Supreme Court upholds Bombay High Court, holds economic viability a pre‑requisite for registration of primary agricultural credit societies

A bench of Justices Vikram Nath and Prasanna B. Varale heard appeals arising from a common Bombay High Court order that set aside State orders directing registration of proposed Primary Agricultural Credit Co‑operative Societies (PACCS). The appeals challenged the High Court's decision in writ petitions filed by a member of an existing society, which had sought to quash the State Government's allowance of fresh registrations despite adverse findings by a Scrutiny Committee.

The Court dismissed the appeals and upheld the High Court's order. It held that economic viability was a mandatory pre‑requisite for registration under the Maharashtra Co‑operative Societies Act, 1960 and that the State could not, in the exercise of appellate discretion, relax conditions laid down by its own Government Resolutions without issuing a fresh resolution. The Court emphasised that the Scrutiny Committee was an expert body constituted to test financial capability and that its findings could not be ignored unless shown to be perverse. The Court, in its reasoning, observed: "A conjoint reading of Section 4 and condition No.1 of Section 6 of the 1960 Act makes it very clear that the economic viability of the society is a pre‑requisite or basic condition for grant of registration to the society." The judgment also noted the Scrutiny Committee's specific finding that, in the Committee's view, "the petitioner society fails to comply with the criteria of economic viability and state it would not be advisable to establish society of the same type and with the same purpose in the area of operation of an unprofitable working society."

Background

The dispute arose when Shri Masaidevi Vividh Karyakari Sahakari Seva Sanstha Maryadit, Warewadi (appellant‑society) applied on 13.01.2023 to the Assistant Registrar for registration as a PACCS and for opening a bank account. A Scrutiny Committee rejected the application on 13.04.2023 for multiple reasons, including absence of verification whether promoters were members of other societies, lack of crop‑wise cultivated area verification, absence of bank undertakings or supportive documents to show loan availability, non‑production of 7/12 extracts and sowing register entries, and a finding that an existing society in the area was itself not financially viable. The Committee recorded that the proposal did "not comply with the criteria of economic viability" and unanimously resolved that the registration proposal should be rejected.

On appeal under Section 152 of the Maharashtra Co‑operative Societies Act, the State (Minister, Co‑operatives) allowed the appellant's appeal by order dated 28.06.2023 and directed registration, accepting the applicants' undertakings to raise share capital and asserting that registration would not adversely affect existing societies. Respondent No.6, a member of an existing co‑operative society, filed writ petitions before the Bombay High Court challenging the State's order. The High Court allowed the petitions, set aside the State orders and held that the State had ignored the Scrutiny Committee's findings and had acted contrary to the proviso to Section 4 of the 1960 Act and relevant Government Resolutions.

The Supreme Court reviewed the statutory provisions (Sections 4 and 6 of the 1960 Act) and the Government Resolutions dated 23.09.2013 and 14.02.2017, which prescribed minimum membership (75), establishment of a Scrutiny Committee to inspect financial ability, and a requirement that a scheduled PACCS have a minimum share capital of Rs.5 lakh at registration. The Court found that the Scrutiny Committee was constituted to check financial capability and that its detailed findings showed absence of required documents and bank guarantees. The Court held that the State, by allowing registration without a fresh Government Resolution relaxing the eligibility standards, had effectively bypassed the policy directives and thereby frustrated the object of the Act. The appeals were dismissed and the High Court's orders were upheld. There were no interim directions and no order as to costs.

Case Details: Case No.: 2025 INSC 436 Case Title: Shri. Masaidevi Vividh Karyakari Sahakari Seva Sanstha Maryadit, Warewadi v. The State of Maharashtra & Ors. Appearances: For the Petitioner(s): Not indicated in the reported judgment For the Respondent(s): Not indicated in the reported judgment