Polpully Ksheera Vyavasaya Sahakara Sangam Ltd.; Pirayiri Ksheera Vyavasaya Sahakarana Sangam Ltd.; Kollengode Ksheera Vyavasaya Co-operative Society Ltd.; Koduvayur Ksheera Vyavasaya Sahakarana Sangam Ltd.; Ongallur Ksheerolpadaka Sahakarana Sangam Ltd. v. Director, Dairy Development Directorate; NABARD; Joint Registrar of Co-operative Societies, Palakkad; Government of India; State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **TUESDAY, THE 31ST DAY OF MAY 2016/10TH JYAISHTA, 1938** **WP(C).NO. 28886 OF 2008 (L) ----------------------------** **PETITIONER(S):** **-------------** **1. THE POLPULLY KSHEERA VYAVASAYA SAHAKARANA SANGAM LTD.NO.P.551,P.O.POLPULLY, PALAKKAD DISTRICT,REP:BY ITS SECRETARY, M.ASHOKAN.** **2. THE PIRAYIRI KSHEERA VYAVASAYA SAHAKARANA SANGAM LTD.NO.P.16(D),KODUNTHIRAPULLY,, PALAKKAD DISTRICT,REP:BY ITS SECRETARY,, M.VIJAYAGOPALAN.** **3. THE KOLLENGODE KSHEERA VYAVASAYA** **CO-OPERATIVE SOCIETY LTD.NO.P.531, P.O.KOLLENGODE,, PALAKKAD DISTRICT, REP: BY ITS SECRETARY,M, VASUDHARA.A.** **4. THE KODUVAYUR KSHEERA VYAVASAYA SAHAKARANA SANGAM LTD.NO.P.521,P.O.KODUVAYUR, REP;BY ITS SECRETARY, V.BALAKRISHNAN.** **5. THE ONGALLUR KSHEEROLPADAKA SAHAKARANA SANGAM LTD.NO.P.216(D)APCOSE, P.O.KALLADIPATTA,, REP.BY ITS SECRETARY, RAJENDRA KUMAR.K.** **BY ADVS.SRI.M.R.VENUGOPAL SMT.DHANYA P.ASHOKAN** **RESPONDENT(S):** - **--------------** **1. THE DIRECTOR, DAIRY DEVELOPMENT DIRECTORATE, PATTOM, THIRUVANANTHAPURAM.** **2. THE CHIEF GENERAL MANAGER,(NABARD), KERALA REGIONAL OFFICE,POST BOX NO.5613,PUNNEN, ROAD,STATUE JUNCTION, THIRUVANANTHAPURAM,, PIN-695039.** **3. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, PALAKKAD.** **4. THE GOVT.OF INDIA, REP:BY THE SECRETARY TO GOVT.,DEPARTMENT OF FINANCIAL SERVICES,, NEW DELHI.** **5. THE STATE OF KERALA, REP:BY THE SECRETARY TO GOVERNMENT, THIRUVANANTHAPURAM.** **R1 & 5 BY ADV. GOVERNMENT PLEADER SRIJOSEPH P.M R4 BY ADV. SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR R4 BY ADV. SRI.M.RAJEEV, ADDL.CGSC BY SRI.JOSEPH P.M SRI.K.P.SUJESH KUMAR, SC., R4 BY ADV. SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 31-05-2016, ALONG WITH WPC. 4596/2009, WPC. 5078/2009, WPC. 6174/2009, WPC. 16976/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **WP(C).NO. 28886 OF 2008 (L)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: TRUE COPY OF THE BYELAW OF THE 1ST PETITIONER** **EXT.P2: TRUE COPY OF THE BYELAW OF THE 2ND PETITIONER** **EXT.P3: TRUE COPY OF THE ORDER DT.21.11.90 OF THE 5TH RESPONDENT** **EXT.P4: TRUE COPY OF THE ORDER DATED 16.07.91 OF THE 3RD RESPONDENT EXT.P5: TRUE COPY OF THE CIRCULAR NO.CPD/1566/PL-14/2008-09 DATED 23.05.2008** **EXT.P5(A):TRUE COPIES OF THE CIRCULAR IN BOTH MALAYALAM AND ENGLISH DATED 23.05.2008 ISSUED BY THE 2ND RESPONDENT** **EXT.P6: TRUE COPY OF THE CIRCULAR DATED 28.05.2008 ISSUED BY THE PALAKKAD DIST.CO-OPERATIVE BANK** **EXT.P7: TRUE COPY OF THE CIRCULAR DATED 19.03.2008 ALONG WITH THE COVERING LETTER ISSUED BY THE 1ST RESPONDENT** **EXT.P8: TRUE COPY OF THE ACCOUNT STATEMENT SUBMITTED BY THE 1ST PETITIONER BEFORE THE AREA OFFICE OF THE 2ND RESPONDENT** **EXT.P9: TRUE COPY OF LETTER DATED 30.06.2008 ISSUED BY THE DEPUTY DIRECTOR OF DAIRY DEVELOPMENT TO THE 2ND RESPONDENT** **EXT.P10: TRUE COPY OF THE CLARIFICATION DT.18.6.2008 ISSUED BY THE 4TH RESPONDENT** **EXT.P11: TRUE COPY OF THE REPRESENTATION DT.3O.06.08 SUBMITTED BY THE 2ND PETITIONER TO THE 2ND RESPONDENT** **EXT.P12: TRUE COPY OF THE REPLY DT.14.7.2008 ISSUED BY THE ASST.GENERAL MANAGER, RPCD** **EXT.P3: THE UNCLAIMED COVER RECEIVED BY THE 4TH PETITIONER** ## **RESPONDENTS' EXHIBITS:** **EXT.R2(A): TRUE COPY OF IMPLEMENTATION CIRCULAR 1/2008 ISSUED BY SECRETARY, DEPARTMENT OF FINANCIAL SERVICES, MINISTRY OF FINANCE, GOVERNMENT OF INDIA DATED 28.05.2008** **//TRUE COPY//** **P A TO JUDGE** ## **A.K.JAYASANKARAN NAMBIAR, J.** **............................................................. W.P.(C).No.28886 of 2008, W.P.(C).No.6174 of 2009, W.P.(C).No.5078 of 2009, W.P.(C).No.4596 of 2009 and W.P.(C).No.16976 of 2009 ............................................................. Dated this the 31[st] day of May, 2016** ## **J U D G M E N T** As all these matters involve a common issue, they are taken up together for consideration and disposed by this common judgment. For the sake of convenience, the reference to facts and exhibits is from W.P.(C).No.28886 of 2008. 2. The petitioners in all these writ petitions are Co-operative Milk Societies that have been registered as such under the Kerala Co-operative Societies Act. Being Milk Societies they all function under the administrative supervision of the Director, Dairy Development Directorate of the State, situated at Trivandum. In the writ petition, the petitioners are aggrieved by the nonconsideration, for the benefit of debt relief under Ext.P5 Agricultural Debt Waiver and Debt Relief Scheme promulgated by -2- W.P.(C).No.28886 of 2008, and con.cases. the Central Government in the year 2008, of the loans advanced by them to their members. It is the specific stand of the petitioners in the writ petition that, while they qualified as co--operative credit institutions under Clause 3.4 of the aforementioned Scheme, and the loans extended by them to their members fell within the definition of Direct Agricultural Loans for the purposes of the Scheme, the respondents, and in particular, the 2[nd] respondent and the 4[th] respondent namely, the National Bank for Agricultural and Rural Development (NABARD) and the Government of India, Department of Financial Services, refuse to consider the applications put in by them for extension of the benefit of the Scheme. It is aggrieved by the inaction on the part of the said respondents to entertain the applications preferred by them for the benefit of the Debt Relief Scheme that the petitioners have approached this Court praying, inter alia, for a direction to the said respondents to extend the benefit of the Agricultural Debt Waiver and Debt Relief Scheme, 2008 to them as well. 3. A counter affidavit has been filed on behalf of the State Government wherein it is stated that the petitioners, being part of -3- W.P.(C).No.28886 of 2008, and con.cases. the co-operative credit structure within the State, would qualify for eligibility for the benefit of the Scheme, and hence, there was no justification in the Central Government excluding them from the benefit of the said Scheme. It is also pointed out that, when informed of the refusal on the part of NABARD to accept applications from the petitioner societies, the State Government had taken up the matter with the Central Government and a decision from the Central Government was awaited. In the counter affidavit filed on behalf of NABARD, reliance is placed on a clarificatory Circular (produced as Ext.P10 in W.P.(C).No.28886 of 2008) to contend that the Central Government had clarified that for the purposes of the aforementioned Debt Relief Scheme, functional societies would not come within the definition of Cooperative Credit Institutions as defined under the Scheme, and that loans given to and by the said societies are not covered under the Scheme. It is relevant to note, however, that the counter affidavit filed by the said respondents, apart from making a bland averment that the Dairy Co-operative Societies are classified as functional societies, does not point to the rationale behind denying the benefit of the Scheme to the petitioner Co-operative Societies. -4- W.P.(C).No.28886 of 2008, and con.cases. It is apparent from a perusal of the counter affidavit of NABARD that their role in the Scheme is only as a Nodal Agency of the Central Government for the purposes of implementation of the Scheme, and that they had only relied on the clarificatory Circular issued by the Central Government for the purposes of refusing the applications put in by the petitioners societies for the benefit of the Scheme. 4. I have heard heard Smt.Dhanya P.Ashokan, the learned counsel for the petitioners in W.P.(C).No.28886 of 2008,W.P.(C). No.6174 of 2009,W.P.(C).No.5078 of 2009 and W.P.(C).No.4596 of 2009, Sri.K.V.Sreevinayakan, the learned counsel for the petitioner in W.P.(C).No.16976 of 2009 and the learned Government Pleader for the official respondents of the State Government, Sri.Sujesh Kumar K.P, the learned Standing counsel for the NABARD and Sri.N.Nagaresh, the learned Assistant Solicitor General of the Central Government. 5. On a consideration of the facts and circumstances of the case and the submissions made across the bar, I find from a -5- W.P.(C).No.28886 of 2008, and con.cases. perusal of Ext.P5 Debt Relief Scheme that the Scheme was intended to cover direct agricultural loans extended to marginal and small farmers and other farmers by, inter alia, Co-operative Credit Institutions (including Urban Co-operative Banks) as indicated in the guidelines. The term 'Direct Agricultural Loan' is defined as including investment loans provided directly to farmers for agricultural purposes. The term 'Investment Loan' is in turn defined as including, inter alia, investment credit for allied activities extended for acquiring assets in respect of activities allied to agriculture, such as dairy, poultry farming, sheep rearing, fisheries, bee keeping etc. The term 'Co-operative Credit Institution' is defined in Clause 3.4 as meaning a Co-operative Society that, inter alia, is part of the short term co-operative credit structure or long term co-operative credit structure in a State or a Union Territory. The issue in these writ petitions pertains mainly to whether the petitioner societies would come under the definition of Co-operative Credit Institutions within the meaning of the term in the Debt Relief Scheme of 2008. It is the stand of the petitioners that they form part of the co-operative credit structure in the State of Kerala, which stand is supported by the State -6- W.P.(C).No.28886 of 2008, and con.cases. Government through the averments in their counter affidavit. The hierarchical structure of co-operative societies within the State has **-** been considered by this Court in **Alapuzha District Co operative Bank Ltd. v. State of Kerala [2003 (1) KLT 297]** wherein on an analysis of the provisions of the Co-operative Societies Act a learned Judge of this Court found as follows: 7. A conspectus of these provisions would show the primordial position of a District Cooperative Bank as the central society for all the primary co-operative societies in a District. District Co-operative Bank lends money to all primary co-operative societies in the district and the Subsidiary State Partnership Fund is distributed only through it. NABARD distributes subsidies or grants only through the District Co-operative Bank. To exclude some of the primary societies from the conceptual main stream of the district cooperative bank and treat them only as nominal or associate members would not render justice to the excluded ones for the main reason that once treated as nominal or associate members, there is vital change in the nature of relationship. Active and effective participation is denied. Participation is the quintessence of democracy and any act resulting in denial of participation will be ultra vires the objects of the KCS Act. The Act visualises a co-operative society as a true democratic institution. In other words, all the primary co-operative societies form one class. -7- W.P.(C).No.28886 of 2008, and con.cases. There is no difference in status in their relationship with the central society, namely, District Co-operative Bank. Being similarly situated, they cannot be dissimilarly treated. Another consequence is that they will not be entitled to their dividend and for other benefits as in the case of those included. 8. By the introduction of Act 15 of 1997 with effect from 3.6.1997, District Cooperative Bank was given a restrictive meaning as a "central society having jurisdiction over one revenue district and having as its members primary agricultural credit societies and urban co-operative banks and the principal object of which is to raise funds to be lent to its members including nominal or associate members". Scraping that provision, the impugned amendment reintroduced the original and basic concept of District Cooperative Bank as one umbrella in the district "a central society, the principal object of which is to raise funds to lend to its members, with jurisdiction over one revenue district and having as its members any type of primary societies and federal and central societies having head quarters in such districts". As already observed above, all types of primary co-operative societies are being financed through the District Co-operative Bank. The relationship between a primary cooperative society and the District Cooperative Bank for the purposes of the Act cannot be narrowly understood as the similarity in transaction of raising funds and lending, so long as the District Co-operative Bank is defined and treated as the Central Society in the District through which other primary societies are disbursed various benefits, both -8- W.P.(C).No.28886 of 2008, and con.cases. under the Kerala Co-operative Societies Act as well as the NABARD Act and other Acts, both Central and State. Classification based on the credit or banking business Vs. non-credit and non-banking activity of a primary co-operative society does not have any nexus to the object of the KCS Act. Therefore, such a classification lacking nexus to the object of the Act is discriminatory and hence impermissible under Art. 14 of the Constitution of India. 6. It will be seen from the above extracted portion of the judgment that, the hierarchical structure of Co-operative Societies within the state comprises of the State Co-operative bank at the state level, the District Co-operative Bank as the Principle Cooperative Bank in the district and the primary Co-operative Societies functioning under the said District Co-operative Banks in the matter of disbursement of funds for various activities recognised by the State. The channelising of funds through NABARD in the form of subsidies or grants is done through the District Co-operative Bank, and it was found in the judgment referred above that, while considering beneficiary societies for the benefit of subsidies and grants distributed through NABARD, there could not be a classification effected between the societies -9- W.P.(C).No.28886 of 2008, and con.cases. engaged in credit or banking business and other societies which were carrying on non-credit and non-banking activities. It was found that such a classification, if effected, would breach the provisions of Article 14 of the Constitution of India and be discriminatory in nature. 7. Given that the petitioner societies would form part of the co-operative credit structure recognised within the State, it would appear on a reading of the provisions of the Scheme that the petitioner societies would also fall within the definition of Cooperative Credit Institutions for the purposes of the Scheme since the definition of Co-operative Credit Institutions under the Scheme includes even those societies as are recognised by the State Government as forming part of co-operative credit structure within the State. It is in the light of this definition under the Scheme that this Court has to consider the scope of Ext.P10 clarification that is relied upon by NABARD for denying the benefit of the Scheme to the petitioners societies. As per the clarification contained in Ext.P10, functional societies are not Co-operative Credit Institutions for the purposes of the Scheme. The term -10- W.P.(C).No.28886 of 2008, and con.cases. 'functional society' is not defined anywhere in the Scheme or in the clarification. The term cannot, however, be given a meaning that goes contrary to the specific provisions of the Scheme and in particular, the definition of 'Co-operative Credit Institution' under the Scheme. As already noted above, there is ample material on record to suggest that the petitioner societies would come within the definition of Co-operative Credit Institutions, they being part of the co-operative credit structure recognised in the State by the State Government itself. Under the said circumstances, unless the Central Government can clearly point to any provision which excludes the petitioner societies from the benefit of the Scheme in question, the action of NABARD in refusing to accept the applications preferred by the petitioner societies cannot be justified. It deserves mention in this connection that the applications preferred by the petitioner societies was in the year 2008, and through interim order passed by this Court in the said writ petitions, after taking note of the fact that the Central Government had not placed any counter affidavit on record, this Court had also directed the respondents to treat the petitioners as eligible for the benefits under the Scheme, and to consider the -11- W.P.(C).No.28886 of 2008, and con.cases. credit facilities given through the petitioners as entitled to the benefit of the Scheme provisionally subject to further orders from this Court. As there is no counter affidavit filed by the Central Government even today in these writ petitions, I am of the view that, the Central Government in the Ministry of Finance (Department of Financial Services) should take a decision in the matter of entitlement of the petitioner societies to the benefit of the Scheme in the light of the observations in this judgment. Taking note of the fact that these writ petitions have been pending before this Court since 2008, the Central Government is directed to pass appropriate orders in the matter within a period of three months from the date of receipt of a copy of this judgment,if need be, after hearing the petitioners. It is made clear that, if the Central Government does not pass orders as directed within the time stipulated above, the interim direction passed in these writ petitions directing the respondents to treat the petitioners societies as entitled for the benefit of the Scheme on provisional basis during the pendency of the writ petition shall be treated as absolute, and the petitioners shall be held entitled to the benefit of the Scheme. In that event, the petitioners would also be entitled to -12- W.P.(C).No.28886 of 2008, and con.cases. all the consequential reliefs that flow from such a finding, subject to their producing the necessary data before the Nodal Agency (NABARD) to substantiate their claims. The writ petition is disposed as above. Sd/- **A.K.JAYASANKARAN NAMBIAR JUDGE** mns/01.06.16