IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN FRIDAY,THE21T DAY OF MARCH201430TH PHALGUNA, 1935 W.P.(C).No.21280 of 2011 (H) --------------------------------------------------- PETITIONER(S):- -------------------------- 1. THE PERUMATTY SERVICE CO-OP.BANK LTD. NO. 357, VANDITHAVALAM,CHITTUR, PALAKKAD DISTRICT, REPRESENTED BY ITS SECRETARY.
2. THE PRESIDENT, THE PERUMATTY SERVICE CO-OP. BANK LTD. NO. 357, VANDITHAVALAM, CHITTUR, PALAKKAD DISTRICT. BY ADVS.SRI.N.RAGHURAJ SMT.K.AMMINIKUTTY RESPONDENT(S):- ---------------------------- 1. THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM - 695 001.
2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), PALAKKAD - 678 001.
3. THE PALAKKAD DISTRICT CO-OPERATIVE BANK LTD., PALAKKAD - 678 001, REPRESENTED BY ITS GENERAL MANAGER. R1 & R2 BY SENIOR GOVERNMENT PLEADER SRI.JAMES MATHEW KADAVAN. R3 BY ADV. SRI.M.P.ASHOK KUMAR THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON0703-3014, THE COURT ON2103-2014 DELIVERED THE FOLLOWING:- W.P.(C).NO.21280 OF2011H APPENDIX PETITIONERS' EXHIBITS:- -------------------------------------- EXT.P1 TRUE PHOTO COPY OF THE AUDIT CERTIFICATE AND MEMORANDUM FOR THE YEAR200809. EXT.P1(a) TRUE PHOTO COP[Y OF THE AUDIT CERTIFICATE AND MEMORANDUM FOR THE YEAR200910. EXT.P2 TRUE PHOTO COPY OF THE TENTATIVE BALANCE SHEET OF THE1T PETITIONER BANK FOR THE YEAR201011. EXT.P3 TRUE PHOTO COPY OF THE ANNUAL REPORT OF THE1T PETITIONER BANK PLACED IN ITS GENERAL BODY HELD ON1806.2011. EXT.P4 TRUE PHOTO COPY OF THE ORDER
BEARING NO.3641/2008 DATED1206.2009 ISSUED BY THE2D RESPONDENT. EXT.P5 TRUE PHOTO COPY OF THE ORDER
BEARING NO.CB(4)/1252/2011 DATED0605.2011 ISSUED BY THE1T RESPONDENT. EXT.P6 TRUE PHOTO COPY OF THE INTERIM ORDER
PASSED BY THIS COURT DATED2411.2010 IN WP(C).NO.33774 OF2010 EXT.P7 TRUE PHOTO COPY OF THE INTERIM ORDER
PASSED BY THIS COURT DATED2401.2011 IN WP(C).NO.33774 OF2010 EXT.P8 TRUE PHOTO COPY OF THE G.O.(Rt).NO.562/2011/CO-OP. DATED2410.2011. EXT.P9 TRUE PHOTO COPY OF THE STATEMENT SHOWING THE YEARWISE, LOANS, INVESTMENTS ETC. AND ALSO THE PROFIT, DIVIDEND AND RESERVE PROVISIONS FROM20012011. EXT.P10 TRUE PHOTO COPY OF THE DETAILS OF THE FLUID RESOURCES OF THE1T PETITIONER BANK FROM2007- 2011. RESPONDENT(S)' EXHIBITS:- ------------------------------------------ NIL. vku/- ( true copy ) K. Vinod Chandran, J ----------------------------------------- W.P.(C).No.21280 of 2011-H ----------------------------------------- Dated this the 21st day of March, 2014 JUDGMENT
Whether Section 74B of the Kerala Co-operative Societies Act, 1969 (for short "KCS Act") restricts opening of branches by the District Co-operative Banks in the area of operation of member credit societies; otherwise than on the conditions provided therein, is the question raised herein. Section 74B is extracted hereunder: "S.74B. Opening of Branches.- (1) The State Co-operative Bank, The State Co-operative Agricultural and Rural Development Bank and District Co-operative Banks may open branches in the area of operation of their member credit societies if such member credit societies are weak and not functioning enough to provide service to the members or to the public".
2. Bereft of the factual mesh, the petitioner is a member society of the 3rd respondent-District Co-operative Bank, challenging the latter's decision to open a branch within the area of operation of the petitioner. The same was also sanctioned by Exhibit P5. The petitioner would contend that as per Section 74B of the KCS Act, a WP(C).No.21280 of 2011 - 2 - District Co-operative Bank could open a branch in the area of operation of its member credit societies only if the member credit societies are found to be weak and the latter's functioning does not provide sufficient service to the members or to the public. The petitioners are aggrieved by Exhibit P5 order, which permits opening of the 3rd respondent's branch at Vandithavalam.
3. It is to be specifically noticed that there is no prohibition in the KCS Act and the Kerala Co-operative Societies Rules, 1969 (for short "the Rules"), from the District Co-operative Banks opening branches within the boundaries of the District, for which the same is constituted and registered under the KCS Act and the Rules. The petitioner's contention is that Section 74B of the KCS Act was subsequently introduced into the Act and the only intention of the legislature, that can be garnered from the provision, is that any opening of branches, inter alia by a District Co-operative Bank, in an area where a Primary Co-operative Society functions, can only be in the circumstance of the Primary Society being rendered financially unstable and the functioning of a branch of the District Co-operative Bank is found essential for extending sufficient banking services to the members of the Primary Society or to the general public. No other WP(C).No.21280 of 2011 - 3 - intention could be attributed to the legislature and, hence, despite the word "may" used in the Section, the prohibition has to be found, except in conditions enumerated therein, is the contention advanced.
4. The learned counsel appearing for the respondent-District Co-operative Bank, however, would contend that there can be no equation of the activities of the Primary Co-operative Society and a District Co-operative Bank. Primary Co-operative Societies are engaged in banking activities by virtue of the exemption provided in the Banking Regulation Act, 1949 (for brevity "BR Act"). However, the District Co-operative Banks, have to obtain a licence from the Reserve Bank of India, under Section 22(1) read with Section 56(0) of the BR Act and, hence, are entitled to carry on banking business anywhere in India. Such licence has been obtained by the 3rd respondent-Bank and it is also emphasised that the 3rd respondent-Bank is the central society and financing bank of the petitioner-Society. The learned counsel would also distinguish the activities, specifically banking activities, conducted by a District Co-operative Bank and a Primary Co-operative Society.
5. Based on Circulars issued by the Department, it is submitted that the Primary Credit Societies are restricted in the quantum of loans which they could extend and confine it, in so far as WP(C).No.21280 of 2011 - 4 - such extension of loan could be made, only to their members. The sweep and extend of the banking activities, that could be engaged in by a District Co-operative Bank is far beyond that engaged in by a Primary Credit Society. It would be a conundrum in terms to say that a District Co-operative Bank's activities would put in peril; that of a Primary Credit Society. The nominal credits that could be extended by the Primary Co-operative Society; and the marginal customer base, constituting the members of a Primary Credit Society, cannot at all be affected by the District Co-operative Bank which caters to more expansive financial credit limits/demands, is the argument.
6. In interpreting Section 74B, the learned counsel for the 3rd respondent relies on Shamrao v. District Magistrate, Thana [AIR1952SC324, M.Pentiah v. Veeramallappa [AIR1961SC1107 as also Cherukode Co-op. Rural Bank Ltd. v. Parur S.C.B. Ltd. [2006 (3) KLT38.
7. Cherukode Co-op. Rural Bank Ltd. (supra), noticed the distinction between Primary Credit Society and a Bank registered under the KCS Act, which has obtained a licence from the Reserve Bank of India under the BR Act. The Division Bench was concerned with an alleged conflict between the BR Act and KCS Act. The Bench found WP(C).No.21280 of 2011 - 5 - that there is no conflict between the said Acts and the use of the word "Bank" in the title of a Co-operative Credit institution, was held to be possible, only when it has a licence from the Reserve Bank of India under the BR Act. The learned counsel for the petitioner would concede that there is no question of any conflict between the two enactments. Whether Section 74B provides a restriction in opening branches by the District Co-operative Bank, is the issue to be considered.
8. A District Co-operative Bank registered under the KCS Act has its area of operation over the entire district and has as its members, the Primary Credit Societies registered and having area of operation within the district. The District Co-operative Bank acts as a central credit Society as also the financing bank of the Primary Credit Societies. The interpretation, attempted to be placed on Section 74B, by the petitioner, if accepted, would result in a conclusion that, for opening of branches of a District Co-operative Bank at any place within the District, the financial base of an existing Primary Credit Society and the extent of its services to the general public would have to be assessed; before a branch is opened. It would also result in assuming that, in the absence of these two conditions pre-existing, no branch of a District Co-operative Bank could be opened. This definitely would result WP(C).No.21280 of 2011 - 6 - in the Central Credit Society and the financing bank being at the mercy of the Primary Credit Societies, which are its members, and confining their activities to financing such credit societies. Their banking arm, could extend to the general public; only on the failure of a Primary Credit Society, would be an unequivocal presumption, on such interpretation. This Court is unable to concede to such an interpretation, which would bring forth absurd results. This would fetter the activities licensed by the Reserve Bank of India. This would deprive the general public from availing of the more expansive facility offered by a District Co-operative Bank, often at terms competitive to other Banks so licensed by the Reserve Bank of India.
9. The literal rule of interpretation is that, on a literal construction, if the words in the statute are unambiguous and are plain, then this Court need not do any hair-splitting exercise to ferret out the intention of the legislature and give an interpretation, which would go against the object and purport of the enactment. Shamrao (supra) was a case in which the petitioner was arrested and detained under a Preventive Detention Act, which enactment expired during the currency of his detention and another amending Act was brought in; prolonging the life of the earlier enactment with transitory provisions. The argument WP(C).No.21280 of 2011 - 7 - of the detenue was that the provision, "every detention order, confirmed under the principal Act as amended by the Amending Act"; would, by reference to the amendment made, indicate that a fresh detention order has to be passed. The Hon'ble Supreme Court was of the opinion that even without the reference to the amended Act, the detention order would have effect and the reference to the amended Act was only explanatory and was intended to provide a comprehensive understanding. Having said so, the learned Judges went deeper on the issue of interpretation and held so: "It is the duty of Courts to give effect to the meaning of an Act when the meaning can be fairly gathered from the words used, that is to say, if one construction will lead to an absurdity while another will give effect to what commonsense would show was obviously intended, the construction which would defeat the ends of the Act must be rejected even if the same words used in the same section, and even the same sentence, have to be construed differently. Indeed, the law goes so far as to require the Courts sometimes even to modify the grammatical and ordinary sense of the words if by doing so absurdity and inconsistency can be avoided".
10. M.Pentiah (supra) noticed the established rules of construction and quoted from text books and precedents to the effect that; always manifest absurdity or futility, palpable injustice, or absurd WP(C).No.21280 of 2011 - 8 - inconvenience or anomaly are to be avoided. It was also found that the Courts are to give a meaningful interpretation to a legislation and at all times the endeavour should be to achieve the manifest purpose of the legislation and eschew an interpretation which would render the enactment nugatory. It was emphasised that every clause in a statute should be construed with reference to the context and the other clauses of the enactment and the interpretation should be consistent with the object and the result which the enactment endeavours to bring in.
11. One has to adhere to the ordinary meaning of the words unless that is at variance with the intention of the legislature or results in an obvious absurdity or repugnance. Looking at the language of Section 74B of the KCS Act, no prohibition can be attributed; on the plain language employed in the provision. The petitioner, in the writ petition as also in the counter affidavit filed, to the application filed by the 3rd respondent-Bank to vacate the stay order, reiterates; to the extent of a refrain, that a District Co-operative Bank could open a branch in the area of operation of a Primary Credit Society only when the financial situation of the Primary Credit Society is weak, coupled with the deficiency of service by the Primary Co-operative Society to the general public. WP(C).No.21280 of 2011 - 9 - 12. One cannot but notice that the word "only" is glaringly absent in the provision. The language used in Section 74B is that, the opening of a branch may be on the two conditions pre-existing. It is trite that the word "may", in normal circumstances, does not indicate a statutory mandate and often is used in an enabling provision. There are instances when the word "may", used in a provision, is interpreted to be mandatory; deeming it to be "shall".
13. Even if the provision is so read; without the word "only" as emphasised by the petitioner, the interpretation could not be; of a prohibition. "May", if replaced by "shall" in the above provision would only be directory, in the sense of a statutory command, directed to the State Co-operative Bank, the State Co-operative Agricultural and Rural Development Banks and District Co-operative Banks to open branches when the pre-conditions co-exist; even if they are, by their own wisdom, managerial or financial; advised otherwise. On such reading of Section 74B; one could only assume a statutory duty on the central credit society to open a branch at the direction of the Department, on the finding of the financial instability of a Primary Co-operative Society. Such statutory improvisation, according to this Court, is not required in the factual context of the instant case. The attending circumstances WP(C).No.21280 of 2011 - 10 - also does not commend this Court to make a "casus omissus" by adding, only to the provision. One can only read it as an enabling provision, where no restriction as such is provided. And that is what comes out of a plain reading of the provision.
14. What the Legislature intended, is for this Court to ponder over, only in instances of there being some anomaly in the language used. True, the Legislature would not act in a vacuum or in futility or without a definite result intended. In a fit case, when the circumstances demand, an improvisation could be made finding a statutory mandate in the Section. But even then, never could a prohibition be intended. To improvise in this case, on the facts and circumstances coming to fore, would be an exercise culminating in an "obiter dicta". This Court would steer clear of such a consequence.
15. As is noticed, the Section at best, enables a District Co-operative Bank, to open a new branch within the area of a Primary Credit Society, or the financial condition of the Society being found bad and if, the services offered by the Society are deficient. In coming to such conclusion, this Court is fortified by the authoritative pronouncement of the Supreme Court in Chief Justice of A.P. v. Dixitulu [(1979) 2 SCC34, specifically paragraphs 66 and 67: WP(C).No.21280 of 2011 - 11 - "66. The primary principle of interpretation is that a Constitutional or statutory provision should be construed "according to the intent of they that made it" (Coke). Normally, such intent is gathered from the language of the provision. If the language or the phraseology employed by the legislation is precise and plain and thus by itself proclaims the legislative intent in unequivocal terms; the same must be given effect to, regardless of the consequences that may follow. But if the words used in the provision are imprecise, protean or evocative or can reasonably bear meanings more than one, the rule of strict grammatical construction ceases to be a sure guide to reach at the real legislative intent. In such a case, in order to ascertain the true meaning of the terms and phrases employed, it is legitimate for the Court to go beyond the arid literal confines of the provision and to call in aid other well-recognised rules of construction, such as its legislative history, the basic scheme and framework of the statute as a whole, each portion throwing light on the rest, the purpose of the legislation, the object sought to be achieved, and the consequences that may flow from the adoption of one in preference to the other possible interpretation.
67. Where two alternative constructions are possible, the Court must choose the one which will be in accord with the other parts of the statute and ensure its smooth, harmonious working, and eschew the other which WP(C).No.21280 of 2011 - 12 - leads to absurdity, confusion, or friction, contradiction and conflict between its various provisions, or undermines, or tends to defeat or destroy the basic scheme and purpose of the enactment...".
16. In Hans Raj Kehar v. State of U.P. [(1975) 1 SCC40, the Hon'ble Supreme Court was concerned with an amendment made by the State of Uttar Pradesh, to the Motor Vehicles Act, 1939 (for brevity "MV Act of 1939"). The MV Act provided for conditions in which permits could be granted to operate stage carriage vehicles. The restriction provided by the MV Act of 1939 was sought to be effaced by the introduction of Section 43A, by which the State Government was empowered to issue general directions, in public interest, to the State Transport Authority or the Regional Transport Authorities. The Section also provided for relaxation of the conditions of grant of permit enabling all eligible applicants to obtain such grants. A notification issued under the above provision was challenged inter alia as being violative of Article 19(1)(f) and (g) of the Constitution of India. The argument was that the notification issued does not indicate any public interest and that the same interfered with the fundamental right of the existing stage carriage operators. WP(C).No.21280 of 2011 - 13 - 17. The Hon'ble Supreme Court, on the first contention, held that public interest is specifically recited in the notification. It was also held that, it does not require any amount of argument to understand that a larger number of buses operating in different routes, would only enure to the benefit of the public. This Court is specifically concerned with the challenge on the ground of violation of fundamental rights, which was negatived so in paragraph 8: "The contention that the impugned notification is violative of the rights of the appellants under Article 19(1)(f) or (g) of the Constitution is equally devoid of force. There is nothing in the notification which prevents the appellants from acquiring, holding and disposing of their property or prevents them from practising any profession or from carrying on any occupation, trade or business. The fact that some others have also been enabled to obtain permits for running buses cannot constitute a violation of the appellants' rights under the above two clauses of Article 19 of the Constitution. The above provisions are not intended to grant a kind of monopoly to a few bus operators to the exclusion of other eligible persons. No right is guaranteed to any private party by Article 19 of the Constitution of carrying on trade and business without competition from other eligible persons. Clause (g) of Article 19(1) gives a right to all citizens subject to Article 19(6) to practice any profession or to carry on any occupation, trade or business. It is an enabling provision and does not confer a right on those already WP(C).No.21280 of 2011 - 14 - practising a profession or carrying on any occupation, trade or business to exclude and debar fresh eligible entrants from practising that profession or form carrying on that occupation, trade or business. The said provision is not intended to make any profession, business or trade the exclusive preserve of a few persons. We, therefore, find no valid basis for holding that the impugned provisions are violative of Article 19".
18. The present case also would fall definitely within the ambit of the Section being construed as an enabling provision without any restriction thereof. Section 74B of the KCS Act, as it is worded, does not persuade this Court to prohibit the opening of a branch by the 3rd respondent-Bank sanctioned as per Exhibit P5. Exhibit P5 sanction was necessitated, since the Bye-laws of the 3rd respondent provides for such a sanction. Writ petition, hence, fails and is dismissed, leaving the parties to suffer their respective costs. Sd/- K.Vinod Chandran vku/- Judge. ( true copy )