The Supreme Court held yesterday that, as an Appellate Authority, the Courts should not sit over the commercial wisdom of the General Body of the Cooperative Society.

The Court further held that the cooperative society must function democratically, with internal democracy, including resolutions passed in accordance with the Act, Rules, and Bye-laws, being respected and implemented.

In this case, the Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. decided to enter into an agreement with Hi-Rise to demolish the old administrative building and build a new administrative building. In the subsequent litigation, the High Court held in the impugned order that "(1) neither the Act nor the Rules allow the society to ask a third party to develop its building, especially when the party has a commercial interest in the same, and (2) the members should have undertaken the commercial activity on their own, which would have been in accordance with the co-operative spirit."

The bench of CJI UU Lalit, Justices S. Ravindra Bhat and JB Pardiwala referred to the history of the cooperative movement in India as well as the 97th Amendment to the Indian Constitution in their observation.

"We are of the view that the High Court is not correct in saying that the Appellant Society could not have entered into an agreement with a third party developer as the Act or the Rules does not provide for the same. It is too much for the High Court to expect that all the members of the Appellant Society should on their own contribute and undertake the development of the new administrative building. We enquired with the learned counsel appearing for the respective parties as regards the total cost of the project. We were informed that approximately the cost would be Rupees Twenty Crore. What is in the mind of Respondent No. 1 perhaps is that the members of the Appellant Society should contribute this amount and undertake the construction rather than involving a developer and making the entire project a business venture. It is just next to impossible.", 

The court also noted that the General Body of the Society's decision to redevelop the subject property had not been challenged in any way.

While allowing the appeal, the court observed:

"In the overall view of the matter, we are convinced that the impugned judgment and order passed by the High Court is not sustainable in law and deserves to be set aside. At one point of time, we were inclined to allow this appeal by imposing an exemplary cost on the Respondent No. 1 for unnecessarily dragging the Appellant Society into frivolous litigation & not allowing the Appellant Society to go ahead with the project for the past almost two decades. However, we refrain from passing such an order of costs in the hope that Respondent No. 1 realises that the development of the administrative building will be for the betterment of society. No individual member is going to gain anything from the redevelopment. It is the society as an autonomous body which will gain something."

Case details:-

C.A. No. 007261 / 2022  

S.L.P. (Civil) No. 506 of 2020

Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd.

vs

Aloke Kumar 

Read the complete judgment on the following link:-

https://main.sci.gov.in/supremecourt/2019/25060/25060_2019_9_1502_38897_Judgement_13-Oct-2022.pdf