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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.71 OF 2012

STATE BANK OF INDIA & ANR. APPELLANT(S)

VERSUS

SACHIV AGRA VANIJIYIK BANK

KARAMCHARI (VETAN BHOGI) SAHKARI RIN

EVAM SAKH SAMITI LIMITED & ORS.

RESPONDENT(S)

O R D E R

1.

The 2nd respondent was an employee of the appellant Bank. He

availed a loan from the 1st respondent-Cooperative Society. He

entered into an agreement with the appellant Bank. It is the case

of the appellant Bank that in terms of the agreement, the appellant

Bank was obliged to deduct amounts due towards the loan taken by

the 2nd respondent from the salary. A Voluntary Retirement Scheme

(for short 'VRS') was introduced in the Bank. The 2nd respondent

sought to avail the benefit of the Scheme. The appellant Bank

accepted the application filed by the 2nd respondent for voluntary

retirement. Consequently, the appellant bank paid the entire

benefits payable under the Voluntary Retirement Scheme to the 2nd

respondent. The 1st respondent-Cooperative Society approached the

Registrar under Section 40(3) of the Uttar Pradesh Cooperative

Societies Act, 1965. The said Authority after notice to the

Digitally signed by

JAGDISH KUMAR

Date: 2022.08.04

17:16:28 IST

Reason:

Signature Not Verified

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appellant allowed the application filed by the 1st respondent-

Cooperative Society in the following terms.:-

"Therefore, the employer/State Bank of India,

S.S.I. Branch Industrial Estate Nunihai Agra is

liable to pay to the Society for knowingly not

deducting the outstanding due loan amount of the

Society from the retiral benefits of Shri Ashok

Kumar the member of Agra Commercial bank employee

(in pay) Cooperative loan and credit Society Ltd.

6/6/2, Shastrinagar Khandari Agra under sub section

3 of Section 40 of U.P. Cooperative Society Act,

1965. It is clear from the circulars of the employer

that the office authorized for the purpose of

deductions is the Branch Manager. Therefore, it is

in accordance with the rules to make recovery of the

said amount of Rs.2,04,065/- (Rupees Two Lakh Four

Thousand Sixty Five) from Shri Kanhaiya Lal Agarwal

Branch Manager, State Bank of India S.S.I. Branch

Industrial Estate Nunihai Agra."

2.

Aggrieved by the said order, the appellant Bank filed the writ

petition challenging the same before the High Court. The High Court

by the impugned order found, inter alia, as follows:-

"We have considered the submissions made by learned

counsel for the parties and have gone through the

orders passed by the Joint Registrar, Cooperative

Societies, Agra Region, Agra. The bank has admitted

that it was statutorily liable to deduct unpaid loan

from the salary of the employee. The bank had also

assured the repayment under the agreement. The

cooperative society did not take any collateral

security from the employee as repayment of the loan

was assured by the bank. The defence taken by the bank

that the management was not aware of the unpaid loan

proves the negligence of both the management as well

as the then Branch Manager of the bank. A surety is

not permitted to plead ignorance of the contract. The

amount of ex-gratia should not have been paid to Shri

Ashok Kumar, the employee and in any case, when the

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account was still operative, the then bank manager was

responsible to honour the cheque. We find that apart

from the agreement by which the payment of the loan

was assured by making deductions from the salary of

the employee, sub-section (3) of Section 40 of the

Cooperative Societies Act, 1965 is attracted and that

the bank did not establish sufficient cause to make

deductions in terms of sub-section (2) of Section 40

of the Act.

We, however, find that Shri Kanhaiya Lal Agrawal was

not posted in the branch at the relevant time and that

he had offered sufficient explan