Kerala High Court
George Kokkattumundayil vs Joint Registrar Of Co-Operative ... on 24 February, 1995
Equivalent citations: AIR1996KER26, AIR 1996 KERALA 26, 1996 COOPTJ 99 (1995) ILR(KER) 2 KER 739, (1995) ILR(KER) 2 KER 739
ORDER
1. These are three petitions practically dealing with identical contentions. Although the first petition (O.P.1019/1995) is by the petitioner farmer and the other two petitions (O.P. Nos. 1174 and 2463 of 1995) are by the dealers in agricultural machineries, apart from other technical contentions and questions raised and involved, the main issue is whether the circular-dated March 30, 1989 by the Registrar of Co-operative Societies, Trivandrum and similar consequential directions issued by the concerned departments of Co-operative Societies of other concerned Districts is an infringement of the fundamental right guaranteed under Article 19(1)(g) of the Constitution of India or in the nature of a reasonable restriction justifiable under Article 19 (6) thereof.
2. Illustratively the petitioner in O.P. No. 1174/1995 is a dealer at Kasaragod in agricultural machineries such as pump sets, sprayers etc. The petitioner deals in ISI marked articles. He is the president of the Kerala Agro Machinery Dealers Association formed for the purpose of promoting the common cause and therefore the petition is filed in individual as well as representative capacity.
3. Similarly the same petitioner in the same capacity has a grievance confining to Kannur District whereas the petitioner in the third petition (O.P. 1019/1995) is a small scale farmer having his agriculture at Aralam village in Iritty.
4. The concerned District Co-operative Bank undertakes schemes for disbursement of loans to agriculturists under various refinance schemes and in such schemes of refinance, the superior banking institutions such as NABARD, the State Co-operative Bank entered into agreements with regard to the procedure of re-finance relating to the loans advanced by the District Co-operative Banks to the concerned agriculturists. The process would show that the District Co-operative Bank carries out the actual disbursement of the loan amounts. It is in regard to this process of disbursement of loans, the concerned Registrar of Co-operative Societies has issued the impugned circulars. The circulars specify that Regional Agro Industrial Co-operative Ltd. (RAIDCO) is the only co-operative society in the State having a network of branches in the entire State for distribution of all sorts of agro machineries like power tillers, tractors, sprayers, pump sets etc. It is also recorded in the said circular that RAIDCO has dealership of almost all important pump are manufacturers in the country. These petitions relate to pump sets only. It further records that in addition RAIDCO has set up its own factory at Palakkad with the assistance of National Credit Development Corporation, especially in the manufacture of pump sets in collaboration with the foster brothers.
5. The circular record policy decisions to encourage patronisation of RAIDCO as a matter of policy with regard to the loans sanctioned to agriculturists through the primary societies for the purpose of agricultural implements, by introducing a condition that the loans are to be routed only through RAIDCO because it is assisted and financed by the Government substantively. The circular also records that RAIDCO functions properly with good basis and therefore the circular directs all the banks, Government Banks, District Co-operative Banks and Service Co-operative Banks -- in the State to patronise RAIDCO to the full extent in fairness to private dealers. It adds that at any rate not less than 75% of the total requirement of agro machineries under the scheme financed by the banks or the society should be purchased through RAIDCO.
6. The contention of the dealers is that the issuance of such a circular is a violation of the fundamental right of the dealer under Article 19(1)(g) of the Constitution because the circular gives an illegal and unjustifiable favour of RAIDCO as against the private dealers in agro machineries outside the cooperative sector, additionally making it violative of the provisions of Article 14 of the Constitution. In this context reliance is placed on the earlier decision of this Court (Ext. P2 -- O.P.I 174/1995) which was dealing with the subject matter of identical circular also by the Registrar of Co-operative Societies dated February 10,1989 which was quashed and set aside by this Court in O.P. No. 9628/1989 holding that if the loanee has freedom to select the machinery and purchase it from the dealers of his own choice, he can purchase it from any dealers which may include RAIDCO also. Reliance is consequently placed on the said decision that in such situations relating to an act of the executive under challenge in violation of Articles 14 and 19(I)(g) of the Constitution, what is required is the satisfaction of double tests, that the classification has to be justified on the basis of an intelligible differentia having a rational nexus with the object sought to be achieved in question. Reliance is placed on the observation that the agriculturists are to get the best implements of their choice and in such a situation if preference is shown, it will have to be said that there is no nexus whatsover.
7. Factually it is placed on record that during the pendency of the writ appeal against this judgment, the impugned circular dated February 10, 1989, referred as the subject matter of O.P. No. 9628/1989, was withdrawn, rendering the observations ineffective in regard to the said circular. In the said decision it is also observed that under the then existing situation of law, the Registrar had no authority to issue such an order when he is legally empowered to supervise the activities of the society. The provisions of the Kerala State Co-operative Agricultural Development Banks Act, 1984 were also examined with reference to the powers of the Registrar thereunder to confer the grant of disbursement of loans, the Court ultimately holding that the Registrar, under the guise of the circular, cannot interfere with the freedom of the loanees.
8. In other words, in the ultimate process of considering as to whether the circulars in question in these petitions are in the nature of reasonable restrictions under Article 19(6) of the Constitution, it is urged that as normally the said decision is of a binding nature, no other decision is possible in these petitions. When these are the submissions of the learned counsel for the petitioners in these petitions, it was equally urged on behalf of the bank and the RAIDCO that the said view could not be stated to be of a binding nature in view of the fact that it does not take into consideration the correct position of law as laid down by the decisions of the Supreme Court together with the amended provisions of Rule 56 of the Kerala Co-operative Societies Rules introducing restrictions on grant of loans making it clear that subject to such terms and conditions as may be fixed on directions or guidelines as may be issued, from time to time, by the Registrar or the NABARD, the loans can be granted.
9. For a ready reference the said amendment to Rule 56(5) is reproduced hereinbelow :
"The grant of loans or advances to any members or non-members by a society shall be subject to such terms and conditions as may be fixed or directions or guidelines as may be issued, from time to time, by the Registrar or the National Bank for Agriculture and Rural Development or the Reserve Bank of India, as the case may be, by general or special order."
The learned counsel submitted that the explanatory note to this amendment introduced on August 28, 1989 is specifically introduced to empower the Registrar of Cooperative Societies or the Reserve Bank of India or the NABARD to fix the terms and conditions by general or special order and the proposed amendment is intended to achieve the above objects.
10. The judgment of this Court in O.P. No. 9628/1989 taking a view that the circular violates the fundamental right of the dealers guaranteed under Articles 14 and 19(l)(g) of the Constitution will have to be described as Sub-silentio because it will be found that the said decision fails to take into consideration the true legal position in law. Apart therefrom, it would have to be considered that the said judgment is dated March 14, 1990 taking a view that the circular issued by the Registrar is in excess of the powers available to him under the Act could not obviously consider the subsequent amendment to Rule 56(5) of the Kerala Co-operative Societies Rules, in view of the fact that the said amendment came on the statute book much thereafter on August 28, 1989. On this count also the effect of the judgment would get impaired in view of clear cut power made available to the Registrar to fix the terms and conditions in regard to the grant and distribution of loans.
10A. Article 19(1)(g) guarantees the fundamental right to practice any profession or to carry on any occupation, trade or business and, on the other hand, Article 19(6) of the Constitution empowers the said Act to make any law imposing incident of restrictions on the exercise of the said right in the interest of the general public. The provisions further enacts that nothing shall prevent the State from making any law relating to the carrying on by the State or by the Corporation owned or controlled by the State of any trade, business, industry or service to the complete or partial exclusion of citizens or other officers. In other words, the above provision relating to the justification of imposition of reasonable restrictions contemplates a law relating to any trade, business, industry or service to the complete or partial exclusion of the citizen. The above provision would take into consideration the law made by the State preventing a citizen either totally or partially.
10B. This aspect has appeared on the anvil of consideration more than once in different contexts. The Supreme Court in AIR 1981 SC 2001, M.P. Ration Vikreta Sangh Society v. State of M.P. had observed that even amongst the equal there can be unequal treatment based on an intelligible differentia having a rational relation to the object sought to be achieved. Consumers' Cooperative Societies form a distinct class by themselves. Benefits and concessions granted to them ultimately benefit persons of small means and promote social justice in accordance with the directive principles. The scheme envisaging a rule of preference really does not exclude the retail traders in violation of the provisions of the Constitution. In fact there is no fundamental right in any one to be appointed as an agent of a fair price shop under the Government Scheme and in this process if the scheme spells out preference to a co-operative society, there could be no violation sought to be urged. In an earlier decision AIR 1962 SC 386, Mannalal Jain v. State of Assam of the Supreme Court a question came up for consideration as to whether reserving certain kind of business activity in favour of co-operative societies would be violative of Articles 14 and 19(1)(g). It is observed that with reference to co-operative societies, even if they resulted in the dealers being prevented altogether from dealing in paddy, would be a reasonable restriction in public interest because it is duty of the State Government to see that the people living within its boundaries are supplied with adequate food grains and that too at a reasonable price.
10C. In yet another decision AIR 1982 SC 32, IT. Commr., Gujarat v. Ahmedabad Rana Caste Assocn. the Supreme Court had an occasion to consider the functioning of the State in relation to exercise of its executive power with reference to the provisions of Article 162 of the Constitution of India. It is observed that the State in such a situation is charged with the duty and the responsibility of carrying on of the general administration of the State and so long as the State Government does not go against the provisions of the Constitution or any law, the width and amplitude of its executive power cannot be circumscribed. The Government can carry on the administration by issuing administrative directions or instructions until the legislature makes a law in that behalf. In relation to the protection of the fundamental rights it is observed that the quintessence of our Constitution is in the rule of law and the State or its executive officers cannot interfere with the rights of others unless they can point to some specific rule of law which authorises their acts and if the object of the Act is to provide in the interest of general public certain essential commodities, reasonable restrictions are required to be understood in the context. The expression "reasonable restriction" signifies that the limitation imposed on a person in the enjoyment of the right should not be arbitrary or of an exclusive nature beyond what is required to be in the interests of justice. The test should be applied to each individual and no abstract standard or general pattern of reasonableness can be laid down as applicable to all the cases.
11. This Court also had an occasion in 1977 KLT 119, Balakrishnan v. S.T.A.T. to consider the situation with reference to a cooperative society in the matter of granting permit where a new entrant came to be preferred to such a society in accordance with the Rule 177A of the Motor Vehicles Act, 1939 then existing. This Court in that case found justification of such a preference. Apart therefrom, this Court again in 1980 KLT SN 24, Laila Beegum v. R.T.A. Quilon endorsed the preference given to an individual as satisfactory.
12. Again thereafter, still latter the Supreme Court in AIR 1984 SC 95, Viklad Coal Merchant, Patiala v. Union of India had an occasion to consider the question of preference whether it is undue or unreasonable. On the count of considerations of load of truck in regard to the provisions of Railways Act when the Railways at a particular time granted priority to the Central or State Government by the orders questioned therein, on a petition of coal merchants. It is observed that coal merchants are required to transfer coal from the colliery to their place of business and in the process of transporting is incidental to their business and in that situation even if the total ban by the Railways to accept coal for transport, there would be no violation of Article 19(1)(g) because there are other means of transport and such prohibition would have to be considered with reference to the planned and regulated movement of goods. The position that emerges would have to be stated that in a given situation preference to a particular cooperative society, just as in this case to RAIDCO, becomes justifiable it if is in public-interest.
13. Taking up the second aspect for consideration, Rule 56(5) clearly confers a legal power on the Registrar or the National Bank for Agriculture and Rural Development or the Reserve Bank of India, as the case may be, to impose terms and conditions in the nature of directions and guidelines. This amendment is introduced on August 28, 1989. The Registrar gets legal power to issue directions. These two aspects weaken the strength of the judgment dated March 14, 1990 in O.P. No. 9628/1989 (Ext.P2 in O.P.I 174/1995). It will have to be stated that not only a preference but also a total prohibition becomes justifiable as a reasonable restriction if it is in the interest of general public.
14. Certain factors that are brought on record would show that RAIDCO is a cooperative society with the primary object to supply agricultural implements including pump sets with a view to augment agricultural activities in the State. The said society stands on a different footing from private traders of pump sets in the State. It is also the duty of the State to encourage the principle of co-operation in accordance with the directive principles of the State policy enjoined in the Constitution of India. Factually it cannot be forgotten that the District Co-operative Bank is itself the financier and therefore it is in the interest of the said bank to augment the business operations and earning of profits by the society. It is but natural that larger sales of pump sets will ensure the safer return of the money advanced by the bank and will further improve the return of the money advanced by the State Government. The material placed on record provides enough material to justify the said preference, nay, absolute right in favour of the society to deal with the transaction of pump sets. The terms and conditions under which a society may receive deposits and grant loans are not fixed and are fluctuating and therefore by amendment of Rule 56(5) the powers are conferred on the Registrar to issue directions from time to time. The above position of law as discussed would also, when it goes to establish that even a law receives justifiability, should also be appreciated in the situation of considering the attack on the circular in question.
15. In the context one more question comes up for consideration. It is one thing to say that the person who has to purchase a pump set must have a right of choice and quite another thing to say that the choice should be with reference to the dealer. The agency advancing the finance will have to be understood in the context of necessary protection and assurance for repayment and in this context if a condition is to be examined requiring the loanee to purchase the article from RAIDCO only, the situation will have to be appreciated in the context that at least the farmer cannot claim to have any with regard to the dealer. It is already on record that the society is having agency of pump sets of various qualities. It is also placed on record in the counters that the RAIDCO is dealing in all kinds of pump sets and different brands suited to the needs of the farmers.
16. It is in the light of the above position the petitions of the dealers (O.P. Nos. 1174 and 2463 of 1995) would have to be considered. It cannot be said that there is any violation of fundamental rights as sought to be contended under Article 19(1)(g) of the Constitution. The above discussion shows that the circular is in pursuance of a valid legal power under Rule 56(5) of the Kerala Co-operative Societies Rules. It is in the nature of an order. Even if it had been the law, the above discussion would show that the provisions of Article 19(6) of the Constitution would justify such a law, being in interest of the public. Apart therefrom, as stated above, the dealers would not have unwanted and unprotected fundamental Tight under Article 19(1)(g) of the Constitution. On the facts that appear in these petitions the right would have to be understood as right against competition or its facet in some character. The petitioners therein cannot be said to have any justification in regard to the circular in question.
17. This takes us to the contentions of the petitioner in O.P. No. 1019/1995. The petitioner is a farmer and it is his case that the RAIDCO need not be able to satisfy his peculiar needs. It is averred by him that he intends to instal a 1.5 HP -- ISI brand pump in order to enhance agricultural production of coconut, pepper and rubber. It is his contention that there is a local problem of voltage instability rendering pump sets useless because the usual voltage oscillates between the area of the range 130 volts to 160 volts in Kannur and Kasaragod areas. As a consequence it is urged that he has made enquiries and found that his needs would not be satisfied by the RAIDCO. In the petition a reference is made to various enquiries made by him and the material collected. It is urged that the bank manager has refused the application of the petitioner on the ground that the petitioner cannot purchase the pump from the dealer of his choice, obviously basing on the impugned circular. The petitioner urges that the condition requiring him to purchase only from RAIDCO is unjustifiable especially in a situation that it will not satisfy his needs. The petitioner has approached this Court in view of the fact that the last date for utilising the scheme is February 28, 1995.
18. Ultimately in appreciating the contentions of the petitioner, what he has submitted in the context, it will have to be considered that this is one of the facilities provided to a farmer in the matter of purchasing pump sets. The facility of purchase is on the basis of purchase under loans and if certain conditions are found to be justifiable and the scheme is understandable in the context of reasonable restrictions, the impugned circular of the Registrar issued under the legal power also will have to be appreciated in the context of the situation. It cannot be presumed that RAIDCO will impose upon the farmers the pump sets which are not suitable to them. The scheme provides that the pump sets are to be given to the farmers under the supervision of the technical assistance and in the process certain amount of fairness will have to be feasible and therefore it cannot be understood that in the process the farmers will get what would be useless for them. The learned counsel appearing for the bank and the RAIDCO appreciating this contention has given assurance in regard thereto. There is an inbuilt assurance providing inspection and satisfaction of the technical personnel in the matter of selection and giving of the required pump sets. Therefore, with regard to the first aspect of preference these petitions have no merit. Certain other contentions were raised. It was urged that a writ of mandamus against the bank, which is a co-operative society, would not be maintainable. It was also urged that the preference is an internal affair with regard to the conducting of the business of the society and this aspect would not be the subject matter of the petition. It is really unnecessary to consider these aspects in view of the fact that on merits the preference is justified as discussed above. If the prayers are carefully seen, they are in the nature of mandamus. Apart therefrom, this Court has a duty to give a mould and shape to the prayers. Mandamus is in the nature of a command to set right the situation. However, in view of this aspect being unnecessary to decide, it will not be taken up for consideration in any manner.
For the above reasons these writ petitions stand dismissed. In the circumstances of the case the parties are directed to bear their own costs.