IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 19TH JANUARY 2010 / 29TH POUSHA 1931 OP.No. 1717 of 2002(D) -------------------------------- PETITIONER(S): -------------------- K.M. SUSEELA, AGED 49 YEARS, W/O. MANI C.R. NAIR, SURABHI, X/584 B, KAKKANAD, KOCHI - 30 NOW RESIDING AT III A/12/71, GOVT. QUARTERS, THRIKKAKARA P.O., KOCHI-682 021. BY ADV. MR.T.R.RAVI RESPONDENT(S): ------------------------- 1. THE ERNAKULAM DISTRICT CO-OPERATIVE BANK LTD., REPRESENTED BY ITS BRANCH MANAGER (MAIN), ERNAKULAM. 2. THE KERALA CO-OPERATIVE TRIBUNAL, TRIVANDRUM. R1 BY ADV.MR.P.V.SURENDRANATH R2 BY GOVT. PLEADER SMT.M.R.SREELATHA THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 19/01/2010, ALONG WITH WPC NO. 17214 OF 2008 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON CMP. NO.2917/2002 IN OP. 1717/2002 DISMISSED 19/01/2010 SD/- S.SIRI JAGAN, JUDGE APPENDIX PETITIONER'S EXHIBITS P1:- COPY OF THE PLAINT IN A..C. NO.10/1996. P2:- COPY OF THE ORDER IN A.R.C. NO.10/1996 DTD. 30.11.96. P3:- COPY OF THE R.P. NO.212/2000. P4:- COPY OF THE ORDER IN RP. 212/2000. P5:- COPY OF THE CIRCULAR NO.09/06 DTD. 27.2.06 ISSUED BY THE REGISTRAR OF CO-OPERATIVE SOCIETIES. P6:- COPY OF THE CIRCULAR NO.09(A)/2006 DTD. 4.3.2006. P7:- COPY OF THE PETITION DTD. 20.9.2004 SUBMITTED BY THE PETITIONER TO THE IST RESPONDENT BANK. P8:- COPY OF THE RECOVERY DTD. 17.7.07 ISSUED BY THE IST RESPONDENT TO THE DEPUTY REGISTRAR OF CO-OPERATIVE SOCIETIES, ERNAKULAM TO RECOVER THE AMOUNTS DUE BY THE PETITIONER. P9:- COPY OF THE CIRCULAR NO.30/2007 DTD. 1.5.2007 ISSEUD BY THE REGISTRAR OF CO-OPERATIVE SOCIETIES, TRIVANDRUM. P10:- COPY OF THE LETTER DTD. 10.10.07 ISSUED BY THE BRANCH MANAGER, ERNAKULAM DISTRICT CO- OPERATIVE BANK TO THE ASSISTANT REGISTRAR (ADMINISTRATION) CO- OPERATIVE SOCIETIES. RESPONDENT'S EXHIBITS P1(a):- COPY OF THE STATEMENT SHOWING THE BALANCE DUE FROM THE PETITIONER. TRUE COPY P.A. TO JUDGE tss S.SIRI JAGAN,J. -------------------- O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 -------------------------------- Dated this the 19th day of January, 2010. JUDGEMENT The petitioner is a retired Deputy Registrar of Co- operative Societies. On 10.8.1990, she availed of a loan of Rs.25,000/- from the Ernakulam District Co-operative Bank. That loan was to be repaid by the petitioner in 60 monthly instalments with interest at the rate of 17.5% and penal interest of 3% in case of default in payment of the instalments on due dates. Till 12.4.1992 the petitioner paid the instalments in time and paid a total amount of Rs.4,553/- towards the principal amount and Rs.7279.80/- towards interest. Petitioner submits that thereafter because of severe financial difficulties she could not pay the remaining instalments and an amount of Rs.20,447/- become overdue towards, principal amount. In view of the default in repayment of the instalments the bank filed O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 2 Arbitration Case No.10/96 on 30.10.1995 before the Joint Registrar of Co-operative Societies, Ernakulam, for recovery of amount of Rs.37,703/- from the petitioner and the sureties. In the same, interest was demanded at the rate of 23%. Petitioner objected to the interest rate and contended that he is not liable to pay interest of more than 20.5% as per the agreement executed between the petitioner and the Bank. According to the petitioner, as on 30.12.95, namely, the date of filing of the Arbitration case, the interest due was only Rs.15,587/- whereas the bank claimed interest of Rs.16,686/-. After hearing, the Arbitrator took up the matter for pronouncing award. No award was communicated to the petitioner. Later on the petitioner received notice in E.P.No.204/98 dated 16.4.99 for an amount of Rs.55,187/- on the basis of the award stated to have been passed in A.R.C No.10/96. On receipt of notice on 26.2.99, the petitioner approached the 1st respondent bank to ascertain the balance of the loan O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 3 amount with interest. Since the bank employees were on indefinite strike, the petitioner could not get any details from the 1st respondent. Hence, the petitioner calculated the interest for the period from 1.4.92 to 31.3.99 at the rate of 20.5% which came to Rs.29,342/- and remited an amount of Rs.29,962/- including the arbitration fee of Rs.500/- and notice fee of Rs.120/- as per chalan No.733/3 dated 31.3.99 leaving balance principal amount. Later, on receipt of a demand notice, the petitioner paid the said balance principal amount of Rs.20,447/- also with interest from 1.4.99 to 15.7.99 on 15.7.99, by paying Rs.21,495/-. Therefore, acccording to the petitioner, by such payment, the petitioner cleared all dues to the 1st respondent Bank in respect of the loan taken by the petitioner with interest at the rate of 20.5%. When later the petitioner approached the bank to confirm the closure of loan account, she was told that a further amount of Rs.16,986/- is still due to the 1st respondent Bank. By that time, the petitioner had O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 4 already paid an amount of Rs.63,289.80/- towards the repayment of the loan of Rs.25,000/-. In view of the exorbitant demand towards repayment of the loan amount, the petitioner immediately obtained a copy of the award in A.R.C 10/96 and filed R.P.No.212 of 2000 before the 2nd respondent Co-operative Tribunnal. Ext.P2 is the award passed in A.R.C 10/96. But, the Tribunnal dismissed the revision petition by Ext.P4 order dated 14.8.2001 holding that the revision petition suffers from inordinate delay and laches. The petitioner challenges Ext. P2 and P4 in O.P.No.1717/02. While that original petition was pending the petitioner retired from service. But the DCRG due to the petitioner was not paid to him on the ground that petitioner is liable to pay the amount due under the loan to the bank which is liable to be recovered from the DCRG due to the petitioner. Therefore, the petitioner has filed W.P.(C) No. 17214/08 seeking disbursal of the DCRG payable to the petitioner with interest for the delayed O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 5 payment. 2. The petitioner's contention is that he is liable to pay interest on the loan amount only at the rate of 17.5% with penal interest at the rate of 3% for delayed payment. According to the petitioner, the agreement does not contain any clause enabling the bank to recover interest at the rate of 23% as done in Ext.P2 award. The petitioner contends that, by Ext.P14 communication produced in W.P.(C) No. 17214/08, the Joint Registrar (General), Ernakulam had recommended to the Registrar of Co- Operative Socities to direct the bank to recover from the petitioner interest as per the rate fixed in the agreement and to avoid interest on interest. Petitioner would therefore submit that she has already paid the entire amounts due from her with interest and penal interest as per the loan agreement and therefore no amounts are due from the petitioner to the bank. 3. Counter affidavits have been filed by the O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 6 respondent in both the writ petitions. According to them, they are legally entitled to recover interest at the rate of 23%, in so far as the agreement provides that the rate of interest may be changed according to the absolute discretion of the bank. It is further submitted that the interest rate has been fixed in accordance with the circulars issued by the Registrar of Co-operative Socities. Therefore, they would take a stand that interest has been rightly charged and demanded from the petitioner. They would further submit that Ext.P2 award was passed on 13.11.96 and the petitioner has filed the revision petition only on 7.11.00, more than 4 years after passing of Ext.P2 award and therefore the Tribunal rightly rejected the revision petition on account of delay and laches. They would therefore seek to sustain Ext.P2 and P4 orders. It is further submitted that since the amounts are due from the petitioner, the same are to be recovered from the DCRG as per agreement executed by the petitioner for the same. O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 7 4. I have considered the rival contentions in detail. First of all, I shall consider the question as to whether the Tribunal was just in dismissing the revision petition filed by the petitioner on account of delay and laches. Ext.P2 award was passed on 30.11.96 admittedly. That award strangely is in a printed form by filling up the blanks. That is a very laconic order which does not reflect the contentions of the petitioner regarding interest and why the same is not sustainable in law. The same does not satisfy the requirements of an award passed under 69 of the Kerala Co- operative Societies Act. An order under Section 69 is a quasi judicial order and the same should contain reasons for the decision especially when the petitioner has challenged the rate of interest payable. What is done in Ext.P2 is to simply allow the claim of the bank for recovery of amounts with interest at the rate of 23% without stating as to how that rate is applicable and why the rate in the agreement is not. The petitioner has made available to me O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 8 a copy of the loan agreement entered into between the petitioner and the bank, wherein the interest rate mentioned is 17.5% and 3% penal interest. The A.R.C was filed based on that agreement. When the agreement stipulates interest at the rate of 17.5 % with 3% penal interest, the Joint Registrar was bound to give reasons as to why he allowed interest at the rate of 23%. It is sadly lacking in Ext.P2 award. It is stated in the award that the petitioner was present on 21.11.96. The award was passed on 30.11.96, on which date the petitioner could not have been present. The only contention raised by the bank regarding the averments of the petitioner that he has not been served a copy of award is that the petitioner was present at the time of award. The same does not appear to be correct, since Ext.P2 only says that the petitioner was present only on 21.11.96, whereas the award was passed on 13.1.96. Apart from that, the fact that the petitioner paid an amount of Rs.29,962/- on 31.3.99 and further O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 9 amount of Rs.21,495/- on 15.7.99 is not disputed by the bank. That being so, I am not satisfied that the petitioner is guilty of delay and laches so as to reject the review petition at the threshold, on that ground. 5. Normaly on finding that Ext.P4 order of the Tribunal discussing the revision petition on technical grounds is wrong, I should remand the matter to the Tribunal for fresh consideration on merits. But in view of fact that this is very old case, I am inclined to consider the disputes involved in this writ petition itself on the merits of the rival contentions, especially since no disputed questions are involved. 6. The only question to be decided in this case is with regard to the rate of interest chargeable on the loan taken by the petitioner. Note 2 under Rule 67(10) of Kerala Co-operative Societies Rules stipulates that the Registrar or such other person deciding the dispute or the Arbitrator shall have power to direct any party to the dispute to pay O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 10 the costs of the other party with interest in apropriate case and the interest awarded on the amounts decreed shall not exeed the contract rate from the date of suit, to the date of realisation of the amount. A learned judge of this Court has in Kottayam District Co-operative Bank v. Annie John, 2003 (3) KLT 416 has held that penal interest cannot be included in contract rate of interest for awarding future interest from the date of suit and that the contract rate of interest as contemplated under Rule 67(10) does not include the penal interest. Despite a written direction to the Bank, they have not chosen to produce a copy of the agreement executed in favour of the bank for the loan. The agreement contains three clauses regarding interest rate payable, which are clauses 3,4, and 6 which read as follows:- "3.That the bank will charge at the rate of 17.5% per annum on the daily balance of the said account and that such interest will during the time the said account runs be calculated at the last Friday of every month. 4. In the event of my default not paying the amount in the manner and within the time prescribed by this agreemebnt the bank is entitled to charge additional interest at the rate of 3% per annum over and above the agreed rate of interest. Provided that the interest payable by the borrower shall be subject to the O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 11 changes in interest rates made by the Reserve Bank of India from time to time. 6. That the rate of interest may be changed according to the absolute discretion of the Bank and the fact may be intimated to the Borrower and such changes in the rate of interest will be binding upon the borrower irrespective of the fact that the intimation shall be deemed to be duly served to the Borrower when given personally or when sent by post in the address as mentioned in this agreement." 7. Going by the same, the contract rate of interest for the loan is 17.5 % per annum. Of course, for delayed payment, penal interest of 3% is also provided for. The contract rate is subject to changes in interest rate made by the Reserve Bank of India from time to time. The bank has no case that the Reserve Bank of India has stipulated interest in excess of 17.5%. In fact, the counsel for the petitioner produced for my perusal a circular issued by the Kasaragod District Co-operative Bank, on 11.8.92, in which interest rates have been changed in accordance with Reserve Bank directions wherein for loans up to Rs.25,000/-, the maximum interest stipulated is only 13.5%. Of course, the learned counsel for the bank would contend that as per clause 6, the Bank had absolute discretion to change the rate of interest. I am not prepared O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 12 to concede such arbitrary and one sided power to the bank. Bank has to function on the basis of the directions issued by the Reserve Bank of India and Registrar of Co-operative Socities. Although the bank would take a contention that the rate of 20% with 3% default interest has been prescribed as per the circulars issued by the Registrar of Co-operative Socities, no such circular has been produced for my perusal. Even otherwise, as per the said clause in the agreement, bank can change the interest only after intimation to the borrower about the change of interest. The bank has no case that the change of interest rate has been intimated to the petitioner at any time. Further one of the objects of Co-operative Banks is to protect the interest of low income groups in the matter of financial assistance and the bank cannot arbitrarily demand such huge rates of interest. I also found that Ext.P14 recommendation of the Joint Registrar, produced in W.P.(C). No. 17214/08, The Joint Registrar had recomended to the Registrar of Co- O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 13 operartive Socities that in the petitioners case interest may be directed to be changed at the contract rate and to close the account without realising interest on interest of that recommendtion is accepted thus the amount already paid by the petitioner is more than what is due from their. Even otherwise, the petitioner has paid interest calclulated at the rate of 20.5% till 15.7.99 whereas the petitioner was liable to pay interest at the rate of 20.5% only till date of filing ARC, namely 2.9.95 and thereafter only at the rate of 17.5%, going by the dicision in Kottayam District Co- operative Bank (Supra). In view of the above finding, I am of the openion that the petitioner is not liable to pay interest in excess of 20.5% up to the date of filing the ARC. For period subsequent to the date of filing of the ARC, only 17.5% interest can be realised. It is not disputed before me that calculated thus the petitioner has already paid the entire amounts due as on 15.7.99. In the above circumstances, I O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 14 declare that no further amounts are due from the petitioner towards repayment of the loan taken by the petitioner from the bank. W.P.(C). No.1717/2002 is disposed of as above. Consequently W.P.(C). No. 17214/08 is allowed and the 2nd respondent Registrar of Co-operative Socities Thiruvananthapuram therein is directed to disburse the full DCRG due to the petitioner as expeditiously as possible at any rate within one month from the date of receipt of a copy of this judgment. S.SIRI JAGAN,JUDGE. mns O.P.No.1717 OF 2002 & W.P.(C).No. 17214 0F 2008 15