Pathanamthitta Primary Co-operative Agricultural and Rural Development Bank Ltd v Joint Registrar of Co-operative Societies, Pathanamthitta; Kerala State Co-operative Agricultural and Rural Development Bank Ltd; Ranni Co-operative Agricultural and Rural Development Bank Ltd; State of Kerala; NABARD

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 12TH APRIL 2011 / 22ND CHAITHRA 1933 ## **WP(C).No. 33000 of 2009(T)** **--------------------------** PETITIONER: - --------------- PATHANAMTHITTA PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LTD Q390, PATHANAMTHITTA, REPRESENTED BY ITS SECRETARY. BY ADV. SRI.D.SOMASUNDARAM RESPONDENTS: - --------------- 1. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, PATHANAMTHITTA. 2. KERALA STATE CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LTD, THIRUVANANTHAPURAM REPRESENTED BY ITS MANAGING DIRECTOR. 3. RANNI CO-OPERATIVE AGRICULTURE AND RURAL DEVELOPMENT BANK LTD, RANNI, REPRESENTED BY ITS ADMINISTRATOR. 4. STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO GOVERNMENT CO-OPERATION DEPARTMENT GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 5. NABARD, NEW DELHI REPRESENTED BY ITS SECRETARY. R2 BY ADV. SRI.M.RAJAGOPLAN NAIR,SC,K.S.CO.OP.AGRICULTURAL AND RURAL DEVELOPMENT BANK. AND BY ADV. SRI.P.U.SHAILAJAN,SC. R3 BY ADV. SRI.ASOK M.CHERIAN R4 BY SRI C.P. SUDHAKARA PRASAD, ADVOCATE GENERAL BY ADV. SMT. ANU SIVARAM, GOVERNMENT PLEADER THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23/03/2011, ALONG WITH WPC NO. 15395 OF 2010 AND CONENCTED CASES, THE COURT ON 12.04.2011 DELIVERED THE FOLLOWING: ## **WP(C).No. 33000 of 2009(T)** ## APPENDIX PETITIONER'S EXHIBITS: EXT.P1 : A TRUE COPY OF THE INTERIM ORDER IN CMP NO.54886/99 IN OP.32374/99 AND FINAL JUDGMENT. EXT.P2 : A TRUE COPY OF THE LETTER. EXT.P3 : A TRUE COPY OF THE JUDGMENT IN OP. 22305/97. EXT.P4 : A TRUE COPY OF THE GOVERNMENT ORDER DATED 21.11.2003. EXT.P5 : A T RUE COPY OF THE GOVERNMENT ORDER DATED 26.10.2006 EXT.P6 : A TRUE COPY OF THE JUDGMENT IN WRIT PETITION 31584/2008 EXT.P7 : A TRUE COPY OF THE PETITIONER'S REQUEST AND THE REPLY. EXT.P8 : A TRUE COPY OF THE REPRESENTATION SUBMITTED BEFORE THE RESPONDENT NO.1,2 AND 4. RESPONDENTS' EXHIBITS: EXT.R2(a) : TRUE COPY OF THE APPLICATION ALONG WITH RESOLUTION AND LETTER. EXT.R2(b) : TRUE COPY OF THE RESOLUTION PASSED BY DIRECTOR BOARD OF THE 2ND RESPONDNET IN ITS MEETING HELD ON 18.11.2009. EXT.R2(c) : TRUE COPY OF THE MINUTES DATED 13.10.99 OF THE 1ST GENERAL BODY MEETING OF ITS MEMBERS. EXT.R2(d) : TRUE COPY OF THE MINUTES DATED 27.11.99. EXT.R2(e) : TRUE COPY OF THE RESOLUTION NO.3 DATED 27.1.2000 OF THE 3RD RESPONDENT. /TRUE COPY/ P.S. TO JUDGE. ## **P.R. RAMACHANDRA MENON, J.** .............................................................................. **W.P.(C) 33000 OF 2009 & W.P.(C)Nos.15395, 17418, 21878, 26063, 29730, 29736, 32600 AND 34059 OF 2010** ......................................................................... **Dated this the 12[th] April, 2011** ## **J U D G M E N T** The issue involved in all these cases is in respect of a common cause as to the rights and liberties of the petitioners Primary Co-operative Agricultural and Rural Development Banks (hereinafter referred to as 'primary banks' for the purpose of convenience of reference) to continue their operation in the concerned Taluks, without being affected by any setting up, registration and affiliation of a similar Bank in the concerned Taluk, virtually amounting to overlapping, which is prohibited under Section 7(1)(c) of the Kerala Co-operative Societies Act 2. The petitioners in W.P(C) 33000 of 2009 and W.P.( C) 15395 of 2010 are the same. The former writ petition was filed **2** ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ seeking for a direction to the respondents 1, 2 and 4 not to grant affiliation to the third respondent bank,while the latter was filed for directing the respondents 1 and 2 to complete the liquidation proceedings in respect of the rival Primary Cooperative Agricultural and Rural Development Bank. Similar prayer as the one contained in W.P(C) 15395 of 2010 has been raised by the petitioners in the other writ petitions as well. 3. All the petitioners herein are registered Primary Cooperative Agricultural and Rural Development Banks, with their area of operation originally conferred/ as available in two or more Taluks. The business being pursued by the petitioners Banks is mainly on the basis of the finance provided by the 'NABARD' (National Bank for Agriculture and Rural Development), which is being distributed through the Apex Bank at State level to the Primary Banks like the petitioners and in turn to the members/beneficiaries. The area of operation of the concerned Banks has already been incorporated in the Bye-laws and the same has been approved by the Registrar as provided under the ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ **==> picture [7 x 9] intentionally omitted <==** relevant provisions of law. While so, certain new Primary Cooperative Agricultural and Rural Development Banks were intended to be set up, allegedly in the area of operation of the petitioners Banks; thus overlapping their business, which was brought to the notice of the authorities concerned, including the NABARD functioning at the National level. After taking note of the situation, the NABARD issued Ext. P2 letter to the Chief Secretary of the State of Kerala, with copies to the others concerned, pointing out the difficulty in continuing the financial assistance to the non-viable Primary Banks and as to the alarming consequence of setting up any more 'New Primary Banks' without any regard to the relevant aspects including overlapping in the area of operation. It was also made clear that the NABARD's prior approval was necessary before opening of any new Primary Bank and failure to do so would result in cessation of financial assistance from the NABARD . The case of the petitioners is that it is without any regard to the instruction given by the NABARD that, several New Primary ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **4** Banks' were sought to be set up, detrimental to the interests of the petitioners in their area of operation, which allegedly was with malafide intention to contest the 'Election' to the Apex Bank in the State and to capture management of the Apex Bank by inducting more and more persons of choice of the ruling front. 4. Pointing out the adverse circumstances as to the market conditions and infringement of statutory prescriptions in setting up 'New Primary Banks', O.P.NO.22305 of 1997 was filed by some aggrieved Existing Primary Banks' including the petitioner in W.P.(C) Nos.33000 of 2009 and 15395 of 2010. The stand of the Government was that New Primary Banks had to be set up in all Taluks, where the existing Primary Banks did not have their head quarters. The availability of finance from NABARD was also a subject matter. The aforesaid Original Petition and all the connected/similar matters were considered and disposed of by a Division Bench of this Court as per Ext.P4 judgment dated 20.09.2002 directing the Government to formulate a 'Policy' and decide the matter according to law, ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **5** before starting and functioning of the 'New Banks' . 5. Pursuant to the above verdict, the Government considered the matter with reference to the relevant provisions of law, particularly with regard to the rights and liberties of 17 'New Primary Banks' proposed to be set up. Accordingly, Ext. P5 order was passed on 21.11.2003, whereby permission to function was denied to 11 'Primary Banks'; while granting liberty in respect of the other 6 Primary Banks mentioned therein. The 4[th] respondent in W.P.(C) 15395 of 2010 (3[rd] respondent in 33000 of 2009 ) is one of such six Banks. 6. One of the aggrieved 11 banks who were denied permission by the Government (as per Ext. P5) sought to challenge the same by filing revision petition before the Government . After considering the matter, the Government decided to cancel Ext. P5 Government Order dated 21.11.2003 and issued Ext.P6 Government Order dated 26.10.2006, whereby the decision to wind up the revision petitioner Bank and 10 others was cancelled. It was challenging Ext. P6 Government Order ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **6** dated 26.10.2006, that the petitioner in WP.(C) 33000 of 2009 (who is the petitioner in W.P.(C)15395 OF 2010 as well) and some other similarly situated Banks chose to challenge the same by filing W.P(C) 31584 of 2006 and connected cases. During the course of final hearing held on 04.02.2009, it was brought to the notice of this Court by the learned Advocate General appearing for the Government that the impugned Government Order dated 26.10.2006 was being withdrawn by the Government. The said submission was recorded and the writ petitions were closed as infructuous, as borne by Ext.P7 common verdict. Pursuant to Ext.P7 judgment, the Government issued G.O. Dated 12.06.2009, withdrawing Ext.P6 G.O., a copy of which has been produced as Ext. R1 (b) along with the counter affidavit filed by the Government in W.P.(C) 33000 of 2009. 7. According to the petitioners, notwithstanding withdrawal of the above Government Order, steps were being pursued enabling the new Primary Banks to function, which made them to approach this Court for appropriate reliefs as prayed for in **7** ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ the above writ petitions. The Government has filed a counter affidavit pointing out that the idea and understanding of the petitioners that, on withdrawing Ext.P6 Government Order, everything included in Ext.P6 Government Order stands withdrawn, is not correct and that, by virtue of withdrawal of Ext.P6 Government Order, Ext.P5 Government Order has come back to existence. Since Ext. P6 G.O. stands withdrawn by Ext.R1(b) as aforesaid, Ext.P5 G.O. has come back and the concerned 'Primary Banks' are entitled to function as mentioned therein. Reference is also made to Ext. R1(a) exemption given to the proposed primary banks from the stipulation under Section 7 (1)(c), which is stated as issued by the Government invoking the power to relax, as provided under Section 101 of the Kerala Co-operative Societies Act. The amendment brought out to Sec. 2(oc) defining the term 'primary bank' is also relied on, stating that, by virtue of the said amendment, the 'Primary Banks' had to confine their business to the Taluks where their head quarters are situated and that they have no right to object ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ **8** to the setting up of New Banks in other Taluks, alleging violation of Section 7(1)(c). 8. Mr. D. Somasundaram and Mr. T.R. Harikumar, the learned Counsel, who led the arguments on behalf of the petitioners submit that the proceedings leading to Exts.P5 and P6 Government Orders followed by Ext. R1(b) Government Order, have to be read and understood with reference to the prevailing circumstances as projected by the NABARD by way of Ext.P4 addressed to the Chief Secretary (as to the requirement of their prior approval for setting up new primary banks for availing financial assistance). It is argued that, since Ext.P6 Government Order stands withdrawn as per Ext.R1(b) Government Order, the position covered by Ext.P5 Government Order also goes and that no new Primay Banks could be permitted to function under any circumstance. 9. In response to the above contention, the learned Advocate General submits that cancellation of Ext. P6 G.O. does not have any effect to set aside Ext.P5 G.O., as obvious from the ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **9** contents of the Government Order itelf. It is further stated that setting up of new Primary Banks was visualised and permitted by the Government by providing exemption as per Ext. R1(a), by relaxing rigour of section 7(1)(c) invoking the power of the State under Section 101 of the Co-operative Societies Act. In so far as Ext. R1(a) stands and not challenged by anybody including the petitioners, it is no more open for them to contend anything to the contrary. It is also brought to the notice of this Court that the challenge raised by some other aggrieved parties with regard to the amendment of Section 2(oc) of the Act has failed and the validity of the provision has been upheld by this Court, as per the decision reported in **2009(1) KLT 729** _**(Irinjalakkuda C.A.R.D. Bank Ltd. vs. K.S. C.A.R.D. Bank Ltd & Others**_ **)** . 10. Section 7(i)(c) of the Kerala Co-operative Societies Act reads as follows: _“7. Registration:-(1) If the Registrar is satisfied--_ _(a) xx xx xx_ ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **10** _(b)xx xx xx._ _© that the area of operation of the proposed society and the area of operation of another society of similar type do not overlap_ _(d) xx xx xx (e)xx xx xx_ _he may register the society and its bye- laws (within a period of ninety days from the date of receipt of the application)”_ Obviously Ext.R1(a) G.O. has been issued by the Government granting exemption to the proposed Primary Banks to be set up, from the adverse circumstances envisaged under Sec.7(1)(c). In fact, Section 101 of the Kerala Co-operative Societies Act enables the State Government, if they are satisfied that it is necessary to do so in public interest, to exempt any society or any class of society from any of the provisions of the Act or to direct that such provision shall apply to such societies or class of societies, subject to such modifications as may be specified in the order, recording the reasons in this regard. 11. Going by the mandate of the above provisions it is seen that Ext.R1(a) has been issued by the Government by virtue ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **11** of the specific enabling provisions and since the said Government Order granting exemption has not been challenged by anybody including the petitioners, it is no more open for them to press the alleged grievance in respect of the proposed setting up, affiliation and functioning of the concerned Primary Banks. 12. As contended by the State, Sec. 2(oc) was amended w.e.f. 01.01.2000 by Act. 1/2000 defining the term _**Primary Co-operative Agricultural and Rural Development Bank**_ , which reads as follows: . _“2(oc)“Primary Co-operative Agricultural and Rural Development Bank” means a society having its area of operation confined to a Taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities._ _Provided that the societies in existence at the commencement of the Kerala Cooperative Societies (Amendment )Act, 1999, having more than one taluk as its area of operation shall, restrict such area of operation to the taluk where the headquarters of such society is situated, within a period of six_ ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **12** _months.”_ By virtue of the 'proviso' to the said provision, all the societies in existence at the time of commencement of the amendment having more than one Taluk as its area of operation, have necessarily to restrict such operation to the Taluks where headquarters are situated; for which, breathing time of 'six months' has been provided, as observed by this Court in **2009 (1) KLT 729 (Irinjalakkuda C.A.R.D. Bank Ltd. vs. K.S. C.A.R.D. Bank Ltd & Others )** . This is the period within which the existing societies have to trim down themselves, so as to fit into the cloak and such societies/Primary Banks which cannot operate in any other Taluk by virtue of the statutory prescription, cannot be heard to say that they are aggrieved of setting up, registration and affiliation of new Primary Banks in the concerned Taluks. For this reason itself, there cannot be any question of overlapping as well, in respect of the stipulation under section 7(1)(c). Since the amendment to Sec.2(oc) has come into operation w.e.f. 01.01.2000 and since the ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **13** constitutional validity of the legal provision has been upheld by this court in **2009(1) KLT 729 (cited supra),** the challenge against the proposed setting up, registration/affiliation of the primary Bank in the concerned Taluks has necessarily to fail. 13. As evident from the materials on record and also as conceded by the respondent State in their counter affidavit, by virtue of cancellation of Ext. P6 G.O. dated 26.10.2006 by Ext. R1(b) G.O. dated 12.06.2009, Ext. P5 G.O. dated 21.11.2003. is automatically brought back (para 10 of the counter affidavit in W.P.(C)15395 of 2010). Then the question is whether all the proposed Banks could be permitted to be set up, registered, affiliated and functioned with reference to Ext. R1(a) relaxation and amendment to Sec. 2(oc). As mentioned hereinbefore, Ext.R1(a) exemption was ordered as a 'general order' on 03.09.1997; whereas Ext. P5 G.O. was issued on 21.11.2003 as a matter of Policy of the Government, pursuant to the specific direction given by the Division Bench of this Court as per Ext.P4 verdict passed on 20.09.2002. Specific reasons have been given ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **14** in Ext.P5 G.O., whereby a finding was rendered by the Government that, if sanction was given to the 'proposed Banks', the viability of the 'existing Banks' will be much adversely affected as pointed out by the NABARD. Reference is also there to the report of the Registrar that, if any change was to be brought about by giving permission to the new/proposed Primary Banks to function, that will run contrary to the stipulation of the NABARD and the guidelines issued by the Apex Bank of the State and hence the feasibility demanded to close down/ complete the liquidation proceedings in respect of concerned New Banks. It was after considering the above vital aspects, that a conscious decision was taken by the State to confine the benefits to 'six' Primary Banks as mentioned in Ext. P5 G.O. , while ordering the other '11' Primary Banks to be closed down, giving appropriate direction to the Registrar to withdraw the registration. As such, this Court finds that the new '11' Primary Banks which come within the scope of Ext.P5 G.O. are not liable to be permitted to function, so long as Ext. P5 G.O. stands, as ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **15** there is no case for the respondent State that the said G.O. has been varied or modified and that the subsequent G.O. giving such permission as borne by Ext. P6 having been withdrawn as per Ext. R1(b)G.O. dated 12.06.2009 in tune with the submission made before the Division Bench of this Court while passing Ext.P4 judgment . 14. With regard to the case of 'six' banks mentioned in Ext. P5, the petitioners have no case that they have challenged the same by filing any revision petition before the Government or by approaching this Court. The petitioners have approached this Court only pursuant to issuance of Ext.P6 G.O. whereby the remaining '11' Primary Banks were also permitted to function. In other words , after issuance of Ext.P5 G.O. on 21.11.2003, till it was sought to be varied by issuing Ext. P6 G.O dated 26.10.2006, there was no grievance for the petitioners during the said three years. As such, it is no more open for the petitioners to contend now that no benefit can be given to the 'six' Primary Banks mentioned in Ext.P5 and the alleged cause of action in ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **16** this regard has become stale. No interference is warranted in any of the above writ petitions. They are dismissed accordingly. 15. Before parting with the case, this Court finds that Ext.R1(a) exemption was given for setting up Primary Banks relaxing the rigor of Section 7(1) (c) with intent to set up such Primary Banks in all the Taluks . It was accordingly that Section 2(oc) was amended w.e.f. 01.01.2000, giving six months' time to the existing Primary Banks having the area of operation in two or more Taluks to confine their business to the Taluk where the headquarter is situated. By virtue of Ext. P5 G.O., a conscious decision was taken by the Government, as a matter of Policy, to deny the benefit of setting up to '11' Primary Banks, except the '6' Banks mentioned therein. By virtue of the various interim orders passed by this Court at different points of time, no Primary Banks have started functioning. Since the existing Primary Banks, in compliance with the mandatory requirement, are to limit the area of operation to the Taluk where the headquarter is situated, as contemplated under Section 2(oc) ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ ## **17** and further since the new co-operative Banks intended to be set up, except the 'six' mentioned in Ext. P5 G.O. are not given such permission, as borne by Ext. P5 G.O. itself, the resultant position may be detrimental to the general public, who were depending upon the existing Banks (like the petitioners) in other Taluks as well(other than the Taluk where the headquarter is situated), for the reason that they will be losing the service of the existing Banks and at the same time, no new Primary Bank is to be set up there (if it happens to be one among the '11' new Banks who are denied permission as per Ext. P5). 16. In the said circumstance, it may be necessary for the Government to re-consider the Policy decision stated as taken by Ext.P5, pursuant to the direction given by a Division Bench of this Court vide Ext. P4. That apart, after referring to the adverse circumstances pointed out by the NABARD and the Registrar of Co-operative Societies; in turn making an inference that setting up of New Primary Banks will be detrimental to the guidelines of the NABARD and the Apex Bank **18** ## _**W.P.(C) 33000 OF 2009 and connected cases.**_ in the State, 'six' Primary Banks have been enlisted therein, out of the total 17, without giving any reason as to why such 'six' Banks alone have been retained, as against the other '11' or what are the yardsticks to have a differentiation in this regard. In the said circumstance, it will be open for the respondent Government to re-consider the matter, taking note of all the facts and circumstances and to formulate 'New Policy'; as Policy can change and there is no question of any estoppel. **P.R. RAMACHANDRA MENON, JUDGE.** lk