Inside Court on Monday, the Supreme Court finally settled a long-running dispute that had quietly troubled Uttar Pradesh’s cooperative sugar sector for years. Hearing appeals filed by the State government, the Bench made it clear that the creation of Uttarakhand in 2000 did not, by itself, convert every cooperative society into a multi-State body. The ruling overturns a 2008 Allahabad High Court judgment that had blocked the State’s move to privatise certain cooperative sugar mills.
Background
The case traces back to the Kisan Cooperative Sugar Factory Limited in Pilibhit, originally registered under State law. After Uttar Pradesh was bifurcated and Uttarakhand carved out, shareholders approached the High Court, arguing that the society had automatically become a “multi-State cooperative society.” If that were so, they said, only the Union government could take decisions, including any move towards privatisation.
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The High Court accepted this view in 2008, relying heavily on Section 103 of the Multi-State Cooperative Societies Act, 2002, which talks about societies becoming multi-State entities after reorganisation of States. Uttar Pradesh challenged that interpretation before the Supreme Court.
Court’s Observations
The Bench, led by Justice Vikram Nath, took a step back and read the law carefully. It noted that Section 103 cannot be seen in isolation. “The bench observed, ‘Not every cooperative society functioning in a reorganised State automatically becomes a multi-State cooperative society,’” stressing that Parliament never intended such a sweeping result.
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In simple terms, the judges explained the difference between a society’s objects and its area of operation. Objects refer to what the society is meant to do, and where those core activities are meant to serve members. Area of operation is just the geographical spread of activities. Confusing the two, the Court said, led the High Court into error.
The Bench underlined that under the Central Act, a society becomes multi-State only if its main objects serve members in more than one State. Merely having members living across State borders, or sourcing sugarcane from another State, does not meet that test. “The residence of members is irrelevant,” the Court remarked during the hearing, adding that legal fictions under deeming clauses must be applied cautiously.
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Decision
After applying this interpretation to the facts, the Court found that the sugar cooperative’s objects remained confined to Uttar Pradesh even after reorganisation. On that basis, Section 103 did not apply. The High Court’s judgment was therefore set aside, the State’s appeals were allowed, and both writ petitions challenging the State’s authority were dismissed, restoring Uttar Pradesh’s power to act under its own cooperative law.
Case Title: State of Uttar Pradesh through Principal Secretary & Ors. vs. Milk iyat Singh & Ors.
Case No.: Civil Appeal Nos. 7050–7051 of 2010
Case Type: Civil Appeal (Cooperative Society / State Reorganisation)
Decision Date: 15 December 2025
