The court established that the interference with the loanee's freedom to choose their dealer was illegal and violated the fundamental rights guaranteed under Article 19(1)(g) of the Constitution. The circular was also found to be in violation of Article 14 of the Constitution.

Petitioner is a dealer in Pump sets, Sprayers and other agro machineries. 2nd respondent, Regional Agro Industrial Co-operative Limited (RAIDCO) is also dealing in agricultural machineries like the petitioner. First respondent, the Registrar of Cooperative Societies, by Ext.P2 Circular No.18/89 dated 30-2-1989, directed all Land Development Banks, District Co-operative Banks and Service Co-operative Banks in the State to patronise RAIDCO in preference to private dealers. By this circular, according to the petitioner, agriculturists who are granted agricultural loans as per the Scheme evolved by NABARD (National Bank for Agriculture and Rural Development) are required to purchase agro machineries manufactured and marketed through 2nd respondent. It is thus interfering with his fundamental rights to carry on business guaranteed under Article 19(1)(g) of the Constitution. It is also contended that first respondent by Ext.P2 illegally preferred 2nd respondent to private dealers in agro machineries outside co-operative sector and consequently violates the provisions contained in Article 14 of the Constitution. Yet another argument advanced by the learned counsel representing the petitioner is that the Registrar of Co-operative Societies has no power to issue a circular likeExt.P2 interfering with the rights of loanee of agricultural loans from co-operative banks and societies to purchase pump sets of their own choice.

2. On behalf of first respondent, Joint Registrar of Co-operative Societies (Marketing and Processing) has filed a very detailed counter affidavit. The contentions raised therein are to the following effect. Amount made available by the NABARD is distributed through primary co-operative societies at the grass root level. Funds provided by NABARD for agricultural purposes is in the nature of a re-financing process. Co-operative institutions raise funds and issue the same to primary cooperative societies or to primary Land Development Banks initially and then avail re-financing from NABARD. In accordance with the exigencies of situations, reimbursement by NABARD may be complete or partial. In that sense when farmers are financed by co-operative institutions, they have stake in the matter. Co-operative institutions are getting substantial State aid in the process of raising funds and in that sense the State has also stake in the matter. So, the State has to safeguard the interest of the funds made available to co-operative institutions. Over-all supervision of this process is left with co-operative department and therefore, first respondent is duty bound to oversee the process of distribution of Joans and its reimbursement by NABARD. It is in this context that first respondent has issued Ext.P2 circular. Ext.P2 was issued under authority from S.66 of the Co-operative Societies Act (hereinafter referred to as 'the Act') read with Rules 56 and 67 of the Rules framed thereunder. Even in the absence of Governmental involvement, co-operative societies are entitled to preferential treatment at the hands of the Government in accordance with the provisions contained in Chapters V and VI of the Act. First respondent is a functionary under the Kerala State Co-operative Agricultural Development Banks Act, 1984, as well. Under S.9 of that Act, loans are to be distributed on the basis of the principles of evaluation approved by the Registrar. The amount disbursed to the farmers by primary societies are advanced by the State Agricultural Development Bank or State Co-operative Bank. These banks are supervised by first respondent. First respondent has to safeguard the interest of the Government as well. Ext.P2 has not violated the petitioner's rights either under Article 14 or Article 19(1)(g) of the Constitution. Petitioner is not entitled to any of the relief's asked for.

3. 2nd respondent in its turn has filed another counter affidavit reiterating the stand taken by first respondent. 2nd respondent has tried to highlight th