Board of Directors of Pallikkunnu Ksheerolpadaka Sahakarana Sangham Ltd. No. D 1940 APCOS v. Diary Extension Officer, Department of Diary, Panamaram Village; Assistant Director, Diary Development (C) Block; Deputy Director of Diary Development (C) Block, Civil Station, Wayanad

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V** **FRIDAY, THE 23RD DAY OF OCTOBER 2020 / 1ST KARTHIKA, 1942** ## **WP(C).No.22692 OF 2020(J)** ## **PETITIONER:** **THE BOARD OF DIRECTORS OF THE PALLIKKUNNU KSHEEROLPADAKA SAHAKARANA SANGHAM LTD.NO.D 1940 APCOS, PALLIKKUNNU P.O, WAYANAD DISTRICT, PIN-673 122, REPRESENTED BY ITS PRESIDENT.** **BY ADVS. SRI.P.P.JACOB SMT.MARIYAM JACOB** ## **RESPONDENTS:** **1 THE DIARY EXTENSION OFFICER, DEPARTMENT OF DIARY, PANAMARAM VILLAGE, WAYANAD-670 721** **2 THE ASSISTANT DIRECTOR, DIARY DEVELOPMENT (C) BLOCK, CIVIL STATION, WAYANAD, KALPATTA NORTH, WAYANAD-673121** - **3 THE DEPUTY DIRECTOR OF DIARY DEVELOPMENT(C) BLOCK, CIVIL STATION, WAYANAD, KALPATTA NORTH , WAYANAD-673 121** ## **SRI BIMAL K NATH, SR GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23.10.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.22692 OF 2020** **2** ## **JUDGMENT** The petitioner, the Board of Directors of the Palikkunnu Ksheerolpadaka Sahakarana Sangham Ltd. No. D 1940 has approached this Court seeking to quash Exhibit P11 notice issued under Section 32(1) of the Kerala Co-operative Societies Act, 1969 (“the Act” for short) and also for a further declaration that Section 32 (1) of the Act will not empower the 3rd respondent to proceed against the present managing committee for the misconduct allegedly committed by the previous managing committee. The petitioners have also sought for a direction to the 3rd respondent to consider Exhibit P10 representation and afford an opportunity of being heard to the petitioner under Section 65(5) of the Act and also to keep in abeyance the proceedings under Section 32 (1) of the Act till such time. 2. The petitioner states that the petitioner society is administered by an elected committee of nine members. During the year 2014-2015, the then Committee implemented a scheme with financial assistance from the Diary Development Department and the NABARD for the construction of a building and for installation of plant and machinery. However due to lack of funds, the plant and machinery had to be kept idle and could not be operated. By resolution dated 25.5.2009, the Board of Directors after much deliberation resolved to hand over the plant and machinery on rental basis to a certain Sri. Prasoon on the **WP(C).No.22692 OF 2020** **3** understanding that the milk measured by the society would be purchased by him for a better price. The resolution was placed before the General Body, which authorised the Committee to proceed with the arrangement. Consequently Exhibit P3 deed was executed between the society and the 3rd respondent on 16.6.2020. However, the 3rd respondent, issued Exhibit P4 letter informing the petitioner that the agreement was entered into without seeking previous permission and sought for their explanation. Exhibit P5 reply was issued by the committee explaining their stand. However, without considering the explanation given by the petitioner, Exhibit P6 order was issued on 24.9.2020 calling upon the petitioner to cancel the lease arrangement and to operate the plant and machinery as originally envisaged. It is stated that an enquiry was ordered by the 3rd respondent without fulfilling the mandate under Rule 66 of the Co-operative Societies Rules. Exhibit P6 order was thus challenged by the petitioner by filing W.P.(C).No.12288/2020 and the same is pending. The petitioner states that later Exhibit P8 order was served upon them, and according to them, the proceedings were held behind their back. According to the petitioner, they have submitted a detailed representation before the 3rd respondent requesting that an opportunity be granted to them as provided under Section 65(5) of the Act. However, without providing any such opportunity, the 3rd respondent has issued Exhibit P11 notice under Section 32(1) of the Act. The petitioner contends that the entire proceeding initiated against the petitioner is contrary to law and against the precedents governing the subject. Exhibit P12 is the explanation offered by the petitioner which is pending before the 3rd respondent. According to the petitioner, there **WP(C).No.22692 OF 2020** **4** was no justification on the part of the 3rd respondent to issue the notice under Section 32 (1) of the Act in respect of misdeeds committed by the previous managing committee. They would state that the respondent No.3 is proceeding with the matter without even consulting the Financing Bank and the Circle Cooperative Union and for that reason alone the proceedings are liable to be interdicted. It is stated that it is with intent to overthrow the democratically elected managing committee that the 3rd respondent has ventured to issue the impugned notice. It is in the above background that the petitioner has approached this Court seeking the following reliefs: i) issue a writ of certiorari or any other appropriate writ order or direction calling for the records leading to the issue of Ext.P11 and quash the same. ii) issue a writ of mandamus or any other writ order or direction directing the third respondent to consider Ext.P10 representation and extend an opportunity of hearing to the Board of Directors of the society as provided by Section 65(5) of the Act and till such time all proceedings pursuant to Ext.P11 proceeding may be ordered to be kept in abeyance. iii) Declare that Section 32(1) of the Kerala Co-operative Societies Act do not empower the third responden to proceed against the present managing committee under Section 32(1) of the Act relating to the misconduct allegedly committed by the previous managing committee in office of the society. 3. Sri.P.P.Jacob,the learned counsel for the petitioner would vehemently submit that the present committee in office came into power only on 26.5.2018 and as is evident from Exhibit P11 proceedings, they are being proceeded against for the misconduct of the previous managing committee. It is further contended **WP(C).No.22692 OF 2020** **5** that the enquiry under Section 65 of the Act was conducted behind the back of the petitioner and they were not given an opportunity to contradict the same. Failure to consult the Financing Bank and the Circle Co-operative Union is also highlighted by the learned counsel and it is argued that the same would vitiate the entire proceedings . According to Sri. P.P. Jacob, mere negligence or omission allegedly committed by the committee in office is not a reason to initiate the drastic action under section 32(1) of the Act. The learned counsel would also place reliance on the judgment of the Apex Court in **State of Madhyapradesh** **and Others v. Sanjay Nagayach and Others** [(2013) 7 SCC 25] and it was argued that when a statutory authority like the 3rd respondent, who is invested with powers, purports to act on its own but in substance the power is exercised by external guidance or pressure, it would amount to non-exercise of power. Placing reliance on a judgment of this Court in **State of Kerala v. Board of** **Directors of Urukunnu Service Co-operative Bank Ltd** .[2013 (2) KLT 201] it is submitted that supersession of a democratically elected committee is a very drastic and extreme step and cannot be initiated lightly for minor violations. The learned counsel would take pains to point out that for mere default or negligence in the performance of duties imposed upon the society by the Act, proceedings for supersession cannot be initiated. Reliance is placed on a decision of this Court in **Vallapuzha Service Co-operative Bank Ltd v Joint Registrar** (2009 (3) KLT 838) and it was argued that the Managing Committee in office cannot be subjected to Section 32 proceeding on the allegation of misconduct on the part of the earlier committee. It has to be shown that there has been default and the **WP(C).No.22692 OF 2020** **6** same was persistent and prejudicial to the interest of the society. He would further contend that the hearing proposed by the 3rd respondent pursuant to Ext.P11 notice on 30.10.2020 is only an empty formality as it is evident that the 3rd respondent will ignore the valid objections and explanations submitted by the petitioner as borne out by Exhibit P12. 4. Sri.Bimal K Nath, the learned Government Pleader has very strenuously opposed the prayer. It is submitted that the issuance of notice by the 3rd respondent was well within his jurisdiction and none of the contentions raised before this Court merits consideration. The petitioner has furnished his explanation to the show cause notice and a decision shall be taken by the 3rd respondent after properly considering the objections raised and in the light of the precedents cited by the petitioner. He would contend that only if the findings against the committee are such that the continuance of the committee would be extremely prejudicial to the interest of the society that the exceptional and rare action under Section 32 can be taken by the 3[rd] respondent. If the default is minor and negligible and not found to be persistent, an opportunity will be extended to the society to rectify the same. Relying on the judgment of the Hon’ble Supreme Court in **Manish S Pardasani(M/s Wine Komder) v. Inspector State Excise and others** [(2019) 2 SCC 660], it is contended that this Court will not be justified in issuing directions merely on anticipation of an order being passed by the Joint Registrar. 4. I have anxiously considered the submissions advanced. I find that the challenge in this petition is to the show cause notice issued by the 3rd respondent under Section 32(1) of the Act. The petitioner has filed Ext.P12 **WP(C).No.22692 OF 2020** **7** explanation detailing their objections and clarifying their position. They have been asked to appear before the 3rd respondent on 30.10.2020 to submit further explanation, if any, on the matter. Unless exceptional cause is made out, this Court would refuse to exercise its discretionary jurisdiction by entertaining a writ petition questioning a notice to show cause. In the case on hand, the petitioner has no case that the order suffers from any jurisdictional infirmity or any other error. The legal contentions raised by the petitioner touching the merits of the notice issued by the 3rd respondent and the violation of the provisions can be brought to the notice of the 3rd respondent . 5. In **Manish S Pardasani(supra),** the Supreme Court had deprecated the issuance of directions which are essentially passed in anticipation of the order passed by an appellate authority, observing that such orders would interfere with the independence of the authority in deciding the matter before it in accordance with law. It was held thus in para 64 to 67. ‘64. We find that the High Court while disposing of the Writ Petitions also passed the following writ / directions in Para 20 which reads as under: “Since an apprehension is expressed and a serious one by the petitioners, we direct that in the event the fourth respondent passes any orders adverse to the petitioners, then such orders shall not take effect for a period of four weeks from the date they are communicated to the petitioners. Since we have set aside the fourth respondent's interim order and for the present not expressed any opinion on the contentions raised before us, interest of justice demands that the sealing of the premises by the authorities should be set aside. Therefore, the Superintendent or other functionary is directed to remove the seal, lock and key placed on the premises forthwith. This **WP(C).No.22692 OF 2020** **8** order will ensure to the benefit of such of the petitioners whose licenses are subsisting and are not cancelled. The other licences, which are no longer in operation on account of their termination, the holders thereof cannot avail the benefit of this order. However, we do not express any opinion on the remedies that are available to them and they can avail them as observed and held in the above paragraphs.” (Emphasis Supplied) 65. In our considered view, the High Court ought not to have issued directions of this nature. It was legally not permissible to do so. Indeed, the High Court by issuing such directions which are essentially passed in anticipation of the the order being passed by an appellate authority, interfered with the judicial independence of an appellate authority in deciding the appeals in accordance with law. 66. It is the sole discretion of the appellate authority under the Act to decide the appeal based on the facts involved in the appeal, and legal provisions which eventually result in passing a judicial order. No higher court can pass such directions merely on anticipation of an order being passed by an appellate authority. It is only after the order is passed, that the aggrieved person has a legal right to take recourse to a legal remedy available in law against such order by approaching to a higher forum and pray for grant of appropriate relief against such order. 67. This stage in this case is yet to arrive. The High Court should not have, therefore, pre-empted the passing of any order of the appellate authority, while deciding the Writ Petition. It is a settled law that the Court can stay or quash only those orders, which are impugned in the lis before it. A fortiori the Court cannot stay or/and quash the orders in anticipation before they are passed. We cannot, therefore, uphold such writ/directions issued by the High Court.’ **WP(C).No.22692 OF 2020** **9** 6. Since the matter is now pending consideration of the 3rd respondent, this Court in the light of the observations made above by the Apex Court will not be justified in issuing any directions merely in anticipation of an adverse order being passed. If the petitioner is aggrieved by the order passed by the 3rd respondent they have a legal right to take recourse to a legal remedy available in law against such an order. 7. In view of the apprehension expressed by the petitioner that the proceeding initiated under Section 32(1) is premeditated and with a view to supersede the elected committee, the 3rd respondent shall do well to remind itself of the principles laid down by the Apex Court as well as this Court. 8. In **Sanjay Nagayach** (supra), the Supreme Court had occasion to observe that supersession of an elected Managing Committee is an exception and can be resorted only in exceptional circumstances and normally the elected body should be allowed to complete the term for which it is elected. In paragraph No.42 of the judgment, the Apex Court had issued general directions taking note of the mushrooming of cases in various Courts challenging orders of supersession of elected Committees: The general directions are extracted below for easy reference. ‘1) Supersession of an elected managing Committee/Board is an exception and be resorted to only in exceptional circumstances and normally elected body be allowed to complete the term for which it is elected. 2) Elected Committee in office be not penalised for the **WP(C).No.22692 OF 2020** **10** shortcomings or illegalities committed by the previous Committee, unless there is any deliberate inaction in rectifying the illegalities committed by the previous committees. 3) Elected Committee in Office be given sufficient time, say at least six months, to rectify the defects, if any, pointed out in the audit report with regard to incidents which originated when the previous committee was in office. 4) Registrar/Joint Registrar are legally obliged to comply with all the statutory formalities, including consultation with the financing banks/Controlling Banks etc. Only after getting their view, an opinion be formed as to whether an elected Committee be ousted or not. 5) Registrar/ Joint Registrar should always bear in mind the consequences of an order of supersession which has the effect of not only ousting the Board out of office, but also disqualify them for standing for election in the succeeding elections. Registrar/Joint Registrar therefore is duty bound to exercise his powers bona fide and not on the dictation or direction of those who are in power. 6) Registrar/Joint Registrar shall not act under political pressure or influence and, if they do, be subjected to disciplinary proceedings and be also held personally liable for the cost of the legal proceedings. 7) Public money not to be spent by the State Government or the Registrar for unnecessary litigation involving disputes between various factions in a co-operative society. Tax payers money is not expected to be spent for settling those disputes. If found necessary, the same be spent from the funds available with the concerned Bank.’ ## 9. In **Vallapuzha Service Cooperative Bank Ltd. v. Joint** **Registrar** [2009 (3) KLT 838], this Court had observed that supersession of a democratically elected committee is a very drastic and extreme step. It is not necessary to cite any judicial precedents to hold that action under Section 32 of the Act cannot therefore be taken lightly for mundane violations. Only if the findings against the Committee are such that the continuance of the Committee would be extremely prejudicial to the interests of the Society, the exceptional and **WP(C).No.22692 OF 2020** **11** rare action under Section 32 of the Act shall be taken. Findings on the culpability of the Committee on their improper action should inform the action of the Registrar while initiating proceedings under Section 32 of the Act. In other words, the mere finding that the Committee has done the acts alleged alone is not sufficient; the same should be supported by a further finding that they did the same with a culpable mind, failing which the action of the Registrar would be improper. 10. These observations shall be borne in mind by the 3rd respondent while hearing the petitioner and other members of the managing committee of the Bank. 11. In that view of the matter, this writ petition will stand disposed of directing the petitioner to appear before the 3rd respondent in terms of the directions issued above and furnish their explanation. The 3[rd] respondent shall consider the same and pass appropriate orders in the light of the observations above. ## **Sd/-** ## **RAJA VIJAYARAGHAVAN V** ## **JUDGE** DSV **WP(C).No.22692 OF 2020** **12** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE RESOLUTION NO.1 DATED 25.5.2019 OF THE PETITIONER SOCIETY. EXHIBIT P2 TRUE COPY OF THE RESOLUTION ADOPTED BY THE PETITIONER SOCIETY DATED 27.12.2019 EXHIBIT P3 TRUE COPY OF THE AGREEMENT EXECUTED BY THE SOCIETY WITH ONE MR. PRASOON DATED 16.6.2020. EXHIBIT P4 TRUE COPY OF THE NOTICE ISSUED BY THE THIRD RESPONDENT DATED 6.8.2020. EXHIBIT P5 TRUE PHOTOCOPY OF THE EXPLANATION FILED BY THE PETITIONER DATED 18.8.2020. EXHIBIT P6 TRUE PHOTOCOPY OF THE ORDER ISSUED BY THE THIRD RESPONDENT DATED 24.9.2020. EXHIBIT P7 TRUE PHOTOCOPY OF THE ORDER ISSUED BY THE THIRD RESPONDENT TO THE PETITIONER. EXHIBIT P8 TRUE PHOTOCOPY OF THE ORDER DATED 7.7.2020 IS ISSUED BY THE THIRD RESPONDENT TO THE PETITIONER. EXHIBIT P9 TRUE PHOTOCOPY OF THE RELEVANT PORTION OF THE ENQUIRY REPORT PAGES 1 TO 3 AND 27 TO 29. EXHIBIT P10 TRUE PHOTOCOPY OF THE REPRESENTATION DATED 12.10.2020 SUBMITTED BY THE PETITIONER BEFORE THE RESPONDENTS 2 AND 3. EXHIBIT P11 TRUE COPY OF THE PROCEEDINGS DATED 8.10.2020 ISSUED BY THE THIRD RESPONDENT. EXHIBIT P12 TRUE PHOTOCOPY OF THE PRELIMINARY EXPLANATION SUBMITTED ALONG WITH THE STATEMENT OF ACCOUNT BY THE PETITIONER DATED NIL. EXHIBIT P13 TRUE PHOTOCOPY OF THE DECISION REPORTED IN 2009 (3) KLT 838.** **WP(C).No.22692 OF 2020** **13** **EXHIBIT P14 TRUE COPY OF THE DECISION REPORTED IN 2008 (4) KLT 856.** **RESPONDENTS EXHIBITS:NIL** **//TRUE COPY//** **P.A TO JUDGE**