IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC WEDNESDAY, THE 24TH JUNE 2009 / 3RD ASHADHA 1931 WP(C).No. 13946 of 2009(K) -------------------------- PETITIONER(S): --------------- COCHIN SERVICE CO-OPERATIVE BANK LTD. E.760,CO.BANK TOWER,KALOOR,COCHIN-17, REP.BY ITS SECRETARY. BY ADV. SMT.P.A.REZIYA SRI.A.A.MOHAMMED NAZIR RESPONDENT(S): --------------- STATE OF KERALA, REP.BY ITS SECRETARY, CO-OPERATION (B) DEPARTMENT, THIRUVANANTHAPURAM. GOVERNMENT PLEADER FOR R1 SRI.I.V. PRAMOD THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24/06/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ANTONY DOMINIC,J. --------------------- W.P.(C).No.13946 OF 2009 ------------------------ Dated this the 24th day of June, 2009. JUDGMENT Petitioner, a Co-operative Bank has filed this writ petition praying for declaring that clause (ba) of Rule 53(2) of the Kerala Co-operative Societies Rules, 1969,(Rules for short) is ultra vires and beyond the rule making power of the Government of Kerala. On that basis the petitioner seeks an order restraining the respondents from implementing the said rule. 2. Section 56 of the Kerala Co-operative Rules Act (Act or short) provides for disposal of the net profit of a Society. Sub Section (b) provides that the society shall out of its net profit in any year credit such portion of the net profit, not exceeding five per cent to the Co-operative Education Fund referred to in clause (xix) of Section 109(2) of the Act. Section 109 provides that the Government may, WP(c).No.13946/09 2 for whole or part of the State or for any class of societies after previous publication by notification in the gazette,make rules to carry out the purpose of the Act. Sub Section (2) provides that in particular and without prejudice to the generality of the power under Section 109(1), Rules may provide for all or any of the matters provided in the said sub section. Clause (xix) provides for the constitution of the Co-operative Education Fund, the payment to be made to the fund by a society out of its net profit and the mode of its investment. 3. It is in exercise of the aforesaid power Rule 53 has been framed by the Government providing for constitution of a Co-operative Education Fund. By Ext.P1, notification dated 23rd of July 2008 sub rule (ba) was introduced, which reads as under. “In the case of failure of remittance of Co- operative Education Fund as aforesaid, the Chief Executive and the President of the Society making such default shall be liable to pay a WP(c).No.13946/09 3 penal interest at the rate of 6% per annum on the default amount.” 4. A reading of this newly introduced portion shows that in the case of failure of remittance of co-operative education fund, the Chief Executive of the President of the Society making such default shall be liable to pay penal interest at the rate of 6% per annum on the defaulted amount, 5. Counsel for the petitioner contends that, in the absence of any provision either in Section 56 or in Section 109 enabling a penal provision, sub rule 53(2)(ba) introduced by Ext.P1 notification referred to above is ultra vires. According to him, in case default is committed in making remittance, the only course open is to recover the same and there is no legislative sanction to impose penal interest personally on the Chief Executive or the President of the Society. 6. In the counter affidavit filed the stand taken by the respondent is that in the absence of a provision similar to Rule 53(2)(ba), many of the Societies were committing default in WP(c).No.13946/09 4 complying with the requirement of the Rule. It was therefore, that the Government realised, that unless a provision providing for consequence is introduced, there will be continued default in complying with Rule 53. It is stated that in order to achieve that purpose, exercising the power under Section 109 of the Kerala Co-operative Societies Act the Government have framed the sub Rule. It is also pointed out that the draft was published in the official gazette and that there was no objection from any one. It is stated that framing of the sub rule is well within the powers of the respondents. 7. I have considered the submissions made. 8. The only plea that is raised before me is that the first respondent was incompetent to frame the rule in question for the reason that Section 56 did not authorize the Government to frame a Rule providing for realizing interest from the Chief Executive or President of the Society. In other words what is contended is that the Rule is ultra vires the present Act. The power to frame rule is provided in Section 109 of the Act. WP(c).No.13946/09 5 Section 109 provides that to carry out the purpose of the Kerala Co-operative Societies Act, the Government may, after previous publication by notification in the gazette make rules prospectively or retrospectively. Clause (xix) to Section 109(2) provides for constitution of the Co-operative Education Fund, the payment to be made by a Society out of its net profit and the mode of its investment. If the Government have the power to constitute the fund provided for payment to make and the mode of its investment, in my view the Government must also be conceded the incidental power to ensure compliance with the said Rule by providing for necessary consequences. If only such power is vested with the Government, can the Government be expected to carry out the purpose of this Act. Viewed in such manner one should concede power to the Government to provide for the consequences in case the default is committed. This precisely the Government have sought to achieve by framing Rule 53(2)(ba) introduced by Ext.P1 notification. For this reason, I cannot accept the WP(c).No.13946/09 6 contention that Rule 53(2)(ba) is ultra vires the Act. Therefore in my view, the contention raised by the counsel for the petitioner deserves only to be rejected and I do so. Writ petition is dismissed. (ANTONY DOMINIC) JUDGE vi/ WP(c).No.13946/09 7