Case Note & Summary
The dispute arose from three writ petitions filed before the Andhra Pradesh High Court by employees of different Cooperative Land Mortgage Banks and by one of the banks, challenging the vires of Rule 70 of the Andhra Pradesh Cooperative Societies Rules framed under the Andhra Pradesh Cooperative Societies Act, 1964. The petitioners contended that Rule 70, which empowered the Board of Directors of the Andhra Pradesh Co-operative Central Land Mortgage Bank Ltd. to constitute a centralised service for mortgage banks, levy contributions, and vest rights and liabilities of employees with the Board, was ultra vires Section 130(1) read with Section 115 of the Act. The High Court upheld the contention and declared Rule 70 ultra vires. The appellant, the Board of Directors of the Central Land Mortgage Bank, appealed by special leave to the Supreme Court. The respondents in the three appeals included an Assistant Accountant of Chittoor Primary Co-operative Land Mortgage Bank Ltd., employees of different Cooperative Land Mortgage Banks, and Nellore Co-operative Land Mortgage Bank Ltd. The material facts showed that the Assistant Accountant claimed loss of promotion rights under Bye-law 10 due to Rule 70; other employees asserted that a cooperative society's general body and managing committee had ultimate authority over appointments, transfers, and dismissals under Section 30 of the Act, which was interfered with by Section 115 and Rule 70; and Nellore Bank apprehended loss of control over employees due to possible transfers by the Central Bank. The High Court negatived the challenge to Sections 115 and 116A as ultra vires the State Legislature but held Rule 70 ultra vires. Before the Supreme Court, arguments were confined to whether Rule 70 was ultra vires Section 115. The legal issues were whether Section 115 empowered the Central Mortgage Bank to create a centralised service and levy contributions, whether 'transfer' included inter-bank transfer, and whether the Central Mortgage Bank could collect loans from borrowers. The appellant argued that Section 115's supervisory power included appointment, transfer, and disciplinary action, and that the Central Bank needed to secure its advances. The respondents contended that Section 115 only granted supervisory powers, not recruitment or centralised cadre creation, and that Section 116A specifically vested common cadre creation in the Registrar, not the Board. The Supreme Court reasoned that the rule-making power under Section 130(1) was confined to purposes enumerated in the Act; Section 115 only conferred supervision over mortgage banks and their employees, including powers of appointment, transfer, and disciplinary action in respect of employees of the mortgage banks, not power to recruit or create a centralised service. The key words 'employees of the mortgage banks' indicated that any power was over existing employees of the mortgage banks, not to create a new employment relationship with the Central Bank. The court held that 'transfer' in Section 115 meant transfer within the same mortgage bank, not across different employers. It also held that the Central Mortgage Bank could not collect loans advanced by member banks because borrowers' liability was only to the mortgage banks that advanced the loans; the deemed transfer of mortgaged property was only security. Finally, the court noted that Section 116A provided a separate mechanism for common cadre through the Registrar, confirming that the Board lacked such power under Section 115. Accordingly, Rule 70 was ultra vires the rule-making power of the State under Section 130(1) read with Section 115. The appeals were dismissed, affirming the High Court's judgment.
Headnote
A) Delegated Legislation - Ultra Vires Rule - Rule 70 exceeds rule-making power under Section 130(1) read with Section 115 - Andhra Pradesh Cooperative Societies Act, 1964, Sections 115 and 130 - The Act only confers supervisory power on the Central Land Mortgage Bank over mortgage banks and their employees, not power to create a centralised service or levy contributions. Rule-making power must be confined to purposes enumerated in the Act. Held that Rule 70 is ultra vires. B) Cooperative Societies - Supervisory Powers - Scope of Section 115 - Andhra Pradesh Cooperative Societies Act, 1964, Section 115 - The power of supervision including appointment, transfer, and disciplinary action under Section 115 refers only to employees of the mortgage banks, not to creating a centralised cadre whose employees would be employees of the Central Mortgage Bank. The Board cannot recruit or appoint to a common cadre. Held that Section 115 does not contemplate centralised service. C) Service Law - Transfer of Employees - Meaning of 'transfer' in Section 115 - Andhra Pradesh Cooperative Societies Act, 1964, Section 115 - Supervisory power does not include power to transfer an employee from one mortgage bank to another creating a contract with a different employer. 'Transfer' must be read as transfer within the same mortgage bank from one branch to another. Held that inter-bank transfer is not authorised. D) Cooperative Societies - Recovery of Loans - Central Mortgage Bank's Role - Andhra Pradesh Cooperative Societies Act, 1964, Sections 84, 85, 93, 94, 97, 100-109 - The Act places duty to collect loans on mortgage banks; deemed transfer of mortgaged property to Central Mortgage Bank is only as security for its advances, not to create direct borrower liability to Central Mortgage Bank. Held that Central Mortgage Bank cannot collect loans from borrowers. E) Cooperative Societies - Common Cadre of Employees - Section 116A - Andhra Pradesh Cooperative Societies Act, 1964, Section 116A - The legislature provided separate mechanism for common cadre through Registrar; Board cannot exercise such power under Section 115. Held that Rule 70 conflicts with legislative scheme.
Issue of Consideration
Whether Rule 70 of the Andhra Pradesh Cooperative Societies Rules is ultra vires Section 130(1) read with Section 115 of the Andhra Pradesh Cooperative Societies Act, 1964, and whether Section 115 empowers the Board of Directors of the Central Land Mortgage Bank to constitute a centralised service and levy contributions from mortgage banks.
Final Decision
The appeals were dismissed. Rule 70 of the Andhra Pradesh Cooperative Societies Rules was declared ultra vires the rule-making power of the State under Section 130(1) read with Section 115 of the Andhra Pradesh Cooperative Societies Act, 1964. The Board of Directors of the Central Land Mortgage Bank cannot constitute a centralised service, levy contributions from mortgage banks, or vest rights and liabilities of employees with the Board.
Law Points
- Delegated legislation must be confined to purposes enumerated in the Act
- Section 115 of Andhra Pradesh Cooperative Societies Act
- 1964 confers only supervisory power over mortgage banks and their employees
- supervisory power under Section 115 does not include creating a centralised service or recruiting employees for mortgage banks
- word 'transfer' in Section 115 means transfer within same mortgage bank
- not across different employers
- Rule 70 is ultra vires Section 130(1) read with Section 115
- common cadre of employees can be created only under Section 116A by Registrar
- not by Board of Central Land Mortgage Bank
