Ramachandran T.R. v. Adat Farmer's Service Co-Operative Bank Ltd

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **SATURDAY, THE 6TH DAY OF AUGUST 2016/15TH SRAVANA, 1938** **WP(C).No. 9530 of 2016 (M) ---------------------------** **PETITIONER(S):** **-------------** **RAMACHANDRAN.T.R.** **S/O.RAMANEZHUTHACHAN, THAZHATHU HOUSE, PURANATTUKARA, THRISSUR DISTRICT.** ## **BY ADV. SRI.C.PRABIN BENNY** ## **RESPONDENTS:-:** **------------** **1. THE ADAT FARMER'S SERVICE CO-OPERATIVE BANK LTD. NO.R689, P.O.PURANATTUKARA, THRISSUR - 680 551, REPRESENTED BY ITS SECRETARY.** **2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES AYYANTHOLE, THRISSUR - 680 003.** **3. THE REGISTRAR OF CO-OPERATIVE SOCIETIES THIRUVANANTHAPURAM - 695 001.** **R1 BY ADV. SRI.GEORGE POONTHOTTAM R2 & R3 BY GOVERNMENT PLEADER SRI.T.R. RAJESH** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26-7-2016, ALONG WITH WPC.9531/2016 AND CONNECTED CATS,THE COURT ON 06-08-2016 DELIVERED THE FOLLOWING:** **bp** ## **WP(C).No. 9530 of 2016 (M) ---------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS -----------------------** **EXT.P1: TRUE COPY OF THE CIRCULAR NO.9/2015 ABOUT THE 'ASWAS' SCHEME ALONG WITH ITS ENGLISH TRANSLATION. EXT.P2: TRUE COPY OF THE LETTER DATED 15.01.2016 ISSUED BY THE 1ST RESPONDENT ALONG WITH ITS ENGLISH TRANSLATION.** **EXT.P2(A): TRUE COPY OF THE LETTER DATED 201.2016 ISSUED BY THE 1ST RESPONDENT ALONG WITH ITS ENGLISH TRANSLATION. EXT.P3: TRUE COPY OF THE APPLICATION DATED 15.02.2016 IN RESPECT OF THE 1ST LOAN BEFORE THE 1ST RESPONDENT BANK ALONG WITH ITS ENGLISH TRANSLATION.** - **EXT.P3(A): TRUE COPY OF THE APPLICATION DATED 15.02.2016 IN RESPECT OF THE 2ND LOAN BEFORE THE 1ST RESPONDENT BANK FOR EACH DEFAULTED ALONG WITH ITS ENGLISH TRANSLATION.** - **EXT.P4: TRUE COPY OF THE APPLICATION DATED 15.02.2016 FILED BEFORE THE 2ND RESPONDENT WITH RESPECT TO 1ST LOAN ALONG WITH ITS ENGLISH TRANSLATION.** - **EXT.P4(A): TRUE COPY OF THE APPLICATION DATED 15.02.2016 FILED BEFORE THE 2ND RESPONDENT WITH RESPECT TO 2ND LOAN ALONG WITH ITS ENGLISH TRANSLATION.** - **EXT.P5: TRUE COPY OF THE COMMUNICATION DATED 16.02.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE 1ST LOAN ALONG WITH ENGLISH TRANSLATION.** **EXT.P5(A): TRUE COPY OF THE COMMUNICATION DATED 16.02.2016 ISSUED BY THE 1ST RESPONDENT IN RESPECT OF THE 2ND LOAN ALONG WITH ENGLISH TRANSLATION. RESPONDENT(S)' EXHIBITS :** - **------------------------** **EXT.R1(A): COPY OF THE INTERIM ORDER DT 21/3/2016 PASSED BY THIS HON'BLE COURT.** - **EXT.R1(B): COPY OF THE INTERIM ORDER DT 31/3/2016 PASSED BY THIS HON'BLE COURT IN WPC NO. 11201/2016.** ## **WP(C).NO. 9530 OF 2016 (M)** |**EXT.R1(C): **|**COPY OF THE ORDER NO.M.U.407/2016/K.DIS DT**| |---|---| ||**3/2/2016 PASSED BY THE R2.**| |**EXT.R1(D):**|**COPY OF THE ORDER NO. M.U.937/2016/K.DIS DT**| ||**25/2/2016 PASSED BY THE R2.**| |**EXT.R1(E):**|**COPY OF THE AGREEMENT EXECUTED BY THE**| ||**PETITIONER IN FAVOUR OF THE BANK.**| ||**//TRUE COPY//**| ||**P.S. TO JUDGE**| **bp** ## **SHAJI P. CHALY, J.** ----------------------------------------------- **W.P.(C). Nos.9530, 9531, 9533, 11201 11208, 12271, 12272 & 14390 of 2016 ----------------------------------------------Dated this the 6[th] day of August, 2016** ## **JUDGMENT** These writ petitions are filed by the petitioners against the denial of benefits in respect of a scheme, 'Aswas - 2016', implemented by the Government of Kerala for clearing the loans availed from Co-operative banks. Since the subject matter of these writ petitions are similar in nature, they are disposed of by a common judgment. Facts discernible from W.P.(C) No.9530/2016 are recited and the documents are also referred accordingly. 2. Material facts for the disposal of the writ petition are thus; petitioner is the member of the 1[st] respondent Cooperative bank. Petitioner has availed loans from the 1[st] respondent bank with principle amount of Rs.1,00,000/- and Rs.5,00,000/- respectively, in the year 2004 and 2002 respectively. According to the petitioner, due to financial crisis, petitioner could not repay the loan in time and W.P.(C). No.9530 of 2016 & connected cases 2 therefore, the amounts were remaining due, however, 1[st] respondent bank did not initiate any legal proceedings to recover. While so, State introduced Ext.P1 Scheme viz., 'Aswas - 2016' for all defaulted loans in Co-operative banks with an intention to help the defaulters to repay the loan in simplified terms. It is also contended that, since there were very high suicide rate in the State due to defaulted loans, Government introduced the said scheme. 3. It is stated that, as per Ext.P1, defaulters have to pay the principal amount, and the interest on principal amount equivalent to the principal along with establishment charge and arbitration/execution charges. Therefore, it is submitted that as per Ext.P1, all borrowers, fully or partially defaulted repayment of the loans are to be included in the adalat, and the respondent bank is bound to appoint a Nodal Officer and his/her contact number along with time, date and venue of the adalat are to be specified in the notice to the defaulters, who are to be included in terms of Ext.P1 Scheme. According to W.P.(C). No.9530 of 2016 & connected cases 3 the petitioner, no such notice has been served on him. 4. Matters being so, 1[st] respondent bank informed the petitioner with respect to Ext.P1 scheme and sought their willingness to include the loan in the said scheme and issued Exts.P2 and P2(a). On receipt of the said communications, petitioner made Exts.P3 and P3(a) applications before the 1[st] respondent bank for availing the benefit of the scheme. On receipt of Ext.P3, 1[st] respondent, declined to apply the conditions prescribed in Ext.P1 scheme, and adopted a different calculation by which the amount quantified was 10 times more than the principal amount. Thereupon being aggrieved, petitioner filed application before the 2[nd] respondent, Joint Registrar of Co-operative Societies and requested to issue directions to the 1[st] respondent to include the petitioner's application in the scheme, evident from Exts.P4 and P4(a). While so, on 16.2.2016, 1[st] respondent issued Exts.P5 and P5(a) letters to the petitioner, making a calculation adopting an altogether different yardstick, not W.P.(C). No.9530 of 2016 & connected cases 4 prescribed in the scheme. According to the petitioner, 1[st] respondent instead of referring Exts.P3 and P3(a) applications to the adalat, straightaway passed Exts.P5 and P5(a) orders, which are unauthorized and not in accordance with Ext.P1 guidelines. Therefore, it is in this background, attributing illegalities and arbitrariness on the part of the 1[st] respondent bank, this writ petition is filed. 5. The other writ petitions are also filed by defaulters claiming benefit of the very same Scheme and the contentions raised are apparently, similar in nature, substantially, and therefore, facts are not narrated separately. 6. First respondent bank has filed counter affidavits in the writ petitions separately. However the counter affidavit filed in W.P.(C) No.9530/2016 is referred to, which will suffice the situation, in view of the judgment I propose to pass. 7. Receipt of applications claiming benefit of the scheme is not disputed by the 1[st] respondent. However, it is contended that, the allegations and claims and demands of W.P.(C). No.9530 of 2016 & connected cases 5 the petitioners cannot be sustained under law. It is contended that, 1[st] respondent is a primary Co-operative society registered under the Kerala Co-operative Societies Act and Rules, hereinafter called “the Act” and “the Rules” and the said Act and Rules provides specific grievance redressal mechanism to resolve the dispute between the society and its members. Therefore, it is well settled that, a writ petition is not maintainable against a Co-operative society unless there is any statutory infraction on the part of the society. Therefore, it is contended that the writ petition is not maintainable either on facts or law and therefore, the same is to be dismissed on the said sole ground. 8. It is also urged, bank is mobilizing funds required for disbursing loans by securing deposits. The depositors are assured of fixed interest for their deposits and the same are to be repaid and the deposit has to be returned after the period fixed thereunder. Therefore, the society cannot give concession to the defaulters without considering the impact in W.P.(C). No.9530 of 2016 & connected cases 6 the general financial health of the bank, when concessions are extended. The society is obliged to consider the contractual obligations of the depositor. Likewise while providing loans, the society is entering into contracts with the customers. Therefore, they are obliged to honour the commitment made by them under the agreement and if the commitment is not honoured then the foundation of the society will be affected materially. It is also contended that, petitioners in the writ petitions are not prompt in the repayment of loans with interest, and petitioners have deliberately made default, to avail the benefits of concessions as it has become the practice of the department to issue general guidelines for granting concessions. The same has given a message or premium for the defaulters and the mindset of the loanee to make deliberate default, to avail the benefit of concessions as and when announced by the department. 9. It is also stated that the present circular/scheme is only a guideline to be adopted by the respective banks and W.P.(C). No.9530 of 2016 & connected cases 7 there is no compelling nature for the said circular. Every society is free to follow their own norms to settle the loan accounts. There is no power conferred on the State or the Registrar to re-write the terms of the contract to suit the convenience. The said practice has been deprecated by this court by interfering with such circular issued in the past when the legal authority, to issue such circulars were questioned. Therefore, it is contended that petitioners have not made out any legal or factual circumstances warranting any interference with respect to the demands made by the 1[st] respondent against the defaulters. It is also contended that, petitioners are members of the society and they are bound by the bye-laws as approved by the statutory authorities. In so far as the respondent bank is concerned, it has an approved byelaw for the grant of loans, and for the grant of concessions, which includes concessions against overdrafts. Bank has also an approved scheme of their own for giving concession for the settlement of overdues, taking into account the financial W.P.(C). No.9530 of 2016 & connected cases 8 stability of the bank, evident from Exts.R1(c) and R1(d). Therefore, communication was given to the petitioner as per Ext.P2, and the reply given, are based on scheme approved by the Joint Registrar. It is thereupon contended that the communication given as per Exts.P2 and P5 cannot be elevated to the status of a statutory order, for this court to issue a writ of certiorari as sought for by the petitioner. Petitioner is not entitled for a mandamus as the scheme envisaged is only the guidelines and the same is not a mandatory direction binding the respondent society. The society is at liberty to adopt the schemes of their own and to implement the same with prior approval of the Registrar. 10. That apart, in the separate counter affidavits filed by the 1[st] respondent, economic stability and financial status of the petitioners are discussed, and contended that petitioners are financially sound to repay the loan and therefore, the claims raised by the petitioners in terms of the 'Aswas Scheme' cannot be sustained in any manner. According to the W.P.(C). No.9530 of 2016 & connected cases 9 respondent, the communication issued by the respondent is not suffering from any legal infirmities so as to enable the petitioners to seek the reliefs in a writ petition. So also it is contended that the respondent is the custodian of public funds. The fund which are being sanctioned and granted as loans and overdraft facility to its members are funds which are mobilized from its members and its creditors, and therefore, the interest of the members and creditors of the bank are also to be protected. It is also canvassed that as per the dictum laid down by this court in **Kallettumkara SCB v. Registrar of Co-operative Societies** [2005(3) KLT 483], the Registrar of Co-operative Societies has no manner of power to issue any circular directing Co-operative Societies to permit the borrowers to settle their outstanding loan at the document rate, or at the then existing rate, excluding the penal interest and compound interest. Further the petitioners cannot claim the benefits of their own fault, and even though OTS schemes were announced in earlier years also, W.P.(C). No.9530 of 2016 & connected cases 10 petitioners have not turned up to settle the outstanding loan amounts. Therefore, 1[st] respondent submits that the writ petitions have no merit and the same are to be dismissed. 11. Petitioners have filed reply affidavits reiterating their stand in the writ petitions. Petitioners relied on various judgments of this court and canvassed for the proposition that the order passed by the Registrar of Co-operative Societies and the Government are bound to be followed by the societies. According to the petitioners, the Aswas Scheme launched by the State Government is binding on the 1[st] respondent, and Government as well as the Registrar of Cooperative Societies are competent to fix the interest rates on the defaulted loans, and therefore, the scheme - 2016 is binding on the 1[st] respondent. It is also urged, the attitude of the bank that, order passed by the Registrar is without considering the impact of the general financial health of the bank, is open defiance to the legal authority of the Registrar of Co-operative Societies and the rule of law. It is further W.P.(C). No.9530 of 2016 & connected cases 11 contended, the communication issued by the 1[st] respondent is unauthorized and unsustainable in law since the terms of scheme is legally binding on the 1[st] respondent. That, petitioners made default in repayment of loan consequent to the setback suffered by them financially. It is also stated that the arbitrary and exorbitant rate of interest with compounding system is shouldered on the defaulters, who could not pay the debts within the agreed period. It is also stated that 1[st] respondent has not complied with the provisions of its own bye-laws with respect to sanctioning of overdraft facility. Apart from the same, allegations are raised with respect to the delay on the part of the 1[st] respondent in securing approval from the Joint Registrar in the matter of proportionate shares and framing of sub-rules. 12. That since the loan agreement executed by and between the petitioner and 1[st] respondent bank is much before the approval accorded by the Joint Registrar, the agreement executed is void. According to the petitioner, the W.P.(C). No.9530 of 2016 & connected cases 12 Registrar is vested with ample powers under Section 66 of the Act, and the judgment rendered by this court in **Kallettumkara SCB** supra, is only with respect to issuance of general directions. Factual circumstances with respect to the respective documents produced by the 1[st] respondent bank in the matter of imposing interest and the settlement scheme are disputed by the petitioner. Therefore, it is contended that the contentions raised in the writ petitions are sustainable under law. 13. The 1[st] respondent bank has filed an additional affidavit and produced the loan applications submitted by the petitioners and the documents executed in favour of the bank by the petitioners. 14. Heard learned counsel for the petitioners, learned counsel appearing for the 1[st] respondent bank, learned Government Pleader and perused the pleadings and documents on record. 15. Question to be considered is whether any manner of W.P.(C). No.9530 of 2016 & connected cases 13 interference is required in the communication issued by the bank directing the petitioners to remit the loan amounts fixed by the bank. In order to find out whether the petitioners are entitled to succeed in the writ petition, a reference to the scheme is required. The primary condition for availing scheme is, as on 31.12.2015 the loan amount either in full or in part shall be remaining due. As per clause (3) thereunder, an adalat is to be constituted by the bank in order to consider the claims put forth by the loanees in terms of the scheme for which sufficient notice shall be given with respect to the date, place, time etc. etc. That apart it is also stipulated that sufficient publicity shall be made by putting up posters, advertisements and notices apart from announcing through mike, local cable television net work and other print and visual media. The provisions of the scheme will apply to legal heirs of defaulters expired, or other persons suffering from chronic and terminal diseases. 16. However, clause (6) of the said scheme stipulates W.P.(C). No.9530 of 2016 & connected cases 14 that the financial stability circumstances and repayment capacity of each and every loanee is to be ascertained by the managing committee and arrive at agreements accordingly with the loanees or representatives. So also clause (8) makes a distinction with respect to loans below Rs.5,00,000/- and above Rs.5,00,000/-. Learned counsel for the 1[st] respondent bank has contended that on a reading of clause 8 (a) and (b), it is categoric and clear from the terminology used, the bank is given option and liberty to settle the loans ignoring Ext.P1 scheme. However, the contention advanced by the learned counsel for the petitioner is that, in view of Ext.P1 scheme the bank has no option but to constitute an adalat enabling the petitioner to approach the adalat and secure reliefs in terms of Ext.P1 scheme. In my considered opinion, even though bank is vested with powers to individually scrutinize the financial capacity of each and every loanee and fix the terms thereunder in accordance with the stipulations or options as per Ext.P1, an adalat is to be constituted, failing which the W.P.(C). No.9530 of 2016 & connected cases 15 purpose will be defeated. 17. The 1[st] respondent bank is not having a case that they have constituted any adalat with respect to the settlement of loans. Ext.P1 scheme is launched with the intention of providing reliefs to the defaulters suffering from any kind of financial difficulties. That is why the bank is given liberty to scrutinize each and every loan with respect to the financial capacity and stability of each and every defaulter. So also on a reading of the terms and stipulations contained in Ext.P1, it is categoric and clear that, the intention behind the scheme is not only to provide reliefs to the defaulters but also to recoup amount outstanding on defaulted loan accounts. True as per Exts.R1(c) and R1(d), OTS scheme launched by the bank and approved by the Registrar is in force. Therefore, in order to ascertain whether the defaulters are suffering from any financial difficulties as provided under clause (6) of Ext.P1, bank was duty bound to constitute an Adalat and take a decision accordingly. W.P.(C). No.9530 of 2016 & connected cases 16 18. Therefore, taking into account the objective of the State Government, in terms of Ext.P1, and since the scheme provides an opportunity of deliberation to the defaulters, in the adalat, the communication issued by the bank ignoring the said condition is absolutely in violation of, the principles of natural justice. In such circumstances, Exts.P5 and P5(a) unilateral communications issued by the bank directing the petitioners in W.P.(C) Nos.9531/2016 and 9533/2016 to pay the amounts stated thereunder, are illegal and arbitrary, and therefore, they are quashed. The other writ petitions are filed seeking direction to constitute adalat in terms of Ext.P1. In the light of the discussions made above, petitioners in the said petitions are also entitled to succeed. The claim of the bank with respect to the liberty in regard to the optional freedom of the bank with respect to the stipulations of the scheme is left open. 19. Writ petitions are allowed to the above extent. Consequently 1[st] respondent bank is directed to constitute an W.P.(C). No.9530 of 2016 & connected cases 17 adalat and then consider respective applications of the petitioners, after issuing registered notices to the petitioners fixing date, time and place and take appropriate decisions in accordance with law, within a period of two months from the date of receipt of a copy of this judgment. Till such time, coercive action, if any, initiated by the bank shall be kept in abeyance. Needless to say, amounts paid by the petitioners as per the interims orders in the writ petitions shall be taken into account while quantifying the balance. Sd/- **SHAJI P. CHALY JUDGE** smv 30.07.2016