H.N. Nagamohan Das, J.
1. These writ appeals are against the common order of the learned Single Judge dated 13-9-2004 dismissing W.P: 22715/01 and connected matters.
2. Appellants are the Co-operative Societies registered under the Karnataka Co-operative Societies Act, 1959 (hereinafter referred to as 'the Act'). The appellants-societies are engaged in different activities like, banking, marketing spinning etc. The Director of Co-operative Audit by his notification dated 17-2-2001 bearing No. CMW. 823.CLM.96, increased the audit fee from 15 paise to 20 paise for every Rs. 100/- on the working capital or business turn over of the Societies. Pursuant to this notification, the audit of some of the societies was conducted and demand notices were issued. The appellants-societies being aggrieved by the impugned notification dated 17-2-2001 and the demand notices have questioned the same before this Court by filing writ petitions. The main contention of the appellant-societies before the learned Single Judge in the writ petitions was that the impugned notification is arbitrary, illegal, without jurisdiction and contrary to Rule 30 of the Karnataka Co-operative Societies Rules (hereinafter referred to as 'Rules'). The appellants-societies further contended that the levy of revised audit fee has no co-relation to the actual service rendered by the Co-operative Audit Department. The levy of revised audit fee on the basis of working capital or turn over of the society is arbitrary, illegal, and discriminatory. The respondents filed their statement of objections in the writ petitions inter alia contending that earlier, the Government vide notification dated 27-10-1986 revised the audit fee from 10 paise to 15 paise on every Rs. 100/- working capital or turn over of the society. Nearly after fifteen years, it is found that the audit fee collected under the earlier Government notification of 1986 was totally insufficient to meet the expenditure of the Co-operative Audit Department which is exclusively meant for auditing the accounting of societies in the State of Karnataka. Therefore, the revision of audit fee under the impugned notification dated 17-2-2001 by enhancing the same from 15 paise to 20 paise on every Rs. 100/- working capital or business turn over of societies is just and proper. It is further contended that under the impugned notification, the audit fee is completely exempted for certain deserving categories of Cooperative Societies like Student Co-operative Societies, SC/ST, Co-operative Societies, Women Co-operative Societies, Medical Aid Co-operative Societies, Sports Promotion Societies, Ex-servicemen Co-operative Societies, Leather Workmen, Pottery makers, Basket Makers Co-operative Societies, etc., and levied only 50% in respect of Co-operative Societies serving the Agricultural Sector. This classification of Societies is well within the power of Legislature and the same is not discriminatory. Therefore, the element of quid pro quo is not always a sine qua non for the levy of audit fee.
3. On the basis of the pleadings and on the submissions made at the Bar, the learned Single Judge framed the following points for consideration:
'a) Whether the audit fee as revised by the State Government is without jurisdiction?
b) Whether levy and collection of audit fee on the basis of Working Capital or Turn-over is illegal, arbitrary and contrary to Rule 30 of the Rules?
c) Whether the audit fee fixed in the impugned Government order should be co-relation to the actual service rendered by the Audit Department?
d) Whether the impugned action amounts to sub-delegation of power to the Director of Co-operative Audit by the State Government?'
4. The learned Single Judge by a detailed order and on consideration of the rival contentions and material on record held all the points in favour of the respondents and against the writ petitioners and dismissed all the writ petitions by a common order. Hence, these appeals.
5. Sri K.M. Nataraj, Sri S.R. Hegde Hudlamane, Sri S.A. Kalage, learned Counsels for the appellants submitted the main arguments and other Counsels adopted the arguments. It is contended that the impugned notification is contrary to Rule 30 of the Karnataka Co-operative Societies Rules. Under the impugned notification the revision of audit fee by enhancing the same and made applicable to appellants-societies and completely exempting certain other societies and levying only 50% on agricultural societies is discriminatory and violative of Article 14 of the Constitution. It is further contended that the appellants-societies are not opposing levy of audit fee but they are opposing the method of fixing the audit fee. Under Rule 30 of the Rules, there is excessive delegation of power by the Government in favour of the Director of Cooperative Audit and the same has resulted in arbitrariness. It is further contended that there is no nexus for the levy of the audit fee and the services rendered and as such, the same is opposed to the principle of quid pro quo. Reliance is placed on the following decisions:
1. The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, AIR 1954 SC 282.
2. Krishi Upaj Mandi Samiti and Ors. v. Orient Paper & Industries Limited, 1995 (1) SCC 655.
3. Vam Organic Chemicals Limited and Anr. v. State of U.P. and Ors., 1997 (2) SCC 715.
4. The Government of Andhra Pradesh and Anr. v. Hindustan Machine Tools Limited, AIR 1975 SC 2037.
5. Vasanlal MAGANSHAI Sanjanvala and Ors. v. The State of Bombay, AIR 1961 SC 4.
6. Devidas Gopalakrishnan v. State of Punjab and Ors., AIR 1967 SC 1895.
7. Air India v. Nagesh Meerza and Ors., AIR 1981 SC 1829.
6. Sri G. Nagarajulu Naidu, Additional Government Advocate for the respondents contends that in 1986 when the Government revised the audit fee under Rule 30 of the Rules, the same was questioned before this Court in W.P.No. 31868/1992 and connected matters. The learned Single Judge rejected the said writ petitions by upholding the constitutional validity of Rule 30 of the Rules and the power to levy the audit fee. This Judgment of the learned Single Judge came to be affirmed by a Division Bench in Writ Appeal Nos. 4603 and 4604/ 1997. Hence, he submits that the present writ appeals are liable to be rejected. He further contends that after lapse of 15 years from earlier revision of audit fee in 1986, it is found uneconomical for the services rendered by the Co-operative Audit Department. Therefore, it became necessary to revise the levy of audit fee from 15 paise to 20 paise for every Rs. 100/- on the working capital or on the total turn over of the societies. He further submits that the Legislature in their wisdom exempted certain categories of societies from payment of audit fee and allowed certain categories of societies to pay 50% of the audit fee and levied full audit fee at the revised rate on certain categories of societies. This classification is within the domain of Legislature and as such the same is not discriminatory. He justifies the order of the learned Single Judge.
7. Heard the arguments on both the side and perused the entire writ appeal papers.
8. Co-operation is as old as the human civilization. In the primitive commune system, man developed the concept of co-operation of each according to his ability and each according to his need. The evolution of family, community and ultimately international feeling spring out of the desire of men and women to co-operate with one another to overcome individual weakness. What is known as cooperative effort is ultimately the group instinct in man which enables him to live together, work together and help each other in times of stress and strain. In India, the principles of co-operation have been practised from time immemorial. The spirit of village communities of India was almost entirely co-operative. The villages have throughout the ages worked together on an informal co-operative basis. The co-operative element in the community life of India was represented by the joint family system. The ancient Indian scripture Rig Veda states:
'May you all have a common purpose
May your hearts be unison
May you all be the same mine
So that you can do work efficiently well'
9. In the modern technical sense, the genesis of co-operative movement and its applications in the economic field can be traced from the Industrial Revolution which took place in England during second half of eighteenth and first half of the nineteenth century. Cooperation as is understood today as an economic system was born as a peaceful reaction against the mercantile economy and Industrial Revolution which had resulted in concentration of wealth, mass poverty and degradation. In India the modern cooperative movement had started in the early part of twentieth century. Since, then, it has grown in statute and extent of covering more than 90 percent of the villages and covering nearly 40 per cent of rural population. The co-operative activities acquired a predominant position in our national life. The Directorate of Economics and Statistics, Government of Karnataka, in its Report 'Karnataka at a Glance 2003-2004' states that there are 301 Cooperative Urban Banks with 655 branches, 8,686 Credit Cooperative Societies, 8,377 PLD Banks and other Co-operative Banks and 22,922 other Cooperative Societies. In all, there are 41, 241 Societies in the State of Karnataka.
10. Number of persons join together, invest and organise themselves into a cooperative society. But it is not possible for all the members to attend to the day-to-day affairs of the Co-operative Society. Therefore, the administration of the Society is entrusted to a few elected representatives. The representatives are expected to carry on the administration of the society in accordance with law and constitution of the society. The representatives should manage the society not for their own selfish motives, but for the common benefit of all the members. Under these circumstances, it is but natural for the members as a body to satisfy themselves that the society is managed properly by their representatives. For this purpose, the members of society have to institute some system of check over on their representatives. Auditing is such a check on the representatives. A cooperative audit is not only a financial audit but also encompasses management audit, detection and prevention of frauds and errors, purposeful and useful suggestions, etc.
11. Keeping this object of audit in view, the law makers in order to protect the interest of members of Societies, in their wisdom made audit of Co-operative societies as compulsory by the Director of Cooperative Audit under Section 63 of the Act, which reads as under:
'63. Audit : (1) (a) The Director of Co-operative Audit shall audit or cause to be audited, at least once in each year by a person authorised by him by general or special order in writing in this behalf, the accounts of every society which has been given financial assistance by way of share capital or loan or subsidy or guarantee by the State Government, financing bank or credit agency from time to time;
b) The societies other than those referred to in Clause (a) shall arrange to get their accounts audited at least once in each co-operative year, by a Chartered Accountant holding a certificate issued by the Institute of Chartered Accountants of India or by an auditor from the panel of Auditors maintained by the Director of Co-operative Audit;
Provided that every third year the accounts of the societies falling under this clause shall be audited or caused to be audited by the Director of Co-operative Audit or by a person authorised by him in this behalf.
2) The audit under Sub-section (1) shall include an examination of overdue debts, if any, the verification of the cash balance and securities, a valuation of the assets and liabilities, and an examination of the working and the other prescribed particulars of the society.
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12. Rule 30 of the Rules reads as hereunder:
'30. Audit fees : (1) Every co-operative society shall pay to the State Government or at a rate equal to the average cost incurred for appointment of auditors under Rule 441 of the Karnataka Civil Services Rules, 1959, a fee for the audit of its accounts for each cooperative year in accordance with the scale fixed by the Director of Co-operative Audit, with the previous approval of the State Government in respect of the class of societies to which it belongs.
(1A) Every Co-operative Society, where the Government decides to post audit staff for concurrent and final audit of accounts, shall pay audit cost in accordance with the provisions of Rule 441 of the Karnataka Civil Services Rules, 1959. The need to post such audit staff and its strength shall be decided by the Government either on receiving a recommendation to that effect from the society or otherwise;......................'
13. A reading of Section 63 of the Act and Rule 30 of the Rules makes it clear that two methods have been provided for levy of audit fee. Firstly, in case where the Government in its discretion or on the request of the Societies, post the audit staff on deputation to the concerned Cooperative Societies on whole time basis for concurrent audit of the accounts on day-to-day basis as well as final audit of the accounts after closure of the accounting year. Secondly, in cases where accounts are required to be audited annually after the closure of the year by the Cooperative Audit Department. In the former case, the cost incurred on such audit staff would be payable in accordance with the provisions of Rule 441 of the Karnataka Civil Services Rules, 1959 as audit charges. In the later case, the audit fee is payable by the Cooperative Society on percentage basis fixed by the Government from time to time.
14. The Government levied audit fee at five percent in the year 1962 and in the year 1976, the audit fee was revised by enhancing from 05 paise to 10 paise for every Rs. 100/- on the working capital or turn over of the co-operative society. Again, the Government vide notification dated 27-10-1986 revised the audit fee from 10 paise to 15 paise for every Rs. 100/-. The Government Order dated 27-10-1986 was questioned before this Court in WP No. 31868/1992 and connected matters, inter alia contending that there is discrimination between one kind of Co-operative society and others while laying the audit fee. Further, it was contended that the Director of Co-operative Audit has no power to levy the audit fee and that without quid pro quo the levy of audit fee becomes illegal and ultra vires. The vires of Rule 30 of Rules was also questioned. The learned single Judge of this Court vide Judgment dated 1-7-1997 rejected the said petitions which came to be affirmed by a Division Bench in W.A. Nos: 4603 and 4604/1997. The ratio of the decision of Division Bench of this Court in the above writ appeals is applicable to the impugned notification dated 17-2-2001 and we are in respectful agreement with the Judgment of the Division Bench in Writ Appeal Nos: 4603 and 4604/97. On this ground alone, the present writ appeals are liable to be dismissed.
15. The appellants contend that under the impugned notification dated 17-2-2001 certain Societies are completely exempted from paying audit fee and levied only 50% audit fee on Societies serving agricultural sector and levied full audit fee to the appellants Societies and therefore the impugned notification is discriminatory and violative of Article 14 of the Constitution. The Supreme Court of India in Sakhawat Ali v. State of Orissa, AIR 1955 SC 166 held that legislation enacted for the achievement of a particular object or purpose need not be all embracing. It. is for the Legislature to determine what categories it would embrace within the scope of legislation. Merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of fundamental right guaranteed by Article 14. Keeping the ratio of the Judgment of Supreme Court in view we have to examine the impugned notification whereunder certain societies are charged only 50% and certain other societies are completely exempted from paying audit fee. Societies like Student Co-operative Societies, Scheduled Caste and Scheduled Tribe Co-operative Societies, Women Co-operative Societies, Medical Aid Co-operative Societies, Sports Promotion Societies, Ex-servicemen Co-operative Societies, Leather Workmen Co-operative Societies, Pottery Workers, Basket Makers Co-operative Societies etc., are completely exempted from paying audit fee under the impugned notification. These categories of Societies are formed by politically and economically disempowered persons of our system. The purpose of these societies is to ameliorate the social and economic living conditions of its members. On the other hand most of the appellant Societies are engaged in banking activity. By composition and by nature of activity these societies are by themselves a different category and they are not similar to the appellant societies. The appellant societies on the one hand and the societies that are completely exempted from paying audit fee on the other hand are unequals and as such there is no discrimination nor violation of Article 14 of the Constitution.
16. Under the impugned notification the Co-operative Societies serving the Agricultural Sector are levied only 50% of the audit fee. It is said that agriculture is the base for all civilizations, but it is the agriculturist who is most exploited in all civilizations. In our Country majority of the people are still living in rural areas and depended on agriculture. Despite the progress we achieved in certain areas the living conditions of our rural masses is deteriorating. The Indian agriculture is in crisis and every now and then we are hearing farmers are committing suicide. Therefore, the Legislature in their wisdom thought it fit to levy only 50% audit fee on the co-operative societies serving agricultural sector. Most of the appellant societies who are engaged in banking activity cannot compare themselves to the societies serving agricultural sector. Therefore, levy of 50% audit fee on cooperative societies serving agricultural sector is neither discriminatory nor violative of Article 14 of the Constitution.
17. The learned single Judge is right in rejecting the appellants contention that there is no co-relation to the services rendered and the audit fee levied. Quid pro quo means something in return and not equal return. The actual expenditure incurred on the Department of Audit is far higher than the audit fee collected resulting in huge deficit. In addition to this, as a social measure the Government levied only 50% audit fee on co-operative societies serving agricultural sector and completely exempted certain co-operative societies from paying audit fee. The element of quid pro quo is not always a sine qua non.
18. The learned single Judge rejected the contention of the appellants that the impugned notification issued by the Director of Audit amounts to sub-delegation of power. Section 129 of the Act, empowers the State Government to frame the Rules and to amend the Rules, to carry out the purpose of the Act. The State Government framed Rule 30 of the Rules empowering the Director of Audit to fix the scale of audit fee with the prior approval of the State Government. It is not the case of appellants that the impugned notification revising the audit fee is issued by the Director of Audit without the prior approval from the Government. On the other hand the impugned notification is issued after approval from the Government. We respectfully agree with the reasoning of the learned single Judge in concluding that there is no sub-delegation of power to the Director of Audit.
19. The contention of the learned Counsels for some of the appellants that the Director of Audit passed an order posting the audit staff on deputation on whole time basis for concurrent audit of accounts on day-to-day basis as well as final audit of the accounts-The Audit Department instead of posting whole time audit staff have only conducted the final audit at the end of the year and issued demand notices to pay the audit fee on percentage basis as per the impugned notification. This action of the respondents/Audit Department resulted in serious financial burden on some of the appellant Societies and therefore the appellants contend that the demand notices issued by respondents are bad in law. A reading of the orders passed by the Director of Audit to post whole time audit staff is conditional and subject to availability of Audit Staff. Due to non availability of audit staff the Co-operative Audit Department has not posted the whole time audit staff to the appellant Societies. At the end of the Co-operative year the Audit Department conducted annual audit of the respective co-operative societies and issued demand notices as per the impugned notification and they are in accordance with law. No right is accrued in favour of appellants under the orders passed by the Director of Audit to post a whole time audit staff. In the event of appellant societies are provided with whole time audit staff then only they are liable to pay as per the provisions of Rule 441 of the Karnataka Civil Services Rules as audit charges. On the other hand the audit of appellant societies are conducted at the closure of the year by the Co-operative Audit Department and therefore they are liable to pay the audit fee on percentage basis under the impugned notification. For the reasons stated above, we reject the contention of learned Counsels for appellants that the demand notices are bad in law.
20. The learned single Judge by well reasoned order rejected the contentions of appellants and dismissed the writ petitions. We are in respectful agreement with the reasoning of the learned Single Judge, the appellants have not shown to us any infirmity in the orders passed by the learned Single Judge. There are no justifiable grounds to interfere with the order of the learned Single Judge and to take different view. Hence, the writ appeals are liable to be dismissed.
21. In the result, these writ appeals are rejected with no order as to costs.