Board of Directors Kozhinjampara Service Co-operative Bank Ltd. v Joint Registrar of Co-operative Societies (General) and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN** **THURSDAY ,THE 01ST DAY OF NOVEMBER 2018 / 10TH KARTHIKA, 1940** ## **WP(C).No. 8156 of 2018** ## **PETITIONER/S:** **THE BOARD OF DIRECTORS, KOZHINJAMPARA SERVICE COOPERATIVE BANK LTD. NO.P.500, KOZHINJAMPARA P.O,PALAKKAD DISTRICT678555.REPRESENTED BY ITS PRESIDENT, K.S.THANLKACHALAM.** **BY ADVS. SRI.GEORGE POONTHOTTAM SMT.NISHA GEORGE** ## **RESPONDENT/S:** - **1 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENREAL),OFFICE OF THE JOINT REGISTRAR OF COOPERATIVE SOCIETIES(GENERAL), FIRST FLOOR,CIVIL STATION, SEKHARIPURAM,KALPATHY, PALAKKAD DISTRICT678010** - **2 THE ASISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), OFFICE OF THE ASSISTANT REGISTRAR OF COOPERATIVE SOCIETIES (GENERAL), CHITTUR, PALAKKAD DISTIRCT-678101** - **3 THE INQUIRY OFFICER (SENIOR INSPECTOR/UNIT INSPECTOR,KOZHINJAMPARA UNIT),OFFICE OF THE ASSISTANT REGISTRAR OF COOPERAITVE SOCIETIES (GENERAL), CHITTUR, PALAKKAD DISTIRCT-678101** **BY SMT C.S.SHEEJA, SENIOR GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 01.11.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No. 8156 of 2018** **2** ## **JUDGMENT** The petitioner, the Board of Directors of Kozhinjampara Service Co-operative Bank Ltd., which is a Co-operative Society registered under the provisions of the Kerala Co-operative Societies Act, 1969, has filed this writ petition under Article 226 of the Constitution of India, seeking a writ of certiorari to quash Ext.P4 inspection report dated 18.01.2018 (wrongly dated as 18.01.2017) of the 3[rd] respondent Inquiry Officer and Ext.P7 notice dated 26.02.2018 issued by the 1[st] respondent Joint Registrar, whereby the members of the Board of Directors of the said Society have been asked to submit their explanations, if any, to the findings in Ext.P4 report, within seven days from the date of receipt of that notice. The petitioner has also sought for other consequential reliefs. 2. On 09.03.2018, when this writ petition came up for admission, the learned Government **WP(C).No. 8156 of 2018** **3** Pleader was directed to get instructions. This Court granted an interim stay of operation of Exts.P4 and P7 and all further proceedings pursuant thereto for a period of two weeks. The said interim order, which was extended from time to time, is still in force. 3. A counter affidavit has been filed by the 1[st] respondent opposing the reliefs sought for in this writ petition. Paragraphs 4 and 5 of the said counter affidavit read thus; “4. It is submitted that there was a detailed inspection conducted by the 3[rd] respondent Unit Inspector on 20.02.2017 and 21.02.2017 in the affairs of Kozhinjampara Service Co-operative Bank. In this inspection the Unit Inspector reported some defects of the bank to the Assistant Registrar (General), Chittur and he enquired the matter by a letter dated 05.04.2017 produced as Exhibit P2. Some of the defects noted in the detailed report was not rectified satisfactorily. The explanation of the bank in this regard was not satisfactory. There were two major defects which are not rectified as narrated below. (i) This office sanctioned permission to build a **WP(C).No. 8156 of 2018** **4** new office cum Godown Building as per order dated 4185/2015/CRP/K.dis dated 11.06.2015. But in this order, there was an instruction to the bank to get permission regarding the utilization of General fund of the bank as per the Provisions of the Kerala Co-operative Societies Act. This is to protect the interest of the Depositors and Members of the Society which is the responsibility of this respondent. It submitted that the bank has not even applied for any permission from this office as contemplated in Rule 54(1) of the Kerala Co-operative Societies Rules. Rules 54(1) of the Kerala Co-operative Societies Rules provides that:- _“A Society may, with previous sanction in writing of the Registrar, invest the whole or any portion of its fund in the purchase or lease of land on the acquisition, construction or renewal of any building that may be necessary to conduct its business and the amount of the fund so invested shall be recouped on such terms as may be determined in each case by the Registrar.”_ Thus Rule 54(1) clearly stipulates that the bank should get permission from Registrar and the amount utilized for the construction purpose should be recouped on such terms as may be determined by the Registrar. The bank has not obtained permission from this office. The first explanation given by the bank is that they will submit that Valuation report after completion of **WP(C).No. 8156 of 2018** **5** the construction work within a period of 3 or 4 months which is not sufficient. The bank is registered and functioning as per the Kerala Cooperative Societies Act and Rules and is bound by the provisions contained in this Act and Rules. (ii) The second explanation of the Bank is with regard to Rule 54(1)(b) of the Kerala Cooperative Societies Act. Rule 54(1)(b) related to purchase or lease of land or purchase, construction or remodeling of Buildings of a Society, whose objects according to its byelaw includes such purchase, lease construction or remodeling. The petitioner bank is a credit Society and its objects is not included the above said activities. The bank has not obtained prior permission from Co-operative department for building construction and interior and other connected works. 5. The petitioner's contention that the subject matter of enquiry by the Unit Inspector and the subject matter of 66(1) inspection was same are not correct. It is alleged by the petitioner that there was request pending in this office regarding the application of fund utilization. It is humbly submitted that there was nothing in this office under consideration of the bank in this regard. The petitioner contents that they attempted to get some financial assistance from NCDC and District Co-operative Bank, but that is not connected to the enquiry. The Bank did not obtain prior permission from the Registrar and it **WP(C).No. 8156 of 2018** **6** was duly reported by the Assistant Registrar, Chittur and on the basis of this report, this respondent was bound to enquire the matter. Consequently, the bank is directed to submit their explanation in this regard.” 4. Heard the learned counsel for the petitioner and also the learned Senior Government Pleader appearing for the respondents. 5. The pleadings and materials on record would show that the 1[st] respondent Joint Registrar vide Ext.P1 order dated 22.09.2017 appointed the 3[rd] respondent Unit Inspector to conduct an inspection under sub-section (1) of Section 66 of the Act. Ext.P4 is the inquiry report dated 18.01.2018 submitted by the 3[rd] respondent before the 1[st] respondent and Ext.P7 is the notice issued by the 1[st] respondent requiring the members of the Board of Directors of the Society to submit explanations, if any, to the findings in Ext.P4 inquiry report. Exts.P4 and P7 are under challenge in this writ petition. 6. The petitioner would contend that there **WP(C).No. 8156 of 2018** **7** are no allegations of misappropriation or misutilisation of funds of the Society in Ext.P4 report and as such, the 1[st] respondent Joint Registrar has issued Ext.P7 notice, without application of mind. The petitioner would also contend that the two alleged defects noted in Ext.P4 report are opposed to facts. The petitioner would contend further that the action of the 1[st] respondent Joint Registrar in issuing Ext.P7 notice is politically motivated and hence, interference of this Court under Article 226 of the Constitution of India is warranted. 7. In **State of U.P v. Brahm Datt Sharma** **[(1987) 2 SCC 179]** the Apex Court held that, when the show cause notice was issued under a statutory provision calling upon to show cause, the courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued palpably without any authority of law. The purpose of issuing show **WP(C).No. 8156 of 2018** **8** cause notice is to afford an opportunity of hearing and once cause is shown it is open to the authority to consider the matter in the light of the facts and submission placed before it and only thereafter a final decision in the matter could be taken. Therefore, interference by the Court before that would be premature. 8. In **Seimens Ltd v. State of Maharashtra** **[(2006) 12 SCC 33]** the Apex Court held that ordinarily, a writ court may not exercise its discretionary jurisdiction to entertain a writ petition questioning a notice to show cause unless the notice appears to have been without jurisdiction. 9. In **Union of India v. Vicco Laboratories** **[(2007) 13 SCC 270]** the Apex Court held that, normally, the writ court should not interfere at the stage of issuance of show cause notice by the authorities. In such a case, the parties get ample opportunity to put forth their contentions **WP(C).No. 8156 of 2018** **9** before the authorities concerned and satisfy the authorities concerned about the absence of case for proceeding against the person against whom the show cause notices have been issued. Abstinence from interference at the stage of issuance of show cause notice in order to relegate the parties to the proceedings before the authorities concerned is the normal rule. However, the said rule is not without exceptions. Where a show cause notice is issued either without jurisdiction or in an abuse of process of law, certainly, in that case, the writ court would not hesitate to interfere even at the stage of issuance of the show cause notice. The interference at the show cause notice stage should be rare and not in a routine manner. The mere assertion by the writ petitioner that notice was without jurisdiction and/or abuse of process of law would not suffice. It should be prima facie established to be so. Where factual **WP(C).No. 8156 of 2018** **10** adjudication would be necessary, interference is ruled out. 10. In view of the law laid down in the decisions referred to supra, no interference under Article 226 of the Constitution of India is warranted on a show cause notice issued under a statutory provision unless the notice is shown to have been issued palpably without any authority of law or that it is an abuse of process of law. The mere assertion in the writ petition that the show cause notice has been issued without any authority of law or that it is an abuse of process of law would not suffice. It should be prima facie established to be so. Where factual adjudication would be necessary, no interference of this Court in exercise of the extraordinary jurisdiction under Article 226 of the Constitution is warranted. 11. Having considered the averments and also the grounds raised in this writ petition, this **WP(C).No. 8156 of 2018** **11** Court finds that the petitioner has not made out a case warranting interference on Ext.P7 notice, in exercise of the extraordinary jurisdiction under Article 226 of the Constitution of India. It is for the petitioner to submit explanation pursuant to Ext.P7 notice so as to enable the 1[st] respondent Joint Registrar to take a final decision on the matter. If the findings in Ext.P4 inquiry report are without any factual basis or if the petitioner has a case that findings in the said report are not sufficient to initiate further proceedings against the Board of Directors of the Society, it is for the petitioner to raise such contentions before the 1[st] respondent Joint Registrar by submitting a proper explanation pursuant to Ext.P7 notice. 12. In **State of M.P. v. Sanjay Nagayach** **[(2013) 7 SCC 25]** the Apex Court, in the context of Section 53 of the Madhya Pradesh Co-operative Societies Act, 1960 held that, the **WP(C).No. 8156 of 2018** **12** Registrar/Joint Registrar, while exercising powers of supersession has to form an opinion and that opinion must be based on some objective criteria, which has nexus with the final decision. A statutory authority shall not act with preconceived notion and shall not speak his masters' voice, because the formation of opinion must be his own, not somebody else in power, to achieve some ulterior motive. There may be situations where the Registrar/Joint Registrar are expected to act in the best interest of the society and its members, but in such situations, they have to act bona fide and within the four corners of the Statute. In paragraph 42 of the judgment (SCC @pages 44 & 45), the Apex Court laid down the general directions in the matter of supersession of the elected committee. ## 13. In **Sanjay Nagayach's case (supra)** , the order of supersession was passed by the Joint Registrar after a period of two and a half years **WP(C).No. 8156 of 2018** **13** of the issuance of show cause notice and most of the charges levelled against the Board of Directors were related to the period when the previous committee was in office and even the charges based on the audit report dated 25.9.2008 were also rectified by the Board of Directors by addressing the primary societies. Based on the decision of the Apex Court In **Sanjay Nagayach's case** , the Registrar of Co-operative Societies has issued Circular No.45/13 dated 12.07.2013. 14. In the result, the challenge made in this writ petition against Ext.P4 inspection report and Ext.P7 notice is repelled, as the petitioner failed to make out a case warranting interference, in exercise of the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. It is for the petitioner to submit explanation to Ext.P7 notice, within two weeks from the date of receipt of a certified copy of this judgment. The 1[st] **WP(C).No. 8156 of 2018** ## **14** respondent Joint Registrar shall consider the same and take an appropriate decision, strictly in accordance with law, taking note of the law laid down by the Apex Court in **Sanjay Nagayach's case (supra)** , with notice to the petitioner and after affording the members of the Board of Directors an opportunity of being heard, as expeditiously as possible, at any rate within a period of three weeks from the date of receipt of a certified copy of this judgment. The decision so taken shall be communicated to the petitioner without any delay. 15. The legal and factual contentions raised by the petitioner are left open to be raised before the 1[st] respondent Joint Registrar at appropriate stage. This writ petition is disposed of as above. ## **Sd/-** ## **ANIL K.NARENDRAN, JUDGE** **WP(C).No. 8156 of 2018** **15** ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** - **EXHIBIT P1: TRUE COPY OF THE ORDER BEARING NO.2498/2017/C.R.P DATED 22.09.2017 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P2; TRUE COPY OF THE NOTICE DATED 05.04.2017 ISSUED BY THE 2ND RESPONDENT ALONG WITH THE COPY OF THE REPORT.** - **EXHIBIT P3: TRUE COPY OF THE EXPLANATION SUBMITTED BY THE SOCIETY TO THE 1ST RESPONDENT DATED 05.07.2017.** - **EXHIBIT P4: TRUE COPY OF THE REPORT SUBMITTED BY THE 3RD RESPONDENT INQUIRY OFFICER DATED 18.01.2018 (WRONGLY SHOWN AS 18.01.2017)** - **EXHIBIT P5: TRUE OF THE ORDER NO.3160/2016/CRP/K.DIS DATED 07.05.2016 PASSED BY THE 1ST RESPONDENT** - **EXHIBIT P6: TRUE COPY OF THE REQUEST DATED 17.11.2017 SUBMITTED BY THE SOCIETY ALONG WITH THE RELEVANT RESOLUTIONS AND VALUATION CERTIFICATE.** **EXHIBIT P7: TRUE COPY OF THE NOTICE NO.2498/2017/CRP DATED 26.02.2018 ISSUED BY THE THE 1ST RESPONDENT** AV/2/11