Section 103 MSCS Act Does Not Automatically Convert State Cooperative Society Into Multi-State Society Upon Reorganisation Of A State: Supreme Court

The Court was hearing civil appeals filed by the State of Uttar Pradesh challenging a judgment of the Allahabad High Court which had treated certain cooperative sugar factories as multi-State cooperative societies after the bifurcation of the erstwhile State into Uttar Pradesh and Uttarakhand.

A Bench comprising Justice Vikram Nath and Justice Sandeep Mehta, upon examining the material placed on the record, held that “Section 103 of the Multi-State Cooperative Societies Act, 2002 does not, by itself, confer an automatic or deemed status of a multi-State cooperative society upon every society registered under a State Cooperative Societies Act merely because the parent State has undergone reorganisation.”

Rana Mukherjee, Senior Advocate, appeared for the appellant-State.

Background

The issue concerned cooperative sugar factories originally registered under the then-applicable cooperative law, later governed by the Uttar Pradesh Cooperative Societies Act after its enactment. After the U.P. State Reorganisation Act, 2000, disputes arose on whether such societies became multi-State cooperative societies due to bifurcation into Uttar Pradesh and Uttarakhand.

Shareholders approached the High Court contending that, by virtue of Section 103 of the 2002 Central Act, the societies attained the status of multi-State cooperative societies and the State Government could not exercise authority under the State Act. The Allahabad High Court accepted this construction and declared the State’s actions relating to these cooperative sugar mills to be without jurisdiction.

The State challenged the High Court’s judgment before the Supreme Court, raising the central issue of whether Section 103 operated to “transform” the subject society into a multi-State cooperative society solely on account of reorganisation.

Court’s Observation

The Supreme Court framed the matter as one turning entirely on the construction of Section 103 of the 2002 Act, which provides a deeming mechanism for treating certain societies as multi-State cooperative societies upon reorganisation. The Court held that the provision cannot be read in isolation and must be construed within the scheme and structure of the Central Act.

The Apex Court clarified that a multi-State cooperative society can come into existence in three ways: direct registration under Section 5, conversion through amendment of bye-laws under Section 22, and deemed conversion under Section 103. It held that the deemed conversion under Section 103 must still align with the core statutory requirement that the objects extend to more than one State, because Section 103 operates within the same Act, which restricts multi-State status to societies meeting the Section 5 framework.

“The applicability of Section 103 requires a factual enquiry in each case as to whether the objects of the society extend to more than one State. If the objects are found to span more than one State, the deeming fiction under Section 103 will operate, and the society would be treated as a multi-State cooperative society. If the objects remain confined to only one State, the status of the society will remain unchanged”, the Court remarked.

The Court further examined the legislative scheme, noting “section 5 of the Multi-State Cooperative Societies Act, 2002 mandates that a society may be registered as a multi-State cooperative society only when its principal objects, as reflected in its bye-laws, serve the interests of members in more than one State”, while clarifying that “it is, therefore, a pre-condition that the objects span more than one State”.

The Court then addressed the meaning of “object”. It referred to Section 10(2), which separately enumerates “area of operation” and “objects” as distinct matters in bye-laws, and held that Section 103’s use of the word “objects” cannot be judicially substituted with “area of operation.”

Rejecting the interpretation accepted by the High Court, the Apex Court held that reorganisation does not ipso jure convert every State society into a multi-State society. It relied on the principle that statutory words must draw meaning from context and scheme, and cited Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill to reiterate that provisions cannot be interpreted in isolation.

The Court also held that the residence or domicile of members/shareholders is irrelevant to the Section 103 enquiry. It held that Section 5’s reference to “more than one State” pertains to the society’s objects and not to where members reside, and therefore held that “the residence or domicile of the members of the cooperative society has no bearing on determining whether the society is a multi-State cooperative society”.

Applying these principles to the case, the Court noted that the High Court had not examined the bye-laws and did not advert to the society’s objects as required. The private respondents’ stand before the High Court was focused on the area of operation and procurement across States, but the Court held that the crucial statutory enquiry remains confined to “objects,” and noted that the respondents’ pleadings were silent on extending objects beyond one State. Proceeding on that footing, the Apex Court held that the society could not be treated as a multi-State cooperative society under Section 103.

Conclusion

Accordingly, based on this reasoning, the Supreme Court allowed the appeal and set aside the Allahabad High Court’s judgment. The petitions were accordingly dismissed, and pending applications closed off.

Cause Title: The State Of Uttar Pradesh Through Principal Secretary & Ors. v. Milkiyat Singh & Ors. Etc. (Neutral Citation: 2025 INSC 1427)

Appearances

Appellant: Rana Mukherjee, Senior Advocate, with Advocates Rohit K. Singh, AOR; Oindrila Sen, Samarth Mohanty, Kartikey Bansal, Shivansh Pundir

Respondents: None Appeared

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