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Gujarat’s bid to collect fee from bank illegal: high court

Gandhinagar, Sep 27, 2010 (Calcutta Tube) The Gujarat High Court has termed as illegal an attempt by the state government to collect a fee from a co-operative bank.

The state government wanted to collect one percent fee from the Gujarat State Cooperative Bank Limited (GSCB) for standing guarantee in a nearly Rs.92-crore loan.

The GSCB used the state government’s guarantee to obtain a loan from the National Bank for Agriculture and Rural Development (NABARD) in 1997.

The state’s registrar of co-operative societies had in a letter April 8, 2004, demanded the fee from the GSCB.

‘We are not inclined to accept the ground shown by learned counsel for the state. The impugned letter dated April 4, 2004, issued by registrar, co-operative societies, being illegal, the same is set aside,’ a division bench of Chief Justice S.J. Mukhopadhaya and Justice Akil Kureshi said in a judgment made available Saturday.

As per the case details, the GSCB applied for a loan of Rs.91.84 crore from the NABARD for financing agriculture projects and rural development in the state.

For securing the, it had applied for default guarantee from the registrar of co-operative societies of Gujarat government.

While accepting the request, the state accorded the default guarantee for the loan in 1997. Following this, the GSCB was sanctioned the loan.

The court said: ‘It will be evident that the default guarantee as given by the state government by its letter dated Feb 15, 1997, was replaced by the petitioner bank (GSCB) by offering fixed deposit receipts lying with the State Bank of Saurashtra in lieu of the default guarantee given by the state government.’

‘In view of such internal arrangement made between the GSCB and the NABARD, the default guarantee given by the state having automatically come to an end, we hold that the state of Gujarat had no right to charge 1 percent guarantee fee,’ the court said.

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