BENGALURU: In a judgment that will help cooperative societies and banks, the Karnataka High Court quashed Clause-5 of the circular issued by the Comptroller and Auditor General of India (CAG) prohibiting Salary Drawing and Disbursing Officers from deducting amounts due to cooperative banks from the salary of employees even if they get the consent for such deduction.
Justice Anant Ramanath Hegde passed the order while allowing the petition filed by the Accountant General’s Office Employees Cooperative Bank Limited questioning Clause-5 of the circular dated October 18, 2019, which says that “no recovery (neither subscription nor any other liability) will be allowed by the drawing and disbursing officers in respect of dues of Co-operative Housing Societies and Co-operative Banks.”
The court also quashed the orders issued on January 29 and 30, 2020, and February 6, 2020, under the impugned Clause 5.
Referring to the Karnataka Co-operative Societies Act, 1959, the senior counsel for the petitioner argued that Section 34 of the Act provides an agreement between the borrower and the cooperative bank, which enables the employer of the borrower to deduct the agreed amount towards repayment of the debt due to the cooperative society. Hence, the CAG has no power to prohibit deductions from the salary of the employees, he argued.
The CAG’s counsel defended that the petitioner has no locus to question the policy decision taken excluding certain classes of cooperative societies and banks from the ambit of Section 34 of the Act.
The court noted that once the member of a co-operative society with the prior concurrence of his employer enters into an agreement with a co-operative society, such agreement creates a right in favour of a co-operative society to recover its dues from the salary of an employee which does not exceed 50%, and the employer is bound to deduct such agreed amount from the salary, as contemplated under Section 34 of the Act. Therefore, the impugned Clause-5 is not a policy decision and hence it is per se illegal, the court said.