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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ANANT RAMANATH HEGDE, J.
The Accountant General's Office Employees Co-operative Bank Ltd. - Petitioner
Versus
Union of India, Represented by Additional Secretary of Ministry of Finance, Department of Economic Affairs & Ors. - Respondents
Writ Petition No. 4273 of 2020 (CS-RES)
Decided On : 19-03-2024
Co-operative Bank - Recovery of Dues - Karnataka Co-operative Societies Act, 1959, Section 34 - The judgment discusses the impugned clause No.v in Annexure-E, which prohibited the salary drawing and disbursing officers from deducting the amount due to the co-operative Bank from the salary of the employee. The court analyzed Section 34 of the Act of 1959, which provides for an agreement between the borrower and the Co-operative Bank, enabling the employer to deduct the agreed amount towards repayment of the debt due to the Co-operative Society. The court held that the impugned clause No.v is per se illegal as it runs contrary to Section 34 of the Act of 1959, and the employer cannot issue a circular that has the effect of rendering Section 34 otiose for a class of a Co-operative Society. The court quashed the impugned clause and the consequential orders.
Fact of the Case:
The petitioner, a Co-operative Bank, challenged the clause in a circular that prohibited the deduction of dues from the salary of the employees, affecting the bank's ability to recover debts from its members. The respondents argued that the petitioner had no locus to question the policy decision and that Section 34 of the Act of 1959 does not apply to them.
Finding of the Court:
The court found that the impugned clause No.v was illegal as it contravened Section 34 of the Act of 1959, and the employer cannot issue a circular that renders Section 34 otiose for a class of a Co-operative Society. The court quashed the impugned clause and the consequential orders.
Issues: The issues revolved around the legality of the impugned clause No.v in the circular and the applicability of Section 34 of the Act of 1959 to the petitioner and the respondents.
Ratio Decidendi: The court held that the impugned clause No.v was illegal as it contravened Section 34 of the Act of 1959, and the employer cannot issue a circular that renders Section 34 otiose for a class of a Co-operative Society.
Final Decision: The court quashed the impugned clause No.v in the circular and the consequential orders.
ORDER :
1. The petitioner is a Co-operative Bank established by the employees of the Accountant General's Office and the Bank is registered under the Karnataka Co-operative Societies Act, 1959 (for short 'the Act of 1959').
2. The petitioner is assailing clause No.v of Annexure E, the Circular dated 18.10.2019 issued by respondent No.3-the Controller and Auditor General of India and the order dated 29.01.2020 marked at Annexure-F, order dated 30.01.2020 marked at Annexure-G, order dated 06.02.2020 marked at Annexure-H and order dated 06.02.2020 marked at Annexure-J which have been issued pursuant to impugned clause No.v referred to above.
3. The impugned clause No.v in Annexure-E reads as under :
(DDO- is the abbreviation for Drawing and Disbursing Officer)
4. The impugned clause No.v issued by the 3rd respondent, prohibited the salary drawing and disbursing officers from deducting the amount due to the co-operative Bank, from the salary of the employee even if the employee is consenting for such deduction.
5. The petitioner Bank claims that it is advancing the loan to its members. Some of the members, are the employees of the Accountant General's office and other members of the Bank are not necessarily employees of the Accountant General's Office.
6. Referring to Section 34 of the Act of 1959, Sri P.P.Hegde, the learned senior counsel appearing on behalf of the petitioner urged that Section 34 of the Act of 1959 provides for an agreement between the borrower and the Co-operative Bank, which enables the employer of the borrower to deduct the agreed amount towards repayment of the debt due to the Co-operative Society. It is stated that the said agreement is binding on the employer of the borrower under Section 34(2) of the Act of 1959, though the employer is not a party to the agreement.
7. It is urged that impugned clause No.v in Annexure-E extracted above, curtails the right of the petitioner Bank to enter into an agreement with the borrower to recover its debt, in the manner provided under Section 34(1) of the Act of 1959.
8. The further contention is that the exclusion in impugned clause No.v is made only in respect of two classes of Co-operative Societies, including the class to which the petitioner/Co-operative Bank belongs. It is further urged that the 3rd respondent has no power to curtail the statutory right.
9. Sri Prakash Shetty, the learned counsel for respondents No.3 to 12 defending the impugned clause No.v would contend that the petitioner has no locus to question the policy decision taken by respondent No.3 in excluding certain classes of Co-operatives Societies and Banks from the ambit of Section 34 of the Act of 1959.
10. It is further urged that Section 34 of the Act of 1959 does not apply to respondent No.3. Section 34 of the Act of 1959 applies only if a member of a Co-operative Society is an employee of the State Government or any other institution referred to in Section 2(e) of the Act of 1959.
11. It is also urged that respondent No.3 is not a party to any agreement between the Co-operative Bank and the borrower, as such; Section 34 of the Act of 1959 cannot be imposed on respondent No.3.
12. By way of reply, the learned Senior Counsel appearing for the petitioner would contend that Sub-Section (3) of Section 34 of the Act of 1959 excludes only the persons employed in Railways and Mines and Oil Fields from the purview of said provision, and by necessary implication, all other employees including employees of 3rd respondent are covered under the said Section 34.
13. It is his further submission that Section 2(e-3) of the Act of 1959, which defines the word 'employee' is only clarificatory in nature and serves a limited purpose of explaining that the employee of the State Government or any other Institution, employed in a Co-operative Society at a given poin
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