Kaipparambu Panchayat Multipurpose Co-operative Society Ltd. v. Joint Registrar of Co-operative Societies (General), Thrissur; State of Kerala, represented by Chief Secretary, Government Secretariat, Thiruvananthapuram; and Additional Respondent(s)

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR** ## **FRIDAY, THE 14TH DAY OF OCTOBER 2016/22ND ASWINA, 1938** **WP(C).No. 30680 of 2016 (H) ----------------------------** ## **PETITIONER(S):** **-------------** **KAIPARAMBU PANCHAYAT MULTIPURPOSE CO OPERATIVE SOCIETY LTD. NO. R1124, REPRESENTED BY THE SECRETARY.** **BY ADV. SRI.GEORGE POONTHOTTAM** ## **RESPONDENT(S):** **--------------** **1. THE JOINT REGISTRAR OF CO OPERATIVE SOCIETIES (GENERAL), THRISSUR - 680 001.** **2. THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), THRISSUR - 680 001.** - **ADDITIONAL R3 IMPLEADED** **3. STATE OF KERALA, REPRESENTED BY CHIEF SECRETARY, GOVERNMENT SECRETARIAT, THIRUVANANATHAPURAM.** - **ADDL. R3 SUO MOTU IS IMPLEADED AS PER JUDGMENT DTD.14.10.2016.** **BY SPECIAL GOVERNMENT PLEADER SRI.MOHAMED HASHIM** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 28-09-2016 THE COURT ON 14-10-2016, THE SAME DAY DELIVERED THE FOLLOWING:** **msv/** ## **WP(C).No. 30680 of 2016 (H) ----------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **-----------------------** **EXT. P1 TRUE COPY OF THE BYE-LAW.** **EXT. P2 TRUE COPY OF THE COMMUNICATION GIVEN BY THE JOINT REGISTRAR NO. H.M. 4480/2016 DATED 12.08.2016. EXT. P3 TRUE COPY OF THE APPEAL DATED 14.8.2016. EXT. P4 TRUE COPY OF THE ORDER NO. 2573/16 DATED 08.09.2016. EXT. P5 A TRUE COPY OF THE ORDER BY WHICH AN INSPECTION UNDER SECTION 66 OF THE ACT IS ORDERED.** ## **RESPONDENT(S)' EXHIBITS** **-----------------------** ## **NIL** ## **//TRUE COPY//** **P.S.TO JUDGE** **Msv/** ## **P.B.SURESH KUMAR, J.** ## **= = = = = = = = = = = = = =** ## **WP.(C).No.30680 of 2016-H.** **= = = = = = = = = = = = = =** Dated this the 14[th] day of October, 2016. ## **J U D G M E N T** Ext.P4 order of the second respondent is under challenge in this writ petition. 2. The petitioner is a multi-purpose co-operative society, registered under the Kerala Co-operative Societies Act ('the Act' for short). The bye-law of the petitioner Society ('the Society' for short), enables it to conduct Neethi-Maveli Stores, super markets, margin free shops, etc. The Society is presently running a super market at Kaipparambu as also a Neethi Medical Store at Peramangalam. According to the Society, having regard to the demands of its members, it decided to start yet another super market at Peramangalam. Thereupon, the Society took on lease a premises paying a sum of Rs.2,00,000/- by way of advance for the said purpose. It also awarded the interior works of the leased premises to a contractor for a sum of Rs.28,97,860/-. In the meanwhile, the Society sought the sanction of the Registrar of Co-operative Societies as required by **WP.(C).No.30680/2016-H.** 2 Rule 54 of the Kerala Co-operative Societies Rules, ('the Rules' for short) for spending the aforesaid amounts. While so, the first respondent who is exercising the powers of the Registrar in relation to the Society, turned down the request made by the Society for sanction, as per Ext.P2 communication. In Ext.P2 communication, it is stated, among others, that the Society has not obtained the previous sanction of the Registrar for the purpose of establishing the proposed super market; that the decision of the Society to take on lease a premise on a monthly rent of Rs.50,000/- and to pay a sum of Rs.2,00,000/- as advance without obtaining the sanction of the Registrar is not in order; that the conduct of the Society in inviting tenders for carrying out the interior works of the leased premises in one local daily alone is not in accordance with law; that the conduct of the Society in assigning the interior works of the leased premises to the contractor and paying advance to the tune of Rs.19,00,000/to him, before obtaining the sanction of the Registrar, is not correct; that the fluid resources of the Society is less by Rs.29,44,407/- and that therefore the sanction sought cannot be granted. Ext.P2 communication is issued on 12.8.2016. On **WP.(C).No.30680/2016-H.** 3 receipt of Ext.P2 communication, the Society preferred an appeal before the Minister for Co-operative Societies of the State seeking orders directing the first respondent to issue the sanction sought by the Society. Ext.P3 is the appeal preferred by the petitioner before the Minister. According to the petitioner, in anticipation of a favourable decision from the Government on Ext.P3 appeal, the Society proceeded to open the super market on 9.9.2016 by completing the interior works and by procuring the articles intended for trade as well. While so, on 8.9.2016, the second respondent issued Ext.P4 order directing the Society to refrain from inaugurating the super market in the light of Ext.P2 decision of the first respondent. In Ext.P4 order, the second respondent has stated that the same is issued in exercise of his powers under Section 66A of the Act. The petitioner is aggrieved by Ext.P4 order and hence this writ petition. 3. A statement has been filed by the second respondent supporting Ext.P4 order. 4. Heard the learned counsel for the petitioner as also the learned Special Government Pleader. 5. The learned counsel for the petitioner contended **WP.(C).No.30680/2016-H.** 4 that the second respondent, the Assistant Registrar of Cooperative Societies has no authority to issue an order in the nature of Ext.P4. 6. Rule 54 of the Rules dealing with the manner of investment of the funds of the societies reads thus: 54. Manner of investment of funds :- (1) A Society may, with the previous sanction in writing of the Registrar, invest the whole or any portion of its funds in the purchase or lease of land on the acquisition, construction or renewal of any building that may be necessary to conduct its business. The amount of the funds so invested shall be recouped on such terms as may be determined in each case by the Registrar. Provided that this sub rule shall not apply-- - (a) to immovable property purchased-- (i) by a society at a sale held in execution of a decree, decision or award obtained by it for the recovery of any sum due to it; or (ii) by a Financing Bank at a sale held in execution of a decree, decision or award obtained by a society financed by it for the recovery of any sum due to such society or at a sale by or on behalf of the liquidator of such society; (b) to the purchase or lease of lands or purchase, construction or remodelling of buildings of a Society, whose objects according to its bye-laws include such purchase, lease construction or remodelling : Provided further that no recoupment of the amount invested under this sub-rule shall be necessary when the investment is made-- (a) by a society from its building fund raised out of net profits as per the bye-laws; or **WP.(C).No.30680/2016-H.** 5 (b)by a society other than a credit society in which the share capital raised from the members is intended to build up the special kind of business for which it has been registered. (2) No society shall dispose of any immovable property acquired by the society without the prior sanction of the general body and of the Registrar : Provided that Housing Societies, the bye-laws of which specifically provide for the purchase and sale of immovable property, may dispose of those property without the sanction of the Registrar or of the general body. (3) A society may with previous permission of the Registrar deposit or invest its funds in institutions registered under the Travancore Cochin Literary, Scientific and Charitable Societies Act, 1955, provided that such 'institutions are jointly managed by Government and Cooperative societies for the promotion of health and educational purposes.' Clause 5(4) of the Bye-law of the Society which empowers it to establish super markets also provides that previous sanction of the Registrar is required for the same. Clause 5(4) of the Byelaw reads thus: **“** ¥¢·BZAí ÈßçÄcÞÉçÏÞ·ØÞÇÈBZ ÈcÞÏÕßÜAí ÜÍcÎÞAáKÄßÈÞÏß Ø¢¸íJßæa çÎWçÈÞGJßW ç¼ÞÏßaí ø¼ßØíd¿Þùáæ¿ ÎáXµâGßÏáU ¥ÈáÎÄßçÏÞæ¿ ÈàÄß_ÎÞçÕÜß ØíçxÞùáµZ, æÎÞJ_ºßÜïù ÕßWMÈÖÞܵZ, ØâMVÎÞVAxáµZ, ÎÞV¼ßX dËà ç×ÞMáµZ ÎáÄÜÞÏÕ **”** È¿Jáµ. **WP.(C).No.30680/2016-H.** 6 It is thus clear that the Society ought to have obtained the previous sanction of the Registrar for establishing the proposed super market. As such, the conduct of the Society in expending its funds for payment of advance to take the premises intended for the super market on lease and for carrying out its interior works, without the previous sanction of the Registrar is _prima facie_ irregular. Coming to Ext.P2 communication, it is seen that one of the reasons stated by the Registrar for declining the sanction sought by the petitioner is that the fluid resources of the Society is less by Rs.29,44,407/-. As such, it cannot be said _prima facie_ that the decision of the first respondent in declining the permission sought by the Society is illegal. Of course, a right of appeal is provided against orders in the nature of Ext.P2 before the Government and the correctness of Ext.P2 order has to be examined by the Government finally. But, it is seen that despite Ext.P2 decision of the first respondent, the Society has decided to proceed with the inauguration of the proposed super market. The said conduct of the Society cannot be appreciated, whatever be the reasons which prompted the Society to take such a decision. The Act is intended to protect the interests of **WP.(C).No.30680/2016-H.** 7 the members of the Societies registered under it. As such, when a Society does some acts which are contrary to the provisions of the Bye-law, the presumption is that the same would go against the interests of the members of the Society and therefore, it is the duty of the authorities under the Act to take appropriate action to prevent such conduct and to ensure that the Society is functioning in accordance with the Act, the Rules and the Bye-law of the Society. If the authorities under the Act fail to take steps in cases of this nature, they will be failing in their duties. 7. The contention advanced by the learned counsel for the petitioner is that the second respondent, the Assistant Registrar of Co-operative Societies, has no authority to issue an order in the nature of Ext.P2. It is now settled that if interference in an order by the High Court for want of jurisdiction of the inferior authority would result in an illegality, the High Court may not exercise its discretionary jurisdiction to set aside the order of the inferior authority. [see **Mohammad Swalleh v. Third Addl.District Judge, Meerut,** (1988)1 SCC 40) and **Maharaja Chintamani Saran Nath Shahdeo v. State of Bihar,** (1999)8 SCC 16]. Acceptance of the contention raised by **WP.(C).No.30680/2016-H.** 8 the petitioner in the writ petition would certainly enable the Society to function contrary to the provisions in the Act and the Rules. In the light of the aforesaid decisions, I am of the view that this is not a fit case where this Court has to exercise its discretionary jurisdiction under Article 226 of the Constitution. 8. Relying on Clause (b) of the proviso to Rule 54 of the Rules, the learned counsel for the petitioner contended that Rule 54 may not have any application to the facts of the present case, for, the Bye Law of the Society authorises purchase and lease of lands. Clause (b) of the proviso to Rule 54, according to me, cannot be pressed into service by the petitioner, for, Clause 5(4) of the Bye-law of the Society makes it obligatory for the Society to obtain prior permission of the Joint Registrar before establishing supermarkets. 9. The learned counsel for the petitioner contended that articles worth several lakhs of rupees have been acquired by the Society of the purpose of the super market and that huge loss will be incurred, if the Society is not permitted to open the super market. True, if the super market is not permitted to be opened, the Society will incur loss, but, the same is no ground to **WP.(C).No.30680/2016-H.** 9 permit the petitioner to run a super market contrary to the provisions of the Rules and the Bye-law of the Society. If the society incurs loss on account of its inability to start the proposed super market, the persons responsible shall pay the cost of the same. Further, it is seen that the Society is running another super market at Kaipparambu and that therefore it can certainly mitigate the loss by transferring the stock of articles to that super market. 10. It is seen that the Society maintains the stand that the Registrar ought to have granted the permission sought by them. In other words, according to them, Ext.P2 order of the first respondent is illegal. But, it is seen that the Society has not preferred an appeal challenging Ext.P2 decision of the first respondent before the Government. Instead, they only preferred an appeal before the Minister. In the circumstances, the only relief that can be granted to the petitioner is to direct the Government to treat Ext.P3 as an appeal preferred under Section 83(1)(j) of the Act and dispose of the same on merits. 11. In the circumstances, 'State of Kerala, represented by its Chief Secretary, Government Secretariat, **WP.(C).No.30680/2016-H.** 10 Thiruvananthapuram' is impleaded _suo moto_ as additional third respondent in the writ petition. The additional third respondent is directed to consider Ext.P3 as an appeal under Section 83(1)(j) of the Act and dispose of the same on merits as expeditiously as possible, at any rate, within six weeks from today, after affording the petitioner an opportunity for hearing. The writ petition is disposed of as above. _**Sd/-**_ **P.B.SURESH KUMAR, JUDGE.** _**Kvs/-**_ _**// true copy //**_