P. V. Scaria (President, Kerala State Co-operative Rubber Marketing Federation Limited) vs State of Kerala and Others

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **&** **THE HONOURABLE MR. JUSTICE EASWARAN S.** **TUESDAY, THE 26[TH] DAY OF MARCH 2024 / 6TH CHAITHRA, 1946** **WA NO. 1748 OF 2023** **AGAINST THE JUDGMENT DATED 3.10.2023 IN WP(C) NO.30625 OF 2023 OF** **HIGH COURT OF KERALA** ## **APPELLANT/PETITIONER :** **P.V. SCARIA PRESIDENT, KERALA STATE CO-OPERATIVE RUBBER MARKETING FEDERATION LIMITED NO. 4331, (RUBBER MARK), GANDHI NAGAR, KADAVANTHRA, ERNAKULAM, KOCHI, PIN - 682020** **BY ADVS. NISHA GEORGE GEORGE POONTHOTTAM (SR.)** ## **RESPONDENTS/RESPONDENTS:** **1 STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, DEPARTMENT OF CO-OPERATION, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695001 2 THE REGISTRAR OF CO-OPERATIVE SOCIETIES JAWAHAR SAHAKARANABHAVAN 8TH FLOOR, DPI JUNCTION, THYCAUD P.O., THIRUVANANTHAPURAM, PIN - 695014 3 JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL) [ENQUIRY OFFICER], OFFICE OF THE JOINT REGISTRAR OF COOPERATIVE SOCIETIES (GENERAL), KAKKANAD, ERNAKULAM, PIN - 682030** ## **SR GP SRI BIMAL K NATH** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 26.03.2024,** **THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Writ Appeal No.1748 of 2023 2 ## **AMIT RAWAL & EASWARAN S. , JJ. ------------------------Writ Appeal No.1748 of 2023** ## **----------------------------------Dated this the 26th day of March 2024** ## **JUDGMENT** ## **AMIT RAWAL, J.** The present appeal is directed against the judgment of the Single Bench dated 3.10.2023 rendered in W.P.(C) No.30625 of 2023 whereby the following reliefs sought for by the petitioner has not been granted. i. Issue a writ of certiorari calling for the records leading to Exhibits-P10 & P11 and to quash the same; ii. Issue a writ declaring that the issues and matters mentioned in Exhibit-P10 and P11 having been concluded through Exhibit- P9 in the absence of a power of review conferred on the Registrar in this regard under the Scheme of the Act and Rules the proceedings, which culminated in Exhibit-P10 and P11 are impermissible course of action and therefore bad in law; - iii. Issue a writ declaring that Exhibit- P11 does not Writ Appeal No.1748 of 2023 3 discloses any of the ingredients for initiating an action under Section 68(1) and therfore, the order issued as per Exhibit- P11 is opposed to law and contrary to the scheme of the Act and Rules. iii(a). Call for the records leading to Exhibit- P14 notice and P15 report dated 14.09.2023 and to quash the same; iv. Dispense with filing of the translation of vernacular documents; v. Grant such other reliefs as this Court deems fit in the facts and circumstances of the case. 2. The brief facts of the case are as under: 2.1. The appellant/petitioner, President of the Rubber Mark, an Apex Society of Co-operative Marketing Societies having its approved bye laws and sphere of activities, owing to the fluctuating price of the rubber, incurred certain losses. The company was established and commenced the manufacture of Balloons and other products and had been running on profit and the total cost worked out to be Rs.8,00,00,000/- Writ Appeal No.1748 of 2023 4 (Rupees eight crores only). The Marketing Federation was established by the State Government for procuring the rubber from the market. 2.2. At an earlier point of time, an inspection was carried out as provided under Section 68(1) of the Kerala Co-opearative Societies Act (hereinafter referred to as 'the Act', for short) and the report received was not acted upon on the ground that the investments made by the Cooperative Society was found to be bonafide. Things did not stop there and the Registrar suo motu initiated an enquiry as provided under Section 68(1) of the Act, received Ext.P15 report and called upon the petitioner/appellant to appear and submit documents, defence in support of his stand. The report Ext.P15 dated 14th September 2023 revealed certain acts of mismanagement and misappropriations. 2.3. Action of the Registrar in initiating enquiry was earlier challenged in the writ petition, but the report Ext.15 and the notice Ext.P14 calling upon the petitioner to appear before the Registrar received during the pendency were also Writ Appeal No.1748 of 2023 5 challenged by way of amendment. 2.4. The long and short of the argument before the Single Bench was that at the time of holding an enquiry by the Registrar as provided under Section 68(1) of the Act, while collecting the evidence of alleged misappropriation and mismanagement the affected party ought to have been given an opportunity of hearing and not thereafter, as provided under Section 68(2) of the Act. 3. The view canvassed before the Full Bench in **Reji K. Joshy and Others v. Joint Registrar of Co-operative Societies (General), Kollam and Others [2022 (3) KHC** **317 (FB)]** was on a different proposition than the one involved in the present case. In support of the contentions reliance was laid to the judgment of the Supreme Court in **Takano T. v. Securities and Exchange Board of India and Another [2022 KHC 6200]** laying guidelines for compliance of principles of natural justice in different proceedings. Notice under Section 68(2) of the Act would be a farcical exercise as the intention to cause damages to the Writ Appeal No.1748 of 2023 6 reputation and integrity of the petitioner had already been reflected. 4. On the other hand, the learned senior counsel appearing for the State relies on the findings of the Full Bench to contend that the legislature in its wisdom did not incorporate any provision of giving two opportunities of hearing, either in a proceedings of inspection as provided under Section 65 or 66 of the Act or under Section 68(1) of the Act. In support of the contention the learned counsel relied on the ratio decidendi culled out in the judgment of the Full Bench (supra). 5. We have heard the learned counsel on both sides. 6. The learned Single Judge, noticing all the documents produced and by relying on the decision of the Full Bench, found that an opportunity of hearing as attempted to be canvassed by the petitoner to be given by the enquiry officer before forming prima facie finding against the society/managing committee or its members is not Writ Appeal No.1748 of 2023 7 permissible. Affected parties should not be given an opportunity as, a plain and simple reading of the provisions of the Act do not provide such procedure. In the absence of challenge to the vires and the fact that the Full Bench had already canvassed the position, rejected the claim. An attempt has been made to refer it to a Larger Bench than the one already canvassed by the Full Bench. 7. The findings rendered by the Full Bench in paragraph Nos.15 and 16 of the judgment, same reads as under: 15. True, it is seen that a contrary view has been taken by a learned Single Judge in Thiruvalla East Co- operative Bank Ltd and the said decision has not been taken note of in Aravindakshan Nair and the view in the said case has been followed by the very same learned Judge while sitting in Division in W.A.Nos.2196 and 2198 of 2012. A reading of the judgment in W.A.Nos.2196 and 2198 of 2012 would show that the learned Judges in the Bench were proceeding as if the opportunity of being heard provided for in Rule 66(5) applies to every action to be taken by the Registrar pursuant to the report of inquiry or inspection without considering the scope of the Rule. But, in Thiruvalla East Co-operative Bank Ltd., the learned Judge has considered the scope of the Rule. Paragraph 12 of the judgment in the said case reads thus: "12. Counsel for the 3rd respondent contended that the hearing contemplated under R.66(5) of the Rules is only on the recommendation of the Registrar about the manner in which the cost of the enquiry or a part thereof is to be apportioned. In my view, there is no warrant for such a Writ Appeal No.1748 of 2023 8 restricted reading of this provision. As is evident from the Rules, apportionment of costs can only be in respect of an enquiry held at the instance of a creditor. In such a case, S.67 of the Act contains provision for apportionment and also for hearing, before anybody is made liable for costs. In such a situation, there is no necessity for any further provision of the Rules and this also strengthen the view that the hearing provided in R.66(5) of the Rules is not confined to apportionment of costs. For these reasons, I am not inclined to accept this contention of the counsel for the respondents." As evident from the extracted paragraph, the view taken is that since Section 67 provides for apportionment of costs after hearing the parties concerned, there is no necessity for a hearing on the said aspect in terms of Rule 66(5) as well and the opportunity of being heard provided for in the Rule is, therefore, only in respect of matters other than the matter relating to apportionment of costs. We are unable to agree. Section 67, of course, provides that where an inquiry is held under Section 65 or inspection is held under Section 66 on the application of a creditor, the Registrar may, by order, apportion the costs or such portion of the costs, as he may deem fit, between the society to which the society concerned is affiliated, the society, the member or creditor demanding an inquiry or inspection, and the officers or former officers of the society. But, what is provided for in Rule 66(5) is a recommendation by the officer authorised to conduct the inquiry or inspection as regards the manner in which the costs or part thereof is to be apportioned among the parties mentioned in Section 67. In other words, the opportunity of hearing provided for under the Rule can only be with regard to the recommendation made by the officer conducting the inquiry or inspection as regards the manner in which the costs or part thereof of inquiry or inspection is to be apportioned amongst the parties mentioned in Section 67. Although it would appear that the manner in which the costs of inquiry or inspection is to be apportioned amongst the parties mentioned in Section 67 would fall within the scope of power of the Registrar under that provision, since Rule Writ Appeal No.1748 of 2023 9 66(5) provides for a recommendation as regards the manner of apportionment of costs also and the Rule being supplementary to the statutory provision, a harmonious construction of the two provisions would only lead to the inference that the power under Section 67 is one to be exercised in the manner provided for in the Rules. 16. Let us now consider the contention of the learned Senior Counsel Sri.George Poonthottam that insofar as the further actions provided for under the Act pursuant to the report of inquiry or inspection is either the supersession of the committee of the Society in terms of Section 32 or surcharge against the members of the Managing Committee and others in terms of Section 68 involving drastic consequences as far as the parties are concerned, in the absence of any provision in the Act or Rules for providing to the parties concerned a copy of the report of inquiry or inspection and for hearing them on the acceptability of the same, an opportunity of hearing should be read into the statute before the report is acted upon. There are two approaches possible to deal with this contention. One is to hold that the provisions of the Act are themselves unconstitutional as they do not provide an opportunity of hearing to the affected parties as to the acceptability of the report of inquiry or inspection, and the other is to hold that as there is nothing in the statutory provisions which debar the application of the principles of natural justice while the authorities exercise the statutory powers under the Act and as the principles of natural justice would apply unless the statutory provisions point to the contrary, it is obligatory for the statutory authorities to afford an opportunity of being heard to the parties concerned before an action affecting their rights adversely is taken. Insofar as the parties who oppose the view taken in Aravindakshan Nair do not have a case that the provisions in the Act are unconstitutional inasmuch as they do not provide an opportunity of hearing for the affected parties on the acceptability or otherwise of the report of inquiry or inspection, what was pressed into service by them by raising the above contention was the second approach mentioned above. Writ Appeal No.1748 of 2023 10 The said approach could be adopted and "audi alteram partem" rule could be imported into a statute in a situation of this nature only if the nature of the statutory duty imposed itself necessarily implies an obligation to hear before deciding on an issue. The said aspect has been clarified by the Apex Court in Government of Mysore v. J.V.Bhat, (1975) 1 SCC 110. Paragraph 8 of the judgment in the said case reads thus: "We think that the Electricity Commissioners' case (supra) which was followed by this Court in Khushaldas S. Advani's case (supra), was not really a departure from the general principle laid down in Cooper v. The Board of Works for the Wandsworth District (supra), but, it was an attempt to formulate the conditions under which the general principle laid down thereby Erle, C.J., who quoted the Biblical story of how even God Himself had given Adam an opportunity of answering why he had eaten the forbidden fruit before, expelling him from Paradises was applicable in the circumstances of an increasingly complex economic and social order whose problems compelled the emergence of the welfare socialistic State with its many organs armed with extensive powers. Courts attempted, in the interests of justice, where its imperative demands were not met, to control administrative action by assimilating it to judicial action over which Courts could exercise supervision. In later cases, emphasis was more on the needs of justice and fairness rather than upon the distinction between the judicial and administrative action. Administrative action had, however, to be given free scope within its legitimate sphere without jeopardizing rights of individuals affected. Policies and schemes framed under statutory provisions, which affected rights of individuals could impose the obligations upon the authorities taking what were essentially administrative decisions at points at which they begin to impinge on specific individual rights. It is only where there is nothing in the statute to actually prohibit the giving of an opportunity to be heard, but, on the other hand, the nature of the statutory duty imposed itself necessarily implied an obligation to hear before deciding that the "audi alteram partem" rule could be imported. The nature of the hearing would, of course, vary according to the nature of the function and what its Writ Appeal No.1748 of 2023 11 just and fair exercise required in the context of rights affected." (underline supplied) The question therefore is as to whether the nature of the statutory duty imposed on the Registrar implies necessarily an obligation to afford to the parties concerned an opportunity of being heard on the acceptability or otherwise of the report of inquiry or inspection before a tentative decision is taken as to the further action pursuant to the report. 8. The petitioner is at liberty to produce all the documents and materials much less the legal position as has been attempted to be raised to little extent before the Registrar in purported receipt of Ext.P14 notice dated 16.9.2023 and Ext.P15 report dated 14.9.2023. 9. There is another fact that Rule 47 of the Act also envisages that the managing committee notwithstanding anything contained in the clause is responsible for maintaining the safety of all accounts, records, cash and other accounts, that aspect is required to be looked into. We, thus, do not agree with the arguments rendered by the learned counsel appearing for the petitioner to disagree with the findings rendered by the learned Single Bench, appeal Writ Appeal No.1748 of 2023 12 sans merit, accordingly dismissed. 10. Since the period granted to the appellant to appear had already elapsed, we direct the Registrar to afford another opportunity of hearing by giving a specific date and time to appear for initiation of steps in pursuance to Ext.P14. Sd/- **AMIT RAWAL JUDGE** Sd/- **EASWARAN S JUDGE** NS Writ Appeal No.1748 of 2023 13 ## **APPENDIX OF WA 1748/2023** ## **PETITIONER ANNEXURES** **Annexure-A** **TRUE COPY OF THE LATEST BALANCE SHEET OF RUBEK BALLOONS PRIVATE LIMITED AS AT 31ST MARCH 2023.**