Employers are legally bound to remit amounts deducted from employees' salaries to cooperative societies within seven days, and any delay incurs interest obligations under the Kerala Co-operative Societies Act.

JUDGMENT

The Managing Director of Kerala State Road Transport Corporation (hereinafter referred to as K.S.R.T.C. for short) has filed this writ petition against the award passed by the Joint Registrar of Co-operative Societies (General), Ernakulam in ARC No.288 of 2003-Ext.P1 and the order passed by the Kerala Cooperative Tribunal, Thiruvananthapuram in Appeal No.56 of

2010-Ext.P2, affirming the award.

2. The 1st respondent, Kerala State Transport Employees Co-operative Society Ltd., filed ARC No.288 of 2003 under section 69 of the Kerala Co-operative Societies Act, 1969 , for a direction to the petitioner to pay interest at the rate of 18% per annum for the delay in payment of the amount due to the first respondent society, after recovering the same from the members of the co-operative society, who are employees of the petitioner towards the monthly instalments due to the society on account of the loan availed by them. Their case was as follows:

3. The first respondent society has been advancing loan to its members. The members are employees of K.S.R.T.C. The loan is disbursed after getting an undertaking from the members/employees that recovery from their salary will be effected in terms of the provisions contained in section 37 (1) of the Kerala Co-operative Societies Act. On the basis of this undertaking K.S.R.T.C used to recover the monthly instalments from the salary of its employees who availed loan, in terms of the requisition made by the 1st respondent society as well as the undertaking given by the employees. But the K.S.R.T.C after recovering the amount from the salary of the employees regularly, did not remit the same to the society. They retained the amount with themselves and the society suffered loss on account of the same. Thus a sum of ₹36,19,251/- was found as the amount not remitted in the account of the first respondent for the period from 22.4.1998 onwards. The non-remittance by the K.S.R.T.C resulted in non-payment of the retirement benefits of the employees, on account of the fact that the loan accounts were not closed. Several writ petitions were filed before this Court by the employees as well as the society in respect of the non-remittance of the amount by the K.S.R.T.C, after recovery of the same from the salary of the employees. In a batch of cases filed by the employees/co-operative society, this Court by its judgment dated 5.4.2002 in O.P.No.857 of 2002 and connected cases, held that the omission of K.S.R.T.C to pay the amount in time, recovered from the salary of the employees, in terms of section 37 of the Co-operative Societies Act is an offence under section 94 of the Act and the officer/employer, who fails to pay the society, the amount deducted by him within seven days will amount to criminal breach of trust and mis appropriation. This Court found that the society had advanced loan to its members on the basis of agreement executed under section 37 of the Act, in which the employer K.S.R.T.C agreed to deduct the monthly instalments due to the society from the salary of the concerned employees and to pay the same to the society. Accordingly, any amount thus deducted was liable to be made over to the society within a period of seven days. In the said case, this Court found that serious prejudice was caused to the society on account of the delay on the part of the K.S.R.T.C to pay the amount. That writ petition was disposed of directing the K.S.R.T.C to pay the amount within 20 equal monthly instalments. It was further ordered as follows.

"Societies have to pay penal interest to the District Co-operative Banks. If the petitioners have suffered any damages as a result of the omission of the respondents to pay the amount in time as provided under section 37 of the Act, they will be free to work out their remedies either before the civil court or before the Arbitrator under the Kerala Co-operative Societies Act”.

On the basis of the said judgment K.S.R.T.C remitted payment by November 2003. The respon