IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.16610 of 2009 1. BIRESH KUMAR S/O LATE BANKE BIHARI SHARMA R/O MOHALLA- ASHOK NAGAR, POKHARIA, P.S.- TOWN, DISTT.- BEGUSARAI 2. CHANDRA BHUSHAN SINGH S/O LATE RAM BALAK SINGH R/O MOHALLA- RATANPUR BISHANPUR, CHATURBHUJ ASTHAN, P.S.- MUFFASIL, DISTT.- BEGUSARAI 3. MANI PRASAD SINGH S/O LATE LAKHAN DEO SINGH R/O MOHALLA- SARVODAYA NAGAR, P.S.- TOWN, DISTT.- BEGUSARAI 4. SUBHASH CHANDRA KUMAR S/O LATE KAMO KUMAR R/O MOHALLA- SARVODAYA NAGAR, P.S.- TOWN, DISTT.- BEGUSARAI 5. BINOD KUMAR SINGH S/O LATE VISHWANATH PD. SINGH R/O VILL.- AKARA, P.O.- DARHARA, P.S.- HAZIPUR SADAR, DISTT.- HAZIPUR 6. RAM SAGAR MALAKAR S/O LATE CHURA MANI MALAKAR R/O VILL. + P.O.- NAWKOTHI, P.S.- NAWKOTHI, DISTT.- BEGUSARAI 7. ASHOK RAM S/O LATE SUKHDEO RAM R/O VILL.- BISHANPUR ADHIK, P.O.- SAHEBPUR KAMAL, DISTT.- BEGUSARAI 8. SUNIL PASWAN S/O LATE RADHE PASWAN R/O MOHALLA- MIRGANJ, WARD NO.14, P.S.- TOW, DISTT.- BEGUSARAI 9. AMITABH SHARMA S/O SRI ANAND NARAYAN SHARMA R/O MOHALLA- VISHWANATH NAGAR, P.S.- TOWN, DISTT.- BEGUSARAI 10. RAJ KUMAR S/O LATE BINDESHWARI KUMAR R/O VILL.- ETWA, P.O.- DUMRI, P.S.- MUFFASIL, DISTT.- BEGUSARAI Versus 1. THE STATE OF BIHAR THROUGH THE SECRETARY DEPARTMENT OF CO-OPERATIVE, GOVT. OF BIHAR, NEW SECRETARIAT, PATNA 2. THE REGISTRAR DEPARTMENT OF CO-OPERATIVE, GOVT. OF BIHAR, NEW SECRETARIAT, PATNA 3. THE MANAGING DIRECTOR THE BEGUSARAI CENTRAL CO-OPERATIVE BANK LTD., BEGUSARAI 2 4. THE CHAIRMAN, THE BEGUSARAI CENTRAL CO- OPERATIVE BANK LTD., BEGUSARAI ----------- For the Petitioners :M/s Aditya Narain Singh & Kundan Kr. Sinha, Advocates For the State :Mr. A. Amanullah, S.C.17 For the Respondent No.3: M/s Ganesh Pd. Singh, Sr. Advocate & Sanjay Kumar, Advocate For the Respondent no.4 : M/s Sateyendra Nr. Singh no.7 & Mrs. Reeta Verma, Advocates 05/ 08.01.2010 Heard learned counsel for the petitioners, for the State, the Registrar Cooperative Societies, Bihar as also counsel for the Managing Director, Begusarai Central Co-operative Bank Ltd. (hereinafter referred to as the Bank). A counter affidavit has also been filed on behalf of the Chairman of the Bank asserting that the Bank has not authorized the Managing Director to contest this case and further alleging non-cooperation on his part in conducting the affairs of the Bank, which is taken on record, copy whereof has, however, not been served on the counsel for the Registrar Co-operative Societies. 2. Petitioners are the employees of the Bank. They have filed this writ application praying, inter alia, to direct the Bank to abide by the decision of the 3 Chairman of the Bank dated 12.8.2009, Annexure-1 to this application taken in compliance of the Resolution of the Board of Directors of the Bank dated 7.7.2009 communicated to all concerned under Memo No. 268 dated 17.7.2009, Annexure-2 in the light whereof recommendation dated 10.8.2009, Annexure-3 was submitted as per the 8th Bipartite Settlement revising the pay scale admissible to the employees of the Bank, notionally with effect from 1.1.2004, actual financial benefit with effect from 1.4.2005 with further direction that arrears of difference in the revised scale for the period April, 2005 till July, 2009 will have to be kept in deposit with the Bank for minimum period of one year and salary in the revised scale shall be paid to the employees of the Bank with effect from August, 2009, which was accepted by the Chairman under order dated 12.8.2009, Anneuxre-1 in compliance of agenda item no. 14 of the resolution of the Board dated 7.7.2009, Annexure-2. On receipt of the copy of the writ petition, the Managing Director, Respondent no.3 filed counter affidavit and supplementary counter affidavit asserting 4 that the decision of the Bank to revise the pay scale of its employees is not in the financial interest of the Bank and this Court should not pass any direction for its implementation. Later, they filed supplementary counter affidavit placing on record the order, bearing Memo No. 7739 dated 4.12.2009, Annexure-G to the supplementary counter affidavit filed on behalf of Respondent no.3 and placed on record the order passed by the Registrar, Cooperative Societies, whereunder the decision to revise the salary structure of the employees of the Bank vide agenda item no. 14 of resolution dated 7.7.2009 was annulled by the Registrar with reference to Clause 48 of the Bye-Laws of the Bank, as according to the Registrar, the decision to revise the salary of the employees of the Bank was taken bereft of the profit and loss account and balance-sheet of the Bank for the year 2008-09 and further the decision was ignoramus of the fact that the Bank is not complying with the provisions contained in sub-section (1) of Section 11 of the Banking Regulation Act, 1949 (hereinafter referred to as the Act). When the aforesaid order of the 5 Registrar was placed on record of the instant application, vide Annexure-G to the supplementary counter affidavit filed on behalf of the Managing Director of the Bank, Respondent no.3, this Court permitted the petitioners to challenge the said order. Petitioners thereafter filed I.A. No. 8447 of 2009 challenging the order of the Registrar dated 4.12.2009 by annexing the same as Annexure-5 to the said I.A. Respondent no.3 has filed counter affidavit to such I.A., which has also been taken on record. 3. Counsel for the petitioners assails the order of the Registrar dated 4.12.2009, Annexure-G to the supplementary counter affidavit and Annexure-5 to I.A. No. 8447 of 2009 on the ground that said order has been passed ignoramus of the decision of the Government of India exempting the Begusarai Co- operative Bank from complying with the provisions of sub-section (1) of Section 11 of the Act vide exemption notified in Gazette notification of the Finance Ministry dated 7.7.2009 contained as part of Annexure-4 series. Perusal of the said Gazette indicates that such 6 exemption was allowed to the Bank with reference to the powers contained in Section 53 read with Section 56 of the Act on the recommendation of the Reserve Bank of India. It is further submitted that the decision to revise the pay scale was taken by the Board of Directors of the Bank in the light of the provisions contained in Chapter VI-D of the Bihar Co-operative Societies Act, 1935 (hereinafter referred to as the Societies Act), which, inter alia, grants complete financial and administrative independence to the Co- operative Bank(s) as special provisions were enacted under the Chapter granting the Societies undertaking Short Term Co-operative Credit Structure complete financial and administrative independence. The provisions of the Chapter have overriding effect over the other provisions of the Societies Act vide section 44AT of the Chapter. With reference to provisions contained in Section 44AV, it is pointed out that Co- operative Banks undertaking Short Term Co-operative Credit Structure have complete autonomy in all financial and administrative matters, including framing 7 of Personnel Policy which shall also include revision of scale admissible to the employees. The Board of Directors of the Bank considering the fact that salary structure of the employees of the Bank was not revised for the last 16 years with effect from 1.1.1993, took such decision to revise pay scale of the employees of the Bank to relieve them of the financial hardship caused on account of failure to revise the scale for the last 16 years. Learned counsel for the petitioners further submitted in the background of the fact that the salary structure of the employees of the Bank was not revised for the last 16 years with effect from 1.1.1993, the Board of Directors resolved to revise the salary structure in view of the receipt of the share capital from the State Government in the light of the report of the Baidyanathan Committee, receipt of insurance money from the Central Government in the account of those defaulters who could not pay back the loan amount on account of crop failure, the overall better financial health of the Bank, as it is in a position to comply sub- section (1) of Section 11 of the Act from the year 2008- 8 09. He further submitted that a Committee of the Senior Officers of the Bank formed under Agenda Item No. 14 of the Resolution dated 7.7.2009 recommended the fitment as per the 8th Bipartite Settlement under recommendation dated 10.8.2009, Annexure-3, which was approved by the delegatee of the Board of Directors, namely, Chairman under orders dated 12.8.2009, Annexure-1, the Bank should implement such decision. Reliance placed by the Registrar over Clause 48 of the Bye-Laws of the Bank for cancelling/ rescinding the resolution of the Bank dated 7.7.2009 is wholly misconceived as thereunder action(s) taken by the Bank in contravention of the provisions contained in the Societies Act or the rules framed thereunder or the Bye-Laws of the Bank can be quashed. Resolution dated7.7.2009 having been passed with reference to the grant of financial independence under Chapter VI-D of the Societies Act could not have been quashed with reference to Clause 48 of the Bye-Laws of the Bank. 4. Counsel for the Registrar, Co-operative Societies and the counsel for the Managing Director of the Bank 9 opposed the aforesaid submission. According to them the financial status of the Bank is not such that it should undertake revision of pay scale of its staff, may be after passage of 16 years. In this connection, reference is made to the letter of the Managing Director dated 29.7.2009, Annexure-B to the counter affidavit of Respondent no.3, whereunder with reference to the resolution of the Board of Directors, vide Agenda Item No. 14 dated 7.7.2009 information was given to the Registrar, Co-operative Societies that resolution to revise the pay scale of the Bank employees, to pay them bonus as also to increase the period of leave encashment from 240 days to 300 days is not in public interest as Bank is not complying with the provisions contained in sub-section (1) of Section 11 of the Act and NABARD has found in its 14th Statutory Inspection Report dated 31.3.2008 that the Bank has cumulative total loss of 2635.37 lacs, negative net worth of Rs. 2013.29 lacs and deposit erosion of 46.9%. Aforesaid letter dated 29.7.2009, Annexure-B was considered by the Registrar, Co-operative Societies 10 and he appreciating the precarious financial condition as indicated in the letter of the Managing Director dated 29.7.2009, Annexure-B, with reference to the powers contained in Clause 48 of the Bye-Laws, held that the financial condition of the Bank is not such that it should undertake revision of pay scale of its employees and set aside the resolution of the Bank, vide Agenda Item Nos. 5, 14 and 18(4) dated 7.7.2009 under order dated 4.12.2009. In this connection, it was further pointed out that the provisions contained in Chapter VI-D of the Societies Act may have overriding effect over other provisions in the said Act and the Bye-Laws and there may be complete financial and administrative autonomy given to the Bank by virtue of the provisions contained in Section 44AV of the Societies Act, but such autonomy in the financial and administrative matters is subject to the powers of Registrar under Section 44BP of the Societies Act, which is also contained in the same Chapter and thus the action of the Bank in the financial and administrative matters are subject to the powers of the 11 Registrar under Section 44BP of the Societies Act. For ready reference Section 44BP of the Societies Act is quoted hereinbelow: “44BP Implementation of regulatory prescriptions of Reserve Bank- Not withstanding anything contained in this Act or Rules made there under, the Registrar shall ensure the implementation of regulatory prescriptions of the Reserve Bank in case of State Co- operative Bank and Central Co- operative Banks.” It would appear from perusal of the provisions contained in Section 44BP that thereunder Registrar, Co-operative Societies has been authorized to ensure implementation of regulatory prescription of Reserve Bank of India in case of State Co-operative Bank and Central Co-operative Banks. Learned counsel further assailed the submission made by the counsel for the petitioners on the ground that the decision of the pay revision committee dated 10.8.2009, Annexure-3 has not been taken by the same committee as was constituted vide Agenda Item No. 14 of Resolution dated 7.7.2009 as thereunder besides the Chairman, 12 Director, Managing Director, Manager Accounts, Incharge Administrative Officer and Incharge Branch Manager, Teghara Branch, Sri Maheshwar Prasad Singh were authorized to make recommendation in regard to the fitment of scale of the employees of the Bank, but Annexure-3 the scale fitment recommendations would indicate that the recommendations have been made by the Chairman, Director, Chief Accountant and Incharge Manager of the Central Co-operative Bank, Begusarai and not by the Committee which included Managing Director, Manager Accounts of the Bank and Incharge Branch Manager of Teghara Branch, Sri Maheshwar Prasad Singh and thus decision, Annexure-3 could not be enforced under the orders of this Court, as such decision is contrary to the resolution dated 7.7.2009, Annexure-2 itself. Learned counsel further assailed the resolution of the Bank taken in regard to Agenda Item No. 14 dated 7.7.2009, whereunder the decision to revise the pay scale was taken and having taken such decision, committee was formed asking the committee to make recommendation for fitment of pay scale with 13 further authorization to the Chairman of the Bank to take decision on the recommendation of the committee, as according to them, the recommendations of the committee should have been placed before the Board of Directors of the Bank and the Chairman could not have been authorized to take such decision. Learned counsel further submitted that exemption granted by the Government of India under Gazette dated 7.7.2009 is only a grace shown to the Bank not to comply the provisions contained in sub-section (1) of Section 11 of the Act and not to make the required deposit for limited period until 31.3.2010, such exemption does not mean that the financial condition of the Bank has become sound and it shall be complying the provisions of the Act after 31.3.2010 by making deposits of the statutory amount with the Reserve Bank of India. 5. Learned counsel for the petitioners, in rejoinder, submitted that the Government of India considered the recommendation of the Reserve Bank of India that Begusarai Central Co-operative Bank is not required to comply with the provisions contained in sub-section (1) 14 of Section 11 of the Act until 31.3.2010 in appreciation of such recommendation the Gazette notification dated 7.7.2009 was issued by the Finance Ministry of the Union but the Bank in consideration of the receipt of the share capital money from the State Government in compliance of the report of the Baidyanathan Committee and insurance amount from the Union in the account of defaulter loanee(s) proceeded to consider the revision of pay scale of its employees in view of the financial autonomy granted to it under Chapter VI-D of the Societies Act, more particularly under Section 44 AV, which was considered by this Court under orders dated 8.7.2009, passed in C.W.J.C. No. 16149 of 2008, reported in 2009(4) PLJR 446 and took decision to revise the pay scale of its employees vide resolution dated 7.7.2009 implementing the 8th Bipartite Settlement and to recommend the fitment, committee of the officers was formed with authorization to the Chairman of the Bank to consider the fitment recommendation. He further submitted that reference of Section 44BP by the counsel for the Registrar, Co- 15 operative Societies and the Bank is misconceived, as according to him thereunder the Registrar is empowered to ensure implementation of regulatory prescriptions of the Reserve Bank of India and with reference to the said power, the resolution of the Bank to revise the pay scale taken on 7.7.2009 could not have been rescinded as the resolution to revise the pay scale is not contrary to any of the prescriptions of the Reserve Bank of India. He further submitted that the delegation made to the Chairman to take decision on the recommendation of the committee constituted under resolution dated 7.7.2009 is a matter, which was considered by the Board of Directors and the Board having considered the financial position of the Bank took decision in principle to revise the pay scale authorized the Chairman of the Bank to consider the fitment in the revised scale as per 8th Bipartite Settlement and the delegation to the Chairman was within the norms of delegation and not beyond it. As regards the submission that pay revision was actually considered by the committee, which was not constituted in the resolution dated 7.7.2009, learned 16 counsel submitted that such aspect of the matter is hardly relevant in these proceedings as this Court is considering the validity of the orders dated 4.12.2009, whereunder Registrar, Co-operative Societies rescinded the resolution dated 7.7.2009 itself and thus it is hardly of any consequence whether the committee which considered the fitment, was the same committee which was constituted under resolution dated 7.7.2009. 6. Having heard counsel for the petitioner, the State, Managing Director, Respondent no.3 and having perused the resolution of the Board of Directors dated 7.7.2009 as also the impugned order dated 4.12.2009, Annexure-G to the supplementary counter affidavit filed on behalf of Respondent no.3 and Annexure-5 to I.A. No. 8447 of 2009, it is evident that the resolution dated 7.7.2009 of the Board of Directors of the Bank has been rescinded by the Registrar, Co-operative Societies, Bihar, Patna under the impugned order dated 4.12.2009, Annexure-G to the supplementary counter affidavit filed on behalf of Respondent no.3 and Annexure-5 to I.A. No. 8447 of 2009 with reference to the powers of the 17 Registrar contained in Clause 48 of the Bye-Laws, which, inter alia, empower the Registrar, Co-operative Societies to rescind any resolution of the Bank, which is contrary to the provisions of the Societies Act, Rules framed thereunder or the Bye-Laws of the Society, in the instant case bank, on the ground that resolution dated 7.7.2009 was passed bereft of the profit and loss account, balance-sheet of the Bank for the year 2008-09 as also in absence of the inspection report of NABARD and also for failure of the Bank to comply with the provisions contained in sub-section (1) of Section 11 of the Act. In terms of the provisions contained in Chapter VI-D of the Societies Act, more particularly Section 44 AV, the Bank has complete administrative and financial autonomy. From perusal of the resolution dated 7.7.2009, it appears that the Bank, having received the loan waiver/ insurance amount from the Union and share capital money from the State Government pursuant to the Baidyanathan Committee Report, was of the view that it is in position to comply the provisions contained in sub-section (1) of Section 11 of the Act 18 from the year 2008-09 and in appreciation thereof resolved to revise the pay scale of the employees of the Bank under resolution dated 7.7.2009 in view of the statutory provisions contained in Chapter VI-D of the Societies Act, this Court does not consider such resolution to be contrary to the provisions contained in the Societies Act, the rules framed thereunder or the Bye-Laws of the Bank which could be rescinded by the Registrar either under Clause 48 of the Bye-Laws or under Section 44BP of the Societies Act. The resolution dated 7.7.2009 has been taken in the light of the funds received from the Union/ State and the legislative mandate contained in Chapter VI-D of the Societies Act. This Court in its writ jurisdiction is to ensure compliance of the statutory provisions as also to uphold the resolution taken in terms of the statute. In view of the aforesaid legal/ factual position, the impugned order dated 4.12.2009, passed by the Registrar, Co-operative Societies, Bihar, Patna as contained in Annexure-G to the supplementary counter affidavit filed on behalf of Respondent no.3 and Annexure-5 to I.A. No. 8447 of 19 2009 rescinding the resolution of the Board of Directors dated 7.7.2009 appears to be without jurisdiction, as resolution dated 7.7.2009 has been passed by the Bank in consideration of the receipts from the Union/ State is in tune with the powers of the Bank contained in Chapter VI-D of the Societies Act which inter alia grant complete financial/ administrative autonomy to the Bank and Registrar could not have rescinded such resolution, as the resolution is not contrary to the provisions contained in the Societies Act, the Rules framed thereunder or in any other Act including the Banking Regulation Act. In the instant case, Bank having been exempted from complying with the provisions contained in sub-section (1) of Section 11 of the Act until 31.3.2010, the said resolution could not have been rescinded also on the ground that Bank is not complying with the provisions of the Act, thus, in my opinion, the impugned order dated 4.12.2009, passed by the Registrar, Co-operative Societies, Bihar, Patna, Annexure-G to the supplementary counter affidavit filed on behalf of Respondent no.3 and Annexure-5 to I.A. 20 No. 8447 of 2009 is wholly without jurisdiction and is, accordingly, quashed with liberty to the Bank to proceed with the resolution dated 7.7.2009 in accordance with law. 7. The writ application is, accordingly, allowed. AFR Arjun/ ( V.N. Sinha, J.)