Sri B. Narasimha Reddy v. The State of Andhra Pradesh

Order

: Date:01-05-2007 Per G. Bhavani Prasad, J. The constitutional and legal validity of the Andhra Pradesh Mutually Aided Co-operative Societies (Amendment) Ordinance 2 of 2006 and the consequential Government Orders and Proceedings are under challenge in this batch of writ petitions. On replacement of the Ordinance by the Andhra Pradesh Mutually Aided Co-operative Societies (Amendment) Act 20 of 2006, W.P. No.3275 of 2006 was permitted to be amended for the purpose of challenging the constitutionality and vires of the Amendment Act without the necessity of filing formal applications for the purpose in the other petitions. The Andhra Pradesh Co-operative Societies Act, 1964 is hereinafter referred to as “1964 Act” and the Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995 is referred to as “1995 Act”. The Andhra Pradesh Dairy Development Corporation is referred to as “the Corporation” and the Andhra Pradesh Dairy Development Co-operative Federation Limited is referred to as “the Federation”. The Chairmen of the District Milk Producers Co-operative Unions of Nalgonda - Ranga Reddy, Krishna, Karimnagar, Kurnool, Nellore, Prakasam and Guntur filed Writ Petition Nos.2214, 2291, 2294, 2295, 2456, 2457 and 2290 of 2006. The District Milk Producers Mutually Aided Co-operative Societies Associations of Guntur, Krishna and West Godavari filed Writ Petition Nos.3401, 3184 and 3189 of 2006. Co-operative Development Foundation, a society registered under the Andhra Pradesh Societies Registration Act, filed Writ Petition No.3275 of 2006. Mulkanoor Women Mutually Aided Milk Producers Co-operative Union Limited, directly registered under 1995 Act with 101 member village dairy co-operative societies, filed Writ Petition No.3502 of 2006. Writ Petition No.3372 of 2006 was filed by 435 Primary Milk Producers Co-operative Societies of Karimnagar district, the majority of which were converted from 1964 Act to 1995 Act, some were directly registered under 1995 Act and some are awaiting registration under 1995 Act. The remaining writ petitions were filed by Primary Milk Producers Co-operative Societies, which were converted from 1964 Act to 1995 Act. The National Dairy Development Board was originally shown as respondent in some writ petitions, but was permitted to be deleted. Miscellaneous petitions were filed by Sri Basavaraju Saraiah, M.L.A., Warangal, Indian National Trade Union Council, Hyderabad represented by its Secretary and Velivolu Milk Producers Co-operative Society Limited requesting to be impleaded to intervene and oppose the writ petitions. Pending the writ petitions, interim directions were given staying the operation of G.O. Ms. No.10, dated 04-02-2006 and orders dated 04-02-2006 issued by the Registrar and allowing the elected bodies of the District Unions and other societies to continue subject to the condition that they shall not take any policy decision until the final adjudication of the writ petitions and shall not incur any expenditure except payment of dues to the milk producers, salaries of the employees and other statutory dues. ORDINANCE / ACT AND CONSEQUENTIAL ORDERS: The Andhra Pradesh Mutually Aided Co-operative Societies (Amendment) Ordinance 2006, Ordinance 2 of 2006 was promulgated and published in the Andhra Pradesh Gazettee on 01-02-2006. By Section 1 (3), the Ordinance shall be deemed to have come into force with effect from 01-06-1995. Section 2 of the Ordinance amended Section 2 (d) of the Principal Act substituting the words “under the provisions” for the words “under Section 7” and adding at the end the words “but does not include the Milk/Dairy Co-operative Societies”. Section 4 of the Principal Act was amended by Section 3 of the Ordinance by substituting the expression “under the provisions” for “under section 7” in sub- section (1) and adding a Proviso to sub-section (1), namely— “Provided that no Co-operative Society shall be registered as a dairy or milk Co-operative Society and no dairy or milk Co-operative Society registered under any other law shall be converted into a Dairy or Milk Co-operative Society under this Act”. After sub-section (1), sub-section (1A) was added as follows: “(1A) Notwithstanding anything contained under this Act or under the provisions of the Andhra Pradesh Co-operative Societies Act, 1964, all the Dairy/Milk Co-operative Societies registered or deemed to have been registered or converted under the provisions of this Act, shall be deemed to have been excluded from the provisions of this Act and deemed to have been registered and continued under the provisions of the Andhra Pradesh Co-operative Societies Act, 1964”. The Ordinance was repealed and replaced by A.P. Act 20 of 2006 with identical provisions which was published in the Andhra Pradesh Gazettee dated 12-04-2006. In the Statement of objects and reasons appended to L.A. Bill No.2 of 2006, which was later enacted into A.P. Act 20 of 2006, it was stated that the registration or conversion of Dairy/Milk Co-operative Societies under 1995 Act is resulting in adverse effects on the interest of the dairy farmers. The recommendations of the House Committee to exclude all Dairy Co-operatives from 1995 Act and to restore the 3-tier structure under 1964 Act were referred to. It was also observed that there were similar restrictions in Karnataka and Madhya Pradesh against registration or conversion of a society into a mutually aided co-operative society. The statement of objects and reasons further stated that — “In Andhra Pradesh a large number of Dairy Co-operative Societies which are having Government Loans, movable and immovable assets acquired with the Government Share capital, Loan and Guarantee, functioning under the 3-tier structure, with the Andhra Pradesh Dairy Development Federation as Apex Body under “Anand pattern”, Gujarat, have been converted into Mutually Aided Co-operative Societies under the said 1995 Act, without returning the share capital, the assets Government Loan/Guarantee, and acquired with Government Share capital or without entering into Memorandum of Understanding with Government loans or guarantees required under Section 4 (3) (e) of Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995, and in some cases conversion was made conditionally. However, so far no society has return(ed) the said Government share capital, Loan guarantee, etc. Further the dairy farmers are facing severe problems under the said Mutually Aided Co- operative Societies institutions. for any such outstanding It is also observed that, most of the persons supplying milk to these Dairies are farmers for whose purpose the Government has organized the Primary Agricultural Co-operative Societies and assisting them in the form of share capital, loan, guarantee, subsidies and other infrastructure to improve the agriculture economically and the dairy activity is a subsidiary activity of these farmers. production assist Experience has shown that for the last 5 years there is continuous drought in Andhra Pradesh and consequent crop failures, death (dearth) of cattle feed leading to commission of suicide by large number of farmers and death of milk-cattle. Therefore, the Government has taken up the cause of all types of farmers on top priority and prepared various plans to augment the agriculture and allied activities.

1. Recently one of the District Co-operative Milk Unions got itself registered as a Producer Company illegally under the Companies Act, 1956. The other District Co-operative Milk Unions may also follow the same way. Hence, there is an imminent danger of large extent of government assets of huge value built with The letter No. 5126/Dairy.II (1)/2003, 11-09-2003 the Principal Secretary Government, Animal Husbandry, Dairy Development and Fisheries Department to the Managing Director of the Federation, referred to the review of the performance of dairy sector in the State on 26-08-2003 with the Chief Secretary, wherein the Chairmen of several District Milk Unions also participated. It was further stated consequent on the discussions had, the decisions

enumerated were arrived at in the meeting, the first of which was to take steps to register the Federation as State Marketing Federation under 1995 Act. It was also further decided that MATA Federation shall cease to exist from the date of such registration and Guntur and Visakha Unions shall join the State Marketing Federation. It was also decided to register all the Milk Sheds of the Federation under 1995 Act and discourage formation of new Primary Societies/District Unions under 1964 Act. Decisions were further taken regarding the operation of Milk Production Fac t or y , Hyderabad under the Federation, marketing activities of respective Unions, marketing the products of the District Unions by the State Federation and supply of products as indented by the Federation for which payments are to be made as agreed upon. the dairy sector suffered It is self-evident from this letter that bringing the entire dairy sector under 1995 Act was considered and discouraging any new societies under 1964 Act were the decisions which could not have disadvantages due to functioning under 1995 Act till that time.public funds going into private hands. In order to prevent this and protect Government assets built up and developed with public money Government feels that there is urgent need to exclude Dairy/Milk Co-operative Societies from the purview of Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995.” In pursuance of the Ordinance, G.O.Ms. No.10 Animal Husbandry, Dairy Development & Fisheries (Dairy-II) Department, dated 04-02-2006 was issued stating that consequent to the promulgation of the Ordinance, the Managing Committees of the societies ceased to exist and elections as per 1964 Act have to be conducted afresh. As it takes some time to conduct the elections, it was stated to have been felt necessary to make interim arrangements to provide management to the societies to avoid vacuum. Accordingly the Milk Commissioner and Registrar of Milk Co-operatives were directed to take action to appoint concerned District Collectors as Official Persons-in-charge in respect of eight district unions under Section 32 (7) of the 1964 Act. The Government orders further authorized the District Collectors to appoint persons-in-charge similarly to the Primary Milk Producers Co-operative Societies. Consequently, the Milk Commissioner and Registrar for Milk Co-operatives have issued the proceedings dated 04-02-2006 respectively appointing the District Collectors concerned as the Person-in-charge for the respective district unions. GROUNDS OF CHALLENGE:

1. The intention of the legislature in enacting the 1995 Act is to enunciate the co-operative principles and promote voluntary, self-reliant, self-financing and autonomous co- operative societies away from State control as per their own bye-laws. The Act enabled conversion of the societies registered under 1964 Act into societies under 1995 Act. After conversion of 8 district unions into 1995 Act, elections were conducted for the Board of Directors, and Chairmen were elected who are entitled to continue till the expiry of their terms. There is no provision to reverse the conversion into 1995 Act back to 1964 Act. Elaborate procedure is prescribed by 1995 Act for liquidation in case of misconduct or misdemeanors or defaults, but no special officers can be appointed unlike under 1964 Act.

2. Nalgonda-Rangareddy District Union cleared dues of Rs.13,000.00 crores in six years and the mother dairy is collecting one lakh litres of milk from Nalgonda-Rangareddy districts per day. The union is selling 1.40 lakhs of litres of milk every day. It is making milk powder, which is popular. The mother dairy is extending various subsidies to farmers for feed, pesticides, fodder and seeds. There are 700 milk collecting centers and 364 societies in the two districts. The 8 district unions are controlled or managed by non- congress people and the State resorted to an inelegant legislative device to take direct control of the district unions, which is demonstrably colourable exercise of legislative power.

3. The Ordinance and the Government orders, etc., were issued on the evening of a Saturday to prevent the affected parties from approaching Court and present a fait accompli situation depriving the elected Chairmen and members of their rights in an extremely arbitrary and capricious manner.

4. By retrospective operation, actual events that happened such as functioning, registration and all activities conducted and completed, as a matter of fact, cannot be reversed by a deeming provision. Any retrospective Act can impose additional burdens or obligations or give additional concessions. But the factual registration and actual functioning for ten years cannot be annihilated. The power to enact retrospective laws has two basic exceptions against creation of retrospective crimes or affecting fundamental rights by reason of taking away vested rights. As observed by the Supreme Court, a Legislature cannot legislate today with reference to a situation that obtained 20 years ago and ignore the march of events and the constitutional rights accrued in the course of 20 years. That would be most arbitrary, unreasonable and a negation of history. Any retrospective operation must be shown ex facie or through extrinsic evidence to bear reasonable nexus with the provision especially when the effect extends over a long period. Any fiction of law cannot run counter to a factual situation.

5. Deprivation of the elected representatives of their assured term of office under 1995 Act without any cause, is capricious and arbitrary exercise of legislative power. The vested right of the Chairmen and the members elected for a term cannot be retrospectively taken away.

6. Assuming that the Ordinance is valid, the Chairmen and members are deemed to be elected under 1964 Act and they are entitled to continue till expiry of their term. The impression that no committee exists due to the Ordinance is mistaken and in the absence of rules prescribed regarding the class of societies, Section 32 (7) of 1964 Act cannot be resorted to appoint persons incharge. The appointment of special officers is contrary to the Ordinance itself, which intended to continue the societies by Section 1A.

7. Expropriation of the societies by throwing out validly elected people is arbitrary, capricious and in violation of Article 14 of the Constitution. The lawless law to obliterate the societies is not a normal legislative exercise of power and smacks of vindictiveness and abuse of power.

8. Nalgonda-Rangareddy District Union supplied ghee worth Rs.66.00 lakhs to Tirumala Tirupathi Devastanams during September, 2002 and the Federation collected the money through Chittoor District Union, but did not pay. The amount due comes to Rs.1.00 crore, and Rs.50.00 lakhs of Nalgonda-Rangareddy Union kept in revolving fund with the Government were given to Chittoor Union and were not restored. A total of Rs.2.00 crores were withdrawn and diverted by the Federation to other entities. The commercial tax officer by seizing the bank account of Nalgonga- Rangareddy Union, collected Rs.36.00 lakhs sales tax on the supplies made to Tirumala Tirupathi Devastanams in spite of exemption. Any defaults are traceable, thus, to the Federation.

9. The National Dairy Development Board specifically advised the authorities not to remove the societies from 1995 Act and informed that no further aid will be forth-coming, if such a thing is done.

10. The 1995 Act was enacted under inspiration from the Central Government headed by the then Prime Minister Sri Rajiv Gandhi and guided by the National Dairy Development Board. Krishna District Union almost unanimously opted for registration under 1995 Act. While the district unions and primary societies are thriving very well under 1995 Act, politically motivated efforts started with W.P. No.23050 of 2004 by Sri Saraiah, an Ex-M.L.A. of congress, as a public interest litigation to retrieve the so-called assets of the Government from the district unions. The Government as the respondent is supporting the petitioner therein.

11. When the Registrar of Co-operative Societies issued instructions to cancel the registration of the district unions without any authority or reasons, the District unions were compelled to file writ petitions, which are pending. The candidates set up by the party in power miserably lost in the elections. The Krishna Union filed a petition before the Co-operative Tribunal to determine the value of items supposedly belonging to the Government, which is pending. The Ordinance is intended to freely interfere with the management and affairs of the milk producers and wholly discriminatory, irrational, motivated, mala fide and unconstitutional.

12. The farmers are by and large one class and some farmers owning cattle produce milk. There is no division like milk producing farmers and non-milk producing farmers. The milk producers are entitled to equality before law and equal protection of laws. The milk producing farmers cannot be denied the benefits and privileges under 1995 Act. There is no rational basis for the classification and the unreasonable classification has no nexus or relation to the object sought to be achieved.

13. The farmers are given highest procurement price after 1995 Act. Almost all the units and machinery are acquired by the unions and not by the Government and any Government properties are of nil value now. Any enjoyment of Government assets by co-operative unions cannot be a ground for removing the societies from the purview of 1995 Act.

14. Since 1995 Act about 6000 societies of milk producers were converted or formed, but the House Committee inspected only three societies, out of which two societies became defunct while functioning under 1964 Act. The National Dairy Development Board took them over by meeting their dues and got them registered under 1995 Act with the approval and consent of the Government. Out of 6000 societies and 10 unions, the alleged properties of the Federation or the Government are with only two or three unions.

15. The fundamental right of the farmers to choose either of the two enactments is taken away.

16. Since conversion into 1995 Act, the Karimnagar District Union increased its procurement from 50,000 litres to 80,000 litres, earned a profit of Rs.1.3 crores during 2003- 04 and Rs.65.00 lakhs in the current year ending with January, 2006. The conversion was as per the unanimous decision of the members of the 8 district unions. With the change of Government in May, 2004, efforts started to regain control over the district unions to have access to their funds. Issuance of revised certificates of registration and show cause notices were challenged before the High Court, which suspended the show cause notices.

17. The milk co-operative societies have to be treated on par with all other co-operative societies like Fishermen Co-operative Societies, Sheep Breeders Co-operative Societies, etc. The distinction sought to be made is not based on any valid and intelligible criteria but is artificial. The classification has no nexus with the object of 1995 Act.

18. Freedom to form associations or unions is guaranteed under Article 19 (1) (c) of the Constitution and the conversion from 1995 Act to 1964 Act without the consent and volition of the members of the societies is in violation of the said fundamental right. The supersession of the elected governing bodies is in violation of the basic structure of the constitution and official persons incharge cannot be foisted against the wishes of the societies. The Government cannot bring legislative changes reversing their own earlier decisions without any valid reasons or public interest. The backward step to subvert the milk co-operative societies is not in public interest.

19. No amendments are made to 1964 Act which prescribes a procedure and requirements for registering a voluntary society as a co-operative society. Without complying with that procedure, no fiction can be created to say that all the milk or dairy co-operative societies have to be deemed to be registered under 1964 Act. The deeming provisions and the deemed registration are contrary to 1964 Act and void.

20. There was absolutely no urgency for invoking the Ordinance making power just before the budget session of the Assembly since 14-02-2006. It was to avoid a debate on the floor of the Assembly.

21. The Kurnool District Union increased the procurement of milk to 161.41 lakh litres from 3 lakh litres and earned considerable profits since its conversion. The profits up to January, 2006 in the current year are Rs.1.20 crores.

22. An unfair and odious discrimination between a homogeneous and uniform group of co-operative societies in the State is introduced without any justifiable reason or plausible explanation for excluding 6000 milk cooperative societies alone from 15000 other mutually aided co- operative societies under 1995 Act. The Ordinance is an affront to Article 13 (2) of the Constitution, which prohibits the legislature from making any law which takes away or abridges the equality clause in Article 14.

23. In 1985 the assets were mostly land, few plants and machinery in Krishna and Visakhapatnam districts. It was later, the district unions improved the units investing huge amounts and hard labour by purchasing machinery like chilling plants, pasteurization units, packing units, collection equipment centers, storage plants and transport vehicles. They also purchased other equipment for making dairy products like cheese, butter, ghee and other products and for converting milk into milk powder. The district unions developed dairy activities by leaps and bounds and increased their turnover by several times. The erstwhile staff of the Federation were absorbed and crores of rupees were paid to them towards salaries and other benefits.

24. Recommendations of the study groups headed by Sri Brahma Prakash and Sri Ramakrishnayya were taken into consideration while drafting the 1995 Act and 3428 co-operative societies got converted into 1995 Act as on 31-03-2005, while another 10,463 new co-operative societies were voluntarily formed and registered under 1995 Act. 7,494 of these societies are functioning in thrift sector and 3,599 are functioning under dairy sector. The reformative provisions of 1995 Act were similarly enacted in 8 other States due to the vibrancy the Act imparted to the co-operative movement. No grounds are made out or established for restricting the fundamental right of freedom of association and the very expression ‘Co-operative society’ takes within its inherent context the element of voluntarism. The provisions of the Ordinance without any element of voluntarism or discretion are beyond and in excess of the legislative competence and power.

25. The Ordinance strikes at the spirit of Articles 38, 39, 43 and 48 of Directive Principles in Part-IV of the Constitution. The discrimination against the co-operative societies from other entities like corporations and companies runs counter to the stated public policy of the Central and State Governments for greater liberlisation. The relevant fact of greater financial vigour of the societies resulting in better benefits to the members, was not studied. The co-operative societies the co-operative movement will be completely destroyed if controlled and administered under 1964 Act.

26. The primary milk co-operative societies do not owe any money to the Government and are not in possession or control of any Government properties.

27. Societies which were directly registered under 1995 Act cannot be converted into 1964 Act without their consent.

28. Mulkanoor Women Mutually Aided Milk Producers Co- operative Union Limited (W.P. No.3502 of 2006) increased its membership from 72 to 101 village dairy co-operative societies between 2000 and 2006 and increased milk procurement from 6000 litres to 17,849 litres of the value of Rs.24.24 lakhs to Rs.53.00 lakhs. The milk sales went up from Rs.9.30 lakhs to Rs.82.53 lakhs. The society declared bonus to the producers and substantially discharged its loans. It is encouraging thrift among the members by compulsorily organizing Vikasa Podupu scheme, which swelled from Rs.11.88 lakhs to Rs.1.13 crores. The Ordinance is vitiated by non-application of mind and irrelevant and extraneous considerations. This society directly formed under 1995 Act has to retain its character and there is no justification to bring such a society with about 15,000 women members under a nominated agency. COUNTER-AFFIDAVITS:

1. The State of Andhra Pradesh is an agricultural State with than 80% rural population depending only on agriculture and till 1960 milk production was unorganized and confined to household. The State Government with the assistance of UNICEF commenced Integrated Milk Project in 1960 and rural surplus milk of Krishna, West Godavari and Guntur districts was procured in villages, transported to chilling centers and was supplied to consumers of Hyderabad. A milk conservation plant/milk products factory was established in 1969 at Vijayawada, which crossed a handling of 1.00 lakh litres of milk per day within one year.

2. An independent Dairy Development Department was carved out in 1970-71 and by 1974 the intensive efforts to give a boost to the dairy development activity resulted in the Central Dairy, Hyderabad with six chilling centers and seven cooling centers attached, the milk products factory, Vijayawada with 14 chilling centers attached, feeder dairies at Warangal, Karimnagar, Nizamabad, Rajahmundry, Visakhapatnam, Nellore, Chittoor, Mydukuru, Anantapur and Kurnool, milk chilling centers at Srikakulam and Ramabhadrapuram and milk cooling centers at Nirmal and Kothagudem already coming into operation.

3. In 1974, all the dairy development activities were transferred to the Andhra Pradesh Dairy Development Corporation Limited, a company under Indian Companies Act, 1956, fully owned by the State Government from the Dairy Development Department transferring all the infrastructure and assets including feed mixing plants to it. The employees of the Dairy Development Department were absorbed in the Corporation and the entire assets and dairy infrastructure of the Corporation, thus, belonged to the State Government built at the cost of public exchequer. The State Government continuously provided funds to the Corporation.

4. The Government sanctioned a working capital of Rs.150.00 lakhs, additional working capital loan of Rs.100.00 lakhs and plan grant of Rs.85.00 lakhs in 1974-75 and entrusted the Corporation with the responsibility of implementing the Operation Flood Programme in the State, under which a Feeder Balancing Dairy at Sangamjagarlamudi in Guntur district with a handling capacity of 1.5 lakh litres per day was taken up and Milk Producers Co-operative Societies in Guntur district were organized. In 1975-76, the Government gave Rs.225.38 lakhs towards the share capital of the Corporation including Rs.50.00 lakhs for Feeder Balancing Dairy at Sangamjagarlamudi. Plan funds of Rs.150.60 lakhs and six point formula funds of Rs.32.38 lakhs were used for commissioning a chilling center at Ongole and strengthening the dairies at Visakhapatnam, Chittoor, Mydukuru and Kurnool. In 1976-77, the Government contributed Rs.174.18 lakhs towards share capital and provided Rs.272.85 lakhs under various schemes. A joint venture milk products factory with 1.5 lakh litres per day capacity was established at Proddutur, which was later taken up exclusively by the Corporation at a total cost of Rs.330.00 lakhs. In 1977-78, the Government support was to a tune of Rs.357.017 lakhs. As on 31-03-1978, 14 main dairies and chilling and cooling centers were in operation including 5 dairies at Visakhapatnam, Vijayawada, Sangam, Nellore Karimnagar. The Feeder Balancing Dairy, Sangam was handed over to the Guntur District Milk Producers Co-operative Union Limited, a co-operative society registered under the Andhra Pradesh Co-operative Societies Act, 1964 with effect from 01-08-1978. The Government continued its assistance to the Corporation to a tune of Rs.538.250 lakhs in 1978-79, Rs.380.456 lakhs in 1979-80 and Rs.219.030 lakhs in 1980-81. In 1979-80 the Second Spray Drying Plant at milk products factory, Vijayawada at a cost of Rs.196.00 lakhs and milk products factory at Nandyal at a cost of Rs.565.00 lakhs were taken up. A second dairy at Hyderabad with handling capacity of 2.00 lakh litres per day at a cost of Rs.550.00 lakhs was also proposed under Operation Flood-II Programme. In addition to the dairy infrastructure, the Corporation established a vast dairy network with the participation of dairy farmers through farmers co-operative societies paying extra for the procured milk as an incentive. The Corporation developed ‘Vijaya’ brand as a strong national brand next only to Amul and the goodwill and brand value are significant assets apart from the physical assets built by the Corporation.

5. The Government of India provided assistance to replicate ‘Anand’ model of Gujarat in other States and Dr. Verghese Kurien helped Gujarat farmers to evolve a 3-tier co- operative model with a village dairy co-operative, a district milk union and a state level federation handling production and procurement, processing and packaging and marketing respectively. The Andhra Pradesh Dairy Development Corporation organized co-operatives provided incentives accordingly and Visakhapatnam Marginal Farmers, Agriculture Labourers and Milk Producers Co- operative Dairy Development Union was also registered. In 1980, the State Government adopted Anand pattern for all the districts and decided to set up Andhra Pradesh Dairy Development Co-operative Federation Limited to cover the whole State in place of the Corporation, with the Guntur District Milk Producers Co-operative Union and to bring other district unions within fold. The Andhra pradesh Dairy Development Co-operative Federation Limited was registered as a co-operative society under the Andhra Pradesh Co- operative Societies Act, 1964 on 01-10-1981 with the Guntur union and the State Government as the original ordinary members and the initial share capital provided totally by the Government. The State Government also transferred the entire assets and dairy infrastructure developed over the years with public finances and under the ownership of the Corporation to the Federation on lease basis for a rent of Rs.1,000/- per annum. The State Government also stood guarantee for the repayment of the loan component and financial assistance provided by Indian Dairy Corporation (now National Dairy Development Board) under Operation Flood-II. Rs.59,74,80,000.00 were borrowed by Federation in 1982, out of which Rs.22,45,22,800.00 were treated as a grant. Sixteen out of 23 districts of the State were covered by Operation Flood-II and between 1981-82 and 1984-85, the Federation carried out establishment of new dairy units and expansion of the existing units at a cost of Rs.903.74 lakhs. The second Spray Drying Plant of 15 metric ton capacity at Vijayawada, Milk Products Factory at Nandyal and second dairy at Hayathnagar apart from strengthening milk chilling centers in five districts and cattle feed plants in two districts, were carried out. The second dairy at Hayathnagar costed Rs.739.38 lakhs. Thus, 7 out of 8 dairies under contention in the writ petitions were established by 1985, while Ongole dairy was taken up between 1991 and 1995.

6. District Milk Unions at Krishna, Visakhapatnam, Kadapa, Prakasam and Godavari were registered as co-operative societies between 1983 and 1985. Proddutur Milk Foods Limited was brought under the fold of Kadapa District Milk Producers Co-operative Union. Between 1985-86 and 1989-90, the Federation received Ford foundation funds and grants and assistance of a total of Rs.1528.46 lakhs from the State Government and Rs.2187.11 lakhs from the Central Government. District Unions of Nalgonda- Rangareddy, Nellore, Chittoor and Kurnool were registered under the Andhra Pradesh Co-operative Societies Act, 1964 in 1986, 1988 and 1989 respectively.

7. As per G.O. Ms. No.551, dated 10-12-1980 the State Government permitted the Federation to hand over the management of the respective units and operations to the respective District Units subject to the conditions and stipulations given in the draft agreement. Among other things, the District Unions have to abide by the directives of the Federation, not to recruit fresh staff, etc., and the Managing Director of the Federation entered agreements of transfer, loans and grants with 9 district unions between 1985 and 1990. The district unions were given only management of the Government assets, but not ownership and all further assets were built on the business and assets created earlier. All the activities taken up by the district units are in their capacity as managers and not as owners. Persons responsible for management cannot appropriate the assets. Between 1991 and 1995, the benefits and financial assistance from the State and Central Governments were Rs.159.45 lakhs and Rs.729.97 lakhs respectively. The Federation with the loan of Rs.1466.00 lakhs from National Dairy Development Board, for which the State Government stood guarantee, constructed milk products factory at Ongole in this period with a total cost of Rs.237.00 lakhs provided by NCDC and the State Government at 60% and 40% respectively. The district administration also contributed funds for development of dairy infrastructure and strengthening procurement activities on a continuous basis. Thus, all the eight district dairies were established by the Corporation and Federation with the support of the State and Central Governments.

8. The Board of management of the Federation has representatives of all the district milk unions, State Government nominees and nominee of the National Dairy Development Board with the Managing Director as the Executive Head. The Co-operative dairy sector was divided into Federation, Milk Sheds and District Milk Unions with the milk sheds under the direct control of the Federation in non-viable districts. Thus, the Federation supervised the entire dairy activity in the State. Karimnagar district union registered as a Co-operative society and management was handed over under the transfer agreement 12-10-1998.

9. The Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995 provided for the existing co-operative societies registered under the Andhra Pradesh Co-operative Societies Act, 1964 to opt for the later Act with certain conditions. The definition of a ‘co-operative society’ under Section 2(d) of 1995 Act prohibits raising any share capital from the Government and provides for return of share capital of the Government apart from entering into a memorandum of understanding for outstanding loans and guarantees or return of the Government assistance. Evidence in this regard is a must for conversion under Section 4(3)(e) of 1995 Act. The District Milk Unions violated these statutory provisions. When Visakha Milk Union sought conversion, the Federation objected the same on statutory grounds and deviation from the Government policy. The Milk Commissioner directed registration of the unregistered Milk Producers Associations under 1995 Act and to convert Primary Milk Co-operative Societies as Vijaya Milk Producers Mutually Aided Co-operative Societies at the village level under 1995 Act. The district or village societies were never encouraged to violate the statutory provisions. When Krishna Milk Union sought for conversion, the Federation required entering into a memorandum of understanding, a provision in the bye-laws on service conditions of the employees and transfer of assets subject to the final verdict of the High Court in W.P. No.25062 of 2000. Though a conditional certificate of registration was issued, the same is ab initio void, as Krishna Milk Union did not fulfill the conditions. The other district milk unions also got themselves registered under 1995 Act illegally without meeting statutory requirements. The Registrar of Mutually Aided Co-operative Societies, Andhra Pradesh issued a show cause notice dated 29-11-2004 to all the district unions to show cause as to why the registration under 1995 Act shall not be cancelled due to not entering into memoranda of understanding as required by Section 4(3)(e) of 1995 Act. The district unions filed eight writ petitions in W.P. No.23429 of 2004 and batch, in which the High Court suspended the show cause notice as without jurisdiction. The writ petitions are pending adjudication.

10. In October, 2004, the Registrars of the Andhra Pradesh Mutually Aided Co-operative Societies of the concerned districts revised the certificates of registration except in respect of Guntur Milk Union indicating that the registration is subject to entering into the required memoranda of understanding. The registration is, thus, conditional and is void ab initio due to non-compliance with the conditions. The Federation filed original petitions in various Co- operative Tribunals seeking dissolution of the societies under Section 40 of 1995 Act, since the statutory requirements were not complied with. As Prakasam Milk Union entered into a memorandum of understanding with the Federation on 09-12-2003 for three years from 15-10-2002, the original petition against it was withdrawn. The Co-operative Tribunal dismissed the original petition against the Visakha District Union by an order dated 19-11-2004 on the ground that the Statute did not mention about return of assets and the Managing Director had no power to sub-delegate the power to file the petition. The order of the Co-operative Tribunal is under challenge in W.P. No.1420 of 2006.

11. The district milk unions have to abide by the transfer agreement on the directions and various Government orders as per Section 6(2) of 1995 Act, but they have violated the same. The directives of the Federation are violated and adequate quantities of milk and milk products are not supplied to the milk products factory, Hyderabad as per the directions of the Federation. The district milk unions are indulging in bulk sale of milk and milk products outside their jurisdiction directly without the knowledge of the Federation and they are not providing any information regarding their business transactions etc., to the Federation. They are not obtaining quality control clearance from the Federation and are not obeying the directions/instructions of Government and the Federation. The Visakha and Guntur milk unions floated MATA Federation, marketing milk and milk products of competitor brands utilizing the State owned infrastructure against the interest of the State owned Vijaya brand. The Visakha Milk Union has Visakha brand. The Nalgonda-Rangareddy Milk Union repatriated the services of N. Hanumantha Rao, posted as General Manager by the Federation against the transfer agreement and all the district unions promoted juniors from common category seniority list tampering with protection of service assured by the State Government. The Krishna Milk Union gave higher emoluments to the Chief Executive Officer. All the district unions deviated from the staff pattern promoting and recruiting personnel at their discretion and ignoring the zonal system and the presidential order. The district unions were not remitting the contribution towards pension, leave salary and gratuity. In violation of the disciplinary control vested with the Federation, the Krishna Union did not implement the punishment in respect of Sri P.S.R. Swamy, S.A.O., MPF, Vijayawada, and Nalgonda-Rangareddy Union did not implement the suspension of Sri P. Dayakar Reddy, D.G.M. All the district unions appointed Chief Executive Officers and other sub-staff without the consent of the Federation. Kurnool, Nellore and Visakha Unions appointed retired personnel as their Chief Executive Officers. The final audit reports of Krishna, Guntur, Prakasam, Nellore, Nalgonda-Rangareddy and Kurnool Unions showed serious financial irregularities and mismanagement.

12. The Andhra Pradesh Legislative Assembly constituted a House Committee on Visakha, Chittoor and Ongole District Unions/Dairies under the Chairmanship of Sri N. Varadarajulu Reddy with 17 M.L.As. of all political parties on 08-02-2005 and in their report, the Committee noted serious irregularities in the working of Visakha and Prakasam Unions. Irregularities in purchase of a second hand continuous butter making machinery from Australia, a second hand milk powder plant from Australia, vehicles, sites at exorbitant prices and cold storage at Autonagar, appointments on contract basis without following the rules including reservation, continuation of retired officers, award of transport contracts on nomination and irregularities in constituting a Trust, were noticed in respect of Visakha Union. Irregularities in appointments made on contract basis, heavy sale proceeds due from sales agents and loss incurred in spoilage of milk were noted in respect of Prakasam Union. After a detailed study on the functioning of two out of eight district unions registered under 1995 Act, the House Committee recommended that 1995 Act has detrimental and adverse consequences and effects on the dairy co-operatives, such as break down of 3-tier structure modeled on Anand pattern, reduction in brand value of Vijaya brand, conflicting marketing strategies, weakening financial position of some district milk unions, denial of fair procurement price farmers, absence of market intervention mechanism, absence of any returns on assets to the State Government or Federation and break down of common cadre of employees. The House Committee, therefore, recommended that all the Co-operative dairies be exempted from 1995 Act and to restore the 3-tier dairy structure. The House Committee also noted that in Karnataka and Madhya Pradesh also, there was no absolute freedom of conversion. The State Government constituted a group of Ministers Committee by G.O. Ms. No.211, dated 23-08-2004 and it considered the recommendations of the House Committee and accepted to exclude the dairy co- operatives from 1995 Act to restore the 3-tier structure.

13. The Government policy has always been to develop dairying in the State through Anand pattern 3-tier structure with a common co-operative State owned Vijaya brand. The Government organized the societies and provided various forms of assistance to make dairy an important subsidiary activity of the farmers. Since last 5 years, there is continuous draught in the State and consequent crop failures and dearth of cattle feed leading to large number of farmers’ suicides and death of milch cattle. The Government took up on top priority various plans to augment agriculture and allied activities. So far, no dairy co-operative society returned Government share capital, loans, guarantees and assets and dairy farmers are facing several problems under such institutions. It is, hence, felt necessary to retain the 3-tier set up under the Andhra Pradesh Co-operative Societies Act, 1964 to ensure autonomy and greater accountability. Expansion of coverage of milk procurement in villages, increase in co- operative turnover from the present Rs.850.00 crores to the level of other States like Tamilnadu (Rs.1100.00 crores), Karnataka (Rs.1500.00 crores) and Gujarat (Rs.3000.00 crores), arresting the negative growth in turnover of co- operatives from 13.91% in 1998-99 to 5.18% in 2004-05, provision of effective price support mechanism, ensuring optimum utilization of dairy infrastructure, providing effective product mix in tune with market demand to arrest the decline in turnover of Vijaya products from Rs.95.00 crores in 2001-02 to Rs.62.00 crores in 2004-05, provision of market intervention mechanism to ensure minimum support price to farmers, discharging social obligation by operating in unviable remote areas and bridging the gap between supply and demand during seasonal fluctuations, the objectives in adopting the 3-tier structure. Accordingly, the diary co-operative societies have been excluded from 1995 Act and brought under 1964 Act. The change in regulatory environment will not take over the district unions or their autonomy, but only ensures greater accountability and use of Government assets for the benefit of small and marginal farmers. When the State Government was in contemplation to bring these amendments, the Visakha District Union got itself incorporated as a producer company though it has no interstate character being confined to three districts in the State. No co-operative society under either Act can be converted as a producer company. The Chairman of Visakha District Union who informed the general body of the union on 27-09-2005 that action to register the union as producer company will be taken after the final judgment of the High Court, got illegally registered the union as a company. The Government, hence, felt the urgency to promulgate Ordinance to amend the provisions of 1995 Act to arrest such mala fide action and clandestine tendencies and to protect the public properties worth several crores from going into the hands of private parties.

14. The exclusion of the milk/dairy co-operatives from the purview of 1995 Act after a review and in the light of the recommendations of the House Committee only restores the 3-tier Anand pattern. The subject ‘co-operation’ is in State List and the State Government is within its powers in promulgating the Ordinance. Any right to choose the governing legislation is not a fundamental right and in all the States the co-operatives are functioning under 3-tier structure as a result of White Revolution. But the time tested successful 3-tier model broke down in Andhra Pradesh due to certain shortcomings in 1995 Act and misapplication of their provisions by certain dairy co-operatives.

15. On the promulgation of the Ordinance, the existing elected managing committees under 1995 Act stood invalid and incompatible for continuation under 1964 Act. The 1995 Act provides for election of 1/5th of members of the Board every year with a term of 5 years, while the 1964 Act provides for the election of the committees at one time for 5 years. The strength of the Committee is 15 under 1995 Act and 9 under 1964 Act. There is no reservation for women in 1995 Act unlike 1964 Act. The president is elected every year under 1995 Act, while he is elected for 5 years under 1964 Act. The disqualifications prescribed for membership of the committees are different under two Acts. Hence, appointment of persons incharge is a natural corollary to avoid dichotomy of managing committees under 1995 Act being in place for societies under 1964 Act. The present incumbents can always recontest for the elected office. The persons incharge were appointed only for a limited period of six months or further orders whichever is earlier and the State Government intends to conduct elections afresh under 1964 Act at the earliest after disposal of the writ petitions.

16. W.P. No.2214 of 2006 – Nalgonda-Rangareddy Milk Union: (a) The findings and report of the House Committee are meant for the legislature and cannot be adjudicatory material in a Court of law. The same cannot be called in question by the writ petitioner or before the Court. The alleged better functioning of Visakha Union cannot affect the policy decision of the State or the legislative action of general application. As on 31-03-2005, only three district unions had some net profit, while five district unions were in loss. (b) Substantial State investment and entire infrastructure were provided by the State, and funds were provided through centrally sponsored schemes such as women dairy, integrated dairy development projects, etc. (c) The Ordinance is justified in giving retrospective operation from 01-06-1995 to have uniform application of law since inception. (d) One-fifth of the directors retire every year and the date of expiry of term of each set of directors will be different. The tenure of the body, hence, will not continue up to 2008. (e) The body elected under 1995 Act shall cease to exist being not compatible with 1964 Act. (f) Several irregularities/defects pointed out by auditors in 2003-04 include false bills to a tune of Rs.4,70,266/-. The management was directed to take action for recovery of the misappropriated amount. The district union entered into an arrangement for packing milk and milk products on competitor brands utilizing the State owned infrastructure against the interests of Vijaya brand in spite of specific instructions Government. (g) Nalgonda-Rangareddy district union supplied ghee to Chittoor milk union for sale to Tirumala Tirupathi Devastanams and the sale proceeds could not be paid, as Chittoor milk union was ordered liquidation. The Federation got exemption of sales tax for the supply of ghee and out of Rs.2.00 crores given as advance to Chittoor milk union for clearing producer bills, the Federation and Krishna, Visakha and Nalgonda- Rangareddy Unions shared Rs.50.00 lakhs each. These transactions were with the approval of the Board of the Federation.

17. Guntur Milk Union: (a) There was no transfer of surplus staff from the Federation to Guntur union, which, fact, retained services of personnel of its choice and transferred the leftover staff as surplus to the Federation. The properties belong to the State Government. (b) The question is one of State policy in the larger interests of milk producers for protection of State owned properties and infrastructure and not of freedom to the members of the society. The exclusion of the dairy sector from 1995 Act to benefit the milk producers is reasonable for achieving the objectives and there was no violation of Article 14 of the Constitution. (c) The Vigilance Department seized records from Sangam dairy (of Guntur Union) relating to the transactions of M/s. Rajesh Dairy, Daman involving tax evasion of Rs.1.20 crores. (d) Out of 12,500 milk collection centers, 6,300 are unregistered milk producer associations and 6,200 are registered bodies, out of which 3,240 are governed by 1964 Act and 2,960 are governed by 1995 Act.

18. Krishna Milk Union: The transfer agreement was violated in respect of business and service matters and the Government investment and assistance are enjoyed by Krishna Union. There are Government employees working in the Union against whom statutory dues of Rs.52.78 lakhs are pending towards pension contribution. There was no transfer of surplus staff from the Federation.

19. Karimnagar, Kurnool and Visakha Milk Unions: Karimnagar and Kurnool unions raised similar questions and Visakha union enjoying Government investment and services of employees has outstanding dues to a tune of Rs.8.82 lakhs towards gratuity and pension contribution. Section 117 of 1964 Act applies only to resistance or prevention from taking charge and has no relevance. (The averments in the counter-affidavit relating to the events leading to and after conversion of Visakha Union into a producer company are not extracted, as W.P. No.2264 of 2006 involving these questions is not part of this batch).

20. Prakasam Milk Union: (a) Though the memorandum of understanding entered into by Prakasam Milk Union with the Federation with effect from 15-10-2002 elapsed, the District Union did not respond for extension of the memorandum of understanding as per the transfer agreement and 1995 Act. Such failure makes the conditional registration of Prakasam Union ab initio invalid. (b) Prakasam Union entered into a management agreement with a competitor brand on 22-10-2005 to take effect on 01-12-2005 to damage Vijaya brand marketing network. (c) The Union is enjoying Government investment and assistance and is due to a tune of Rs.28.85 lakhs towards gratuity and pension contribution.

21. Nellore Milk Union: This union is also enjoying Government investment in the form of assets and assistance through various programmes. It has statutory dues of Rs.26.27 lakhs towards gratuity and pension contribution.

22. Primary Societies: If the District Unions have to function successfully under 1964 Act, the Primary Societies have to be necessarily restored under that Act. The primary societies cannot seek any separate treatment or continuance of elected body under 1995 Act, as the general bodies of the District Unions consist of representatives/delegates of primary societies.

23. The District Unions in possession of the assets built with Government funds, guarantees and assistance are working in total disregard of the Government policies, in violation of their agreements with the State Federation, and have committed financial and other irregularities. Andhra Pradesh is the only State not following the 3-tier Anand pattern for dairy development now and some milk unions are sending milk outside the State also without coordinating with the Federation or packing milk for competitor brands. The Federation is forced to procure milk from neighbouring State for Hyderabad supplies. Retired employees appointed were not removed in spite of directions. Common cadre of employees was not followed. General Managers appointed by the Federation were not allowed to work. Irregular engagement of labour was done in some Unions. An official enquiry found financial and other irregularities in Guntur milk union. Some district unions appointed retired persons as Managing Directors and General Managers as Managing Directors against the orders of the Managing Director of the Federation and contrary to the interim orders of the High Court.

24. The State Government is entitled to classify the farmers depending on their avocation, and bring them into a specific fold of legislation. The milk producers form a class by themselves and the co-operative societies functioning under 3-tier structure are a separate distinct class. The Government making policy can take welfare measures to protect the interests of an identified segment of farmers to ensure their upliftment. The welfare measures in respect of other farmers may not be applicable to milk producers or vice versa.

25. The object sought to be achieved by the classification is that infrastructure created by the State at a huge cost to the State exchequer does not go into private hands and the State will give a protective coverage to the farmers by maintaining the functioning of the societies to help the farmers whenever required.

26. Keeping in view the milk producers and larger public interest is not colourable exercise of power. The societies will not their autonomy by change of statutory environment except being subject to more regulatory control of the State. The policy adopted by the Government is applicable universally to all societies and does not discriminate any society.

27. The right to form an association is unaffected, as the societies are allowed to exist with wider perspective and representative capacity.

28. The competence and power of the legislature to make retrospective legislation enables the legislature to restore the law as it existed and no vested right of the unions or their members is taken away.

29. The allegation that with the change of the Government in May, 2004 efforts are made to control the District Unions to have access to their funds, is untenable and objectionable, as it is a uniform policy decision applicable to all societies.

30. The present milk procurement price paid by the Federation is on par with the District Unions and mostly close to the price offered by the District Unions. The milk procurement is seasonal and based on local conditions. Restoration of 3-tier structure would facilitate higher milk procurement price to the dairy farmers.

31. Krishna Milk Union sent signed copy of memorandum of understanding with substantial variation from the draft sent by the Federation, through its letter dated 30-10-2001, which was not acceptable to the Federation. In a subsequent meeting on 19-11-2001 Krishna Milk Union was asked to the memorandum of understanding as per discussions, after which it did not take any steps.

32. The Feeder Balancing Dairy at Sangamjagarlamudi with handling capacity of 1.50 lakh litres per day at an estimated cost of Rs.168.00 lakhs was established in 1973 prior to the formation of the Corporation. The Government released Rs.10.00 lakhs in 1972-73 and earmarked Rs.50.00 lakhs under the 5th plan budget and took Rs.117.00 lakhs on 70% loan and 30% grant basis from Indian Dairy Corporation. The work was entrusted to the National Dairy Development Board for execution at a fee of 5% of total project cost. The State Government provided Rs.57.50 lakhs towards share capital for the Feeder Balancing Dairy and provided further funds from plan budget under various schemes for milk chilling center, Guruzala at Rs.2.50 lakhs and staff quarters for Sangamjagarlamudi at Rs.23.50 lakhs. The Corporation purchased 14.42 acres at Vadlamudi at a cost of Rs.1.06 lakhs and set up a Feed Mixing Plant of 100 tonnes capacity at a cost of Rs.75.00 lakhs with the assistance of 70% loan and 30% grant from Indian Dairy Corporation. Rs.18.00 lakhs were provided for organizing Milk Producers Co- operative Societies and a Milk Union and Rs.70.00 lakhs for providing technical inputs. The Corporation gave Rs.15.00 lakhs to the Union towards working capital loan with interest at 13.5 per cent per annum in September, 1978, which was recovered from the Union out of the sale proceeds. Thus, the entire assets of the Dairy and Plant were built with Government funds and were given to Guntur Milk Union for management only. The payment of Rs.81.00 lakhs into Treasury on 11-12-1996 on its own by Guntur Union without any demand from the State Government has no consequence on the conditions of transfer of management. There was no assessment of the value of shares or interest payable. The amounts of Rs.40,53,636/- and Rs.49,51,307/- paid by Guntur Union on 05-02-1997 were paid subsequent to registration of the Union under 1995 Act contrary to the statutory stipulation and obligation to repay as on the date of registration. The claim of absolute ownership due to payments is, thus, baseless.

33. The District Unions converted themselves into 1995 Act without return of Government funds, due to which the registration certificates were revised by the Registrar making the registrations subject fulfillment of statutory conditions. The Ordinance only reintroduced the pre-existing management and control under 1964 Act. The Constitution does not confer any fundamental rights on institutions or societies. No mala fides can be attributed to a legislative act. All societies having Government participation are under 1964 Act only and the State applied its mind to all the relevant factors from different angles before issuing the Ordinance. When the societies were excluded from 1995 Act, the deeming provision cannot mean that the managing committees will continue. REJOINDERS / REPLIES:

1. Nalgonda-Rangareddy District Milk Union: (a) Under Operation Flood-II Programme, the State Government and the Federation entered into an agreement/letter of understanding with National Dairy Development Board which provided, among other things, that the ownership of all assets like processing plant, cattle feed plant, etc., would be transferred the District Co-operative Milk Producers Union concerned within one year and that the State Government shall provide the co- operative institutions necessary land required for the project and adequate autonomy to the co- operative structure ensuring control by producer members and development of systems to provide maximum possible share of consumers to the producer members. (b) As per the specific conditions, the assets and infrastructure of the Federation were transferred to the union. While transferring the Mother dairy, the Federation retained the operational benefits for the past five years while passing on the total liability to the District Union and ignoring huge depreciation. The book value of the transferred assets as on 31-03-2005 is Rs.639.56 lakhs out of which only Rs.2.61 lakhs are of the Federation. The growth and development of the union is the result of assistance and constant financial support of National Dairy Development Board but not the State or the Federation since inception. The assets transferred by the Federation are almost of nil value as on date. While for the assets completely financed by the National Dairy Development Board, the District Union discharging the loan with interest, the District Union made huge investment over the years totally changing the original physical identity of the infrastructure. (c) On conversion into 1995 Act the Federation itself informed the District Union that it ceased to be a member of the Federation with effect from 15-01-2003. (d) The State Government transferred 9 Units to the District Union under G.O. Ms. No.49, dated 11-02-1987 and 4 chilling centers and 5 mini chilling centers were established later with latest technology resulting in high yield and heavy sales. (e) The Registrar of Milk Co-operative Unions by a letter No.1042/00-P1 dated 11-01-2001 directed the District Union to take steps for conversion into 1995 Act and the Milk Commissioner/Managing Director also directed to take steps to register the societies under 1995 Act by a letter dated 15-12-

2000. Accordingly, the Union got registered under 1995 Act by the Special Cadre Deputy Registrar through a letter dated 23-01-2003. The Government issued a memo dated 05-02-1985 constituting a Committee to assess the value of the assets transferred. In AIR 2000 AP 76 the High Court held the 1995 Act to not contemplate handing over of assets at the time of conversion and any procedural irregularity in not redelivering any assets cannot affect the validity of the conversion. Thus, the question of handing over assets or entering into a memorandum of understanding does not arise till all the accounts are settled. The Co-operative Tribunal dismissed the original petition, as 1995 Act mentioned about retaining the assets and infrastructure of the Federation and a writ petition against the same is pending. The use of Vijaya brand was stopped in view of the decision in the Board meeting on 29-09-2001. (f) The memorandum of understanding submitted the District Union is pending with Federation. Section 25 of 1995 Act makes the staff accountable to the society only and the transfer agreement in respect of service matters has no application after conversion. The transfer agreement even in respect of business matters has no application on conversion. In fact, in W.P. No.452 of 2003 filed by the Marketing Manager of Krishna Union, the Federation submitted that the writ petitioner was not an employee of Federation. (g) There were no financial irregularities or mismanagement and there were no false bills in 2003-04. In an isolated case in 1995-96, C.C. No.1009 of 1996 and O.S. No.156 of 1999 were filed by the District Union against the defrauding contractor as per the directions of the Federation. The cases ended in favour of the District Union and execution proceedings are in progress. (h) The difference in term or number of members of the Managing Committees under the two Acts cannot be a ground to promulgate an Ordinance nor is the rule of reservation for women relevant. (i) The District Union brought down the accumulated loss of Rs.8.98 crores to Rs.1.00 crore by the end of March, 2005. There are cash profits since 1999.

2. Krishna District Milk Union: (a) Milk is not a monopoly product of the Government and without maintenance and assistance by the farmer, the organizations and projects would not have naturally developed. The Government has to take up projects in public interest and for public benefit and the growth and fruits cannot be estates and properties of the Government. Almost all the co- operative societies formed under 1964 Act are on the brink of liquidation due to the intervention of the bureaucracy. (b) Operation Flood-I Programme is not that of and not funded by the State Government. If other societies are working well with the so-called 2-tier system, it is not known as to how it does not work successfully with milk societies. Processing, packing and marketing are done by District Unions. (c) The assets were established by the Unions and at the time of conversion into 1995 Act, all the amounts, loans and guarantees of the Government were satisfied. These factors are inconsequential in considering the question of exclusion. (d) The transfer of assets was made in 1980 two decades earlier to conversion under 1995 Act. Even the Federation was directed to be converted into 1995 Act. The co-operative society itself is the owner of all the properties in its possession, conducting its activities and business itself but not as agent or employee or manager. (e) Whenever Vijaya brand name is used, consortium is paid to the Federation and Krishna Union paid Rs.12.00 crores from 1985-86 to 2004-05 and nearly Rs.5.00 crores even after conversion into 1995 Act. Though the District Unions did not need the brand name, the Federation is insisting for its use to get substantial amounts. The use of brand name has nothing to do with the registration of the societies and the unions do not have any Government investments. (f) Krishna Union sent a memorandum of understanding duly signed to the Federation on 31-10-2001, which is kept pending. The burden of surplus staff was borne by Krishna Union including payment of retirement benefits and voluntary retirement compensation to a tune of several crorers. Gratuity and pension were given to them and the Unions were forced to have the Federation employees. The value of assets transferred was nil as per book balance and this issue has to await the decision in W.P. No.25062 of

2000. Being vexed, Krishna Union filed O.P. No.33 of 2005 before the Co-operative Tribunal to determine the issue of estates including plant and machinery and the same is pending. (g) Registration of Krishna Union under 1995 Act is not conditional and cannot be later made conditional. The National Dairy Development Board released the State Government liabilities under guarantee, and the Government and the National Dairy Development Board themselves encouraged the conversion. (h) All the societies including the Unions are prospering very well after conversion and the Government wants to revert back only to take away the profitable amount accumulated after two decades of hard and honest work. The Registrar was not authorized to issue show cause notice leading the Unions to file writ petitions, in which the High Court suspended the Registrar’s proceedings. The interpretation of the business matters and service matters in the transfer agreement and the provisions of 1995 Act incorrect. (i) The sale proceeds from Allahabad Doodh Dairy were realized and the purchase advances were completely accounted for. The balance amounts are in the process of recovery and there are no financial irregularities. Even now the general body or the Tribunal can enquire into any irregularities. (j) The motivated report of the House Committee with politically loyal members about three Unions was intended to liquidate the societies and if the yearly growth has come down, the Government will not be anxious to get the losing societies. The producers are paid a higher price than paid by the Federation and the employees are very happy with the working of the societies. (k) The Rajya Sabha system was adopted and reservations were omitted in 1995 Act to avoid vacuum and separation. (l) Several Committees like Subrahmanyam Committee appointed by the authorities themselves clearly stated that there is no value for the transferred items and the book value is nil. The existing liabilities and unwanted surplus staff were also transferred to the Unions. Rs.17.61 lakhs were paid to pension contribution up to 31-03-2005 and the pension contribution for 2005-2006 was resolved to be paid directly to the Government and there are no dues. Rs.60,66,129/- and Rs.298.36 lakhs were due from the Federation under various heads and the amount was proposed to be adjusted towards the so-called claim of value of assets of the Government. (m) 532 Primary societies were registered under 1995 Act, which need not necessarily depend on the District Unions. It is not true that the 3-tier system is followed except in Andhra Pradesh. (n) Vijaya brand exists only at Bombay and Delhi and not the remaining cities and the Federation miserably failed in marketing Vijaya brand products forcing the loss to be absorbed by the milk unions. The Federation has no meaningful market plan resulting in the Unions like Chittoor, Godavari and Proddutur under the Federation control being closed down. (o) Krishna Union is paying highest procurement price of Rs.195/- per kg. fat to the farmers compared to the low procurement price of the Federation under 1964 Act. (p) The Federation has no effective procurement and manufacturing programme due to which the Unions prepare such plans to have meaningful activities for survival and growth. (q) Krishna Union has increased its business to Rs.140.00 crores per annum, entered export market and was awarded ISO 9001, ISO 14000 and HACCP by various organizations for effective management. Either the Government or the Federation never got such quality certificates. (r) The Union audit completed up to 31-03-2005 by the Government departmental auditors was issued ‘A’ class audit certificates for the last ten years, while the Federation audit completed up to 2000-01 was issued ‘B’ class audit certificate. (s) Since handing over of the management on 08-02- 1985, Krishna Milk Union improved the assets and infrastructure with an asset base of Rs.14.00 crores as on date. The members manage their assets on the feeling of owning. (t) The Federation paid prices below the market price and delayed payments from 2 to 4 months causing huge financial loss to the Union and hence, the Union is making bulk sales after receiving the value of the product at market price, which is more beneficial to t he Union and the farmer. A consortium of 3% is paid to the Federation on such bulk sales. (u) The pension trust/Federation demanded payment of pension contribution at 41% against the Government pension rules and there was misappropriation to a tune of Rs.30.00 lakhs in the pension trust by issuing bearer cheques. The gratuity contributions were paid by Krishna Union up to 31-07-2005 and Federation failed in collecting and crediting the gratuity contributions of the employees for the period they worked with the Government or Corporation or Federation. Hence, the Union was forced to open a new gratuity account fulfill the statutory obligations. (v) The Federation clearly informed by a letter dated 20-12-1988 about the administrative and disciplinary control of the respective Unions over their staff. The Federation informed the High Court in several writ petitions that it is no way concerned with the staff and officers working with the Unions. The Unions have a right to appoint their Chief Executive Officers and if the profit earning organizations are merged with the Federation with a loss of Rs.30.00 crores as on 2005 with no audit, they will also collapse. The Federation did not supply any software after collecting Rs.2,50,000/- from Krishna Milk Union. Three employees involved in misappropriation of Rs.150.00 lakhs in 1999-2000 at Mahabubnagar Milk Shed were not subjected to any action. The officers of the Federation misappropriated Rs.40.00 lakhs paid to advertisers without following the procedures, which is the subject of an enquiry. The General Managers— Finance and Marketing, are being continued in spite of several irregularities.

3. Karimnagar District Milk Union: (a) The diary industry in the State was developed with UNICEF funds and the funds under DPAP schemes, ITDA schemes, SFDA schemes, Six Point Formula funds and State Plan schemes. The Central Government provides 75% of the funds under ITDA and DPAP schemes. The funds spent from all the schemes come to Rs.25.77 crores only. (b) The development of dairy sector since 1980 was under Operation Flood-II Programme and the State Government entered into an agreement with Indian Dairy Corporation dated 08-01-1981 under which the State Government is under an obligation to provide necessary land and transfer the dairy plants, chilling facilities and other units to co-operative institutions. The State Government cannot make any claim over the assets created out of the amounts provided by the Indian Dairy Corporation from 1982, and the Andhra Pradesh Dairy Development Corporation acted only as a coordinating authority. The District Unions are repaying the loan provided by the Indian Dairy Corporation from the funds generated by them from dairy activities. The registration of the District Unions under the 1964 Act was as per agreement. (c) Under Operation Flood-III Project of 1988, the State Government entered into an agreement with NCDC on 21-01-1988 with similar conditions of providing land and transferring ownership of all the assets to elected Boards of Directors of the District Unions. The business and assets of the Unions belong to the Co-operative Societies, and Karimnagar Union was registered under 1964 Act on 13-03-1997. The assets of Rs.87,32,042-75 ps. and liabilities of Rs.3,93,14,700/- (NCDC loan) and Rs.57,64,672/- towards EMD deposits and solvency of contractors were transferred to the Union. Thus, a negative net worth of Rs.3.63 crores was given to the Union and t he Union repaid the entire NCDC loan of Rs.3.05 crores with interest by 14-12-2004, which is certified by the Federation. It also repaid Rs.57,64,672/- towards refund to contractors. The Union turned into a profit generating venture and the assets of the District Union, thus, belong it. The State Government is duty bound to develop the dairy sector. 95.47% of the Union’s assets were created funds of the Union only. The State Government has, in fact, to make good Rs.3.63 crores liabilities transferred to the Union. (d) W.P. No.14636 of 1999 filed by the staff and workers union of the Corporation and others against conversion alleging it to be contrary to Sections 2(d) and 4(e) of 1995 Act, was dismissed as reported in AIR 2000 A.P. 76. The unions were registered under 1995 Act after obtaining no-objection Federation. (e) The State Government which took a policy decision to convert the Federation from 1964 Act to 1995 Act failed to take follow up action for reasons best known to it. There is no provision in 1995 Act to revise the registration certificates once issued. The Government filed W.P. No.1420 of 2006 against the dismissal of the original petition by the Federation against Visakha Union after the Ordinance to give legitimacy to their illegal action. (f) Karimnagar Union is distributing milk under Vijaya brand only and did not violate the transfer agreement or any directions or instructions. In W.P. No.963 of 2004 filed by the staff and workers union of the Corporation, the Federation filed a counter clearly stating that the District Unions are maintaining their understanding with the Federation and never compromised on the quality of milk, and the terms of MoU are to be finalized. (g) Karimnagar Union is supplying adequate quantity of milk and milk products as per the quotas fixed and indents issued by the Federation and supplying surplus milk outside the State only after meeting such demand and furnishing information. The Federation itself suddenly stopped receiving milk and fixed lesser rates compelling the Union to sell milk outside the State. While the Union paid Rs.175/- per kg. fat to the dairy farmers, the Federation paid only Rs.165/- per kg. in 2004-05 causing a loss of Rs.46,86,749-50 ps. to the Union. Similarly in 2006 February, the Union paid Rs.185/- per kg. fat to the farmers, while the Federation paid only Rs.175/- causing a loss of Rs.1,18,565-52 ps. The Union paid franchisee charges to the Federation for using Vijaya brand. The Union did not make any fresh recruitment except appointment of persons on contract basis temporarily to meet the increased work load. (h) How the Government orders for recruitment into Government service are applicable appointments in co-operative societies is not specified. There are no allegations of financial irregularities, mismanagement and malfeasance against Karimnagar Union. (i) The District Unions and Primary Societies did not have any share capital or loan from the Government and the dairy farmers have no problems. Karimnagar Union made substantial progress since conversion and Kadapa, Chittoor and Rajahmundry continuing under 1964 Act incurred enormous losses. The Federation continuing under 1964 Act also continuously incurring losses. The 3-tier structure was not brought into existence under 1995 Act solely due to the Government not converting the Federation into that Act. How any exclusion from 1995 Act will bring any change was not stated, while issuing the Ordinance solely to supersede the managing bodies. The recommendations of the House Committee were without an opportunity to the concerned Unions to give a reply and the report in respect of a few societies cannot be the basis of a decision with respect to 6,000 dairy co-operative societies. The impugned Ordinance is a colourable exercise of power without any public interest and is mala fide. (j) The Government cannot change the status of the Unions and Societies by an Act in violation of Articles 14 and 19(1)(c) of the Constitution. (k) If the societies are deemed to be registered under 1964 Act, the elected bodies of the Unions and societies shall also be deemed to be continued under 1964 Act by virtue of the deeming clause. While 1995 Act is a progressive legislation, it is not stated how the functioning of the existing governing bodies impedes the functioning of the societies under 1964 Act. The official persons incharge busy with their routine office work, have no knowledge or initiative to run the milk dairies. The Ordinance is aimed to strike at the gross root democratic institutions to subserve the interests of the party in power and the persons incharge can never be a valid substitute for the elected representatives. (l) Karimnagar Union is having a profit of Rs.12,31,770- 22 ps. as on 31-03-2005 as per the audit report and the amount of Rs.0-84 lakhs shown as loss in the counter is due to increase of procurement price paid to the farmers. T h e Union earned a profit of Rs.1,01,16,113/- for the year 2005-06 up to 31-01-

2006. The Union apart from paying higher purchase price to farmers, is giving loans for purchase of milch animals to a tune of Rs.135.00 lakhs every year. It is paying Rs.3,000/- to Rs.4,000/- to the farmers on death of milch animals. It is also paying Rs.75/- as subsidy out of Rs.150/- as premium per person for Janasree Bhima Yojana of the Central Government. The Union paid its subsidy to 20,000 dairy farmers in 2005-06. It paid Rs.35.63 lakhs as subsidy for purchase of veterinary medicines and vaccines. It is arranging check up of milch animals by veterinary doctors appointed by the Union at the doorsteps of the farmers. It stood guarantee for Rs.296.06 lakhs for bank loans for purchase of milch animals by farmers in 2005-06 in other years. The Karimnagar Union established artificial insemination centers for buffalos. (m) The terms of the memorandum of understanding are at the stage of discussions, for which the Unions are not responsible and no Union assets are appropriated for private gains.

4. Kurnool District Milk Union: (a) Under the agreements dated 08-01-1981 and 21-01-1988 with the Indian Dairy Corporation under Operation Flood – II and III Programmes, the State Government is obliged to transfer the dairy plants and chilling facilities and other units to the Co- operative institutions and to provide the land. The Government undertook to transfer the ownership of all the assets to district unions with elected Boards of Directors. The total amount spent on dairy development under various schemes was only Rs.25.77 crores as against Rs.59.74 crores provided by the Indian Dairy Corporation in 1982 alone. The Corporation acted only as a coordinating authority. The State Government or the Corporation cannot claim any ownership over the dairy infrastructure created out of the funds provided by the Indian Dairy Corporation which loans are being repaid by the district unions. The business and assets of the unions belong to the co-operative societies. (b) The assets and liabilities as per the audit report for 1990-91 of the Kurnool District Milk Producers Co-operative Union are Rs.3,11,89,725-65 ps. and Rs.4,18,42,515-15 ps. respectively. As on the date of transfer i.e. 01-04-1990, the negative net worth was Rs.1,06,54,790/-. The State Government which transferred the liability, cannot claim any assets of the Government to be in the hands of the union. The turned the negative growth into a profit generating venture and paid the loan taken from the National Dairy Development Board. The Federation borrowed Rs.565.00 lakhs in 1981 for construction of the powder plant at Nandyal and to expand the dairy at Kurnool, which was transferred to the district union which is repaying the loan. 96.10% of the Union’s assets were created from out of the funds of the union only. (c) Kurnool Union is distributing milk under Vijaya brand only and did not violate any directions or instructions of the Government or Federation. Kurnool Union is strictly adhering to the procurement schedule of milk and milk products, standards, etc. as per directions of the Federation and supplying adequate quantity of milk and milk products every month as per the quotas fixed and indents issued by the Federation. It is supplying only surplus milk outside the State after meeting the demand of the Federation. (d) The only irregularity alleged against the Union is that the sale proceeds are not realized in 2003-04 and 2004-05. The amounts were remitted a day after the closing day of the year in the running account and all the outstanding amounts were realized as certified by the auditor. Kurnool Union made enormous progress after conversion into 1995 Act. There are no allegations of misappropriation or malfeasance against the governing body. (e) The accumulated losses of Kurnool Union as on 31-03-2002 before conversion were Rs.300.00 lakhs. The union paid Rs.298.16 lakhs to the National Dairy Development Board towards the loan leaving a balance of Rs.13,69,000/- payable by 2010. The amount of Rs.0.79 lakhs shown as accumulated losses in the counter as on 31-03-2005 was one reduced from Rs.300.00 lakhs within three years and after deduction of the accumulated losses, the net profit earned by the Union as on 28-02-2006 is Rs.24.87 lakhs. (f) Kurnool Union raised the purchase price from Rs.150/- per kg. fat to Rs.185/- and is also giving loans to dairy farmers for purchase of milch animals to a tune of Rs.3.00 crores every year. It is also bearing 50% of the animal insurance premium besides giving Rs.3,000/- per acre as subsidy for fodder development. Veterinary medicines are supplied to the farmers at 50% cost. The union is arranging regular check up of milch animals by the veterinary doctors appointed by the union at the doorsteps of the farmers. The union is standing guarantee for repayment of bank loans for purchase of milch animals by farmers to a tune of Rs.12.00 crores per annum.

5. Nellore District Milk Union: (a) The claim that the classification made through the impugned Ordinance seeking remove milk/dairy co-operative societies from the purview of 1995 Act is arbitrary, irrational and discriminatory, was not answered. How the dairy/milk co-operative societies are different from various other co- operative societies under 1995 Act, was not stated. The conversion into 1995 Act was done at the encouragement and behest of the State Government. How excluding the milk societies from 1995 Act restores Anand pattern, was not explained. While the legislative competence on the subject of ‘Co- operation’ is not questioned, even democratically elected bodies were removed, it would not be necessary to appoint officials as persons incharge and the democratically elected Chair- persons of the Unions can be permitted to continue as persons incharge to manage the unions. (b) Nellore Union is regularly repaying the loans to the National Dairy Development Board as per schedule and only minimum balances are owed to the Government. Contribution to the Corporation cannot imply contribution to the Union, and Nellore Union was not sanctioned any amounts under the Ford Foundation, Netherlands Assisted Project, Health Project Schemes, etc. The union played a major contributory role in creating physical infrastructure and developing co-operative network throughout the district. (c) Nellore Union independently constructed bulk cooling centers at Doravarisatram, Nellorepalem, Adurupalli and Seetharamapuram at a total cost of Rs.175.00 lakhs. Regarding non-realisation of sale proceeds, erring individual was dismissed from service and prosecuted. The purchase advances of the year 2002-03 were adjusted in the accounts of the next year. Out of the loss due to spoilage milk, the producers had borne the loss of 8,261 litres and the transporters had borne the loss of 1,376 litres, while the Union had borne only the loss of 635 litres. (d) The union is paying a higher procurement price to milk producers to withstand competition from private dairies, while the Federation is paying lesser purchase price resulting in accumulation of losses. The Federation also reduced the operation cost paid by it from Rs.2.45 ps. per litre in 1999 to Rs.2/- per litre from 2001 in spite of escalating operational expenditure due to revised pay scales and enhanced dearness allowance for employees and higher electricity, fuel and transport charges and wages, etc. In spite of the unrelenting efforts of the management, there were a few lapses of the Union for which it should not be penalized. Between 1999 and 2004, the union remitted Rs.1,20,43,084/- towards gratuity and pension contribution, while the authorities released only Rs.1,07,99,662/-. Rs.8,94,550/- are due to some employees who retired in 2005 and Rs.3,48,872/- are still lying with the Federation. Retired personnel are employed on a very insignificant scale keeping in view the economy measures to keep the union financially fit.

6. Prakasam District Milk Union: (a) The Government cannot rationalize its constitutional violations by citing administrative and financial inadequacies, if any, of the unions. The audit objections with respect to purchase advances for 2002-2003 were complied with and the balance outstanding will be adjusted in due course. The losses due to souring of milk happened due to handling of milk over and above the plant capacity and mechanical break down, and the union suspended the Incharge Milk Manager, Milk Chilling Center, Kanigiri. The loss due to leakage of milk is only 0.46%, which is within the permitted norms. A large extent of the dues from sales were recovered from milk commission agents and Rs.27,18,985-75 ps. were not due to the Federation as alleged. Legal proceedings were initiated against the commission agents and distributor for recovery. Such operational problems are handled by the management with requisite professional skill. The union played a major contributory creating physical infrastructure and developing co-operative network throughout the district. (b) No appointments were made on contract basis by the union. Retired Assistant Veterinary Surgeons are employed on assignment basis on consolidated remuneration as per the permission given by the Government. Six time scale worker posts were filled up with women extension supervisors of the erstwhile Netherlands Assisted Projects as per the orders of the High Court in C.C. No.2088 of 1998 in W.P. No.1279 of 1995. (c) Prakasam Union entered into a memorandum of understanding with the Federation on 19-12-2003 for a period of three years from 15-10-2002. Only on the expiration of the said memorandum of understanding, Prakasam Union entered into an agreement with National Dairy Development Board for a period of 7 years on 22-10-2005 with effect from 01-12-2005. The Managing Director of the Federation himself corresponded with the National Dairy Development Board even on 18-07-2000 regarding handing over the management of Prakasam Union to National Dairy Development Board. Prakasam Union also entered into an agreement with the Federation on 05- 10-2005 for the surplus milk and milk products. The union is making business transactions exclusively with the Federation adhering to the conditionalities in the agreement. The agreement with National Dairy Development Board was entered into to repay the outstanding loans amounting to Rs.48.03 crores and under the agreement the total liability of the union would be waived off on completion of the stipulated period of seven years. The joint venture with National Dairy Development Board will strengthen the existing infrastructure technically and financially. (d) Rs.1,11,38,034/- accrued to the Federation from Prakasam union between 2000 and 2005 towards gratuity and pension contributions and the Union did not default in its statutory liabilities. The losses are largely arising out of lower purchase price and lesser operation cost paid by the Federation, while the Union was constrained to pay milk purchase price on par with private dairies. There were delays in payments by the Federation amounting to hundreds of lakhs between 1999 and 2005 resulting in heavy borrowings by the union from commercial banks leading to interest burden and losses.

7. Guntur District Milk Union: (a) The Guntur Union was established on 23-02-1977 the milk producing farmers themselves contributed for purchase of land, construction of buildings, purchase of vehicles and for other infrastructure and installation facilities with no contribution or investment by the Government or the Federation. The entire share capital was completely paid to the Government. There was no such thing as management transfer or handing over of Sangam unit on 01-08-1978. The Guntur Union was registered much earlier, while the Federation was registered on 01-10-1981. At the time of conversion into 1995 Act, all the amounts payable to the Government were paid, loans were discharged and guarantees were lifted, only after which registration was made. (b) The donation of Ac.10-00 of land to the trust through a general body meeting when the Union was under 1964 Act, was only to promote and implement the objects and purposes of the union itself. The sale proceeds are being recovered from Krishna Veni Foods through legal proceedings. The cheque bouncing cases in C.C. Nos.46 and 47 of 2001 and 1 to 6 of 2002 are pending before VI Additional Munsif Magistrate’s Court, Guntur. On acquittal in some criminal cases, appeals were preferred in Criminal Appeal Nos.2190 to 2195, 2197 and 2198 of 2003 which are pending before the High Court. In the company case in C.P. No.201 of 2002, the Madras High Court directed Krishna Veni Foods Private Limited not to alienate or sell its assets. The civil suit for recovery of the amount in O.S. No.95 of 2005 is pending before the District Judge, Guntur. Tankers of different capacities will be utilized depending on requirement. A Marketing Executive was appointed believing the alleged loss of qualification certificate and when the certificate was not produced, later he was terminated and a case of cheating was filed. The so-called irregularities in the audit cannot be a ground for the amendment of the Act. (c) There are no State owned properties with Guntur union. There was no tax evasion in respect of the transport of M/s. Rajesh Dairy, Daman. The final assessment of 1998-99 and 1999-2000 was completed and the tax demand of Rs.19,89,813/- but not Rs.1.2 crores was paid under protest. Appeal Nos.1001 and 1002 of 2002 against the same are pending before the Sales Tax Appellate Tribunal. The Federation/Government itself is due Rs.1,11,47,258/- to the Union. (d) 437 primary societies and 400 unregistered associations are supplying milk to Guntur Union and they are autonomous. The Guntur Union is paying the highest procurement price of fat to the farmers. The Union entered into export market and got ISO 9001 for effective management. The union audit was completed up to 31-03-2005 by Government departmental auditors and ‘A’ class audit certificates were issued for the last 10 years. The Guntur Union was awarded various certificates for maintaining best quality in manufacture of milk products.

8. Co-operative Development Foundation: (a) No document was filed setting out the main features of Anand pattern of 3-tier structure. It was not stated as to which provision of the Ordinance provides for adoption of Anand pattern. No provisions of 1964 Act were relied on as providing for such pattern. (b) The object of the Act appears to be to circumvent and nullify the operation of judicial and quasi-judicial orders in force to which the State is a party and judicial orders cannot be nullified by invoking legislative power. (c) While the figures given in W.P. No.3275 of 2006 regarding the co-operative societies converted into or registered under 1995 Act were not denied, the break up of 2,960 societies said to be governed by 1995 Act was not given. The professed object of the Act to check wrongful conversion into 1995 Act, does not have any nexus or reasonable nexus with the newly registered societies under 1995 Act without any Government share capital or Government loans or guarantees. Similar are other societies which did not have Government share capital or Government loans or guarantees at the time of their conversion. (d) The report of the group of Ministers Committee is not disclosed or filed and the House Committee considered only 3 out of 11 district unions. (e) The 3-tier system did not emanate from any statutory provisions but the conditions stipulated by National Dairy Development Board for extending financial assistance to dairy co- operatives. The 1995 Act provides for accountability in case of violation of its provisions. The Ordinance militates against the objects of 1995 Act and the earlier Acts and the co-operative principles. Retrospective cancellation of registration is ex facie arbitrary. (f) The Ordinance was issued for a collateral and unsustainable purpose of seeking to wrest control of the district milk unions and village milk societies. Assuming the assets and funds of Government or the Federation are with the unions, the Government has take appropriate and necessary contractual steps and legal remedies for their recovery. 1964 Act permits continuance of the persons incharge for 3 years and the Government is seeking to have Government controlled co-operatives in milk and dairy sector. (g) The milk unions and societies are continuing to run under the same Anand model as the one that was followed earlier and the 3-tier structure was affected in its functioning only due to the Federation failing to discharge its functions harmoniously with the district milk unions. Out of three district unions continuing under 1964 Act, two are under liquidation and the 3rd is on the verge of liquidation. The Federation also continues under 1964 Act though all its remaining 8 functioning constituent milk unions and their affiliated societies have converted into mutually aided co-operatives. (h) The Union Government decided to remove governmental control over the milk/dairy sector. It issued Milk and Milk Products Order in 1992 to regulate in milk and milk products in a liberalized market economy. It envisages licencing of dairies having milk processing facility of 10,000 litres and above. The Milk Commissioner is the licencing authority under the order, who is also the Managing Director of the Federation and Registrar of Milk Co-operatives under 1964 Act. As licencing authority, the Milk Commissioner permitted several private corporates and non-corporates to set up dairies in the State who account for half of the market share. The private players remain outside the fold of the Federation and the Government with managerial autonomy and their own brands names. The milk co-operatives with no functional autonomy and controlled by external agencies will not be in a position to compete. The entire dairy/milk co- operative sector will be marginalized due regressive legal environment under 1964 Act. (i) In respect of the three unions under 1964 Act which became non-functional, hundreds of village milk societies and milk producers were left in lurch. Lakhs of milk producers in these districts are compelled to sell their milk to the agents of private dairies. In respect of six districts—Anantapur, Mahabubnagar, Medak, Nizamabad, Warangal and Khammam, where the State Federation is directly procuring milk, there is no development of dairy sector and there is a drastic decline in the quantity of milk procured. The price paid in 12 districts by 8 milk unions under 1995 Act is higher than the price paid by the Federation or the three milk unions under 1964 Act. The 8 milk unions under 1995 Act are healthy with a high growth rate. (j) Any irregularities or mismanagement can at best lead to initiation of enquiry and action under 1995 Act but not exclusion from the Act. The Co-operative Tribunals under 1995 Act are headed by serving judicial officers not below the rank of District Judge, which can take action. While the allegations are made only against eight district unions, Ordinance seeks to exclude from the purview of 1995 Act all the milk/dairy co-operatives. There are currently more than 3,600 milk/dairy co-operatives, several of which came into existence subsequent to 1995 Act. (k) Cartelisation by private corporates resulted in lower prices to milk producers, higher price for milk consumer and more profit to the private operators. A vibrant, self-reliant co-operative movement alone offers the best protection the milk producers and consumers.

9. Primary Societies of Kurnool District: (a) The primary societies did not make any complaint regarding the functioning of Kurnool District Union to the officials. The procurement of milk and payments by the District Union are to the satisfaction of the primary societies. The functioning and coordination between the union and the primary societies are very smooth and successful. The members of the primary societies are getting financial, technical and marketing support from the district union, which is standing guarantee for the loans taken by the dairy farmers for purchase of milch cattle. The State Government is responsible for not bringing into existence the 3-tier structure under 1995 Act due to non-registration of the Federation under that Act. (b) The primary societies are not in possession of any Government properties or share capital or any loans or assets or guarantees. The reasons for excluding the milk co-operatives from 1995 Act are not applicable to primary societies.

10. Primary Societies of Karimnagar District: (a) The primary societies did not make any complaint regarding functioning of Karimnagar District Union to the officials. The procurement of milk and payments are made by the district union to the satisfaction of the primary societies. The procurement price went up from Rs.150/- to Rs.185/- per kg. fat after conversion into 1995 Act. The district union is giving financial, technical and marketing support to the members of the primary societies, standing guarantee for their loans and paying bonus to the members every year out of the profits. (b) The primary societies are not in possession of any Government properties or share capital or assets or loans or guarantees. The Ordinance is only for the intended benefit of the members of the party in power. The Government officers cannot be imposed to run the primary societies against the wishes of the members. The Ordinance is neither in the interest of dairy farmers nor dairy sector nor co-operative movement at large. MATERIAL REFERRED TO BY THE PARTIES:

1. Brahm Perkash Committee Report dated 20-05-1991: The Planning Commission constituted the Committee to have a quick review of the present status of co-operatives and to formulate a model co-operative law. In the Foreword to the report, it was observed that it was visualized that the co-operative sector was to emerge as a strong balancing sector between the private and the public sectors. Definite policy measures were taken to change the official character of co-operatives, which, inter-alia, included discontinuance of long-standing practice of Government officers occupying ex-officio positions in co-operatives as presidents/ chairmen; prohibiting the Ministers to hold offices in co-operatives, liberalization of co-operative laws; periodical review of the progress made in the direction of democratization of co- operatives, etc. As a consequence of these measures, co- operatives moved faster in the direction of becoming popular peoples institutions. While reviewing the current situation, the report stated that the essence of the co-operative organization the principle of democratic management, signifying institutional regulation by the members and their elected representatives in accordance with the bye- laws. It precludes control and interference by any outside agency including Government, except the usual penal action by the competent statutory authority in proven cases of abuse. The co- operative law has to respect this aspect of co-operative organization. The report noted that however, trends that have developed during the post independence period present an altogether different picture. Faster as has been the growth of co- operative activity through increased governmental aid, stronger and tighter has been the control of the Government over the movement through incorporation of restrictive features in co- operative legislation stultifying co-operative leadership, generating members’ apathy and curbing local initiative at grass-root level. After analyzing the restrictive provisions in force, the report proceeded to consider the draft model Co-operative Societies Act, with an approach to give a genuine character to co-operatives, to minimize Government control and interference to enable co-operators and co-operatives to develop self-reliance and self-confidence with power of decision making and to eliminate politicization. It was stated that the proposed draft law removes the colonial approach and character of existing laws and truly meets the norms of governance of a democratic autonomous enterprise in the country so deeply committed to democratic values.

2. Report of the Study Group on Co-operative Law in Andhra Pradesh: The Study Group concluded that under 1964 Act, co-operatives were made subordinate to the Registrar who is subordinate to the Government and as an unintended consequence of the concept of the State partnership, the Registrar transformed into a Controller and Superseder. The Study Group recommended adoption of the model Act with some changes suggested by them. The Study Group was appointed by the Co-operative Development Foundation (petitioner in W.P. No.3275 of 2006) consisting of Sri M. Ramakrishnayya, Former Deputy Governor of Reserve Bank of India and two others. The Study Group observed that any arrangement to protect the interests of the Government for orderly redemption of the existing Government equity should not be such as to endanger the autonomy of the co-operative and it was concluded that the time has come to recognize that the success of co-operation depends on the fundamental freedom to form co- operative associations and to practise co-operative principles unhindered. Co-operatives must flourish as voluntary, democratic and autonomous organizations.

3. Report of the Task Force of the Government of India dated 04-02-2005: The task force on revival of the rural co-operative credit institutions, traced the evolution of the Indian Co-operative Movement and noted that the movement was initiated by the Government and it spread and diversified with the encouragement and support of the Government and its present condition is also to a great extent because of the intrusive involvement of, and interference by the Government. It also noted that since 1990 there has been an increasing realization of the destructive effects of intrusive State patronage, politicization and the consequent impairment of the role of co-operatives in general, and of credit co-operatives in particular, leading to a quest for reviving and revitalizing the co-operative movement. It noted various Committees strongly supporting replacement of the existing laws with the proposed model law and that the passage of 1995 Act by the Andhra Pradesh Government marked a significant step towards reform. The report noted that following the example of Andhra Pradesh, eight other States viz. Bihar, Chhattisgarh, Jammu and Kashmir, Jharkhand, Karnataka, Madhya Pradesh, Orissa and Uttaranchal have passed similar legislation to govern and regulate mutually aided co-operatives. The report observed that in all cases these new laws provide for co-operatives to be democratic, self-reliant and member-centric, without any State involvement or financial support. They provide for co-operatives registered under the old law to migrate to the new Act. The old Acts were not repealed, nor was there any serious effort to encourage and facilitate the conversion of old co-operatives to come within the purview of the new Act. Most existing co- operatives, therefore, continued to adhere to the old law. It also noted that the new law, however, did lead to the emergence of a “new generation autonomous financial co-operatives”, albeit slowly and unevenly across the country and that while the number of co- operatives registered under the new liberal Act is slowly picking up, the conversion from the old law to the new Act has largely been in the arena of commodity co-operatives. 4 . Information from the Internet-based Dairy Information System for 2003-04 on District-wise milk production and marketable milk surplus per day showed that the organized milk marketing sector is able to procure only 21 lakh litres out of 132 lakh litres of marketable surplus and that within the organized sector, eight milk unions under 1995 Act were collecting 10.10 lakh litres, private corporates 9.70 lak litres and the Federation with six district units and three milk unions under 1964 Act only

1.45 lakh litres. The average price paid to milk producers between 1996-97 and 2005-06 by 8 unions under 1995 Act and the Federation indicated that the price paid by the Federation was less than the price paid by the 8 unions. Out of 11 district unions at the time of enactment of 1995 Act, three unions remained under 1964 Act (Chittoor, Kadapa and Godavari) and 8 converted into 1995 Act. Chittoor and Kadapa are under liquidation. Godavari is stated to be on the verge of liquidation. The milk marketed and the business turnover progressively increased in respect of the 8 unions under 1995 Act and progressively decreased in respect of the 3 unions under 1964 Act.

5. Anand Pattern: The Anand pattern is an integrated co-operative structure that procures, processes and markets the produce. Supported by professional management, producers decide their own business policies, adopt modern production, marketing techniques and receive services that they can individually neither afford nor manage. The institutional infrastructure – village co-operative, dairy and cattle feed plants, state and national marketing – is owned and controlled by farmers. Professionals are accountable to leaders elected by producers. The village societies are formed by milk producers and each society has a milk collection center. The district union is owned by dairy co-operative societies. It processes and markets fluid milk and products. It provides a range of inputs and services to the members of the village societies regarding feed, veterinary care, artificial insemination, training, consulting services, etc. The State Federation is responsible for marketing the fluid milk and products. 6 . The statistics furnished by the State Government regarding financial performance, milk procurement and sales and purchase price broadly indicate progressive increase procurement, sales and purchase price in respect of the 8 unions under 1995 Act in general. The financial performance as per co- operative audit report in respect of these 8 unions seeks to paint the picture as not rosy, while the statistics presented to the Court by the respective district unions seek to project their performance in positive light.

7. House Committee Report: Pursuant to the discussion on Chittoor and Visakha dairies on the floor of the House during question-hour, the Minister for Animal Husbandry agreed for a probe on Visakha, Chittoor and Ongole Dairies by a House Committee, which was accordingly constituted with Sri N. Varadarajulu Reddy as Chairman and eight other M.L.As. as Members. The terms of reference include enquiry into irregularities in purchase of machinery, equipment, land, vehicles, construction of buildings, appointments made on contract basis, misuse of funds, transport contracts pertaining to Visakha, Chittoor and Ongole Dairies; creation of Trust with Rs.20.00 crores by the Chairman, Visakha Dairy; reasons for losses of the co-operative dairies and irregularities in purchase of HTST Plant by Ongole Dairy and suggestion of remedial measures for effective functioning of the dairies in the State. The report presented to the House on 15-12-2005 contained the information collected and proceedings held by the Committee during the course of its hearings and ultimately the Committee concluded that private dairies like Heritage Dairy are flourishing at the cost of Government dairy and small/marginal farmers in Chittoor. The Committee recommended to reopen the closed Chittoor dairy and to pay the wages to 140 employees. The Committee also observed that Visakha Dairy affairs have become more like a private affair treating it as a private estate and it desired evolution of proper mechanism to ensure regular check and control over the co-operative dairies. It observed several irregularities and corrupt practices in Visakha dairy and recommended to award of transport contracts through a transparent tender system, constitution of a representative committee to oversee the payments towards cattle insurance claims, milk purchasing price, ex-gratia to workers, etc., action against officials and non-officials responsible for purchasing unnecessary and unwanted machinery, a joint account system, prohibition of employment of retired persons, observance of rule of reservation in all appointments, rescinding the contract with Smt. Allu Bhanumathi regarding a godown, delinking of the Trust from the dairy, deletion of offending bye-laws and an enquiry by the Vigilance Enforcement Cell into all these aspects. Concerning Ongole Dairy, the Committee recommended a review of the man power against the work load while noting that better steps should have been taken in respect of spoilage of milk, purchase of HTST plant, etc. It noted functioning of 41 private dairies the district to be affecting Ongole dairy and recommended to constitute an expert committee to suggest measures for revitalization of the Ongole dairy on the verge of closure. The Committee noted that in no other neighbouring State, such an Act like 1995 Act is applicable in the dairy sector. Karnataka and Madhya Pradesh have enacted similar Acts but the dairy sector is allowed to continue to function under the old Act and 3-tier system. Tamil Nadu, Kerala, Orissa and West Bengal have not enacted any Act like 1995 Act. In all the surrounding States, dairy activities are being undertaken under 3-tier structure and milk and milk products are being marketed on single brand name. The general recommendations of the Committee expressed a strong opinion that 1995 Act has detrimental and adverse consequences and effects on the dairy co-operatives and it strongly recommended that all the co-operative dairies be exempted from the purview of 1995 Act in order to strengthen the dairy co-operatives and for overall development of dairy industry in the State by restoring the 3-tier dairy structure, which was in existence prior to coming into force of 1995 Act. A dissent note was submitted by two legislators stating about the specific conditions agreed by the State Government in 1981 and 1988 under Operation Flood-II and III to transfer the assets to co-operative institutions and to give liberty to the co-operative institutions in service matters. The Government was stated to have motivated and encouraged the village societies and district unions to convert into 1995 Act and the three unions which remained under 1964 Act are stated to be under liquidation or near liquidation. The dissent note stated that 1995 Act has nothing to do with a situation, which remained unrectified for 25 years. It also referred to the non-conversion of the Federation into 1995 Act and the losses of the Federation being passed on to the unions. The dissent note projected 8 unions under 1995 Act as better performers and the Federation and the unions under it to be poor performers and it opined that the attempt to revert the dairy co- operatives from 1995 Act to 1964 Act is to exercise control over the co-operatives to destabilize the autonomy and growth of co- operatives enjoyed under 1995 Act. It also enclosed a note in Telugu answering the allegations made against the Visakha dairy.

8. A copy of letter from Dr. V. Kurien, Chairman, National Co-operative Dairy Federation of India Limited dated 21-10- 2005 was filed in W.P. Nos.2294 and 2295 of 2006, wherein Sri Kurien noted that eight years ago it was Andhra Pradesh to be the first State in the country to have come out with such a progressive co-operative legislation to provide an opportunity to the co-operatives of the State to register under the new Act to be able function as truly autonomous and democratic people’s institutions and they all took pride developments. Sri Kurien also regretted that now, at a time when the whole world is moving towards more and more liberalization and adopting policies of increasing deregulation and decontrol of State institutions, the Government of Andhra Pradesh considering to revert to the old Act which would really be a huge backward step. He requested the Government of Andhra Pradesh take such retrogressive step that has potential permanently disable the fast-growing dairy co-operatives of the State and in his view, disabling district unions registered under the new Act cannot be the solution for the problems dairy co-operatives are facing in the State. ARGUMENTS: Sri P.P. Rao, learned senior counsel appearing for the petitioners has argued impugned amendments are inconsistent with and contrary to the objects and reasons and the scheme 1995 Act national policy liberalization/privatization. He has drawn the attention of the Court to the judgments of the Supreme Court in R.K. Dalmia v. Justice Tendulkar reported in AIR 1958 SC 538 at Paras 11, Indravadan H. Shah v. State of Gujarat reported in 1986 (Supp) SCC 254 at paras 13 to 15,Harbilas Rai Bansal v. State of Punjab reported in (1996) 1 SCC 1. at Paras.9 to 18. Learned senior Counsel has also advanced the following arguments,

1. The amendments seek to undo the events and transactions of past 10 years and wipe out accrued rights which can not be permitted as per the judgment of Apex Court in State of Gujarat v. Ramanlal Keshavlal Soni as reported in (1983) 2 SCC 33 Prs.50 to 52.

2. 1995 Act and 1964 Act make no distinction between dairy co-operative societies and other co-operatives. The co- operative principles are applicable to all co-operative societies alike. The reasons given in support of the impugned amendment do not apply to the dairy co-operative societies formed and registered after 1995 Act. Lack of classification violates Article 14. In support of contention he has relied on K.T. Moopil Nair v. State of Kerala which is reported in AIR 1961 SC 552, Pr.8.

3. The impugned provisions have no nexus with the object of enforcing the 3-tier system as both the 1964 and 1995 Acts permit registration of Federations. The 1964 Act does not contain any express provision providing for 3-tier structure. A provision for 3-tier structure can be made in 1995 Act itself and even 1964 Act does not treat dairy co-operatives as a separate class.

4. Curtailment of the terms of duly elected management committees is violative of Article 14. Learned Senior Counsel has referred an authority of Supreme Court in D.S. Reddy v. Chancellor, Osmania University as reported in AIR 1967 SC 1305 Prs.32 to 35, 40 to 48.

5. The dairy co-operative societies are deprived of the benefit of the basic principles of cooperation stated in Section 3 of 1995 Act. 1995 Act provides for barest minimum State regulation, while 1964 Act provides for extensive State control and regulation inconsistent with the present national policy adopted by the State of Andhra Pradesh as reflected in the scheme of 1995 Act based on the model law recommended by the Planning Commission. The outdated amendments obstruct and frustrate the object of development and growth of vibrant co-operative societies. Unaided private institutions are entitled to autonomy and freedom from State control or regulation except to a limited extent to safeguard public interest. In support of his preposition he has cited authority of Supreme Court in TMA PAI Foundation v. State of Karnataka as reported in (2002) 8 SCC 481 and P.A. Inamdar v. State of Maharashtra as reported in (2005) 6 SCC 537.

6. The impugned amendments and the reasons therefor to the extent they seek to regulate business in milk and milk products carried on by dairy co-operative societies trench upon the field occupied by the Essential Commodities Act, 1955 and the Milk and Milk Products Order, 1992 falling within the scope of Entry 33 of List III and consequently outside the Entries 27 and 32 of List II of Schedule VII of the Constitution.

7. The recommendations of the House Committee and the group of ministers are not based on adequate relevant material, as there was no investigation of all the co- operative societies either converted or registered under 1995 Act. The House Committee looked into Visakha and Ongole Unions converted under 1995 Act and Chittoor under 1964 Act under liquidation. The House Committee did not consider the functioning of 3599 societies newly formed and registered under 1995 Act. The House Committee did not recommend retrospective conversion of the societies from 1995 Act into 1964 Act. The impugned provisions are, hence, arbitrary and ultravires under Article 14. In order to substantiate this contention he has cited following authorities 1) State of A.P. v. P. Sagar – AIR 1968 SC 1379. 2) T. Muralidhar Rao v. State of A.P. – 2004 (6) ALD 1 (L.B). 3) B. Archana Reddy v. State of A.P. – 2005 (6) ALD 582 (L.B). 4) Indra Sahwney v. Union of India – (2000) 1 SCC 168.

8. The effect of the impugned provisions is to nullify the judicial orders passed in pending proceedings initiated by District Unions on being aggrieved by the show cause notices proposing to cancel their registration and they are hence, colourable legislation as by Apex Court in P U C L v. Union of India which is reported in (2003) 4 SCC 399.

9. The provisions of 1964 Act providing for extensive State control are incompatible with the co-operative principles enunciated by the International Co-operative Alliance and endorsed by the United Nations and the International Labour Organisation and adopted by the Planning Commission and the Central Government. The impugned amendments are, hence, arbitrary and violative of Article 14.

10. The amendments violate the fundamental right of the members of the societies under Article 19 (1) (c) of the Constitution and are not saved by Clause (4) thereof. They also violate the right to carry on business conferred by Article 19 (1) (g) and not saved by clause (6) thereof. Sri S. Ramachandra Rao, learned senior counsel has submitted following arguments:

1. The impugned provisions are clear instances of hostile discrimination and class legislation, whereby only milk and dairy cooperative societies are taken out of the field of the modern cooperative principles of democracy and self- sufficiency and are placed under the State control and management, thereby violating the constitutional protection of Article 14 by an arbitrary legislative action. For this preposition learned Senior Counsel has relied on following judgments of Supreme Courts, 1) D.S. Nakara v. Union of India – (1983) 1 SCC 305: AIR 1983 SC 130. 2) Express Newspaper Ltd. v. Union of India – AIR 1958 SC 578. 3) State of Maharashtra v. Manubhai Pragaji Vashi – (1995) 5 SCC 730 4) Venkateshwara Theatre v. State of A.P. – (1993) 3 SCC 677. 5) Mohan Kumar Singhania v. Union of India – 1992 Supp (1) SCC 594. 6) Riaz Ahmed v. Competent Authority – AIR 1994 J.K.

51. 7) Javed v. State of Haryana – (2003) 8 SCC 369. 8) State of A.P. v. Nallamilli Rami Reddi – (2001) 7 SCC 708. 9) Hamdard Dawakhana v. Union of India – AIR 1960 SC 554. 10)State of Bombay v. F.N. Balsara – AIR 1951 SC 318:1951 SCR 682. 11)E.P. Royappa v. State of T.N. – (1974) 4 SCC 3: AIR 1974 SC 555 . 12)Ajay Hasia v. Khalid Mujib Sehravardi – (1981) 1 SCC 722 : AIR 1981 SC 487.

2. By removing the milk and dairy cooperative societies only from the protection of beneficial, democratic 1995 Act, which is in tune with the current principles of cooperation i.e., free from State aid and control and placing them under the compulsory and deemed membership of 1964 Act, the State has violated Article 19 (1) (c) of the Constitution. Learned Senior Counsel has relied on following authorities, 1) Damyanti Naranga v. Union of India – 1971(1) SCC 678 : AIR 1971 SC 966. 2) M. Sitharamachary v. The Senior deputy Inspector of Schools – AIR 1958 AP 78. 3) L.N.M. Institute of Economic Development and Social Change v. State of Bihar – (1988) 2 SCC 433. 4) Chintaman Rao v. State of Madhya Pradesh – AIR 1951 SC 118 : 1950 SCR 759. 5) Hari Chand Sarda v. Mizo District council – AIR 1967 SC 829. 6) Mohd. Faruk v. State of M.P. – (1969) 1 SCC 853 : AIR 1970 SC 93. 7) Dwaraka Prasad Laxmi Narain v. State of Uttar Pradesh – AIR 1954 SC 224. 8) K.R. Lakshman v. Karnataka Electricity Board – (2001) 1 SCC 442. 9) O.K. Ghosh v. E.X. Joseph – AIR 1963 SC 812. 10)Delhi Transport Corpn. V. D.T.C. Mazdoor Congress – 1991 Supp (1) SCC 600 : AIR 1991 SC 101.

3. These impugned provisions are unsustainable in law as it is in breach of earlier commitments of the State as undertaken by the Government of India to IDC, World Bank, EEC and International Development Association as the doctrine of Promissory Estoppel operates in the field of legislation also as held by the Supreme Court in 2006 (1) Decisions Today (SC) 352.

4. The actual accrued benefits under valid earlier law cannot taken away by fiction of retrospective operation of the impugned provisions as the same is beyond the legislative power as held by the Supreme Court. He has cited following rulings of Supreme Court, 1) State of Gujarat v. Raman Lal Keshv Lal Soni – (1983) 2 SCC 33. 2) Chairman, Rly. Board v. C.R. Rangadhamaiah – (1997) 6 SCC 623. 3) T.R. Kapur v. State of Haryana – 1986 Supp SCC

584. 4) State of T.N. v. Arooran Sugars Ltd. – (1997) 1 SCC

326. 5) Union of India v. Tushar Ranjan Mohanty – (1994) 5 SCC 450. 6) S.S. Bola v. B.D. Sardana – (1997) 8 SCC 522.

5. Placing the milk and dairy cooperative societies under 1964 Act by taking them out of the 1995 Act is nothing but putting the clock back and is meant for achieving full and total governmental and State control and management and is attaining virtual usurpation of their assets and the same is incompatible with the present day voluntary democratic cooperative principles i.e., free from State aid and control, hence the impugned provisions are contrary to the main purposes of both the Acts.

6. Section 19 of 1964 Act prescribes eligibility for membership and the same is subject to Section 21. In respect of membership, 1964 Act, which is a self-contained code and as per Section 21 (1) (aa), any one who cannot be a member under Section 19 (1), cannot be a member. With these provisions of 1964 Act in full force by amending another Act, i.e. 1995 Act no membership can be granted by a deeming provision under another Act since the same runs counter to the explicit provisions of 1964 Act.

7. This is a colourable legislation and as such is constitutionally unsustainable: (a) As the Act suffers from malice in law as it is aimed at destabilizing the term of elected people belonging to opposition parties compulsorily depriving the membership of 1995 Act and coercively placing them under 1964 Act, is in violation of Constitution and only a single class are taken out with more than 13,000 societies of various kinds are not effected; (b) as it is aimed at scuttling and nullifying the judicial process and decisions. Learned senior counsel has relied on, 1) In the matter of: Cauvery Waters Disputes Tribunal 1993 Suppl. 1 SCC 96 (II). 2) S.R. Bhagwat & Others v. State of Mysore – (1995) 6 SCC 16. 3) Indian Aluminium Co. & others v. State of Kerala & others – (1996) 7 SCC 637. 4) Dr. DC Wadhwa & others v. State of Bihar & others – (1987) 1 SCC 379. (c) to bureaucratize and bring it under the State control and (d) for breaching of all cooperative norms and hence it does not come within the scope of Entry 32 of the State list and (e) the reasons given in the Bill as its objects reasons ‘weakened financial position of some District Unions’, ‘denial of the fair procurement price to farmers’ and ‘absence of market intervention mechanism’ are demonstrably false; (f) for relying upon the partisan House Committee which recommended this switch over based on irrelevant and insufficient data; (g) for further claiming that farmers are having problems and the risk of assets in the private hands; (h) for issuing the impugned Act with a view to bring them within the mischief of Section 32 (7) of 1964 Act and to run thousands of District and Primary Milk and Dairy Societies through Government officials being the real purpose and to bring them within the sweep of Section 131 and the Primary elected bodies also to be replaced by officials; (i) the reasons given for urgency in the ordinance are irrelevant and irrational (Counter Page 41). Learned consel has relied on the preposition laid down in the following judgements, 1) Gurudeva Dutta VKSSS Maryadit & others v. State of Maharashtra – (2001) 4 SCC 534. 2) Dr. DC Wadhwa & others v. State of Bihar & others – (1987) 1 SCC 379. (j) It is a legislation with vindictive purpose to be achieved indirectly what could not be done directly is constitutionally defective and breaches it. (k) Acting on political, partisan and collateral considerations basing upon the partisan House Committee report to hit at progressive, profit-making and economically viable, productive, modern cooperative units functioning democratically is nothing but an act of legislative despotism and the same cannot be sustained in Constitution as it is vitiated by malice in law. (l) The reasons given for enacting and the reasons for urgency are not sound but are nothing but expression of legislative excesses. (m) The legislative effort to do away with elected tenure of thousands of milk and dairy cooperative unions is capricious, whimsical and unsustainable in law for this preposition following authorities, 1) Express Publications (Madurai) Ltd. v. Union of India – (2004) 11 SCC 526. 2) State of A.P. v. Goverdhanlal Pitti –