HP High Court quashes Govt Nomination on Solan Cooperative Federation Board

1. HP High Court quashes Govt Nomination on Solan Cooperative Federation Board

Shimla, Oct 8,

The Himachal Pradesh High Court has quashed the State Government’s nomination of three members to the Board of Directors of the Solan District Cooperative Marketing and Consumers Federation Ltd., holding that the Government cannot retain the right to nominate representatives merely on the basis of financial assistance or shareholding that no longer exists.

Petitioner’s counsel, advocate Sudhir Thakur, told Himachal Scape that the court allowed the petition, holding that an entity with public shareholding and equity participation could not be equated with a state-funded establishment. The ruling underscores the legal distinction between entities with public shareholding and institutions financed directly by the State.

A Division Bench comprising Justice Vivek Singh Thakur and Justice Ranjan Sharma passed the judgment on October 8, 2026, in CWP No. 4365 of 2026, filed by Sundram Thakur and another elected director of the Federation.

The petitioners had challenged the notification dated March 16, 2026, through which the Cooperation Department had nominated three government representatives to the Federation’s Board under Section 35 of the Himachal Pradesh Cooperative Societies Act, 1968.

The State Government had defended the nominations, arguing that it had historically held nearly 99 per cent of the Federation’s share capital. According to the State, it had invested about ₹59.69 lakh between 1964-65 and 2014. Although the entire share capital had subsequently been redeemed by the Federation by 2023-24, the Government argued that its past investment, loans, subsidies, guarantees and other assistance entitled it to nominate representatives.

The State also relied upon financial assistance provided under the Integrated Cooperative Development Project, including loans and subsidies, as well as a 398-square-metre parcel of land transferred between government departments in Solan for construction of a godown.

The High Court, however, rejected the State’s interpretation of Section 35.

The Court held that the Government’s power to nominate members is linked to its existing financial stake or subsisting assistance or guarantee, and not merely to assistance provided at some point in the past. The Court noted that the words used in Section 35—“has subscribed”, “has assisted indirectly” and “has guaranteed”—must be understood in the context of a subsisting financial relationship.

The Bench specifically observed that once the Government’s subscription to the Federation’s share capital was redeemed, its right to nominate representatives automatically came to an end, unless one of the other statutory conditions under Section 35 continued to exist.

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The Court also rejected the State’s reliance on loans and subsidies provided through the NCDC’s ICDP scheme. It held that the financial assistance came from NCDC, a statutory organisation under the Ministry of Cooperation, Government of India, and could not by itself be treated as financial assistance provided by the Himachal Pradesh Government. Further, no material was produced to establish that the ICDP loans were backed by a subsisting State Government guarantee.

On the issue of land, the Court found that the land had not actually been allotted or transferred to the Federation. Instead, ownership remained with the State Government and possession had merely been transferred from one government department to another. Therefore, the Court held that the transaction could not constitute indirect assistance towards formation or augmentation of the Federation’s share capital.

The Bench further emphasised that government nomination is an exception to the normal democratic structure of an elected cooperative board and therefore the statutory conditions for such nomination must be clearly satisfied.

“The moment subscription of the share capital is ended, the right to nominate vested in the State Government is vanished automatically,” the Court held.

Accordingly, the High Court declared the nomination of respondents No. 4 to 6 illegal, null and void ab initio and quashed the March 16 notification.

The Court also directed that the three nominees would cease to be members of the Federation’s Board from the date of their induction. Importantly, any decision of the Federation influenced by their opinion or voting rights—including the election of the Chairman or other office-bearers—has also been quashed. The Court directed that a fresh election of the Chairman or other office-bearers, if required, be conducted by October 31, 2026.

The writ petition was accordingly allowed and disposed of.

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