KALPANA BANERJEE Vs. STATE OF WEST BENGAL

JUDGEMENT

(1.) The Petitioners are the joint members of a Co -operative Society. In this writ petition the Petitioners challenged the order of the respective Cooperative Tribunal in dismissing the two appeals being appeal No. 78 of 1999 and appeal No. 54 of 2001 consequent to the original order passed in the award case. Although the dispute is commercial in nature but the point for judicial review by the writ Court is whether the imposition of penal interest either by the Arbitrator or by the Co -operative Tribunal is without jurisdiction or not in view of the judgment Central Bank of India v/s. Ravindra and Ors. : A.I.R. 2001 S.C. 3095. In such judgment the Supreme Court observed' that private money lending business has almost come to an end. The needy borrowers are depending upon the banking institutions for financial facilities. Several unhealthy practices having slowly penetrated into prevalence were pointed out. Banking is an organized institution and most of the banks press into service long running documents wherein the borrowers fill in the blanks at a times without caring to read what has been provided* therein, and bind themselves by the stipulations articulated by best of legal brains. Borrowers other than those belonging to corporate sector, find themselves having unwittingly: fallen into a trap and rendered themselves liable and obliged to pay interest, the quantum whereof may at the end prove to be ruinous. At times the interest charged and capitalized in manifold then the amount actually advanced. Rule of demodulate does not apply. Penal interest, service charges and other - over -heads are debited in the account of the borrower may not even aware. If the practice of charging interest on quarterly rests is upheld and given a judicial recognition, unscrupulous banks may - resort to charging interest even on the monthly rests and capitalising the same Statements of accounts supplied by banks to borrowers may at time do not contain particulars of details of debit •entries and when written in and are worse then the medical prescriptions putting to rest the eyes and wits of the borrowers. Instance of unscrupulous, unfair and unhealthy dealings can be multiplied though they cannot be generalized. Suffice it. To observe that such issue shall have to be left upon to be adjudicated upon in appropriate cases, as and when actually arising for decision. The Supreme Court held that though interest can be capitalised on the analogy that the interest falling due on the accrued date and remaining unpaid partakes the character of the amount advanced on that date, yet penal interest, which is charged by way of penalty for non -payment, cannot be capitalised. Further interest, i.e. interest on interest whether simple, compound or penal cannot be claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be opposed to public policy.

(2.) By placing this judgment, Mr. Bikash Ranjan Bhattacharjee, learned Senior Counsel, appearing for the Petitioners contended that in view of such judgment writ Court can interfere with the matter because the Petitioners challenged the decision making process for judicial review but not the decision.

(3.) In answer to question whether the Petitioners supposed to pay -penal interest on agreed rate of interest as per bye -laws of the respective Co -operative Society he cited a judgment Co -operative Central Bank Limited and Ors. etc. v/s. Additional Industrial Tribunal, Andhra Pradesh, Hyderabad. and Ors. etc. : A.I.R. 1970 S.C. 245 and relying upon para 10 therein contended that the bye -laws of the Cooperative Society framed in pursuance of the provisions of the Act cannot be held to be law or to have the force of law. The principle of Rule making power of the Government under any Statute does not apply to bye -laws of the nature that a Co -operative Society is empowered by the Act to make. The bye -laws that are contemplated by the Act can be merely those which govern the internal management, business and administration of a society. They are of the nature of the articles of association of a. company incorporated under the Companies Act. They may be binding between the persons attended by them but they do not have the force of the Statute.