State of Kerala vs Palghat Dist. Co-operative Rubber Mkg. Society

A.R. Lakshmanan, J.—Heard learned Government Pleader Mr. P.K. Ravikrishnan for the appellants and Mr. M. Krishna Kumar for the respondent. This Writ Appeal is directed against the judgment of Sankarasubban, J. in O.P. No. 16537 of 1995 dated 9th February, 1998. The respondent Society filed the Original Petition to quash all proceedings pursuant to Exts. P5, P7 and P9 levying ''guarantee commission'' from the society with regard to the loans sanctioned to the society by Palghat District Co-operative Bank, by the issuance of a Writ in the nature of certiorari and for other consequential reliefs. In the instant case, the respondent Society was selected for establishing a crumb rubber factory at Mannarghat, as one of the nine new factories included in the rubber processing component of the World Bank aided Kerala Agricultural Development Project (KADP) with the approval of the Rubber Board and the World Bank Technical Consultants. The National Bank for Agriculture and Rural Development, Bombay (NABARD) agreed to refinance the scheme. As per its letters dated 23-9-1983 and 8-11-1983, the NABARD agreed, subject to the terms and conditions specified therein, to provide refinance of Rs. 59.64 lakhs to the Kerala State Cooperative Bank and the State Co-operative Bank, in turn, agreed to sanction a term loan of Rs. 74.55 lakhs to the Palghat Co-operative Central Bank (now known as Palghat District Co-operative Bank), which granted a loan of Rs. 96.89 lakhs to the respondent Society. One of the specific conditions for the refinance by the NABARD vide condition No. 7 under Schedule 1-A to Ext. P1 was that the Government of Kerala should guarantee the loans fully and unconditionally in respect of repayment of the principal and payment of interest thereon and that the Government shall not charge guarantee fee/commission in respect of the guarantees to be provided by it under the scheme.

Pursuant to the above scheme, the State Co-operative Bank sanctioned a long term loan of Rs. 74.55 lakhs to the Palghat Co-operative Central Bank to finance the petitioner society (respondent herein). The same conditions regarding Government guarantee stipulated by NABARD was incorporated by the State Co-operative Bank also in the conditions stipulated by them in the schedule attached to their letter dated 10-12-1983 addressed to the Palghat Co-operative Central Bank, marked in the original petition as Ext. P3. The Government, considering the report of the Registrar of Co-operative Societies regarding the financial soundness of the respondent Society to meet the financial requirement and examining the proposals, accepted the conditions stipulated by NABARD in Exts. P1 and P2 letters and decided to stand guarantee to the Palghat Co-operative Central Bank Ltd. on behalf of the respondent society for the repayment of the loan amount of Rs. 96.89 lakhs and the interest thereon to be sanctioned by the Palghat Co-operative Central Bank to the respondent Society. The Government order in this regard dated 21-8-1984 is marked as Ext. P4 in the original petition. On 5-6-1991 the respondent society was served with a copy of a letter Ext. P5 dated 30-5-1991 from the Joint Registrar of Co-operative Societies, Palghat to the Assistant Registrar of Co-operative Societies, Palghat wherein it was stated that the Government had ordered to levy ''guarantee commission''. Since the levying of guarantee commission was opposed to the conditions stipulated by NABARD and since the said conditions were accepted by the Government by-Ext. P4 Government order, the respondent filed a representation Ext. P6 to the Government requesting not to levy guarantee commission. However, the Government, by order dated 19-8-1992 ordered that the postponement of the payment of guarantee commission will be considered on request and on merits on an year to year basis. Copy of the said order is marked as Ext. P7. The respondent society again requested the Government not to levy the guarantee commission as provided in the terms and conditions of NABARD, by Ext. P8 representation dated 10-12-1993. While so, a demand notice was served on 5-10-1995 requiring the respondent society to pay Rs. 6,54,569.22 as guarantee commission for the period from 1985-86 to 1994-95 within 15 days. Aggrieved by the said demand, the respondent society preferred the above original petition for the reliefs mentioned above.

The State Government filed a counter affidavit in the Original Petition stating that the NABARD and the Rubber Board as also the State Co-operative Bank unilaterally stipulated that the Government guarantee is free of guarantee commission, but the general conditions for standing guarantee to such loan as sanctioned to the respondent Society are part of the policy decision of the Government in standing guarantee to such loans and it was not possible for the Government to exempt the respondent Society alone from the purview of the above policy. Hence, Government issued Ext. P7 order. It is the specific case of the Government that the Government had never agreed that the guarantee is free of commission. The contentions raised in the counter affidavit have been controverted by the respondent society by filing a reply affidavit.

The learned single Judge, after referring to Exts. P1, P4, P6, P7 and P9, and after hearing both sides, came to the conclusion that the State Government have agreed not to charge guarantee commission in respect of guarantee to be provided by it under the scheme and that therefore the Government is precluded from claiming any commission for the guarantee. The learned single Judge allowed the Original Petition holding that the Government had agreed that guarantee Commission will not be realised and quashed Ext. P9.

Heard Government Pleader for the appellants and the counsel for the respondent. The only question which arises for consideration is as to whether the State Government is entitled to levy guarantee commission in respect of the guarantee provided by it to the loan sanctioned to the respondent society under the NABARD Scheme. Our attention was drawn to Ext. P1 and the other documents produced along with the original petition. A reading of Ext. P1 and the Schedule I attached thereto will clearly show that one of the conditions stipulated by NABARD for extending refinance assistance was that the State Government shall guarantee the loans fully and unconditionally in respect of repayment of the principal and payment of interest therein and that the State Government shall not charge guarantee fee/commission in respect of guarantees to be provided by it under the scheme. By Ext. P3, the State Co-operative Bank has also stipulated similar conditions for the refinance assistance extended by it. The terms and conditions mentioned in Schedule I to Ext. P3 and particularly clause 8(f) would clearly go to show that the State Government was not to charge any guarantee commission for the guarantee provided by it under the Scheme. Paragraphs 4 and 5 of Ext. P4 also clearly refer to the scheme formulated by NABARD and the terms and conditions stipulated by it for providing refinance assistance. In para.5 of Ext. P4 it is specifically stated that the Government had examined the proposals and approved the conditions stipulated by NABARD in their letters dated 23-9-1983 and 8-11-1993 (Exts. P1 and P2) and was pleased to stand guarantee to the Palghat Co-operative Central Bank Ltd. on behalf of the respondent Society for the repayment of the loan amount of Rs. 96.89 lakhs, to be sanctioned to the respondent society for setting up of a Crumb Rubber Factory at Mannarghat. A close scrutiny of Exts. P1 to P4 and other relevant records placed before us will clearly show that the Government is precluded from claiming any commission for the guarantee provided by it for the loan sanctioned to the respondent society. We are of the opinion that the Government has acted against the terms and conditions stipulated by NABARD, which was approved by the government by Ext. P4 order. The Government cannot now turn round and take a stand that they are entitled to levy commission for the guarantee provided by it. In view of the above, the learned single Judge has rightly come to the conclusion that the Government is precluded from claiming any commission for the guarantee provided by it for the loan sanctioned to the respondent society under the scheme formulated by NABARD.

The judgment of the learned single Judge is perfectly in order. We, therefore, confirm the same and dismiss this Writ Appeal.