Karnataka HC quashes CAG circular prohibiting salary deduction of employees towards due in co-op bank

Bengaluru: The Karnataka High Court has quashed a circular issued by the Comptroller and Auditor General of India (CAG), prohibiting deduction of the amount due to a co-operative bank from the salary of the employees.

Allowing the petition filed by the Accountant General’s Office Employee Cooperative Bank Limited, Bengaluru, Justice Anant Ramanath Hegde said that the benefit conferred under the statute cannot be taken away by way of a circular.

The petitioner bank submitted that some of its members are the employees of the Accountant General's office. Clause (v) of the circular, issued on October 18, 2019, stated that no recovery (neither subscription nor any other liability) will be allowed by the salary drawing and disbursing officers (DDOs) with respect to dues of Co-operative Housing Societies and Co-operative Banks.

The petitioner stated that Section 34 of the Cooperative Societies Act, 1959, provides for an agreement between the borrower and the co-operative bank, which enables the employer of the borrower to deduct the agreed amount towards repayment of the debt due to the co-operative society.

The bank said that the circular curtails the right of the petitioner bank to enter into an agreement with the borrower to recover the debt, in the manner provided under Section 34(1). On the other hand, the CAG defended the circular claiming it as a policy decision to exclude certain classes of co-operatives societies and banks from the ambit of Section 34 of the Act.

Justice Hegde observed that if clause (v) of the circular is given effect to, the agreement referred to in Section 34(1) becomes unenforceable and in such an event, both sections 34(1) and 34(2) become otiose.

"..impugned clause No (v) conflicts with the binding provision of law. Thus, the court in exercise of its writ jurisdiction can certainly strike down the said clause even if it is the policy decision, as such decision seeks to override the provision of law and seeks to take away certain rights conferred under the statute. The right conferred under the statute can be taken away only in the manner known to law and not by any executive decision taken by any authority, which has no authority to meddle with the statutory rights," the court said.