Case: Board Of Directors Of Andhra Pradesh Co-Operative Centra Vs. Chittor Primary Co-Operative Land Mortgagebank Ltd. Etc

2. The respondent in Civil Appeal No. 2229/72 is an Assistant Accountant in the Chittor Primary Co-operative Land Mortgage Bank Ltd. In Civil Appeal No.2230/72 the respondents are employees of the different Co-operative Land Mortgage Banks. The respondent in Civil Appeal No. 2231/72 is the Nellore Co-operative Land Mortgage Bank Ltd. In the first of the appeals the petitioner/respondent complained that when he was due for promotion for the post of an Accountant, under Rule 70 his right to promotion based on seniority had been taken away. According to him, but for Rule 70, he would have had a right to promotion under, Bye-law 10 on the basis of his seniority among the Assistant Accountants of that Bank. The petitioners/respondents in the second of the appeals had urged that a co-operative society was a body corporate and the ultimate authority over that Society was vested in its general body under Section 30 of the Act, and the Managing Committee thereof had the right to manage all its affairs including the power to appoint, transfer and dismiss its employees. That power of the Society is sought to be interfered with not only by vesting the Board with power of superintendence under Section 115 of the Act but also by Rule 70 made pursuant of that section. Not only Section 115 and Rule 70 but also S. 116A of the Act, according to them, were wholly ultra vires the State Legislature. The respondent in the third of the appeals apprehends that Rule 70 takes away its right of appointment, dismissal and control over certain of its employees which render them liable to be transferred by the Central Land Mortgage Bank to other mortgage banks elsewhere in the State, which is an interference with the right of management of the Primary Land Mortgage Banks. The High Court, while negativing the contention that Sections 115 and 116A of the Act were ultra vires the State Legislature, has, however, held as already adverted to, that Rule 70 was ultra vires of Section 130(1) read with Section 115 of the Act.

Court's reasoning:
6. We have set out some of the relevant provisions to show that there is nothing in the Act which empowers the Central Mortgage Bank, notwithstanding the fact it provides funds to the mortgage banks to make collection of the loans advanced by the mortgage banks. The rule making power conferred on the Government for carrying out all or any of the purposes of the Act must be confined to such of the purposes as are enumerated or indicated in the preamble or in any of the provisions of the Act. The only provision to which a reference has been made specifically as empowering the Board of Directors of the Central Mortgage Bank to constitute a centralised service for the mortgage bank is Section 115 of the Act. A careful reading of Section 115, however, does not justify the contention that the Central Mortgage Bank either has the power directly to collect the loans and advances given by the member banks, namely, the mortgage banks, or to create a centralised cadre of service from among the employees of the mortgage banks which are members of the Central Mortgage Bank. That section merely confers power of supervision on the Board of the Central Mortgage Bank over the mortgage banks which power includes the power of appointment, transfer and disciplinary action in respect of the employees of the mortgage banks. It may be that some questions may be raised in respect of the actions of the mortgage banks in the matter of appointment, transfer and disciplinary actions of its employees. Whenever such questions are raised, the Board of Directors of the Central Mortgage Bank in exercise of its power of supervision can go into the question of such appointments, transfers and disciplinary actions made or taken by the mortgage banks. This power, therefore, can in no circumstances be construed as empowering the Board to Directors of the Central Mortgage Bank to recruit employees for the mortgage banks or to make appointments to a common cadre created by it from out of the employees of the member mortgage banks. If the employees are appointed by the Central Mortgage Bank, their salaries and other emoluments should be paid by it. But evidently this is not so as sub-rules (13) and (14) of R. 70 authorise the Central Mortgage Bank to call for contribution for the cost of the service rendered by the Central Mortgage Bank to be borne by the mortgage banks and provides that once a centralised cadre is constituted all rights and privileges accrued and liabilities incurred by the employee in relation to his service in the mortgage bank shall stand vested with the Board. It is power that the appellants are seeking to draw from Section 115, because only if such a power can be found in that provision, or any other provision of the Act, can the impunged Rule 70 be made under sub-section (1) of Section 130 of the Act. In this connection it should be observed that the key words in Section 115 are employees of the mortgage banks. The power of supervision including the power of appointment, transfer and punitive action may be taken by the Central Mortgage Bank against persons who are the employees of the mortgage banks. But Rule 70 seeks to bring into being a centralised service, the employees whereof shall be the employees of the Central Mortgage Bank and not of the mortgage banks. Such a centralised service is not contemplated by Section 115.We cannot read this power in the manner suggested, and if so this would authorise the constitution of a centralised cadre. As we have explained already the power of the Central Mortgage Bank is only of supervision which power to supervise is to include the power of appointment, transfer and disciplinary action. It is only where what is not included in a particular term as generally understood or where there is some doubt in respect of any particular matter being included, that the Legislature specified it by including that matter.The supervisory power in respect of the employees of the mortgage banks does not include the power to transfer an employee from one mortgage bank to another creating thereby a contract of service with a different employer. The word transfer, must be read as a transfer from one branch of the same mortgage bank to another of its branch. The learned Advocate for the appellants stated that the mortgage banks have no branches. We would not, however, venture to say so. As pointed out by the learned Advocate for the first respondent in Civil Appeal No. 2231 of 1972 that By-law 20 of the Model Bye-Laws of Co-operative Land Mortgage Bank Ltd. provides for maintaining a record of service by the Bank in respect of each employeein which all changes affecting rank, emoluments, transfers and other allied matters shall be noted in the register under the attestation of the Secretary. This provision shows that the Bye-laws envisage a transfer of an employee from one branch to another of a mortgage bank. This bye-law is consistent with Section 115 of the Act which confers a supervisory power in respect of transfer of an employee from one branch to another of the mortgage bank and not from one mortgage bank tono doubt the Central Mortgage Bank may be concerned with securing its loans to the mortgage banks, the provisions of the Act do not confer upon the Central Mortgate Bank the power to collect any loans advanced by the member banks i.e. the mortgage banks. The security given to the mortgage banks in respect of the loans advanced by them no doubt is deemed to have been transferred to the Central Mortgage Bank, but that is only by way of securing the monies advanced by the Central Mortgage Bank to the mortgage banks. Nonetheless, as we have seen earlier, the duty to collect the loan is upon the mortgage banks and notwithstanding the deemed transfer to the Central Mortgage Bank of any property mortgaged to the mortgage banks, the amount due to the mortgage banks is payable to the mortgage banks only and not to the Central Mortgage Bank. Unless there is any specific provision in the Act which directly creates a contractual liability between the Central Mortgage Bank and the borrowers from the mortgage banks, the liability of the borrows for payment of loans advanced to them is only to the mortgage banks which actually advanced the loans to them. The borrowers have no liability to the Central Mortgagepower of the Registrar, it will be noticed, is to create a common cadre of employees for any class of societies. The power, therefore, is of a general nature and is applicable to the mortgage banks as well as to the other societies registered as societies under the Act. Section 116-A also empowers the Registrar to require the affiliated societies to make contribution of such sum every year towards expenditure as may be incurred for the purposes of creation of any common cadre and make such payment enforceable.In our view the High Court is right in holding that when a centralised service or any cadre of employees of the mortgage banks cannot be created by the Board in exercise of its power under Section 115 of the Act, Rule 70 cannot vest such power in the Board. In this view, Rule 70 is ultra vires the rule-making power of the State under sub-s. (1) of Section 130 read with section of thecannot read this power in the manner suggested, and if so this would authorise the constitution of a centralised cadre. As we have explained already the power of the Central Mortgage Bank is only of supervision which power to supervise is to include the power of appointment, transfer and disciplinary action. It is only where what is not included in a particular term as generally understood or where there is some doubt in respect of any particular matter being included, that the Legislature specified it by including that matter.The supervisory power in respect of the employees of the mortgage banks does not include the power to transfer an employee from one mortgage bank to another creating thereby a contract of service with a different employer. The word transfer, must be read as a transfer from one branch of the same mortgage bank to another of its branch. The learned Advocate for the appellants stated that the mortgage banks have no branches. We would not, however, venture to say so. As pointed out by the learned Advocate for the first respondent in Civil Appeal No. 2231 of 1972 that20 of the Modelve Land Mortgage Bank Ltd. provides for maintaining a record of service by the Bank in respect of each employeein which all changes affecting rank, emoluments, transfers and other allied matters shall be noted in the register under the attestation of the Secretary. This provision shows that theenvisage a transfer of an employee from one branch to another of a mortgage bank. Thisis consistent with Section 115 of the Act which confers a supervisory power in respect of transfer of an employee from one branch to another of the mortgage bank and not from one mortgage bank tono doubt the Central Mortgage Bank may be concerned with securing its loans to the mortgage banks, the provisions of the Act do not confer upon the Central Mortgate Bank the power to collect any loans advanced by the member banks i.e. the mortgage banks. The security given to the mortgage banks in respect of the loans advanced by them no doubt is deemed to have been transferred to the Central Mortgage Bank, but that is only by way of securing the monies advanced by the Central Mortgage Bank to the mortgage banks. Nonetheless, as we have seen earlier, the duty to collect the loan is upon the mortgage banks and notwithstanding the deemed transfer to the Central Mortgage Bank of any property mortgaged to the mortgage banks, the amount due to the mortgage banks is payable to the mortgage banks only and not to the Central Mortgage Bank. Unless there is any specific provision in the Act which directly creates a contractual liability between the Central Mortgage Bank and the borrowers from the mortgage banks, the liability of the borrows for payment of loans advanced to them is only to the mortgage banks which actually advanced the loans to them. The borrowers have no liability to the Central Mortgageour view the High Court is right in holding that when a centralised service or any cadre of employees of the mortgage banks cannot be created by the Board in exercise of its power under Section 115 of the Act, Rule 70 cannot vest such power in the Board. In this view, Rule 70 is ultra vires thepower of the State under(1) of Section 130 read with section of the