GUJARAT STATE COOPERATIVE UNION & Ors. v. STATE OF GUJARAT & Ors.

Judgment

1. Petitioner-Gujarat State Cooperative Union, a State level body, which was set up in the year 1960 for promotion and development of the cooperative movement in the State of Gujarat as mentioned in the petition, is before this Court. SCA/3854/2000 JUDGMENT The petitioner is aggrieved by order dated 13th March 2000 at Annexure-A passed by the Registrar, Cooperative Societies, Gujarat State, whereby the Registrar has asked petitioner to deposit an amount of Rs.44.60 lakhs towards the principal amount of loan, due as on 31st March 1999 and a sum of Rs.81,04,175/- towards interest, as per the terms and conditions laid down in Resolution bearing No.GCU-1188/M-64/G(1) dated 19th November 1991, a copy of which is produced at Annexure-R-1 with the affidavit-in-reply filed

on behalf of respondent no.1 by one Shri A.M. Patel, Deputy Secretary, Agriculture and Cooperation Department. The Registrar also ordered that the said amount be recovered as arrears of land revenue under Section 157 of the Gujarat Cooperative Societies Act, 1961 (hereinafter referred to as 'the Act'). The petitioner also challenged order dated 31st March 2000 passed by the Registrar, Cooperative Societies, Gujarat State, whereby SCA/3854/2000 JUDGMENT he has ordered for recovery of an amount of Rs.44.60 lakhs towards the principal as on 31st March 1999 and an amount of Rs.81,04,175/- towards interest; and in view of contents of Government Resolution bearing No.GCU-1188/M- 64/G(1) dated 19th November 1991, the aforesaid amount– principal as well as interest– having become time barred (as the amount is not paid within the stipulated time for payment), is liable to be recovered along with penal interest and, therefore, the total principal amount due is Rs.71 lakhs as on 31st March 1999 with interest of Rs.81,04,175/- and penal interest of Rs.37,500/-, is required to be recovered. The amount is ordered to be recovered by way of arrears of land revenue under Section 157 of the Act.

2. Mr.K.G. Vakharia, learned Senior Counsel appearing with Mr.M.K. Vakharia for petitioner, vehemently submitted that petitioner is a federal cooperative society. It is a State level cooperative union and it is engaged in imparting cooperative education SCA/3854/2000 JUDGMENT and training to the cooperators in the State of Gujarat. It is also submitted by learned Senior Counsel that in fact petitioner is discharging a function, which otherwise is required to be discharged by the State. The learned Senior Counsel submitted that this function is entrusted by the State Government. The learned Senior Counsel submitted that the activity of imparting cooperative education is carried on, on behalf of the State and, therefore, for discharging such duties/ functions, it is the State who is required to make available the funds. The learned Senior Counsel submitted that it was in this regard that the amount was made available by Resolution bearing No.GSS/1188/M/64-G.1 dated 31st March 1989 and also Resolution bearing No.GSS-1189-2572-G dated 18th November 1989. The learned Senior Counsel submitted that the amount of Rs.20 lakhs and Rs.51 lakhs made available by these two Resolutions respectively is nothing but a grant for enabling the petitioner to discharge function SCA/3854/2000 JUDGMENT of imparting cooperative education, on behalf of the State. The learned Senior Counsel submitted that earlier the position was different and petitioner had a source of income from which the petitioner was meeting with the expenses of discharging these functions, on behalf of the State. It was with a change in scenario that the petitioner was rendered without any income and, therefore, petitioner approached the Government for 'grant' or in the event, the Government is not ready and willing to make available the funds by way of 'grant', a request was that the funds be made available by way of a 'loan- without interest'.

2.1 The learned Senior Counsel invited attention of the Court to the aforesaid two Resolutions dated 31st March 1989 and 18th November 1989, wherein this particular aspect is referred to and the factum of the request of petitioner that the amount be made available either as a 'grant' or a 'loan–without interest', is mentioned in no uncertain terms. SCA/3854/2000 JUDGMENT

2.2 The learned Senior Counsel submitted that though it was mentioned in those two Resolutions that conditions on which the aforesaid loan of Rs.20 lakhs and Rs.51 lakhs is made available to the petitioner, will be intimated to petitioner, were never intimated. The learned Senior Counsel, submitted that in fact the petitioner was never in know of Resolution dated 19th November 1991 and it was made available to petitioner for the first time along with the affidavit-in-reply filed on behalf of respondent no.1, affirmed on 16th March 2007.

2.3 The learned Senior Counsel submitted that, that been so, the terms and conditions which were never communicated to petitioner, cannot be held to be binding to petitioner and, therefore, to ask the petitioner to pay interest on the amount of loan which was granted by the aforesaid two Resolutions dated 31st March 1989 and 18th November 1989, cannot be held to be legal. At this juncture, the SCA/3854/2000 JUDGMENT learned Senior Counsel submitted that the principal amount is already paid by the petitioner as it was a condition made at the time of granting interim relief by order dated 04th March 2003. He submitted that in view of the aforesaid facts i.e. petitioner-Union discharging the duties/functions which are otherwise required to be discharged by the State, as a welfare State, the State must waive the demand of interest on the amount in question.

2.4 The learned Senior Counsel submitted that besides the aforesaid submission, the petitioner is having other submissions to make. He submitted that the respondents are restrained by 'promissory estoppel' from demanding the aforesaid amount, more particularly, interest amount as the petitioner was all the way under an impression that its request of allocating grant or sanctioning a 'loan-without interest', was being acceded to, when the Government sanctioned loan of Rs.20 lakhs and Rs.51 lakhs SCA/3854/2000 JUDGMENT by the aforesaid two Resolutions. The learned Senior Counsel submitted that after having sanctioned loan on 31st March 1989 and 18th November 1989, and thereafter communicating to the petitioner by a Government Resolution dated 26th October 1990 that the State Government has sanctioned 'interest free loan' of Rs.20 lakhs and Rs.51 lakhs to petitioner- Union, a copy of which is produced at Annexure-N, it is not open to the Government to say that the aforesaid loans were at the interest of 12% per annum. He submitted that the Government cannot be allowed to demand the interest. The learned Senior Counsel invited attention of the Court to Resolution dated 26th October 1990, wherein it is specifically mentioned that : “The State Government has sanctioned 'interest free loan' of Rs.20/- lakhs and Rs.51 lakhs to the Gujarat State Cooperative Union, Ahmedabad vide Government Resolution dated 31.3.89 & SCA/3854/2000 JUDGMENT dtd.18.11.89 cited at Sr.No.1 & 2 above respectively, in preamble. .. ..” (emphasis supplied) On perusal it is noticed that by this Resolution, the Government undertook an exercise of opening a new sub-head under the Major Head '6425 – Loans for Cooperation'.

2.5 The learned Senior Counsel submitted that it is important to note that even in affidavit- in-reply the Government is not able to explain this situation. He submitted that the deponent has branded it as an inadvertence. In paragraph no.9 of the affidavit-in-reply, this particular aspect is dealt with by deponent Shri A.M. Patel, Deputy Secretary, Agriculture and Cooperation Department. For ready perusal, the contents of paragraph no.9 are reproduced, which reads as under: “9. It is submitted that whenever the State Government sanctions any loan or grant to any institution, it is required to create a sub head of SCA/3854/2000 JUDGMENT account. The said sub head is also required to be approved by Finance Department. In the present case also the State Government vide Circular dated 26.10.1990 had opened new sub head of account and while opening this sub head, it was sheer inadvertence that the words “Interest Free” were mentioned in the said circular dated

26.10.1990. Having realized the said mistake, the State Government had reconsidered entire issue and having satisfied to the effect that if was sheer mistake in mentioning words “Interest Free” in the circular dated

26.10.1990 and vide another Circular dated 23.06.1992 rectified the said mistake and deleted the words “Interest Free” from circular dated 26.10.1990.”

2.6 The learned Senior Counsel submitted that the Government took 18 months i.e. from 26th October 1990 to 26th March 1992, to rectify the SCA/3854/2000 JUDGMENT so-called mistake. He submitted that the act is speaking for itself and cannot be allowed to stand.

2.7 The learned Senior Counsel next submitted that the act is in violation of principles of natural justice inasmuch as petitioner-Union was never heard before passing Resolution dated 19th November 1991, whereby the terms and conditions were settled to govern loan sanctioned vide Resolutions dated 31st March 1989 and 18th November 1989.

2.8 The learned Senior Counsel also submitted that in sub-section (1) of Section 157 of the Act, the words are “all sums due”, which necessarily mean that it is only after an adjudication the 'sum' is determined. He submitted that in the present case, there was no adjudication at all. Even on that count, the order passed by the authorities is vitiated and liable to be quashed and set aside. SCA/3854/2000 JUDGMENT

3. Having considered the submissions of the learned Senior Counsel appearing with Mr.M.K. Vakharia for petitioner, the Court finds that the same are not acceptable. Even if it is true that the functions/duties discharged by petitioner-Union are otherwise required to be discharged by the State Government, that does not necessarily make it mandatory for the State Government to allocate grant or to sanction interest free loan. In the opinion of this Court, the issue involved in the matter is as to whether the loan sanctioned by Government Resolutions dated 31st March 1989 and 18th November 1989 was 'interest free' or not. Having perused Annexure-M, Resolution dated 31st March 1989 and Annexure-L Resolution dated 18th November 1989, it is clear that the Government did not allocate the 'grant' or sanction 'interest free loan', otherwise this very fact would have been indicated in the body of both these aforesaid Resolutions. On the contrary, it is specifically mentioned in paragraph no.2 of both these SCA/3854/2000 JUDGMENT Resolutions, 'the terms on which loan is sanctioned will be communicated hereafter'.

4. Coming to Resolution dated 26th October 1990, wherein it is stated that the State Government has sanctioned 'interest free loan', on the face of it, it is an error inadvertent. It appears that while reproducing the factum of request for loan as can be seen in the body part of Resolutions dated 31st March 1989 and 18th November 1989, it was mentioned, 'the representation of the petitioner-Union was to either allocate 'grant' or sanction 'interest free loan'', the inadvertent mistake has crept in. In any case this inadvertent mistake was corrected by Resolution dated 26th March 1992 and not only that, even prior thereto a Resolution dated 19th November 1991 was passed, wherein the terms and conditions were prescribed. That being so, to say that once a mistake is committed, it cannot be rectified, is an argument which cannot be accepted by this Court. SCA/3854/2000 JUDGMENT So far as 'promissory estoppel' is concerned, the said principle will have no application to the facts of present case. In the present case, the petitioner-Union has not acted adverse to its interest relying upon a promise made by the Government and, therefore, to say that the principle of 'promissory estoppel' applies, cannot be accepted by this Court. In fact, right from the beginning, the request of petitioner-Union was either to allocate 'grant' or in the event if it is not possible for the Government to allocate the grant, to provide a 'loan-without interest'. The Government taking into consideration the factors which it would have found relevant decided not to allocate 'grant', and to sanction the 'loan-without interest'. The Government sanctioned the loan with interest – on conditions which are set out in Government Resolution dated 19th November 1991. SCA/3854/2000 JUDGMENT The submission that the act is violative of 'principles of natural justice', is also not found without any substances, inasmuch as the petitioner knew about sanction of loan in the year 1989 when the Resolutions dated 31st March 1989 and 18th November 1989 were passed, wherein it was specifically mentioned in paragraph no.2 that the terms and conditions of grant of loan will be decided later on, it was obligatory on the part of petitioner to know about those terms and conditions; and if the petitioner had undertaken the said exercise, the petitioner- Union would have come to know about Resolution dated 19th November 1991, about which the petitioner is pleading ignorance. If the petitioner could know about Resolution dated 26th October 1990, there is no reason why petitioner should not know about Resolution dated 19th November 1991 and, therefore, the submission about violation of principles of natural justice, cannot be accepted by this Court. SCA/3854/2000 JUDGMENT

5. So far as the submission regarding provisions of Section 157 of the Act is concerned, the same do not find favour with this Court. The provision of recovery of sums due to Government, does not prescribe the authority who will adjudicate upon the issue which is the subject matter of this petition. Section 157(1) of the Act says that : “157(1) : Unless otherwise provided by this Act, all sums due from a society or from an officer or member or past member or a deceased member of a society as such to the Government, may be recovered as arrears of land revenue.” The said provision does not deal with adjudication part at all and, therefore, there is no question of the Registrar being not empowered referring to Section 157 of the Act. Only part which is applicable to the present case is that, the Registrar in his orders SCA/3854/2000 JUDGMENT dated 13th March 2000 and 31st March 2000 has said that the amount is liable to be recovered as arrears of land revenue. The Court finds no flaw in those two orders on this count also.

6. So far as the next submission regarding the phrase used “all sums due” is concerned, the submission is that it is only after the amount is adjudicated upon or ascertained that Section 157 can be resorted to. In the present case, it is a matter of account and the Registrar has taken care of mentioning that an amount of Rs.44.60 lakhs towards principal and Rs.81,04,175/- towards interest as on 31st March 1999 is due and payable. If at all the petitioner had any grievance about quantification of amount, that can be agitated before the concerned authority and not before this Court.

7. In view of aforesaid discussion, the petition fails. Rule is discharged with no order as to costs. SCA/3854/2000 JUDGMENT

8. At this juncture, the learned Senior Counsel appearing with Mr.M.K. Vakharia for petitioner, prays for continuing interim relief granted earlier.

9. Earlier the interim relief was granted on a condition that the petitioner-Union pays principal amount. The fact that petitioner- Union has paid the principal amount, the request is granted. The interim relief is ordered to be continued for six months. (Ravi R. Tripathi, J) Aakar