Case Note & Summary
The petition was filed by a district cooperative bank challenging a Government Order dated 16.3.2011 and two subsequent orders that directed refund of interest collected from primary cooperative societies and withheld subsidies. The bank was responsible for distributing agricultural credit from NABARD through the Apex Bank to primary societies, collecting interest at 1% for the financial year 2009-2010. As per NABARD conditions, the bank deposited the collected interest of Rs.12,29,70,774/- with NABARD on or before 31.3.2010, and also paid dividends to members and income tax. Thereafter, the Government issued the impugned order directing refund of the interest. The bank requested alternative arrangements, but the State did not respond and instead took coercive steps by withholding funds for subsequent years and threatening to keep them in fixed deposits. The core legal issue was whether these orders were valid and enforceable against the bank. The bank argued impossibility of compliance due to prior lawful deposit and payments, while the State insisted on compliance. The court found the State's stand unreasonable, noting that the bank had acted in accordance with NABARD’s condition of timely deposit before the order was issued. The court held that the belated government order could not compel the bank to refund amounts already lawfully disbursed and that the subsequent orders withholding subsidies were also unjustified. Consequently, the writ petition was allowed, and all three impugned orders were quashed.
Headnote
A) Cooperative Banks - Refund of Interest Collected - Government Order - Constitution of India, Articles 226, 227 - The petitioner bank had already deposited the interest collected from primary cooperative societies with NABARD on or before 31st March 2010 as required by NABARD conditions; subsequently, a Government Order dated 16.3.2011 directed refund of such interest. The court found the GO unreasonable as the bank had already disbursed funds including dividends and taxes before the order. Subsequent orders withholding interest subsidy were also quashed. Held that the impugned orders are unreasonable and unenforceable, writ petition allowed (Paras 6-8).
Issue of Consideration
Whether the Government Order dated 16.3.2011 and subsequent orders directing refund of interest and withholding subsidies are valid and enforceable against the petitioner bank.
Final Decision
Writ petition allowed. Government Order dated 16.3.2011, order dated nil/11.2012, and order dated 12.3.2013 are quashed as unreasonable.
Law Points
- Legal points not extracted
- Government orders that retrospectively compel a bank to refund interest after it has already been lawfully deposited with NABARD are unreasonable and unenforceable
- belated orders cannot override statutory compliance
- withholding of subsidies in such circumstances is arbitrary.
