When State Reorganisation Is Already Done, Section 103 Of Multi-State Cooperative Societies Act Cannot Undo It: Supreme Court Rules Sugarcane Societies Are Not Multi-State Bodies

"A deeming provision under Section 103 of the 2002 Act cannot unsettle completed action for reorganisation by virtue of Sections 87 and 93 of the Reorganisation Act", In a significant ruling on cooperative society law and state reorganisation, the Supreme Court of India on March 10, 2026, held that two Sugarcane Growers Cooperative Societies situated in Udham Singh Nagar, Uttarakhand — at Bajpur and Gadarpur — cannot be treated as Multi-State Cooperative Societies under the Multi-State Cooperative Societies Act, 2002, after their reorganisation had already been completed under the Uttar Pradesh Reorganisation Act, 2000.

A bench of Justices P.S. Narasimha and Alok Aradhe, in a judgment authored by Justice Aradhe, allowed the appeals filed by the Registrar, Cane Cooperative Societies and the State of Uttarakhand, quashing the contrary finding of the Allahabad High Court.

Background of the Case

The Sugarcane Growers Cooperative Society, Bajpur, was originally registered under the U.P. Cooperative Societies Act, 1965, with an area of operation covering 96 villages in Bajpur and 34 villages in Suar, District Rampur — both in the erstwhile undivided State of Uttar Pradesh. When Parliament enacted the U.P. Reorganisation Act, 2000, carving out the new State of Uttaranchal (now Uttarakhand) with effect from November 9, 2000, the 34 villages including Suar fell within Uttar Pradesh while the Bajpur villages fell within Uttaranchal, inadvertently making the Society's area of operation span two states. Pursuant to an inter-State meeting on February 8, 2001, both States agreed to reorganise such societies. A General Body resolution was passed on April 3, 2001, for reconstitution, and the Deputy Cane Commissioner by order dated May 14, 2002, deleted the 34 U.P. villages from the Society's area, confining it entirely to Uttaranchal. Similarly, the Sugarcane Growers Cooperative Society, Gadarpur, underwent reorganisation by deletion of 9 villages in U.P. through an order dated December 1, 2003. One Gurdeep Singh Narval, a cane grower from village Suar whose name was excluded from membership following the reorganisation, successfully argued before a sole arbitrator and thereafter the High Court that by virtue of Section 103 of the 2002 Act, the Society automatically became a Multi-State Cooperative Society on November 9, 2000, rendering the entire reorganisation process illegal. The High Court in 2007 upheld this view and directed elections to be conducted under the Central Registrar, Multi-State Cooperative Societies. The State of Uttarakhand and Society members challenged this before the Supreme Court.

Legal Issues

The central question was whether Section 103(1) of the Multi-State Cooperative Societies Act, 2002 — which creates a legal fiction deeming certain societies affected by state reorganisation as Multi-State Cooperative Societies — operated automatically and overrode the prior reorganisation validly completed under Sections 87 and 93 of the U.P. Reorganisation Act, 2000. A related question was whether the objects of these Societies, confined to serving local canegrowers, satisfied the statutory precondition for invoking the Multi-State deeming fiction at all.

Court's Observations and Judgment

The Court began by noting the constitutional and legislative framework carefully. Section 87 of the Reorganisation Act embodies what the Court described as "the doctrine of legislative continuity," enabling the appropriate government to adapt laws applicable to the successor State of Uttaranchal within two years of bifurcation. Section 93 of the Reorganisation Act provides an overriding clause, stipulating that its provisions shall have effect notwithstanding anything inconsistent in any other law. The 2002 Act, on the other hand, came into force only on August 19, 2002 — nearly two years after the reorganisation — and its Section 103 introduced a deeming fiction for societies whose objects spanned multiple states as a consequence of state bifurcation.

The Court categorically rejected the argument that Section 103 of the 2002 Act operated automatically and retroactively to invalidate the completed reorganisation. It held that "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 key finding was that the reorganisation of both Societies had been validly undertaken within the transitional regime created by the Reorganisation Act itself, with the consent of both States, through General Body resolutions and consequential administrative orders — all before the 2002 Act even came into force.

"Legal fictions are crafted tools, precise in purpose and limited in reach"

The Court laid down an important principle on the nature and scope of legal fictions in statute law. It observed that "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." The deeming fiction under Section 103 of the 2002 Act, the Court held, could not be construed in isolation to override the express statutory scheme of the Reorganisation Act, which was a comprehensive parliamentary enactment governing all legal, administrative and institutional consequences of bifurcation of Uttar Pradesh, and which additionally carried its own non-obstante clause under Section 93.

The Court further held that even as a matter of statutory precondition, the deeming fiction under Section 103 was "neither automatic nor universal, but conditional upon factual determination of the objects of the concerned Society." Following its recent decision in State of Uttar Pradesh v. Milkiyat Singh (2025), the Court emphasised the crucial distinction between "objects" and "area of operation" — the residence of members or geographical spread of activity cannot substitute the statutory requirement that the principal objects of the Society must themselves be multi-state in character. On examining the bye-laws, the Court found that the objects of both Societies were confined to safeguarding and promoting the interests of local canegrowers and "do not evince any intention to serve the members across the State boundaries." The statutory preconditions for invoking Section 103 were thus held to be absent on the facts.

The Court also distinguished the earlier decision in Naresh Shankar Srivastava v. State of U.P. (2009), which had dealt with the Multi-State Cooperative Societies Act, 1984, holding that it had no application because it did not consider the impact of Sections 87 and 93 of the Reorganisation Act.

Applying the principle of harmonious construction, the Court held that "provisions contained in two statutes must, if possible, be interpreted in a harmonious manner to give full effect to both." Reading the Reorganisation Act and the 2002 Act together, the operation of the Section 103 legal fiction had to be restricted in cases where reorganisation had already been completed and where the objects and area of operation were confined to a single State.

Allowing the appeals of the State of Uttarakhand and the Registrar, Cane Cooperative Societies, the Court quashed the High Court judgment of March 14, 2007, and upheld the order of September 5, 2006, which had dismissed the challenge to elections conducted by the State of Uttaranchal. The Court declared that the Sugarcane Growers Cooperative Societies, Bajpur and Gadarpur are not Multi-State Cooperative Societies under the 2002 Act, and directed the authorities under the State Cooperative law to expeditiously conduct elections of the Societies.

Date of Decision: March 10, 2026