An employer cannot refuse statutory wage deductions to repay loans to co-operative societies based on the creation of a welfare fund; existing obligations take precedence.

JUDGEMENT

1. This group of appeals raising common and connected issues were heard together, in view of the urgency of the matter, for final disposal. Appeals No.201 and 234 of 2005 are preferred from the common order dated 4.3.2005 below notice of motion in Civil Suits No.2954 and 3216 of 2004, whereas Appeal No.218 of 2005 is preferred from the order dated 9.4.2005 below notice of motion Ex.6/7 in Civil Suit No.2619 of 2004. All the appeals are filed by Ahmedabad Municipal Corporation ('AMC' for short) against the co-operative credit societies lending loans to the employees of AMC.

2. The grievance of the respondents, original plaintiffs, in the first mentioned two suits was against the communication dated 8.11.2004 of the appellant informing that deductions from wages in respect of the loans advanced by the plaintiffs would be stopped by the appellant with effect from 1.11.2004. The City Civil Court, by the impugned order, directed the appellant not to act upon that 3/33 order and communication from March, 2005 onwards and allowed the respondent-societies to deduct the installments from respective salary accounts of its member-workmen who had taken loan. In the third appeal, the suit is filed by the Presidents of the co-operative credit societies of the workmen as such and as tax payers of Ahmedabad, calling into question the setting up of a welfare fund by AMC to advance loans to its employees by its welfare cell.

Remarkably, no workman is a party to any of the proceedings and the tussle obviously is between the lending agencies who, in substance, claim not just parity but priority and precedence in the matter of recovering the loan amounts by direct deduction from the salary of the borrowing workmen. Pending hearing of the main suits, this Court is called upon to examine whether the impugned orders granting interim relief to the respondents required any interference.

3. It is the case of the appellant that the loans granted by the respondents to its employees carried interest at the rates upto 15% which are 4/33 much higher than the current rates of interest.

Therefore, a welfare fund came to be set up with the approval of the General Board of AMC. Then, the Deputy Municipal Commissioner (Finance) sought details of loans granted by the co-operative societies, like the respondents, and also called for applications from the workmen who would like to repay the loans of the credit society by taking loans on easier terms from the employees' welfare fund of AMC. Since the co-operative societies did not submit details of the loans advanced by them, the impugned notice/order/letter dated 8.11.2004 to stop direct deductions from the wages had to be issued. It was also contended on behalf of the appellant-AMC that some of its employees were in such critical position that after statutory deductions from the total salary, major part of the remaining salary would go in repayment of the installments of loans given by the co-operative societies, after which very small amounts, at times only Re.1/-, would be carried by the workman to his home. It is also contended that the employees' co-operative credit societies were 5/33 exploiting by charging interest at exorbitant rates and indulging in many irregularities including multiple loans by several societies which required the AMC to step in and save its employees from the debt-trap.

4. The respondent-societies having perceived the danger to their existence by the i