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Judgment
V. Eswaraiah, J.—The employees who are forty one in number of the Ongole Cooperative Bank Limited, the 4th respondent herein have filed these three writ petitions questioning the proceedings issued by the said Bank in Proceedings File No. 9/2003-2003 dated 28-4-2003 in reducing their existing salaries, pursuant to the resolution taken in the General Body dated 27-4-2003 to create 2% working capital towards the administrative and contingent fund in pursuance of Rule-36 (B) of the Andhra Pradesh Cooperative Societies Rules ( hereinafter referred as ''the Rules'') for utilization of the administrative and contingent expenditure of the bank for the year 2003-2004.
In the impugned order it is that, in view of the weak financial position of the bank and in view of the provisions contained in the newly added Rule-36 (B) of the Rules, it is a statutory obligation on the part of the management of the bank to implement the resolution passed by the General Body effectively and therefore, it was decided to reduce the salaries of the employees of the bank commensurating to the amount available in the administrative and contingent fund for the year 2003-2004. It is also stated that the working capital of the bank as on 31-3-2003 is 3575.45 lakhs and the administrative and contingent charges on 2% working capital worked out to Rs. 71.51 lakhs. Accordingly, the salaries of the respect of the 69 employees of the bank were reduced from the existing gross salaries.
This Court while admitting W.P. No. 9033 of 2003 granted interim direction suspending operation of the said proceedings by order dated 6-5-2003 in W.P.M.P. No. 11578 of 2003. For non-implementation of the said order i.e. for not paying the gross salaries, Contempt Case No. 672 of 2003 has been filed. To vacate the said interim order dated 6-5-2003, W.V.M.P. No. 1893 of 2003 has been filed by the respondents.
By order dated 02-05-2003 in W.P. No. 11315 of 2003 in W.P. No. 8785 of 2003, this Court directed the respondents that the deductions towards recovery of advances paid to the petitioners shall not be made from the reduced salaries of the petitioners for a period of two months. In another writ petition 11132 of 2003, this court by order dated 16-6-2003 in W.P.M.P. No. 13895 of 2003 granted interim stay of all further proceedings in pursuance of the impugned order dated 28------4-2003. However, it was made clear that the said order does into preclude the 4th respondent bank from giving effect to the provisions of section 116-C of the A.P. Cooperative Societies Act by retrenching the persons, following the Rule of Last-cum-First go and by issuing necessary notices or proceedings as the case may be. Vacate stay petitions have been filed in all the three writ petitions to vacate the interim orders.
At the stage of considering the vacate stay petitions, a request has been made by the learned counsel appearing for the petitioners as well as the respondents to hear the main writ petitions themselves and dispose of the same. That is how these writ petitions have been heard and disposed of finally by this common order.
Sri Ravindra Rao, learned counsel appearing on behalf of the petitioners and Sri N. Sridhar Reddy contended that the 4th respondent bank has come into being in the year 1908 with an objective to provide credit facility to the needy persons in the urban limits of Ongole town on low rates of interest. It is stated that the 4th respondent bank was initially registered as a cooperative credit society in the year 1908 and subsequently converted as a bank vide licence No. ACD/A.P. 268 P in the year 1981 granted by the Reserve bank of India. It is stated that the bank is providing credit facility to the needy persons of ongole town and Pernamita village. It has also secured the deposits by offering higher rates of interest by amendment Act 21 of 1985 and act 22 of 2001, section 116-C was introduced providing for staffing pattern of the societies. The said provision inter alia provides that the society shall fixing the staffing pattern, qualifications, pay scales and other allowances for its employees with prior approval of the Registrar of the Cooperative Societies. The said section makes it clear that fixing of the staffing pattern, qualifications, pay scales and other allowances for its employees shall be subject to the condition that the expenditure towards pay and allowances of the employees shall not exceed 2% of the working capital or 30% of the gross profits in terms of actuals in a year, which ever is less. The 4th respondent bank has been functioning and conducting its affairs in such a manner as not to result in a situation reducing the pay of its employees in the process of complying with the above said conditions. It is stated that due to extraneous considerations imposed and lopsided policies of the management of the 4th respondent bank had taken a decision on 30.9.1998 to increase the staff strength by 21 persons in different categories on a false presumption that the volume of the business of the bank is increased. It is contended that the existing sanctioned strength of 50 was enough and they were able to handle the volume of the work. But without any justification whatsoever, sanctioned 21 posts and the Registrar of the Cooperative Societies also by his proceedings in RC. No. 85935/98 UB I. Dated 11.1.1999, without any reference to the statutory provisions of section 116-C of the A.P. Cooperative Societies act accorded permission for the additional post of 21 subject to the following conditions:
a) Establishment and contingent charges should be reduced to minimum of 2% of its working capital in coming 2 years
b) Overdue position has to be reduced to below minimum compared to its outstandings within 2 years period of time.
c) File Officer in the cadre of Branch Manager has to be set up with one attender (clerical) to assist him for collection work and identification of loanees, authorizing him to issue receipts for collection of loan amounts, with which a net work of collection of dues from the members can be taken up for improvement of financial position.
d) The deposits should be invested in loans and advances in full after maintaining the SLR and CRR.
e) The recruitment should be made as per the procedure prescribed and the vacancies have to be notified to the employment ex-charge besides issue of advertisement in leading news papers and entire recruitment procedure followed strictly;
f) The back-log vacancies should be filled up immediately;
g) Rule of reservation for S.Cs. S.Ts. PH & Women and Roster has to be maintained while filling up the vacancies.
It is stated that without fulfilling the aforesaid conditions, the bank has filled up the additional posts and other vacancies in the year 2000 by inducting the persons of their choice without following even the Roster to be maintained by the bank while filling up the vacancies. It is stated that had the 4th respondent bank fulfilled the condition No. 1, it could not have filled the additional posts. It is further stated that an amount of Rs. 2.87 crores have been deposited in the Charminal Cooperative Urban Bank which landed in several financial crisis and is on the brink of being closed. Due to the adverse developments in Charminar Cooperative Bank and the fact that the deposits made therein by the management 4th respondent bank in the said bank is lost for the time being, it created a panic in the minds of the depositors which resulted in withdrawals by several deposits by the depositors. The recovery rate was also reduced and these developments have resulted in reducing the working capital and gross profits for the bank during the year 2002-2003. On account of this adverse financial situation, which was the impractical lopsided policies of the management of the 4th respondent bank. It is stated that due to the reduced working capital, the general body of the bank in its meeting held on 27.4.2003 decided to reduce the salaries of the employees commensurate with 2% of the working capital. It is further stated that the management with an intention to escape from the operation of the penal provisions in Rule 36(b) of the A.P. Cooperative Society Rules has decided to victimize the petitioners herein and other employees by reducing their salaries. The effect of reduction in the salaries as proposed in the impugned proceedings of the 4th resplendent bank will have the effect of most of the employees paying the bank the substantial amount instead of receiving any salaries for the services rendered and this has happened on account of the fact that most of the employees have to repay the loans availed by them. It is further stated that the total membership of the bank is about 10038 members and thereby 1/5th of the quorum required for convening the General Body should be 1/5th of the total membership is 2008 members whereas only 72 members were only present in the bank on 27-4-2003 and even those persons did not vote in favour of the said resolution. Therefore, the said resolution is illegal and cannot be implemented. It is further stated that section 116-C of the A.P. Cooperative Societies Act mandates that the fixing of the pay scales of the employees among other things has to be done with the prior approval of the Registrar of the Cooperative Societies. But without any prior approval of the Registrar of Cooperative Societies, the pay scales of the employees cannot be revised or reduced. The managing committee of the 4th respondent bank cannot take an independent decision on its own for reducing the salaries of the petitioners unilaterally and therefore, the impugned order issued by the 4th respondent bank are un-sustainable. The decision taken by the management of the 4th respondent bank has not been ratified or approved by the Registrar of the Cooperative Societies and no notice whatsoever was issued to the petitioners before reducing the salaries of the petitioners and in that view of the matter also, the impugned order passed by the 4th respondent bank is against the principles of natural justice.
The respondents have adopted a noval method of reducing the salaries of all the employees in an arbitrary manner. It is further stated that the Employees Union has made several representations to the authorities for conducting enquiry into the illegal appointments made by the Managing Committee of the 4th respondent bank, including a representation to the District Collector, who was pleased to appoint one D.S. Murthy, the then Cooperative Officer, to conduct enquiry into the matter and the said officer had submitted his report to the District Collector and to the Registrar of the A.P. Cooperative Societies stating that there is no work load in the bank and that the Committee has irregularly and illegally appointed 22 persons. Even in the enquiry conducted u/s 51 of the A.P. Cooperative Societies Act, it was learnt that the Enquiry Officer had submitted a report finding fault with the Managing Committee in appointment of 22 persons into the of the 4th respondent bank. Lastly it is contended that the salaries of the petitioners were reduced contrary to the agreement and the settlement arrived at between the Employees Union and the Bank.
The 4th respondent bank filed its counter stating that the term of the elected Managing Committee has expired by 25-3-2002. It is stated that the District Cooperative Officer, the 3rd respondent has appointed a 3 man committee under the Chairmanship of the Deputy Registrar/Officer on Special Duty, Prakasam district Cooperative Central Bank Limited, Ongole to manage the affairs of the 4th respondent bank vide proceedings in Rc. No. 878/2001-A1, dated 26-3-2002 and accordingly the official Committee has assumed office on 26-3-2003. The Government of Andhra Pradesh in G.O.Ms. No. 370 Agriculture & Cooperation (Coop.III) Department has also ratified the action of the respondent No. 3 in extending the term of the official Person-in-Charge Committee from time to time up to 25-12-2002 and the 2nd respondent, the Registrar of the Cooperative Societies also vide his letter dated 20-5-2003 has recommended the Government for the extension of the term of the present official person-in-charge committee up to 25-6-2003. It is further stated that the impugned order has been issued by the 4th respondent bank ordering reducing the salaries of the employees keeping in view of the inspection report of the Reserve Bank of India dated 24-5---2002 for the period ending 31-03-2002. It is stated that the bank has service conditions and staffing pattern approved by the 2nd respondent and the appointments wee made as per the staffing pattern approved u/s 116-C in proceedings RC. No. 85935/98-UB-I, dated 11-1-1999 of the Registrar of Cooperative Societies. It is also stated that as per the proceedings, the 2nd respondent has imposed among other conditions that the establishment and contingent charges of the bank should be reduced to minimum of 2% of its working capital in two years and it was clearly indicated therein that the conditions must be followed strictly without any deviation. It is further stated that the Expert Committee on Urban Cooperative Bank its report dated 16-9-2002 has recommended to the Government that the cost of establishment and administrative overhead should be brought down to below 2% of the working capital and the Reserve Bank of India in their inspection report dated 24-5-2002 as on 31-3-2002 has also observed that in view of the negative CRAR the 4th respondent bank has slipped from weak category to sick category. The implementation committee for Urban Bank in its meeting held on 7-4-2003 has also recommended for implementation of section 116-C of the A.P. Cooperative Societies Act 7 of 1964 and in view of the same, the Person-in-Charge/Chairman issued the impugned proceedings reducing the salaries of the employees for the financial year 2003-2004 and therefore, the contention of the petitioners that the proceedings dated 28-4-2003 issued by the Chairman of the 4th respondent bank reducing the salaries of its employees for the year 2003-2004 is in conformity with section 116-C of the Act.
It is further stated the Government of Andhra Pradesh have also made certain amendments to section 116-C which have come into existence vide Act 22 of 2001 for fixing staffing pattern. Further Rule 28(4)(b) also provides that " revision of any service rules or pay scales etc., shall be made by the General Body on the recommendations of the managing Committee provided the staff cost and contingencies are less than 2% of the working capital or less than 30% of the Gross profit under intimation to Registrar of Cooperative Societies. It is further stated that the present Person-in-Charge/Committee is appointed u/s 32(7) of the A.P. Cooperative Societies Act and the said Committee is empowered and competent to issue the impugned proceedings u/s 31-A (12) of the Act. With regard to the General Body meeting, it is stated that the Government in their G.O.Rt. No. 155 dated 4--------3-3002 has permitted the Managing Committee to conduct the General Body meeting with the quorum as specified in the existing bylaws. As per the bylaw No. 22 of the 4th respondent bank the quorum of the General body is 50 and the General Body meeting has been conducted as per the rules and byelaws of the bank. Therefore, the contention of the petitioners that last come first go should be the policy of the bank for reducing the staffing pattern is not correct. It is further stated that the Registrar of Cooperative Societies has approved the staffing pattern as per section 116-C of the Act and while sanctioning the additional staff in proceedings dated 11-1-1999 has imposed a condition to the effect that the staff cost should not exceed 2% of the working capital and since the expenditure on establishment charges has been exceeded 2% of the willing capital and keeping in view of the instructions of the 2nd respondent, the Registrar of Cooperative Societies and keeping in view the provisions of section 116-C o the Act and the Rules framed there under i.e. Rule 28(4)(b), the impugned proceedings were issued by the 4th respondent bank reducing the salaries within 2% of the working capital. It is stated that the 4th respondent bank felt that instead of terminating the staff, the salaries will be the best course of action will be reducing the salaries, as the salaries of the employees can be enhanced with in the norms fixed u/s 116-C of the Act if the financial position of the bank in the coming years improves and the same was already indicated in the impugned proceedings dated 28-4-2003. It also stated in the counter that an enquiry was conducted by the District Cooperative Officer, Ongole into the recruitment of the 22 persons but the findings of the enquiry are not intimated to the 4th respondent bank. It is stated that the petitioners have not given any representation to the 4th respondent bank with regard to the alleged illegal recruitment of 22 persons. It is also admitted in the counter that an enquiry u/s 51 of the A.P. Cooperative Societies Act was ordered and the same is pending.
A counter has been filed on behalf of the Government stating that the Registrar of Cooperative Societies while sanctioning the additional 21 posts vide his proceedings dated 11-1-1999 imposed many other conditions that the establishment and the contingent charges of the 4th respondent bank should be reduced to 2% of the working capital in two years. The Expert Committee on the Urban Cooperative Bank on 16-9-2002 has also recommended to the Government that the costs of establishment and administrative overheads should be brought down to below 25 of the working capital. The Reserve Bank of in India in its inspection report dated 24-5-2002 as on 31.3.2002 has observed that in view of the negative CRAR the Bank has slipped from weak category to sick category. It is stated that the Implementation Committee for Urban Bank in its meeting held on 7-4-2003 has also recommended for imlementation of section 116-C of the APCS Act 7 of 1964 and in view of the above, the person-in-charge/Chairman issued the impugned proceedings reducing the salaries of the employees for the financial year 2003-2004 and the said proceedings are in conformity with the provisions of section 116-C of the Act and the rules made there under.
The Government while reiterating similar reply as that of the 4th respondent bank have made radical changes in the provisions of the A.P. Cooperative Societies Act and the Rules to make the Cooperative Societies as viable units. Therefore, the decision taken by the Person-in-Charge /Chairman of the bank is in accordance with law and that the employees of the bank have also been informed various views made by the management to take steps in consonance with section 116-C of the Act and Rule 28 (4)(b) have been informed to the employees requesting them to come to the rescue of the bank and voluntarily agree for reduction of their salaries which are of no avail. Further a communication was sent to the Union Secretary of the Employees Union informing the proposal by 5-1-2002 so as to send the j revised proposals to the Registrar of Cooperative Society.
In respect of the pay scales, service conditions for approval, u/s 116-C of the act, as the period of settlement entered earlier has expired and yet the union has not chosen to submit the proposal. Hence the contention of the petitioners the impugned orders are illegal, arbitrary and violative of the principles of natural juice is incorrect and unsustainable.
The relevant provisions of section 116-C of the A.P. Cooperative Societies Act 1964 reads as follows:
116-C: Staffing pattern of Societies: (1) A society shall have power to fix the staffing pattern, qualifications, pay scales and other allowances for its employees with the prior approval of the Registrar of Cooperative Societies subject to the condition that expenditure towards pay and allowances of the employees shall not exceed two per cent of the working capital or thirty per cent of the gross profit, in terms of actuals in a year whichever is less.
Therefore, the said sub-section-(1) of section 116-C of the Act was substituted by Act 22 of 2001 w.e.f. 25-4-2001. The working Capital has been defined in Rule-2(O) of the A.P. Cooperative Societies Rules, 1964, which reads as follows:
Rule 2(O): "working capital" includes such portion of the reserve fund, other reserves appropriated out of profits, paid-up share capital, loan and deposits received by a society and debentures issued, by a society, as have not been locked up in buildings and other fixed assets"
Rule 28 of the A.P. Cooperative Societies Rules, 1964 deals with the appointment of Officers and servants of the Societies. With read to their qualifications, l staff pattern etc. Rule 28(3) of the Rules provides that all existing societies shall furnish to the Registrar details of persons working in the society against the existing posts along with their qualification; job Chart/nature of working/Pay scales for each post/categories; staff in excess of staffing pattern if any, prescribed by Registrar, staff cost and contingent cost, and its percentage to working capital and gross income; identification of surplus staff or adequate staff, if any, category wise, and how the society, intends to deal with surplus staff or inadequate staff, pay scales of existing staff and when they are approved and by whom, the working capital and Gross income. Rule 28(4) provides that every society within 45 days of registration shall frame and submit to the Registrar for approval its staffing pattern which shall include service rules for its employee, specifying staff pattern; qualificational method of appointment, scales of pay and allowances responsibilities, duties, training, securities and disciplinary rules etc and revision of any of the service rules or pay scales etc, shall be made by the General Body on the recommendation of the managing Committee provided the staff cost and contingencies are less than 2% of the working capital or less than 30% of the Gross Profit under intimation to Registrar of Cooperative Societies. Provided the further that if it is found to be in excess of the said norms either in audit, inspection or inquiry, the excess so spent shall be recoverable from members of the Managing Committee concerned u/s 60(1) of the Andhra Pradesh Cooperative Societies Act and the Registrar shall have the powers to cancel such pay revision or modify it as deemed fit and adjust securities furnished by the paid servants.. Rule 36-B provides that every society by resolution of the General Body shall open a separate account into which an amount not more than 30% of gross profit or 2% of working capital, whichever isles, as per the previous year financial statement, shall be credited and utilized for administrative and contingent expenditure. Failure to credit requisite amount to this fund, and or any excess expenditure over and above the limits fixed by the act shall be specifically pointed out by the auditor and excess expenditure if any shall be a change on the managing Committee jointly and severally.
Gross Profit means interest received on loans advances and investments and the income earned on non-credit business minus the interest paid on borrowings and deposits on the basis of actuals as per the financial statement of the previous year.
A combined reading of section 116-C (1) of the A.P. Cooperative Societies Act r/w Rules 28 and 36-B makes it clear that a society shall have the power to fix the staffing pattern, qualifications, pay scales and other allowances for its employees with the prior approval of the Registrar of the Cooperative Societies subject to the condition that the expenditure towards pay and allowances of the employees shall not exceed 2% of the working capital or 30% of the gross profit in terms of actuals in a year which ever is less. The word fixation of the staffing pattern has an emphasis, which means to say that in fixing of the staffing pattern with reference to the qualifications, pay scales, allowances etc, shall not exceed subject to the conditions imposed therein i.e. to say that the expenditure shall not exceed 2% of the working capital or 30% of the gross profit. While fixing the staffing pattern itself, the society shall keeping in view that the salaries payable to them shall fulfill the said conditions. Rule 36-B makes it clear that every society shall make sure that every society shall make sure that an amount not more than 30% of gross profit or 2% of working capital, which ever is less, as per the previous year financial statement shall be credited and utilized for administrative and contingent expenditure. The amount shall be deposited in the contingent fund, so as to ensure service conditions of the employees. Therefore, there is an embargo for any society to increase the staffing pattern without reference to the conditions of expenditure towards pay and allowances of the employees which shall not exceed 2% of the working capital or 30% of the gross profit. Therefore, on the one hand a society is into empowered to increase the additional staff and on the other hand, it cannot also reduce the salaries of the employees on the ground that the expenditure towards the pay and allowances of the employees exceeding 2% of the working capital.. There is an obligation on the part of the society not to increase the pay scales and other allowances of the existing staff over and above 2% of the working capital and 30% of the gross profits. If for any reason, if any society faces financial crisis in later years, after fulfilling the conditions of meeting the expenditure towards the pay and allowances of the employees not exceeding 2% of the working capital and 30% of the gross profit, then of course, the society can reduce the pay and allowances in conformity with the provisions of section 116-C of the A.P. Cooperative Societies Act and Rules 28 and 36-B of the A.P. Cooperative Societies Rules to meet the expenditure not exceeding 2% of the working capital and 30% of the gross profit.
But in the instant case there is neither a specific report nor any material is placed to show that the expenditure towards the pay and allowances of the employees was not exceeding 2% of the working capital or 30% of the gross profits when the management of the 4th respondent bank recommended for the additional posts. The proceedings of the Registrar of Cooperative Societies vide his order in RCC No. 85935/98 UB. I dated 11-1-1999 shows that in view of the resolution of the Board of Directors of the 4th respondent Bank in its meeting held on 30.9.1998 and by virtue of the powers conferred u/s 116-C of the A.P. Cooperative Societies Act, permission was acceded to the Ongole Cooperative Urban Bank Limited, Ongole the 4th respondent to recruit 21 additionals poss in addition to the already sanctioned 50 posts in view of the increased volume of business of the bank and for its smooth functioning and the sanction was subject to the conditions extracted I here in above.
It appears that the Registrar of Cooperative Societies without any material whatsoever on record as to whether the contingent charges were not exceeding 2% of its working capital, has accorded the sanction.
Sub-section -(1) of Section 116-C of the act has been substituted by Act 21 of 2001 and the same was further amended by Act 22 of 2001. The fixation of the staffing pattern, the pay scales and other allowances of its employees by the society subject to the condition that the expenditure towards the pay and allowances of the employees shall not exceed 2% of the working capital or 30% of the gross profit in terms of the actuals in a year whichever is less is not a new one, but as early as on 15-3-1971, the Registrar of Cooperative Societies issued a Circular in RC No. 5199/79/C-1(a) which prescribed that the establishment costs shall not exceed 30% of the gross profit or 2% of the working capital. The said guidelines were reiterated from time to time and finally they were incorporated in the Act itself. The Reserve Bank of India also has fixed similar norms vide their letter dated 4.12.1984 and similar instructions were also issued by the NABARD which is a financing bank to the Cooperative structure in respect of DCCBS. The RCS vide Rc. No. 58155/82/C2-B dated 13-3-1983 and Rc. No. 6093/88/C2(B) dated 21-1-1988 also issued guidelines on staffing pattern. This Court in a batch of writ petitions upheld the circulars of the RCS dated 2-1-1995 and 18-11-1995 which were reported in The Krishna District Cooperative Credit Societies Employees Union, Vijayawada and Others Vs. The Commissioner for Cooperation and Registrar of Cooperative Societies, Nampally, A.P., Hyderabad and Others, .
Therefore, the Societies cannot go beyond the above stipulations imposed u/s 116-C of the A.P. Cooperative Societies Act as it is a statutory limit and in case they violate the same, they are liable for consequences under the provisions of the Andhra Pradesh Cooperative Societies Act. This Court while upholding section 116-C of the Act vide its judgment dated 12-7-2002 in W.P. No. 28473 of 1997 at para-67 held thus:
"It is needless to reiterate that the societies are formed by the people themselves on the principle that '' all for one and one for all''. The societies are organized and registered under the provisions of the Act and meant to cater the needs of its members. The societies are not meant for providing any employment to the unemployed. It is neither the function nor the duty of the societies to provide any o job or employment to the unemployed. The society is bound to keep its financial status and availability of s resources in view while making the appointment as well as fixing the staffing pattern, pay scales and other allowances for its employees. The societies cannot be permitted to in discrimately appoint the employees and fix their pay any due regard to its financial resources. Having regard to the experience that some societies have altogether vanished into thin air on account of such indiscriminate appointments and fixation of pay scales and other allowances, the Legislature has stepped in and put an embargo up on the societies motto incur expenditure towards the pay and allowances of the employees exceeding two percent of the working capital or 30 per cent of the gross profit, in terms of actuals in a year whichever isles. The object is a laudable one. The provision is obviously amended in order to protect the interest of the societies and to save them from further financial ruination".
Rule-28 and 36-B provide the procedure for implementation of section 116-C by constituting a separate found and defines gross profits also. The said rules are enabling provisions to implement section 116-C(1) of the Act .
It is brought to my notice that several primarily Agricultural Cooperative Societies have taken steps to reduce the staffing patterns by removing the employees who were appointed country to the conditions stipulated u/s 116-C of the Act. Though this Court in its judgment reported in The Krishna District Cooperative Credit Societies Employees Union, Vijayawada and Others Vs. The Commissioner for Cooperation and Registrar of Cooperative Societies, Nampally, A.P., Hyderabad and Others, held that the matters relating to fixation of staffing pattern of the society, prescription of qualification and determination of pay scales and other allowances for its employees have to be left to the concerned society itself inasmuch as it is the society which keeping in view of its size, volume of work and its resources could pragmatically manage the affairs, but the question that arises in the instant case is as to whether what would be the reasonable action i.e. to remove the persons who were recruited if any contrary to section 116-C or whether to reduce the salaries of the existing staff.
It is relevant to note at this stage the directions issued by the Commissioner and Registrar of Cooperative Societies A.P., Hyderabad in Rc. No. 9078/2000.K.2 dated 10-8-2002 which was issued in exercise of the powers conferred on him u/s 4(2) of the Cooperative Societies Act in the interest of and to ensure the smooth functioning of the Primary Agricultural Cooperative Societies Act for dixation of staffing pattern, pay scales for their employees in accordance with section 116-C,. Another circular was issued in Rc No. 9078/2000-K2 dated 18-12-2002 by the Commissioner and Registrar of Cooperative Societies, A.P. Hyderabad for implementation of the provisions of section 116-C of the Act. Both the said circulars were question in W.P. No. 3156 of 2003 before this Court and a Division Bench of this Court by its judgment dated 31-3-2003 held that both the Circulars are in consonance with the judgment of this Court in A.P. State Co-operative Societies Secretaries and Employees Union Vs. Government of Andhra Pradesh and Others, and also in the case of The Krishna District Cooperative Credit Societies Employees Union, Vijayawada and Others Vs. The Commissioner for Cooperation and Registrar of Cooperative Societies, Nampally, A.P., Hyderabad and Others, .
It is the contention of the learned counsel for the petitioners that without retrenching the employees by following the principles of last -cum-first go, there will not be any justification in reducing the salaries of the employees. It is also contended that in the case of certain persons, the salaries have been reduced without any reference to the provisions relating to Minimum Wages Act. If the society sustains further loss, the method adopted by the society in reducing the salaries may lead to a reduction of salaries without reference to the Minimum Wages Act. Therefore it is contend that the just and proper method will be to remove the persons who were appointed contrary to the provisions of section 116-C of the Act by applying the method of last-cum-first go, but not the method in which the 4th respondent bank has resorted to in reducing the salaries not only to newly 22 additionally recruited employees, but also to the originally sanctioned 50 employees.
The Managing Committee of the respondent bank by virtue of the exemption granted by the Government in G.O. Rt. No. 1025 AGRL Cooperative Department dated 3-10-2002 which was extended from time to time and G.O.Ms. No. 170 Agriculture and Cooperation dated 4-----3-200 to conduct the General Body meeting on or before 30-4-2003 conducted the General Body on 27-4-2003 after amending the bylaws etc. As per the quorum to convene the General Body , the quorum is 50, but where as only 72 members attended the General Body meeting and one of them unitarioally resolved was to create 2% of the working capital towards the administrative and contingent fund and to utilize the said amount for administrative and contingent expenditure. To implement the said resolution, the Managing committee of the 4th respondent bank decided to reduce the salaries of the employees of the bank commiserating to the amount available in the administrative and continent fund for the year 2003-2004.
The Reserve Bank of India, Urban Bank Department vide its Inspection report dated 31-10-2000 carried out u/s 35 of the Banking Regulation Act, with reference to the position of the 4th respondent bank as on 31-directed the bank to place the report before the Board of Directors of the Bank for taking action to rectify the features observed in the banks working under intimation to the Reserve Bank of India. With regard to the management of the 4th respondent Bank, the Reserve bank of India observed that while reducing the pay scales of the staff in the Board''s meeting held on 22-11-1998 the Board did not take into account the net impact on the financial position of the bank. The bank did not provide the system of for casting its employer requirement. Thus while taking decision permitting of the existing staff, to the next. The impact of the financial burden on the bank was also not properly assessed. The basis on which the recruitment of the additional staff was arrived at was discussed in the Board meeting and it appeared to be arbitrary. The Reserve bank of India, Urban Bank Department vide its proceedings dated 24-5------------2002 with regard to the management of the 4th respondent bank has also observed that '' the Board in particular the Ex-chairman had acted against the interest of the bank in deciding to place the deposits with the Charminar Cooperative bank Urban Limited and in recruiting 23 members of the staff when there is no need for increase the staff strength. It is stated that the staff strength was disproportionate to the volume of the business handled by the bank. That means the staff is more than required. In the counter it has been accepted by the bank that an enquiry was conducted by the District Cooperative Officer Ongole into the recruitment of the 22 posts , but however, it is stated that the findings are not intimated to the respondent bank. It is further admitted that the enquiry u/s 51 of the A.P. Cooperative Societies Act is ending.
The learned counsel appearing for the petitioners submitted that the elections have been held to the management of the bank and the elected management has taken over the charge .
The learned counsel appearing for Cooperative Societies and the 4th respondent bank, submitted that instead of giving any direction, it may be left for the reconsideration of the entire matter as to the revival of the old pay scales or for the reduction of the staff as the case may be in accordance with law. The learned Government Pleader relied on the judgment of the Apex Court in the case of Dy. Dir. Gen. of Geo. Survey of India and Another Vs. R. Yadaiah and Others, and submitted that it may not be appropriate for this Court to interfere with the reduction of the pay scales and it may be left to the discretion of the person-in-Charge of the Managing Committee of the respondent bank. In the said judgment the Apex Court held as follows:
" Ordinarily, the Courts or tribunal should not go into the question of fitment of the officers in a particular group or the pay scale there to, and leave the matter to the discretion and expertise of the special commission like the Pay Commission, unless the Court finds on materials produced that there is some apparent error. Whether there is an apparent error either in sending the proposals for the additional sanction of the posts and also in according sanction by the Commissioner for Cooperative Societies vide his order dated 11-1-1999. There is nonmaterial placed before this Court to show as to whether the sanction of 21 additionals posts exceeds the establishment and contingent charges over and above 2% of the working capital , except the inspection report of the Reserve Bank of India carried out u/s 35 of the Banking Regulation Act.
Admittedly the District Cooperative Officer has conducted enquiry as regards the recruitment of 22 persons. Admittedly an enquiry was also ordered u/s 51 of the A.P. Cooperative Societies Act. Therefore, I am of the opinion hat it is for the person-in-Charge of the management of the 4th respondent bank to take a decision basing on the enquiry report of the District Cooperative officer, Ongole either to retrench the additionally recruited 22 persons if they are recruited contrary to the provisions of section 116-C o the Act or to confirm the reduced pay scales or revised the original pay scales in format with section 116-C and Rule 28 and 36-B of the A.P. Cooperative Societies Rules.
Accordingly, the writ petitions are disposed of directing the District Cooperative Officer, Ongole to communicate the enquiry report conducted by him with regard to recruitment of 22 persons if not already communicated within a period of four weeks from the date of receipt of a copy of this order. The 4th respondent bank and concerned Enquiry officer of the 4th respondent is direct to complete the enquiry contemplated u/s 51 of the act as early as possible within a period of four weeks from the date of receipt of a copy of this order and a copy of the same may be furnished to the 4th respondent bank so as to enable the bank to take necessary action.
The present management of the 4th respondent bank may take appropriate action in conformity with section 116-C of the Act r/w. Rule 28 and 36-B of the Rules within four weeks thereafter and pass appropriate orders in accordance with law either for retrenchment of the personals among the newly recruited 22 persons as per the principle of last-cum-first go or to refuse the pay scales of the employees of the bank in accordance with law. No costs.