G.V. Munivenkatashamy Vs. State of Karnataka - Court Judgment

Excerpt:
(a) karnataka co-operative societies act, 1959 (karnataka act no. 11 of 1959) - section 29(1)(d) -- power of state government to nominate on board of directors of co-operative bank or co-operative society not violative of article 19(1)(g) -- guarantee given by state government to the state co-operative bank on behalf of primary co-operative bank enables exercise of power of nomination to board of directors of primary co-operative bank. ;on the contention of a director of the primary co-operative agriculture and rural development bank that section 29(1)(d) of the act is violative of the fundamental right under article 19(1)(g) of the constitution :;(i) the petitioner is not prevented by section 29(1)(d) of the act to practice any profession or to carry on any occupation, trade or business which is permitted by law. section 29(1)(d) of the act only empowers the state government to nominate on the board of directors of a co-operative bank or a co-operative society regarding which it has guaranteed the repayment of principal and payment of interest on loans and advances to the co-operative societies. thus, no right of the petitioner it affected by section 29(1)(d) of the act. it does cot come in the way of the petitioner to have himself elected as a director of a co-operative society -- therefore, the power of the state government to nominate on the board of directors of a co-operative bank or a co-operative society on fulfilling the conditions laid down in section 29(1) of the act cannot be held to be violative of article 19(1)(g) of the constitution.;(ii) section 29(1) of the act is very widely worded. the existence of respondent bank (primary co-operative agriculture & rural development bank ltd.) is mainly dependant upon the karnataka state co operative agricultural and rural development bank of which the respondent-bank is a member. therefore, guarantee given by the state government in terms of section 29(1)(c) and (d) to the parental bank enables the state government to exercise the power of nomination and nominate its representatives on the board of directors of the respondent-bank.;(b) constitution of india - article 19(1)(g) -- section 29(1)(d) of karnataka co-operative societies act, 1959 not violative of article. - karnataka stamp act, 1957.[k.a. no. 34/1957]. section 34: [cyriac joseph, c.j. & a.n.venugopala gowda, jj] imposing of penalty - trial court imposed ten times the amount of the deficient portion of the proper duty as penalty - held, the impugned order was passed by the trial court in exercise of the power under the proviso to section 34 of the karnataka stamp act, 1957. according to clause (a) of the said proviso, when the amount of the proper duty or deficient portion thereof exceeds five rupees, the penalty to be imposed is a sum equal to ten times such duty or portion. there is no discretion granted to the court to impose a lesser penalty. orderk.a. swami, j.1. in this petition under article 226 of the constitution, the petitioner has sought for quashing the order dated 19-4-1985, bearing no. cmw 53 ccb 85, passed by the state government, produced as annexure-b.2. the petitioner has also sought for an amendment to include an additional prayer to declare that section 29(1)(d) of the karnataka co-operative societies act, 1959 (hereinafter referred to as the act) is unconstitutional and to strike down the same. though the application seeking amendment is filed at the stage of hearing, since the amendment sought for is necessary, the petitioner is permitted to amend the petition and seek the relief relating to the validity of section 29(1)(d) of the act.3. the petitioner has been elected as a director of the second respondent bank on 6-10-1985. on 19-4-1985 by the impugned order, the state government has nominated on the board of directors of the second respondent-bank, respondents 3, 4 and 5 in exercise of its power under sub-section (1) of section 29 of the act.4. it is contended on behalf of the petitioner that no doubt the state government contributed certain amount towards the share capital of the second respondent-bank but subsequently on 20-11-1984 the share capital was ordered to be returned to the state government by the karnataka state co-operative agriculture and rural development bank limited. accordingly, on 24-11-1984 the second respondent-bank returned the amount of the share capital of rs. 1,20,600/-to the state government. these facts are not disputed. it is on the basis of these undisputed facts, contended that once the share capital of the state is returned, the state government ceases to have power to nominate its representatives on the board of directors of the 2nd respondent-bank. it is also further contended on behalf of the petitioner that section 29(1)(d) of the act is violative of the fundamental right guaranteed to the petitioner under article 19(1)(g) of the constitution. therefore, it is unconstitutional.5. on behalf of the state government, it is contended by sri chandrasekharaiah, learned government advocate, that no doubt the amount of the share capital of the state government has been returned by the second respondent-bank, but nevertheless the state government has not ceased to have the power under section 29(1) of the act, in as much as there is a guarantee given by the state government in respect of the debentures floated by the karnataka state cooperative agriculture and rural development bank, of which the second respondent is a member bank and from which the second respondent bank gets the money for advancing the loans to its members; that the state government has not only stood surety for the debenture amount but also for repayment of the same alone with interest. therefore, it is contended that under section 29(1)(d) of the act the state government is entitled to nominate its directors on the board of directors of the second respondent-bank. in support of this contention, learned government advocate has placed reliance on a decision of this court dated 4-2-1980 rendered in w.p. 10269/ 79 hanumegowda v. state of karnataka. it is also further submitted that w.a. 344/1980 filed against the aforesaid decision was dismissed on 8-7-1983 as not pressed.6. having regard to the aforesaid contentions, the points that arise for consideration are as follows:(1) whether the provisions of section 29(1)(d) of the act are hit by article 19(1)(g) of the constitution?(2) whether as a result of return of its share capital the state government has ceased to have power to nominate on the board of directors of the second respondent-bank under section 29(1) of the act?point no. 1:7. by any stretch of imagination it is not possible to bold that section 29(1)(d) of the act interferes with or violates the fundamental rights guaranteed to the petitioner under article 19(1)(g) of the constitution. article 19(1)(g) of the constitution guarantees to all citizens a right to practice any profession or to carry on any occupation, trade or business. how such a right is affected by the power of the state government to nominate on the board of directors of a co-operative bank or a society is beyond anybody's comprehension. the petitioner is not prevented by section 29(1)(d) of the act to practice any profession, or to carry on any occupation, trade or business which is permitted by law. section 29(1)(d) of the act, only empowers the state government to nominate on the board of directors of a co-operative bank or a co-operative society regarding which it has *hanumegowda v. state of karnataka guaranteed the repayment of principal and payment of interest on loans and advances to the co-operative societies. thus, no right of the petitioner is affected by section 29(1)(d) of the act. it does not come in the way of the petitioner to have himself elected as a director of a co-operative society. it must also be remembered that the right which the petitioner claims is that as a director of the 2nd respondent-bank he is entitled to be elected as president or vice-president of the board of directors of the 2nd respondent-bank and that right is affected by reason of nomination by the state government of its nominees on the board of directors of the 2nd respondent-back. such a right being a creation of the statute and as such it is governed by the provisions of the statute. when the statute creates a right it is also entitled to impose conditions. therefore, the power of the state government to nominate on the board of directors of a co-operative bank or a co-operative society on fulfilling the conditions laid down in section 29(1) of the act cannot be held co be violative of article 19(1)(g) of the constitution. accordingly, point no. 1 is answered in the negative.point no. 2:8. this is covered by a decision of this court in w.p. 10269 of 1979, dated 4-2-1980. the relevant portion of the judgment is as follows:'the 2nd respondent-bank being the primary land development bank ltd., is governed by the provisions contained in chapter xi of the act. section 76b of the act provides that there shall be a state land development bank for slate of karnataka and as many primary land development banks as may be deemed necessary. section 76(b) defines 'land development bank' means co-operative land development bank registered or deemed to be registered under the act and admitted as a member of the state land development bank and includes such class or classes of co-operative societies as may be notified by the registrar and admitted as members of the state land development bank. thus it is clear that the 2nd respondent-bank is a member of the state land development bank. section 79 of the act provides for issue of debentures by the state land development bank in the discharge of its function as land development bank with the previous sanction of the state government and the trustees and subject to such terms and conditions as the state government may impose. the debentures may be issued either on the security of - (a) mortgage or mort-gages already held or (b) mortgage or mortgages to be acquired; or (c) partly on mortgage held and partly to be acquired ; or (d) the guarantee of the state government guaranteeing the full amount of principal and interest on debentures until the date of complete discharge of the debentures or (e) partly on mortgages held or to be acquired partly on the government guarantee for the principal and interest till the complete discharge of the debentures ; and (f) properties and other assets of the land development bank.section 81 of the act provides that the principal of, and the interest on the debentures issued under section 79 shall, in respect of such maximum amount as may be fixed by the state government and subject to such conditions as it may think fit to impose, carry the guarantee of the state government. section 82 further provides for other guarantees by the state government.section 85 of the act provides that the mortgages executed in favour of the land development banks stand vested in the state land development bank. thus, the various provisions contained in chapter xi of the act, make it clear that there is a state land development bank at the apex and all the primary development banks in the state are its members. the state land development bank advances loans to the primary land development bank which in turn, advance the loans to its members. the state land development bank raises the fund by issue of debentures which are guaranteed by the state government. therefore, the state government has not only guaranteed the repayment of principal and payment of interests on loans and advances to the 2nd respondent-bank by the state land development bank, but has also guaranteed the repayment of principal and payment of interests on debentures issued by the state land development bank. thus, section 29(c) and (d) have been complied with. that being so, the contention of the learned counsel for the petitioner that the state government ceased to have any power to make the nominations to the board of directors of the 2nd respondent-bank under section 29 of act, cannot at all be accepted'.no doubt, writ appeal 344/80 was preferred against the aforesaid judgment, but it was not decided and was dismissed as not pressed. however, no reasons are shown to take a view different from the one taken in w.p. 10269/79. section 29(1) of the act is very widely worded. the existence of 2nd respondent bank is mainly dependent upon the karnataka state co-operative agricultural and rural development bank of which the 2nd respondent-bank is a member. therefore, guarantee given by the state government in terms of section 29(1)(c) and (d) to the parental bank enables the state government to exercise the power of nomination, and nominate its representatives on the board of directors of the 2nd respondent-bank. accordingly, point no. 2 is answered against the petitioner.9. for the reasons stated above, the writ petition fails and the same is dismissed.

Judgment:
ORDER

K.A. Swami, J.

1. In this Petition under Article 226 of the Constitution, the petitioner has sought for quashing the order dated 19-4-1985, bearing No. CMW 53 CCB 85, passed by the State Government, produced as Annexure-B.

2. The petitioner has also sought for an amendment to include an additional prayer to declare that Section 29(1)(d) of the Karnataka Co-operative Societies Act, 1959 (hereinafter referred to as the Act) is unconstitutional and to strike down the same. Though the application seeking amendment is filed at the stage of hearing, since the amendment sought for is necessary, the petitioner is permitted to amend the petition and seek the relief relating to the validity of Section 29(1)(d) of the Act.

3. The petitioner has been elected as a Director of the second respondent Bank on 6-10-1985. On 19-4-1985 by the impugned order, the State Government has nominated on the Board of Directors of the second respondent-Bank, respondents 3, 4 and 5 in exercise of its power under Sub-section (1) of Section 29 of the Act.

4. It is contended on behalf of the petitioner that no doubt the State Government contributed certain amount towards the share capital of the second respondent-Bank but subsequently on 20-11-1984 the share capital was ordered to be returned to the State Government by the Karnataka State Co-operative Agriculture and Rural Development Bank Limited. Accordingly, on 24-11-1984 the second respondent-Bank returned the amount of the share capital of Rs. 1,20,600/-to the State Government. These facts are not disputed. It is on the basis of these undisputed facts, contended that once the share capital of the State is returned, the State Government ceases to have power to nominate its representatives on the Board of Directors of the 2nd respondent-Bank. It is also further contended on behalf of the petitioner that Section 29(1)(d) of the Act is violative of the fundamental right guaranteed to the petitioner under Article 19(1)(g) of the Constitution. Therefore, it is unconstitutional.

5. On behalf of the State Government, it is contended by Sri Chandrasekharaiah, learned Government Advocate, that no doubt the amount of the share capital of the State Government has been returned by the second respondent-Bank, but nevertheless the State Government has not ceased to have the power under Section 29(1) of the Act, in as much as there is a guarantee given by the State Government in respect of the debentures floated by the Karnataka State Cooperative Agriculture and Rural Development Bank, of which the second respondent is a member Bank and from which the second respondent bank gets the money for advancing the loans to its members; that the State Government has not only stood surety for the debenture amount but also for repayment of the same alone with interest. Therefore, it is contended that under Section 29(1)(d) of the Act the State Government is entitled to nominate its Directors on the Board of Directors of the second respondent-Bank. In support of this contention, learned Government Advocate has placed reliance on a decision of this Court dated 4-2-1980 rendered in W.P. 10269/ 79 Hanumegowda v. State of Karnataka. It is also further submitted that W.A. 344/1980 filed against the aforesaid decision was dismissed on 8-7-1983 as not pressed.

6. Having regard to the aforesaid contentions, the points that arise for consideration are as follows:

(1) Whether the provisions of Section 29(1)(d) of the Act are hit by Article 19(1)(g) of the Constitution?

(2) Whether as a result of return of its share capital the State Government has ceased to have power to nominate on the Board of Directors of the second respondent-Bank under Section 29(1) of the Act?

POINT NO. 1:

7. By any stretch of imagination it is not possible to bold that Section 29(1)(d) of the Act interferes with or violates the fundamental rights guaranteed to the petitioner under Article 19(1)(g) of the Constitution. Article 19(1)(g) of the Constitution guarantees to all citizens a right to practice any profession or to carry on any occupation, trade or business. How such a right is affected by the power of the State Government to nominate on the Board of Directors of a Co-operative Bank or a society is beyond anybody's comprehension. The petitioner is not prevented by Section 29(1)(d) of the Act to practice any profession, or to carry on any occupation, trade or business which is permitted by law. Section 29(1)(d) of the Act, only empowers the State Government to nominate on the Board of Directors of a Co-operative Bank or a Co-operative Society regarding which it has *Hanumegowda v. State of Karnataka guaranteed the repayment of principal and payment of interest on loans and advances to the Co-operative Societies. Thus, no right of the petitioner is affected by Section 29(1)(d) of the Act. It does not come in the way of the petitioner to have himself elected as a Director of a Co-operative Society. It must also be remembered that the right which the petitioner claims is that as a Director of the 2nd Respondent-Bank he is entitled to be elected as president or vice-president of the Board of Directors of the 2nd Respondent-Bank and that right is affected by reason of nomination by the State Government of its nominees on the Board of Directors of the 2nd Respondent-Back. Such a right being a creation of the statute and as such it is governed by the provisions of the statute. When the statute creates a right it is also entitled to impose conditions. Therefore, the power of the State Government to nominate on the Board of Directors of a Co-operative Bank or a Co-operative Society on fulfilling the conditions laid down in Section 29(1) of the Act cannot be held co be violative of Article 19(1)(g) of the Constitution. Accordingly, Point No. 1 is answered in the negative.

POINT NO. 2:

8. This is covered by a decision of this Court in W.P. 10269 of 1979, dated 4-2-1980. The relevant portion of the Judgment is as follows:

'The 2nd Respondent-Bank being the Primary Land Development Bank Ltd., is governed by the provisions contained in Chapter XI of the Act. Section 76B of the Act provides that there shall be a State Land Development Bank for Slate of Karnataka and as many Primary land Development Banks as may be deemed necessary. Section 76(b) defines 'Land Development Bank' means Co-operative Land Development Bank registered or deemed to be registered under the Act and admitted as a member of the State Land Development Bank and includes such class or classes of co-operative societies as may be notified by the Registrar and admitted as members of the State Land Development Bank. Thus it is clear that the 2nd Respondent-Bank is a member of the State Land Development Bank. Section 79 of the Act provides for issue of debentures by the State Land Development Bank in the discharge of its function as Land Development Bank with the previous sanction of the State Government and the trustees and subject to such terms and conditions as the State Government may impose. The debentures may be issued either on the security of - (a) mortgage or mort-gages already held or (b) mortgage or mortgages to be acquired; or (c) partly on mortgage held and partly to be acquired ; or (d) the guarantee of the State Government guaranteeing the full amount of principal and interest on debentures until the date of complete discharge of the debentures or (e) partly on mortgages held or to be acquired partly on the Government guarantee for the principal and interest till the complete discharge of the debentures ; and (f) properties and other assets of the Land Development Bank.

Section 81 of the Act provides that the principal of, and the interest on the debentures issued under Section 79 shall, in respect of such maximum amount as may be fixed by the State Government and subject to such conditions as it may think fit to impose, carry the guarantee of the State Government. Section 82 further provides for other guarantees by the State Government.

Section 85 of the Act provides that the mortgages executed in favour of the Land Development Banks stand vested in the State Land Development Bank. Thus, the various provisions contained in Chapter XI of the Act, make it clear that there is a State Land Development Bank at the apex and all the Primary Development Banks in the State are its members. The State Land Development Bank advances loans to the Primary Land Development Bank which in turn, advance the loans to its members. The State Land Development Bank raises the fund by issue of debentures which are guaranteed by the State Government. Therefore, the State Government has not only guaranteed the repayment of principal and payment of interests on loans and advances to the 2nd Respondent-Bank by the State Land Development Bank, but has also guaranteed the repayment of principal and payment of interests on debentures issued by the State Land Development Bank. Thus, Section 29(c) and (d) have been complied with. That being so, the contention of the Learned Counsel for the petitioner that the State Government ceased to have any power to make the nominations to the Board of Directors of the 2nd Respondent-Bank under Section 29 of Act, cannot at all be accepted'.

No doubt, Writ Appeal 344/80 was preferred against the aforesaid judgment, but it was not decided and was dismissed as not pressed. However, no reasons are shown to take a view different from the one taken in W.P. 10269/79. Section 29(1) of the Act is very widely worded. The existence of 2nd respondent Bank is mainly dependent upon the Karnataka State Co-operative Agricultural and Rural Development Bank of which the 2nd respondent-Bank is a member. Therefore, guarantee given by the State Government in terms of Section 29(1)(c) and (d) to the parental Bank enables the State Government to exercise the power of nomination, and nominate its representatives on the Board of Directors of the 2nd respondent-Bank. Accordingly, Point no. 2 is answered against the petitioner.

9. For the reasons stated above, the Writ Petition fails and the same is dismissed.