The Supreme Court has clarified that a cooperative society does not automatically acquire the status of a multi-state cooperative merely because its members are located in different states. The Court ruled that what truly determines such status is the nature of the society’s objectives, not the geographical spread of its membership.
A Bench comprising Justices PS Narasimha and Alok Aradhe overturned a decision of the Uttarakhand High Court that had treated a state-level cooperative as a multi-state body solely because its members were situated across two states.
The Court made it clear that the statutory test is rooted in the purpose of the society. If the primary objectives of a cooperative are designed to operate across state boundaries, only then can it be treated as a multi-state cooperative society. Simply having members living in different states does not meet this threshold.
The judges noted that the residence of members or the geographical reach of certain activities cannot replace the legal requirement that the society’s principal objectives themselves must be multi-state in character.
The dispute traces back to the reorganisation of Uttar Pradesh and the creation of Uttarakhand under the Uttar Pradesh Reorganisation Act, 2000. Two sugarcane growers’ cooperative societies based in Bajpur and Gadarpur were originally registered under the U.P. Cooperative Societies Act, 1965. After the bifurcation, some of their members found themselves located in villages that fell within Uttar Pradesh, while the societies themselves operated in the newly formed state of Uttarakhand.
A cane grower from a village that remained in Uttar Pradesh challenged his exclusion from the Bajpur society after its operational jurisdiction was reorganised to restrict it within Uttarakhand.
An arbitrator had earlier concluded that the society had effectively become a “deemed” multi-state cooperative society under Section 103 of the Multi-State Cooperative Societies Act, 2002 because its operational reach extended across two states after the reorganisation. The Uttarakhand High Court had endorsed this view.
However, the Supreme Court disagreed. The judgment emphasised that the mere presence of members in different states does not transform a cooperative society into a multi-state entity.
Referring to its earlier ruling in State of U.P. v. Milkiyat Singh, the Court explained that the decisive factor lies in whether the core objectives of the society inherently require functioning across state boundaries.
When the Court examined the bye-laws of the Bajpur and Gadarpur societies, it found that their goals were narrowly focused: protecting the interests of local sugarcane growers and coordinating with nearby sugar mills. These functions were essentially local and did not indicate any intention to serve members across multiple states.
The Court observed that the societies’ objectives were clearly limited to promoting the interests of local cane growers and did not demonstrate any design to operate beyond state boundaries.
With this reasoning, the Supreme Court allowed the appeal and held that the Bajpur and Gadarpur sugarcane cooperative societies could not be classified as multi-state cooperative societies. Their reorganisation under the Uttar Pradesh Reorganisation Act, 2000 therefore remained valid.
