High Court of KeralaSingle JudgeWrit petition allowed; Ext.P17 order quashed; 2...

A.P. Balakrishnan and P. Prabhakaran v. Registrar of Co-operative Societies, Joint Registrar of Co-operative Societies (General), Assistant Registrar (General), Part Time Administrator, Kumaramputhur Service Co-operative Bank Limited and others

Case / Petition Number:WP(C).No.31566/2013 (U)

Case Details & Bench

Court
High Court of Kerala
Hon'ble Judges
  • A.V.RAMAKRISHNA PILLAI
Judgment Date
2014-08-14
Court Decision / Holding
Ext.P17 order quashed; writ petition allowed. The 2nd respondent is directed to reinstate the managing committee forthwith. The Registrar may, after expiry of the current term, constitute an administrative committee under Section 33, rather than continuing with immediate supersession, and the petitioners are not directed to function as the administrative committee at this stage.
Final Disposition
Writ petition allowed; Ext.P17 order quashed; 2nd respondent directed to reinstate the managing committee; Registrar may constitute an administrative committee under Section 33 after the expiry of the current term if necessary to avoid a governance stalemate.

Parties to the Case

Appellants / Petitioners

  • A.P. Balakrishnan
  • P. Prabhakaran

Respondents

  • Registrar of Co-Operative Societies, Thiruvananthapuram
  • Joint Registrar of Co-Operative Societies (General), Palakkad
  • Assistant Registrar (General), Co-operative Societies, Mannarkad
  • Part Time Administrator, Kumaramputhur Service Co-Operative Bank Ltd.
  • Kumaramputhur Service Co-Operative Bank Limited (Represented by its Secretary)
  • Addl. R6 – Abubacker V.

Legal Representation & Advocates

Counsels for Petitioners

  • • Sri. V.M. Kurian
  • • Sri. Mathew B. Kurian
  • • Sri. K.T. Thomas

Counsels for Respondents

  • • Sri.K.K. Saidalavi (Senior Government Pleader)
  • • Sri.B.S. Swathy Kumar
  • • Sri.Reemy Murali
  • • Sri.Ashish Mohan
  • • Sri.A.K. Rajesh
  • • Sri.Venkatesh Gopi

Case Synopsis & Summary

This writ petition under WP(C) No.31566/2013 (U) challenges Ext.P17, the order dated 16 December 2013 superseding the managing committee of Kumaramputhur Service Co-operative Bank Ltd. and appointing a part-time Administrator. The petitioners, being former President and former Director of the Bank, contend that the 2nd respondent invoked Section 32 of the Co-operative Societies Act without proper consultation and without considering material opinions from the Circle Co-operative Union and the financing bank, and without waiting for the opinion of the financing bank after Ext.P11 (the prior judgment) directed a fresh consultation. The counter-affidavit defends the action on several reported irregularities (e.g., gold loans, cash balances, building expenditures, and other misfeasances) detected via VACB and internal enquiries under Section 65. The court notes that Section 32 requires a finding of persistent default or acts prejudicial to the society, supported by substantive grounds, not merely expediency or safeguarding trust. It holds that Ext.P17 lacks adequate reasons and proper procedure, including disregarding opinions of the Circle Co-operative Union and the financing bank, and thus interferes with the governance of the society. The judgment ultimately quashes Ext.P17 and directs reinstatement of the managing committee, with a registrar empowered to appoint an administrative committee after the term expires under Section 33, instead of immediate permanence of administration.

Provisions of Law Cited

Section 32 of the Co-operative Societies ActSection 65 of the Co-operative Societies ActSection 65(5) of the Co-operative Societies ActSection 33 of the Co-operative Societies ActBanking Regulation Act, 1949 (Central Act 10 of 1949)

Legal Doctrines & Maxims

  • Consultation under the Act is not an empty formality.
  • A decision under Section 32 must be grounded on findings showing culpable mind or breach of duties, not mere formalities or superficial reasons.

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners contend that Ext.P17 superseding the managing committee was issued in haste without consulting the financing bank and Circle Co-operative Union, and without awaiting their opinions after the court’s Ext.P11 judgment directed a fresh process. They argue there was no finding of personal wrongdoing by the directors, and the alleged irregularities were the subject of pending disciplinary and civil actions. They assert that the procedure under Section 32 requires meaningful consultation and specific grounds such as default, breach of trust, or misappropriation, which Ext.P17 does not adequately demonstrate. They emphasize that the VACB interim reports and annexed explanations were not properly weighed, and the order undermines the society’s governance and members’ interests.

Contentions of Respondents

The respondents defend Ext.P17 as a legitimate exercise of power under Section 32 to protect the society’s interest and trust. They rely on substantial irregularities identified in internal audits, VACB reports, and interim/final enquiry under Section 65, including improper gold loans, cash mismanagement, unapproved expenditures, and misappropriation concerns. They argue that consultative processes were undertaken, opinions from the Circle Union and financing bank were sought or available, and the order was necessary to prevent further deterioration of assets. The respondents maintain the action was warranted to protect depositors and members and that the court should defer to administrative expertise given the dynamic nature of co-operative governance.

Cited Precedents (3)

Case NameCitationTreatmentExplanation
State of Kerala v. Urukunnu Service Co-operative Bank Ltd. and others2013 (2) KHC 201PositiveCited to underscore that consultation under Section 32 is not an empty formality and must be grounded in findings showing defects or mismanagement, guiding the court’s scrutiny of the Registrar’s action.
State of M.P. v. Sanjay Nagayach2013 (2) KLT 733Mentioned OnlyCited by petitioners to challenge the decision as inconsistent with higher-judicial principles; not a binding precedent for the current Court’s ruling.
W.P.(C) 11797/2013Exhibit-P11 (Judgment dated 05/11/2013)Mentioned OnlyReferenced as a prior judgment relied upon in the exhibits, not as a controlling authority in the present decision.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI** ## **THURSDAY, THE 14TH DAY OF AUGUST 2014/23RD SRAVANA, 1936** ## **WP(C).No. 31566 of 2013 (U)** **----------------------------** **PETITIONERS:** **--------------------------** **1. A.P.BALAKRISHNAN, (FORMER PRESIDENT), BOARD OF DIRECTORS OF THE KUMARAMPUTHUR SERVICE CO-OPERATIVE BANK LIMITED NO. P 373, KUMARAMPUTHUR, MANNARKKAD COLLEGE POST, PALAKKAD - 678 582. RESIDENCE ADDRESS AT: ALAMBADATH HOUSE, P.O. CHANGALEERY, MANNARKAD, PALAKKAD.** **2. P. PRABHAKARAN, (FORMER MEMBER), BOARD OF DIRECTORS OF THE KUMARAMPUTHUR** **SERVICE CO-OPERATIVE BANK LIMITED NO. P 373, KUMARAMPUTHUR, MANNARKKAD COLLEGE POST, PALAKKAD, PIN - - 678 582, RESIDENCE ADDRESS AT:PAKIDERY HOUSE, KUMARAMPUTHUR POST, MANNARKAD, PALAKKAD.** **BY ADVS.SRI.V.M.KURIAN SRI.MATHEW B. KURIAN SRI.K.T.THOMAS** **RESPONDENTS:** **---------------------------** ## **1. THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM - 695 001.** **2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, PALAKKAD- 678 582.** **3. THE ASSISTANT REGISTRAR (GENERAL), CO-OPERATIVE SOCIETIES, MANNARKAD, PALAKKAD - 678 582.** **..2/-** **Kss** **..2....** ## **WPC.NO.31566/2013 (U)** ## **4. THE PART TIME ADMINISTRATOR,** **KUMARAMPUTHUR SERVICE CO-OPERATIVE BANK LIMITED NO. P 373, KUMARAMPUTHUR, MANNARKAD COLLEGE P.O., PALAKKAD- 678 582, ALSO AT : OFFICE INSPECTOR, OFFICE OF THE ASSISTANT REGISTRAR (GENERAL), CO-OPERATIVE SOCIETIES, MANNARKAD, PALAKKAD - 678 582.** **5. KUMARAMPUTHUR SERVICE CO-OPERATIVE BANK LIMITED NO. P 373, KUMARAMPUTHUR, MANNARKAD COLLEGE P.O., PALAKKAD- 678 582, REPRSENTED BY ITS SECRETARY.** ***ADDL.R6 IMPLEADED:** **R6. ABUBACKER.V. , S/O.ASSAINER, VARODAN, PAINADAM.P.O., MANNARKKAD, PALAKKAD.** - **(*ADDL. R6 IS IMPLEADED VIDE ORDER DATED 6/8/2014 IN IA NO.10627/2014)** **R1 TO R3 BY SR.GOVERNMENT PLEADER SRI.K.K.SAIDALAVI R4 & R5 BY ADVS. SRI.B.S.SWATHY KUMAR SRI.REMYA MURALI SRI.ASHISH MOHAN SRI.A.K.RAJESH ADDL.R6 BY ADV. SRI.VENKATESH GOPI** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07/08/2014, THE COURT ON 14/08/2014 DELIVERED THE FOLLOWING:** **Kss** ## **WP(C).No. 31566 of 2013 (U)** **-----------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS:** **---------------------------------------** **EXHIBIT-P1-TRUE COPY OF REPORT (WITHOUT DATE) SUBMITTED BY SUPERINTENDENT OF POLICE, VIGILANCE AND ANTI CORRUPTION BUREAU PALAKKAD UNIT TO DIRECTOR, VACB.** **EXHIBIT-P2-TRUE COPY OF THE REPORT DATED 21/06/2012 SUBMITTED BY DIRECTOR, VACB TO GOVERNMENT.** **EXHIBIT-P3-TRUE COPY OF THE REPORT DATED 18/03/2013 SUBMITTED BY THE SECRETARY TO THE PRESIDENT.** **EXHIBIT-P4-TRUE COPY OF THE RESOLUTION DATED 18/03/2013 AND 19/03/2013 PASSED BY THE BOARD OF DIRECTORS.** **EXHIBIT-P5-TRUE COPY OF THE SHOW CAUSE NOTICE DATED 22/04/2013 ISSUED BY THE 2ND RESPONDENT.** **EXHIBIT-P6-TRUE COPY OF THE ORDER DATED 20/03/2013 ISSUED BY THE 2ND RESPONDENT.** **EXHIBIT-P7-TRUE COPY OF EXPLANATION DATED 29/04/2013 SUBMITTED BY THE MEMBERS OF THE BOARD OF DIRECTORS.** **EXHIBIT-P8-TRUE COPY OF THE STATEMENT DATED 30/04/2013 FILED BY THE PRESIDENT BEFORE THE 2ND RESPONDENT.** **EXHIBIT-P9-TRUE COPY OF THE NOTICE DATED 30/04/2013 ISSUED BY THE 2ND RESPONDENT TO THE FINANCING BANK THROUGH SPECIAL MESSENGER.** **EXHIBIT-P10-TRUE COPY OF THE ORDER DATED 09/04/2013 ISSUED BY THE 2ND RESPONDENT.** **EXHIBIT-P11-TRUE COPY OF THE JUDGMENT DATED 05/11/2013 IN W.P(C) 11797/2013.** **EXHIBIT-P12-TRUE COPY OF THE NOTICE DATED 28/11/2013 ISSUED BY THE 2ND RESPONDENT.** **..2/-** **Kss** **...2.....** ## **WPC.NO.31566/2013 (U)** ## **EXHIBIT-P13-TRUE COPY OF THE OPINION DATED 07/12/2013 SUBMITTED BY THE CIRCLE CO-OP UNION, MANNARKAD.** **EXHIBIT-P14-TRUE COPY OF THE LETTER DATED 11/05/2013 SUBMITTED BY PALAKKAD DISTRICT CO-OPERATIVE BANK LIMITED.** **EXHIBIT-P15-TRUE COPY OF THE LETTER DATED 12/12/2013 SUBMITTED BY PALAKKAD DISTRICT CO-OPERATIVE BANK.** **EXHIBIT-P16-TRUE COPY OF THE ORDER DATED 22/07/2013 ISSUED BY THE 2ND RESPONDENT.** **EXHIBIT-P17- TRUE COPY OF THE ORDER DATED 16/12/2013 PASSED BY THE 2ND RESPONDENT.** **EXHIBIT-P18-TRUE COPY OF THE CIRCULAR DATED 12/07/2013 ISSUED BY THE IST RESPONDENT.** **EXHIBIT - P19: TRUE COPY OF THE APPLICATION DATED 15/02/2013 SUBMITTED BY THE SOCIETY TO THE 2ND RESPONDENT.** **EXHIBIT - P20: TRUE COPY OF THE ARBITRATION CASE FILED BY THE SOCIETY WITHOUT ANNEXURES.** **EXHIBIT - P21: TRUE COPY OF THE NOTICE DATED 12/10/2013 ISSUED BY THE PRESIDENT TO THE SECRETARY.** **EXHIBIT - P22: TRUE COPY OF THE REPLY DATED 22/10/2013 SUBMITTED BY SECRETARY.** **EXHIBIT - P23: TRUE COPY OF THE NOTICE DATED 22/11/2013 ISSUED BY THE PRESIDENT TO THE SECRETARY.** **EXHIBIT - P24: TRUE COPY OF THE PROCEEDINGS IMPOSING PUNISHMENT ON THE SECRETARY.** ## **RESPONDENT(S)' EXHIBITS:** **------------------------------------------** **EXHIBIT R2(a): TRUE COPY OF THE REPORT OF THE VIGILANCE & ANTI CORRUPTION BUREAU.** **/TRUE COPY/** **P.A.TO JUDGE** **Kss** ## **A.V.RAMAKRISHNA PILLAI, J.** = = = = = = = = = = = = = = = W.P(C) No.31566 of 2013 = = = = = = = = = = = = = = = Dated this the 14[th] day of August, 2014 ## **JUDGMENT** Ext.P17 order dated 16.12.2013 passed by the 2[nd] respondent superseding the present managing committee of the Kumaramputhur Service Co-operative Bank Ltd., is under challenge. 2. The aforesaid Co-operative Society was established about 55 years ago and the same is extending different kinds of service to the members, including facility to avail gold loan. The petitioners allege that in March, 2012, a surprise check was conducted by the Vigilance and Anti Corruption Bureau (VACB) and a report was submitted to the Government proposing action under Section 32 of the Co-operative Societies Act. 3. It is further alleged that verification by the Secretary of respondent society on 15[th] and 16 March, 2013 revealed that fraud was committed by some employees in the matter of gold loans and it was reported to the 3[rd] respondent and the Board of Directors pursued immediate action. The Police registered a case and arrested those who suspected to be involved. Six employees were suspended and disciplinary proceedings are pending against them. WP(C).31566/13 ## **-:2:-** 4. The petitioners allege that while so, the 2[nd] respondent issued show cause notice to the Board of Directors proposing action under Section 32 of the Co-operative Societies Act (for short, the Act) on the basis of an interim enquiry report under Section 65 of the Act. The Board of Directors filed detailed explanation answering every allegation. The main allegation is with regard to the fraud committed by the employees. The petitioners allege that out of 81₹ lakhs stated to be the loss, 25 lakhs was already recovered from₹ the accused persons and the society has filed arbitration case also to recover the balance amount with interest. 5. The grievance of the petitioners is that without considering the explanation, the 2[nd] respondent decided to supersede the managing committee and appoint a part time Administrator, and the decision was conveyed to the financing bank. The petitioners further allege that there was no consultation with the financing bank or the Circle Co-operative Union before taking a decision to appoint the Administrator. 6. The action of the 2[nd] respondent was challenged by the petitioners before this Court and this Court by Ext.P11 judgment set aside the notice of consultation issued by the 2[nd] respondent, and directed to proceed afresh from the stage of consultation. WP(C).31566/13 **-:3:-** Thereafter the 2[nd] respondent issued notice to the financing bank and the Circle Co-operative Union seeking their opinion. The Circle Co-operative Union opined against supersession. The financing bank sought few days' time to give its opinion, as they were unaware of the pendency of Ext.P11 judgment. However, without considering the explanation offered by the managing committee and the opinion expressed by the Circle Co-operative Union, and without even waiting for the opinion of the financing bank, the 2[nd] respondent passed Ext.P17 order on 16.12.2013 in a hasty manner superseding the managing committee and appointing the 4[th] respondent as part time Administrator. It is with this background, the petitioner has come up before this Court. 7. In the counter affidavit filed by the respondent State, they have justified the action of the 2[nd] respondent. According to them, the following defects have been reported in the Audit Certificate, for the year 2011-12: _1. Gold loan issued in excess of IMBP. (Sl. No.3)_ _2. Loans renewed without remitting interest. (Sl. No.5)_ _3. Funds utilised for computerisation and Building without obtaining permission from Joint Registrar (General), Palakkad (Sl. No.12)_ _4. Difference in cash balance adjusting in suspense heads both in Head office and Branch. (Sl. No.19)_ **-:4:-** WP(C).31566/13 _5. No actions taken for gold auctions in overdue gold loan........since 2009. (Sl. No.22)_ _6. No sub rules framed and obtained approval regarding issue of gold loans. (Sl. No.13)_ _7. Appointment of daily collection agents and Neethi store agents against Circular No.18/91 of Registrar of Co-operative Societies. (Sl. No.25)._ 8. They would further allege that a surprise inspection by the - VACB was made in the 5[th] respondent bank on 31.3.2012 wherein, the following irregularities were detected: - _a) In the Kumaramputhur Service Co-operative Bank and its Branch at Payyanadam, loans were being renewed to defaulters violating the existing Co-operative Society Rules, valuation of pledged properties for loans has not been done in some cases of the loans. Hence there is a possibility for that defaulters in repayment of loan amount occur._ - _b) In the short term loan for one year defaulters were being given enhanced on simple remission of the interest amount only be violating the existing rules._ - _c) In the main branch the President, the Vice-President, the Board members and the office staff are claiming TA without producing necessary tour diary/vouchers._ - _d) A huge amount has been spent in the renovation of Bank building without obtaining sanction from higher authority. Further on construction of the extension building the execution of the work was_ WP(C).31566/13 ## **-:5:-** - _done at 38% enhanced rate of the estimated amount without obtaining the approval of the General Body and the Joint Registrar._ - _e) In the case of printing and purchasing of stationary items an amount of Rs.153306/- was seen given to a private concern named Pavithra Press, Mannarkkad without obtaining quotations from them and violating society rules that the work for the amount more than Rs.5,000/- has to be ordered only after quotations are obtained._ - _f) While granting loans to the members mortgages were being registered by the Manager himself at Payyanadam Branch accepting remuneration as per the oral directions of the Board._ 9. They further contend that as per order dated 20.03.2013 an enquiry has been ordered under Section 65 of the Act on the following matters: _1. Regarding issue of gold loan of Rs.78,16,800/- without keeping any gold._ _2. Regarding issue of loan against the provision of byelaws of the society._ _3. Regarding construction made in the Society without obtaining the prior permission from this respondent._ _4. Regarding utilisation of own fund of the society without obtaining prior permission from this respondent._ _5. Regarding other matters coming before the enquiry officer._ 10. It was further contended that on 19.04.2013 the Enquiry Officer submitted an interim report in which, the following irregularities have been reported: WP(C).31566/13 ## **-:6:-** - _1)As per the approved byelaw of the society the maximum amount of cash balance to be kept in the Head Office is Rs.35,00,000/- but on 25.03.2013 an amount of Rs.56,83,191.20 was kept in cash which is against the provisions of approved byelaw._ - _2)On 25.03.2013 a number of 6,614 gold loan were stood outstanding as such the number of gold loan security packets should be equal to the number of fold loans outstanding. On physical verification of pledged jewel packets, only 6554 packets were found in the strong room of the 3[rd] respondent bank. There was a shortage of 60 packets of jewels (i.e. 3912.30 grams of gold). In effect Rs.81,16,000/- had been disbursed without keeping gold as security. On calculating the interest upon 25.03.2013, the total misappropriated amounts owned by them would come to Rs.91,93,702/-._ - _3)The bank had not taken any action for the auction of pledged ornaments in the case of overdue loan accounts since 2009. As per the approved byelaw of the bank the maximum amount of loan to be disbursed to one person in Rs.2,00,000/- but the bank had issued loan of Rs.4,00,000/- to Rs.36,00,000/- to single person in different days. It is also a clear instance of misappropriation of bank funds._ 11. Thereafter the 2[nd] respondent sought explanation from the society and proceeded with the action which resulted in Ext.P17. They would contend that the enquiry officer submitted a final report under Section 65 pointing out the following irregularities: WP(C).31566/13 ## **-:7:-** - _a) An amount of Rs.5,66,034/- had been enhanced in the valuation certificate without any explanation vide resolution No.22 dated 06.01.2012._ - _b) A fake valuation certificate had been submitted in the name of PWD Executive Engineer, Buildings with forged seal and signature. A loss of Rs.5,66,034/- had been incurred to the 5[th] respondent bank and Rs.55324/had been incurred to the Government of Kerala in valuation fees._ - _c) An amount of Rs.68,68,186/- spent for interior and exterior work in the newly constructed Head office building without obtaining prior sanction from this respondent. An additional amount Rs,16,34,750/- had also been released to Mr. Jothi Prakash for the same work. The valuation certificate for the work has been issued by the Assistant Engineer, LSGD Sri. Anilakumar, who is not competent to issue the same._ - _d) An excess amount of Rs.4,30,024/- has been incurred for the laying of tiles in the car parking area of Head office which is more than the prevailing market rate._ 12. In the light of the above, the respondents justified the action of the 2[nd] respondent in superseding the managing committee under Section 32 of the Co-operative Societies Act. 13. In the reply affidavit, the petitioners have refuted all the allegations in the counter affidavit. 14. The additional respondents 4 and 5 though entered appearance did not file counter. WP(C).31566/13 **-:8:-** 15. During the pendency of the writ petition, additional respondent no.6 was impleaded. Though no counter has been filed, the additional 6[th] respondent supported the action of the 2[nd] respondent in superseding the managing committee. 16. Arguments have been heard. 17. Before proceeding with the discussion, it is worth while to have a glance at Section 32 of the Co-operative Societies Act, which reads as follows: _**32. Supersession of Committee** .- (1) If the Registrar, after an inquiry by himself or through his subordinates or on a report of the financing bank, or the Vigilance and Anticorruption Bureau of the Government or the Vigilance Officer or otherwise is satisfied that the committee of any society.-_ (a) _persistently makes default or is negligent in the performance of the duties imposed on it by this Act or the rules or bye-laws or does anything which is prejudicial to the interests of the society; or_ _(b) wilfully disobeys or fails to comply with any lawful order or direction issued under this Act or the rules; or_ _(c) makes any payment contrary to this Act or the rules or the bye-laws or cause any loss or damage to the assets of the society by breach of trust of wilfull negligence; or_ **-:9:-** WP(C).31566/13 _(d) misappropriates or destroys or tampers with the records or cause the destruction or records to cover up any misconduct or malpractice._ _He may, after giving the committee an opportunity to state its objections, if any, by order in writing, remove the committee and appoint in its place, one administrator or an administrative committee consisting of not more than three individuals, one among them as convener, who need not be members of the society, to manage the affairs of the society for a period not exceeding six months._ _Provided that in the case of Co-operative Society, carrying on the business of banking, the provisions of the Banking Regulation Act, 1949 (Central Act 10 of 1949) shall also apply;_ _Provided further that in the case of a Co-operative Society, carrying on the business of Banking, appointment of Administrator/administrative committee, shall not exceed one year in the aggregate._ _Provided also that the Board of Co-operative Society shall not be superseded or kept under suspension where there is no Government share holding or loan or financial assistance or any guarantee by the Government or any Board or Institutions constituted by the Government].”_ WP(C).31566/13 **-:10:-** 18. The argument advanced by the learned Senior Government Pleader as well as the learned counsel appearing for the additional 6[th] respondent is that there are justifiable reasons for supersession of the managing committee under Section 32 of the Act. However, the argument advanced by the learned counsel for the petitioners is that the procedural legal formalities have not been complied with before passing Ext.P17. 19. The 2[nd] respondent issued Ext.P5 show cause notice directing the members of the board to show cause why action under Section 32 of the Act should not be taken. In the notice, 7 allegations are raised out of which, the main allegations are regarding missing of gold ornaments pledged in the society and maintenance of cash in the head office exceeding the limits approved under the bye-laws. It can be seen from Ext.P7 explanation that each and every allegations have been answered. 20. As regards the allegation of missing of gold ornaments pledged in the society, it was stated that on receipt of the report from the Secretary regarding the missing of gold ornaments, the managing committee had immediately convened a meeting and took action against the employees responsible for the same. The matter was reported to the authorities and a criminal case was filed WP(C).31566/13 ## **-:11:-** before the Police. The Police arrested the accused also. Six persons were suspended from service. It is stated that the society has suffered a loss of 81lakhs, out of which an amount of 25 lakhs₹ ₹ was recovered from accused persons due to the timely action taken by the managing committee. It is also pointed out that the society filed arbitration case before the Arbitration Court seeking recovery of the balance amount and the same is pending. Disciplinary proceedings were also pending against the delinquent employees, involved in the illegal acts. 21. It is crucial to note that there is absolutely no finding that the members of managing committee are involved in illegal acts, in any manner. The argument advanced by the learned counsel for the petitioners is that despite submitting the above explanation, the 2[nd] respondent without even referring to the action taken by the managing committee has proceeded to pass the impugned order. 22. The learned counsel for the petitioners would argue that all other allegations raised on the basis of the interim enquiry report was also explained in detail. It was argued that the bank was functioning from 8 am in the morning to 8 pm in the evening and, therefore, it was not possible to deposit the excess amount in the District Co-operative Bank on the same day. It was also argued that WP(C).31566/13 **-:12:-** there was no finding that the society had suffered any loss due to the aforesaid acts and at no point of time, direction was issued by the authorities in this regard. 23. Ext.P5 show cause notice also refers to an enquiry report by the VACB based on which, six other allegations are also made against the managing committee. Those allegations were also answered in Ext.P7 reply to the show cause notice submitted by the members of the managing committee. As the allegations on the basis of the report of the VACB does not find a place in Ext.P17 order, it would appear that the 3[rd] respondent was satisfied of the explanation offered by the petitioners with regard to the said allegations. The main reasoning in Ext.P17 order is that it was issued for protecting the interest of the members of the society and to retain the trust of the co-operative sector. This, according to the learned counsel for the petitioners, is insufficient in the absence of any valid reason to invoke the power under Section 32 of the Act. I see valid force in the said argument. 24. Sub section (a) of Section 32 mandates that the power under Section 32 can be invoked when the committee of any society persistently makes default or is negligent in the performance of the duties imposed on by it by the Act or Rules or WP(C).31566/13 **-:13:-** does anything which is prejudicial to the interest of the society. Similarly sub section (c) of Section 32 mandates that the power under Section 32 can be invoked if the Registrar is satisfied that the committee of any society makes any payment contrary to this Act or Rules or bye-laws or causes any loss or damages to the assets of the society by breach of trust or willful negligence. Ext.P17 order does not reveal that any of these conditions are present. 25. Ext.P17 order is based on the interim enquiry report under Section 65 of the Act. It was pointed out by the learned counsel for the petitioners that copy of the enquiry report was not furnished to the society or the managing committee. Enquiry is stated to have been completed and the report was submitted by the Enquiry Officer. Therefore, it was pointed out that the sequence of events leading to the issue of Ext.P17 order would show that the 2[nd] respondent had obtained the interim enquiry report and acted upon the same only to ensure that the existing managing committee is ousted. 26. This Court in ampteen number of decisions have held that the Registrar has to reach a finding that there are major defects in the constitution or working of a society in an enquiry under Section 65(5) of the Act and thereafter to act upon the same by proceeding WP(C).31566/13 **-:14:-** under Section 32 of the Act. In this case, the Circle Co-operative Union has submitted its opinion to the 2[nd] respondent against the supersession of the managing committee. No reason is stated by the 2[nd] respondent in the impugned order to reject the opinion of the Circle Co-operative Union. 27. The financing bank has already forwarded its opinion against action under Section 32 of the Act vide Ext.P14 dated 11.05.2013. However, by Ext.P15, the financing bank has requested the Joint Registrar of Co-operative Societies to make available a copy of Ext.P11 judgment to enable the bank to study the matter. However, without issuing a copy of the same and without waiting for its opinion on the basis of Ext.P11, the 2[nd] respondent hastened to pass Ext.P17 order. 28. It is well settled by this Court as well as the Apex Court that the act of consultation envisaged by the Act is not a empty formality. Mere finding that the committee failed in its duties are not sufficient. It should be supported by further finding that the managing committee did the same with a culpable mind failing which the action of the Registrar would be improper. (See **State of Kerala** v. **Urukunnu Service Co-operative Bank Ltd. and others** [2013 (2) KHC 201]) WP(C).31566/13 ## **-:15:-** 29. It was strenuously argued by the learned Senior Government Pleader that the remedy of the petitioner is to file appeal against Ext.P17 order. In answer to that, the learned counsel for the petitioners would submit that such a remedy is not invoked as the the authority which passed the impugned order is acting under the influence of persons owing allegiance to the ruling party and, therefore, no justice could be expected from the appellate authority. Moreover, the impugned order passed by the 3[rd] respondent is grossly against the law laid down by the Apex Court in **State of M.P** v. **Sanjay Nagayach** [2013 (2) KLT 733]. 30. It is also crucial to note that this Court has entertained the writ petition and interim orders have been passed. Therefore, it will not be just and proper to dismiss the writ petition at this stage relegating the petitioner to avail the remedy of statutory appeal. 31. On a consideration of the entire materials now place on record, this Court is of the view that Ext.P17 order calls for interference. Therefore, the writ petition is allowed. Ext.P17 order is quashed. The 2[nd] respondent is directed to reinstate the managing committee of the 5[th] respondent society forthwith. WP(C).31566/13 ## **-:16:-** It was brought to my notice that the period of present administrative committee expires by the end of this month, Therefore, it may not be possible for the petitioners to get the new managing committee elected as per the Rules, by the expiry of the term of the present committee. Therefore, in order to avoid stalemate, it shall be open to Registrar to constitute an administrative committee, in accordance with Section 33 of the Act, on the expiry of the term of the present managing committee. Though it was submitted by the learned counsel for petitioners that a direction be given to the respondents to permit the petitioners to function as the administrative committee, this Court is of the view that as Section 33 gives discretion to the Registrar in the matter, it may not be proper for this Court, at this juncture, to grant such a direction. ## Sd/- **A.V.RAMAKRISHNA PILLAI JUDGE** krj /True Copy/ ## P.A to Judge