Kerala High Court
Kadakam Service Co-Operative Bank Ltd. vs Narayana Bhat on 27 January, 2004
Equivalent citations: AIR2004KER266, 2004(2)KLT179, AIR 2004 KERALA 266, ILR(KER) 2004 (2) KER 502 (2004) 2 KER LT 179, (2004) 2 KER LT 179
Author: K. Padmanabhan Nair
Bench: K. Padmanabhan Nair
JUDGMENT Cyriac Joseph., J.
1. This Writ Appeal is filed against the judgment dated 6.11.2003 in W.P.(C) No. 19948 of 2003. The appellants are respondents 1 and 2 in the Writ Petition. The respondents herein are the petitioner and the third respondents in the writ petition.
2. The first appellant, Kadakam Co-operative Bank Limited, No. C.99 {hereinafter referred to as "the Bank") is a society registered under the Co-operative Societies Act, 1969. The first respondent M. Narayana Bhat, was a member of the Bank. At the time of his admission as a member of the Bank, the first respondent paid Rs. 10/- as individual share value. Later, on 27.3.1999 the general body of the Bank amended the bye-laws of the Bank, enhancing the nominal value of one share to Rs. 50/-. The amendment was approved by the second respondent, Joint Registrar of Co-operative Societies. As per the amended bye-laws a period of six months was allowed to the existing members to enhance their share value. Accordingly, the Bank published a notice calling upon the existing members to pay the difference in share value in terms of the amended bye-laws before 20.4.2000. On the basis of a resolution passed by the general body, the time was subsequently extended upto 20.7.2000. However, the first respondent did not pay the difference in share value within the stipulated time. Long after the expiry of the time for paying the difference in share value, the first respondent submitted Ext.P1 representation dated 2.1.2003 requesting the Bank to receive the balance share value. The Bank sent Ext.P2 reply dated 6.1.2003 rejecting the request on the ground that the first respondent was bound to pay the amount within the time granted by the general body and that having failed to do so, he ceased to be a member of the Bank and that he will have to file a fresh application for obtaining membership. Thereupon the first respondent submitted Ext.P3 petition dated 10.3.2003 demanding information regarding the newspapers in which the notice of the meeting of the general body and the decision of the general body were published. No reply was given by the Bank. Hence, first respondent filed the Writ Petition praying for quashing Ext.P2 and for a direction to the second respondent in the writ petition to allow the petitioner to remit the additional share amount and accept payment.
3. A counter affidavit was filed by respondents 1 and 2 opposing the prayers in the writ petition. According to the said respondents, on account of his failure to remit the difference in the share value within the time stipulated by the general body, the first respondent ceased to be a member of the Bank and the Bank is not legally bound to accept the additional share amount offered by the first respondent long after the expiry of the time fixed by the general body. It was contended that the Writ Petitioner could make a fresh application for membership and that it would be considered in accordance with law by the Board of Directors of the Bank.
4. In the impugned judgment, the learned Single Judge took the view that in the absence of any provision in the Rules regarding any time limit, an existing member can pay the balance share amount at any time and enjoy the rights of a full member. According to the learned Single Judge, the time limit, if any, prescribed by the general body can only be directory so as to alert all the members to pay the amount which will help enhancement of the share capital and if a member offers to pay the balance amount after the time limit, the same cannot be rejected. The learned Single Judge directed the second respondent to accept the balance share amount from the petitioner if he pays the same within one month from the date of judgment. Aggrieved by the above direction in the judgment, respondents 1 and 2 in the Writ Petition have filed this appeal.
5. It is not disputed that the bye-laws were amended enhancing the share value of the Bank. It is also riot disputed that the amendment was registered by the Joint Registrar of Co-operative Societies. It is still not disputed that the writ petitioner did not pay the difference in share value within the time allowed for the purpose. Hence, the only question is whether the writ petitioner is entitled to pay the difference in share value after the date fixed by the general body and whether the appellants are bound to accept the belated payment.
6. According to Rule 16(1)(c) of the Kerala Co-operative Societies Rules, no person shall be admitted as a member of a society unless he has fulfilled all conditions laid down in the Kerala Co-operative Societies Act, the Kerala Co-operative Societies Rules and the bye-laws of the Bank. As per the bye-laws of the Bank, an applicant for membership has to pay the value of the share. Admittedly the first respondent had paid the value of the share at the time of his admission and ever since his admission as a member of the Bank he had been enjoying the rights as a member. Consequent on the amendment enhancing the share value of the Bank, every existing member was bound to pay the difference in share value if he wanted to continue as member. Unless the difference in share value is paid by an existing member, he is not entitled to continue as a member of the Bank. But what is the process by which an existing member ceases to be a member or is removed from membership on account of his failure to pay the difference in share value? Naturally, such a member can be removed from the membership of the Bank only by following the procedure laid down under the provisions of the Kerala Co-operative Societies Rules.
7. As per Rule 16(3) of the Kerala Co-operative Societies Rules, where a person already admitted to membership is seen to have been ineligible for membership at the time he was so admitted as a member or if he subsequently becomes ineligible for membership, the Committee of the Society may remove the person from membership after giving him an opportunity for making his representation, if any, and the person concerned shall thereupon cease to be a member of the society. As per Rule 16(4), where a member of a society becomes ineligible to continue as such, the Registrar may on his own motion or on a representation made to him by any member of the society or by the financing Bank, by an order in writing declare that he has ceased to be member of the society from the date of his order. The Registrar shall give such person an opportunity to state his objection, if any, to the proposed action and if the person wishes to be heard, he shall be given an opportunity to be heard, before passing an order as aforesaid. Where an existing member fails to pay the additional value of the share consequent on the enhancement of the share value, he becomes ineligible for membership and to continue as member and hence he can be removed from membership either under Rule 16(3) or under Rule 16(4). Till he is so removed, he will not cease to be a member.
8. Admittedly the first respondent has not been removed from the membership of the Bank either under Rule 16(3) or under Rule 16(4). Hence it cannot be said that consequent on his failure to pay the additional share value he ceased to be a member or that he will have to apply for fresh membership. The only effect of his failure to pay the additional share value is that until he pays the additional share value, he will not be entitled to exercise any of the rights of a member of the Bank. But once he is removed from the membership following the procedure under Rule 16(3) or under Rule 16(4), he ceases to be a member and if he again wants to be a member of the Bank, he will have to make a fresh application for membership. Since the first respondent has not been removed from the membership either under Rule 16(3) or under Rule 16(4), the Bank could not have refused to accept the difference in share value, eventhough it was submitted by him belatedly. At the same time until he pays the additional share value, the first respondent cannot exercise the rights of a member. We are justified in taking such a view in the light of the provisions contained in Section 19 of the Kerala Co-operative Societies Act which reads thus:
"19. Member not to exercise rights till due payment made:- No member of a society shall exercise the rights of a member unless he has made such payments to the society in respect of membership or has acquired such interest in the society, as may be prescribed by the rules or the bye-laws."
The expression "such payments to the society in respect of membership" includes the extra amount to be paid by a member on account of any subsequent amendment to the bye-laws increasing the share amount. Hence a member who fails to pay the difference in share value within the stipulated period will remain to be a member in name without any rights of a member until he is duly removed from membership following the procedure laid down under Rule 16(3) or under Rule 16(4) of the Kerala Co-operative Societies Rules. To this extent we disagree with the learned Single Judge.
9. Hence, we do not find it necessary to interfere with the direction of the learned Single Judge to the second respondent (second appellant) to accept the balance share amount from the petitioner (first respondent), learned counsel for the first respondent submits that on the basis of the judgment, the first respondent offered to pay the balance share amount on 1.12.2003, but the appellants refused to accept the same. Learned counsel for the appellants submits that the amount could not have been accepted in view of the decision of the appellants to file this appeal. Hence, it is directed that if the first respondent pays the balance share amount within one week from today, the same shall be accepted by the appellants.
10. The impugned judgment will stand modified to the above extent.