COMPENDIUM OF CO-OPERATIVE LAW – 2008
(By R. Muralidharan, Deputy Registrar, Planning & Legal,
Co-operative Department, Puducherry)
The High Court of Kerala continues its onward march to contribute to the case law section on co-operative law in general and to co-operative law of Kerala in particular. As many as thirty nine decisions were reported in Kerala Law Times, more decisions would have been rendered by the Court, during 2008. What is more intriguing is in the interpretation and elucidation of law the High Court of Kerala continues to occupy its prime position. The decisions have far reaching impact and ramification. This article is a compendium of decisions of Kerala High Court co-operative law, reported in Kerala Law Times, during the year 2008, set out chapter-wise. Much of the decisions were on election and employees of co-operatives, twelve and fifteen respectively, to be specific. The connotation of Act and Rules denote the Kerala Co-operative Societies Act and Rules made thereunder.
On Membership
The law laid down in Thevan Ayyappan v. Kottapady East Service Co-operative Bank (2008 (3) KLT 42) is that a reading of Ss.16, 18 and 19 would show that membership depends upon the decision of a committee to admit a person as a member of the society. Such membership does not depend upon payments to the society in respect of membership. The use of words ‘applicant’ and ‘persons’ in S.16 contrasted with the use of the word ‘member’ in S.19 easily leads to this conclusion. R.20 prescribes the payments to acquire the rights of a member and S.19 inhibits exercise of rights of a member unless he has made such payments in respect of membership, as may be prescribed by the rules or the bye laws.
On Management
The question came up for consideration in Moideen v. Registrar of Co-operative Societies (2008 (2) KLT 184) is “what is the quorum for a meeting of a committee of a co-operative society in which Government has nominees ?” The only restriction on the nominated member is abstinence from participation in the discussion of any no-confidence motion and voting thereon and subject to such restriction, Government nominee are members of the committee. The quorum for a meeting of a committee in which S.31 applies, shall be such number of persons just above 50% of the total number of members, consisting of elected members in terms of S.28(1) and nominated members in terms of S.31(1). This is how the quorum rule contained in S.28(5) would apply to a meeting of an apex or a central society under the Act.
In terms of Explanation to S.33(1) “a tender of resignation” by a member of the committee shall have the effect of terminating his membership from the committee and hence provision in R.38(4) that resignation shall have effect only from date of its acceptance by committee is contrary to provisions of Act and their resignation had taken place the moment it was tendered by them to the President. The Court in Nataraja Gownder v. Registrar (2008 (2) KLT 335) held that R.38(4) to the extent it provides that resignation shall have effect only from date of its acceptance by committee is ultra vires of S.33(1) read with Explanation thereto and is void, as regards elected members. An elected member ceases to be in office by tendering his resignation to the President of the society.
What is the meaning of ‘month’ ‘six months’ and ‘consecutively’ appearing in S.33(1) came up for decision in Radhakrishnan v. Joint Registrar (2008 (2) KLT 385). The term “month” and “six months” in S.33(1) mean “month” or “six months” as per British calendar and “consecutively” is different from term “continuously”. Therefore, a regular period of a month understood as defined in General Clauses Act has to consecutively occur for six times to attain the status “consecutively for six months” enjoined by S.33(1). If a meeting is held in a month reckoned according to British calendar, meeting for next consecutive month can be held on any day in the next month and so calculating, if a meeting has been held In a particular month, vice of S.33 (1) would be attracted only on failure to hold a meeting on any of the days of the sixth consecutive month. Hence a meeting having been held on 7.4.2007, i.e. April, 2007, S.33(1) can be invoked only if no meeting was held till the end of October 2007, i.e. 31.10.2007.
As per bye laws of the second respondent society, board of directors shall consist of 14 members of whom 11 are elected members and two nominees of Rubber Board. Election notification was issued for electing 13 members including one member each from among members belonging to SC and ST communities and one woman representative. Same is challenged as contrary to bye laws. In Azeeskutty v. Returning Officer (2008 (4) KLT 165) it was held that dictate in S.28A overrules prescription in S.28(1A) regarding maximum number of members of committee. Hence in giving effect to reservation in terms of S.28A, in bench mark of 15 members preserved by R.28(1A) is exceeded, same will stand to be one within the permissible limits because the legislative intention and direction is to obtain representative of women and members of SC, ST and that goal has to be achieved notwithstanding anything else contained in the Act itself. No illegality was found with the provisions of the bye laws.
On Election
Question raised in Babu Andrews v. Thalassery Taluk Rubber & Agricultural Marketing Co-operative Society Ltd. (2008 (1) KLT 268) is whether returning officer appointed under R.35(3)(b) to conduct election is within authority to reschedule date publishing the final list of voters. Notification issued fixing the date of publication of final list of voters. Later returning officer, adjourned the date of publication of final list of voters to some other later date which is challenged. Court held that there is no legal impediment for returning officer, to publish final list of voters to any time, after considering of objections, if any, to draft list and it is within his power to adjourn date of publication of final list of eligible voters to any date later than the one stated in the notification declaring schedule of date in connection with election, but such publication shall be before 10 clear days of date fixed for poll.
The lis before the Division Bench in Subodhan v. State of Kerala (2008 (2) KLT 198) is when does an elected delegate of the primary society cease to be a member of a board of directors of an apex society on the basis of ‘default’ committed by the affiliated primary society is the question raised in the Writ Appeal. Court held that the moment a primary society is in default, the delegate from that society will cease to be a member of the apex society and that there is no requirement of issuing notice demanding payment of defaulting amount and allowing one month’s time. A provision similar to proviso to R. 44(2) is absent in R.46 and there is an automatic ceasure from membership of the committee for the delegate of that primary society. Reliance placed by the appellant on the decisions of this Court in Thommen Ittichenyanthu v. State of Kerala (1978 KLT 887), Rasheed v. State of Kerala (1988 (1) KLT 190) and Gangadharan v. Joint Registrar (1990 (2) KLT SN 13 (C.No.18) where in it was held that date of issuance of notice is an important criteria to decide disqualification would not apply to this case as these decisions relate to disqualification and membership of a committee under R.44.
The main challenge before the Division Bench in Philip v. State of Kerala (2008 (2) KLT 555) is to the exclusion of other types of co-operative societies other than primary agricultural credit societies and urban co-operative banks from voting rights or participating in the administration of District Co-operative Bank. Such exclusion of societies belonging to categories other than the two, was claimed to be arbitrary and discriminatory and violative of Art.14 relying on Alappuzha District Co-operative Bank v. State of Kerala (2003 (1) KLT 297). Held, there is a clear intelligible differentia between the societies retained as members of the DCB and those excluded. The view that the said classification has rational nexus with the orderly development of co-operative movement, which is the object of the Act cannot be said to irrational. The decision reported in 2003 (1) KLT 297 (supra) stands overruled.
The question in Ajeer v. Returning Officer (2008 (2) KLT 600) was whether administrators appointed under S.33 were within authority to allot additional shares to members, after declaration of election to the society since the bye laws provides that holding of not less than Rs.10,000 share capital in the society as a qualification for being elected to its board from among ordinary share holders. According to the petitioners, such allotment of shares would be contrary to R.26, if such transfer is made within sixty days prior to date of election. Additional shares were allotted before date fixed for filing nominations. Court held that acquisition of qualification of the immediate bench mark in the matter of holding share capital for being nominated can be satisfied at any time before submission of nomination paper and that prohibition in R.26 does not extent to transfer of shares among the members.
Returning officer handing over notification under R.35(3)(a) to President for dispatch and it was dispatched only on the date of nomination. When such an act was impugned in Thomas v. Thiruvananthapuram Jilla Unemployees’ Welfare Co-operative Society (2008 (2) KLT 743), Court held that it is not proper as R.35 does not include any authority for returning officer to authorize President or Secretary to dispatch the notifications which are issued by the returning officer.
Rr.27(2) & 44(1) - Dual membership is not a ground of disqualification from contesting in the election or to become a member of the committee and there is no provision which disqualifies a person on the ground of dual membership from being a candidate for election to the committee of one of those societies unless he is a member of the committee of another society of same type. This decision was reported in Ambatt Asokan v. Oochira Service Co-operative Bank Ltd (2008 (3) KLT 645).
The concept of the period of “at least 60 days” in R.35A(1) cannot be put in any straight formula. It has to be understood and applied in the context in which its application is called for, on the facts and in the circumstances of a given case, vide Abu v. State Co-operative Election Commission (2008 (3) KLT SN 56 (C.No.68). There is no specific power conferred on the State Co-operative Election Commission or any other authority on whose permission or orders would depend the date of conduct of the election. The State Co-operative Election Commission is duty bound to appoint an electoral officer to give effect to the decision of the committee fixing the date, time and place for the conduct of election to the new committee.
A member challenged the scheduling of election to that society on the ground that it violated R.35(3)(a)(iii) in Bhaskaran Pillai v. Nediyavila Milk Producers Co-operative Society Ltd. (2008 (4) KLT 271). It was contended that sufficient time for filing objections to draft voters list as contemplated in that rule and individual notice to him to do so were not granted. Cardinal questions before the Court were:
(i) Whether individual notice to members of a society inviting objections to draft voters list is necessary?
(ii) Whether period of submission of nominations under R.35(3)(a)(iii) can be taken as the period during which objections to draft voters list are to be filed?
(c) Whether “within three days of publication” occurring in R.35(3)(b) would take in ‘three clear days” as the time for filing objections to draft voters list?
(d) Interpretation of “not less than 15 days prior to” and “within three days of occurring in R.35(3)(b).
Court answered the three questions above in negative. Regarding the fourth question, it was declared that “not less than 15 days prior to” and “within three days of occurring in R.35(3)(b) do not have the same meaning as different words, phrases and expressions in the same sentence are not intended to convey the same meaning.
In cases of societies where there is no delimitation of area of operation into wards or regions on geographical basis, Col.1(f) in Form No.36 is superfluous and illusory and will be of no consequence because there is no particular region or ward which could be represented. Any failure to fill it will be of no consequence. This decision is reported in Francis Dominic v. State Co-operative Election Commission (2008 (4) KLT 701).
Nominee of a society will be disqualified for election to the society in which he is a delegate, if at the time of submission of his nomination his society is in default to the society in which he is a delegate under R.46(e). The G.O exempts all primary agricultural credit societies from the provisions of R.46(e) for a period of one year from the date of that notification is not discriminatory and is valid as held in Purushothaman Nair v. State of Kerala (2008 (4) KLT 879).
Petitioner challenges rejection of his nomination in Soman v. Electoral Officer (2008 (4) KLT 984). He did not make the declaration to be made by the candidate, though he states that he has made a declaration to be made by a candidate who is contesting to the seat reserved for SC/ST and contends that such declaration is sufficient and would be one in lieu of declaration of candidate as required by Form 36 issued in terms of R.35A (6)(a). Held, that declaration that he is qualified to contest for election is seat reserved for SC/ST candidate is insufficient to be read as a declaration that he has not incurred any disqualification from being a candidate. Principle of substantial compliance cannot be imported to sustain a nomination with no such declaration.
Petitioner’s nomination for election to the committee of the co-operative bank was rejected on the ground that he was in default to the bank as on the date of submission of nomination. Same is challenged in Rajasekharan Nair v. Returning Officer (2008 (4) KLT 994) on the ground that no notice was given to the petitioner calling upon him to pay any amount due or payable to the bank. Held, each of the clauses under sub-r.(2) is followed by a proviso and therefore it has to be held that the proviso at the foot of R.44(2)(c) applies only to that clause and cannot be imported into R.44(1)(c)(i) which prescribed ineligibility for being elected. Proviso at the foot of R.44(2)(c) is wholly irrelevant and inapplicable to the eligibility criteria fixed in R.44(1)(c)(i) for a member of a society to be eligible for being elected or appointed as a member of the committee of that society.
On Disputes
A dispute arose between the employee and the co-operative society on account of his dismissal from service. Bank raised a preliminary objection that dismissal is not a matter that would fall under S.69(1) and no question of reinstatement in service can be considered by Arbitrator. Order turning down the plea is challenged in Edava Service Co-operative Bank Ltd. v. Co-operative Arbitration Court (2008 (3) KLT 780). It was contended that specific inclusion of the words “touching their promotion and inter se seniority” in S.69(2)(d) include only dispute in connection with employment excluding appointment, dismissal etc. Held that inclusion of words “including their promotion and inter se seniority” as the last limb of S.69(2)(d) only clarifies that notwithstanding any vagueness that may be pointed out in that regard in S.69(1)(c), such disputes also fall within purview of that provision.
When there is a dispute regarding the credibility of documentary evidence tendered by one party, it being challenged as fabricated, the adjudicator has to decide whether the aid of an expert is required to reach at the conclusion which is just and in accordance with law. In deciding a dispute under S.69, the arbitrator appointed under S.70 has the power to entertain an application to bring in expert evidence, including by sending documents to obtain opinion of experts. Also, the evidentiary value of such opinion, if obtained, is also a matter to be evaluated by the arbitrator, who has to decide on the issue by himself, may be, with the aid of the expert opinion. While deciding so in Njanamuthan v. Thiruvananthapuram District Co-operative Bank Ltd. (2008 (3) KLT 1018), profitable reference was made to the judgments of the Court in Ebrahim Ismail Kunju v. Phasila Beevi (1991 (1) KLT 861), Thankam R. Pillai v. Arbitrator (1996 (1) KLT 225) and Paul v. Asst. Registrar (1998 (2) KLT 449).
On Appeal, Revision and Review
In Karumbi v. Thalayolaparambu Farmers Co-operative Bank (2008 (1) KLT SN 20 (C.No.24), it was held that under S.84, Secretary of Co-operative Tribunal cannot refuse to receive a revision petition on the ground that it is time barred. This is not a matter on which the Secretary of the Tribunal has to decide, because even if the case is to be dismissed as time barred, it is within the exclusive domain of the functions of the Tribunal. Hence, on production of copy of the judgment, the revision petition will be placed before the Tribunal for orders and the petitioner, through counsel, will be extended an opportunity of being heard before a final decision is taken in the matter by the Tribunal.
An arbitration award was challenged before Co-operative Tribunal. Tribunal set aside the award holding that it was not one touching the business of the society but granted 30 days time to plaintiff to approach Civil Court by filing a suit. Same is challenged in Lakshmanan v. Kanhirode Weavers Co-operative (P & S) Society Ltd. (2008 (2) KLT 234). Court held that the period of limitation for suits are prescribed in Limitation Act. Such time limit cannot be extended or curbed by Tribunal. It is not within the domain of the Tribunal to authorize the institution of a civil suit within any period.
Whether S.5 of the Limitation Act can be invoked for condoning delay in filing appeal under S.83(1) and absence of an order condoning delay will vitiate the proceedings came up for consideration in Calicut City Service Co-operative Bank Ltd. v. State of Kerala (2008 (3) KLT 1011). Held, there is no provision in S.83(1) to condone delay and Government not being a Court, S.5 of the Limitation Act does not apply. There has to be a formal order on the files condoning the delay, if it has power to do so.
On Employees of Co-operatives
Doubting the correctness of the decision in Public Service Commission v. Ramesan (2005 (4) KLT 466), the case was referred to Full Bench in Sathydevan v. Public Service Commission (2008 (1) KLT 289 (F.B.)). The petitioners who are employees of primary co-operative societies applied for the post of clerk/cashier in various district co-operative banks in the in-service quota. The qualification prescribed is graduation with Diploma in Co-operation. Contention is that the qualification is contrary to Rules and the only qualification required is S.S.L.C. with J.D.C. with three years experience for the posts.
S.80 authorizes Government, in consultation with the State Co-operative Union, to make rules regulating the qualification, either prospectiveiy or retrospectively and other conditions etc., but such rules can be framed only in consultation with the State Co-operative Union. Admittedly no such consultation was done. Apart from the above, power to make rule under S.80 is only with the Government and not with the Registrar or General Manager of Societies. Rules made under S.80 are subservient to those provided for in R.186. Registrar cannot make model rules or co-operative societies cannot make rules on advice of the Registrar which are inconsistent with the statutory rules. Registrar or district co-operative societies cannot pass rules against the provisions of the Act and Rules.
It is well settled law that a delegated power can be conferred by the delegate upon another. Applicable maxim is “Delegata potestas non potest delegari”, means a delegated power cannot be delegated. Therefore, model rule suggested by the Registrar and allegedly adopted by societies is not a valid rule made under S.80, which can be famed only by Government. Hence, considering R.186, the Full Bench is of the opinion that petitioners who had qualification of S.S.L.C, with J.D.C. and three years continuous experience are entitled to write the test under the 50% quota reserve for in-service candidates if they are otherwise eligible and rejection of their candidature for lack of qualification cannot be sustained. The Full Bench explained and distinguished the decision made in Ramesan’s (supra) case.
The Full Bench quoted with advantage the following decisions:
(a) In Valsala Devi v. Leela Bhai (2002 (3) KLT SN 18 (C.No.26), a Division Bench held that the qualification at the time of recruitment has to be considered.
(b) Rule made under S.80 is subservient to those provided for in R.186, as held in Ali v. State of Kerala (2006 (1) KLT 205).
(c) In Abdul Rasheed v. Kerala Public Service Commission (2002 (3) KLT 405) and Public Service Commission v. Abdul Rasheed (2007 (3) KLT 881), it was held that Public Service Commission has no power to go beyond qualification prescribed by the rule.
The creation of posts is a matter to be done in public interest, after job assessment, volume of work etc., and not to regularize the illegal appointments already made. If appointment is illegal, the same cannot be validated by the process of regularization or confirmation or creating posts. Ratification or regularization is possible only if one has acted within his authority, an illegal act cannot be ratified is the dictum of the Division Bench in Kerala State Wharehousing Corporation v. Devadasan (2008 (1) KLT SN 17 (C.No.21)).
As per G.O. (P) 44/1995 dated 14.3.1995, retiring pension shall be granted to an employee of a co-operative society who retired voluntarily after completing minimum of 20 years of qualifying service. Thereafter on 7.3.2001, earlier Government Order was amended to include a further condition that they should have attained the age of 50 years also. Amendment cannot apply to those who were granted voluntary retirement before 7.3.2001, as held in Krishna Kumar v. Kerala State Co-operative Employees’ Pension Board (2008 (2) KLT 230).
Petitioner was placed under suspension. The enquiry was not contemplated for a long time and hence seeks that suspension be revoked. The power to keep an employee under suspension in terms of R.198(6) has to be understood in such a manner that it stands controlled by the need and necessity that may be, on the facts, situation and circumstances of each case. Otherwise, the exercise of that power, merely by reference to the Rule, would erode justice as held in Leelamma v. Kerala State Co-operative Rubber Marketing Federation (2008 (2) KLT 608).
The Government exempted the Bank from the provisions of item (ii) of R.186(1) for the limited purpose of enabling the bank to appoint the second respondent as Junior Clerk subject to the condition that he shall successfully complete the J.D.C. course within two years from date of joining duty. However, he did not complete the J.D.C. course within the prescribed time. The Joint Registrar enlarged the time fixed to acquire the qualification. Same is challenged in Dilip v. Varapuzha Service Co-operative Bank (2008 (2) KLT 643). Court held that the power to grant exemption from rules is with the Government and power to enlarge the prescribed time can be exercised only by Government and not by Registrar.
R.188(A) stands with an explanation that for the purpose of that rule, “dependent” means “any member of the family of a deceased employee of the society; has no independent means of livelihood and who was dependent on the earnings of the deceased employee at the time of his/her death for his/her maintenance” and “family” means and includes the relative of the deceased employee in the order of priority indicated in that explanation. The daughter-in-law is not a relative going by the list of relatives included in terms of family going by that explanation is the decision reported in Aided Primary Teachers Co-operative Society Ltd. v Joint Registrar (2008 (3) KLT 755).
S.80(4) - Reservation for candidates belonging to SC/ST has to be on the basis of number of posts and not vacancies, vide Anandavally v. Alleppey District Co-operative Bank (2008 (3) KLT 1020).
Whether the benefit of reservation of 50% quota for employees of co-operative societies is confined to employees of primary agricultural credit societies and urban co-operative banks which are members of apex/central society and employees of nominal and associate banks are excluded. Held, nominal and associate members are also members for the purpose of the Act and Rules and notwithstanding Ordinance 62/07, benefit of reservation in terms of R.187 is available to employees of all member societies, including nominal and associate members. To reach the above decision in Vinod Kumar v. State of Kerala (2008 (4) KLT 49) the Court relied on a decision of the Division Bench in Surendran v. Kerala Public Service Commission (2002 (1) KLT 673).
Selection of junior clerks took place, rank list expired. Complaints arose that the selection overlooked communal reservation. It was contended that already there is 10% staff in the bank who belong to SC/ST community. Held in Beena Kumari v. Joint Registrar of Co-operative Societies (2008 (4) KLT 110), (i) Expiry of rank list is not a bar for a claim of reservation as appointments made violating reservation policy is illegal; (ii) Reservation policy has to be followed afresh for each recruitment; (iii) Availability of staff from SC/ST community is no reason to deny reservation for fresh recruitment.
In Thiruvalla East Co-operative Bank Ltd. v. Deputy Registrar (2008 (4) KLT 220), it was held that Act and Rules do not provide for invalidation of list made by Board, merely on the ground that committee of a society had not conducted the interview within the time limit fixed in R.182(4)(v) and that exceptional situations could be a ground on which conduct of interview beyond period of two months could be justified.
In Deepthy Vijayakumar v. Joint Registrar (2008 (4) KLT 321) the issue before the Division Bench relates to appointment of junior clerks in a co-operative bank. It was tainted with procedural irregularities and favouritism granted to certain candidates by granting higher marks in the interview and lowest marks to the written test rank holders and appointing more candidates than that is notified. Setting aside the entire selection, it was held that if in a public appointment the selection is fraudulent and deceitful, entire selection has to be set aside, individual innocence has no place in it. Vacancies that arise after a notification for a public appointment cannot be filled up without a fresh notification or without making necessary amendments. It violates the equality principle enshrined in Arts.14 and 16(1) of the Constitution.
An employee of a co-operative bank was convicted of a criminal offence. Later he was suspended by the President of the society in anticipation of disciplinary proceedings. It was challenged on the ground that in R.138(6) it is only the committee of the society who has the power to suspend such an employee. The bye-laws empowers the President to have a general control over the affairs of the bank. Such power of the President includes the power to make an order suspending an employee from the society in anticipation of ratification by the competent authority, namely the committee, of which the President is essentially a member, so held in Prasanth Maroli v. Kannur Primary Co-operative Agricultural & Rural Development Bank Ltd. (2008 (4) KLT 451).
In Josekutty v. Public Service Commission (2008 (4) KLT 546) it was held that B.Com. degree holder with co-operation as a subsidiary subject is not qualified to be appointed as Junior Clerk. R.7(1)(a) does not govern field of direct recruitment but only to other modes of recruitment.
State Co-operative Employees Pension Board was delaying payment of family-pension to member on the ground that contribution from employer co-operative society has not been received up-to-date towards pension fund. Held in Thulasi Devi v. Kerala State Co-operative Employees Pension Board (2008 (4) KLT 647), inability to pay is no answer in a matter relating to pension and non-payment of contribution by an employer is not a ground on which Pension Board can delay payment of pension.
The power to fix or re-fix a pay which carried with it, the power to rectify an anomaly that has crept into the fixation or re-fixation of pay, primarily rests with employer society. Such power may be available with an authority exercising powers of Registrar or superior authority in Government. It does not trickle down to officers of Pension Fund by virtue of Cl.27(3). This dictum is found in Kunju v. Kottayam Co-operative Agricultural & Rural Development Bank Ltd. (2008 (4) KLT 682).
On Miscellaneous
The issue raised in Ernad Primary Co-operative Agricultural & Rural Development Bank Ltd. v. State of Kerala (2008 (1) KLT 132) is as to whether the sale certificates issued under the Kerala Cooperative (Agricultural and Rural Development Banks) Act, 1984, for short “the CARD Act” are exempted from levy of stamp duty under the provisions of the Kerala Stamp Act. When exemption from stamp duty is claimed on the basis of awards or orders of the Registrar or Arbitrators, such decisions which fall under the clause of the notification are only those which are issued under the provisions of the Co-operative Societies Act and not under CARD Act.
A plain reading of sub-ss.(1) and (2) of S.37 would show that what is contemplated in an agreement between the creditor and the debtor, whereby the debtor agrees to the creditor requesting for deduction from salary in case of default in repayment of loan. Once such an agreement is executed between the creditor and the debtor, S.37(2) obliges the employer of the debtor to act in terms of any request made by the creditor, provided the request falls on the basis of the agreement under S.37(1), Once that is done, the responsibility to make deduction in terms of S.37(2) does not depend upon the violation of the employer, it is a statutory obligation, so held in Vilappil Service Co-operative Bank v. Commissioner of Police (2008 (2) KLT SN 32 (C.No.39)).