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. 21870 of 2007(C) -------------------------------------- PETITIONER: ------------------ P.BALAGOPAL, MEMBER, BOARD OF DIRECTORS, KERALA STATE CO-OPERATIVE AGRICULTURAL & RURAL DEVELOPMENT BANK LTD., THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE POONTHOTTAM RESPONDENTS: ---------------------- 1. STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, DEPARTMENT OF CO-OPERATION, GOVT. SECRETARIAT, THIRUVANANTHAPURAM. 2. THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM. BY SPL. GOVT. PLEADER SMT. A.G. ANEETHA THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13/02/2008, THE COURT ON 29/02/2008 DELIVERED THE FOLLOWING: WP(C) NO: 21870/2007 APPENDIX PETITIONER'S EXHIBITS EXT.P1. COPY OF THE CIRCULAR NO. 7/02 DT. 26/3/02. EXT.P2. COPY OF THE CIRCULAR NO.25/04 DT. 16/7/04. EXT.P3. COPY OF THE CIRCULAR NO. 26/2006 DT. 28/06/06. EXT.P4. COPY OF THE CIRCULAR NO. 57/06 DT. 28/11/06. EXT.P5. COPY OF THE CIRCULAR NO. 27/05 DT.2/08/05. EXT.P6. COPY OF THE CIRCULAR NO. 55/06 DT. 30/11/2006. EXT.P7. COPY OF THE CIRCULAR NO. 37/06 DT. 28/07/04. EXT.P8. COPY OF THE CIRCULAR NO. 25/06 DT. 17/11/06. EXT.P9. COPY OF THE NOTICE NO. CLT (3) 9293/07 DT. 13/3/07. EXT.P10. COPY OF THE JUDGMENT IN WP NO. 10043/07 DT. 26/3/07. EXT.P11. COPY OF THE REQUEST DT. 23/3/07. EXT.P12. COPR EPLY FILED BY THE PETITIONER DT. 24/3/07. EXT.P13. COPY OF THE ORDER NO. CLT (3) 9293/07 DT. 5/5/07. EXT.P14. COPY OF THE LETTER TO THE GOVT. SECRETARY BY NAFED DT. 10/2/2006. EXT.P15. COPY OF THE LETTER TO THE REGISTRAR DT. 17/5/06. EXT.P16. COPY OF THE APPEAL FILED BEFORE THE GOVT. DT. 15/5/07. EXT.P17. COPY OF THE STAY PETITION FILED BEFORE THE GOVT. DT. 15/5/07. EXT.P18. COPY OF THE JUDGMENT IN WPC NO. 15535/07 DT. 24/5/07. EXT.P19. COPY OF THE LETTER NO. RP/P1/CORRES/2007-08 DT. 21/6/07. EXT.P20. COPY OF THE GO NO. 439/07/CO-OP DT. 30/6/07. RESPONDENT'S EXHIBITS NIL. True copy tga THOTTATHIL B.RADHAKRISHNAN, J. ------------------------------------------- W.P(C).No.21870 OF 2007 ------------------------------------------- Dated this the 29th day of February, 2008 JUDGMENT Petitioner in W.P(C).21870/07, a member of the Palakkad 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 requesting that he may be given a copy of the report which is stated to be the basis of Ext.P9 notice. He also filed Ext.P12 reply to the notice. Ext.P13 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.P16 appeal. That has been rejected by the WPC.21870/07 Page numbers Government as per Ext.P20 order. Exts.P13 and P20 orders are criticized as cryptic in as much as they do not contain any reason in spite of the clear directions of this Court to take decision after considering the objections. The petitioner contends that the statutory authorities were bound to issue an order after considering the fact whether there was any error, particularly in view of Ext.P19 certificate issued by the State Bank stating that the Primary Bank is not in arrears to the Bank as on 31.3.2007. 2. It is next pointed out that in view of Ext.P19 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. The district of Palakkad is one where the Government extended different measures in view of drought and certain package schemes are also announced by the Government of India. It is accordingly contended that there is no basis at all for the finding that the Primary Bank is in default. WPC.21870/07 Page numbers 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.P19, 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 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. Reimbursement of WPC.21870/07 Page numbers interest, waiver of interest etc. were provided for as per Ext.P7. 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.P14. Guidelines were sought to be issued in the light of Ext.P14. 4. 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 that 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 WPC.21870/07 Page numbers 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 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 WPC.21870/07 Page numbers 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 various circumstances which cannot be treated as default by a defaulter. 5. For the aforesaid reasons the impugned actions do not stand. In the result, these writ petitions are allowed quashing Exts.P13 and P20. No costs. Sd/- THOTTATHIL B.RADHAKRISHNAN, Judge kkb.