Legal Review and Analysis of State of Uttar Pradesh vs Milkiyat Singh & Ors 2025 INSC 1427
Case Synopsis
State of Uttar Pradesh vs Milkiyat Singh & Ors., (2025) INSC 1427
Synopsis : The Supreme Court overturned the High Court's verdict, ruling that the deemed conversion of a State cooperative society into a multi-State society under Section 103 of the Multi-State Cooperative Societies Act, 2002, is not automatic upon state reorganization. The conversion is contingent on a factual finding that the society's core objects, not merely its area of operation or members' residence, extend to more than one State.
1. Heading of the Judgment
Case Name: The State of Uttar Pradesh Through Principal Secretary & Ors. vs Milkiyat Singh & Ors. Etc.
Citation: 2025 INSC 1427 (Civil Appeal Nos. 7050-7051 of 2010)
Court: Supreme Court of India
Bench: Hon'ble Mr. Justice Vikram Nath and Hon'ble Mr. Justice Sandeep Mehta
Date of Judgment: December 15, 2025
2. Related Laws and Sections
The judgment primarily interprets the following statutory provisions:
Multi-State Cooperative Societies Act, 2002 (Central Act):
Section 3(n) & (p): Definitions of 'member' and 'multi-State cooperative society'.
Section 5: Conditions for registration as a multi-State cooperative society.
Section 10: Matters to be provided in the bye-laws of a society, distinguishing between "objects" and "area of operation".
Section 22: Provision for conversion of a State cooperative society into a multi-State cooperative society by amending its bye-laws.
Section 103: Deemed conversion of societies upon reorganization of a State.U.P. Cooperative Societies Act (State Act): The State legislation under which the subject society was originally registered.
U.P. Reorganisation Act, 2000: The parliamentary enactment that bifurcated the erstwhile State of Uttar Pradesh into the States of Uttar Pradesh and Uttarakhand.
3. Basic Details of the Judgment
A. Facts of the Case
The Kisan Cooperative Sugar Factory Ltd., Majhola, Pilibhit (U.P.), was registered under the U.P. Cooperative Societies Act (State Act).
In 2000, the State of Uttar Pradesh was reorganized, leading to the creation of Uttarakhand.
Subsequently, the State of Uttar Pradesh initiated steps to privatize several financially unviable cooperative sugar mills, including the respondent society, through an ordinance in 2007.
Shareholders of the society challenged this action before the Allahabad High Court. They argued that post-reorganization, the society's area of operation and membership spanned two states (U.P. and Uttarakhand). Therefore, by virtue of Section 103 of the Multi-State Cooperative Societies Act, 2002, it was automatically deemed to be a multi-State cooperative society, placing it outside the regulatory purview of the U.P. State Act.
The High Court accepted this argument, allowed the writ petitions, and held the State's privatization actions as without jurisdiction.
B. Issues Before the Supreme Court
The core legal issue was:
Whether, by virtue of Section 103 of the Multi-State Cooperative Societies Act, 2002, a cooperative society originally registered under a State Act is automatically transformed into a multi-State cooperative society merely because the erstwhile State in which it operated has been reorganized into two States?
C. Ratio Decidendi (Court's Reasoning)
The Supreme Court allowed the State's appeal and set aside the High Court's judgment. The core reasoning is as follows:
Interpretation of Section 103: The Court held that Section 103 does not trigger an automatic or deemed conversion of every State cooperative society upon state reorganization. The provision applies only if, post-reorganization, the "objects" of the society extend to more than one State.
Critical Distinction: "Objects" vs. "Area of Operation": The Court made a pivotal distinction. The "objects" of a society refer to its primary aims and purposes as stated in its bye-laws (e.g., manufacturing sugar, serving members' interests). The "area of operation" is the geographical territory where it conducts its activities. Section 103 specifically uses the term "objects," not "area of operation."
Harmonious Construction with Section 5: Reading Section 103 with Section 5(1)(a) of the Central Act, it is clear that for a society to be a multi-State cooperative society, its main objects must be to serve the interests of members in more than one State. This is a substantive condition relating to the society's purpose, not merely the incidental location of its members or sourcing areas.
Residence of Members is Irrelevant: The Court clarified that the domicile or residence of the society's members has no bearing on determining its status as a multi-State cooperative society. The crucial test is the territorial ambit of its "objects."
Factual Application to the Case: The respondents (writ petitioners) failed to demonstrate that the "objects" of the Kisan Cooperative Sugar Factory, as per its bye-laws, extended to serving interests in Uttarakhand post-reorganization. Their argument was based solely on the "area of operation" (sourcing sugarcane from Uttarakhand) and the residence of some members. Since the appellants' (State's) assertion that the society's objects were confined to U.P. was not contradicted, the condition under Section 103 was not met. Hence, the society continued to be governed by the U.P. State Act.
4. Core Principle and Analysis of the Judgment
Title: The Imperative of Purposive Over Literal Interpretation in Statutory Deeming Provisions
Main Issue: The Supreme Court addressed a fundamental question of statutory interpretation: How should a deeming provision in a central legislation, enacted to address federal restructuring, be construed—literally and automatically, or purposively, in harmony with the statute's overarching scheme and essential conditions?
Analysis and Explanation
This judgment is a masterclass in nuanced statutory construction. The High Court had adopted a literal, almost mechanical, interpretation of Section 103, holding that state reorganization ipso facto (by that very fact) changes a society's character. The Supreme Court rejected this approach, emphasizing that a deeming fiction cannot be expanded beyond the legislative intent evident from the statute's overall architecture.
The Court performed a "harmonious construction" of the Central Act. It looked at the Act as an integrated whole:
Entry Criteria (Section 5): The Act sets a clear entry barrier—registration as a multi-State society is permitted only if the society's main objects serve multiple states. This is the substantive heart of the law.
Voluntary Conversion (Section 22): The Act provides a pathway for an existing State society to choose to become a multi-State society by amending its bye-laws (which define its objects) to extend its jurisdiction.
Deemed Conversion (Section 103): This is an exceptional, involuntary pathway triggered by a specific external event (state reorganization). The Court reasoned that this exceptional route must still satisfy the Act's core substantive requirement reflected in Section 5. Therefore, the phrase "objects confined to one State" in Section 103 must be read as a mirror of the condition in Section 5. The deemed conversion applies only if, due to reorganization, the society's pre-existing objects now inherently relate to more than one state.
By insisting on this distinction between "objects" and "area of operation," the Court prevented an absurdity. It averted a situation where a society with a purely local objective (e.g., running a sugar mill in Pilibhit) would fall under central regulation merely because it sourced raw material from a neighboring state or had members who moved there—factors incidental to its core purpose. This preserves legislative competence and ensures that the more rigorous central law applies only to societies whose fundamental aims and operations are genuinely inter-state in character.
5. Final Outcome
The Supreme Court:
Allowed the Civil Appeals filed by the State of Uttar Pradesh.
Set aside the common judgment dated 26.09.2008 of the Allahabad High Court.
Restored the position that the Kisan Cooperative Sugar Factory Ltd., Majhola, continues to be a society governed by the U.P. Cooperative Societies Act and does not acquire the status of a multi-State cooperative society under the Central Act of 2002.
Dismissed the original writ petitions (C.M.W.P. Nos. 61489 of 2007 and 18556 of 2008) filed before the High Court.
6. MCQs Based on the Judgment
Q1. In State of Uttar Pradesh vs Milkiyat Singh (2025 INSC 1427), the Supreme Court held that for a cooperative society to be 'deemed' a multi-State cooperative society under Section 103 of the 2002 Act after state reorganization, what is the decisive factor?
a) The geographical area from where it sources its raw materials.
b) The residence or domicile of a majority of its members in the new state.
c) Whether its primary objects, as stated in its bye-laws, extend to serving interests in more than one State.
d) A joint decision by the governments of the newly created states.
Q2. According to the Supreme Court's interpretation in this judgment, which of the following is a correct statement about the Multi-State Cooperative Societies Act, 2002?
a) Section 103 automatically applies to all societies operating in a state that is reorganized.
b) The 'area of operation' and 'objects' of a society are synonymous terms under the Act.
c) The Act recognizes voluntary conversion under Section 22, which requires amending the bye-laws to extend the society's objects.
d) The registration under the Central Act is primarily based on the location of the society's headquarters.