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. 25106 of 2007(L) ------------------------------------- PETITIONER: ------------------ SOLAMAN ALEX, 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, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM. BY SPL. GOVERNMENT 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: 25106/2007 L APPENDIX PETITIONER'S EXHIBITS EXT.P1. COPY OF THE CIRCULAR NO. 7/02 DT. 26/3/02. EXT.P2. COPY OF THE CIRCULAR NO.2 5/04 DT. 16/07/04. EXT.P3. COPY OF THE CIRCULAR NO. 26/06 DT. 28/6/06. EXT.P4. COPY OF THE CIRCULAR NO. 27/05 DT. 2/08/05. EXT.P5. COPY OF THE CIRCULAR NO. 55/06 DT. 30/11/06. EXT.P6. COPY OF THE NOTICE NO. CLT(3) 14416/2007 DT. 7/4/07. EXT.P7. COPY OF THE LETTER TO THE GOVT. SECRETARY BY NAFED DT. 10/2/06. EXT.P8. COPY OF THE LETTER TO THE REGISTRAR DT. 17/5/06. EXT.P9. COPY OF THE STATEMENT GIVEN FOR THE REPAYMENT OF THE AMOUNTS UNDER DEBTORS RELIEF ACT. EXT.P10. COPY OF THE REPLY GIVEN BY THE PETITIONER DT. 16/4/07. EXT.P11. COPY OF THE ORDER NO. CLT(3) 14416/2007 DT. 24/4/07. EXT.P12. COPY OF THE APPEAL FILED BEFORE THE GOVT. DT. 2/5/07. EXT.P13. COPY OF THE STAY PETITION FILED BEFORE THE GOVT. DT. 2/5/07. EXT.P14. COPY OF THE JUDGMENT IN WPC NO. 15007/07 DT. 15/5/07. EXT.P15. COPY OF THE COMMUNICATION NO. 5715/B1/2007/CO-OP DT. 13/6/07. EXT.P16. COPY OF THE GO NO. 480/2007/CO-OP DT. 27/07/07. EXT.P17. COPY OF THE DUE POSITION OF VYTHIRI PRIMARY BANK AS ON 31/06/2006 AND 31/12/2006. RESPONDENT'S EXHIBITS NIL. True copy tga THOTTATHIL B.RADHAKRISHNAN, J. ------------------------------------------- W.P(C).No.25106 OF 2007 ------------------------------------------- Dated this the 29th day of February, 2008 JUDGMENT Petitioner is sitting on the committee of the Kerala State Co-operative Agricultural & Rural Development Bank Ltd., hereinafter, the 'State Bank' for short, as a delegate of the Neyyattinkara Primary Co-operative Agricultural & Rural Development Bank Ltd., hereinafter, the 'Primary Bank'. 2. Ext.P6 notice was issued to him and the Primary Bank, delegate, stating that the petitioner has ceased to be a member of the committee of the State Bank in view of Rule 46 (e) of the Kerala Co-operative Societies Rules, 1969 on the ground that the Primary Bank has committed default in repaying amounts due to that State Bank. Petitioner submitted Ext.P7 reply refuting the allegations and contending that the Primary Bank is not in default in view of the different circulars relied on by him in Ext.P10 and the fact that the State Bank has re-scheduled the loans. WPC.25106/07 Page numbers 3. By Ext.P11, the Registrar took the view that the one time settlement schemes and other facilities were extended in relation to agricultural loans and that except in stopping attachment proceedings till 31.12.2006, there was no ban on recovery of agricultural and non-agricultural loans. On such premise, the Registrar decided that the petitioner has ceased to be a member of the committee of the State Bank. The petitioner filed Ext.P12 appeal against that decision before the Government. By Ext.P16, that appeal was dismissed merely by stating that the records have been perused and the arguments examined and that the Registrar has issued Ext.P11 decision, after considering all aspects. 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.P16 WPC.25106/07 Page numbers 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 has been taken by the Government in the counter affidavit, the challenge to Ext.P16 that it is a decision by an officer, other than the one who heard the petitioner could have been overruled. More importantly, Ext.P16 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.P16 that all the contentions and materials have been considered and that the subordinate authority, viz., the Registrar, has issued the order impugned in Ext.P12 appeal after considering all the relevant aspects is insufficient expressions of reasons in support of an appellate decision. For this reason, Ext.P16 decision has to go. WPC.25106/07 Page numbers 5. However, it also requires to be examined whether merely on account of the setting aside of Ext.P16, the matter needs to go back to the Government for reconsideration of Ext.P12 appeal. 6. Exts.P1 to P5 are circulars issued by the Government, granting various benefits by way of concessions, exemptions, also from enforcement of recovery proceedings against defaulters of various loans, including agricultural loans. Ext.P7 is a communication issued by NABARD to the Government of Kerala, calling upon the State Government to take a policy decision facilitating Primary Co-operative agricultural and Rural Development Banks to proceed with recovery of non-agricultural loans by adopting a system of part valuation of the land against the non-agricultural loans overdue. Such a suggestion was made by NABARD because, the Agricultural & Rural Development Banks Act permits the primary banks to grant multiple loans, both agricultural and non-agricultural, against mortgage of same piece of land and in view of some of the orders issued by the State Government deferring repayment of WPC.25106/07 Page numbers agricultural loans, no legal proceedings can be effected against them, even for non-agricultural loans, since the mortgage related to agricultural land, offered as security for agricultural loans also. NABARD clearly expressed its views to the State Government that adopting of policy of part valuation of land against overdue non-agricultural loans would bring respite to the Primary Co-operative Agricultural and Rural Development Banks, at least in so far as recovery of overdues under non- agricultural loans are concerned. 7. The complex situation in which the scenario of recovery of agricultural and non-agricultural loans by banks which are governed by the Kerala State Agricultural and Rural Development Banks Act are placed would show that it is inappropriate to conclude that any particular primary co- operative society is in default to an apex society, at least without getting the firm view of the apex society. To hold that the Primary Bank is in default, the books of accounts have not been taken into consideration and no opinion of the State Bank has WPC.25106/07 Page numbers been taken by the Registrar before deciding as to whether there was default at all. The reports of the officials of the co-operative department are insufficient to conclude, particularly when there is nothing on recored to show that the State Bank has raised any demand referable to the default. The question whether a participating bank is in default to the apex bank to be visited with action against its delegate under Rule 46 (e) does not depend upon a mere arithmetical calculation regarding the outstandings, that too by the officials of the Department of Co- operation in the Government. This is because, Rule 46(e) cannot be interpreted in isolation. That provision enjoins that a delegate of one society, sitting on the committee of another society, shall cease to be a member of such committee if the society which sent him as delegate is in default to the society in the committee of which he sits as a delegate. Such disqualification in relation to the State Bank and district co- operative banks are regulated by the provisos occurring after Rule 46 (e). Unlike disqualification, for becoming and being a member of the committee of a society, there is no WPC.25106/07 Page numbers disqualification prescribed, disentitling a society from sending a delegate to another society, merely on the ground that the society which sends a delegate is in default to the other society, while it sends its delegate to that society, though it may, as a matter of fact, be. To demonstrate this, if a primary co- operative agricultural bank is in default to the State Bank, there is no prohibition in the Rules which disentitles the primary co- operative agricultural bank from sending its delegate to sit on the committee of the State Bank. If that be so, the disqualification that could be incurred by a delegate merely on the ground that the society which sends him as delegate is in default has to be understood as a case where the default is not merely the existence of liability of that society to the apex society. Rule 2 (d) of the Act provides that a “default” means failure . . . . . . to repay. “Defaulter” is defined in Rule 2 (e) to mean any co-operative society against which or any person against whom a decree has been obtained. “Decree” means any order, decision or award referred to in Section 76 of the Act-see Rule 2 (b) of the Rules. Having these three definitions in mind, WPC.25106/07 Page numbers the liability of a co-operative society for cessation of the membership of its delegates in the committee of another society cannot be treated as one that emerges merely on account of accrual of unpaid outstandings within a time limit. 8. The different factors noticed above, including the policy of the financing NABARD; the various schemes which are extended by the State Government, as ameliorative measures to different sectors, the fact that recoveries would be held up by the pendency of proceedings before statutory authorities as well as courts, have to gain attention to conclude that a society which has sent its delegate to another society is to be visited with the liability of cessation of the membership of that delegate, by the operation of Rule 46 (e) of the Rules. If a contrary view is taken, a delegate of a society to which neither among the two provisos to Rule 46 (e) applies could be disqualified on the first day of its sitting as a member of the committee where he is sent as a delegate and his delegateship would cease as if such cessation is available on the mere dropping of the hat, since transactions WPC.25106/07 Page numbers between the different tiers of the financing track in the co- operative sector have different adjustments among themselves, which would keep changing from time to time, that too, quite frequently on the basis of the economic, agricultural and other policies of the State. This is all the more evident from the circulars and other orders which have been placed on record. 9. In the aforesaid view of the matter, it would be impermissible to conclude as has been done in the impugned Ext.P11, that the Primary Society of which the petitioner is a delegate is in default and that therefore, the petitioner has ceased to be a member of the committee of the State Bank in terms of Rule 46 (e) of the Rules. The reason given in support of Ext.P11 that though there was restraint order issued by the Government on recovery by attachment till 31.12.2006, there was no orders prohibiting recovery is, the least said, fallacious. The impugned orders do not therefore, stand. WPC.25106/07 Page numbers 10. Having regard to the conclusions arrived at above, the questions as to the quality of pre-decisional hearing, notice and any requirement to furnish the materials, on the basis of which the tentative conclusion in the notice was issued, are not being considered and are left open. In the result, this writ petition is allowed, quashing Exts.P11 and P16. No costs. Sd/- THOTTATHIL B.RADHAKRISHNAN, Judge kkb.