The Karassery Service Co-Operative Bank Ltd. v. State of Kerala & Others

``` IN THE HIGH COURT OF KERALA AT ERNAKULAM ``` ``` PRESENT ``` ``` THE HONOURABLE MR. JUSTICE AMIT RAWAL ``` ``` & ``` ``` THE HONOURABLE MR. JUSTICE EASWARAN S. ``` ``` WEDNESDAY, THE 22[ND] DAY OF MAY 2024 / 1ST JYAISHTA, 1946 ``` ``` WA NO. 1195 OF 2020 ``` ``` AGAINST THE ORDER/JUDGMENT DATED 29.07.2020 IN WP(C) NO.38305 OF 2016 OF HIGH COURT OF KERALA ``` ## _`APPELLANT/PETITIONER:`_ ``` THE KARASSERY SERVICE CO-OPERATIVE BANK LTD. NO.D 2628, KARASSERY P.O., KOZHIKODE - 673 602, REPRESENTED BY ITS GENERAL MANAGER. ``` ``` BY ADVS. AJITH KRISHNAN LEO LUKOSE ``` ## _`RESPONDENTS/RESPONDENT:`_ ``` 1STATE OF KERALA REPRESENTED BY SECRETARY, DEPARTMENT OF CO-OPERATIVE SOCIETIES, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001. ``` - _`2 THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM - 695 001.`_ - _`3 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, KOZHIKODE-673602.`_ - _`4 THE MUKKOM SERVICE CO-OPERATIVE BANK LTD NO.F.1241, MUKKOM, KOZHIKODE-673602, REPRESENTED BY ITS SECRETARY.`_ - _`5 OMASSERY SERVICE CO-OPERATIVE BANK LTD. NO.D.1957, OMASSERY, KOZHIKODE-673582, REPRESENTED BY ITS SECRETARY.`_ - _`6 THE KODUVALLY SERVICE CO-OPERATIVE BANK LTD NO.F.1240, KODUVALLY, KOZHIKODE-673572, REPRESENTED BY ITS SECRETARY.`_ ``` WA NO. 1195 OF 2020 ``` ``` 2 ``` - _`7 THE PUTHUPPADI SERVICE CO-OPERATIVE BANK LTD. NO.F.1830, PUTHUPPADI, KOZHIKODE-673586, REPRESENTED BY ITS SECRETARY.`_ - _`8 THE NARIKKUNI SERVICE CO-OPERATIVE BANK LTD. NO.L1143,`_ - _`NARIKKUNI, KOZHIKODE-673585, REPRESENTED BY ITS SECRETARY.`_ - _`9 PUTHUPPADI SERVICE CO-OPERATIVE BANK LTD.NO.F.1830, ENGAPUZHA, PUTHUPPADI P.O., KOZHIKODE-673586, REPRESENTED BY ITS PRESIDENT.`_ - _`10 MAVOOR SERVICE CO-OPERATIVE BANK LTD. NO.F.1247, MAVOOR P.O., KOZHIKODE DISTRICT-673661, REPRESENTED BY ITS SECRETARY, P.M.LEELA.`_ - _`11 CHATHAMANGALAM SERVICE CO-OPERATIVE BANK LTD. NO.F.1839, CHATHAMANGALAM P.O., KOZHIKODE DISTRICT, REPRESENTED BY ITS SECRETARY, VINODKUMAR V.`_ - _`12 CHERUKULATHUR SERVICE CO-OPERATIVE BANK LTD. NO.F.775, CHERUKULATHOOR P.O., KOZHIKODE DISTRICT-673601, REPRESENTED BY ITS SECRETARY, E.VISWANATHAN.`_ - _`13 KUNNAMANGALAM SERVICE CO-OPERATIVE RURAL BANK LTD. NO.F.1246, KUNNAMANGALAM P.O., KOZHIKODE DISTRICT-673571, REPRESENTED BY ITS SECRETARY, P.SUDHAKARAN.`_ - _`14 PERUVAL SERVICE CO-OPERATIVE BANK LTD. NO.L1.26, PERUVAYAL, KOZHIKODE DISTRICT-673024, REPRESENTED BY ITS SECRETARY, E.P.BEENA.`_ - _`15 CHELANNUR SERVICE CO-OPERATIVE BANK LTD. NO.S.1242, (SUPER GRADE), CHELANNOOR P.O., KOZHIKODE DISTRICT-673616, REPRESENTED BY ITS SECRETARY, MURALEEDHARAN.`_ - _`16 KAKKODI SERVICE CO-OPERATIVE BANK LTD. NO.D.2725, KAKKODI P.O., KOZHIKODE DISTRICT-673611, REPRESENTED BY ITS SECRETARY, REEJIL KUMAR.`_ ``` WA NO. 1195 OF 2020 ``` ``` 3 ``` ``` 17IRINGALLUR PALAZHY SERVICE CO-OPERATIVE BANK LTD. NO.F.1171, GURUVAYOORAPPAN COLLEGE P.O., KOZHIKODE DISTRICT-673014, REPRESENTED BY ITS SECRETARY, SATHYAPAL K.V. ``` ``` BY ADVS. SRI.P.P.JACOB SRI.B.S.SWATHI KUMAR SRI.ABILASH (B/O) SMT.ANITHA RAVINDRAN SRI.HARISANKAR N UNNI ``` ``` SRI.T.K.VIPINDAS – SR. GP ``` ``` THIS WRIT APPEAL HAVING COME BEEN FINALLY HEARD ON 08.04.2024, THE COURT ON 22.05.2024 DELIVERED THE FOLLOWING: ``` ``` WA NO. 1195 OF 2020 ``` ``` 4 ``` ## **JUDGMENT** ## **Amit Rawal, J.** 1. The present intra court appeal is directed against the judgment of Single Bench dated 29.07.2020 in W.P. (C)No.38305 of 2016 wherein the appellant/petitioner have not been found successful, by laying challenge to the constitutional validity of sub-section (2) of Section 74B of the Kerala Co-operative Societies Act. Section 74B of the Act reads as under: “ **74B.Opening of Branches.** —(1) The State Co-operative Bank, The State Co-operative Agricultural and Rural Development Bank and District Co-operative Banks may open branches in the area of operation of their member credit societies if such member credit societies are weak and not functioning enough to provide service to the members or to the public.” 2. The aforementioned sub-section was introduced by an amendment with effect from 14.02.2013 whereas other provisions of the Act ie., Section 101 of the Kerala ``` WA NO. 1195 OF 2020 ``` ``` 5 ``` Co-operative Societies Act permits Kerala Co-operative Society to run branches in the entire area. According to the contention of the appellant/petitioner, it has an overlapping effect as there is no negative provision provided under Section 74B; thus cannot be read mandatory but directory in nature, therefore, non-compliance could not render the action to be invalid. 3. Appellant-society is a Primary Agricultural Society formed in the year 1994. According to the averments, it is one of the most outstanding banks in the co-operative sector in Kerala as the bank operates 24 hours a day, 365 days in a year and also one of the first banks in the cooperative sector to provide Automated Teller Machines (ATMs). As per order Ext.P1, Government granted permission to have the area of operation in a particular area but, thereafter, limited to Kozhikode Corporation. The affected party challenged the same but the said assailment was not accepted by the Single Bench, Division Bench as ``` WA NO. 1195 OF 2020 ``` ``` 6 ``` well by the Supreme Court. This Court had given a passing reference requiring the societies like appellant/petitioner to obtain consent under Section 74B to submit an application without fail. In that background application was submitted which was rejected and an independent order has been passed against which separate writ petitions have been filed and pending adjudication. 4. The constitutional validity of Section 74B was challenged on the following grounds: - i. Section 74B (2) of KCS Act violates Article 19(1) (c) and Article 243-ZI of the Constitution of India and is therefore unconstitutional. - ii. Section 74B (2) of KCS Act grants unbridled powers to the Registrar is, therefore, arbitrary and thus violates Article 14 of the Constitution of India. - iii. Section 74B (2) of KCS Act can be read only as a directory provision and hence absence of compliance does not render the act bad. This is evident from the fact that no ``` WA NO. 1195 OF 2020 ``` ``` 7 ``` prohibitory or negative words are used in Section 74 B(2) of KCS Act. No penal consequences are also provided. (Mere intimation is required as Section 7 (1) (c) exemption has already been granted to the Appellant) iv. The fundamental rights and directive principles are supplementary and complementary to each other. The provisions of Part III (in this case Art. 19 (1) (c) and Article 14) should be interpreted having regard to the Preamble and the Directive Principles of State Policy (in this case Art. 43B). v.Right to form association becomes meaningful only if business is permitted. If by permission u/s 7 (1) (c) of KCS Act business is permitted then a restriction of getting a further permission becomes a prohibition and is unreasonable. vi. As per Rule 147 A and Rule 148 of the High Court Rules, 1971 r/w Order I Rule 10 C.P.C. more than one person may join in Writ Petition as Petitioners. ``` WA NO. 1195 OF 2020 ``` ``` 8 ``` 5. The aforementioned action was opposed by the State Government on the ground that the Government has the legislative competence to enact the Act as it does not affect Article 14 of the Constitution of India or various provisions of the directive principles and permission under Section 74B(2) would be read as mandatory. There is no violation of Article 14 of the Constitution of India. On appreciation of the rival contentions, learned Single Bench dismissed the writ petition by holding that there is no violation of any of the provisions of the Constitution of India. 6. Learned Senior Counsel appearing on behalf of the appellant submitted that learned Single Bench has interpreted the provisions of Section 74B(2) of Kerala Cooperative Societies Act and Rule 178A of Kerala Cooperative Societies Rules without referring to the Cooperative principles of autonomy and independence stipulated in Section 2(eccc) r/w schedule II item No.4 of ``` WA NO. 1195 OF 2020 ``` ``` 9 ``` the KCS Act. By virtue of 97[th] constitutional amendment, right to form a co-operative society has been raised to the level of fundamental right guaranteed in the Constitution of India. Therefore, the powers exercised by the Registrar of Co-operative Societies and others under the Act are only directory in nature. Once the society has been granted permission to have the area of operation opening of branch could not have been truncated or restricted by seeking consent of the Registrar. It is only in view of the observations recorded in the judgment whereby the permission granted under Section 101 was assailed, application was submitted. 7. Appellant-society being a Primary Agricultural Society is covered under Rule 178A of the Rule for opening new branches/offices. Learned Single Bench failed to note that the issue involved in the matter before the Division Bench was only with regard to the scope of section 101. 8. The provisions of Section 74B(2) are only ``` WA NO. 1195 OF 2020 ``` ``` 10 ``` directory in nature and therefore, actions of compliance would not render the Act as invalid. In view of the observation an application was submitted for opening new branches which was rejected and the order is under challenge before the Single Bench. Two branches in Palazhy and Poovattuparamba are being run under the interim order. 9. On the other hand, learned State counsel opposed the aforementioned prayer and submitted that there is no illegality and perversity in the judgment of Single Bench. Appellant/petitioner would have the independent right to assail the order passed on their applications rejecting the consent to operate in view of Ex.P1 order passed under Section 101 of the Act. The matter is subjudice. Aggrieved party cannot be permitted to challenge the vires of the Act when there is no illegality or unjustifiability or violation of Article 19 of the Constitution of India. The Court have to be circumspect in ``` WA NO. 1195 OF 2020 ``` ``` 11 ``` interfering whenever the constitutional validity or the legislative competence of the State is under challenge. 10. We have heard the learned counsel for the parties and appraised the paper book. 11. In **Kadungallor Service Co-operative Bank** v. **State of Kerala** [2016 (1) KLT 67], it has been laid down that in terms of sub-section (2) of Section 74B of the Kerala Co-operative Societies Act, it is mandatory for any co-operative bank to obtain prior permission from the Registrar to open either a branch or extension. One of the issues raised by the court was whether the bank was entitled to open its customer service centre without permission from the Registrar in terms of sub-section (2) Section 74B of the Act or not. The learned Single Bench relying upon the aforementioned judgment negated the plea of petitioner and held that the said provisions cannot be said to be directory as the very object of the provisions would be defeated. Appellant/petitioner has not been able ``` WA NO. 1195 OF 2020 ``` ``` 12 ``` to make out a single fraction of any argument to bring the case within the doctrine akin to lack of legislate competence (“while enacting sub-section (2) of Section 74B of the Act”). In fact, the said provisions had been incorporated and brought into force with a view to curtail the unabated opening of branches without the prior permission of Registrar. There are many cases where the permission under Section 101 may not have been granted. Each and every case has to be examined on the touchstone of the merits of the application but the procedure as attempted to be bypassed by submitting an application, in our considered view, does not merit acceptance. For ascertaining the true intention of the legislature the determining factor is that it must ultimately depend on the context, very nature and design of the statue and consequences to follow from construing it one way or the other. Impact of other provisions are the ingredients required to be seen as and when any constitutional validity ``` WA NO. 1195 OF 2020 ``` ``` 13 ``` is assailed. No doubt, in a case where the legislative action has been found to be wanting, the court has to interfere. The learned Single has rendered in 141 pages judgment, each and every point has been dealt in extensive. We do not find any illegality and perversity in the judgment. No ground for interference is made out. Appeal is dismissed, leaving open the parties to assail the order of the Registrar rejecting the sanction to operate the branches in the pending writ petition, in accordance with law. Sd/- **AMIT RAWAL JUDGE** Sd/- **EASWARAN S. JUDGE** nak