Executive Decisions Have No Authority To Meddle With Statutory Rights Which Can Only Be Curtailed In A Legal Manner: Karnataka High Court

The Karnataka High Court has quashed a circular issued by the Controller and Auditor General of India (CAG) by which it prohibited salary drawing and disbursing officers from deducting the amount due to the Accountant General's Office Employees Cooperative Bank Ltd (established by the employees of the Accountant General's Office), from the salary of the employee even if they had consented for such deduction.

A single judge bench of Justice Anant Ramanath Hegde said “The impugned clause conflicts with the binding provision of law. Thus, the Court in exercise of its writ jurisdiction can certainly strike down the said clause even if it is the policy decision, as such decision seeks to override the provision of law and seeks to take away certain rights conferred under the Statute. The right conferred under the Statute can be taken away only in the manner known to law and not by any executive decision taken by any authority which has no authority to meddle with the statutory rights.”

The petitioner Bank claimed that it was advancing the loan to its members. It is stated that some of the members are the employees of the Accountant General's office and other members of the Bank were not necessarily employees of the Accountant General's Office.

The bank contended that Section 34 of the Karnataka Co-operative Societies Act, 1959, provides for an agreement between the borrower and the Co-operative Bank, which enables the employer of the borrower to deduct the agreed amount towards repayment of the debt due to the Co-operative Society.

It stated that the said agreement was binding on the employer of the borrower under Section 34(2) of the Act of 1959, though the employer is not a party to the agreement.

Further it was said that the impugned clause curtailed the right of the petitioner Bank to enter into an agreement with the borrower to recover its debt.

The respondents opposed the plea saying that the petitioner had no locus to question the policy decision taken by respondent No.3 in excluding certain classes of Co-operatives Societies and Banks from the ambit of Section 34 of the Act of 1959.

It was also claimed that Section 34 of the Act of 1959 does not apply to respondent No.3. (CAG), it applies only if a member of a Co-operative Society is an employee of the State Government or any other institution referred to in Section 2(e) of the Act of 1959.

The bench on referring to the provisions said “If impugned clause No.v is given effect to, the agreement referred to Section 34(1) of the Act of 1959 becomes unenforceable. In such an event both Section 34(1) and 34(2) of the Act of 1959, become otiose.”

It added that once the member of a cooperative society with the prior concurrence of his employer, enters into an agreement with a Co-operative Society, such agreement creates a right in favour of a Cooperative Society to recover its dues from the salary of an employee, and the employer is bound to deduct such agreed amount from the salary.

It was added that if there is no concurrence in writing as mandated in the first proviso to Section 34 of the Act of 1959, then there is no obligation on the employer to deduct such an amount from the salary of the employee.

The Bench observed that when a law creates certain rights and obligations on the parties to an agreement, those rights, and obligations can be enforced and extinguished only in the manner recognised under the law.

The court held “Section 34 of the Act of 1959, creates the rights and obligations if certain conditions enumerated therein are fulfilled. However, 3rd respondent employer by executive order impugned in this petition directs the salary drawing officer not to honour the obligations arising under Section 34 of the Act of 1959. The 3rd respondent has no such power.”

It added “On a meaningful reading of Section 34 of the Act of 1959, there cannot be any doubt that the impugned clause No.v is per se illegal as it runs contrary to Section 34 of the Act of 1959.”

It also noted that Section 34 of the Act of 1959 excludes the operation of the persons employed in Railways as defined in Article 366 of the Constitution and Mines and Oil Fields.

The court then rejected the contention that Section 34 of the Act of 1959 applies only if the employee of the State government.

It said that Section 34 provides for an agreement by a member of a Co-operative Society who is employed anywhere to enter into an agreement with the Co-operative Society where he is a member, authorising his employer to deduct a certain amount from his salary.

Court held that the said provision cannot be read as a provision applicable only to the employees of the State Government as it enables the employee of any institution to enter into an agreement with the Co-operative Society for deducting the amount from the salary to be credited to the dues of the Society.

Allowing the petition the court clarified that the employer has the discretion to either approve or reject the proposal of the employee seeking concurrence to enter into an agreement contemplated under Section 34 of the Act of 1959.

Once such concurrence is provided then the agreement binds the employer and the employer cannot shirk the statutory obligation by issuing executive fiat contrary to law, it concluded.

Appearance: Senior Advocate P P Hegde for Advocate Sharadi S Shetty for Petitioner.

CGC B M Kushalappa FOR R1.

AGA B J Eswarappa FOR R2.

Advocate Prakash Shetty FOR R3 TO R12.

Citation No: 2024 LiveLaw (Kar) 139

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