The High court of Kerala upheld ordinances regarding the amalgamation of district cooperative societies with the Kerala state cooperative societies. The question was whether the amended section 74H(1) and sec 2(ia) of the ordinance promulgated by the Governor of Kerala was constitutionally valid and it was argued by the petitioners to  struck down the amended provisions on the ground that it was  arbitrary and unreasonable under art 14 and violative of Art 19(1)(c) and in violation of the constitutional obligation of the state under Art 43B.

The Kerala state cooperative societies act 1969 and the Kerala cooperative societies rules provides for the establishment of cooperative societies in the apex, central and primary levels. The government felt that it had to review the structure to make it effective and hence, made suggestions for delayering the three tier system to two tier. On getting the ‘in principal’ approval of the RBI, the Government promulgated an ordinance by amending the said Act inserting Sec 14A providing for the transfer of assets and liabilities to the Kerala state cooperative bank (KSCB) by the district cooperative bank (DCB) after passing a resolution to that effect. Following unsuccessful challenges to the ordinance, Malappuram district cooperative bank refused the proposal to amalgamate. Consequently, another ordinance was promulgated bringing an amendment to sec 2(ia) and Sec 74H of the Act empowering the Registrar after consultation with the RBI to order the merge of DCBs with KSCB in case of noncompliance of Sec 14A by DCBs. These ordinances were challenged in the High court through various writ petitions.

Regarding the questions confronted by the court, the court pointed out that Art 19(1)(c) protects the rights of citizens to associate and that cooperative societies are not citizens who can have fundamental rights guaranteed under Part III of the constitution and that not even a citizen has a fundamental right to be members of a society. The court opined that the intention behind the amendment is to enable the Co-operative sector to realize its full potential by removing issues relating to governance, financial health, upgradation of technology and by removing the middle tier the lower tier will have a direct role in decision making. The court also stated that the classification made under Art 14 was on sound and intelligible basis and clearly stands the tests laid down by the Apex court. Stating down these, the court upheld the ordinances.