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2007 DIGILAW 100 (KAR)

VENKAPPA v. REGISTRAR OF CO-OPERATIVE SOCIETY

2007-02-14

SUBHASH B.ADI

body2007
SUBHASH B. ADI, J, J. ( 1 ) THOUGH respondent No. 2 served, but remained unrepresented. Sri. V. Narasimha Holla, learned Standing Counsel for the State employees' Insurance Corporation is directed to take notice for respondent No. 2. ( 2 ) THIS Writ Petition is directed against the notice issued by the respondent No. 2 dated 25th October 2006. Fourth respondent is a Co-operative Society registered under the provisions of Karnataka Co-operative Societies Act. It had made certain deposits in the Belgaum D. C. C. Bank Branch at Gokak. Petitioner is the Branch Manager. Second respondent by notice dated 12/13th September 2006, had called upon the petitioner as a branch Manager of the Belgaum District Co-operative Bank, gokak to produce documents specified in the said notice and also directed the petitioner to take notice that in case of failure to comply with the summons issued under Rule 83 of the Income tax Act, 1961 read with Section 45-C to 45-1 of the E. S. l. Act (hereinafter referred to as 'the Act') would entail punitive action being taken against the petitioner under the provisions of Section 32 of CPC. Thereafter on 25. 9. 2006, another notice was issued to the petitioner in his individual capacity interalia informing the petitioner that the fourth respondent is in arrears towards ESI dues to the tune of Rs. 64,726/- and interest at Rs. 22,011/- upto 25. 9. 2006 i. e. , in all Rs. 86,737/- and directed the petitioner to pay the said amount failing which the proceedings would be initiated under Section 45-C to 45-I of the Act including the attachment of his salary. ( 3 ) PETITIONER after receiving the said notice informed the main Bank i. e. , respondent No. 3. Respondent No. 3 by his communication dated 4. 10. 2006 directed the petitioner to pay the amount to the Insurance Corporation, except the reserve fund deposit of the respondent No. 4. Accordingly, the petitioner by his letter dated 6. 10. 2006 informed the second respondent that under the provisions of Rule 23 sub-rule (3) of the Karnataka co-operative Societies Rules (hereinafter referred to as 'the rules') that the DCC Bank Branch cannot withdraw the amount in reserve fund, unless the Registrar of the Co-operative Societies sanctions permission. Incorporating the said provision, petitioner replied to the notice issued by the second respondent. Incorporating the said provision, petitioner replied to the notice issued by the second respondent. Thereafter, the second respondent issued another show cause notice dated 12. 10. 2006 interalia summoning the petitioner, as to why further proceedings may not be initiated against the petitioner for realisation of the amount as if it were arrears of ESI Corporation due from the petitioner in the manner provided under Section 45-C to 45-I of the Act, treating the same as having an effect of attachment of debt by the Recovery Officer in exercise of his power under Section 45-C of the Act. The Recovery Officer thereafter issued an order of attachment against the petitioner treating him as a defaulter. It is this order of attachment is called in question by the petitioner. ( 4 ) LEARNED Counsel for the petitioner submitted that the fourth respondent is a customer of the Bank of the third respondent at Gokak and under Section 58 of the Karnataka Co-operative societies Act, the Co-operative Society has deposited the amount, as a reserve fund and said reserve fund can be withdrawn by the said co-operative society only subject to the previous sanction obtained from the Registrar of Co-operative Societies. Relying on the provisions of Rule-23 sub-rule (3), learned Counsel for the petitioner submitted that as a Branch Manager of the Bank, he cannot withdraw the amount belonging to the fourth respondent without the sanction of the Registrar and he further submitted that the third respondent, which the main Bank, has instructed not to withdraw the amount in reserve deposit. ( 5 ) SRI. HONNAPPA, learned Government Pleader appearing for respondent No. 1 submitted that the reserve deposit made by a co-operative Society can be utilised only with the sanction of the registrar and for specific purpose and the said amount is not available to be withdrawn either by the Co-operative Society or any person on its behalf for any other purpose other than the purpose mentioned under Rule 23 of the Rules. He also submitted that if the second respondent is exercising his power under the provisions of the Act, he can do so without even recourse to the sanction of the Registrar. The Registrar can exercise his power only when the Branch Manager or the Main Bank makes a request for withdrawal of the said amount. He also submitted that if the second respondent is exercising his power under the provisions of the Act, he can do so without even recourse to the sanction of the Registrar. The Registrar can exercise his power only when the Branch Manager or the Main Bank makes a request for withdrawal of the said amount. Since there is no such request made by the petitioner or the third respondent, the question of the first respondent - Registrar exercising his power either under Rule 13 of the Rules or any other provision does not arise. ( 6 ) LEARNED Counsel appearing for respondent No. 3 - main bank submitted that since they are custodian of the amount belonging to the third party as a trustee, it will not be appropriate for the Bank or the Manager of the Bank to withdraw the said amount and appropriate the same towards contribution under the provisions of the Act. ( 7 ) SRI. Narasimha Holla, learned Counsel appearing for respondent No. 2 submitted that Section 45-G empowers the recovery Officer to adopt any one mode provided under Section 45-C to 45-1 of the Act, which provides for mode of recovery of the arrears towards the ESI contribution and under the provisions of Section 45g sub-section (3), a person from whom money is due or may become due to the factory or establishment or, as the case may be, the principal or immediate employer or any person who holds or may subsequently hold money for or on account of the factory or establishment or, as the case may be, the principal or immediate employer, to pay to the Director General either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due from the factory or establishment or, as the case may be, the principal or immediate employer in respect of arrears or the whole of the money when it is equal to or less than that amount. Relying on this provision, learned Counsel for second respondent submitted that any person holds the amount on behalf of the employer is liable to pay the same towards the arrears of ESI contribution and in this regard, he also pointed out from Section 45-G sub-section (3) clause (iv) that such person is bound to comply with the notice and any bank or post office or insurer, which makes the payment is not required to make an entry either in the pass book, deposit receipt, policy or any other document or is necessary to produce for the purpose of making entry. He also submitted that under Section 45-G sub-section (3)clause (viii), any discharge of liability on behalf of the employer by any other person is a valid and legal discharge and for which he would be entitled for grant of a receipt for any payment made in compliance with the notice. He also submitted that Rule 23 of the Rules only prohibits the Co-operative Society from withdrawing the reserve fund without the sanction of the Registrar, but it does not prohibit for making payments towards the arrears under the provisions of ESI Act and the petitioner as a Bank manager cannot withhold the payment of the arrears under the provisions of the Act on the ground that he requires a permission from the Registrar, ( 8 ) IT is a deposit made by the fourth respondent as a reserve fund under Section 58 of the Kamataka Co-operative Societies act. It is also clear from Rule 23 of the Rules that the fourth respondent cannot withdraw the amount without the previous sanction of the Registrar. However, Section 45 of the Act provides for determination of the contribution and also recover)' of the contribution. Under Section 45-C of the Act, the authorised officer has power to issue a recovery certificate to the Recovery Officer and the Recovery Officer to whom the certificate is forwarded has power to recover the said amount in any of the modes prescribed under Section 45-C to 45-1 of the Act. Section 45-G sub-section (3) reads as under: "45-G Other modes of recovery.- (1 ). . . . . (2 ). . . . . . Section 45-G sub-section (3) reads as under: "45-G Other modes of recovery.- (1 ). . . . . (2 ). . . . . . (3) (i) The Director General or any other officer authorised by the Corporation in this behalf may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the factory or establishment or, as the case may be, the principal or immediate employer or any person who holds or may subsequently hold money for or on account of the factory or establishment or, as the case may be, the principal or immediate employer, to pay to the Director General cither forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due from the factory or establishment or, as the case may be, the principal or immediate employer in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii ). . . . . . . . . . (in ). . . . . . . . . . (iv) Save as otherwise provided in this subsection, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding any rule, practice or requirement to the contrary. (v ). . . . . . . . . (vi ). . . . . . . . . (vii ). . . . . . . . (viii) The Director General or the officer so authorised shall grant a receipt for any amount paid in compliance with a notice issued under this subsection and the person so paying shall be fully discharged from his liability to the principal or immediate employer to the extent of the amount so paid. (ix ). . . . . . . . (x ). . (ix ). . . . . . . . (x ). . . . . . . . It makes clear that a person who holds or may subsequently hold money for or on account of the factory or establishment or, as the case may be, the principal or immediate employer to pay to the Director General either forthwith upon the money becoming due or being held or at or within the time specified in the notice. It also makes clear that a person on whom notice is served is bound to comply with such notice and particularly in case of post office or bank or insurer, it is not necessary for any pass book or deposit receipt or policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding any rule, practice or requirement to the contrary. Section 45-G clause (viii) also makes it clear that any discharge made by a person on behalf of the employer shall be discharged and for which he is entitled for grant of a receipt for the amount paid in compliance with the notice and that would be a discharge of the liability to the principal or immediate employer to the extent of the amount so paid. ( 9 ) FROM the provisions of Section 45, it is clear that the recovery Officer has power to recover the amount not only from the employer or the person, who is liable, but also from a person, who holds the amount on behalf of the employer. In such circumstances, the second respondent has rightly issued notice to the third respondent and also to the Branch Manager of the Bank at Gokak and thereafter has rightly issued notice to the petitioner in his individual capacity as the petitioner failed to comply with the notice issued by the second respondent. ( 10 ) IN case of failure to comply with the notice under Section 45-G, power is conferred on the Recovery Officer to proceed against the person, who makes default and in this case, it is in non-compliance with the notice, the second respondent has issued an individual notice to the petitioner. ( 10 ) IN case of failure to comply with the notice under Section 45-G, power is conferred on the Recovery Officer to proceed against the person, who makes default and in this case, it is in non-compliance with the notice, the second respondent has issued an individual notice to the petitioner. In this case, the petitioner being a Branch Manager of the Bank has informed the third respondent - main Bank in respect of the notice issued by the second respondent and he also brought to the notice of the second respondent that under Rule 23 sub-rule (3) of the Rules, a permission is necessary from the first respondent in order to withdraw the reserve fund in deposit made by the fourth respondent and that is the bonafide explanation of the petitioner. ( 11 ) SINCE the power is conferred on the second respondent to recover the amount in any one of the modes prescribed under section 45-G, the petitioner is required to comply with the notice issued by the respondent No. 2 in consonance of the provisions of section 45-G, which would be a valid discharge of the liability of the fourth respondent. If that is so, I find no reason to interfere with the notice issued by the respondent No. 2. However, it is made clear, that the petitioner as a Bank Manager, would discharge the liability of fourth respondent in compliance with the notice issued by respondent No. 2 under Section 45-G of the Act and would obtain necessary discharge certificate in accordance with law. Petitioner and respondent No. 3 are given one month's time to comply with the notice issued by the second respondent. If such compliance is made, second respondent need not proceed further either against the petitioner or against any of the officers of the third respondent to the extent of liability from the deposit in the account of fourth respondent. With these observations, the Writ Petition stands disposed of. Sri. V. Narasimha Holla, learned Counsel is permitted to file vakalath on behalf of respondent No. 2 within four weeks from today.