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Judgment
V. Ramasubramanian, J.—The Co-operative Societies of Employees of the Tamil Nadu State Transport Corporations, have come up with
these writ petitions challenging various orders passed by the Managements of the Transport Corporations, proposing to discontinue the practice of
effecting recovery of dues to the Co-operative Societies from the wages payable to the employees.
I have heard Mrs. Nalini Chidambaram, learned Senior Counsel, Mr. T. Dhanyakumar and Mr. S.M. Subramaniam, learned Counsel for the
petitioners and Mr. Jayesh B. Dolia, learned Counsel appearing for the respondent-Corporations.
The Thiruvalluvar Transport Corporation Employees'' Co-operative Credit Society Ltd., which is the petitioner in W.P. No. 30864 of 2008,
was registered under the Multi State Co-operative Societies Act, 1984. The Tamil Nadu State Transport Corporation Employees'' Co-operative
Thrift and Credit Society Ltd., which is the petitioner in W.P. No. 1547 of 2009, was originally registered under the Tamil Nadu Co-operative
Societies Act and was later converted into a Multi State Co-operative Society, after its operations were extended beyond the State of Tamil
Nadu. The Tamil Nadu State Transport Corporation (Salem Division-I) Employees'' Co-operative Thrift and Credit Society Ltd., which is the
petitioner in W.P. No. 2596 of 2009, was registered under the Tamil Nadu Co-operative Societies Act, 1983.
The employees of the respondent-Corporations are members of these Co-operative Societies. The members of the petitioner-Societies have
availed loans from the Societies and by virtue of an agreement that these members have had with the Co-operative Societies, the loans are repaid
in monthly instalments. These instalments are deducted from the wages payable to the employees, by the respondent-Corporations and remitted by
the Corporations to the Societies.
Now by the orders impugned in these writ petitions, dated 20.12.2008, 23.12.2008 and 27.12.2008 respectively, the respondent-
Corporations have informed the Societies of their intention to discontinue the recovery of dues from the salaries of the employees. Aggrieved by
the said orders, the petitioners have come up with the present writ petitions.
Mrs. Nalini Chidambaram, learned Senior Counsel appearing for the petitioner in W.P. No. 30864 of 2008 and Mr. T. Dhanyakumar and Mr.
S.M. Subramaniam, learned Counsel appearing for the petitioners in the other two writ petitions, assailed the impugned orders on the ground that
the respondent has a statutory obligation u/s 60 of the Multi State Co-operative Societies Act, 1984 and Section 48 of the Tamil Nadu Co-
operative Societies Act, 1983 and that the respondents cannot unilaterally withdraw the service provided by them for such a long time, even
without a notice. Mrs. Nalini Chidambaram, learned Senior Counsel also relied upon an unreported decision of Justice S.S. Subramani on the
issue.
In response, Mr. Jayesh B. Dolia, learned Counsel for the respondent-Corporations, contended that the obligation of the respondents to effect
recovery of dues to Co-operative Societies, from the salaries of the employees, is not statutory but only contractual in nature. Therefore, the
learned Counsel contended that the respondents had a right to terminate the contracts and that such termination of a contractual obligation, is
beyond the pale of judicial review, in a writ petition under Article 226. Moreover, it is the contention of the learned Counsel for the respondents
that there have been several instances of misappropriation of funds, by the employees, resulting in the Co-operative Societies, seeking a direction
from this Court to the respondents to remit the money already deducted but not paid. Such directions in favour of Co-operative Societies have
actually imposed an additional burden upon the respondent-Corporations, to pay interest, running to Rs. 53 crores. Therefore, the learned Counsel
submitted that the Managements of the respondent-Corporations had taken a policy decision to discontinue this facility and that therefore, the same
is not only legal but also fully justified.
From the rival contentions, it is clear that the very nature of the obligation on the part of the respondent-Corporations, is in dispute. While the
petitioners term the obligation as statutory in character, the respondents claim that it is only contractual in nature. Therefore it is essential to find out
first, the nature of this obligation. This can be done by referring to the statutory provisions of both the Co-operative Societies Acts.
Section 60 of Multi State Co-Operative Societies Act, reads as follows:
(1) Notwithstanding anything contained in any law for the time being in force, a member of Multi-State Co-Operative Society may execute an
agreement in favour of that Society, providing that his employer disbursing his salary or wages shall be competent to deduct every month from the
salary or wages payable to him, such amount as may be specified in the agreement and to pay the amount so deducted to the Society in satisfaction
of any debt or other demand the member owes to the Society.
(2) On the execution of such agreement, the employer disbursing the salary or wages of the members shall, if so required by the Multi-State Co-
operative Society, by a requisition in writing and so long as the Society does not intimate that the whole of such debt or other demand has been
paid, make the deduction in accordance with the agreement and pay the amount so deducted to the Society with a period of fourteen days on the
date on which deduction has been made, as if it were a part of the salary or wages payable on the day as required under the Payment of Wages
Act, 1936 (4 of 1936) and such payment shall be valid discharge of the employer for his liability to pay amount deducted.
If after the receipt of a requisition made under Sub-section (2), the employer disbursing the salary or wages of the member at any time fails to
deduct the amount specified in the requisition from the salary or wages payable to the member concerned or makes default in remitting the amount
deducted to the Multi-State Co-operative Society, the Society shall be entitled to recover any such amount from such employer as arrears of land
revenue and the amount so due from such employer shall rank in priority in respect of the liability of such employer equal to that of the salary or
wages in arrears.
The above Section 60 of the Multi State Co-operative Societies Act, 1984, is similar to Section 48 of The Tamil Nadu Co-operative Societies
Act, 1983, which reads as follows:
Deduction from salary, wages or gratuity. - (1) A member of a registered Society may execute an agreement in favour of that Society
providing that-
(a) his employer or the Officer disbursing his salary or wages shall be competent, on a requisition in writing from the Society to deduct every month
from the salary or wages payable to him such amount as may be specified in the requisition towards the amount; and
(b) If he ceases to be an employee, his employer shall be competent on a requisition in writing from the Society to deduct from the gratuity payable
to such employee such amount as may be specified in the requisition towards the entire balance, due by him to the Society in respect of any debt
or other demand owing by the member to the Society.
(2) (a) Where any such agreement as is referred to in Sub-section (1) has been executed by a member of a registered Society, the employer or the
Officer disbursing the salary or wages of such member shall, on receipt of a requisition from the Society, make the deduction from the salary or
wages or the gratuity, as the case may be, payable to the member in accordance with the requisition, and pay, within such time as may be
prescribed in respect of any Society or class of Societies, the amount so deducted to the Society.
(b) Where the amount to be deducted in any month in accordance with the requisition made by a Society, or where a requisition has been made by
two or more Societies in respect of the same person, the total amount to be deducted in accordance with all the requisitions exceeds one-half of
his gross salary or wages for the month, the employer or the Officer disbursing the salary or wages shall deduct from the salary or wages of such
person only a sum representing one-half of his gross salary or wages for the month. The amount deducted shall, where deductions have been made
against requisitions received from two or more Societies, be paid by the employer or the Officer disbursing the salary or wages to all the Societies
in proportion to the amounts to be deducted according to their requisitions:
Provided that where any amount is due to such class of registered Societies as may be prescribed, the entire net salary or wages for the month or
such portion thereof as may be prescribed in respect of any such class of Societies may be deducted and paid as aforesaid.
(c) Where a requisition has been made by two or more Societies for deduction from the gratuity in respect of the same person, the amount
deducted from the gratuity shall be paid by the employer to all the Societies in proportion to the amounts to be deducted according to their
requisitions.
(3) The employer or the Officer disbursing the salary or wages shall maintain such registers as may be prescribed.
(4) The provisions of this Section shall apply to all such agreements of the nature referred to in Sub-section (1) as are in force at the
commencement of this Act and also to agreements of the said nature executed by the members of any society registered or deemed to be
registered in any other State having reciprocal arrangements with the State of Tamil Nadu.
(5) The requisition in writing from any Society registered or deemed to be registered in any other State having reciprocal arrangements with the
State of Tamil Nadu in respect of a member of that Society who for the time being is employer in the State of Tamil Nadu, received by his
employer or the Officer disbursing the salary or wages of such member, shall be acted upon as if such requisition had been made by a Society
registered in the State of Tamil Nadu and provisions of Sub-section (2) in so far as it applies to a requisition made under Sub-section (1) shall
apply to requisition made under this sub-section.
(6) If any employer or the Officer disbursing the salary or wages of any such member as is referred to in Sub-section (1) or Sub-section (5) fails to
comply with any of the provisions of this Section, he shall be punishable with fine which may extend to five hundred rupees and in the case of a
continuing offence, with further fine of fifty rupees for each day on which the offence is continued after conviction therefor.
(7) The provisions of this Section shall apply notwithstanding any law to the contrary for the time being in force.
(8) Without prejudice to any other mode of recovery which is being taken or may be taken under this Act or any other law for the time being in
force, any sum deducted under Sub-section (2) or Sub-section (5) but not paid to the Society within the prescribed time may be recovered
together with interest at such rate as may be prescribed from the date of such deduction and the cost involved in such recovery as if it were an
arrear of land revenue and for the purposes of such recovery, the Registrar shall have the powers of a Collector under the Tamil Nadu Revenue
Recovery Act, 1864 (Tamil Nadu Act II of 1864).
(9) Nothing contained in this Section shall apply to establishments under a railway administration operating any railway as defined in Clause (20) of
Article 366 of the Constitution.
Explanation � For the purpose of this Section and the Explanation under Clause (a) of Section 143 ""State having reciprocal arrangements with
the State of Tamil Nadu"" means such State having reciprocal arrangements as the Government may, by notification, specify in this behalf.
A comparison of the provisions of both the enactments make clear, the following:
(a) Section 60(1) of the Central Act, begins with a non obstante clause. Similarly, Section 48(7) of the State Act, also declares that the provisions
of the Section shall apply notwithstanding any law to the contrary, for the time being in force.
(b) Section 60(1) of the Central Act, as well as Section 48(1) of the State Act, enables a member of the Multi State Co-operative Society or a
Co-operative Society, as the case may be, to execute an agreement in favour of the Society, of which he is a member. Interestingly, there is no
indication in these provisions, that such an agreement would be a tripartite agreement. Section 60(1) of the Central Act, as well as Section 48(1) of
the State Act, use the same phrase viz., ""a member of...Society may execute an agreement in favour of that Society"". Therefore it is clear that these
provisions do not contemplate such agreements to be tripartite in nature. They are only bipartite agreements between the member and the Society.
(c) Sub-sections (2) of both these provisions viz., Section 60 of the Central Act and Section 48 of the State Act, are also similarly worded in the
sense that the employer is made obligated to make deductions from the salaries, if two conditions are satisfied. The first condition to be satisfied is
that an agreement as per Sub-section (1) should have been executed between the member and the Society. The second condition is that there must
be a ""requisition in writing from the Society"". If both these conditions are satisfied, the employer becomes obligated. The provisions of both these
enactments do not appear to confer any discretion upon the employer, as Sub-sections (2) of both these provisions use the same expression ""the
employer...shall
(d) Sub-sections (2) of both these provisions do not even stipulate a requisition in writing from the employee concerned. They only envisage a
requisition in writing from the Society concerned. Thus the obligation imposed under these provisions comes into effect, the moment an agreement
is executed by a member with the Co-operative Society and the Society in turn, makes a request in writing to the employer.
(e) Section 48(6) of the State Act, makes the employer or the Officer disbursing the salary, vulnerable for penal action, if they fail to comply with
the provisions of the Section. The failure contemplated by this provision, is not a mere failure to remit the money deducted from the salary of the
employee. It includes a failure even to effect recovery from the salary.
(f) u/s 48(8) of the State Act, the Registrar of Co-operative Societies, is conferred with the power of a Collector under the Tamil Nadu Revenue
Recovery Act, 1864, for the purpose of recovering any amount deducted by the employer from the salary of the employee, but not remitted to the
Society.
All the above salient features of Section 48 of the State Act and Section 60 of the Central Act, establish beyond any shadow of doubt that the
obligation in question, is not contractual but statutory in character. First of all, the provisions of these Acts, do not contemplate a contract, to which
the employer is required to be made a party. The agreement referred to in these provisions, is to be only between the member and the Society.
Therefore there is no contract, to which the employer is a party, in so far as the deductions are concerned. At the most, the obligation to effect
recovery from the salary of the employees, can be read into the contract of employment. But if so read, the same would become part and parcel of
the terms and conditions of service of workmen, which cannot be altered without notice, in view of Section 9A of the Industrial Disputes Act,
1947.
Moreover, a mere contractual obligation, cannot result in prosecution and penal consequences, in case of breach. The very fact that even the
failure to effect recovery from the salary is made a punishable offence, is indicative of the fact that the obligation is statutory in character. The fact
that the provisions of the Revenue Recovery Act, can be invoked against the employer, in case of failure to remit the amount already deducted,
lends support to the view that the obligation is statutory.
Moreover, the provisions of the Payment of Wages Act, also recognises this obligation on the part of the employer. Section 7(2) of the
Payment of Wages Act, reads as follows:
(2) Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act, and may be of the
following kinds only namely-
(j) deductions, for payments to co-operative societies approved by the State Government or any Officer specified by it in this behalf or to a
scheme of insurance maintained by the Indian Post Office.
Therefore, the contention of Mr. Jayesh B. Dolia, learned Counsel for the respondent-Corporations that the obligation of the respondents is
only contractual in nature and that the contract is liable for termination, cannot be accepted. As a matter of fact, Justice S.S. Subramani, has taken
a similar view in an unreported decision in UCO Bank Employees'' Co-op. Thrift & Credit Society Ltd v. UCO Bank and Ors. W.P. No. 14510
of 1998 dated 7.12.1998 where it has been held as follows:
Under the Multi State Co-operative Societies Act also, when such authorisation is given, the employer is legally bound to deduct from the wages
and pay the same to the Society. This established practice cannot be withdrawn, at any rate without notice to the petitioner.
Once it is found that the obligation to make deductions from the salaries of employees, for payment of the dues to Co-operative Societies, is
statutory in character, it follows as a corollary that the employer has no right to wriggle out of the same at his choice, however justified the
employer''s grievance may be. Therefore the orders impugned in the writ petitions are violative of statutory provisions and are liable to be set aside.
As a matter of fact, the impugned orders may not really serve the purpose for which the respondents have issued the same, in view of certain
other statutory provisions. For instance, Section 90(1) of the Tamil Nadu Co-operative Societies Act, 1983, provides for the settlement of
disputes between a member and the Society, through arbitration. Sub-section (6) of Section 90 enables the Registrar, while adjudicating a dispute,
to pass such interlocutory orders, as he may deem fit in the interest of justice. Section 167(2) of the Act, empowers the Registrar to order
conditional attachment of a property. Therefore, even if the respondents make an attempt to avoid effecting recoveries as a matter of routine, they
will be duty bound to comply with the orders passed u/s 90(2) or 167(2). Therefore, the respondents have no gate way, out of this obligation,
except to set their house in order.
In view of the above, all the writ petitions are allowed and the orders impugned therein are set aside. The respondents are directed to continue
to effect recovery of dues to the Co-operative Societies, from the salaries of those employees, who have an agreement with the Co-operative
Societies and in respect of whom a requisition in writing has been made by the respective Societies. No costs. Consequently connected
miscellaneous petitions are closed.