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Judgment
B. Subhashan Reddy, CJ.
This batch consisting of thousands of cases (some writ appeals but mostly writ petitions) raise an important point of regularisation of illegal
employment in several cooperative societies across the State of Tamil Nadu.
Hitherto, the cooperative societies and land development banks were being governed by the Tamil Nadu Cooperative Societies Act, 1961, and
the Tamil Nadu Land Development Banks Act, 1934, respectively. Repealing the above two, was enacted the Tamil Nadu Cooperative Societies
Act, 1983. It received the assent of the President on 15.7.1983 but was brought into force only on framing the Rules titled, The Tamil Nadu
Cooperative Societies Rules, 1988'' with effect from 13.4.1988. The above Act and the Rules are hereinafter referred to as the ''Act'' and the
''Rules"" respectively. It is needless to mention that the societies and the land development banks, hitherto registered under the repealed Acts of
1961 and 1934, are deemed to be the cooperative societies under the new Act of 1983. In addition, several other cooperative societies have been
registered under the Act of 1983. Rules have been framed to give effect to the Act and for internal management of societies, bye-laws have been
registered with the Registrar of Cooperative Societies. The societies are formed specifying the area of operation and basing upon the same, they
are defined as primary, central and apex societies. The apex society has got area of operation all over the State of Tamil Nadu, the central society
over a district/part of the State of Tamil Nadu and a primary society for the local area. There are several classes and categories of societies like
farming societies, dairy societies, fishery societies, housing societies, industrial societies, labour contract societies, irrigation societies, oil seeds
growers'' societies, cooperative unions, cooperative training institutes, consumer societies etc. There are also some credit societies like agricultural
service societies, land development bank, financial bank, urban bank, urban credit society, employees'' credit society etc., whose principal objects
are to lend money to their members, by levying interest. Some cooperative societies have also undertaken the business of distribution of
commodities under public distribution system. Any society which does not come under a specific category is called a miscellaneous society.
3.The cooperative societies are managed by the elected managing committees with periodical tenures, be it three or five years. During the absence
of the elected bodies, the Special Officers man the same and they are from among the departmental staff. Each cooperative society was entitled to
recruit staff to aid the elected bodies in the discharge of the functions of the society. Under the Madras Cooperative Societies Rules, 1963, framed
under the Act of 1961, the bye-laws required to contain, among other things, (i) the age at the entry in service and for retirement on
superannuation; (ii) the minimum educational and other qualifications for the several categories of employees, (iii) the method of recruitment of
candidates.... There was no specific provision obligating the drawal of candidates from employment exchange. That was introduced for the first
time by Rule 10 (a) of General Rules, which was inserted by an amendment and gazetted on 9.7.1980. This date 9.7.1980 assumes significance as
the Government was considerate in dealing with the staff recruited in cooperative societies otherwise than by drawal from employment exchange.
There is also a reasonable basis for condoning the lapse of non-drawal of the list from the employment exchange for the period upto 8.7.1980. But
the recruitment of the staff in cooperative societies, without notifying the vacancies to the employment exchange and calling the list therefor, went
on even after 8.7.1980. In the process, several appointees did not even satisfy the requirement of educational qualifications and other qualifications
like cooperative training etc. Reservation policy also was not followed. Above all, the recruitment was much beyond the permissible cadre
strength. The permissible cadre strength varied between 2 and 3% of the working capital. The ''working capital'' is such portion of the reserve
fund, the paid-up share capital, loans and deposits received by a society, deposits and debentures issued by a society as have not been invested in
buildings and other fixed assets.
The basis of cooperative movement is to enable the people to form different cooperative societies with different objects and activities for
betterment of the economic conditions particularly of the under-privileged, by collective action. Financial viability is the essential factor for
sustenance of the society, as otherwise, there is no purpose of constituting the societies. Cooperative societies are not akin to other kinds of
societies or associations, which are registered under the Public Societies Registration Act or other enactments. The cooperative movement is a
special feature having specific object of enabling a group of persons to combine and work for economic upliftment, which is a most important
factor for the development of the state/country. There is enormous contribution made by the Government for the establishment and growth of the
cooperative societies, be it the grant of money or counter guarantee for the payment of money raised by way of loans from the financial institutions
like banks, including the Reserve Bank of India. The Government has got effective control over the functioning of the cooperative societies and
several provisions contained in the Act make it abundantly clear that a society cannot be registered unless legal formalities enumerated are
complied with and it is subjected to audit and accounts inspection, enquiry and for supercession in case of non-compliance of the statutory
provisions and the directions issued by the authorities. The Act vests the Registrar of Cooperative Societies with the power to issue directions from
time to time for better governance of the cooperative societies and over all, the Government has got the supervisory powers and is entitled to issue
directions. The power of the Registrar is contained in Section 181 of the Act and that of the Government in Section 182 of the Act. There is a
power to levy surcharge and take appropriate action to realise the money in case of dereliction of duties either by the elected personnel or the
officer-in-charge. In fact, there is no dispute with regard to the powers of the Government and its subordinates, right from Registrar of cooperative
societies to the lowest rung of the cooperative officers, regarding the control over the management of the cooperative societies. That is how the
Government has condoned the lapse in not drawing the candidates from the employment exchange upto 8.7.1980. The Government was
sympathetic and went on condoning the lapse from time to time fixing various cut off dates and extending the same by several Governmental
Orders. Firstly, it was G.O. Ms. No. 790, dated 5.7.1971, fixing the cut off date for ratifying the irregular appointments made otherwise than
through employment exchange upto 5.7.1971. Further, by G.O. Ms. No. 1352, dated 7.11.1978, the cut off date was extended upto
31.12.1977. Again, by G.O. Ms. No. 605, dated 3.6.1980, the cut off date was extended upto 31.12.1979. By G.O. Ms. No. 312, dated
30.11.1987, the cut off date is extended to 8.7.1980. Ultimately, by G.O. Ms. No. 86, Cooperation, Food and Consumer Protection
Department, dated 12.3.2001, the cut-off date was extended to 11.3.2001. The common feature in all the above Governmental Orders is to the
effect of ratifying the appointments made to the cooperative societies and authorising regularisation of their services condoning the lapse of only
non-drawal of the candidates from the employment exchanges subject to a condition that such recruits should possess all the qualifications
prescribed for the post. Even though it was mentioned in the above Governmental Orders that stringent action would be taken against the persons
responsible for illegal recruitment, it remained only on paper without any effective steps being taken in that regard. That is the reason for the
perpetuation of illegal appointments. It is made clear that there is no dispute regarding the regularisation of the personnel recruited upto 8.7.1980.
The problem is only relating to post 8.7.1980 appointees. The figures are startling! For the period from 9.7.1980 to 24.4.1990, there were 5,790
illegal recruits. The said figure rose to 15,107 by the year 1995 and further rose to 23,728 by 11.3.2001. It is not out of place to mention that the
illegal recruitments had not stopped on 11.3.2001 but had been continuing and there is no surprise to say that even while we took up the matters
for judgment, the spree of illegal recruitments might be going on. Such is the magnitude of the problem and unless there is a clear-cut judgment,
there will be multiplicity of litigations even throwing the judicial system out of gear, going by the volume of cooperative societies-recruitment
litigation instituted in this High Court for several years. It should be taken note of that out of the staff of 60,211 in the cooperative societies, the
illegal recruits conform to more than 39% and out of them 20,526 are the candidates who have completed 480 days and seeking shelter under the
provisions of the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981. Others are taking shelter under
the Industrial Disputes Act on the ground of retrenchment or the attempt to retrench as violative of Section 25(f) of the Industrial Disputes Act or
banking on the settlements entered between the Management and the staff purporting to be either u/s 12 or Section 18 thereof.
Several writ petitions have been filed before, raising several points like the violation of audi alteram partem rule and claiming permanency under
the Act of 1981 as also the violation of Sections 12, 18 and 25(f) of the Industrial Disputes Act. Several learned single Judges have passed orders
in that regard. While in some cases directions have been issued to the Authority under the Act of 1981 to consider the case in accordance with
G.O. Ms. No. 86, dated 12.3.2001, some writ petitions have been dismissed on the ground of non-availment of alternative remedy and in some
other cases, directions were issued to hold enquiry after satisfying the rule of audi alteram partem. In some cases, a detailed order has been passed
on merits by repelling the contentions therein. Some writ petitions have been dismissed on the ground of non-maintainability in view of the Full
Bench judgment of the five Judges of this Court in M. Thanikachalam and others Vs. Maduranthakam Agricultural Producers co-operative
Marketing Society and others, or on the ground of non-completion of 480 days. Some writ appeals are directed against non-grant of stay pending
disposal of writ petitions. A detailed order on merits is the one adjudicated by the learned single Judge Mr. Justice P. Shanmugam in W.P. No.
122 of 1999 etc. batch and by order dated 15.11.1999, the learned single Judge has dismissed a batch of writ petitions on merits holding that the
illegally recruited staff are not entitled for regularisation. Writ appeal Nos. 2571 of 1999 etc. batch are directed against the said order.
It is true that termination of services results in civil consequences and that audi alteram partem rule has to be followed. But the theory of
principles of natural justice cannot be put in a straightacket and it is not an absolute rule that in each and every adverse order, there should be a
strict adherence to the principles of natural justice. One such exception to audi alteram partem rule is absence of any legal right to defend the
impugned action and in fact, such cases are covered by the ''useless formality theory'' propounded by the Supreme Court in Aligarh Muslim
University and Others Vs. Mansoor Ali Khan, . Even for availment of the alternative remedy, a legal right should subsist and there may be some
cases like the instant one where there is no right accrued even at the time of entry into service and when the top administrative authority, i.e. the
Government, has already taken a stand, it serves no purpose to drive a party to avail of the alternative remedy as there is absolutely no discretion
for the subordinate officers of the Government to take any decision contra to the view taken by the Government. Further, when interpretation of
the provisions of the Statute, Rules framed thereunder and the Governmental Orders are involved, it is for the High Court to embark upon enquiry
to adjudicate the matter and cannot be left to the subordinate officers of the Government, who are named as the statutory authorities. Added to
that, having regard to the magnitude of the problems and the bulk of cases, it serves no purpose in driving the parties to approach the statutory
authorities as it is bound to bounce back again to this Court resulting in multiplicity of proceedings creating a fluid situation without concretisation of
the legal principles. Having regard to these factors, we are of the considered view that the matter should be set at rest by laying down the definite
and clear-cut legal principles so that the statutory authorities can be left only with the task of fact finding and then give a quietus to the situation. We
now proceed to adjudicate.
Among the counsel for the writ appellants/writ petitioners, Mr. K. Chandru, learned senior counsel, led the arguments followed by other learned
senior counsel M/s. A.L. Somayaji, G. Subramanian & Nalini Chidambaram. M/s.AR.L. Sundaresan, M. Jaichandran, K. Suguna, C.Prakasam,
D. Rajagopal, G. Venkataraman, K.V. Ananthakrishnan, P. Chandrasekaran, S.N. Ravichandran and V. Dhanabalan have also addressed
arguments. Other learned counsel appearing for the petitioners/appellants in these writ petitions have adopted the arguments of the above counsel.
For the Government and the Governmental authorities, Mr, N.R. Chandran, learned Advocate General, has appeared and argued the matter.
For other respondents, M/s. A.S. Thambusamy and Mr. Sanjay Mohan have appeared.
On behalf of the writ appellants/writ petitioners, the following contentions are raised.
(i) That G.O. Ms. No. 86, dated 12.3.2001 directs the regularisation of all the personnel appointed to the cooperative societies regardless of non-
drawal from employment exchange, want of vacancy and want of educational and other qualifications. Even assuming that G.O. Ms. No. 86 only
restricts the regularisation of the appointed staff only condoning the recruitment otherwise than by employment exchange, by virtue of Section 3 of
Tamil Nadu Industrial Establishments (Conferment of Permanent Status by Workmen) Act, 1981, all such appointed personnel to the cooperative
societies, who had completed 480 days in service in a continuous period of 2 years, regardless of any qualification or vacancy position or
otherwise, are entitled for regularisation and conferment of permanent status.
(ii)That for personnel not covered by the Act of 1981, there is a protection afforded by the Industrial Disputes Act.
In support of their arguments, they have relied upon the following judgments.
A. Palanivel v. T.N. Khadi & Village Industries Board, 1997 (3) L.L.N. 509; 2. The Bank of Madura Staff Co-op. Thrift & Credit Society
Ltd. v. The Dy, Commissioner of Labour and Industry, W.P. No. 10145 of 1996, dated 26.11.1997; 3.M. Irudhayanathan v. State of Tamil
Nadu, 1997 (3) L.L.N. 544 ; 4. M. Arumugam v. Registrar of Co-op. Societies W.A. No. 1495 of 1997, dated 17.3.1998; 5,T.N. Civil
Supplies Corporation, Madras, Tamil Nadu Civil Supplies Corporation Anna Staff Union Vs. The Tamil Nadu Civil Supplies Corporation Limited,
Agra District Co-operative Bank Ltd. Vs. Prescribed Authority, Labour Court, U.P. and Others, ; 7. Shankar v. Joint Registrar of Cooperative
Societies, 2001 (4) CTC 483 : 2002 (I) L.L.J. 596; 8. Thanjavur District Employees Co-op. Credit Societies, Employees Union, Thanjavur Vs.
The Secretary to Government, Co-operation, Food and Consumer Protection Dept., Chennai, The Registrar of Co-op. Societies, N.V. Natarajan
Maligai, Chennai, The Joint Registrar of Co-op. Societies, Thanjavur Region, Thanjavur, The Joint Registrar of Co-op. Societies, Nagapattinam
Region, Nagapattinam and The Joint Registrar of Co-op. Societies, Tiruvarur Region, Tiruvarur, ; 9. T.N. Medical Services Corporation
Employees Welfare Union v. State of Tamil Nadu, 2001 FJR (99) 252; 10. The Secretary, H.S.E.B. v. Suresh, 1993 (3) S.C.C. 601; 11. P.
Arumugam v. Special Officer, T.N. Cooperative Societies & Others, 1997 (1) S.L.R. 498; 12. South Arcot Co-operative Motor Transport
Society Ltd. (for ex-servicemen) Devanam-pattinam, Cuddalore Vs. Syed Batcha and Others, ; 13. Co-operative Central Bank Ltd. and Others
Vs. Additional Industrial Tribunal and Others, ; 14.The School Committee, Tilak Vidyalaya Higher Secondary School v. District Educational
Officer, Tirunelveli, 1991 T.L.N.J. 1; 15 T.N. Primary Agricultural Bank Employees Association v. T.N. Co-op. Primary Agricultural & Rural
Development Banks Employees Union, W.P. No. 10609 of 2002 dated 20.9.2001; 16. Trichirapalli Hprm. Cooperative Bank Employees Union
v. Joint Registrar of Cooperative Societies, 1992 II L.L.J. 747; 17. Bhagwati Prasad v. Delhi Pradesh Municipal Corporation, 1990 S.C.C. 174;
Nellai Cotton Mills Ltd. v. State of Tamil Nadu, 1987 W.L.R. 258; 19. T. Mutheeswaran Vs. The Registrar of Co-operative Societies
(Housing) Gandhi Nagar, Adayar, Chennai - 20 and three others,
Mr. N.R. Chandran, learned Advocate General, addressing the counter arguments, submits that the jurisdiction under Article 226 of
Constitution of India cannot be invoked in view of the Full Bench Judgment of this Court in M. Thanikachalam and others Vs. Maduranthakam
Agricultural Producers co-operative Marketing Society and others, and that even assuming that the extraordinary jurisdiction under Article 226 of
the Constitution of India can be invoked, firstly the alternative remedy should be exhausted and this Court cannot be approached directly. He
further submits that the cooperative societies do not come within the ambit of Permanency Act of 1981 or the Industrial Disputes Act and that
G.O. Ms. No. 86, dated 12.3.2001 confines the act of regularisation only to the appointments made otherwise than through employment exchange
and if the appointments exceed either the cadre strength or the candidates not possessing the educational and other qualifications and if there is
violation of other conditions envisaged in Rule 149 of the Rules, then G.O. Ms. No. 86 cannot come to the rescue of the illegally appointed staff.
He also submits that when the initial appointment itself is illegal, no right accrues either under the Permanency Act of 1981 or the Industrial
Disputes Act even assuming that the said Acts are applicable to the cooperative societies. For this proposition, he relies upon the judgments of the
Supreme Court in Ashwani Kumar and Others Vs. State of Bihar and Others, , Nazira Begum Lashkar v. State of Assam, 2001 (1) S.C.C. 143
and Subedar Singh v. Distt. Judge, Mrzapur, 2001 (1) S.C.C. 37 and a judgment of a learned single Judge of this Court in Tamil Nadu Civil
Supplies, Corporation Employees Union and four others Vs. Tamil Nadu Civil Supplies Corporation Ltd. and another, .
In view of the rival contentions, following issues arise for consideration:
(i) whether the writ petitions are maintainable?
(ii) whether the cooperative societies are covered by the provisions of Tamil Nadu Industrial Establishments (Conferment of Permanent Status to
Workmen) Act, 1981 as also the Industrial Disputes Act, 1947?
(iii) whether G.O. Ms. No. 86, dated 12.3.2001 aims at regularising all the staff appointed to cooperative societies regardless of any defect or any
violation of the Rule 149 of the Tamil Nadu Cooperative Societies Rules, 1988, as amended in 1995?
(iv) in the alternative, are the illegal appointees entitled for statutory protection of regularisation and permanent status by virtue of Section 3 of the
Permanency Act subject to their completion of 480 man days in a continuous period of 2 years? and
(v) whether personnel not covered by Clause (iv) are entitled for protection under the Industrial Disputes Act, 1947?
Issue No. (i)
In M. Thanikachalam and others Vs. Maduranthakam Agricultural Producers co-operative Marketing Society and others, , a Five Judge
Bench of this Court was dealing with a batch of writ petitions arising under the Tamil Nadu Cooperative Societies Act and because of the
divergent views of the learned single Judges and the Division Benches, the matter was referred to the Full Bench of 5 Judges. Surveying the case
law on the subject, it was held that the cooperative society is a body, which, after having come into existence, is governed in accordance with the
provisions of the statute and normally a writ petition is not maintainable against the cooperative society but there are exceptions like violation of
statutory provisions or principles of natural justice, etc. and that each case depends upon the facts and circumstances of its own. In this batch,
question of issuance of any writ against any cooperative society does not arise at all. What is needed is the interpretation of intricate questions of
law and not against any questions of fact relating to conditions of service between the cooperative society and its employee. If an employee is
regularly and legally appointed but has been divested of his posts or is kept under suspension or any action is taken in the course of discharge of
his functions, then it is a dispute inter se between the cooperative society and its employee. Such is not the situation in the instant cases. The cases
on hand invite a broader and comprehensive adjudication regarding the fate of thousands of employees and in the face of Government''s
unequivocal stand that such appointments are illegal and only concession given is the exemption from the purview of the employment exchange and
not relaxing or condoning any other requirement, the said interpretation cannot be left to the cooperative societies or any statutory authority under
the Act. Further, the applicability or otherwise of Permanency Act of 1981 or the Industrial Disputes Act also cannot be the subject matter of
adjudication by any statutory authority. Such matters have to be decided only by this Court and the appropriate remedy is the invocation of the
extraordinary jurisdiction of this Court under Article 226 of the Constitution of India.
Issue No. (ii)
The Permanency Act of 1981 is also an Act enacted by the State and received the President''s assent. Section 3 of the Act contains non
obstinate clause and provides protection to workmen, who are in continuous service for a continuous period of 480 days in a period of 24
calendar months in an industrial establishment, thus conferring a status of permanency. ''Industrial establishment'' is defined in Sub-section (3) of
Section 2 of the Act and in Clause (e) thereof, an ''establishment'' as defined in clause 2 (6) of the Tamil Nadu Shops and Establishments Act,
1947, is defined to be an industrial establishment. If we go to Section 2(6) of the Tamil Nadu Shops and Establishments Act, it is clear that the
word ''establishment'' therein takes in cooperative society also. As such, there cannot be any doubt regarding the applicability of the Permanency
Act of 1981. The word, ''industry'' defined in Section 2(j)(q) under the Industrial Disputes Act, 1947 also makes the cooperative societies
susceptible to the Act of 1947. Thus, all such workmen belonging to a class and are afforded protection, are entitled for the benefits of the
Permanency Act of 1981 as also the Industrial Disputes Act of 1947.
But the real question is whether the said benefits conferred under the Act of 1981 and Industrial Disputes Act, 1947, are applicable while
giving effect to G.O. Ms. No. 86, dated 12.3.2001. In this context, all the issues 3, 4 and 5 have to be adjudicated together.
Issue Nos. (iii), (iv) and (v)
Staff is necessary for the working of the societies. It may be administrative or technical and again, administrative may be managerial, clerical
and also sub-staff. Cooperative societies are the creatures of the statute and they have got no independent status or life outside the Act. Since they
are formed under the Act and also controlled by various provisions of the Act, so long as the societies function within their powers conferred under
the Act, in a democratic polity, the activities of the societies including the recruitment of the staff are not liable to be interfered with. The Act does
not confer any unfettered right on the societies to recruit staff as they deem fit. Recruitment of staff is regulated by the Act and such power flows
specifically u/s 73 of the Act and generally by rule-making power conferred in Section 180 of the Act pursuant to which Rules have been framed.
Under the proviso to Section 73 of the Act, the societies are empowered to appoint the staff for their efficient performance of the functions for
which they are formed and making it very specific in the proviso that the qualifications for the appointment of the staff, the conditions of service,
including the disciplinary control, and the cadre strength of such staff, shall be such as may be prescribed. While there is reason for condoning
some lapses on the part of the cooperative societies in the recruitment of the staff for the period upto 8.7.1980, which is mentioned supra, we do
not find any such condonable reasons for the period from 9.7.1980 onwards. Further, what was condoned relating to the lapse of the cooperative
societies for the period upto 8.7.1980 was recruitment of staff directly by the cooperative societies without the intervention of the employment
exchange. But what happened later from 9.7.1980 onwards is quite alarming. The cooperative societies had been behaving in a very arbitrary
manner while recruiting the staff and most of them did not care to notify the vacancies to the employment exchange and what is more, most of the
members of the staff recruited lack educational and other qualifications prescribed for the post and most intriguing is the recruitment beyond the
permissible cadre strength. Cadre strength is fixed having regard to the objects and activities of the societies and more particularly, the financial
limits. The staffing pattern of all the societies cannot be uniform having regard to the distinct and different activities and the functions attached to the
same in view of the varied nature and kinds of societies. Rule 149 of the Rules have been framed in the year 1988 and underwent an amendment
by G.O. Ms. No. 212, dated 4.7.1995. The pre-amended Rule 149 categorised the posts by classifying the same to classes 1 to 7, be it
administrative or technical, officer, clerk/stenotypist/typist or attender basing on the minimum scale of pay and also prescribing the educational
qualifications and other qualifications. Quite naturally, the educational qualifications differ having regard to the posts, administrative and technical.
So far as the other qualifications are concerned, cooperative training is made a requirement for administrative posts borne on classes 1 to 6
coupled with previous experience and for technical posts, there is no requirement of cooperative training but previous experience was required. As
seen from the above, there was no discretion for the societies to play regarding the requirements of the educational qualifications and the
cooperative training for the respective classes of posts mentioned. The only discretion vested in the cooperative societies is relating to the previous
experience of the candidates opting for employment. Condition relating to previous experience is not of much concern as the illegal entrants, by this
time, might have acquired sufficient experience. Having regard to the magnitude of the problem, such experience aspect, having regard to the fact
of long years of service, need not be taken seriously and in fact is condonable. The other requirement is the drawal of the candidates from the
employment exchange by notifying the vacancies and that has been grossly violated by most of the societies and what was being condoned by the
Government in G.O. Ms. Nos. 790, 1352, 605, 312 and 86 related only to the condonation of the actions of the cooperative societies in
appointing the staff without notifying the vacancies to the employment exchange and instead resorting to appointments directly. But all the
Governmental Orders issued above from time to time fixing the cut off dates for such condonation, specifically say that the condonation was only
relating to the lapse of bye-passing the employment exchange rule and not with regard to other aspects like cadre strength, qualifications etc.
Different arguments are advanced regarding the source of the above Governmental Orders. Some counsel referred to Section 182 of the Act and
some others to Section 170. According to the learned Advocate General, the above Governmental Orders, including G.O. Ms. No. 86, dated
12.3.2001, emanate from the executive power of the State conferred by virtue of Article 162 of the Constitution of India. But there is a specific
power vested in the Government by the legislature and contained in Section 170 of the Act and all the Governmental Orders, including the latest
one, i.e. G.O. Ms. No. 86, dated 12.3.2001, are traceable to the above provisions in Section 170 of the Act. No doubt, qualifications and other
requirements for the recruitment of the staff are specified by Rules in exercise of the rule-making power and the Government is entitled to exempt
any or all such requirements. But the Government, in exercise of its power, had exempted the societies only relating to the requirement of drawal of
the candidates through employment exchange. But the learned counsel read more into it and contend that such Governmental Orders issued
absolve the societies with regard to all the requirements while recruiting the staff and that in any event G.O. Ms. No. 86 has to be applied only
prospectively from 12.3.2001 and all the appointments made by the cooperative societies upto 11.3.2001 stand regularised regardless of the
satisfaction of the requirements like cadre strength, educational qualifications, the cooperative training and the experience. But we are at a loss to
find any such blanket exemption. It had been the consistent approach of the Government to exempt only the condition relating to employment
exchange intervention and not other conditions. Even if the above requirement of cooperative training and experience qualifications are condonable
because of the long years of service put in by the staff on equitable grounds and tempering justice with mercy, the conditions relating to educational
qualifications and technical qualifications and more particularly, the cadre strength, cannot be condoned in the exercise of the discretionary
jurisdiction of this Court under Article 226 of the Constitution of India. The provisions of either the Permanency Act of 1981 or of the Industrial
Disputes Act 1947 cannot also be pressed into service when the appointments are ipso facto illegal and unauthorised. We cannot accede to the
contention that even if the appointment is illegal and unauthorised, merely on the passage of time and completion of the stipulated period of 480
days under the Permanency Act of 1981 or 240 days under the Industrial Disputes Act, 1947, an indefeasible right accrues to an employee. Such
an argument is clearly untenable. If we accept the said argument, then there is no need for any law and finally, the concept of rule of law loses its
significance. The conduct of personnel manning the cooperative societies while recruiting the staff is reprehensible.
They have made the cooperative movement farcical for their personal ends by indulging in favouritism and nepotism and for extraneous
considerations behaving like extra-legal and extra-constitutional authorities. That is said even by the Director of Employment and Training while
offering comments and expressing resentment regarding the mode of recruitment vide his letter dated 19.12.1995 addressed to the Government.
We feel sorry for those unfortunate candidates possessing qualifications sans the influence and had been on the rolls of the employment exchange
for years waiting for that fortunate moment of being sponsored by the employment exchange for the purpose of interview. But the Government had
been very generous towards the illegal appointees in exempting the requirement of the intervention of the employment exchange time and again
fixing the cut off dates and then extending the same and every time asserting that stern action would be taken against those responsible for the
lapses but such assertions and threats of taking stern action remained just on the paper and not translated into action thus emboldening the
cooperative societies to go on illegal recruitment spree of the staff. The result is the near bankruptcy of 85% of the Co-operative societies, as they
are running on losses, because of over-employment. Enough is enough. We hope and trust that this G.O. Ms. No. 86, dated 12.3.2001 shall be
the last one without any further exemptions.
Coming to the application of Permanency Act of 1981 or the Industrial Disputes Act, 1947, de hors G.O. Ms. No. 86, the said enactments
are not applicable to the appointments made in an illegal manner. There is a lot of difference between irregularity and illegality. The appointments
here are not irregular but illegal. Irregular is something which is done in an authorised manner but while doing so, there is some procedural
irregularity. Illegality is altogether different. An action is illegal if it is contrary to law. The law in the instant case is so clear that the appointments
cannot be beyond the permissible cadre strength. The rule mandates the fixation of the cadre strength. In fact, amendment of Rule 149 by G.O.
Ms. No. 212 was only made with that object obligating the societies to fix the cadre strength per force. Government has felt that the general
criteria for fixation of the educational qualifications or the executive instructions fixing the cadre strength with expenditure not exceeding 2 to 3% of
the working capital, need to be emphasised in a more clear and effective manner. For that reason, the Government brought forth amendment to
Rule 149, particularly Sub-rule (1) thereof, by which, every society shall, taking into account its nature of business, volume of transaction and
financial position, adopt, with the approval of the Registrar of Cooperative Societies, a special bye-law covering the service conditions of its
employees and also enumerated the same, which are as stated below:
(i) Cadre strength and classification of various categories of posts and the qualifications required thereof for each such posts.
(ii) The method of recruitment for each such posts.
(iii) The scale of pay and allowances for each such posts. @BT-1-IND =
(iv) Conditions of probation for each such posts.
(v) Duties and responsibilities for each such posts @ BT-1-IND = (vi) Leave of various kinds admissible and, the conditions thereto for each such
posts.
(vii) The penalties that may be imposed upon, the procedure for taking disciplinary action and inflicting various kinds of punishments on an
employee holding each such post and the authority competent to entertain and dispose of appeal made against an order of punishment imposed by
the competent authority on a disciplinary proceedings.
(viii) Conditions relating to acquisition and disposal of movable and immovable property :
Provided that a minimum period of three years of satisfactory service shall be prescribed for eligibility for promotion from one category to the
immediate next higher category of post:
Provided further that the Co-operative Training at the appropriate level may be prescribed as a necessary qualification for specific categories of
non-technical posts.
Most of the societies have not followed the mandate of this Rule. The arguments of the learned counsel for the appellants/petitioners are to the
effect that the fault lies with the cooperative societies, which did not adopt the special bye-laws and for that reason, they should not be punished.
We are unable to accept this contention for the reason that the illegal appointees cannot have more rights than the cooperative societies themselves.
The cooperative societies were totally prevented from making any appointments until the compliance of the mandate of the above Rule adopting a
bye-law containing the particulars specified. Even thereafter, the appointments were to be only strictly as per the approved special bye-laws and
not otherwise. Compassion cannot displace the essential legal requirements and as already stated above, essential legal requirements are the cadre
strength and the qualifications and these cannot be bye-passed and any infraction in observance of the said essential requirement, makes the action
of the Appointing Authority illegal. Neither the Permanency Act of 1981 nor the Industrial Disputes Act, 1947, imply that regardless of the illegal
nature of appointments even at the entry stage, statutory protection is afforded under the above Acts after the completion of the man-days, be it
480 or 240 prescribed under the above statutes. The above two enactments have to be read and understood in the context that if only the
appointments are authorised and the employees continued even in temporary positions beyond the respective mandays prescribed, the workmen
get right to continue further on the legal presumption that the temporary posts are allowed to be treated as permanent. But if the appointment itself
is illegal, then the Permanency Act of 1981 or the Industrial Disputes Act, 1947 cannot be invoked at all.
The decisions cited by the learned counsel appearing for the writ appellants/writ petitioners do not contain any statement of law that even if the
appointment is illegal and unauthorised, then the Permanency Act of 1981 or the Industrial Disputes Act of 1947 is applicable. There is no such
adjudication in the said cases excepting the one in Irudhayanathan v. State of Tamil Nadu, 1997 (3) LLN 544 where the learned single Judge of
this Court held that want of vacancy is not a ground for denying the benefit under the Permanency Act of 1981. But a contrary view has been
taken by the Supreme Court in Ashwani Kumar and Others Vs. State of Bihar and Others, , which we will discuss later.
(a) In The Bank of Madura Staff Co-op. Thrift & Credit Society Ltd. v. The Dy, Commissioner of Labour And Industry, W.P. No. 10145 of
1996. dated 26.11.1997, a learned single Judge of this Court dealt with a post of Call Boy in a Cooperative Society and held that eighth standard
was not prescribed in the special bye-laws of the Society and that it came to be prescribed in the year 1990 while the employee was recruited in
1980 and as such there cannot be any retrospective prescription of qualification.
(b) In A. Palanivel v. T.N. Khadi & Village Industries Board, 1997 (3) L.L.N. 509, a learned single Judge was dealing with a case of unfair labour
practice, as a circular was issued by T.N. Khadi & Village Industries Board to terminate the workmen after 240 days. Holding it as amounting to
unfair labour practice, directions were issued to regularise under T.N. Act of 1981.
(c) In M. Arumugam v. Registrar of Co-op. Societies, (W.A. No. 1495 of 1997, dated 17.3.1998, which arose out of W.P. No. 3353 of 1988,
the Division Bench did not decide the legal principles and there is no ratio decidendi. In that case, an office assistant worked for 8 years and he
was not appointed through employment exchange. Relief was granted for continuation of the said employee on the ground of long years of service
by him for 8 years in the society without any blemish.
(d) In Tamil Nadu Civil Supplies Corporation Anna Staff Union Vs. The Tamil Nadu Civil Supplies Corporation Limited, , the learned single Judge
was adjudicating with regard to the effect of non-obstante clause in Section 3 (1) of T.N. Act of 1981. There also, the Inspector, u/s 5 of 1981
Act, found that workmen were entitled for regularisation and Corporation also issued proceedings but not implemented. The validity of
appointment was not in issue. Writ was, therefore, issued to regularise the employees.
(e) In Shankar v. Joint Registrar of Cooperative Societies, 2001 (4) CTC 483 : 2002 (I) L.L.J. 596, a learned single Judge of this Court, in a
similar matter arising under the Cooperative Societies Act and particularly with reference to G.O. Ms. No. 86, issued direction to the Authority
under the 1981 Act to consider the case of the petitioner, a Supervisor in a Cooperative Society, in accordance with G.O. Ms. No. 86, stipulating
some time. The merits were not gone into and question of adjudicating on the qualifications or the consequences of violation of the aspect of
qualifications were not gone into. They were left to be considered by the Authority.
(f) In Thanjavur District Employees Co-op. Credit Societies, Employees Union, Thanjavur Vs. The Secretary to Government, Co-operation,
Food and Consumer Protection Dept., Chennai, The Registrar of Co-op. Societies, N.V. Natarajan Maligai, Chennai, The Joint Registrar of Co-
op. Societies, Thanjavur Region, Thanjavur, The Joint Registrar of Co-op. Societies, Nagapattinam Region, Nagapattinam and The Joint Registrar
of Co-op. Societies, Tiruvarur Region, Tiruvarur, , one of the contentions was that the appointments were unauthorised and illegal and that they
were temporary and not permanent. The learned single Judge did not go into the aspect of the status of the workmen as to whether they were
temporary or permanent or whether they are liable to be made permanent but was dealing only with the equal pay for equal work regardless of the
status of the workmen whether they are temporary or permanent and held that even while considering the workmen as temporary, as they were
doing the same nature of the duties as those permanent, the said temporary employees were held entitled for the same scales of pay.
(g) Even in the case of T.N. Medical Services Corporation Employees Welfare Union v. State of Tamil Nadu, 2001 FJR (99) 252, the issue was
not similar. There, the second respondent company, owned by the Government of Tamil Nadu, employed some workmen and because of the
computerisation, some workmen were to be laid off and then it was held that such workmen, even though temporary and having regard to the fact
that the company was making loss of profits, the workmen were entitled to be regularised in accordance with the T.N. Act of 1981 and directions
were issued to the Inspector u/s 5 of the Act to verify regarding the satisfaction of the requirements under the Act and then take appropriate action
within the stipulated time. Questions, as arose in this batch, were not there for adjudication. There was no plea of any recruitment, unauthorised or
of unqualified persons. It was held that the second respondent, even though a Government company, is an industrial establishment and comes
within the ambit of T.N. Act of 1981.
(h) In P. Arumugam v. Special Officer, T.N. Cooperative Societies and Ors., 1997 (1) S.L.R. 498, the case involved promoting the third
respondent to the post of Secretary and consequently reverting the petitioner as an Assistant, even though Rule 149 (2) (a) of the Tamil Nadu
Cooperative Societies Rules, 1988, was pleaded to be null and void but arguments were not raised. The only argument was that the above
provision is invalid because it is beyond the rule making power and is inconsistent with the main rule. The Division Bench held that the State
Government had the power to prescribe qualifications and eligibility conditions for the post and that the power to prescribe also includes the power
to relax or to provide for lesser qualification and also subject to certain conditions. The validity of the Rule was upheld. The other facet of the case
relates only to facts of that case and there is no such ratio decidendi which we can trace.
(i) The case in South Arcot Co-operative Motor Transport Society Ltd. (for ex-servicemen) Devanam-pattinam, Cuddalore Vs. Syed Batcha and
Others, dealt with the validity of a claim for compensation for retrenchment on the closure of a section of the South Arcot Cooperative Motor
Transport Society and is of no relevance to batch.
(j) In Co-operative Central Bank Ltd. and Others Vs. Additional Industrial Tribunal and Others, , held that the dispute with regard to the service
conditions could not be gone into by the Registrar u/s 61 of the Cooperative Societies Act and it squarely falls for reference u/s 10 of the Industrial
Disputes Act, 1974.
(k) In the case of The School Committee, Tilak Vidyalaya Higher Secondary School v. District Educational Officer, Tirunelveli, 1991 T.L.N.J. 1,
the issue was as to whether a post of sweeper fell within the ambit of Employment Exchanges (Compulsory Notification of Vacancies) Act, 1989,
it was held that the said Act will not apply.
(1) In T.N. Primary Agricultural Bank Employees Association v. T.N. Co-op. Primary Agricultural & Rural Development Banks Employees
Union, W.P. No. 10609 of 2002 dated 20.9.2001, a learned single Judge of this Court, in a similar matter, did not adjudicate the merits but only
directed the members of the petitioner''s association i.e. Tamil Nadu Primary Agricultural Cooperative Bank Employees to approach the Authority
to work out their remedy by moving the Appropriate Authority under the Tamil Nadu Industrial Establishment (Conferment of Permanent Status)
Act, 1981 or any other provision or moving the State Government to consider their claims.
(m) In Trichirapatti Hprm. Cooperative Bank Employees Union v. Joint Registrar of Cooperative Societies, 1992 II L.LJ. 747, it was held that a
settlement between Cooperative Societies and their employees concerning wage structure cannot be nullified merely because the elected bodies
were superceded and the special officers appointed in their place. The circular issued by the Registrar of Cooperative Societies ignoring the
settlement was held to be incompetent and without jurisdiction. The settlement was relating to wage structure entered into under Sections 12(3)
and 18(1) of Industrial Disputes Act and all the formalities regarding such settlement as per the prerequisites of the Act have been satisfied. The
settlement was between the concerned Cooperative Societies on the one hand and the employees on the other. The question was regarding the
validity of the circular issued by the Registrar of Cooperative Societies unilaterally annulling all the statutory settlements entered into by the elected
bodies of the Cooperative Societies with the workmen. The merits of the contentions were not gone into. The case did not deal with the
unauthorised settlements or settlements giving retrospective effect but dealt with a settlement which was valid in law but was being annulled later
because of the change of management.
(n) In Nellai Cotton Mills Ltd, v. State of Tamil Nadu, 1987 W.L.R. 258, a Division Bench of this Court was dealing with the constitutional validity
of T.N. Act of 1981 and it was held (1) the Explanation to Section 3 is incapable of enforcement and must therefore be held to be redundant, (2)
the provisions of Section 3 (2) of the Act are valid except that the clause ""or on account of non-employment or discharge of such workman for a
period which does not exceed three months and during which period a substitute has been employed in his place by the employer"" is void on the
ground that it amounts to an unreasonable restriction on the right of the employer; (3) an apprentice or a badly worker could not be included in the
''workman'' referred to in Section 3 (1) and (2) of the Act, and they will, therefore, be not entitled to the benefit of Section 3; (4) the Act will not
supersede a settlement between the workers and the employer in so far as it deals with the subject of conferment of permanent status to workmen;
and (5) the Act cannot be held to be retrospective in character. The adjudication which is sought for in this case did not arise in that case.
(o) In T. Mutheeswaran Vs. The Registrar of Co-operative Societies (Housing) Gandhi Nagar, Adayar, Chennai - 20 and three others, , a learned
single Judge of this Court was dealing with an officer, who retired as a Secretary but was appointed even after his superannuation and pursuant to
the directions of the Registrar in exercise of the powers u/s 181 of the Cooperative Societies Act. It was held that there was no such power to
issue such directions and that Section 181 of the Act empowers the Registrar to issue general directions and no particular direction of this nature to
appoint. It was also held that every attempt will have to be made within the four corners of Section 73 of the Act and Rule 149 and merely
because there is urgency and pressure of work, the respondents 1 to 3 cannot be permitted to do an illegal act.
As already stated, in the above cases, there was no adjudication regarding the effect of unauthorised employment either for want of fixation of
the cadre strength or in excess of the cadre strength fixed or lack of educational and other qualifications. The decision in Bhagwati Prasad v. Delhi
Pradesh Municipal Corporation, 1990 S.C.C. 174, has got no relevance to this batch. The decision in Agra District Co-operative Bank Ltd. Vs.
Prescribed Authority, Labour Court, U.P. and Others, , which has been decided by the Supreme Court and which has been cited on behalf of the
writ appellants/writ petitioners, is of no help to them and in fact, it runs contra to their arguments. In that case, the Supreme Court was dealing with
a situation arising under U.P. Cooperative Societies Act, 1955. In the said case, the employees of the cooperative societies were sought to be
disturbed after 20 years of their service. But it was not a case of unauthorised appointment. There was some irregularity in the selection process
and the Supreme Court emphatically held that inasmuch as there was no unauthorised employment and the employment was not against non-
existing vacancies and carved out a distinction from the ratio laid down in Ashwani Kumar and Others Vs. State of Bihar and Others, . In fact, it
was positively held that if the appointments are unauthorised, then the ratio laid down in Ashwani Kumar and Others Vs. State of Bihar and
Others, is applicable. That only shows that the views taken by the Supreme Court in Ashwani Kumar and Others Vs. State of Bihar and Others,
have not been deviated but were followed in later decisions in Agra District Co-operative Bank Ltd. Vs. Prescribed Authority, Labour Court,
U.P. and Others, and Nazira Begum Lashkar v. State of Assam, 2001 (1) S.C.C. 143. The other judgment in M.M. Dolichan v. State of Kerala,
cited by the learned Advocate General has got no relevance for this adjudication. The view taken by the learned single Judge of this Court in Tamil
Nadu Civil Supplies, Corporation Employees Union and four others Vs. Tamil Nadu Civil Supplies Corporation Ltd. and another, is also in
consonance with the judgment of the Supreme Court in Ashwani Kumar and Others Vs. State of Bihar and Others, . Now, we go to the main case
law on the subject i.e. Ashwani Kumar and Others Vs. State of Bihar and Others, , which is applicable in this batch on all fours. In the said case,
as a part of 20-Points programme for eradication of tuberculosis in the State of Bihar, 2,250 posts were sanctioned borne on class 1 and class 4.
But the Director of Tuberculosis Centre at Patna, by misuse of his office, had appointed 6,000 persons, which is in excess by 3,715, as compared
to the sanctioned cadre strength of 2,250. In the process, the very financial viability of the Scheme was affected. The recruited staff also sought for
regularisation of their appointments on the ground of long service and sought direction against termination of their services. The Supreme Court
held that when plan expenditure is required to be incurred, budgetary sanction is a sine qua non and that it is axiomatic that unless there is vacancy,
there is no question of filling it up and there cannot be any employee when no vacancy or post available on which he can work and can be paid as
per the budgetary sanction. The Supreme Court categorised such illegally appointed personnel as persona non grata and held that question of
confirmation or regularisation of an irregularly appointed candidate would arise only if the candidate concerned is appointed in an irregular manner
or on ad hoc basis against an available vacancy, which is already sanctioned but if the initial entry itself is unauthorised and is not against any
sanctioned vacancy, question of regularising the incumbent on such a non- existing vacancy would never survive for consideration as the very entry
itself was illegal and void. In fact, in that case, regularisation has been made by the Authority but the same was set at naught by the Supreme Court
holding that the so-called exercise of confirming those employees was a nullity. It was emphatically ruled by the Supreme Court that any posting
which is de hors the budgetary grant and on a non-existing vacancy would be outside the sanctioned scheme and would remain totally unauthorised
and no right would accrue to the incumbent of such an imaginary or shadow vacancy. The Supreme Court held that in only two categories of
cases, the claim for regularisation can be countenanced. Firstly, if on any available clear vacancies, which were of a long duration, appointments
are made on ad hoc basis or daily-wage basis by a competent authority and are continued from time to time and if it is found that the incumbents
concerned have continued to be employed for a long period of time with or without any artificial breaks, then they may be entitled to claim
regularisation but that claim can be made only on the pre- condition that the initial entry of such an employee must be made against an available
sanctioned vacancy by following the rules and regulations governing such entry. Secondly, when the initial entry of the employee against an
available vacancy is found to have suffered from some flaw in the procedural exercise though the person appointed is competent to effect such
initial recruitment and has otherwise followed due procedure for such recruitment, the second instance is cited as a case of irregular appointment in
centra-distinction to the illegal appointment stating that the regularisation cannot be made in the second type of cases when the initial entry was
found to be totally illegal or in blatant disregard of all the established rules and regulations governing such recruitment and such illegal appointments
can never be regularised.
In view of the authoritative pronouncement of the Supreme Court, which is the law of the land under Article 141 of the Indian Constitution, and
as the facts of this batch of cases clearly attract the legal principles enunciated by the Supreme Court, we hold that the appointments of the staff
made to the cooperative societies by the elected bodies or the officers in charge, in violation of the cadre strength or the prescriptions of the
educational qualifications, cannot stand and are held to be null and void. As already stated above, the Permanency Act of 1981 or Industrial
Disputes Act, 1947, cannot be pressed into service. Non-obstante clause in the above enactments have to be read down to be in consonance with
the legal principles enunciated by the Supreme Court in Ashwini Kumar''s Case, (supra). Hence, the settlements entered under Sections 12 or 18
of the Industrial Disputes Act, have got to no statutory force and are unenforceable. Promotions effected also fall to ground.
In view of what is stated supra, we hold;
(i) that G.O. Ms. No. 86, Cooperation, Food and Consumer Protection Department, dated 12.3.2001, has got the effect of only authorising the
regularisation of the employees recruited by the cooperative societies for the period from 9.7.1980 to 11.3.2001 exempting the intervention of
employment exchange;
(ii) that G.O. Ms. No. 86, Cooperation, Food and Consumer Protection Department, dated 12.3.2001, shall not operate for regularisation of any
employee recruited by the cooperative societies in violation of Sub-rule (1) of Rule 149 of the Tamil Nadu Cooperative Societies Rules, as
amended by G.O. Ms. No. 212, Cooperation, Food and Consumer Protection Department, dated 4.7.1995;
(iii)in societies, where the cadre strength has not been fixed, direct them to adopt the special bye-law in conformity with Sub-rule (1) of Rule 149
of the Tamil Nadu Cooperative Societies Rules, as amended by G.O. Ms. No. 212, Cooperation, Food and Consumer Protection Department,
dated 4.7.1995;
(iv)direct the Registrar of Cooperative Societies to issue a circular within a week from today calling upon all the cooperative societies in the State
of Tamil Nadu to comply with the directions in Clause (iii) supra.
(v)direct that within two months of the approval of the special bye-laws under Sub-rule (1) of the Rule 149 of the Rules, the respective Deputy
Registrars of Cooperative Societies having jurisdiction over the cooperative societies in their Divisions, shall enquire, by issuing notice to the entire
staff recruited from 9.7,1980 to 11.3.2001, and decide as to whether the said recruitment is in conformity with the special bye-laws approved by
the Registrar of the Cooperative Societies and terminate the services of such staff members, whose appointments are in contravention of the
special bye laws so approved by the Registrar of Cooperative Societies; it is made clear that while considering the validity or otherwise of the
appointment of the staff cooperative societies, the requirement of notifying the vacancies to employment exchange shall not be taken cognisance of.
(vi) that no cooperative staff member appointed subsequent to G.O. Ms. No. 86, Cooperation, Food and Consumer Protection Department,
dated 12.3.2001 otherwise than through employment exchange shall be continued in service and their services shall be terminated forthwith,
(vii) that either the provisions of Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981 or the Industrial
Disputes Act, 1947, or the settlements entered under Sections 12 or 18 thereof, shall have no application to the staff of the cooperative societies
appointed without adequate qualifications or beyond the cadre strength for the period from 9.7.1980 to 11.3.2001. This is equally applicable to
the staff appointed to the cooperative societies, otherwise than through employment exchange, for the period from 12.3.2001 onwards.
The writ appeals and the writ petitions are disposed of accordingly. No costs. Consequently, the connected W.A.M.Ps. and W.P.M.Ps. are
closed.