise that, by operation of law, the society acquired the
status of a multi-State cooperative society and its earlier status
stood displaced.
c.) Averments of Parties before this Court
13.5. The interpretation accorded to the Central Act by the High
Court does not align with the construction placed by us in the
preceding paragraphs. Ordinarily, having clarified the correct
legal position, we would proceed to apply it to the factual matrix
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 25 of 29
and conclude whether interference with the High Court’s
judgment is warranted. However, the matter assumes a distinct
complexion as the impugned judgment does not adequately
advert to the merits concerning the bye-laws or the objects of
the cooperative society. It therefore becomes necessary for us to
independently examine the submissions canvassed in the
present appeals.
13.6. The writ petitioners (now the private-respondents) urged
before the High Court that the territorial operation of the subject
cooperative society extends to both States. According to them,
a cooperative society whose field of operation spans more than
one State would, by virtue of Section 103 of the Central Act,
necessarily acquire the status of a multi-State cooperative
society. It was further asserted that during the crushing season
2005-06, nearly half of the sugarcane supplied to the mill was
procured from cultivators located in the newly created State of
Uttarakhand.
d.) Subject cooperative society is not multi-State
cooperative society
13.7. The appellant-State has consistently refuted this
assertion. It is specifically urged in the grounds of appeal that
the subject cooperative society was engaged in the manufacture
of sugar entirely within the territorial limits of the appellant-
State. The appellant-State has further submitted that the High
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 26 of 29
Court has erroneously conflated the expressions “area of
operation” and “objects of the society”.
13.8. As regards the interpretation advanced by the appellant-
State, it is noteworthy that the private-respondents, in their
counter-affidavit, have not disputed the distinction between the
“area of operation” and the “objects” of a society. Their stand is
only that the area of operation extends to two States and hence
Section 103 applies. The counter-affidavit is completely silent
on the crucial aspect of the society’s objects and does not deny
the appellant-State’s assertion that the objects were confined to
a single State. Since the High Court has also not dealt with this
issue, we proceed on the footing that the appellant-State’s
position, being that the objects were limited to one State, stands
admitted.
14. As we have already clarified, Section 103 of the Central Act
is attracted only where the objects of the cooperative society
extend to more than one State. Consequently, we are unable to
accept the submission of the private-respondents that merely
because the area of operation of the society spans across two
States, the same would render it a multi-State cooperative
society.
CONCLUSION:
15. In light of our discussion, in the foregoing paragraphs, we
summarise our conclusions as under:
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 27 of 29
A. Section 103 of the Multi-State Cooperative Societies Act,
2002 does not, by itself, confer an automatic or deemed
status of a multi-State cooperative society upon every
society registered under a State Cooperative Societies Act
merely because the parent State has undergone
reorganisation.
B. The applicability of Section 103 requires a factual enquiry
in each case as to whether the objects of the society extend
to more than one State. If the objects are found to span
more than one State, the deeming fiction under Section
103 will operate and the society would be treated as a
multi-State cooperative society. If the objects remain
confined to only one State, the status of the society will
remain unchanged.
C. It would be erroneous to undertake an enquiry into the
area of operation of a society for the purposes of Section
103, when the provision itself mandates an examination
only of the objects of the society. Read with Section 5, it
becomes evident that Section 103 is attracted only where
the objects of the society extend to more than one State. It
is only in such situation that the society would, by
operation of law, be treated as a multi-State cooperative
society.
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 28 of 29
D. The residence or domicile of the members of the
cooperative society has no bearing on determining whether
the society is a multi-State cooperative society.
E. Section 5 of the Multi-State Cooperative Societies Act,
2002 mandates that a society may be registered as a multi-
State cooperative society only when its principal objects,
as reflected in its bye-laws, serve the interests of members
in more than one State. It is, therefore, a pre-condition
that the objects span more than one State.
th
16. Accordingly, the judgment dated 26 September, 2008,
passed by the Division Bench of the High Court of Judicature
at Allahabad in Civil Miscellaneous Writ Petitions Nos. 61489 of
2007 and 18556 of 2008 is hereby set aside.
17. Consequently, the present appeals stand allowed, and
both the writ petitions are dismissed.
18. Pending application(s), if any, are disposed of.
………………………………………..J.
[VIKRAM NATH]
………………………………………..J.
[SANDEEP MEHTA]
NEW DELHI
DECEMBER 15, 2025
CIVIL APPEAL NO(S).7050-7051 OF 2010 Page 29 of 29