ORDER
Chandrakantaraj Urs, J.
1. These Petitions are by the four Agricultural Cooperative Societies. They are aggrieved by the Government Order as at Annexure 'A'. That order is dated 17-5-1989 in G.O.No. CMW:73:CCB:89 Bangalore. The petitioners-Societies are aggrieved by the order because till the order was passed there was a deemed financial assistance to carry out the objects of the respective Societies viz., advancing loans to agriculturists from Commercial Banks by virtue of a scheme introduced on the recommendation of the Reserve Bank of India in thirteen States of the Country. It is averred that Reserve Bank of India by its letter dated 14th April, 1982, had left the choice to the concerned Co-operative Societies to opt for continued financial assistance from Commercial Banks or seek financial assistance only from the District Co-operative Banks to which they are affiliated or attached and therefore, the Government of Karnataka could not have passed the impugned order as at Annexure 'A' inter alia on the ground (i) that the direction issued as per Annexure 'J' - the letter dated 14th April, 1982 having the force of law, has been disobeyed by the State Government; (ii) that the order of the Government of Karnataka as at Annexure 'A', is arbitrary and therefore, violative of Article 14 of the Constitution; (iii) before passing the order, the State Government did not afford any opportunity to the petitioner-Societies and therefore, the impugned order is in violation of Rules of natural justice; (iv) that paragraph 4 of the letter of the Reserve Bank of India dated 14th April, 1982, provided for continuation of the linkage with the Commercial Bank in cases where the concerned Co-operative Societies opted for the same and that having not been taken note of by the State Government in passing the impugned order, is violative of a directive of the Reserve Bank of India which has the force of law.
2. This Court issued Rule and interim order as prayed for on October 20, 1989.
3. The matter coming up for hearing, the same is disposed of by the following order.
4. I do not think there is any merit in any one of the contentions advanced for the petitioner-Cooperative Societies. The first of the contentions is founded on the basis of Sections 21 and 56 of the Banking Regulation Act, 1949 (hereinafter referred to as the 'B.R. Act'). Section 21 of the B.R. Act does no more than empower the Reserve Bank to control the advances by Banking Companies. That power of controlling advances is enumerated specifically in Subsection (2) thereof, Sub-section (2) is as follows:-
'21(2): Without prejudice to the generality of the power vested in the Reserve Bank under Sub-section (1), the Reserve Bank may give directions to banking company or group of banking or group of banking companies in particular:
(a) the purposes for which advance may or may not be made,
(b) the margins to be maintained in respect of secured advances,
(c) the maximum amount of advances or other financial accommodation which, having regard to the paid up capital, reserves and deposits of a banking company and other relevant considerations, may be made by that banking company to any one company, firm, association of persons or individual,
(d) the maximum amount up to which, having regard to the considerations referred to in Clause (c), guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual, and
(e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given.
Similarly, Sub-clause (a) of Sub-section (1) of Section 56 does ho more than make a Co-operative Bank i.e., a Co-operative Society carrying on banking activities, but incorporated under the relevant Co-operative Societies Act of the State, also a banking company within the meaning of that expression as defined in the B.R. Act.
5. The learned Counsel was unable to point out how the two provisions in the B.R. Act referred to above, give the letter of the Reserve Bank as at Annexure 'A' the force of law. He only contended that in similar circumstances, this Court in the case of D.S. GOWDA v. CORPORATION BANK, ILR (Karnataka) 1982(2), 1353: 1982(2) KLJ 490 had ruled that directives of the Reserve Bank have the force of law. That letter of Reserve Bank of India was held to be a circular issuing direction having - the force of law and therefore, Annexure 'J', particularly paragraph 4, also should be considered as a directive to the State Government and disobedience thereof should result in the order impugned being set aside as the benefit of paragraph has been denied to the petitioner-Societies. That argument based on the decision in D.S. Gowda's case is wholly misconceived. What fell for consideration in the case of D.S. Gowda v. Corporation Bank, was the rate of interest and the period of rests applicable to agricultural loans advanced by nationalised commercial banks. A letter issued bearing the date August 17 1976 modifying an earlier directive, was held to be having the force of law which the banks could not disobey, having regard to Section 21 of the Act under which the original directive had been issued. That case does not lay down the proposition that every correspondence carried on by the Reserve Bank of India with Officer of the State Government shall have the force of law. Annexure 'J' prima facie indicates, it is no more than correspondence addressed by an official of the Reserve Bank of India (the identity of the official is not disclosed in the true copy filed along with the petition) and addressed to the Agricultural Production Commissioners of the States of Andhra Pradesh, Assam, Bihar, Haryana, Jammu and Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Tripura, Uttar Pradesh, West Bengal and Manipur. It refers to the scheme of financing agricultural credit assistance by commercial banks introduced in 1970. It also refers to a study undertaken by the Study Group evidently appointed in exercise of the powers of the Reserve Bank under Section 54 of the Reserve Bank Act and discusses the report in paragraph 3 of the said letter. The concluding portion of paragraph 3 of the said letter is as follows:-
'...Thus, according to the Study Group, the conclusion seems inescapable that the scheme has failed to bring about even a marginal improvement in this most important among the major activities.'
Thereafter, in paragraph 4, it refers to the suggestion made by the Agricultural Credit Board at its meeting held on 23rd November, 1981. That suggestion was to the effect that where the overall picture of the ceded Societies i.e., Societies linked under the Scheme with the Commercial Banks and done better in some States may be left with the choice of the financing institutions or agencies and allowed to continue the linkage with the Commercial Banks, That was not either the directive of the Reserve Bank or the intention of the Reserve Bank to make that recommendation part of its directive even if the letter in question should be construed as a directive. This becomes obvious when paragraph 6 of the letter is read and that is as follows:-
'In the implementation of the Board's decision, the Committee set up at the State level in your State will discuss from time to time any operational difficulties encountered in the process of retransfer of Primary Agricultural Credit Societies to District Central Cooperative Banks from Commercial Banks and guide the financing agencies in the matter.'
Therefore, it is clear that the Board's decision was that at the State-level, the decision must be implemented as modalities of the transfers of District Co-operative Societies from Commercial Banks had been agreed upon.
6. Therefore, the letter in question, instead of coming to the assistance of the petitioner-Societies, helps the respondent-State which has done no more than carry out the instructions contained in the letter.
7. Next argument that it is violative of Article 14 also is not well-founded. The learned Counsel submitted, it is violative of Article 14 in the sense that the petitioner-Societies, when they obtained financial assistance or aid from the commercial banks, were re-depositing part of the funds in the said banks which gave higher returns than the D.C.C. Banks and therefore, it has visited the Co-operative Societies with some disadvantage and as such, order is liable to be set aside. A feeble attempt was made to sustain the contention on the ground that the petitioners have been treated unequally in comparison with the other Societies. But there is no material placed for that before this Court. On the other hand, the impugned order clearly states that the order is applicable to all Societies whether they have progressed well under the original scheme or they have not so progressed under the said scheme. Therefore, even on that ground there is no discrimination made out to attract the guaranteed equal treatment under law provided under Article 14 of the Constitution.
8. It was next urged that in not giving a hearing to the Societies, the Government had denied the benefit of paragraph 4 of the Reserve Bank letter dated 14th April, 1982. I have already pointed out paragraph 4 was the recommendation of the Study Group which was referred to in the course of the correspondence by the Reserve Bank. But it is not found that the decision which is to be found in paragraph 6 i.e., the implementation of the abandonment of the scheme and re-transferring Agricultural Credit jurisdiction to the District Co-operative Banks de-linking them from the Commercial Banks. Therefore, what is only a recommendation of the Study Group cannot be said to have the force of law visiting the petitioner-Societies with any civil consequences which entitle them to a hearing. Therefore, that argument must fail.
9. It was lastly urged that having regard to the fact that the petitioner-Societies were carrying on banking activities in that they were depositing certain monies, that the very act of deriving assistance from the commercial banks by District Co-operative Societies itself constitute banking activity and therefore that cannot be regulated by the State Government by the impugned order and therefore, the order must be struck down for want of legislative competence as the executive power could only co-exist with Legislative powers. This argument is not well-founded at all. It is undisputable that the Co-operative Societies are incorporated under the Co-operative Societies Acts of States and is wholly regulated by the provisions of such Acts. When a Co-operative banking institution which is also incorporated under the Karnataka Co-operative Societies Act, to the extent of its banking activities is controlled by the provisions of the Reserve Bank of India Act in terms of Section 56(1)(a) of the B.R. Act. But the object for which the Societies are incorporated are for assisting its members, who are agriculturists, to get finance for the growing of crops on certain conditions which is non-banking activity. Therefore, all that the State Government has done is to provide financial assistance through the District Co-operative Banks by the impugned order breaking the linkage with the commercial banks which was in force under the scheme introduced in 1971. If the argument were to be accepted, then the very linkage with the commercial banks under the original scheme of 1971 would have become incompetent and the State Government would not have had the power to link the agricultural Co-operative Societies to any Commercial Banking Institution.
There is no merit in these Writ Petitions. They are rejected.