A) ABSTRACT / HEADNOTE

The judgment in Shri. Masaidevi Vividh Karyakari Sahakari Seva Sanstha Maryadit Warewadi v. The State of Maharashtra & Ors., 2025 INSC 436; [2025] 5 S.C.R. 409, concerns the legality of government action in granting registration to a proposed Primary Agricultural Credit Co-operative Society (PACCS). The Supreme Court examined whether the High Court correctly set aside the State Government’s order that had overridden the Scrutiny Committee’s rejection of the appellant-society’s registration proposal.

The Committee, constituted under Government Resolution dated 23.09.2013, had rejected the application owing to multiple deficiencies, primarily the absence of proof of economic viability as required under Sections 4 and 6 of the Maharashtra Co-operative Societies Act, 1960, and under Government Resolution dated 14.02.2017. The State, however, allowed the appeal by relaxing these mandatory prerequisites on the basis of unsubstantiated undertakings and general assertions by the appellant-society.

The Supreme Court emphasised that the statutory mandate under Section 4 prohibits registration of societies that are “likely to be economically unsound,” and that the policy regime instituted through Government Resolutions makes the Scrutiny Committee the expert body responsible for evaluating such financial viability.

The State, by disregarding the Committee’s findings and accepting hypothetical claims, acted contrary to its own binding policy framework. The High Court, therefore, was justified in restoring the Committee’s decision. The Supreme Court upheld the High Court’s view and dismissed the appeal, holding that administrative discretion cannot be exercised in a manner that defeats the statutory scheme or the objectives of cooperative development.

Keywords: economic viability; Sections 4 & 6 MCS Act, 1960; Primary Agricultural Credit Co-operative Society; Scrutiny Committee; Government Resolutions; financial prerequisites; registration of societies; locus standi; State discretion; patent illegality.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The matter arises from a challenge to the State Government’s decision to allow the registration of a new Primary Agricultural Credit Co-operative Society (PACCS) despite the rejection of the proposal by the expert Scrutiny Committee constituted under Government Resolution dated 23.09.2013 for examining financial viability. The appellant-society had applied on 13.01.2023 to the Assistant Registrar seeking registration of a new PACCS for the revenue village of Warewadi.

The Committee rejected the application on 13.04.2023 after recording detailed findings that the proposal lacked evidence of financial viability, did not adhere to documentary standards prescribed by Government policy, and failed to demonstrate compliance with the statutory scheme under Sections 4 and 6 of the Maharashtra Co-operative Societies Act, 1960.

The appellant preferred an appeal under Section 152 of the 1960 Act before the State Government. The Minister for Co-operatives set aside the Committee’s rejection and directed registration of the society on 28.06.2023, basing this reversal largely on assurances and future commitments made by the appellant-society, including proposed mobilisation of Rs. 5 lakh share capital within three years despite Government Resolution dated 14.02.2017 requiring the share capital to exist at the time of registration. The State also accepted speculative arguments that societies can undertake 152 types of business activities aside from agricultural lending.

Respondent No. 6, a member of an existing co-operative society operating within the same geographical area, challenged this order before the High Court. The High Court held that even though the respondent’s locus was debatable, the State’s order suffered from patent illegality for ignoring mandatory statutory and policy conditions. It restored the Committee’s decision. The appellant thereafter approached the Supreme Court.

The Supreme Court, after analysing the statutory framework, the Government Resolutions, and the Committee’s findings, upheld the High Court’s order, emphasising that economic viability is a mandatory precondition to registration and that State discretion cannot nullify policy norms or statutory objectives. The appeals were dismissed.

D) FACTS OF THE CASE

The appellant-society filed an application for registration of a proposed PACCS on 13.01.2023 before the Assistant Registrar, seeking permission for registration as well as for opening a bank account.

The Scrutiny Committee, constituted under Condition No. 5 of the Government Resolution dated 23.09.2013, undertook an examination of the proposal with specific focus on the society’s financial capability as mandated under Section 4 of the 1960 Act, which prohibits registration of societies likely to be “economically unsound.”

The Committee recorded several deficiencies. It noted the absence of verification regarding whether the proposed area fell within another society’s jurisdiction; lack of verification of promoters’ membership in other societies; and the absence of crop-wise cultivated area certification.

The Committee also found that no undertaking from the Kolhapur District Central Co-operative Bank or any other financial institution was furnished to demonstrate potential credit support. The proposal lacked essential documents such as 7/12 extracts and extracts from the Crop Sowing Register, rendering it impossible to ascertain the proposed loan distribution.

The Committee further noted that the existing society in the revenue village was itself financially weak and disbursing loans of less than Rs. 150 lakhs, indicating an already strained credit ecosystem. The proposal of the appellant lacked proof of its ability to mobilise the minimum share capital of Rs. 5 lakhs mandated under Criterion 1A of Government Resolution dated 14.02.2017.

Instead, the appellant relied on a certificate issued by a Gaon Kamgar Talathi asserting potential loan sanction of more than Rs. 150 lakhs without providing supporting documents. The Committee concluded that the proposed society was financially non-viable and rejected the application on 13.04.2023.

The appellant challenged this decision before the State under Section 152 of the 1960 Act. The State, on 28.06.2023, allowed the appeal by setting aside the Committee’s order. It held that no existing society had objected, that the proposed society could undertake multiple business activities, and that share capital could be raised within three years. The State treated geographical inconvenience suffered by villagers as a supporting factor for registration.

Respondent No. 6 filed a writ petition before the Bombay High Court, arguing that the State had ignored mandatory criteria. The High Court allowed the petition, holding that the State’s order violated Section 4 and contradicted binding Government Resolutions. The appellant thereafter filed the present appeals before the Supreme Court.

E) LEGAL ISSUES RAISED

i. Whether the State Government was justified in overturning the Scrutiny Committee’s rejection despite the appellant’s failure to prove economic viability as mandated under Section 4 of the Maharashtra Co-operative Societies Act, 1960?

ii. Whether the High Court correctly exercised jurisdiction in setting aside the State’s order on the ground of patent illegality?

iii. Whether relaxation of mandatory prerequisites under Government Resolutions dated 23.09.2013 and 14.02.2017 could be granted by the State in the course of an appeal?

iv. Whether respondent No. 6 possessed the locus standi to challenge the State Government’s order?

F) PETITIONER/APPELLANT’S ARGUMENTS

The appellant submitted that it was the first and only co-operative society in the revenue village and that the Assistant Registrar had acknowledged this fact. It argued that securing Rs. 5 lakhs share capital at the time of registration was impractical, and therefore its undertaking to raise such capital within one to three years should suffice. It maintained that substantial efforts were made to fulfil documentary requirements.

The appellant contended that financial viability cannot be assessed solely on farm-loan distribution metrics because co-operative societies may engage in up to 152 auxiliary business activities capable of generating revenue. It further submitted that Respondent No. 6 lacked locus standi because the existing society had allegedly issued a No Objection Certificate and an individual member cannot contradict the society in absence of a formal resolution.

The appellant argued that increasing village population justified the need for an additional PACCS and that it had exceeded the minimum membership requirement under Condition No. 4 of the Government Resolution dated 23.09.2013, having enrolled 150 members.

G) RESPONDENT’S ARGUMENTS

The respondents argued that eligibility for registration must be determined strictly in accordance with financial viability criteria under Section 4 and relevant Government Resolutions. The appellant failed to produce any documentary proof of its economic viability, including bank undertakings or evidence of share capital.

It was asserted that the Scrutiny Committee, as an expert body, conducted a detailed evaluation and its findings could not be lightly disregarded. The State’s order was termed perverse for accepting unsubstantiated undertakings. The respondents further stated that Respondent No. 6, as a member of an existing society, had a vital interest since the entry of an unviable new society could destabilise the functioning of the existing society.

The respondents highlighted that the No Objection Certificate relied upon by the appellant was unauthorised and absent from official records. They also alleged that the appellant artificially inflated membership by including deceased persons, thereby showing mala fides. It was argued that the State’s relaxation of the mandatory Rs. 5 lakhs share capital requirement was contrary to Criterion 1A of Government Resolution dated 14.02.2017.

H) RELATED LEGAL PROVISIONS

i. Section 4, Maharashtra Co-operative Societies Act, 1960 – prohibits registration of societies likely to be economically unsound.

ii. Section 6, Maharashtra Co-operative Societies Act, 1960 – prescribes minimum membership and viability parameters.

iii. Government Resolution dated 23.09.2013 – sets revised criteria including minimum 75 accounting members and establishment of a Scrutiny Committee.

iv. Government Resolution dated 14.02.2017 – mandates minimum Rs. 5 lakhs share capital at the time of registration and emphasises economic viability.

H) JUDGMENT

The Supreme Court upheld the High Court’s decision and dismissed the appeals. It held that the economic viability of a society is a pre-requisite under Section 4 and a foundational condition for registration

. The Court emphasised that Condition No. 5 of the 2013 Government Resolution establishes the Scrutiny Committee specifically to evaluate this aspect. The Committee’s findings formed a vital part of the statutory and policy framework, and the State was obligated to consider them with due seriousness.

The Court noted that the Committee’s report contained detailed reasons demonstrating non-compliance with viability criteria chiefly absence of bank undertakings, insufficient documentation, and failure to show capacity to mobilise mandatory share capital of Rs. 5 lakhs as per Criterion 1A of the 2017 Government Resolution.

The State, however, disregarded these findings and overturned the Committee’s decision based on speculative assertions that societies may undertake 152 business activities. The Court rejected this reasoning, holding that hypothetical possibilities cannot substitute mandatory compliance.

The Court clarified that while the State may have discretion to relax conditions, such relaxation must not frustrate the object of the Act. Relaxing the economic viability requirement through an appellate order, instead of a formal Government Resolution, was impermissible. The State’s action amounted to bypassing eligibility standards set by its own policy framework.

On locus standi, the Court held that even if the respondent’s standing was questionable, the presence of patent illegality in the State’s order justified judicial interference. The High Court was therefore correct in setting aside the State’s order.

The Supreme Court concluded that the Committee’s rejection was justified and that the State had acted in undue haste and contrary to statutory requirements. It affirmed the High Court’s judgment and dismissed the appeals with no order as to costs.

a. RATIO DECIDENDI

The ratio of the judgment rests on the mandatory nature of economic viability as a statutory and policy precondition for registering a cooperative society under the Maharashtra Co-operative Societies Act, 1960. The Court held that Section 4 expressly prohibits registration of societies “likely to be economically unsound,” making financial viability a substantive threshold rather than a procedural formality.

The Court further held that the Government, through its Resolutions dated 23.09.2013 and 14.02.2017, institutionalised specific benchmarks minimum Rs. 5 lakhs share capital, minimum 75 members, and mandatory scrutiny by an expert Committee. These policy instruments bind executive action and reflect State policy directives under the proviso to Section 4. Therefore, the Scrutiny Committee’s findings form a core evaluative mechanism that cannot be disregarded arbitrarily.

The ratio establishes that administrative discretion, including appellate authority under Section 152, cannot override mandatory statutory and policy conditions. The State may relax conditions only through a valid policy instrument such as a Government Resolution, not through ad hoc orders. The State’s reversal of the Committee’s decision without supporting material, based solely on undertakings and hypothetical business possibilities, constituted an abuse of discretion.

The Court also clarified that judicial review is warranted where an administrative order suffers from patent illegality, regardless of questions relating to locus standi. The High Court’s intervention was therefore proper.

Thus, the ratio decidendi is that economic viability is a mandatory precondition for registration, Scrutiny Committee’s findings are binding unless perverse, and executive discretion cannot dilute statutory or policy thresholds.

b. OBITER DICTA

In its observations, the Court noted that allowing registration of societies unable to comply with economic viability requirements can ultimately harm members and undermine the co-operative movement. This reflects broader concerns about the proliferation of weak societies.

The Court highlighted that registration of a new society in a region where an existing society is itself financially unstable poses systemic risks. Although not central to the decision, this reflects the Court’s cautionary stance toward unregulated expansion of co-operative institutions.

The Court also commented that the State’s appreciation of arguments regarding 152 potential business activities was misplaced without evidence. This observation underscores a judicial preference for evidence-based decision-making rather than speculative policy justification.

Additionally, the Court’s observation that relaxation of preconditions must occur only through Government Resolutions signals an important administrative law principle: executive policy changes require formal rule-making mechanisms. Though not dispositive for the outcome, this remark reinforces procedural discipline in public administration.

The Court’s view that locus standi concerns cannot defeat judicial scrutiny where illegality is manifest similarly constitutes obiter. It affirms the judiciary’s commitment to legality over technical objections.

Collectively, the obiter dicta reinforce the policy objectives of cooperative regulation, emphasising prudence, evidence-based oversight, and institutional discipline.

c. GUIDELINES

Though the Court did not formally enumerate guidelines, the judgment implicitly lays down important normative principles governing the registration of co-operative societies:

i. Economic viability is an indispensable precondition for registration under Section 4, and proposals must be supported by concrete documentary evidence, not undertakings or future promises.

ii. Scrutiny Committee findings must be given primacy, as the Committee is an expert body tasked with evaluating financial capacity under Government Resolution dated 23.09.2013.

iii. Mandatory criteria under Government Resolutions, including minimum share capital of Rs. 5 lakhs under the 2017 Resolution, cannot be relaxed through appellate orders; any relaxation requires a formal Government Resolution.

iv. Registration cannot be justified on hypothetical grounds, such as potential diversification into 152 business activities; viability must be shown through substantiated facts and present financial capability.

v. State discretion must operate within statutory and policy boundaries; decisions that contradict the Government’s own norms constitute patent illegality.

vi. Judicial review is warranted whenever an administrative order disregards mandatory requirements, regardless of disputes regarding locus standi.

These implicit guidelines serve to strengthen regulatory discipline within Maharashtra’s cooperative sector.

I) CONCLUSION & COMMENTS

The judgment reinforces a rule-based regulatory framework for co-operative societies by underscoring economic viability as the cornerstone of registration. The Supreme Court’s endorsement of the Scrutiny Committee’s technical evaluation signals strong judicial support for evidence-based governance. The State’s attempt to override mandatory financial thresholds through an appellate order was clearly impermissible, and the Court rightly rejected it.

The decision balances administrative discretion against legal constraints, making clear that the cooperative sector cannot be exposed to unviable institutions that may ultimately default or collapse. The emphasis on adhering to Government Resolutions ensures consistency and predictability in the regulatory process.

The Court’s commentary on locus standi reflects a pragmatic approach, prioritising correction of illegality over procedural objections. This is important in preventing executive decisions from escaping scrutiny.

The judgment stands as a significant affirmation of cooperative governance principles, embedding financial prudence and procedural discipline into the legal architecture of PACCS registration.

J) REFERENCES

a. Important Statutes / Instruments Referred

i. Maharashtra Co-operative Societies Act, 1960 – Sections 4 and 6.
ii. Government Resolution dated 23.09.2013.
iii. Government Resolution dated 14.02.2017.