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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ...

on 30 August, 2004

Equivalent citations: 2005 (5) ALD 682, 2005 (4) ALT 684

Bench: V Eswaraiah

A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, Co-Operation Department,
Represented By Its Secretary And Ors. on 30/8/2004

ORDER

V. Eswaraiah, J.

1. Batch of these Writ Petitions are filed, seeking the following reliefs:-

(1) To declare the action of the respondents in not paying the salaries to the petitioners, as illegal and violative
of Articles 14 and 21 of the Constitution of India,

(2) To direct the respondents to pay salaries to the petitioners without reference to Section 116-C of Andhra
Pradesh Co-operative Societies Act (for short 'Act'),

(3) To declare the proceedings of the Commissioner and Registrar of Co-operative Societies in prescribing the
format showing the eligibility of establishment charges i.e., pay and allowances under Section 116-C (1) of
the Act to be furnished by each of the Primary Agricultural Co-operative Society, as illegal,

(4) To direct the respondents to fix the salaries of the employees by taking into account 2% of the working
capital without reference to 30% of the gross profit.

(5) To direct the respondents to reinstate the services of certain employees of Primary Agricultural
Co-operative Societies whose services were terminated, taking into consideration of 2% working capital of the
society alone pursuant to certain directions.

(6) To declare the action of the District Co-operative Officer in not considering the staffing pattern proposals
submitted by the concerned Primary Agricultural Co-operative Societies taking into consideration of 2% of
the working capital alone without reference to 30% of gross profit.

(7) Certain Writ Petition have been filed apprehending the termination of services of the petitioners, therefore
to direct the respondents not to terminate their services,

(8) To declare the notices issued for termination of services of the petitioners as illegal,

(9) To set aside the termination notices issued pursuant to the resolution of the General Body of the Primary
Agricultural Co-operative Societies, resolving to terminate the services of certain employees.

(10) To declare the termination orders issued by paying one month salary or in lieu of one month salary,
giving one month notice, as illegal and

(11) To declare the proceedings of the Deputy Registrar of Co-operative Societies in approving the proposals
of the Co-operative Societies which are submitted in accordance with Section 116-C(1) of Primary
Agricultural Co-operative Societies Act as illegal, contending that the Deputy Registrars have no power or
authority to approve the proposals in the absence of any delegation of powers, delegating the powers of the
Registrar to and the Deputy Registrars of Co-operative Societies to exercise the powers under Section
116-C(1) of the Act.

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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

2. In some of the Writ Petitions, the proposals sent by the Primary Agricultural Co-operative Societies for
approval of staffing pattern, qualifications, pay scales and other allowances were returned by the concerned
co-operative officers without forwarding the same for approval of the Commissioner as the said proposals are
not in accordance with Section 116-C(1) of the Act and in some others, the same was forwarded for approval
of the Commissioner. In some of the cases, either the special cadre Deputy Registrar of Co-operative Societies
working as District Co-operative Officers or the Deputy Registrars of Co-operative Societies in-charge of
divisions approved the pay scales, staffing pattern etc., wherever they are in accordance with Section 116-C(1)
of the Act. The petitioners in effect prays that their pay scales cannot be reduced and they are entitled for the
existing salaries without any retrenchment and without any reduction of salaries without reference to Section
116-C(1) of the Act. In some of the Writ Petitions, the proceedings issued by the District/Divisional
Co-operative Officers advising the Societies to remove certain employees who are illegally appointed without
getting approval of the Commissioner under Section 116-C(1) of the Act was questioned. The orders of the
respective co-operative societies, retrenching the services of some of its employees who were appointed
contrary to the provisions of Section 116-C(1) of the Act by paying one month salary or in lieu thereof one
month notice given, was also questioned.

3. The learned counsel appearing for the petitioners Sri V. Ajay Kumar, Sri D.V. Bhadram, Sri G.V. Shivaji
and some other learned counsel have advanced their arguments on behalf of the petitioners. The Government
Pleader for Co-operative Societies and Sri C.V. Mohan Reddy and some other counsel appearing on behalf of
the Primary Agricultural Co-operative Societies have advanced their arguments.

4. The different contentions raised in the batch of writ petitions are as follows:-

Batch of these writ petitions are filed against the action of the concerned Primary Agricultural Co-operative
Societies in not paying salaries to the petitioners on the pretext of amendment to Section 116-C(1) of the Act
or on various directions issued by the Government and the Registrar of Co-operative Societies and also in
pursuance of the amendments owing to rules and Act with reference to definition of working capital as well as
gross profit.

It is stated that some of the petitioner were appointed prior to amendment to Section 116-C(1) of the Act and
their service conditions and pay structure are in accordance with Section 116-A read with rule 72 of Andhra
Pradesh Co-operative Societies Rules. Section 116-C(1) was inserted into the statute by way of amendment
(Act No. 21 of 1985) with a view to streamline the general working conditions of the society. As per the said
provision, the society is empowered to fix the staffing pattern, qualification, pay scales and other allowances
for its employees with prior approval of the Registrar of Co-operative Societies. The Secretaries of the
Primary Agricultural Co-operative Societies are the Chief Executives and therefore, the Secretaries of the
Primary Agricultural Co-operative Societies cannot be appointed or removed without prior approval of the
Registrar of the Co-operative Societies. Though Section 116-C(1) was inserted into the statute book in the
year 1985, the Government did not take steps in consonance with the said provision and no permanent
structure has been framed. As on the date of insertion of the said Section, the societies have been functioning
with the staff which includes paid secretaries and other staff. At the instance of the Registrar of Co-operative
Societies with reference to the fixation of staffing pattern as well as salary structure, pursuant to the insertion
to the said Section, no concrete steps have been taken so far and therefore, the societies are compelled to
engage various staff along with the Secretaries who had already been working in the society in order to allow
the society to function.

By virtue of insertion of Section 116-AA, the common cadre of the paid secretaries were abolished and prior
to abolition of the centralized services of the paid secretaries, the paid secretaries were governed under the
common cadre regulations issued under Section 116-A. As per the said common cadre, the salaries of the paid
secretaries are sought to be made from and out of the cadre fund created for that purpose. But the said
common cadre regulations were not implemented and common cadre fund was also not created. Thus, the paid
secretaries and other staff of the primary agricultural co-operative societies continued to receive meager
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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

salaries at the mercy of the societies as the State has completely failed to create permanent structure either in
pursuance of Section 116-C or Section 116-A. The paid secretaries went on agitating for salaries akin to
Supervisors of the District Co-operative Central Banks. Then, the Government entered into an understanding
with the Union of Paid Secretaries and accordingly, accepted to allow the paid secretaries to take salaries on
par with the Supervisors of the District Co-operative Central Banks (Cadre-V), keeping in view that there was
no fair deal in favour of the paid secretaries though they are appointed under a specific scheme i.e., "Half a
Million Job Scheme" and issued Memo No. 5661, dated 14-10-1991.

Even after decaderisation in terms of special bye laws issued, the pay structure of the secretaries is not
protected. Similarly, the societies had been paying the salaries to other staff based on their financial viability
by engaging such staff as the Government did not prescribe any permanent staffing structure. Apart from this,
the special bye laws issued by the Registrar after decaderisation has prescribed the staffing pattern which
includes, Secretary, Accountant/Clerk/Salesman and Attender/Peon. So far as appointment of the secretary is
concerned, it should be made by the Managing Committee as per the recommendation made by the District
Level Committee. Since the paid secretary was sought to be allotted in pursuance of the decaderisation, the
question of appointment of the secretary does not arise. So far as other posts are concerned, the societies are
entitled to make appointments and accordingly, other employees of the societies are appointed. Even the said
byelaws have created promotion channel from lower cadre to higher cadre. The societies have adopted these
byelaws in terms of Rule 72(3) of the Rules. Therefore, the pay structure of Cadre-V employees of the District
Co-operative Central Banks were revised, but at the same time, the salaries of paid secretaries were not
allowed to be revised. To implement the Memo No. 5661, dated 14-10-1991, Writ Petition No. 16558 of 1992
and batch was filed and pursuant to the interim directions, salaries were paid in terms of the said Memo and
the said Writ Petition was disposed of on 13-08-1996 with a direction to constitute a committee to consider
the pay scales of the petitioners and allotment of their services etc., and pursuant to the said directions, the
Government issued G.O.Ms. No. 314, dated 26-12-2000, withdrawing the Memo No. 5661 dated 14-10-1991
while leaving the whole spectrum of fixation of the staffing pattern and pay scales to Primary Agricultural
Co-operative Societies in terms of Section 116-C(1) of the Act. The petitioners are getting salaries in terms of
the pay fixed by the respective societies. As per the said Government Order, fixation of the staffing pattern
and scales were left to the discretion of the concerned societies and the State Government did not left the issue
there and went on issuing one or other directions thereafter with a view to prevent the petitioners from
receiving their legitimate salaries to which they are entitled.

It is stated that Section 116-C(1) of the Act was amended by Act No. 22 of 2001 by stipulating that the
expenditure towards pay and allowances of the employees shall not exceed 2% of the working capital or 30%
of gross profit in terms of actuals in a year whichever is less. The said amendment was designed in such a way
that the salaries of the staff working in a society shall not be paid unless said requirement is satisfied.
Satisfying the said requirement is not possible in respect of the Primary Agricultural Co-operative Societies.
On the premise of the said amendment, salaries to the staff of the Primary Agricultural Co-operative Societies
have been stopped from the month of March, 2002. Therefore, the petitioners are constrained to file these
batch of writ petitions for a direction to pay the salaries without reference to Section 116-C(1) of the Act.

It is stated that though Section 116-C(1) and other provisions were upheld by this Court, but all these
provisions will not prevent the societies from paying salaries to the petitioners and the respondents are liable
to pay the salaries as long as the societies are continued to exist and services of the petitioners are being
engaged. The action of the respondent in not paying salaries or reducing the salaries is a serious violation of
the human rights, fundamental rights and violative of Articles 14 and 21 of the Constitution of India.

It is stated that the society is a body corporate and ultimate authority vests in the general body of the society
for fixing the staffing pattern, pay and allowances subject to the approval of the Registrar. The society is
bound to comply with the requirement of the relevant provisions, but it cannot reduce the salaries or retrench
the petitioners and therefore, the action of the respondents is against Articles 14, 19, 21 and 23 of Constitution
of India. The petitioners are entitled for the living wages for the work done by them and the petitioners cannot
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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

be deprived of their right to receive salaries. The action of the respondents is cruel. Sri V. Ajay Kumar relied
on several Judgments of the Supreme Court, which will be dealt at a later stage.

5. Sri D.V. Bhadram, learned Advocate appearing for some of the petitioners submitted that the Deputy
Registrar of Co-operative Societies, Guntur approved the proposal submitted by the respective Primary
Agricultural Co-operative Societies for staffing pattern and salaries etc. The said approval by the Deputy
Registrar of Co-operative Societies is without jurisdiction and instead of forwarding the said proposals to the
Commissioner and Registrar of Co-operative Societies, he himself approved the proposals and therefore, the
said approval is illegal and without jurisdiction. It is further stated that the society having employed the staff
and having obtained their services, ,it cannot deny the pay pockets to its employees simply basing on the
restricted conditions stipulated in Section 116-C(1) of the Act. According to the said Act, the expenditure
towards pay and allowances of the employees shall not exceed 2% of the working capital or 30% of the gross
profit in terms of actuals in a year whichever is less, which provision is impossible of implementation and
bristles with rank absurdity. It is further stated that though Section 116-C(1) was upheld by the Division
Bench, a W.P. No. 5647 of 2003, was referred to a Full Bench as to "whether the provisions of Section
116-C(1) of the Act in so far as restrictive condition that the expenditure towards pay and allowances of
employees shall not exceed 2% of the working capital or 30% of the gross profit in terms of actuals in a year
whichever is less are violative of Articles 14, 16, 19, 21 and 23 of the Constitution of India" and therefore as
long as the Full Bench decides the issue, the respondent cannot implement the provisions of Section 116-C(1)
of the Act. It is further stated that the order issued by the Deputy Registrar of Co-operative Soceities are in
violation of Rule 28(4) and 36-B of the Rules. The co-operative societies are let into service not with profit
motive but with service motive. Almost all the Co-operative Central Banks in the State except few are
incurring heavy losses, but the Government has not been applying the provisions of Section 116-C(1) of the
Act to the Co-operative Central Banks and therefore, the Government cannot insist upon the implementation
of the provisions of Section 116-C(1) of the Act in respect of the Primary Agricultural Co-operative Societies.
The Government cannot discriminate the employees working in the Co-operative Central Banks, State
Government and other Corporations, which are sustaining heavy losses, with that of the employees working in
Primary Agricultural Co-operative Societies. The Society cannot hire and fire the employees in such a
draconian way and when the work is extracted, the societies are bound to pay the wages. The society and the
Government are to be blamed for the present precarious situation in not implementing the provisions of
Section 116-C(1) of the Act, Rules 28 and 36-B of the Rules and they cannot shift the responsibility on the
employees making them scapegoats. 99% of the Primary Agricultural Co-operative societies are functioning
in losses and therefore, the restrictive provision in Section 116-C(1) of the Act is not legal and it is
unconstitutional. The Deputy Registrar of the Co-operative Societies is not clothed with any delegation of
powers under Section 116-C(1) of the Act and therefore, he is not a competent authority to approve the
proposal of pay scales and staffing pattern. In the previous Judgments, the absurdity of implementing the
restricted condition in Section 116-C(1) of the Act is not argued and therefore, the said Judgments require
reconsideration. In view of the restrictive provision contained in Section 116-C(1) of the Act, the staff of the
societies are not getting salaries since April, 2003 and therefore, these Writ petition have to be tagged on to
the Full Bench for a just adjudication and unless the issue with regard to the restrictive condition contained in
Section 116-C(1) of the Act is thrashed out, the controversy of non payment of salaries to the employees of
the primary Agricultural Co-operative Societies cannot be resolved.

6. Sri G.V. Shivaji, the learned counsel appearing for some of the petitioners submitted that the action of the
respondents in not paying salaries is contrary to the provisions of Andhra Pradesh Shops and Establishments
Act, 1988, Industrial Disputes Act and also the Minimum Wages Act. The petitioners cannot be retrenched
and they are entitled to receive the salaries without reference to Section 116-C(1) of the Act. It is further
stated that as long as the proposals of staffing pattern and the pay scales are not approved by the Registrar, the
petitioners are entitled to draw their salaries. The services of the petitioners cannot be terminated and the
wages also cannot be reduced contrary to the Minimum wages Act. Other learned counsels adopted the
arguments of Sri V. Ajay Kumar, Sri D.V. Bhadram and Sri G.V. Shivaji.

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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

7. The learned Government Pleaders for Co-operation Sri E. Seshagiri Rao, Sri C.V. Mohan Reddy, Sri P.M.
Srinivas Rao etc., appearing for some of the Primary Agricultural Co-operative Societies have submitted that
Section 116-C(1) of the Act is mandatory and the Writ Petitions filed against the action of the respective
co-operative societies are not maintainable and the functions of the co-operative societies are not statutory in
nature and therefore, against the orders of respective co-operative societies, the petitioners have alternative
remedy either under the Co-operative Societies Act itself or under the Shops and Establishments Act or
Minimum Wages Act or Industrial Disputes Act. It is stated that the function of the Co-operative Societies
cannot be termed as action of the State and therefore, the Primary Agricultural Co-operative Societies will not
come under the purview of "other authority" for maintaining the writs under Article 226 of the Constitution of
India.

8. It is stated that some of the writ petitions have been filed only apprehending termination of their services
and some of them have been filed against the termination orders which were issued by paying one month
salary and some of them were filed against the notices, giving 30 days time before terminating their services
in lieu of one month salary. It is stated that if any termination is illegal or if the payment of wages are contrary
to the provisions of minimum wages Act, it is always open for the petitioners to approach the appropriate
authorities, but the writ petitions filed by them are not maintainable as the function of the So-operative society
is not a statutory function and the societies are purely formed and managed by its members who are the
farmers. There is no Government aid, and the societies are availing the credit facility from the District
Co-operative Central Banks and the District Co-operative Central Banks are receiving loans from the
NABARD.

9. The respondents have filed counters, stating that Section 116-C(1) was introduced by Act 21 of 1985 and
the same was amended vide Act 22 of 2001 to regulate the expenditure incurred towards salaries and other
allowances by the following statutory provision:-

116-C Staffing pattern of Societies - (1) "A society shall have power to fix the staffing pattern, qualifications,
pay scales and other allowances for its employees with the prior approval of the Registrar of Co-operative
Societies subject to the condition that expenditure towards pay and allowances of the employees shall not
exceed two percent of the working capital or thirty percent of the gross profit, in terms of actuals in a year
whichever is less".

The said provision has to be followed by all the Primary Agricultural Co-operative Societies, District level
Co-operative Societies and Apex level Institutions also. The constitutional validity of the said provision was
already upheld by this Court as well as the Apex Court and the said stipulations are not new to the
co-operative structure, as the Registrar of Co-operative Societies vide a Circular Rc. No. 5199/79/C-1(A),
dated 15-3-1979, prescribed the establishment costs not to exceed 30% of the gross profit or 2% of the
working capital. The said guidelines were reiterated from time to time and finally, they were incorporated in
the said Act itself, which were upheld by this Court. The RBI., and NABARD issued similar instructions and
guidelines of the staffing pattern and circulars issued by the Registrar of Co-operative Societies dated
2-1-1995 and 18-11-1995 were questioned on the file of this Court and this Court confirmed the same. The
Government issued orders in G.O.Ms. No. 314 (A&C) Co-operation-III Department, dated 26-12-2000,
directing the Registrars of Co-operative Societies to approve the staffing pattern, qualifications, pay scales and
other allowances to the employees of the co-operative societies in accordance with Section 116-C(1) of
Andhra Pradesh Co-operative Societies Act. Questioning the said orders, the paid secretaries filed W.P. No.
21488 of 2000 and W.P. No. 656 of 2001 and this Court upheld the said orders of the Government in Writ
Appeal Nos.424 of 2001and 425 of 2001 on 16-10-2001. It is also stated that the provisions of Sec.116-AA
abolishing the common cadre for all categories of employees other than those specified under Section 116-A
and on such abolition to allot the concerned employees to such of the Primary Agricultural Co-operative
Societies and Section 116-C(1) fixing the staffing pattern to the societies was also questioned and this Court
vide Judgment dated 12-7-2002 in WP. No. 28473 of 1997 upheld the said provisions. For implementation of
Section 116-C(1), rules 28(4) and 36-B were suitably amended inconsonance with Section 116-C(1), defining
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the gross profit and working capital.

It is stated that in so far as Nellore District is concerned, out of 199 societies, proposals have been received in
192 societies, out of which, 109 were approved and in respect of 83 societies, proposals were rejected as the
said proposals are not in accordance with the stipulations laid down under Section 116-C(1) of the Act.

It is stated that it is the responsibility of the petitioners who are the Chief Executives of the societies to submit
the proposals and get the same approved by the Registrar of Co-operative Societies to enable them to draw
salaries as fixed by the Society. The criteria to fix the staffing pattern and the salaries will depend upon the
size, working capital and gross profit of the respective societies and therefore, reduction of salaries or
termination of the services of the employees by the societies when the financial position of the society is in
crisis, cannot be said to have violative of the rights of the petitioners under the Constitution of India.

Wherever the proposals were sent, which are in accordance with Section 116-C(1) of the Act, the proposals
forwarded through the proper channel to the Commissioner were approved. But, wherever the proposals are
not in accordance with the provisions of Section 116-C(1), the same were returned for resubmission,
complying the said provisions. The question of approving the defective proposals does not arise and therefore,
the Commissioner of Co-operative Societies did not approve certain proposals. The Commissioner issued
directions under Section 4(2) of the Andhra pradesh Co-operative Societies Act in proceedings No. 9078 of
2000 K2, dated 10-8-2002 instructing to send the proposals in full shape. Accordingly, the Co-operative

Registrars/Sub-Registrars/Person-in-charge have prepared the revised proposals keeping in view the directions
of the Commissioner and submitted the proposals to the concerned Divisional Co-operative Officers. The
Division Co-operative Officer wherever the proposals are in accordance with Section 116-C(1) of the Act,
approved the proposals and the proposals which are contrary to the provisions of Section 116-C(1) of the Act
are returned. The proposals have been scrutinized by the District Co-operative officers in the light of Section
116-C(1) of the Act. It is stated that powers have been delegated to the Special Cadre Deputy Registrar of
Co-operative Societies working as District Co-operative Officers for approval of the staffing pattern, pay and
other service conditions of the employees of Primary Agricultural Co-operative Societies under Section
116-C(1).

10. The concerned Primary Agricultural Co-operative Societies filed separate counters, stating that Andhra
Pradesh Co-operative Societies Act 1964 was amended by Act 22 of 2001, on account of which, Section
116-C(1) was inserted putting a gap on the maximum expenditure that could be incurred by the society.
Section 116-C(1) lays down that a society shall have power to fix up its staffing pattern, qualifications, pay
and allowances of the staff with the prior approval of the Registrar of Cooperative Societies, subject to the
condition that expenditure towards pay and allowances of the employees shall not exceed 2% of working
capital or 30% of the gross profit, whichever is less, in terms of actuals in a year. Rule 36-B provides that
every society shall set up the administrative and contingent fund not more than 30% of gross profit or 2% of
the working capital whichever is less and utilize the said fund for the administration and contingent
expenditure. The working capital and gross profit are also defined in the relevant rules. Section 116-C(1) is
mandatory, as penal action is contemplated for violating the said provision against the Managing Committee
and its members jointly and severally. The fundamental rights of the petitioners nor any other statutory rights
have been violated, on the contrary, the financial viability of the co-operative body i.e., Primary Agricultural
Co-operative Societies is adversely effect by the acts of the petitioners. The petitioners being the Chief
Executives have to appraise the Primary Agricultural Co-operative Societies, the financial implications and
pay and allowances being drawn by them. The petitioners being the Chief Executive Officers are duty bound
to brief the Managing Committees of the Primary Agricultural Co-operative Societies about the financial
implications of such excessive salaries being drawn by them. The petitioners are duty bound to place the
financial position of the society, the provision of bye-laws, Act and Rules for taking a considered decision on
the pay and allowances to be fixed for the employees working in the Primary Agricultural Co-operative
Societies. On the contrary, in contravention to the provisions of the Act and Rules, Bye-laws of the society
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and poor financial position of the society, the petitioners have been drawing very high salaries equivalent to
Cadre-V employees of the District Cooperative Central Banks. The societies are having loaning business and
charging 2% extra on the loans advanced by the District Co-operative Central Banks. The society is expected
to meet the cost of management of the society including the pay and allowances of the employees from out of
the income derived from the borrowing funds from the District Cooperative Central Banks. On account of
high expenditure and poor recovery, the societies have loan outstanding from the members and therefore, they
could not pay the borrowed funds from the District Cooperative Central Banks. The societies are utilizing the
borrowed money towards the salaries. On account of such situation, there is a likelihood of eating away the
depositors' money of the District Cooperative Central Banks.

It is stated that the financial position of the society is based upon the pay and allowances of the employees,
staffing pattern etc., and therefore, the aforesaid limits have been prescribed under Section 116-C(1) of the
Act, read with Rule 36-B. The Union of Paid Secretaries have challenged the orders of the Government in
G.O.Ms. No. 314, dated 26-12-2000, issued for implementing the provisions of Section 116-C(1) and the
Division Bench of this Court in Writ Appeal Nos.424 of 2001 and 425 of 2001 observed that "the
Co-operative Societies are not run as Government organizations. They are not meant for carrying out welfare
activities of the State, while promoting the thrift movement, it is supposed to earn profit for its members. The
scheme and purport of the Act in regard to the recruitment of staff as envisaged in terms of 116-C(1) of the
Act, is to control the expenditure to be incurred on the staff which has a direct nexus with the profit earned by
the Co-operative Societies or the working capital". As the said provisions were upheld, it is not open for the
petitioners to file these writ petitions for payment of salaries without reference to the provisions of Section
116-C(1) of the Act.

11. The Primary Agricultural Co-operative Societies are registered under the Co-operative Societies Act. The
objects and reasons of the Co-operative Societies Act are to facilitate and strengthen the functioning of the
So-operative Societies based on the Co-operative principles and Co-operative identity. The objects of the
Primary Agricultural Co-operative Societies are to promote, thrift, self help and mutual help among its
members to obtain the short, medium and long term credit facilities for the purpose of agricultural operations
etc. The loans are availed by the members of the Society who are farmers, for the purpose of seeds,
agricultural implements and other cultivation expenses, purchase of cattle, cattle fodder, carts, improvement
of land, construction of cattle sheds, houses etc., and as per the prescribed norms in the bye laws. The
Societies are formed to cater the needs of the loan facility at village level farmers who are the members of the
concerned Primary Agricultural Co-operative Societies. The model byelaws of Primary Agricultural
Co-operative Societies as framed by the Registrar have been adopted by all the Societies. The Societies are
registered under Section 6 of the Act. The constitution of the Society is regulated and registered under the Act.
Appropriate laws, rules, bye laws and special bye laws provide that the general body of the society
periodically elects the members of the committee, which in turn elects the president or the general body
committees elect the president for a specified term. The president and committee as the case may be, is
empowered to appoint the officers, employees and servants of the society in accordance with the Act, rules
and bye laws. The Registrar under the respective Acts, has the supervision and control over the working of the
societies and its employees. The Registration of a society shall render it a body corporate, having perpetual
succession and a common seal. The society is entitled to acquire, hold and dispose of property, to enter into
contract on its behalf, to institute and defend suits and other legal proceedings and to do all other things
necessary for the purpose for which it was constituted. In case of any disputes between the society and its
members or the society and its officers, or employees, the same is resolved by an arbitrator under the Act and
appeal there under is provided to the Tribunal constituted or to an appellate forum as specified. Jurisdiction of
the Civil Court stands excluded in respect of the said disputes. The General Body of the societies are also
empowered to amend the bye laws subject to approval of the Registrar. The agriculturists who have attained
the age of majority and sound mind for whose purpose the society is registered are entitled to seek
membership. Credit loans will be given to the members for seasonal agricultural operations and other
productive purposes as decided by the managing committee or the general body. Any member, who acted
adversely to the interest of the society is liable to be expelled by resolution of the general body, after giving a
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notice to the said member. Ultimate authority of the society vests in the general body under Section 30 of the
Act, but however, the same is subject to the provisions of the Act, rules and bye laws. The general body is
empowered to act as per the relevant provisions of the Act, rules and bye laws. The general body is
empowered to elect and remover the members of the committed, submit annual report to the Registrar,
consider the audit report and annual service, amend the bye laws, expulsion of the members, approval of the
annual budget of income and expenditure etc. Under Section 30(2)(xxiii) of the Act, the General Body shall
approve the staffing pattern, pay and other allowances of employees of the society and contingencies, subject
to the availability of administrative and contingent fund and approval of the Registrar. Under Section 31, the
General body of a society shall constitute a committee in accordance with the bye laws and entrust the
management of the affairs of the society to such committee. The committees are empowered to function as per
the powers provided under Section 31-A, rules and bye laws. Under Section 34 of the Act, the Registrar is
empowered to supersede the committee if the committee is not functioning properly or willfully disobeys or
fails to comply with any lawful orders or direction issued by the Registrar under the Act or rules, after giving
an opportunity to them, either to appoint a special officer or a committee of two or more persons of the
society. Under Section 32(7) of the Act, after expiry of the elected period of the committee and if there is no
committee, the Registrar or the Government may appoint a person or persons to manage the affairs of the
society initially for a period of six months, which can be extended with the approval of the Government from
time to time.

12. Under Section 44 of the Act, no part of the funds other than the net profits of a society shall be paid by
way of bonus or dividend or otherwise distributed among its members. Under Section 45(2) of the Act, a
society shall credit an amount not being more than 30% of gross profit or 2% of working capital, whichever is
less, in a year to the administrative and contingent fund towards pay and other allowances of its employees
and contingencies in the manner prescribed. Every function of the society is subject to the audit under Section
50 and also enquiry under Section 51 for the mis-management or mall- management. In certain circumstances,
the Registrar is also empowered to direct the committee pending investigations or enquiry under Sections
50,51, 52 and 53 to place such officer or servant of the society under suspension. Under Section 60, if any of
the officer or servant of the society has misappropriated or fraudulently retained any money or other property
or has been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the
society by breach of trust or willful negligence or has made any payment contrary to the provisions of the Act,
rules or bye laws, the Registrar himself, or any person specially authorized by him either suo-motu or on
application of the committee, may enquiry into the conduct of such person or servant and make an order
requiring him to pay or restore the money or property by way of surcharge proceedings. Where the society is
conducting its affairs in manner detriment to the interest of its members or the promotion for which, it has
been registered, the Registrar is empowered to wind up the society and appoint a liquidator.

The Co-operative Tribunals are constituted under Section 75 of the Act to decide the appeals filed against
certain orders as mentioned in Section 76(1) of the Act and in respect of other proceedings, where the appeals
are not provided under Section 76(1) of the Act, the Registrar is empowered to decide and pass orders under
Section 77 of the Act. In any case, it appears to the Registrar that any decision or order should be modified,
annulled, reversed or remitted for reconsideration, the Registrar is empowered to pass appropriate orders.
Against the orders of the Registrar, the Government is also empowered to exercise its powers under Section
77 of the Act. The power of review is also provided on the appellate and revisional authorities. Under Section
79A(1)(c) If any officer, employee or a paid servant of the society uses or allows the use of funds of the
society otherwise than in accordance with the provisions of the Act, rules or the bye laws of the society or
commits any other irregularities, are liable to be punished for their corrupt practices. Certain officers of the
Co-operative Department are empowered to collect the borrowed amounts from the members by taking
necessary action.

13. The Registrar of Co-operative Societies is the authority to exercise the supervisory jurisdiction over the
societies to make them to function in accordance with the relevant provisions. The Registrar of Co-operative
Societies is empowered to appointed supervisory staff under Section 116 of the Act to assist in the working of
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any society or class of Societies, subject to such terms and conditions as may be prescribed. The persons so
appointed are empowered to have freaccess to the books, accounts, documents, securities, records, cash and
other properties belonging to, or in the custody of the society and may also call for such information,
statements and returns as may be necessary for the purpose.

14. The Government made an attempt to constitute a common cadre of employees even in respect of Primary
Agricultural Co-operative Societies under Section 116-A, but, having realized the practical difficulties in
implementing the common cadre for the secretaries of the Primary Agricultural Co-operative Societies,
abolished the Centralised services by way of an amendment under Section 116-AA. After abolition of the
common cadre to the Primary Agricultural Co-operative Societies, Section 116-C was inserted by A.P. Act
No. 21 of 1985 with effect from 22-4-1985, which was again amended by way of substitution by Act No. 22
of 2001, dated 25-4-2001. Thus, Section 116-C(1) was came into force with effect from 22-4-1985. As per the
said provision, the society itself is empowered to fix the staffing pattern, qualifications, pay scales and other
allowances for its employees with the prior approval of the Registrar of Cooperative Societies subject to the
condition that expenditure towards pay and allowances of the employees shall not exceed 2% of the working
capital or 30% of the gross profit, in terms of actuals in a year whichever is less. To get the approval of the
staffing patter, qualifications, pay scales and other allowances, the proposals submitted by the respective
societies shall be subject to the condition that the expenditure towards the pay and allowances of the
employees shall not exceed 2% of the working capital or 30% of the gross profit, in terms of actuals in a year
whichever is less. Once the staffing pattern is approved, the society itself is empowered to appoint its
employees itself, but the expenditure towards the pay and allowances of the employees shall not exceed the
above said expenditure criteria.

15. Some of the counsels appearing for the petitioners argued that the paid secretary is the chief executive of a
society and therefore, the paid secretaries neither can be appointed nor can be removed by the societies
without prior approval of the Registrar of Co-operative Societies as contemplated under Section 116-C(2) of
the Act. A perusal of the said provision clearly discloses that such a condition is there in respect of such of
those societies which are in receipt of the financial aid from the Government. There is no financial aid that is
being paid by the Government to the Primary Agricultural Co-operative Societies. Therefore, Section
116-C(2) of the Act has no application to the Primary Agricultural Co-operative Societies empowering them
either to appoint or to remove the paid secretaries who are the chief executives of the Primary Agricultural
Co-operative Societies as the Primary Co-operative Societies are not receiving any financial aid from the
Government.

16. Under Section 4(2) of the Act, the Registrar is empowered to issue certain directions from time to time in
the interest of the co-operative movement or the public interest or in order to prevent the affairs of the society
from being conducted in a manner detrimental to the interests of the members or of the depositors or creditors
thereof, and the society shall comply with such directions of the societies. Under Section 131 of the Act, the
Government also is empowered to issue certain orders and directions in accordance with the provisions of the
Act and in the interest of co-operative movement in the State as they may consider necessary to the Registrar
and he shall give effect to such orders or directions. Section 129 of the Act states that Andhra Pradesh
(Andhra Area) Shops and Establishments Act, 1948 and Andhra Pradesh (Telanga Area) Shops and
Establishments Act, 1951 shall not apply to the societies. But, this provision is contrary to the A.P. Shops and
Establishments Act, 1988 (Act No. 20 of 1988). Andhra Pradesh Shops and Establishments Act, 1988 is a
later Act and as per definition of Section 2(5) 'commercial establishment' means and includes Co-operative
Societies also. Co-operative Societies were not included in the definition of commercial establishments under
the Andhra Pradesh (Andhra Area) Shops and Establishments Act, 1948 and Andhra Pradesh (Telanga Area)
Shops and Establishments Act, 1951. But the societies are included within the definition of the commercial
establishments under Section 2(5) of Andhra Pradesh Shops and Establishments Act, 1988, as such, the later
Act will prevail and therefore, I am of the opinion that the provisions of Andhra Pradesh Shop and
Establishments Act, 1988 are also applicable to all the Co-operative societies including the Primary
Agricultural Co-operative Societies.
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17. Under Rules 28 of the Andhra Pradesh Co-operative Societies Rules, 1964, the society is empowered to
appoint its paid officer or servant in any category, who possessed requisite qualifications subject to approval
of the staffing pattern, scales of pay and allowances. Any revision of the service rules or pay scales etc., shall
be made by the General Body on the recommendation of the Managing Committee provided the staff cost and
contingencies are less than 2% of the working capital or less than 30% of the gross profit and submit for
approval of the Registrar of Co-operative Societies. If such fixation of the staffing pattern, pay scales and
allowances are found in excess of the said norms either in the audit, inspection or enquiry, the excess so spent
shall be recovered from the members of the managing committee concerned under Section 60(1) of the Act
and the Registrar shall have the power to cancel such pay revision or modify it.

18. For the purpose of implementation of Section 116-C in respect of Primary Agricultural Co-operative
Societies, the Government also suitably amended the relevant rules and Rule 36-B reads as follows:-

36-B. Constitution of administrative and Contingent Fund:- "Every society by a resolution of the General
Body shall open a separate account into which an amount not more than 30% of gross profit or 2% of working
capital, whichever is less, as per the previous year financial statement, shall be credited and utilized for
administrative and contingent expenditure. Failure to credit requisite amount to this fund, and or any excess
expenditure over and above the limits fixed by the Act shall be specifically pointed out by the auditor and
excess expenditure if any shall be a charge on the Managing Committee jointly and severally"

19. After abolition of the common cadre of the employees of the Primary Agricultural Co-operative Societies
and after decaderisation, and pursuant to the directions to allot them to the respective societies, certain
guidelines have been issued under Rule 72 of the Rules to allot the decaderised secretaries to the societies. An
argument was advanced by Smt. Akella Padma learned Advocate that some of the paid secretaries are
working prior to decaderisation of the paid secretaries and even after their allotment to the concerned Primary
Agricultural Co-operative Societies, the regulations existing prior to the abolition of the common cadre of the
secretaries shall govern and therefore, neither their salaries can be reduced nor their services can be removed.
Certain guidelines were only issued under Rule 72 of the rules for the purpose of allotment of decaderised
secretaries. The Registrar was empowered to decaderised secretaries of the Primary Agricultural Co-operative
Societies and once the secretary is allotted to a society, he shall be deemed to be the employee of that society
and shall be entitled to receive pay and allowances as may be fixed from the funds of the said society alone
under Rule 72(3)(a) of the rules. Wherever such of those societies were not allotted and until the allotment of
the secretaries is made to the Primary Agricultural Co-operative Societies, a clarification has been issued by
way of an amendment to Rule 72(5) for the purpose of disciplinary control that until such allotment is made,
the common cadre regulations existing prior to the abolition of the common cadre of secretaries shall apply
for taking action against them for the lapses committed by them. Once the secretary is allotted, he will be
deemed to be the employee of the society and the relevant special bye-laws, rules and the Act alone applies
for taking action by the respective societies.

20. As the common cadre regulations have no application to the decaderaised secretaries of the Primary
Agricultural Co-operative Societies, the Commissioner for Co-operation and Registrar of Co-operative
Societies, Andhra Pradesh, Hyderabad, communicated the model bye-laws vide his proceedings in R.C. No.
34483/85/C2/(B), dated 30-9-1985 to be adopted by the respective societies. According to the said special
bye-laws issued relating to the service conditions of the employees of the Primary Agricultural Co-operative
Societies and as per bye law No. 2(a); Subject to the budget allotment sanctioned by the General body, the
Managing Committee is empowered to appoint the employees of the society. The President is competent to
issue the appointment order to all categories of the employees, such as Secretary, Accountant/Clerk/Salesman,
Attender/Peon of the society based on the decision of the Managing Committee. The age of retirement of the
employees is 58 years. The Special ByeLaw No. 12 deals with the disciplinary control. The Managing
Committee is empowered to suspend or remove the secretary, Accountant/Clerk. The president is empowered
to suspend or remove the Attender/Peon. Special bye law No. 12(3) deals provides appeals to the concerned
authorities. It is argued that the said bye laws were amended in consonance with the provisions of Section
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116-C(1) of the Act and other relevant provisions and the rules as the bye laws or the special bye laws cannot
run contrary to the Sections.

21. Questioning the validity of Section 116-AA of the Act in abolishing the common cadre paid secretaries of
the Primary Agricultural Co-operative Societies, Writ Petitions have been filed on the file of this Court and
the Division Bench of this Court while dealing with the validity of Section 116-AA and 116-C and Rule 72 of
Andhra Pradesh Co-operative Societies Rules, 1964 with regard to the allotment of decaderised secretaries, in
the case of A.P. State Co-operative Societies, Secretaries and Employees Association, Nizamabad Vs. State of
A.P., and others, considered the similar

contentions of the learned counsels that the effect of implementation of Section 116-C would amount to
retrenchment. The said contentions were rejected for the reason that decentralization of cadre has already
taken place by the statutory provision, which has come into force in 1985, and any hardship by reason of
implementing the statutory provision itself cannot be a ground for declaration of the statutory provisions ultra
vires or violative of Article 14 of Constitution of India. The provisions of Sections 116-AA and 116-C are not
violated any of the provisions of the Constitution and no discrimination can be alleged, nor Article 14 of the
Constitution of India would be violated thereby. Accordingly, the provisions of Section 116-AA and 116-C
are held that they are not unconstitutional.

22. Questioning the Circular Memo dated 18-11-1995 of the Registrar of Co-operative Societies in issuing
certain directions, writ petitions were filed. It is stated in the said memo that in spite of ban imposed on the
recruitment of the paid secretaries, some of the Primary Agricultural Co-operative Societies have resorted to
recruitment of paid secretaries and other employees in violation of the instructions issued by the Registrar of
Co-operative Societies, causing erosion of their own funds and emergence of huge imbalance between
members' dues to the society and the Societies to the Co-operative Central Bank. Pursuant to the said circular
of the Registrar of the Co-operative Societies, the Divisional Co-operative officers were directed to terminate
certain secretaries who are appointed subsequent to the said circular. Questioning the said action, Writ
Petitions were filed and the Division Bench of this Court in the case of Polavarapu Nagendra Babu Vs.
Commissioner for Co-operation and Registrar of Co-operative Societies, Hyderabad and others, held that:
"The

Commissioner of Co-operation and Registrar of Co-operative Societies has issued the Circular dated
18-11-1995 only to implement the ban orders, but contrary to the said Memo, some of the societies have
resorted to recruit paid secretaries and other employees in violation of the instructions issued by the Registrar
of Co-operative Societies, causing erosion of their own funds and also causing serious financial and
administrative complications, therefore, the Divisional Co-operative Officers/District Co-operative Officers
issued certain proceedings to terminate the services of the secretaries and others whose appointments were
made contrary to the Memorandum of the Commissioner for Co-operation dated 18-11-1995. Without
expressing any opinion on the said circular, the Division Bench, while noticing the provisions of Section
116-C(1), according to which, the Primary Agricultural Co-operative Societies are empowered to fix the
staffing pattern, qualifications, pay scales and other allowances for its employees with prior approval of the
Registrar of Co-operative Societies, held that the societies are at liberty to fix the staffing pattern and the Writ
Petitions were disposed of directing the societies to take appropriate steps in regard to staffing pattern of the
societies under Section 116-C of the Act if it so desires. In so far as the action of the learned Single Judge in
vacating the interim order which was obtained by the paid secretaries for continuing in service was upheld, by
observing that:

"It is well settled that if any order is passed against the condition specified in the memorandum banning the
appointment during a particular period, such order has to be construed as an illegal order and therefore, such
an order cannot be legalized through judicial process".

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23. Krishna District Co-operative Credit Societies Employees Union, Vijayawada and others filed W.P. No.
21494 of 2004 and Batch, challenging the action of the Primary Agricultural Co-operative Societies in
proposing to terminate their services pursuant to the directions issued by the District Co-operative officers and
Divisional Co-operative officer concerned. The Writ Petitions were also amended questioning the
constitutional validity of Section 116-C of the Act. The Division Bench of this Court (consisting of His
Lordship Justice B. Sudershan Reddy and myself) while dealing with the said batch of cases filed by Krishna
District Co-operative Credit Societies Employees Union, Vijayawada Vs. Commissioner for Co-operation and
Registrar of Co-operative Societies, A.P., Hyderabad and others,

held that

"A plain reading of Section 116-C would make it abundantly clear that the power to fix the staffing pattern,
qualifications, pay scales and other allowances for its employees vests in the society concerned. The societies
are entrusted the power to fix the staffing pattern, pay scales and other allowances for its employees with prior
approval of the Registrar of Co-operative Societies. That power of the society and approval to be granted by
the Registrar of Co-operative Societies itself is subject to the condition that the expenditure towards pay and
allowances of the employees shall not exceed 2% of the working capital or 30% of the gross profit, in terms of
the actuals in a year, whichever is less. Therefore, a limitation shall be imposed on the societies to fix the
staffing pattern for its employees subject to the said conditions and it cannot deviate the said conditions. The
power conferred upon the society is limited in such fixation i.e., subject to the approval of the Registrar and
subject to the condition that the expenditure towards pay and allowances shall not exceed 2% of the working
capital or 30% of the gross profit whichever is less. There is a laudable purpose and object behind enacting the
said provision as most of the societies have indiscriminately made appointments of its employees, which
resulted in virtual threat to the very existence and survival of the societies. Most of its financial resources
were being spent to meet the expenditure in regard to the payment of remuneration, allowances, pay scales
etc., to its employees. The Co-operative Societies are not organized, formed and incorporated for providing
any employment as such to the unemployed. Their main purpose is to cater the need of the agriculturists for
whose benefit they are organized and formed. They are meant to look after the welfare and the credit needs of
their members. Promotion of economic interest of the agriculturists and rural artisans is the paramount
consideration and of importance for which purpose the societies themselves are organized and brought into
existence.

The circular instructions issued by the Registrar of Co-operative Societies dated 2-1-1995 and 18-11-1995
themselves have taken note of these facts and it is under those relevant circumstances such circular
instructions requiring the Primary Agricultural Co-operative Societies and District Co-operative Central
Banks not to make any further appointments or recruitments of the employees were issued in order to protect
the interest of the societies."

It is held that the said circulars issued by the commissioner have legal force and his power is traceable to issue
such directions under Section 4(2) of the Act. Though, mentioning of Section 4(2) was not stated in the
Circulars, but it is held that non mentioning of the provision of law itself would not vitiate any notification,
circular or order, provided the power is traceable to the correct provisions of law. Accordingly, the Division
Bench held that the Registrar has authority in law to issue the said circulars. The view taken by me in W.P.
No. 4213 of 1999, upholding the order passed by the Divisional Co-operative Officer, Kurnool, directing the
President, Done Primary Agricultural Co-operative Credit Society to terminate the services of a clerk working
in the society on the ground that he was appointed in the year 1995, violating Section 116-C of the Act; as the
appointment made by the society was contrary to the provisions of Section 116-C(1) was also upheld by the
Division Bench of this Court in W.A. No. 1043 of 2000 and the said view was concurred with in the case of
Krishna District Co-operative Credit Societies Employees Union, Vijayawada Vs. Commissioner for
Co-operation and Registrar of Co-operative Societies, Andhra Pradesh, Hyderabad (3rd cited). The Circulars
of the Commissioner of Co-operative societies were upheld as they are only issued for implementation of the
provisions of Section 116-C(1) of the Act. We have also expressed the desire that the Commissioner for
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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

Co-operation and Registrar of Co-operative Societies shall issue fresh instructions in order to enforce the
circular instruments issued in Rc. No. 6093/88 CP (B), dated 21-1-1988, for sending proposals, seeking prior
approval of the Registrar as required in law to fix the staffing pattern and pay scales etc. We have also
observed that the Commissioner is empowered to issue further directions or instructions in accordance with
the provisions of Section 116-C of the Act.

24. The Andhra Pradesh Co-operative societies Secretaries and Employees Union also questioned the action
of the Government in issuing the Memo No. 59283/97/K2, dated 25-9-1997 in not applying the revision of
pay scales from 1-4-1996 on par with the Category-V Supervisors of the District Co-operative Central Banks
(DCCBs) as opposed to the doctrine of "Equal pay for Equal Work" and violative of the fundamental rights
guaranteed under Articles 14, 16 and 21 of the Constitution of India and also questioned by amending the writ
prayer to declare Sections 116-AA and 116-C of the Act as violative of Articles 14, 16, 21, 39, 41, 42 ad 43 of
the Constitution of India, which was fell for consideration before the Division Bench consisting of His
Lordship Sri Justice B. Sudershan Reddy and myself in the case of A.P. State Co-operative Soceities
Secretaries and Employees Union Vs. Government of Andhra pradesh Agricultural and Co-operation
Department and others, . We have noticed that out of 4,610 Primary

Agricultural Co-operative societies, one fourth (1/4) of the societies are either running on profit or on no profit
no loss basis and the remaining 3/4 societies are completely running in losses. The paid secretaries and other
staff of the societies are drawing salaries on an average irrespective of the margin of the interest available to
the PACSs., to meet the said expenditure. The high incidence, on account of establishment charges of
PACSs., is about Rs.42 crores per month, leading to heavy imbalances in the societies every year and
therefore, the very existence of the societies has become doubtful. With regard to the issuance of Memo No.
5662/Co-op.III/2/91-1, dated 14-10-1991, we have observed that the Government having realized its mistake,
rightly constituted a committee, vide orders in G.O.Ms. No. 1338, dated 23-12-1996 to study the whole matter
and to make recommendations after ascertaining the views of the representatives of the PACSs., District
Co-operative Central Banks and Unions of the paid secretaries etc., and on the recommendations of the
committee, the matter was further referred to the Cabinet Sub Committee constituted by the Government vide
G.O.Ms. No. 71, Agriculture and Co-operation Department, dated 25-3-2000. The view of the Cabinet
Sub-Committee was that the paid secretaries should be treated as employees of the concerned Co-operative
societies only and their pay and service conditions shall be determined by the Societies themselves after
taking prior approval of the Registrar of Co-operative Societies as provided for in the Act and the rules.
Accordingly, the Government issued G.O.Ms. No. 314, Agriculture and Co-operation (Co-op.III) Department,
dated 26-12-2000, ultimately canceling the Memo No. 5661/Co-op.III/1/91, dated 14-10-1991.

The said G.O.Ms. No. 314, dated 26-12-2000 was also questioned in W.P. No. 21488 of 2000 and the
Division Bench of this Court in Writ appeal No. 424 and 425 of 2001 upheld the validity of the said G.O.Ms.
No. 314 in view of the provisions contained in Sections 116-AA and 116-C of the Act. While noticing all the
relevant provisions and the previous Judgments and also after considering the similar arguments that the
decaderisation made under Section 116-AA and fixation of the staffing pattern, pay scales etc., under Section
116-C(1) would result in termination or removal of the paid secretaries from service, we have held the validity
of Section 116-AA as it does not save from any constitutional infirmity, the said provisions cannot be said to
be irrational or they cannot characterized as discriminatory in nature. We have observed that the societies are
formed by the people themselves on the principle that "all for one and one for all". The societies are organized
and registered under the provisions of the Act and meant to cater the needs of its members. The societies are
not meant for providing any employment to the unemployed. It is neither the function nor the duty of the
societies to provide any job or employment to the unemployed. The society is bound to keep its financial
status and availability of resources in view, while making the appointment as well as fixing the staffing
pattern, pay scales and other allowances for its employees. The societies cannot be permitted to
indiscriminately appoint the employees and fix their pay scales and other allowances without having any due
regard to its financial resources. Having regard to the experience that some societies have altogether vanished
into thin air on account of such indiscriminate appointments and fixation of pay scales and other allowances,
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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

the Legislature has stepped in and put an embargo upon the societies not to incur expenditure towards the pay
and allowances of the employees not exceeding 2% of the working capital or 30% of the gross profit, in terms
of actuals in a year whichever is less. The object is a laudable one. The provision is obviously amended in
order to protect the interest of the societies and to save them from further financial ruination." The bird's view
of the Act, as stated in para 68 is extracted below:-

"The Co-operative societies registered under the provisions of the Act are not the satellites of the Government
or the Registrar of the Co-operative societies. The Government and the Registrar of Co-operative societies are
entitled to issue such orders and directions in accordance with the provisions of the Act only and in the
interest of the Co-operative movement in the State or public interest or in the interest of the members of the
society itself. Except to that extent, neither the Government nor the Registrar of the Co-operative societies has
any power or authority to interfere in the day-to-day management and affairs of the society. The Government,
obviously, appears to have realized its limitation and mistakes it had committed by unnecessarily interfering
in the affairs of Societies, more particularly in the matter of fixation of pay scales and other allowances of the
Paid Secretaries and accordingly issued G.O.Ms. No. 314, dated 26-12-2000 which has received the approval
of this Court. In the same process, steps were taken to substitute Section 116-C of the Act in order to protect
the interest of the societies and its members and to prevent the societies from indulging in extravagant
expenditure towards the salaries and other allowances payable to its employees. By no stretch of imagination,
the provision could be characterized as an irrational one".

The constitutional validity of Section 116-C has been upheld by the said Division Bench on the ground that
there is no lack of legislative competency or inconsistency with or derogation of fundamental rights
guaranteed by the Constitution or of any other constitutional provision. The said provision under Section
116-C was also not violative of the provisions of Constitution of India. Accordingly, we have held that the
members of the Paid Secretaries Employees Union are not entitled for any pay scales or the revision of pay
scales on par with Category-V Supervisors of District Co-operative Central Banks. They cannot equate
themselves with any other employees including category-V Supervisors of the DCCBs. The Paid Secretaries
are the employees of the concerned society. The society with the prior approval of the Registrar is empowered
and entitled to fix the staffing pattern, qualifications, pay scales and other allowances for its employees
subject to the condition that the expenditure towards pay and allowances of the employees shall not exceed
two per cent of the working capital or 30 per cent of the gross profit, in terms of actuals in a year whichever is
less.

25. The same Andhra Pradesh State Co-operative Societies Secretaries and Employees Union, filed W.P. No.
3706 of 2002 a reported case in A.P. State Co-operative Societies Secretaries and Employees Union Vs.
Government of Andhra Pradesh and others, , seeking a direction to the respondents not to apply in any manner
the provisions of A.P., Co-operative societies Amendment Act 22/2001 with a retrospective effect and not to
take any coercive steps by way of recoveries or fixation of salaries. The learned Single Judge of this Court
allowed the Writ Petition, against which, Writ Appeals were filed and the Division Bench of this Court in the
case of Government of Andhra Pradesh Vs. A.P., State Co-operative Societies Secretaries and Employees
Union and others, , set-aside the said

Judgment, dismissing the writ petitions. The Division Bench disposing of the Writ Appeals and another
connected W.P. No. 8522 of 2003 observed that the Memo of the Government dated 14-10-1991 was kept in
abeyance by the Registrar of Co-operative Societies vide orders dated 14-2-1992 and the interim orders
granted by this Court have got themselves merged into the final orders whereunder no relief as such has been
granted by this court conferring any right upon the Paid Secretaries/employees of PACSs to draw any
particular emplument or pay scales as such. The present pay scales and allowances that are being drawn by the
paid secretaries were not fixed by the society concerned after abolition of the common cadre, nor the pay
scales and allowances were fixed under any statutory provision, but were fixed and drawn by themselves
under the Memo dated 14-10-1991, which is void and inoperative. Accordingly, the Division Bench held that
the notices issued for recovery of excess pay cannot be questioned and they do not suffer from any illegality.
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All the authorities including the PACSs., are bound to implement the statutory provisions and accordingly fix
the pay and allowances and other emoluments payable to its employees in accordance with Section 116-C of
the Act. The societies are entitled to fix the salary, emoluments and other allowances of its employees in
accordance with law even for the period before incorporation of Section 116-C and its subsequent amendment
by Amendment Act 22 of 2001. The emoluments, pay scales and allowances that are to be fixed in respect of
each of the employees by each of the societies may depend upon variety of facts and circumstances so far as
they relate to the period prior to Section 116-C of the Act coming into operation with effect from 22-4-1985 is
concerned. So far as such fixation after 22-4-1985 is concerned, the same is to be in accordance with the
mandatory requirement under Section 116-C of the Act. The quantum of amounts to be recovered from each
one of the employees of the society concerned depends upon such fixation of pay scales, emoluments and
other allowances. It shall always be open to an aggrieved employee to raise a dispute about the quantum of the
amount if any, sought to be recovered from such employee after such fixation. Each of the proceedings
proposing to recover the amount, if any, from each of the employees, is required to contain the complete
details as to how the amounts sought to be recovered are arrived at. It is further observed that the societies are
not employment generating units, but have been formed for the welfare of its members. It is unfortunate that
the State Government in its anxiety to cajole the members of the Union went on entering into settlements and
agreements without any notice and approval of the Societies concerned involving them with extra financial
burden. After fixing the pay scales by the societies, the societies are entitled to recover the excess of pay
scales for which they are legitimately entitled to.

26. The question now arises for consideration as to whether the petitioners are entitled for the pay and other
allowances even without fixing the staffing pattern, pay scales and other allowances with prior approval of the
Registrar of Co-operative societies subject to the condition that the expenditure towards the pay and
allowances of the employees shall not exceed 2% of the working capital or 30% of the gross profit, in terms of
actuals in a year whichever is less.

27. Admittedly in most of the cases, the concerned societies have not fixed the staffing pattern, qualifications,
pay scales and other allowances for its employees and obtained the prior approval of the Registrar of
Co-operative societies. To obtain the prior approval, the societies must necessarily follows the conditions
imposed in Section 116-C(1) that the expenditure towards the pay and allowances of the employees shall not
exceed 2% of the working capital or 30% of the gross profit, in terms of actuals in a years whichever is less.
For some of the societies, approval has been obtained and the employees of the societies are being paid the
allowances with regard to the staffing pattern as fixed by the society and approved by the Registrar. In respect
of other societies, wherever the societies have not fixed the staffing pattern, pay scales and other allowances
and have not obtained the prior approval of the Registrar, the societies have stopped payment of salaries to its
employees.

28. In the case of D.V.N. Linga Reddy Vs. Vasavi Co-operative Urban Bank Limited, Hyderabad and another,
, wherein the

services of the employees of Co-operative societies were terminated by paying one month salary as required
under Section 47 of the Andhra pradesh Shops and Establishments Act, 1988 in compliance of the provisions
under Section 116-C of the Act and the staffing pattern provided there under were existed. An argument was
advanced that for retrenching the employees, prior approval of the Registrar is required. While dealing with
the said contention, this Court held that there is nothing indicated in Section 116-C of the Act that the prior
approval of the Registrar is necessary to retrench any employee of a society. Approval is needed only for the
purpose of fixing the staffing pattern. Once the staffing pattern is approved, prior approval of the Registrar is
not required for retrenchment or for appointment of a particular employee in the approved post of the staffing
pattern.

With regard to the non-compliance of the provisions of the Industrial Disputes Act, Shops and Establishments
Act, the learned Single Judge held that it is for them to make out their remedies in accordance with the
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provisions of A.P., Shops and Establishments Act, 1988 or Industrial Disputes Act as the case may be.

29. For the aforesaid reasons and in view of the Judgments cited above, I am of the opinion that as long as the
society fixes the staffing pattern, qualifications, pay scales and other allowances for its employees and obtains
approval of the Registrar of Co-operative societies and such expenditure to be incurred by the society towards
the pay and allowances for its employees shall not exceed 2% of the working capital or 30% of the gross
profit, in terms of the actuals in a year whichever is less; the employees of the society are not entitled to draw
any salaries contrary to the provisions of Section 116-C of the Act and the guidelines issued by the Registrar
of Co-operative societies from time to time for implementation of the provisions of Section 116-C(1).

30. Section 116-C(1) is mandatory in its nature. For violation of said provisions and for exceeding the
expenditure as stipulated under Section 116-C(1) of the Act, there will be a charge on the members of
Managing Committee jointly and severally and also they are liable for penal action. If the employees are
allowed to draw the salaries contrary to the provisions of Section 116-C, not only the paid secretaries and its
employees are liable for disciplinary action to be taken against them, but also the Managing Committee
members/ person in-charge are liable for the surcharge proceedings and penal action. Therefore, I am of the
opinion that Section 116-C is mandatory and the petitioners are not entitled to draw salaries without reference
to the provisions of Section 116-C(1) and also contrary to the circulars and guide lines issued by the
Commissioner from time to time. To get the approval of the staffing pattern, pay scales and other allowances
for its employees, the societies must follow the condition that the expenditure towards pay and allowances
shall not exceed 2% of the working capital or 30% of the gross profit, in terms of actuals in a year whichever
is less.

The Commissioner and Registrar of Co-operative societies issued guidelines in circular Rc. No. 9078 of
2000-K2, dated 10-8-2002 for the action to be taken in respect of the matter relating to the staffing pattern,
qualifications, pay scales and other allowances for the employees of the societies in accordance with the
provisions of Section 116-C(1) of the Act while drawing the attention of the Managing Committees of the
PACs., to fix the staffing pattern, pay scales of the employees of PACS., in accordance with the norms
prescribed under Section 116-C(1) of the Act and to ensure smooth functioning of the PACS. Certain
directions have been issued by the Registrar in the said circular in exercise of his powers under Section 4(2) of
the Act. He directed all the Managing Committees of PACs., to fix-up the staffing pattern, pay scales and
other allowances of is employees under Section 116-C(1) of the Act within 45 days from the date of issuance
of said directions. The directionsissued thereunder at Sl. Nos. 1 and 2 reads as follows:-

1) The Managing Committees of PACS shall fix the staffing pattern and pay scales of their employees in
accordance with section 116-C of the APCS Act 7 of 1964 and submit proposals to the Registrar of
Co-operative societies, A.P., Hyderabad for approval within 45 days from the date of receipt of this order.

2) If any PACS does not comply with the Rules it will not be permitted to incur expenditure on staff and
establishment beyond the time limit prescribed above. Every PACS must open a separate account in the
DCCBs concerned in which the margins earned from business shall be credited for purpose of meeting the
staff cost. In this account the margins earned by the PACS have to be credited and salary and staff costs and
contingencies have to be met from these margins only. The other receipts such as loan amounts recovered
should be credited to the DCCBs as that money belongs to the DCCBs.

In case any society incurs expenditure and staff cost over and above the margin earned by the society,
straightaway action will be initiated against management's of PACS for diversion of funds.

As per the recent amendment made to section 116-C every society has to determine its staffing pattern, review
its existing employees strength and give details of their pay scales etc., and seek approval of the Registrar
within a time frame as prescribed in the Rules. The managing Committee of the PACS which do not comply
with the Act and Rules and these directions will be made responsible for incurring any expenditure without
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the approval of the Registrar.

The proposals in this regard are to be submitted by the managing committees of PACS within 45 days for
approval of the Registrar. In case the managing committees of PACS fail to submit the proposals to the
Registrar of Co-operative Societies within the time limit action will be taken against them for non compliance
with statutory provisions".

As long as the societies comply with the provisions of Section 166-C(1) of the Act and relevant rules,
bye-laws and special bye-laws and the directions issued by the Government and Commissioner from time to
time for implementation of Section 116-C(1), I am of the opinion that the petitioners are not entitled to spend
money for their salaries exceeding 2% of the working capital or 30% of the gross profit, in terms of the
actuals in a year whichever is less. Any payment of such salaries will be contrary to Section 116-C, which is
mandatory in nature and it has been upheld in more than two cases by different Division Benches of this
Court.

31. With regard to the argument that the action of the respondents are not paying the salaries for some and
paying the salaries to some others less than the wages prescribed under the Minimum Wages Act is contrary
to the provisions of Minimum Wages Act and also the action of the respondent in retrenching the employees
of the societies are contrary to the A.P., Co-operative societies Act and A.P Shops and Establishments Act,
1988 and Industrial Disputes Act.

32. MINIMUM WAGES ACT:- The Minimum Wages Act is to provide fixing the minimum rates of wages
for certain employees. The Scheduled Employment is defined under Section 2(g), which means an
employment specified in the schedule or any process or any branch of work forming part of such employment.
Under Section 12 of the Minimum Wages Act; "Where in respect of any scheduled employment a notification
under Section 5 is in force, the employer shall pay to every employee engaged in a scheduled employment
under him, wages, at a rate not less than the minimum rate of wages fixed by such notification for that class of
employees in that employment without any deductions except as may be authorized within such time and
subject to such conditions as may be prescribed".

If the minimum wages are not paid, the employer is liable to penal action under Section 22 and 22A of the
Act. Under Section 27, the appropriate government is empowered to add any employment in the Schedule
Employment applying the minimum rates of wages fixed under the Act and upon issue of such notification, it
shall be deemed that the schedule issued pursuant to Section 2(g) and 27 of the Act is accordingly amended.

The Primary Agricultural Co-operative societies are not included in the schedule. But the Government issued
orders in G.O.Ms. No. 82, Labour, Employment, Training and Factories (Lab.II), dated 2-12-2000, with effect
from 29-3-2001 that the Primary Agricultural Co-operative societies are also included in the schedule. As per
the said notification, the minimum basic pay plus value of the Dearness Allowance is Rs.4,185.50 Ps for a
secretary. The wages of a Supervisor is Rs.3,268.50 Ps., Typist is Rs.3,268-50 Ps., Cashier is Rs.2,906.50 Ps.,
Clerk is Rs.2,906.50 Ps., and for Attender/Peon/ Watchman/Office Boy Sweeper/Scavenger is Rs.2,730-50
Ps. It is stated that as long as the petitioners are working in the Primary Agricultural Co-operative societies,
the societies are bound to implement the minimum wages Act by paying wages prescribed under the
Minimum Wages Act.

As regards this contention, I am of the opinion that as long as the staffing pattern and pay scales are fixed by
the society and approved by the Registrar of Co-operative Societies subject to the condition that such
expenditure shall not exceed 2% of the working capital or 30% of the gross profit, in terms of the actuals in a
year whichever is less, the petitioners are not entitled to get the enforcement of Minimum Wages Act
dehorsing the Section 116-C(1) of the Act, as their employment is illegal. Only after fixing of the staffing
patter, pay scales, and after regularizing their services, they are entitled to get the benefit of the provisions of
Minimum Wages Act. No doubt, the Minimum Wages Act is a Central enactment and the State government in
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exercise of its powers issued notification including the Primary Agricultural Co-operative societies also in the
Schedule, making applicable to Minimum wages, but as long as the societies appoint its employees in
confirmity with Section 116-C, the question of seeking redressal for payment of minimum wages under the
Minimum Wages Act does not arise. Therefore, it is one of the reasons as to why the society is bound to
implement the provisions of Section 116-C, keeping in view the mandatory provision contained in Section
116-C(1) and also the payment of wages under Minimum Wages Act. However, if any minimum wages are
not paid, it is for the concerned employees to approach the authorities under the Minimum Wages Act for
appropriate relief.

33. INDUSTRIAL DISPUTES ACT AND THE A.P. SHOPS AND ESTABLISHMENTS ACT:-The next
question that arises as to whether the Industrial Disputes Act applies to the Secretaries of the Primary
Agricultural Co-operative societies. Industry is defined under Section 2(j) of the Industrial Disputes Act.
"Industry means any business, trade, undertaking, manufacture or calling of employers and includes any
calling service, employment handicraft or industrial occupation or avocation of workmen". There is a
systematic activity carried on by the co-operation between the Primary Agricultural Co-operative societies
and its workmen (employees) for rendering service to the farmers who are members of the society, giving
them credit facility by getting the advance from the District Co-operative Central Banks and earning 2% of
the interest over and above the interest charged by the District Co-operative Central Banks and as there is a
capital investment for the purpose of carrying on such activity and such activity is carried on though with a
motive to give service to the farmers, and by taking profit to meet the establishment charges of the society, I
am of the view that the Co-operative societies Act comes within the purview of the Industry as defined under
Section 2(j) of the Industrial Disputes Act. "Industrial dispute means any dispute or difference between
employers and employers, or between employers and workmen, or between workmen and workmen, which is
connected with the employment or non-employment or the terms of employment or with the conditions of
labour, of any person". Workman is defined under Section 2(s) of Industrial Disputes Act. Under Sec.2(s)(iii)
or (iv) a person who is employed mainly in a managerial or administrative capacity or in a supervisory
capacity drawing wages more than Rs.1,600/- are not included within the definition of workmen.

Paid Secretaries being the Chief Executives of the Primary Agricultural Co-operative societies and they are
employed in a managerial or administrative capacity, I am of the opinion that the paid secretaries are not
workmen within the meaning of Section 2(s)(iii) and (iv) of the Industrial Disputes Act. Other employees of
the society who are not employed in the managerial or administrative capacity or employed in a supervisory
capacity are workmen and they are entitled to seek the appropriate relief either with regard to the dismissal,
retrenchment made contrary to the Industrial Disputes Act by approaching the Labour Court/Industrial
Tribunal under the Industrial Disputes Act. But, the paid secretaries working as Chief Executives of the
Primary Agricultural Co-operative Societies (PACS) being commercial establishments under Section 2(5) of
A.P. Shops & Establishments Act, they are entitled for the appropriate relief under A.P. Shops &
Establishments Act. I have already held that though Section 129 of A.P., Co-operative societies Act states that
the provisions of Andhra Area Shops and Establishments Act, 1951 and Telangana Area Shops and
Establishments Act, 1958 does not apply to the provisions of A.P., Co-operative societies Act, but there is
nothing to show in Section 129 of the Co-operative societies Act that the A.P., Shops & Establishments Act,
1988 has no application. That means, A.P., Shops & Establishments Act is also applicable to Primary
Agricultural Co-operative societies Act.

34. The Commercial Establishment is defined under Section 2(5) of the A.P. Shops and Establishments Act,
1988 is extracted below:-

'Commercial establishment' means an establishment which carries on any trade, business, profession or any
work in connection with or incidental or ancillary to any such trade, business or profession or which is a
clerical department of a factory or an industrial undertaking or which is a commercial of trading or banking or
insurance establishment and includes an establishment under the management and control of a co-operative
society, an establishment of a factory or an industrial undertaking which falls outside the scope of the
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Factories Act, 1948 (Central Act 63 of 1948), and such other establishment as the Government may, by
notification, declare to be a commercial establishment for the purposes of this Act but does not include a
shop".

The employee is defined under Section 2(8) of the A.P. Shops and Establishments Act, 1988, which is
extracted below:-

'Employee' means a person wholly or principally employed in, and in connection with any establishment and
includes an apprentice and any clerical or other staff of a factory or an industrial establishment who fall
outside the scope of the Factories Act, 1948 (Central Act 63 of 1948); but does not include the husband, wife,
son, daughter, father, mother, brother or sister of an employer or his partner, who is living with and depending
upon such employer or partner and is not in receipt of any wages".

The definition of workmen under the Industrial Disputes Act, 1947 under Section 2(s) means, the persons
employed in a supervisory capacity drawing wages exceeding one thousand, six hundred rupees per month
and the persons employed in a managerial or administrative capacity are excluded within the definition of the
workmen. But, as the definition of Section 2(8) of A.P. Shops and Establishments Act, every staff of
Industrial Establishment are also comes within the purview of the employee. Therefore, even the paid
secretaries who are the chief executives of the Primary Agricultural Co-operative Societies comes within the
meaning of employees as defined under A.P., Shops and Establishments Act, 1988.

35. Every employer shall register its establishment under Section 3 of the A.P. Shops and Establishments Act,
1988. Under Section 47 of the A.P. shops and Establishments Act, the employer is entitled to terminate the
services of its employee by giving a notice of one month in writing or by paying the wages of one month in
lieu thereof and also by paying the compensation amounting to fifteen days average wages for each year of
continuous employment. Any termination is made contrary to the provisions of Section 47 of the Act, the
aggrieved employees are entitled to approach the authorities, questioning their termination of services under
Section 48 of the Act. Therefore, if any termination is made without following the provisions of Section 47 of
the A.P., Shops and Establishment Act and Section 25-F of the Industrial Disputes Act as the case may be,
they have appropriate remedies either under the Industrial Disputes Act or under the A.P., Shops and
Establishments Act and also for protection of wages under the Minimum Wages Act apart from having regular
remedies by way of appeal or revision under Sections 76 and 77 of the A.P. Co-operative societies Act and the
bye-laws and special bye-laws of the concerned societies. Therefore, Section 116-C(1) is mandatory on the
part of every society for its compliance so as to enable the concerned societies to implement the relevant laws
under the payment of minimum wages Act, Industrial Disputes Act and under the A.P. Shops and
Establishments Act. Even before the provisions of Section 116-C are implemented, it is not open for the
petitioners to advance all these arguments contending that they are entitled for the wages without reference to
the provisions of Section 116-C(1) of the Act on the one hand, and on the other hand that they are also entitled
to payment of minimum wages and the protection given to them under the Industrial Disputes Act and the
A.P. Shops and Establishments Act, 1988. The paid secretaries being the Chief Executives of the respective
societies, they are bound to properly advise the Managing Committee and General Bodies to guide them
properly for implementation of the provisions of Section 116-C with regard to fixing of the staffing pattern,
pay scales and to obtain the approval of the Registrar of Co-operative Societies keeping in view of the total
expenditure of the pay scales shall not exceed 2% of the working capital or 30% of the gross profit, in terms
of actuals in a year whichever is less. Only after implementation of the said Section 116-C, the petitioners are
entitled for the benefits under the aforesaid relevant Acts and if the society violates any of the said Act, they
have appropriate remedies. Therefore, I am of the view that the petitioners are not entitled for any relief in all
these writ petitions.

36. Sri V. Ajay Kumar, the learned counsel appearing on behalf of the petitioners relied on the Judgment of
the Apex Court in Administrator, Municipal Committee Charkhidari and another Vs. Ramji Lal, Bagla and
others, 1995 (5) Supreme Court Cases 272 and submitted that in the absence of provision for consequence in
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case of non-compliance with the requirements prescribed would indicate directory nature despite use of work
'shall'. As already stated, for non-implementing the provisions of Section 116-C(1), there is not only a charge
on the members of Managing Committee, but also penal action is contemplated against all the concerned and
therefore, Section 116-C is mandatory in nature and the said Judgment of the Supreme Court has no
application to the facts of this case.

37. Sri V. Ajay Kumar also relied on the Judgment in the case of State of Gujarat and another Vs. High Court
of Gujarat, 1998(7) Supreme Court Cases 392 and argued that the action of the societies in getting the services
of the petitioners without paying salaries, amounts to forced labour and therefore, the petitioners are entitled
for payment of reasonable wages as held by the Supreme Court. The Apex Court while dealing with the cases
of the prisoners who are undergoing sentence of Simple Imprisonment, Rigorous Imprisonment and the cases
of Under Trials, held that it is lawful to employ the prisoners sentenced to Rigorous Imprisonment to do hard
labour whether he consents to do it or not. It is open to the Jail Officials to permit other prisoners also to do
any work, which they choose to do, provided, such prisoners make a request for that purpose. It is imperative
that the prisoners should be paid equitable wages for the work done by them. In order to determine the
quantum of equitable wages payable to the prisoners, the State concerned shall constitute a Wage Fixation
Body for making recommendations. Until the State Government takes such decision on such
recommendations, every prisoner must be paid wages for the work done by them at such rates or the revised
rates as the Government concerned fixes in the light of the observations made in the said Judgment, and the
Government was directed to fix the rate of such minimum wages. In the context of coming forward by the
prisoners to work, the Supreme Court held that the Jail Authorities cannot take forced labour from them
without payment of reasonable wages as fixed. Therefore, I am of the view that the principles laid down by
the Apex Court in the said Judgment has no application for the questions involved in these writ petitions as
without getting the fixation of the staffing pattern, pay scales as approved by the Registrar of Co-operative
Societies, the petitioners are not entitled to any salaries over and above the expenditure of 2% of the working
capital or 30% of the gross profit, in terms of actuals in a year whichever is less.

38. The learned counsel for the petitioners also placed reliance on the Judgment of the Apex Court in the case
of People's Union for Democratic Rights and others Vs. Union of India and others, 1982 (3) Supreme Court
Cases 235. The case relates to the workmen engaged in various Asiad projects taken up fop the purpose of
conducting Asian Games at Delhi. In that context, the Government of India had to embark upon various
construction projects which included building of flyovers, stadia, swimming pool, hotels and Asian Games
Village Complex. The construction work was farmed out by the Government of India amongst various
authorities such as the Delhi Administration, the Delhi Development Authority and the New Delhi Municipal
Committee. Writ Petitions were filed by way of Public Interest Litigation that the workmen, working under
the Contractors are not getting even the minimum wages and the rights of the workmen and various labour
laws are violated. In that context, the Supreme Court held that there was violation of fundamental rights of the
workmen. Though the concerned workmen are entitled to approach the Courts for the purpose of enforcement
of their fundamental rights, but that cannot absolve the State from its constitutional obligation to see that there
is no violation of the fundamental right of such person, particularly, when he belongs to the weaker section of
humanity and unable to wage a legal battle against a strong and powerful opponent who is exploiting him.
Accordingly, the Apex Court held that the Union of India, the Delhi Administration and the Delhi
Development authority are under an obligation to ensure observance of various labour laws by the Contractors
and if the provisions of any of those Labour Laws are violated by the contractors, the workmen are entitled to
enforce the obligation against the main employer i.e., Union of India, the Delhi Administration and the Delhi
Development Authority. The principal employer was the State within the meaning of Article 12 of the
Constitution of India and therefore, the Apex Court directed the main employer to enforce the labour laws
while giving contracts and if the contractors fails to implement the labour laws, it is their obligation to fulfill
the requirement of labour laws.

In the instant case, the paid secretaries of the Primary Agricultural Co-operative Societies have become
powerful and dominating the Primary Agricultural Co-operative Societies, they have eaten away the corpus
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fund, making the Primary Agricultural Co-operative Societies to incur heavy losses. The societies are not
departments, organizations or branches of the Government. Primary Agricultural Co-operative Societies are
independent entities to appoint and retrench its employees and also fix the pay scales and other allowances
subject to the restrictions imposed under Section 116-C(1) of the Act. Therefore, I am of the view that the law
laid down by the Apex Court is not applicable to these cases as the societies are not States within the meaning
of Article 12 of Constitution of India to issue any writ under Article 226 of the Constitution of India.

39. The learned counsel for the petitioners also placed reliance in the case of Kapila Hingorani Vs State of
Bihar, 2003 (6) Supreme Court Cases 1. That was the case decided by the Apex Court relating to the non
payment of salaries to the employees of State-owned Corporation and Public Sector Undertakings. The Public
Sector Undertaking were not paying salaries to its employees as the State Government was failed to provide
the funds. Therefore, the Apex Court held that all those Government companies or corporation referred in the
said case are the State within the meaning of Article 12 of the Constitution of India and the State of Bihar
having deep and pervasive control over the affairs thereof can be held to be liable to render all assistance to
the said companies so as to fulfill its own and/or the corporation's obligations to comply with the citizen's
rights under Articles 21 and 23 of the Constitution of India. The Apex Court also held that there is a failure on
the part of the State even to enforce the social-welfare legislations enacted, such as Payment of Wages Act,
Minimum Wages Act and it is the duty of the State being a welfare State to do all things, which they are
statutorily obligated to perform.

40. Admittedly, the Primary Agricultural Co-operative Societies are not funded by the State Government and
therefore, it cannot be said that the societies comes within the meaning of the State or other authority under
Article 12 of the Constitution of India for issuance of any writ under Article 226 of Constitution of India. In
view of the afore said facts and circumstances of the case, the said Judgment only applies to the State
Government undertakings, Corporation and projects, but not the non-statutory bodies like Primary
Agricultural Co-operative Societies.

41. The learned counsel for the petitioners Sri G.V. Shivaji placed reliance in the case of U.P. State
Co-operative Land Development Bank Ltd., Vs Chandr Bhan Dubey and others, 1999(1) Supreme Court
Cases 741 and stated that the writ petition is maintainable against the Primary Agricultural Co-operative
Societies also under Article 226 of Constitution of India as held by the Supreme Court. Admittedly, the
persons who have approached the Allahabad High Court are the employees of U.P. State Co-operative Land
Development Bank. The Supreme Court also noticed the Full Bench Judgment of this Court in the case of Sri
Konaseema Co-operative Central Bank Ltd. Vs. No. Seetharama Raju, AIR 1990 A.P., 171 as to whether writ
lies against the Co-operative Societies and whether the society can be characterized as State within the
meaning of Article 12 of Constitution of India. The Supreme Court held that there was control over the U.P.
State Co-operative Land Development Bank Limited and Sree Konaseema Co-operative Central Bank Limited
and the Government have all pervasive control and the employees had statutory protection and therefore, the
Bank was an authority or even instrument of the State. In those facts and circumstances of the case, the Apex
Court held that the U.P. State Co-operative Central Bank Limited is an authority controlled by the State
Government and the service conditions of the employees of the said Bank with regard to the disciplinary
proceedings against them are statutory in nature and therefore, writ petition is maintainable against the said
Bank. As already stated, there is no financial aid or pervasive control over the functioning of the Primary
Agricultural Co-operative Societies and they are independently formed and managed by the societies
themselves. Only to help the Primary Agricultural Co-operative Societies, the supervisory staff appointed by
the Registrar of Co-operative Societies and the Government are supervising the functions for proper
functioning of the societies alone and therefore, I am of the view that the Primary Agricultural Co-operative
Societies will not come within the meaning of State under Article 12 of the Constitution of India.

42. No doubt, the employees are entitled to minimum wages and the employer who cannot pay the minimum
wages has no right to engage them and there cannot be any justification to run the industry. Therefore, to pay
the minimum wages, it is the duty of the society to implement the provisions of Section 116-C(1) of the Act.
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Before implementing the said provision, it is not open for its employees to have the grievance of non-payment
of minimum wages. They are appointed contrary to the provisions of Section 116-C(1) and therefore, unless
their services are regularized in the manner as contemplated under Section 116-C(1), they cannot have any
grievance to complain against the implementation of minimum wages.

43. In the case of Nazira Begum Laskar and others Vs. State of Assama and others, AIR 2001 Supreme Court
102, the Supreme Court held that the termination of Assistant Teachers of Primary Schools whose
appointments were contrary to the statutory recruitment rules, though was made against the vacancy position,
but the same was not done in accordance with the provisions of the rules, therefore, the said terminations are
valid and legal. The appointments to the posts are governed by the set of statutory rules and prescribed
procedure therein has not been followed and on the other hand, appointments have been made
indiscriminately, immediately after the posts were allotted to different districts at the behest of some unseen
hands, such appointments would not confer any right on the appointee nor such appointee can claim any
equitable relief from the Court.

44. In the case of Ashwani Kumar Vs State of Bihar,

the Supreme Court held that as the appointments had been made illegal and contrary to all recognized
recruitment procedure and were highly arbitrary, the same were not binding on the State of Bihar. As the
initial appoints have been made contrary to the statutory rules, the continuance of such appointees must be
held to be totally unauthorized and no right would accrue to the incumbent on that score. The Supreme Court
also held that it cannot be said that principles of natural justice were violated or full opportunity was not given
to the employees concerned to have their say in the matter before their appointments were recalled and
terminated. The said principles laid down by the Apex Court are equally applies to the present cases as the
appointments of the petitioners are contrary to the provision of Section 116-C(1) and unless the staffing
pattern, pay scales is approved fulfilling the conditions laid down therein, the petitioners cannot complain
about the violations of other welfare enactments.

45. In the case of Maharashtra Vikrikar Karamchari Sangthan Vs. State of Maharashtra and another, 2000(2)
Supreme Court Cases 552, the Supreme Court held that certain Sales Tax Inspectors were temporarily
promoted because no candidates were available for direct recruitment for the posts of Sales Tax Inspectors.
Promotions given to the promotees in excess of their quota for the respective unit years were treated as
temporary promotions. Therefore, the said promotions made by the Government cannot be treated as regular,
but they are temporary/adhoc or stopgap arrangements. The certificates produced by the said promotees
stating that their promotions are regular and functioning continuously has no validity. Merely because, some
of them have put in more than 17 years of service and when the direct recruitees were either studying or not
born in the cadre, the said promotees were pushed down as against the direct recruitees, it cannot be aid that it
would cause great hardship. As there is a patent violation of quota rule, the result must follow and the
promotees who remained in the office for all these years cannot take advantage of their long standing.

46. With regard to the maintainability of these writ petitions against the Primary Agricultural Co-operative
societies as to whether the societies are considered to be a State within the meaning of Article 226 of
Constitution of India, the principle laid down by the Supreme Court in the case of Union of India (Railway
Board) and others Vs. J.V. Subhaiah and others, 1996(2) Supreme Court Cases 258 is relevant. The said case
also arose under the Andhra Pradesh Co-operative Societies Act, 1964. The Railway Co-operative Stores were
registered under the Andhra Pradesh Co-operative Societies Act as amended from time to time. The
Co-operative Stores were organized by the Railway Administration as a welfare measure to inculcate, thrift
and cooperative spirit in the management of the Co-operative Societies, distribution of essential commodities
and lending of credit facilities etc., to the members of the societies. The societies are formed at Railway
junctions and the working of the societies is supervised by the Welfare Officers appointed by the Railway
Administration. In that case, 1/3rd members of the societies are nominated by the Railway Administration.
The Railway Administration has no control over the selection, appointment and payment of salaries to the
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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

staff of the society. Their work is controlled and supervised by the Welfare officers appointed by the Railway
Administration, as in the case of Primary Agricultural Co-operative Societies, the supervisory staff was
appointed by the Commissioner of the Co-operative Societies. While dealing with the similar contentions, the
Supreme Court held that such societies organized as a welfare measure to inculcate co-operative movement,
self help and thrift among the officers and servants of the Railway Administration entitling them certain
benefits. The relevant provisions in the Co-operative Societies Act were also noticed particularly Section
116-C of the Act, which empowers the society with prior approval of the Registrar to fix staffing pattern,
qualification, pay scales and other allowances. The rights and liabilities are subject to the bye laws, rules and
Act. The Society owes its existence and continuance by its efficient and proper management by the
Committee assisted in its day-to-day management by its staff. The relevant Rules 28 and 29 were also noticed
and held that the power to prescribe strength of the establishment, appointment of the staff of the society, its
officers, employees and servants and their scale of pay are regulated by bye laws, rules and the Act.
Disciplinary control lies with the president and the Committee. Appoint of officers, employees and servants of
the Society is regulated by the provisions of the Act, rules and the bye-laws as self-contained scheme and
code. The Society enjoys autonomy as a body corporate subject to the provisions of the Act, Rules and
bye-laws and it enjoys exclusive power to appoint and keep disciplinary control over the staff in its
establishment. It was also observed that instructions issued are only to regulate the systematic organization
and management of the societies.

In the case of the Primary Agricultural Co-operative Societies also, the service conditions of the employees of
the societies are not regulated by the State Government, but they are governed by the bye laws of the societies
subject to the control and sanction by the Registrar under the Act or the relevant provisions. There is no
obligation on the part of the State Government to provide any financial aid or have any supervision over the
management and functioning of the society as long as the societies are acting inconsonance with the Act and
rules. Accordingly, the Apex Court held that there is a duel control over the staff by the society and the
Registrar, but the Registrar has no role to play in the day-to-day administration of the societies and there is no
subsidy given by the State in respect of the Primary Agricultural Co-operative Societies. Therefore, the Apex
Court held that the Railway employees are not entitled for the regular salaries to be paid by the Railway
Administration. Therefore, the principles of equity enshrined under Article 14 of the Constitution does not
apply as the officers, employees and servants appointed by the Railway Co-operative Stores/societies cannot
be treated on par with the Railway servants nor can they be given parity of status, promotions, scales of pay,
increments etc.

47. The Division Bench of this Court in the case of Administration Staff College of India, Hyderabad Vs. D.P.
Seshachalam, 1990 (1) LLJ 575, with regard to the maintainability of the writ petition against the
Administration Staff College, after considering several decisions of the Apex Court, held that as per the
principles laid down by the Supreme Court in Ramana Dayaram Shetty Vs. International Airport Authority
(1997-II-LLJ-217), it is pointed out that for determining whether a Corporation is an instrumentality or an
agency, the following tests have to be observed:-

1. On thing is clear that if the entire share capital of the Corporation is held by the Government, it would go a
long way towards indicating that the Corporation is an instrumentality or agency of Government.

2. Existence of 'deep and pervasive State control' may afford an indication that the Corporation is a State
agency or instrumentality.

3. It may also be a relevant factor whether the Corporation enjoys monopoly status which is State conferred or
State protected.

4. If the functions of the Corporation are of public important and closely related to Governmental functions, it
would be a relevant factor in classifying the corporation as an instrumentality or agency of Government.

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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

5. Specifically, if a department of Government is transferred to a corporation, it would be a strong factor


supportive of this inference of the Corporation being an instrumentality or agency of Government.

With regard to test No. 1 is concerned, the entire share capital of the Primary Agricultural Co-operative
Societies are held by its members and the Government is not having any shares in the Primary Agricultural
Co-operative Societies. With regard to test No. 2 is concerned, except supervisory jurisdiction for proper
functioning as per its aims and objectives, there is no deep or any pervasive State control over the PACS.
With regard to test No. 3, the PACS enjoys autonomous status. The functions of the Primary Agricultural
Co-operative Societies are not closely related to the Governmental functions and therefore, they cannot be
classified as instrumentalities or agency of the Government. With regard to test No. 5, the Primary
Agricultural Co-operative Societies are not Departments of Government and they are not agencies of the
Government. The Division Bench held while considering the said decisions that the Administrative Staff
College is not a State so as to come within the purview of the other authorities under Article 12 of the
Constitution of India, therefore, writ cannot lie. The said principle squarely applies in so far as the Primary
Agricultural Co-operative Societies are concerned.

48. In the case of Ch. Ankamma Vs. Registrar of Co-operative Societies, Hyderabad and others, , the Division
Bench of this

Court consisting of His Lordship the then Chief Justice S.B. Sinha and His Lordship Justice V. V.S. Rao,
while considering the Judgments of the Supreme Court in the case of U.P. State Co-operative Land
Development Bank Limited Vs. Chandra Bhan Dubey and Konaseema Co-operative Central Bank Ltd.,
Amalapuram Vs. N. Seetharama Raju (AIR 1990 AP 171), held that for the purpose of holding that a society
or Co-operative Society is a State, one of the criteria that has to be considered is as to whether it discharges
any sovereign function. Some amount of control over such societies by the State or some amount of funding
would not render the same as the instrumentality or agency of the State. The said Division Bench while
reviewing the entire case law on this aspect about the maintainability of the writ petitions against the societies,
held that at the instance of the paid secretary whose services were terminated cannot be entertained as no
public law remedy is available to him in the absence of violation of any statutory regulations.

49. While considering the similar claims of the employees of the Primary Agricultural Co-operative Societies
filed for issuance of writ of mandamus declaring the action of the respondents in not paying the salaries to
them is illegal, arbitrary and violative of Articles 14 and 21 of the Constitution of India and consequently
direct the respondents to pay salaries to them without reference to Section 116-C of the Act; my learned
Brother Justice Goda Raguram, in the case of S. Bala Narsaiah and others Vs. State of A.P., and Registrar of
Co-operative Societies and others (W.P. No. 11445 of 2003), held as follows:-

"Petitioners claim to be employed as Paid Secretaries of several Primary Agricultural Co-operative Societies
in Nalgonda district of the State. Section 116-C of the Co-operative Societies Act, 1964 (for short 'the Act') as
amended by Act 22 of 2001 ordains that the expenditure of a society towards pay and allowances of its
employees shall not exceed 2% of the working capital or 30% of the gross capital in terms of actuals in a year,
whichever is less. Consequent on this ceiling of expenditure towards pay and allowances obligated by Section
116-C of the Act, the State Government, Registrar of Co-operative Societies and other officials in the
co-operative department have issued circulars requiring several primary agricultural co-operative societies to
so restrict the salaries of their employees as to conform with the provisions of Section 116-C of the Act.
Without challenging the validity of Section 116-C of the Act, the petitioners seek a direction that they should
be paid salaries as were paid in the month of February, 2003 and that they should be continued to be paid the
same salaries. These claims are made against primary agricultural co-operative societies. The petitioners'
entitlement to salaries from various primary agricultural co-operative societies, which are neither pleaded,
urged or demonstrated to be State within the meaning of Article 12 of the Constitution of India, do not have
any public law component warranting adjudication under Article 226 of the Constitution of India. The writ
petition is accordingly dismissed. No costs."
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The said Judgment applies in all force to hold that the petitioners have not demonstrated as to how the
Primary Agricultural Co-operative Societies comes within the purview of the State within the meaning of
Article 12 of Constitution of India. The Primary Agricultural Co-operative Societies do not have any public
law component warranting adjudication under Article 226 of the Constitution of India.

50. For the aforesaid reasons, I am of the opinion that the petitioners are not entitled for any relief in these
writ petitions, as such, the repeated contentions advanced by them in various cases have been rejected in the
aforesaid decisions. Section 116-C(1) is mandatory in nature and all the societies are bound to fix the staffing
pattern, qualifications, pay scales and other allowances for its employees and get the approval of the Registrar
of Co-operative Societies, showing the expenditure towards the pay and allowances not exceeding 2% of the
working capital or 30% of the gross profit, in terms of the actual in a year whichever is less.

51. It is also pertinent to note that the State Government in exercise of its powers for the smooth
implementation of Section 116-C(1), issued certain orders in G.O.Ms. No. 308, Agriculture and Cooperation
(Coop-VI) Department, dated 19-11-2003 and G.O.Ms. No. 94, Agricultural and Cooperation (Coop.VI)
Department dated 28-2-2004 and G.O.Ms. No. 1104, Agricultural and Cooperation (Coop.VI), dated
4-12-2003. The validity of the said Government Orders was also questioned by the A.P., Co-operative
Societies Secretaries and Employees Union and my learned Brother Justice Goda Raghuram dismissed the
said Writ Petition No. 25318 of 2003 on 6-8-2004 and all such similar contentions have been rejected by the
learned Judge in the said order.

52. With regard to the delegation of powers of the Registrar under Section 116-C is concerned, as per the
orders of the Government in G.O.Ms. No. 34, Food and Agriculture (Coop.VI) Department dated 18-1-1989
as amended from time to time, the Special Cadre Deputy Registrar of Co-operative Societies working as
District Co-operative Officers are alone delegated powers of the Registrar under Section 116-C(1) of the Act
in so far as the Primary Agricultural Co-operative Societies are concerned.

53. Sri D.V. Bhadram, learned counsel appearing for some of the petitioners submitted that the Deputy
Registrar of Co-operative Societies in-charge of the Divisions has approved the staffing pattern sand
therefore, the said approvals have no authority of law. Though the said Divisional Registrars of Co-operative
Societies have approved the staffing pattern, it is not brought to my notice that the said proposals sent by the
concerned Primary Agricultural Co-operative Societies are not in confirmity with the provisions of Section
116-C(1). As the said proposals are in accordance with the stipulations contained under Section 116-C(1), the
Deputy Registrar of Co-operative Societies having without any delegation of powers have approved. If the
said proposals are not in confirmity or even in confirmity with the provisions of Section 116-C, it is open for
such of those petitioners to file a revision before the Registrar of Co-operative Societies under Section 77 of
A.P. Co-operative Societies Act if they have any grievance with regard to the proposals submitted by the
Primary Agricultural Co-operative Societies.

54. The sum and substance and the effect of the aforesaid Judgments is only to implement the mandatory
provisions of Section 116-C of the Act so as to enable the societies to fix the staffing pattern, qualifications,
pay scales and other allowances for its employees with prior approval of the Registrar of Co-operative
Societies subject to the condition that the expenditure towards the pay and allowances of the employees shall
not exceed 2% of the working capital or 30% of the gross profit in terms of actual in a year whichever is less.
It is mandatory on the part of the respective Primary Agricultural Co-operative Societies to fix the staffing
patter, pay and allowances and the expenditure towards the pay and allowances shall not exceed the aforesaid
criteria. As long as the provisions of Section 116-C(1) are not implemented and as long as the said mandatory
provision is violated, the members of managing committee is not only liable for the surcharge proceedings
and also penal action is contemplated apart from implementing the Minimum Wages Act. As such, it is
mandatory on the part of the societies to implement the said provisions. Therefore, the Commissioner and
Registrar of Co-operative Societies has issued guidelines and circulars from time to time guiding the Primary
Agricultural Co-operative Societies to implement the said provision. Therefore, I do not see any illegality
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A. Subramanyam Naidu And Ors. vs The Government Of Andhra Pradesh, ... on 30 August, 2004

either in the guidelines or in the circulars issued from time to time. To implement the said mandatory
provision, the concerned societies have to necessarily take appropriate action for fixing the staffing pattern,
pay and allowances and in that process, it is open for them to retrench/remove the surplus employees who are
working contrary to the provisions of Section 116-C(1) of the Act. If any employee is retrenched or
terminated contrary to the provisions of 25-F of the Industrial Disputes Act or 47 of the A.P Shops and
Establishments Act as the case may be, it is open for them to seek appropriate reliefs provided under the said
Acts.

55. For the aforesaid reasons, I do not see any merits in the writ petitions, and as they are not maintainable,
they are accordingly, dismissed. No order as to costs.

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