Allowed

Kerala Primary Co-Operative Societies v. Wyanad District Co-Operative Bank

Kerala HC10 Aug 2016WP(C)/11493/2010

Case brief

AI extract

What is this about?

The High Court quashed a demand notice for interest levied by a District Cooperative Bank on loan amounts eligible for waiver under the 2008 Agricultural Debt Waiver Scheme, holding that lending institutions are barred from charging such interest to primary banks.

What did the court decide?

Quashing of the demand notice dated 6.2.2010 issued by the 1st respondent demanding interest on eligible written-off amounts.

Kerala Primary Co-Operative Societies Vs Wyanad… — Cooperative Societies | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

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WEDNESDAY, THE 10TH DAY OF AUGUST 2016/19TH SRAVANA, 1938 WP(C).No. 11493 of 2010 (J) ----------------------------

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PETITIONER(S):

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1. KERALA PRIMARY CO-OPERATIVE SOCIETIES ASSOCIATION, WAYANAD DISTRICT COMMITTEE, REPRESENTED BY SECRETARY, MANGALASSERY MADHAVAN P.O.THARUVANAM P.O.,WAYANAD DISTRICT.

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2. THE SECRETARY, THARIYODE SERVICE CO-OPERATIVE BANK, LTD.NO.F 967, KAVUMANNAM,, WAYANAD DISTRICT. BY ADV. SRI.P.N.MOHANAN

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RESPONDENT(S):

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1. WAYANAD DISTRICT CO-OPERATIVE BANK, REPRESENTED BY GENERAL MANAGER, KALPATTA NORTH, WAYANAD DISTRICT.

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2. REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM.

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*** ADDITIONAL R3 TO R6 IMPLEADED**

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3. UNION OF INDIA, REPRESENTED BY THE SECRETARY, FINANCE DEPARTMENT, CENTRAL SECRETARIAT, NEW DELHI.

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4. STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, CO-OPERATIVE DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695 001.

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5. NATIONAL BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT (NABARD), PONNIAM ROAD, P.B.NO.5613, STATUE, THIRUVANANTHAPURAM - 695 039, REPRESENTED BY ITS GENERAL MANAGER.

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6. THE MANAGING DIRECTOR, KERALA STATE CO-OPERATIVE BANK LTD., HEAD OFFICE, PALAYAM, THIRUVANANTHAPURAM - 695 001.

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*** ARE IMPLEADED AS PER ORDER DTD.15.3.2016 IN IA.3697/16 R1 BY ADV. SRI.MILLU DANDAPANI R2 & R4 BY GOVERNMENT PLEADER SRI.G.GOPAKUMAR R5 BY ADV. SRI.K.P.SUJESH KUMAR**

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 10-08-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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msv/

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WP(C).No. 11493 of 2010 (J)

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APPENDIX

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PETITIONER(S)' EXHIBITS: ------------------------

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EXT.P1: TRUE COPY OF THE SCHEME.

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EXT.P2: TRUE COPY OF THE LETTER DTD.28.5.2008 OF THE GOVERNMENT OF INDIA. EXT.P3: TRUE COPY OF THE CIRCULAR OF THE REGISTRAR. EXT.P4: TRUE COPY OF THE DEMAND NOTICE. EXT.P5: TRUE COPY OF THE REPRESENTATION FILED BEFORE THE 1ST RESPONDENT. RESPONDENT(S)' EXHIBITS: ------------------------

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EXT.R1(a): TRUE COPY OF THE AGRICULTURAL DEBT WAIVER AND DEBT RELIEF SCHEME, 2008. EXT.R1(b): TRUE COPY OF THE CIRCULAR NO.72/2008 DTD.10.11.2008. EXT.R1(c): TRUE COPY OF THE MINUTES DTD.30.10.2008 OF THE CENTRAL BANK CONFERENCE. EXT.R1(d): TRUE COPY OF THE RELEVANT PAGES OF THE MINUTES OF THE CENTRAL BANK CONFERENCE DTD.29.9.2009.

//TRUE COPY//

P.S.TO JUDGE

Msv/

SHAJI P. CHALY, J.

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W.P.(C). No.11493 of 2010

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Dated this the 10^th day of August, 2016

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JUDGMENT

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This writ petition is filed by the petitioners, an

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association of Kerala Primary Co-operative Societies in Wyanad and the Secretary of one of the Primary Co-operative Societies challenging Ext.P4 demand made by the 1^st respondent and also to quash the same to the extent it demands interest of eligible amount found on 29.2.2008 under the Agriculture and Debt Waiver Scheme, 2008 (hereinafter referred as “Debt Waiver Scheme”) till 8.2.2010 when last installment was received from NABARD and to declare that the 1^st respondent cannot demand interest on the eligible amount found out on 28.2.2008 for Debt Waiver in terms of Exts.P1, P2 and P3.

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Material facts for the disposal of the writ petition are thus; 1^st petitioner is an association of 26 Primary Cooperative Societies including the 2^nd petitioner. They are

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W.P.(C). No. 11493 of 2010 2

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involved in the business of lending agricultural and other loans to members taking re-finance or advances from the the 1^st respondent as these primary banks had no fund of their own for the lending purpose. The 1^st respondent is a Central Bank constituted for the purpose of advancing money to primary banks in addition to other business and the State Cooperative Bank is the apex bank under the three tyre system.

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Matters being so, Central Government introduced an Agricultural Debt Waiver Scheme 2008, evident from Ext.P1. According to such scheme, amount disbursed up to 31/3/2007 and overdue as on 31.12.2007 and remaining unpaid till 29.2.2008 is the 'amount eligible' for Debt Waiver. According to paragraph 8 of the Scheme, the lending institutions shall not charge any interest on the 'eligible amount' for any period after 29.2.2008. The said aspect was clarified by the Government of India as per its communication dated 28.5.2008, evident from Ext.P2. The amount eligible for Debt Waiver or Debt Relief as on 29.2.2008 was found out finally in a joint inspection conducted by the Joint Registrar of the Co-operative Societies and the 1^st

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W.P.(C). No. 11493 of 2010

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respondent. There is a monitoring committee for the same in the District level and the District Co-operative bank is the nodal agency of the Wyanad District. The amount found eligible for Debt Waiver is advanced from the 1^st respondent bank. Accordingly, the Registrar of Co-operative Societies issued Ext.P3 Circular dated 10.11.2008 stating that, such amount advanced to Primary Co-operative banks for providing agricultural loans, which is found eligible for Debt Waiver, need not collect interest from 29.2.2008. The eligible amount of claim being disbursed by the NABARD through the District Cooperative Banks is not giving that amount to any primary Cooperative banks and it is being credited in the loan account of each primary bank to discharge the liability. As and when the primary banks are taking advance from the 1^st respondent bank, the interest is being calculated annually on 31^st March of the year.

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Thus according to the petitioners, NABARD paid entire eligible amount to all primary Co-operative banks from the 1^st respondent. The 1^st respondent in turn appropriated that

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W.P.(C). No. 11493 of 2010

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amount in the loan account of the concerned primary Cooperative banks to discharge the liability. Therefore, according to the petitioners, 1^st respondent has received an amount of Rs.58,11,39,423/-. Now as per Ext.P4, 1^st respondent bank has issued a demand notice for an amount of Rs.21,54,863/(mistakenly shown in paragraph 14 of the writ petition as Rs.7,57,012/-) purportedly towards the interest due towards the aforesaid amounts. On receipt of Ext.P4, 1^st petitioner filed a representation before the 1^st respondent to refrain from initiating any steps to recover the amounts that sought for in Ext.P4. However, the 1^st respondent did not take any action pursuant to Ext.P5 representation and it is in this background this writ petition is filed by the petitioners.

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First respondent bank has filed a counter affidavit refuting the claims and demands made by the petitioners. That apart it is contended that petitioners had represented before the 2^nd respondent that the interest on the loans after 29.2.2008 may not be realized from the primary Co-operative Societies taken from the District Co-operative Bank. According to the 1^st

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W.P.(C). No. 11493 of 2010

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respondent, on account of the direction from the 2^nd respondent, 1^st respondent is losing a sum of Rs.1.65 Crores towards interest against the written off amount of Rs.58.15 Crores for the period from 29.2.2008 to 31.10.2008. That apart it is also contended that, as per the guidelines issued under the Scheme 2008, interest after the period 29.2.2008 on the written off amount is to be realised from the financing institutions like NABARD, the State Co-operative Bank, the District Co-operative Bank and the Primary Co-operative Societies. It is also urged, contrary to the above, the State Co-operative Bank had debited a sum of Rs.124.37 lakhs in the account of the District Co-operative Bank towards the interest for the period from 1.3.2008 to 31.10.2008.

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That apart reliance is made on clause Nos.13(1) and 13 (2) of Ext.P1 Scheme 2008. According to the 1^st respondent, the scheme is also silent as to who is to bear the interest for the period after 29.2.2008, for which the Government of India must be made a party to the writ petition. The action initiated by the Central Government with respect to Circular No.72/2008 are disputed by the 1^st respondent. It is also stated that, as per

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W.P.(C). No. 11493 of 2010

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Ext.R1(c) minutes drawn in the presence of Minister for Cooperation, it is decided to recoup the loss caused to District Cooperative Banks towards the interest written off from the Government of India and the State Co-operative bank had already written to the NABARD for the purpose.

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Heard learned counsel for the petitioners, learned Government Pleader, learned counsel appearing for the 1^st respondent bank and perused the documents and pleadings put forth by the respective parties.

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The contention advanced by the learned counsel for petitioner is that, 1^st respondent bank is not entitled to realise any interest from the primary Co-operative societies as provided under Clause 8.1 of the Scheme. Clause 8.1 of the Scheme read thus:

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“ 8. Interest and other charges

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8.1 The lending institutions shall not charge any interest on the eligible amount for any period after February 29, 2008. However in the case of an 'other farmer' who defaults in paying his share of the eligible amount on or before June 30, 2009 and becomes ineligible for OTS relief, the bank

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W.P.(C). No. 11493 of 2010

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may charge interest for the period after June 30, 2009.”

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Therefore, on a reading of Ext.P1, with specific

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reference to Clause 8.1, it is categoric and clear that, 1^st respondent bank is not entitled to claim any interest with respect to the written off amounts from the Primary Cooperative Societies. Ext.R1(d) produced by the 1^st respondent is a testimony, realsing the terms of clause 8.1 and that is the

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reason why a resolution was drawn in the presence of the Minister for Co-operation and decided to forward the request to the NABARD in order to compensate the District Cooperative Banks with respect to the loss suffered by it consequent to the waiver of interest as per Ext.P1 Scheme. Therefore, now the question is whether Ext.P4 issued by the 1^st respondent bank demanding interest from the 2^nd petitioner can be sustained at all ? As I have already discussed, clause 8.1 is a clear indication that the 1^st respondent cannot realise any interest for any eligible amount for the period after 29.02.2008 apart from other farmers,

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W.P.(C). No. 11493 of 2010

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which is described herein as 'eligible amount' on or before 30.06.2009 and becomes ineligible for OTS relief. The said decision was clarified as per Ext.P2 communication of the Ministry of Finance, Government of India dated 28.05.2008, wherein, as per Clause ix(a), the issue was considered which reads thus:

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“Lending institutions shall neither claim from the Central Government, nor recover from the farmer, interest in excess of the principal amount, unapplied interest, penal interest, legal charges, inspection charges and miscellaneous charges, etc. All such interest/charges will be borne by the lending institutions”.

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On a reading of Clause ix(a) it is categoric and clear

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that, the interest/charges will be borne by the lending institutions. Pursuant to Ext.P2, Registrar of Co-operative Societies has issued Ext.P3 dated 10.11.2008, by which, the District Co-operative Banks were directed to make necessary arrangements with respect to the interest consequent on the directives contained under Ext.P2 communication issued by

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W.P.(C). No. 11493 of 2010

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the Government of India.

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Taking into account the factual circumstances narrated above and the relevant clauses under Ext.P1 Scheme, I am of the considered opinion that Ext.P4 demand raised by the 1^st respondent bank against the 2^nd petitioner dated 6.2.2010 cannot be sustained. Sequel to the above discussion is that, petitioners are entitled to succeed in this writ petition and therefore, I quash Ext.P4 demand issued by the 1^st respondent dated 6.2.2010 against the 2^nd petitioner.

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Writ petition is allowed accordingly. However, I make it clear that quashing of Ext.P4 will not stand in the way of 1^st respondent seeking appropriate claims against NABARD, Union of India or the State Government in terms of Ext.P1 Scheme.

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Sd/-

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smv 16.08.2016

Kerala Primary Co-Operative Societies v. Wyanad District Co-Operative Bank

Case brief

What is this about?

What did the court decide?

Kerala Primary Co-Operative Societies v. Wyanad District Co-Operative Bank

Case brief

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What did the court decide?

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