IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN FRIDAY, THE 29TH FEBRUARY 2008 / 10TH PHALGUNA 1929 WP(C).No. 25161 of 2007(U) --------------------------------------- PETITIONER: ------------------- P.GANGADARAN NAIR, MEMBER, BOARD OF DIRECTORS, KERALA STATE CO-OPERATIVE AGRICULTURAL & RURAL DEVELOPMENT BANK LTD., THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE POONTHOTTAM, ADV. SRI.T.R.RAVI. RESPONDENTS: ------------------------ 1. STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, DEPARTMENT OF CO-OPERATION, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM. BY SPL. GOVERNMENT PLEADER SMT. A.G. ANEETHA. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13/02/2008, THE COURT ON 29/02/2008 DELIVERED THE FOLLOWING: THOTTATHIL B.RADHAKRISHNAN, J. ------------------------------------------- W.P(C).No.25161 OF 2007 ------------------------------------------- Dated this the 29th day of February, 2008 JUDGMENT Petitioner, a member of the Kasaragod Primary Co- operative Agricultural & Rural Development Bank Ltd., hereinafter referred to as 'Primary Bank', is a delegate of that society to the committee of the Kerala State Co-operative Agricultural & Rural Development Bank Ltd., hereinafter referred to as 'State Bank'. The second respondent issued Ext.P9 notice, taking the stand that the petitioner has ceased to be a member of the committee of the State Bank on the ground that the Primary Bank is in default to the State Bank. Following Ext.P10 judgment of this Court, the petitioner made Ext.P11 objection to Ext.P9 notice. Ext.P12 order was thereafter issued by the Registrar, concluding that the petitioner has ceased to be a member of the committee of the State Bank. The petitioner carried Ext.P15 appeal. That has been rejected by the Government as per Ext.P19 order. Exts.P12 and P19 orders are criticized as cryptic in as much as they do not contain any WPC.25161/07 Page numbers reason in spite of the clear directions of this Court to take decision after considering the objections. 2. It is next pointed out that in view of Ext.P8 certificate, there could not have been any action against the Primary Bank and its delegate, the petitioner. It is contended that the impugned action is actuated and it is malafide. 3. The question whether a debtor has committed default or not is firstly for the creditor to say. It is not to be assumed that the creditor State Bank would act merely on the ipse dixit of persons like the petitioner, on the sole premise that he is a member of the Board of Directors of the State Bank. Whether there is default in repayment of debts or not is a matter that could be reflected by the books of accounts. The creditor State Bank has issued Ext.P8, stating that the Primary Bank is not in arrears to the State Bank as on 31.3.2007. By Ext.P1 circular, directions were issued by the Registrar of Co-operative Societies in relation to loans availed by agriculturalists. The recovery WPC.25161/07 Page numbers proceedings were thus interfered with. By Ext.P2, moratorium for loans and other restrictions on recovery of interest were imposed. Ext.P3 circular was also issued on the basis of certain decisions, taken on consensus, in relation to certain benefits, in particular, to districts including Palakkad, Wayanad and Kasaragod. Ext.P5 circular was issued with directions regarding re-scheduling of loans. Attachment proceedings were further avoided by the issuance of Ext.P6 circular. Certain recommendations were made on the claims of primary co- operative societies on the basis of package schemes announced by the Government of India. The question of proceeding appropriately against hypothica, at least in relation to non- agricultural loans which are supported by such security as are offered to agricultural loans by the same person, is a matter raised by NABARD, calling for a policy decision by the State Government. This is evidenced by Ext.P13. Guidelines were sought to be issued in the light of Ext.P13. WPC.25161/07 Page numbers 4. The appellate order of the Government is challenged on different grounds. For one thing, it is stated that the appeal was notified for hearing and was heard by the Additional Secretary Sri.S.Venkedeswara Iyer and that the impugned order has been issued, though in the name of Government of Kerala, by Sri.E.Sudheer, who had not heard the appeal. Though Ext.P19 could be treated as an institutional decision, there is no case in the counter affidavit that the files contain the minutes of the hearing conducted by Sri. S.Venkedeswara Iyer, disclosing the submissions made at the personal hearing. If such minutes were part of the files and if such plea had been taken by the Government in the counter affidavit, the challenge to Ext.P19 that it is a decision by an officer, other than the one who heard the petitioner could have been overruled. More importantly, Ext.P19 has been criticized as a cryptic order, which does not contain any reasons. In my view, that plea is fully justified because, the omnibus statement in Ext.P19 that all the contentions and materials have been considered and that the subordinate authority, viz., the Registrar, has issued the order WPC.25161/07 Page numbers impugned in Ext.P15 appeal after considering all the relevant aspects is insufficient expression of reasons in support of an appellate decision. 5. A conclusion as to whether the Primary Bank, of which the petitioner is a delegate in the committee of the State Bank, is in default could be considered only with reference to such default, as could be termed as referable to the failure of the Primary Bank to enforce recovery and payments to the State Bank. If it is concluded merely on the strength of books of accounts that a society is in default to another, to visit it with liability under Rule 46 (e) of the Rules, that would be unreasonable and beyond what is provided for and contemplated by the rule in question. As noticed by me in the judgment deciding W.P(C).No.25106/07, a primary society, merely on account of non-payment of amounts lent to it, is not disqualified from sending its delegate to be in the committee of the lender Bank. Rule 46 (e) only provides for cessation of membership of that person as a member of the committee of the apex society on ground of default. A WPC.25161/07 Page numbers reasonable and meaningful application of Rule 46 (e) can be had only when the debtor society could be treated as one which had incurred liability by being in default to recover and pay. If the Government and other agencies having statutory control over the co-operative sector repeatedly extend benefits by way of moratorium, stay of attachment proceedings, deferring of collection of interest etc., which are done having regard to the economic scenario, the primary societies cannot be compelled to effect recoveries. If amounts are not recovered, payments to the lender societies would obviously be affected. The situation contemplated in Rule 46 (e) is not one that extends a provision where the State or the Registrar may interfere with a democratic institution, a co-operative society, on the mere ground that payments are not made. If such a view is taken on the interpretation of Rule 46 (e), that provision has necessarily to be treated as arbitrary, unconstitutional and would be void and inoperative. To exclude that, it has to be necessarily taken that the said Rule would not come into play where the outstandings due from a primary society to the lender society is on account of WPC.25161/07 Page numbers various circumstances which cannot be treated as default by a defaulter. 6. For the aforesaid reasons the impugned actions do not stand. In the result, this writ petition is allowed quashing Exts.P12 and P19. No costs. Sd/- THOTTATHIL B.RADHAKRISHNAN, Judge kkb.