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1992 DIGILAW 194 (KER)

Parameswaran Kartha v. Asst. Registrar

1992-06-24

VISWANATHA.IYER

body1992
Judgment :- The petitioner in O.P.No.985 of 1992 is a Senior Clerk in the second respondent society, which is a credit society registered under the Kerala Co-operative Societies Act, 1969 (the act). The society had been classified in class IV of Appendix III to the Kerala Co-operative Societies Rules, 1969 (The rules) though the increase in its working capital and outstandings justified a higher classification. The managing committee of the society passed resolution Ext.P1 on 30-5-1991, resolving to upgrade the society to class III and to pay salary accordingly to the members of its staff. This was duly intimated to the first respondent, Assistant Registrar. But he informed the society by his communication Ext.P2 dated 7-11-1991 that as per the extant orders of the Government, no reclassification of any society was permissible, and that it was not proper to pay the employees, the salary admissible for a society included in class III. The petitioner who is an employee of the society and who is affected by Ext.P2 has challenged it by filing the original petition. 2. O.P.No. 1436 of 1992 is by a Co-operative Bank. Its working capital and the outs landings entitled it to be included in Class II of Appendix III. But it had been included only in Class III. The managing committee passed resolution Ext.P3 on 25-2-1991 to upgrade the classification to Class II. However, the second respondent, the Assistant Registrar of Co-operative Societies informed the petitioner by his proceedings dated 1-11-1991 that the reclassification, and the payment of enhanced salary and grant of promotions to the employees consequent thereon without the approval of the Joint Registrar were irregular. Accordingly he directed the petitioner to cancel the reclassification, and the promotions, and to take steps to recover the excess amounts paid to the employees. Petitioner challenges this order, which has been extracted in paragraph 3 of the original petition. (Ext.P4 produced as a copy of this order is really some other communication, which has nothing to do with this case). 3. A counter affidavit has been filed on behalf of the respondents, in which, while admitting that it is for the managing committee of the society to decide on the classification, it is contended that the reclassification can be brought into effect only with the prior approval of the Registrar. That was why the communication dated 1-11-1991 was issued. 3. A counter affidavit has been filed on behalf of the respondents, in which, while admitting that it is for the managing committee of the society to decide on the classification, it is contended that the reclassification can be brought into effect only with the prior approval of the Registrar. That was why the communication dated 1-11-1991 was issued. Norms for classification have been laid down by various circulars of the Registrar. Since the reclassification involves revision of pay and increase in the number of staff, the Registrar has to be satisfied about the achievement of the norms by the society before giving approval for the reclassification. It is his duty to see that the reclassification does not affect the working of the society adversely. 4. O.P.No.3154 of 1992 is filed by an employee of the second respondent Cooperative Society in similar circumstances as in O.P.No.985 of 1992. Here again the resolution passed by the managing committee to upgrade the society to class III was rejected by the order Ext.P1 on various grounds. It was pointed out that the additional expenditure on establishment consequent on the reclassification will be Rs.22, 086.30, which is detrimental to the shareholders. Government was taking steps to change the norms prescribed for classification and they were yet to be finalised. The reclassification sought could not be granted for these reasons. Petitioner challenges Ext.P1. 5. In all the cases, the contention of the petitioners is that as per S.80 read with rules 182 and 188, and Annexure III to the Rules, it is the prerogative of the society to place it in the proper classification, and to appoint and pay the staff appropriately for that classification. The contention is that no prior approval of the Registrar is required for effecting such a change. 6. Government Pleader on the other hand, submits that though the re-classification may be done by the society, payment of enhanced salary or the appointment of additional staff can be had only with the prior approval of-the Registrar. 7. Sub-section (1) of S.80 of the Act provides that the government shall classify the societies in the State according to their type and financial position. Government has accordingly classified the societies in the State with reference to their type and financial position as mentioned in Appendix III to the Rules. 7. Sub-section (1) of S.80 of the Act provides that the government shall classify the societies in the State according to their type and financial position. Government has accordingly classified the societies in the State with reference to their type and financial position as mentioned in Appendix III to the Rules. This is as per R.182 which reserves a power in the Government of their own motion or otherwise to revise the classification once in every three years, after consultation with the Registrar. It is this revision that is stated to be in the offing and which is put forward as a ground for refusing to recognise the reclassification in O.P.No. 3154 of 1992. Under sub-section (2), Government shall, in consultation with the State Co-operative Union, fix or alter the number and designation of the officers and servants of the different classes of societies specified in subsection (1). Sub-section (3) of S.80 empowers the Government to make rules regulating the qualifications, remuneration, allowances and other conditions of service of officers and servants of the different classes of societies in the State. Rules 183 to 201 deal with these matters of which R.188 deals with staff pattern and R.189 with remuneration and allowances. R.188 requires every society to adopt the staff pattern indicated in Appendix III according to the type and class to which it belongs. There are two provides so to this rule. The first proviso lays down that where any society cannot adopt the staff pattern prescribed in the Appendix because of its financial position, the members of the committee of the society may work in an honorary capacity in lieu of appointing any paid employee. The second proviso prescribes that where any society is in need of any change in the staff pattern, including the special scale of pay under special circumstances, the same may be made by the society with the prior approval of the Registrar. This proviso is intended to cover cases where having regard to the peculiar nature of the work to be undertaken particular society, which may require any peculiar staff pattern with some special/higher scale of pay, the Registrar may approve such staff pattern or such scale of pay. This is an exception to be resorted to-in special circumstances. R.189 lays down that the scale of pay of different categories of posts shall be as shown in Appendix III. This is an exception to be resorted to-in special circumstances. R.189 lays down that the scale of pay of different categories of posts shall be as shown in Appendix III. I must also refer to Note 2 to Appendix III, which lays down, that any increase in the existing staff strength shall be made only with the approval of the Registrar. Thus Government has prescribed in Appendix III the staff pattern of the different societies in the State as also the emoluments payable to the employee's of. each class of societies. It will be seen therefrom that societies have been classified with reference to their working capital, loan outstandings, investments, and or turnover/sales turnover/business turnover. After the basic classification on the basis of its type is arrived at, a society is sub-classified with reference to these factors with societies having larger working capitals/ loan outstandings investments / turnover being permitted to employ larger number of staff with higher emoluments. In other words, as the -work of the society expands and its business increases, the Appendix provides for employment of larger and perhaps better equipped staff with higher emoluments for copying up with the work. 8. The primary right to classify the societies in the State into different categories, as also the right to prescribe the staff pattern and scales of pay of the employees is that of the Government. It is so laid down in the first three sub-sections of S.80. But when once the broad classification specified in S.80 has been made, it is for the particular society to decide as to the class in which it will fall. Neither the Government nor the Registrar come into the picture of classifying individual societies into any particular class specified in Appendix III. No such power is vested in them. The society falls under a particular classification once it satisfies the conditions mentioned in column 3 of Appendix III. It is for the society to decide the category in which it falls with reference to those conditions. Neither the Act nor the Rules provide for any prior approval of the Registrar or the Government before the society is classified in a particular slot. It is for the society to decide the category in which it falls with reference to those conditions. Neither the Act nor the Rules provide for any prior approval of the Registrar or the Government before the society is classified in a particular slot. Any decision of the society that it falls ina particular class will no doubt be open to recess ion by the Registrar in exercise of his powers under R.176, if he is not satisfied that the working capital/ outstandings/investments-turnover, as the case maybe, of the society are such as to bring it within a particular class. It will always be open to him to examine whether the society in question does' satisfy the conditions prescribed in Appendix III regarding its working capital, loan outstandings and the like, which as mentioned earlier, and as mentioned in my judgment in O.P.No.10078 of 1985, are the only matters made relevant in the matter of classification of a society. The resolutions passed by the societies involved in these cases that they fall in particular classes cannot therefore be branded as illegal or otherwise liable to be cancelled. I must mention here that the respondents have no case that based on their working capital, loan outstandings or the like, the societies concerned will not fall within the classes into which they wanted to be placed by the resolutions in question. 9. The next question for consideration is whether the increase in the staff strength or the payment of higher scales of pay as envisaged in Appendix III require prior approval of the Registrar. R.188 requires every society to adopt the staff pattern indicated in Appendix III. This is liable to be departed from only in the circumstance mentioned in the two provisos, one in the case of societies passing through a financial crisis, and the other, in respect of societies which require a different staff pattern having regard to the peculiar nature of their function's. A society is therefore bound to adopt the staff pattern prescribed in Appendix III in the normal course, rule 188 being mandatory. 10. The contention of the respondents is that having regard to Note 2 to Appendix III an increase in the staff strength requires the prior approval of the Registrar. There is no dispute that this note is to Appendix III as a whole and not merely to serial No.8 therein. 10. The contention of the respondents is that having regard to Note 2 to Appendix III an increase in the staff strength requires the prior approval of the Registrar. There is no dispute that this note is to Appendix III as a whole and not merely to serial No.8 therein. The Note has got to be read in the light of R.188. This rule requires the society to adopt the staff pattern indicated in Appendix III. It does not lay down that approval of the Registrar is required for the purpose of employing the requisite additional staff as laid down in Appendix 111. This is relied on, in the forefront of the contentions raised by the petitioner. But appendix III itself is subject to the Note that any increase in the existing staff strength has to be with the approval of the Registrar. Therefore, and even though R.188 does not in terms lay down that the approval of the Registrar is required, still and having regard to the terms of Note 2, the position is that when' a society is upgraded and goes into a higher classification, the additional staff permitted consequent on the up gradation can be appointed only after obtaining the approval of the Registrar. This is the effect of Note 2 to Appendix III. 11. There is apparently a purpose behind this note. It cannot be disputed that the Registrar has the right to supervise the activities of the society and to rescind any resolution passed by it under R.176. Cases may be postulated where a society resolves to upgrade itself, perhaps with ulterior motives, without the requisite conditions existing for the upgra'dation. If on such resolution, further staff is appointed, consequent on the increased staff strength admissible for a higher class, and it turns out later that the up gradation was invalid and was not justified, the newly employed staff will pose problems to the society as also to themselves. It is apparently to safeguard against any such wayward action by the societies with unjustified resolutions for up gradation, and with a view to provide an opportunity even at the threshold to ascertain whether the society was arbitrarily or illegally upgraded, that Note 2 provides for prior approval of the Registrar before increasing the staff strength. 12. It is apparently to safeguard against any such wayward action by the societies with unjustified resolutions for up gradation, and with a view to provide an opportunity even at the threshold to ascertain whether the society was arbitrarily or illegally upgraded, that Note 2 provides for prior approval of the Registrar before increasing the staff strength. 12. The decision in Cherthala Urban Co-operative Bank Ltd. v. State of Kerala, 1984 KLT 911 = 1984 KLJ 409 which was referred to in the course of the arguments does not affect the question under consideration. In that case, the issue considered was the validity of the prohibition imposed by the Registrar, on appointments without his prior sanction, while recognising the up gradation of a society. This Court held the prohibition to be unauthorised. The questions arising before me are different. In fact, the effect of Note 2 was not under consideration in the Sherthallai case. That decision has therefore no relevance here. 13. The result of the discussion there fore is that while the up gradation of a society does not require the approval of the Registrar, increase in the staff strength consequent thereon does require his approval, and any additional staff can be appointed only after such approval of the Registrar is obtained. 14. But this does not mean that the Registrar can refuse approval to increase the staff strength arbitrarily or unreasonably or any ground whatsoever. If the decision of the society to upgrade itself is regular and valid, the Registrar will not be entitled to refuse approval for increase in the staff strength, taking shelter under Note 2 to Appendix III. The only questions, which will open to him for consideration, will be whether the conditions specified in column 3 of Appendix III regarding working capital; loan outstandings etc., appropriate to the society in question are satisfied. If these conditions are satisfied, it is incumbent on the Registrar to accord approval for the increase in the staff strength. He cannot take other factors into account to refuse such approval. This is the effect of the decisions in O.P.No.10078 of 1985, O.P.No.5321 of 1990 and O.P.No.8628 of 1990. He cannot for example, rely on the fact that the society is working at a loss as a ground for declining approval. 15. He cannot take other factors into account to refuse such approval. This is the effect of the decisions in O.P.No.10078 of 1985, O.P.No.5321 of 1990 and O.P.No.8628 of 1990. He cannot for example, rely on the fact that the society is working at a loss as a ground for declining approval. 15. The embargo under Note 2 applies only to the increase in the staff strength; it does not apply to the payment of salary due to the employees appropriate to the upgraded category. The Note provides for approval only for increase in the staff strength, but not otherwise. Therefore, and on the up gradation of the society, the existing staff will have to be paid at the higher scales applicable to the higher classification. This is the effect of R.189, which prescribes the scale of pay for different categories of posts, as shown in Appendix III. 16. I shall summarise my conclusions as under (a) The re-classification of a society does not require the approval of the Registrar or Government. (b) But increase in the existing strength of the staff does require the approval of the Registrar and appointment of additional staff appropriate for the upgraded class can be made after such approval for the increase is obtained. (c) On up gradation, the existing staff has to be paid at the scales of pay applicable to the higher class. 17. The reason stated in O.P.No.3154 of 1992 that Government was proposing to change the classification fixed as early as on 1-7-1974 is not a relevant one. Government is enabled by R.182 to effect such a change once in three years. But that is not a justification to refuse approval of the change in classification. 18. The orders impugned in these cases are therefore unsustainable. They are quashed. The appropriate respondent is directed to pass orders on the question of Increase in the staff strength in the light of the observations contained herein above after adverting to the only relevant question whether the reclassification is justified on the basis of the stipulations contained in column.3 of Appendix III to the Rules. No other question' will be open for consideration. No other question' will be open for consideration. Since the work of the societies has increased tremendously over the years, without any corresponding change in the staff strength, the concerned respondents are directed to pass orders regarding the staff strength of the concerned societies within a period of two months from the date of receipt of a copy of this judgment. The original petitions are allowed as above. No costs.