Hon'ble Ashwani Kumar Mishra, J.
We have heard Sri Ved Byas Mishra, learned counsel for the petitioners and Sri Nikhil Kumar, learned counsel for respondents no. 6, 8 & 9.
The petitioner Uttar Pradesh State Road Transport Corporation has approached this court seeking a writ of certiorari to quash the recovery citation dated 03-09-2009 and notice dated 18.8.2009 issued in ZA Form-71 for attachment of movable property. Further relief of mandamus has been claimed not to proceed with any coercive action in pursuance of the recovery citation and to release the bank account no. 1 maintained with Central Bank of India, Branch Garh Mukteshwar, District Ghaziabad.
The aforesaid relief has been claimed in the backdrop of following facts.
Respondents no. 4 & 5 who were employees of the petitioner Corporation applied for grant of loan from Ghaziabad District Co-operative Bank, the respondent no. 6. Respondent no. 4 who was a conductor posted at Garh Depot was sanctioned loan of Rs.30000/- in 1994. Similarly, respondent no. 5 who was a driver was also sanctioned the same amount as loan in 1994. The petitioner Corporation executed a memorandum of undertaking dated 10.7.1994 and 22.11.1994 in respect of respondents no. 4 & 5 respectively in favour of the bank containing a stipulation that installment of the loan to be sanctioned by the Co-operative Bank will be deducted from their monthly salary and the amount so deducted shall be deposited with the bank within seven days from the date of its deduction.
It appears that when regular instalments in respect of loan taken by the respondents no. 4 & 5 and certain other employees of the Corporation was not deposited in the bank, the Branch Manager wrote a letter dated 18-06-1998 to the Assistant Regional Manager of the petitioner Corporation giving details of such employees in respect of whom regular installments were not being deposited with the bank. The Assistant Regional Manager wrote letter dated 01-07-1998 giving information in respect of respondents no. 4 & 5 that since their services have been terminated, therefore, any deduction from their salary was not possible and thus instalments were not being deposited with the bank. It appears that thereafter the District Co-operative Bank, Meerut issued a recovery certificate for recovery of a sum of Rs.2,00,905/- on the basis of which a citation to appear dated 18.8.2009 was issued for recovery of the said amount and subsequently, bank account of the petitioner with the Central Bank of India was attached.
It is contended by learned counsel for the petitioner that the petitioner only undertook to deduct instalments of the loan sanctioned by the bank from the monthly salary of its employees and since the respondents no. 4 & 5 are no longer the employees of the petitioner Corporation it is not possible for them to deduct any amount from their salary and once their services stood terminated the undertaking itself came to an end and no recovery can be made by the bank in respect of the loan taken by the said respondents. Learned counsel for the petitioner further submitted that the petitioner Corporation did not stand guarantee to the loan but had only given an undertaking to deduct the instalment of the loan from the salary of the respondents no. 4 & 5 and the undertaking would continue only such time the employees continued in the employment of the petitioner and were being paid salary.
On the contrary, Sri Nikhil Kumar, learned counsel appearing for respondents no. 6, 8 & 9 submits that since the loan was sanctioned to the respondents no. 4 & 5 on the assurance of the petitioner to deduct the installment of the loan and to deposit the same in accordance with Section 40 of the U.P. Co-operative Societies Act, 1965 and therefore, in case of default by the employees the petitioner was legally liable for repayment of loan advanced by the bank and the citation issued for recovery of the outstanding amount cannot be said to be illegal. He further pointed out that even if the services of the respondents no. 4 & 5 have come to an end still in view of the authorization and the undertaking by the petitioner it was under an obligation to deduct the outstanding amount of the bank from the bonus, gratuity, provident fund etc. of the erring employees and repay the outstanding by adjusting the same from any amount due to be paid by the petitioner to the employees.
We have considered the argument advanced by learned counsel for the parties and perused the record.
The authorization letter in respect of respondent no. 4 on the basis of which the loan was sanctioned is quoted hereunder :
Employer Recommendation for Sanction of Consumer Durable Loan To The Branch Manager Ghaziabad Zila Sahkari Bank Limited, Ghaziabad Branch Garh.
We hereby certify that Sri Avdesh Rai son of Sri Palakdhari Rai working as conductor is a permanent employee of our Institution/Organisation. We hereby recommend to sanction a loan of Rs.30,000/- to the said employee for purchase of ............
Yours faithfully, Sd/-
Illegible 16.7.94 HEAD OF THE INSTITUTION The Regional Manager of the petitioner Corporation also signed memorandum of undertaking in favour of the bank to deduct the installment of loan sanctioned by the respondent bank from the monthly salary of the employee. The memorandum of undertaking in respect of respondent no. 4 is quoted hereunder :
Memorandum of Undertaking from the Employer in favour of the Bank This is to certify that Sri Avdesh Rai son of Sri Palak Dhari Rai resident of employee of our Institution/Department. He is working as conductor U.P.S.R.T.C. Garh and his monthly emoluments are as under :
He will retire on ...............................
Basic Pay 990 Dearness Allowances 1030 Other Allowances 100 + 75 + 30 + 15 Total Emoluments 2240 Deductions 40 + 212 = 252 Net Amount Drawn 1988.00 only
We undertake that the instalment of the loan to be sanctioned by Ghaziabad Zila Sahkari Bank Ltd., ghaziabad to him will be deducted from his monthly salary. The amount so deducted shall be deposited with the Bank within seven days from the date of its deduction u/s 40(1) of U.P. Co-operative Societies Act, 1965. The deduction will be stopped only on receipt of clearance certificate from the bank.
Dated ................
Signature of Employer Name ...........................
Designation ..................
Seal of Institution or Department.
Similar memorandum of undertaking was issued in respect of respondent no. 5 also. Authorization letter by the two respondents was also issued to the petitioner authorising for deduction of the loan instalment from the monthly salary.
A perusal of the aforesaid documents go to show that Bank had issued a certificate in respect of the two respondents that they are its employee and the monthly salary and allowances etc. payable to them. The other document executed by the bank was a memorandum of undertaking, on the basis of authorisation of the two respondents to deduct the amount of instalment from their monthly salary and to deposit the same with the bank as per Section 40 of the U.P. Co-operative Societies Act which reads as under :
" 40. Deduction from salary to meet society's claim in certain cases. - (1) Notwithstanding anything contained in any law for the time being in force, but subject to such conditions, if any, as may from time to time be laid down by the State Government, a member of a co-operative society may execute an agreement in favour of the society providing that his employer shall be competent to deduct from the salary or wages payable to him by the employer 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 owing by the member of the society.
(2) Notwithstanding anything contained in any law for the time being in force, the employer shall, if so required by the co-operative society by requisition in writing and so long as such debt or demand or any part of it remains unpaid, make the deduction in accordance with the agreement executed under sub-section (1) and pay the amounts so deducted to the society within fourteen days from the date of the deduction.
(3) An employer who without sufficient cause fails to make the deduction in terms of sub-section (2), or having made, any such deduction fails to pay the amount so deducted to the society within fourteen days from the date of deduction, shall be liable to the society to the extent of the amount which the employer has failed to deduct or to pay, as the case may be."
A perusal of the aforesaid provision goes to show that it speaks of an agreement in favour of the co-operative society by its member providing that his employer shall be authorised to deduct the specified amount from wages and to pay the same to the society towards satisfaction of the debt or any other due owed by the said member of the society. The aforesaid provision and the consequences prescribed in sub-section (5) stands attracted only in case of a member of the society. There is no pleading that respondent nos. 4 & 5 are member of the District Co-operative Bank. In the absence of any pleading that respondents no. 4 & 5 were members of the society, the provisions of Section 40 of the Act shall have no application and the petitioner cannot be held liable to making payment of the outstanding dues of respondents no. 4 and 5 who were its employees.
Even otherwise, the undertaking executed by the petitioners was to the effect that instalment of loan shall be deducted from the monthly salary and remitted to the Co-operative Bank. Once the employment of respondents no. 4 and 5 ceased, there was no payment of monthly salary, the undertaking could not be enforced any further so as to realise the outstanding from the petitioners under coercion as arrears of land revenue.
Admittedly, the petitioners did not stand as a guarantor of the loan. Pleadings of the writ petition goes to show that loan of both the respondents was secured by guarantee of two individual persons each. The fact has not been denied by the Co-operative Bank in its counter affidavit.
The petitioners not being a borrower or guarantor, is not under any liability of repayment. In its capacity as employer of the two borrowers it has agreed to deduct the instalment from the monthly salary and to remit it to the bank. The memorandum of undertaking executed by the petitioner to make deductions from the salary could be enforceable till such time it was under a legal obligation to pay salary. However, when the said obligation came to an end for the reason of dismissal of the two borrowers from service, the memorandum of undertaking being only in respect of deduction from monthly salary the same could not be enforced against the petitioner beyond the same.
Thus the recovery of the outstanding dues of the respondents no. 4 and 5 being made from the petitioners as arrears of land revenue, is patently illegal and not liable to be sustained.
As a result, writ petition stands allowed. Recovery proceedings against the petitioners including the citation dated 18-08-2009 as well as attachment order dated 23-10-2009 are hereby quashed. A further writ of mandamus is issued to respondent no. 10 to release the bank account no. 1 of the petitioners forthwith.
Dt.04-09-2014 nd.