IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE J.B.KOSHY & THE HONOURABLE MRS. JUSTICE K.HEMA THURSDAY, THE 14TH FEBRUARY 2008 / 25TH MAGHA 1929 WA.No. 365 of 2008 --------------------------- AGAINST THE JUDGEMENT IN W.P.(C).NO.15722/2007 DATED 04/02/2008 .................... APPELLANT/PETITIONER: ------------------------------------- ADV. G.SUBODHAN, MEMBER, BOARD OF DIRECTORS, THIRUVANANTHAPURAM DISTRICT CO-OPERATIVE BANK LTD., THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE POONTHOTTAM. RESPONDENTS/ 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. 3. THE TRIVANDRUM DISTRICT CO-OPERATIVE BANK, TRIVANDRUM, REPRESENTED BY ITS GENERAL MANAGER. BY THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 14/02/2008,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: J.B.KOSHY & K.HEMA, JJ. -------------------------------------- W.A.No.365 OF 2008 ------------------------------------- Dated 14th day of February, 2008 J U D G M E N T Koshy,J . When an elected delegate of the primary society ceases to be a member of the Board of Directors of the Apex Society, on the basis of the 'default' committed by the affiliated primary society under Rule 46(2) of the Kerala Co-operative Societies Rules, is the question considered in this case. Appellant is a member of the Board of Directors of the 3rd respondent, Thiruvananthapuram District Co-operative Bank representing a primary society namely Handloom Weavers Co-operative Society under Rule 44 A of the Kerala Co-operative Societies Rules, 1969 (hereinafter referred to as the 'Rules'). He was elected by the above affiliated primary society to be member of the 3rd respondent Bank which is an Apex Co-operative society. The 3rd respondent is a financing Bank of the appellant's primary society. Ext.P1 notice was W.A.365/08 2 issued by the 2nd respondent, Registrar of Co-operative Societies, that the primary society in which appellant is registered committed default and therefore he ceased to be a member of the Board of Directors (Managing Committee) of the Co-operative Bank under Rule 46(e) and Clause 27(b) of the Byelaws of the 3rd respondent Bank. There were three loan accounts for the above primary society with the 3rd respondent Bank. Out of the three accounts, two accounts were not renewed in time, therefore it became NPA, and therefore, society became a defaulter. The third account is the Onam Cash Credit which was sanctioned on 10.9.2005. An amount of Rs.1 lakh was withdrawn on 13.10.2005. Promissory note was also executed to repay the amount and it was also agreed to make payment of monthly interest. It fell into arrears from 1.11.2005. It was renewed giving the maximum time for closing the loan account upto 15.7.2006. But payment was made only on 17.7.2006. In the reply Ext.P2, appellant contended that 15.7.2006 was a Saturday. Society was ready to pay the amount on 15.7.2006. The appellant reached the Bank after 12 noon for paying the amount. There was dearth of staff in the Bank and appellant was not able W.A.365/08 3 to remit the amount. 16.7.2006 was a holiday being Sunday and on the next day it was paid back. In any event, before issuance of notice (Ext.P1) the amount was paid. Hence society cannot be declared as defaulter. With regard to 2 NPA accounts, it was also stated that the 2 NPA accounts were renewed subsequently on the basis of Government Order applicable to all Handloom Societies. Notice was issued without any basis. Ext.P1 notice was issued only on 1.12.2006. The primary society was not in default after 17.7.2006. The Registrar by Ext.P6 order found that appellant was not entitled to continue as a member of the Board of Directors in the 3rd respondent Bank in view of the disqualification of his primary society under Section 46(e) of the KCS Rules. Registrar mainly relied on the prudential norms fixed by the Reserve Bank of India or NABARD to find that the above society was a defaulter. Appeal filed before the Government was also dismissed by Ext.P11 order. Hence he approached this Court. The learned Single Judge found that prudential norms fixed by the RBI or NABARD cannot be a ground for disqualification of membership. Therefore learned Judge found that two loans became NPA is not a ground for disqualification. But the learned W.A.365/08 4 Single Judge was of the opinion that appellant ceased to be a member of the Director Board of the Apex Society because primary society he was representing failed to pay back the loan taken from Onam Cash Credit on the due date and was in default from 15.7.2006. It is not disputed that the primary society he was representing ought have been repaid the loan on or before 15.7.2006. According to him, he tendered the money after the banking hours (after 12 p.m.) on 15.7.2006. But it was not accepted. 15.7.2006 was Saturday. It was paid only on 17.7.2006. Therefore, his society was not in default as immediately after the due date, loan amount was paid back. In any event, it is his case that notice was issued only on 1.12.2006 and on the date of issuance of notice, he was not a defaulter and based upon the decisions of this Court in Thommen Itticheriyanthu v. State of Kerala (1978 KLT 887), Rasheed v. State of Kerala (1988 (1) KLT 190), Gangadharan v. Joint Registrar 1990 (2) KLT Short Note 18 Page No.13), it was argued that date of issuance of notice is an important criteria and on the date of issuance of notice, if the primary society is not in default, it cannot be declared as a defaulter and W.A.365/08 5 disqualification under Rule 46(e) is not applicable. 2. Now we will come to the meaning of the word “Default” as defined under Rule 2(d) of the Kerala Co-operative Societies Act which is as follows: “2(d): “Default” means failure on the part of any person, to repay to the financing bank or to any other society a loan or any other amount due to it within the time fixed for repayment or to return to the society within the time fixed the finished goods in respect of raw materials advanced or to keep any other obligation for the fulfilment of which a time limit has been specified in the bye-laws.” Rule 46(e) reads as follows: “46. Term of office of member of committee who is delegate of another Society:- A delegate of one society sitting on the committee of another society shall cease to be a member of such committee- (e) if the society which sends him as delegate is in default to the society, in the committee of which he sits as a delegate: [Provided that in the cases of delegates W.A.365/08 6 of Primary Co-operative Agricultural Development Banks in the Committee of the Kerala State Co-operative Agricultural Development Bank and of Primary Housing Societies in the Committee of the Kerala State Co-operative Housing Federation Ltd., the disqualification shall apply only if the default exceeds six months]. [Provided further that in the case of delegates of Primary Agricultural Credit Societies in the Committee of the District Co-operative Banks, this disqualification shall apply only if the default exceeds ninety days]' A plain reading of the rule would show that the moment a primary society is in default, the delegate from that Society will cease to be a member of the committee. When the wordings of a statutory provision is very clear, without any ambiguity, court has to interpret it according to the plain terms. Other methods of statutory interpretation need be adopted only if wordings are ambiguous or plain interpretation result in absurdity. Those principles of interpretation explained in the well known treatise on the subject by renowned author Craies and accepted by our Supreme Court from 1955 onwards (See Jugalkishore Saraf v. M/s.Raw Cotton Co. Ltd. (AIR 1955 SC 376) and followed till now were now restated again by the Apex Court in State of W.A.365/08 7 Rajasthan v. Babu Ram (2007 AIR SCW 3799) as follows: 7. One of the basic principles of interpretation of Statutes is to construe them according to plain, literal and grammatical meaning of the words. If that is contrary to, or inconsistent with, any express intention or declared purpose of the Statute, or if it would involve any absurdity, repugnancy or inconsistency the grammatical sense must then be modified, extended or abridged, so far as to avoid such an inconvenience, but no further. The onus of showing that the words do not mean what they say lies heavily on the party who alleges it. He must advance something which clearly shows that the grammatical construction would be repugnant to the intention of the Act or lead to some manifest absurdity (See Craies on Statute Law, Seventh Ed. Page 83-85). In the well known treatise - Principles of Statutory Interpretation by Justice G.P.Singh, the learned author has enunciated the same principle that the words of the Statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construed according to their grammatical meaning, unless that leads to some absurdity or unless there is something in the context or in the object of the Statute to suggest the contrary (See the Chapter – The Rule of Literal Construction – page 78 – Ninth Edn.). This Court has also followed this principle right from the beginning. In Jugalkishore Saraf v. Raw Cotton Co. Ltd. (AIR 1955 SC 376), S.R.Das, J. said:- “The cardinal rule of construction of statutes is to read the statute literally, that is, by giving to the words used by the legislature their ordinary, natural and grammatical W.A.365/08 8 meaning. If, however, such a reading leads to absurdity and the words are suspectable of another meaning the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation.” Here the words are very clear. The moment society commits default, the delegate of that society ceases to be a member of the committee of the Apex Society. Only three exceptions are provided (1) With regard to delegates of Primary Agricultural Development Banks, disqualification starts only if default exceeds six months (2) With regard to delegates from Primary Housing Society, disqualification will start if the default exceeds six months (3) In the case of delegates of Primary Credit Societies, disqualification starts from 90 days of default. No such exemption is proved for the delegates of Primary Handloom Weavers Society. 3. The three decisions (supra) referred to by the learned counsel for the appellants relate to disqualification and membership of a committee under Rule 44. Based upon the W.A.365/08 9 wordings of that rule, it was held that to attract disqualification under the above rule on issuance of notice he should not be a defaulter. Section 44 reads as follows: 44. Disqualification of membership of committee:- (1) [No member of the society shall be eligible for being elected, or appointed as a member of the committee of the society under Section 28 if he]:- (a) is disqualified under Section 28; or (b) is a near relative of a paid employee of the society; or (c) (i) is in default to the society or to any other society in respect of any loan or loans taken by him or loan in which he had stood surety, for such period, as is prescribed in the bye-laws of the society concerned or in any case for a period exceeding three months or is a defaulter to the society or to any other society; or xx xx xx xx (rest not relevant) (2) A member of the committee shall cease to hold his office as such, if he- (a) becomes disqualified under sub-rule (1), provided that where a member ceases to hold his office as such by reason of having been sentenced for any offence, he shall be restored to office for such portion of the period for which he was elected or appointed as may remain unexpired at the date of W.A.365/08 10 such restoration, if and when the sentence is annulled on appeal or revision and any person elected or appointed in the vacancy in the interim period shall on such restoration vacate office; [Provided further that the disqualification under sub-clause (i) of clause (c) of sub-rule (1) shall be deemed to be accrued only after expiry of a period of one month from the date of receipt by the member concerned of a notice from the society demanding him to clear off the defaulted amount specified therein and he fails to remit or cause to remit the amount within the said period; or] (b) cease to be a member of the society; or [Provided that this clause shall not apply to a person nominated by the Government or any other authority specified in this behalf by the Government under sub-section (1) of S.31 of the Act or by Government or Registrar under sub-section (1) of S.28 of the Act] [or by Government under Sub- section (3) of Section 28 (A) of the Act] (c) is subsequently seen to be disqualified under sub-rule (1) on the date of election itself. [Provided that the disqualification under sub- clause (i) of clause (c) of sub-rule (1) shall be deemed to be accrued only after the expiry of a period of one month from the date of receipt by the member concerned of a notice from the society demanding him to clear off the defaulted amount specified therein and he fails to remit or cause to remit the amount within the said period] (3) If any person is or becomes disqualified to be a member of the committee, the Registrar may on his own motion or on a representation made to him W.A.365/08 11 by any member of the society or by its Financing Bank by an order in writing declare that he shall cease to be a member of the committee of the society concerned from the date of such disqualification. Before passing an order, the Registrar shall give such person and opportunity to state his objections, if any, against the proposed action and if the person wishes to be heard he shall be given an opportunity to be heard.” Proviso to the above rule makes it clear that for ceasing to be a member, disqualification will start only if defaulted amount is not paid within one month of notice demanding payment. Such a provision is consequently absent in Rule 46. We are of the view that the ratio of the decisions relied on by the appellants regarding disqualification under Rule 44 is not applicable while interpreting Rule 46(2) and provisions are not analogous. Under Rule 46(2) when a primary society commits default, there is an automatic ceasure from the membership of the committee for the delegate of that primary society. We are not going to the interpretation of Rule 44 in this judgment. But a plain reading of Rule 46(2) shows that the moment a primary society other than that is mentioned in the provisos to the rule defaults, delegate from that society automatically ceases to continue as a member W.A.365/08 12 of the Board of Apex Society. Rule 46 does not contain a provision similar to Rule 44(3). As far as Rule 46 is concerned, there is no requirement of issuing notice demanding payment of defaulting amount and allowing one month time for payment. It is true that ceasing of membership from a committee has its own consequences and principles of natural justice requires a hearing as well as an adjudication of the matter. But in that adjudication, what is to be decided is whether on the date in question, delegate ceased to be a member as mentioned in the notice but it cannot be stated that default will start only from the date of notice or on the expiry of time allowed as per statutory notice or from the date of adjudication. If in the adjudication, it is found that primary society is a defaulter, the delegate from that Society ceases to be a member from the date of default. In this case, facts are not disputed. On 15.7.2006, the last date of payment, primary society did not pay the amount. It is true that if the last date for payment was a holiday, on the basis of the provisions of the General Clauses Act, the amount could have been remitted on the next day. Here 15th was not a W.A.365/08 13 holiday. The admitted fact is that he did not pay the amount or reached the bank and offered the amount before noon, banking hours of the bank. So due to non-payment of amount on 15.7.2006, primary society in which appellant was representing committed a default. So, he ceased to be a member of the Apex society on the date when primary society committed default. The fact that notice was issued and order was passed declaring the above subsequently will not enable him to continue as a member after the date of default. We see no ground to differ from the findings of the learned Single Judge in this aspect. Hence, this appeal is dismissed. J.B.KOSHY, JUDGE K.HEMA, JUDGE prp