Deeming Fiction Under Multi-State Cooperative Societies Act Cannot Override Statutory Scheme Of Reorganisation Act: Supreme Court

The Court observed that the legal fiction created under Section 103 must be strictly confined to its limited purpose and cannot be extended to invalidate actions lawfully taken under the Reorganisation Act.

The Court was hearing a batch of civil appeals arising from a dispute concerning the legal status of certain sugarcane growers’ cooperative societies following the bifurcation of the erstwhile State of Uttar Pradesh and the creation of the State of Uttaranchal (now Uttarakhand).

A Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, while examining the statutory scheme governing cooperative societies and State reorganisation, held: “It is well settled legal proposition that a legal fiction must be strictly confined to the purpose for which it is created and cannot be extended beyond its legitimate field. Legal fictions are crafted tools, precise in purpose and limited in reach. The deeming fiction created under Section 103 of the 2002 Act cannot, in any case, be construed in isolation so as to override the express statutory scheme contained in the Reorganisation Act, which is an enactment governing all legal, administrative and institutional consequences arising from the bifurcation of the erstwhile State of Uttar Pradesh. The Reorganisation Act also has a non obstante clause, i.e., Section 93. The deeming fiction, which though provides for a contingency on bifurcation of State, embodied in Section 103 of the 2002 Act, did not apply in view of the decision taken for reconstitution of the societies under the Reorganisation Act”.

Background

The dispute concerned the legal status of sugarcane growers’ cooperative societies whose area of operation originally extended across territories that later fell within the successor States of Uttar Pradesh and Uttarakhand after the enactment of the Uttar Pradesh Reorganisation Act, 2000.

Following the creation of the new State on 9 November 2000, certain villages forming part of the societies’ operational areas fell within the territory of Uttar Pradesh, while others fell within Uttarakhand. To address this situation, officials of both States convened a meeting in February 2001 and decided that societies whose areas spanned both States would be reorganised.

Pursuant to this decision, resolutions were passed by the general bodies of the societies and administrative orders were issued, deleting villages located in Uttar Pradesh from the societies’ area of operation and reorganising them as separate cooperative societies confined to their respective States.

Subsequently, a dispute arose when it was contended that by virtue of Section 103 of the Multi-State Cooperative Societies Act, 2002, the societies had automatically acquired the status of Multi-State Cooperative Societies upon the reorganisation of the State. The High Court accepted this contention and held that the societies were deemed to be Multi-State Cooperative Societies, thereby directing that elections be conducted under the authority of the Central Registrar.

The said judgment was challenged before the Supreme Court.

Court’s Observation

The Supreme Court undertook a detailed examination of the interplay between the Uttar Pradesh Reorganisation Act, 2000 and the Multi-State Cooperative Societies Act, 2002. The Court noted that the Reorganisation Act provides a comprehensive statutory framework governing the legal, administrative, and institutional consequences arising from the bifurcation of the erstwhile State of Uttar Pradesh.

The Bench observed that Section 87 of the Reorganisation Act embodies the principle of legislative continuity, enabling existing laws to continue operating in the successor States for a transitional period while necessary adaptations or modifications are made. The Court further noted that Section 93 of the Reorganisation Act contains a non-obstante clause giving overriding effect to the provisions of the Act over inconsistent provisions contained in any other law.

In this statutory context, the Court examined Section 103 of the Multi-State Cooperative Societies Act, 2002, which introduces a legal fiction whereby certain cooperative societies affected by State reorganisation may be deemed to be Multi-State Cooperative Societies. The Bench emphasised that legal fictions are precise statutory devices and must be strictly confined to the purpose for which they are created.

The Court held that the deeming fiction under Section 103 cannot be interpreted in isolation to override the statutory scheme of the Reorganisation Act. Where steps for reorganisation of cooperative societies had already been undertaken under the Reorganisation Act, the legal fiction under Section 103 could not retrospectively invalidate those completed actions.

“The overriding effect of the Reorganisation Act and the effect of Section 103 of the 2002 Act necessitates a harmonious construction by which the operation of legal fiction has to be restricted, in cases where action for reorganisation of the Societies has already been taken and in respect of the Society whose objects and area of operation are confined to a single State. A deeming provision under Section 103 of the 2002 Act cannot unsettle such completed action for reorganisation, by virtue of Sections 87 and 93 of the Reorganisation Act”, the Bench remarked.

The Court, while relying on its previous decision in State of Uttar Pradesh v. Milkiyat Singh (2025), also observed that the deeming fiction under Section 103 does not operate automatically. Its application depends upon a factual determination of whether the principal objects of the society extend to more than one State.

The Court reiterated that there is a conceptual distinction between the “objects” of a society and its “area of operation.” The mere fact that members or activities may extend across geographical boundaries cannot substitute the statutory requirement that the principal objects of the society must themselves be multi-State in character.

Upon examining the bye-laws of the societies concerned, the Court found that their objectives were confined to safeguarding and promoting the interests of local sugarcane growers. The objects did not demonstrate any intention to serve members across State boundaries. Consequently, the statutory conditions necessary for invoking the deeming fiction under Section 103 were not satisfied.

Conclusion

The Supreme Court concluded that the sugarcane growers’ cooperative societies in question could not be treated as Multi-State Cooperative Societies under the Multi-State Cooperative Societies Act, 2002.

Accordingly, the Court set aside the judgment of the High Court, which had held otherwise. The Court upheld the validity of the reorganisation undertaken under the Reorganisation Act and directed the authorities under the State cooperative law to conduct elections of the societies expeditiously.

Cause Title: Registrar Cane Cooperative Societies & Ors. v. Gurdeep Singh Narval (Dead) Through LRs & Ors (Neutral Citation: 2026 INSC 216)

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