P.V. Rajan & others v. Joint Registrar of Co-operative Societies (General), Ernakulam; Assistant Registrar Co-operative Societies, Kothamangalam; C.P. Kunju; Idamalayar Service Co-Operative Bank, Ltd.; Administrator (Appointed Under Order) Idamalayar Service Co-operative Bank, Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **FRIDAY, THE 12TH DAY OF APRIL 2013/22ND CHAITHRA 1935** ## **WP(C).No. 1801 of 2013 (A)** **--------------------------------------** **PETITIONER(S): --------------------------** **1. P.V. RAJAN, PRESIDENT IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 69, ERNAKULAM DISTRICT.** **2. M.K.RAMACHANRAN MANAGING COMMITTEE MEMBER IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 691 ERNAKULAM DISTRICT.** **3. A.B.SIVAN, MANAGING COMMITTEE MEMBER, IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 691 ERNAKULAM DISTRICT.** **4. N.P.ABDULGADER, MANAGING COMMITTEE MEMBER, IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 691 ERNAKULAM DISTRICT.** **5. BIJU K.VARUGHESE, MANAGING COMMITTEE MEMBER, IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 691 ERNAKULAM DISTRICT.** **6. ANEES PAPPACHAN, MANAGING COMMITTEE MEMBER, IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 691 ERNAKULAM DISTRICT.** **7. JIJO XAVIER, MANAGING COMMITTEE MEMBER, IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 691 ERNAKULAM DISTRICT.** **DCS** ## **WP(C).No. 1801 of 2013 (A)** **8. C.PADMAJAN, MANAGING COMMITTEE MEMBER, IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD. NO.1.178 VADATTUPPARA P.O. KOTHAMANGALAM - 686 691 ERNAKULAM DISTRICT.** **BY ADVS. SRI.K.RAMAKUMAR (SR.) SRI.P.N.MOHANAN** ## **RESPONDENT(S):** - **----------------------------** **1. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL) ERNAKULAM PIN 682 011.** **2. ASSISTANT REGISTRAR CO-OPERATIVE SOCIETIES, KOTHAMANGALAM, ERNAKULAM- 686 691.** **3. C.P.KUNJU, CHERUPURAM HOUSE, VADATTUPARA, KOTHAMANGALAM ERNAKULAM- 686 691.** **4. IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD.NO.1.178 REPRESENTED BY ITS SECRETARY, VADATTUPPARA P.O. KOTHAMANGALAM 686 691, ERNAKULAM DISTRICT.** **5. ADMINISTRATOR (APPOINTED UNDER ORDER) IDAMALAYAR SERVICE CO-OPERATIVE BANK, LTD.NO.1.178 VADATTUPPARA P.O., KOTHAMANGALAM 686 691 ERNAKULAM DISTRICT.** **R1 & R2 BY GOVERNMENT PLEADER SRI. D. SOMASUNDARAM R3 BY ADVS. SRI.V.G.ARUN** **SRI.T.R.HARIKUMAR** **R4 & R5 BY ADV. SRI.GEORGE POONTHOTTAM** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 05.04.2013, THE COURT ON 12.04.2013 DELIVERED THE FOLLOWING:** **DCS** **WP(C).No. 1801 of 2013 (A)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:-** - **EXT.P1: COPY OF THE AGREEMENT DATED 5/9/2009. EXT.P2: COPY OF THE VALUATION CERTIFICATE DATED 13/10/09 FOR RS.26,45,000/- ISSUED BY THE TAHSILDAR.** - **EXT.P3: COPY OF THE ORDER OF THE JOINT REGISTRAR GRANTING PERMISSION IN PURCHASING THE LAND.** - **EXT.P4: COPY OF NOTIFICATION PUBLISHED ON 6/3/2010 IN THE GAZETTE. EXT.P5: COPY OF THE COMPLAINT FILED BEFORE THE GOVT. SECRETARY EXT.P6; COPY OF THE REPORT OF THE ASSISTANT REGISTRAR DATED 16/3/11** - **EXT.P7: COPY OF THE COMPLAINT DATED 25/6/11 FILED BEFORE THE MINISTER** - **EXT.P8: COPY OF THE LETTER DTED 21/7/2011OF THE JOINT REGISTRAR. EXT.P9: COPY OF THE REPORT DATED 23/8/2011 OF THE ASSISTANT REGISTRAR.** - **EXT.P10: COPY OF THE NOTICE DATED 9/11/2011 ORDERING ENQUIRY. EXT.P11: COPY OF THE JUDGMENT REPORTED IN 1976 KLT 353. EXT.P12: COPY OF THE INTERIM ORDER DATED 7/12/2011. EXT.P13: COPY OF THE JUDGMENT DATED 8/8/2012 IN WPC NO.31317/11 EXT.P14: COPY OF THE SHOW CAUSE NOTICE DATED 18/10/2012. EXT.P15: COPY OF 5TH OBJECTION FILED BY THE PETITIONERS. EXT.P16: COPY OF THE JUDGMENT REPORTED IN 1997 (2) KLT 85 EXT.P17: COPY OF THE JUDGMENT REPORTED IN 2008(4) KLT 865 EXT.P18: COPY OF TH JUDGMENT REPORTED IN 2010 (3) KLT 307. EXT.P19: COPY OF THE ORDER DATED 16/1/2013. EXT.P20: COPY OF THE JUDGMENT REPORTED IN 2012(4) KLT 941. EXT.P21: COPY OF THE NOTICE DATED 12/1/2013 OF CIRCLE UNION. DCS** **WP(C).No. 1801 of 2013 (A)** **EXT.P22: COPY OF THE MINUTES OF THE MEETING DATED 15/1/2013.** ## **' RESPONDENT S EXHIBITS:-** **EXT.R1(a): COPY OF THE STATEMENT** - **EXT.R3(a): COPY OF THE RELEVANT PAGES OF THE EXTRACT CONTAINING THE DETAILS OF THE SALE OF PROPERTIES, RECEIVED FROM THE SUB REGISTRAR'S OFFICE, KOTHAMANGALAM** - **EXT.R3(b): COPY OF THE REPLY NO. C3-6685/11 OF THE TALUK OFFICE, KOTHAMANGALAM DATED 16.08.2011** - **EXT.R3(c): COPY OF THE DOCUMENT NO. 6516/2004 DATED 7.10.2004 OF THE SUB REGISTRAR, KOTHAMANGALAM** - **EXT.R3(d): COPY OF THE REPLY NO. A3-5738/2012 OF THE KUTTAMPUZHA GRAMA PANCHAYAT DATED 19.07.2012** - **EXT.R3(e): COPY OF THE NOTIFICATION NO. K-13430/08 DATED 14.12.2009** - **EXT.R3(f): COPY OF THE RESOLUTION OF THE BLOCK PANCHAYAT, KOTHAMANGALAM DATED 05.12.2008** - **EXT.R3(g): COPY OF THE RELEVANT PAGES OF SURVEY SKETCH** **/TRUE COPY/** **P.A. TO JUDGE** ## **DCS** A.M.SHAFFIQUE, J. ---------------------------------------------------- W.P.(C) No. 1801 of 2013 - A --------------------------------------------------Dated this the 12[th] April, 2013 **==> picture [215 x 14] intentionally omitted <==** Petitioners are elected members of the Managing Committee Edamalayar Service Co-operative Bank. An order of supersession was passed by the Joint Registrar of Co-operative Societies under section 32(1) of the Co-operative Societies, Act as per Ext.P19, which is impugned in the writ petition. 2. The main challenge to Ext.P19 order is that, though an enquiry was conducted under S. 65 of the Act without proceeding further in the matter to recover the alleged loss from the respective members, who were said to have caused loss to the Society proceedings under S. 32 has been initiated without any basis. The contention is that the enquiry was conducted on the basis of a complaint by the Asst. Registrar which was closed as per Ext.P6 report. When there was a change in the Government, another complaint was filed as Ext.P7 which was again closed as per Ext.P9 report. It is said that due to political reasons the first respondent ordered an enquiry as per Ext.P10. This came to be challenged and Ext.P13 is the said judgment. In Ext.P13 2 W.P.(C) No. 1801 of 2013 - A judgment, this Court observed that in regard to the main allegation regarding the purchase of a property, if the property is purchased at market value and the purchase is an investment which is a worth to the bank, there would be no cause of action against the managing committee. In the said judgment, the Joint Registrar was directed to consider the matter after issuing notice to the petitioners and finalise the proceedings. 3. It is contended that without passing any order in terms of Rule 66(5) of the Rules, there could not have been any proceedings under S. 32 of the Act. That apart it is contended that the allegations made out in Ext.P19 does not warrant invoking S. 32 of the Act and that there is non-compliance of section 32(2) of the Act in so far as there is no consultation with the Financing Bank and the Circle Co-operative Union. 4. The learned senior counsel Sri. Ramkumar arguing on behalf of the petitioners also contended that the allegations in Ext. P14 is basically with reference to purchase of a property by the Society and in the report at Ext. P6 there is indication that sanction was obtained from the Joint Registrar as per Order No. W.P.(C) No. 1801 of 2013 - A 3 C.R.P. (1) 10999/2009 for purchasing 41.15 ares of land for Rs. 26,45,000/- and that valuation certificate had been obtained from the Tahsildar. Further reference is made to Ext.P9 which again is a report of the Asst. Registrar reiterating the aforesaid facts. It is therefore contended that the allegation of wrongful purchase of property was totally baseless and the general body had subsequently ratified the action of the committee in purchasing the property. 5. The learned counsel also relied upon the judgment of the Division Bench of this Court in W.P.(C) No. 31317/11 wherein this court held as under: “In other words if the property is purchased at market value and the purchase is an investment worth for the bank certainly there is no case for action against the managing committee”. 6. Reference is also made to judgment in **Cheranellur Co-operative Society Ltd. v. Dy.Registrar [1976 KLT 353]** to contend that when an enquiry is ordered under S. 65 specific points on which the enquiry is to be made has to be stated. Judgment in **Ellakkal Service Co-operative Bank v. State of** W.P.(C) No. 1801 of 2013 - A 4 **Kerala (1997 2 KLT 85)** is relied upon to contend that the power of supersession can be exercised only after an effective consultation with the Apex Bank and Co-operative union. The provision of supersession is an exceptional and rare action. Mere default or disobedience, or failure to comply with the provisions cannot be a ground for supersession unless it is shown that there is persistent and wilful negligence and wilful disobedience. 7. Reference is also made to the judgment of this Court in **Kandalloor Farmers Service Co-operative Bank Ltd. v. Joint Registrar (2008 (4) KLT 856)** wherein this court held that to initiate action for supersession on the basis of finding in an enquiry under S. 65(5) the Registrar has to reach at a finding that there are major defects in the constitution, working or the financial conditions of the Society. It is also found that once a proceedings have commenced under S.65, Registrar cannot abdicate or defer the function and arrive at a conclusion and then with the materials gathered in the enquiry under S. 65, move on to S.32(1) of the Act. W.P.(C) No. 1801 of 2013 - A 5 8. Further reliance is placed on the judgment in **Mariamma George v. Joint Registrar (2010 (3) KHC 307)** wherein the judgment in Kandalloor Service Co-operative Bank Ltd. v. Joint Registrar (supra) was relied upon. 9. Another judgment relied is **Urukunnu Service Cooperative Bank Ltd. v. State of Kerala (2012 (4) KLT 941)** wherein a learned Single Judge of this Court held that the act of consultation as provided under S.32(2) is not a mere formality whereas it is a condition pre-requisite before passing an order of supersession. Hence proper and effective consultation is mandatory. 10. Counter affidavit is filed by the 1[st] respondent and 3[rd] respondent who supported the stand taken by the authorities concerned. It is indicated in the counter affidavit of the 1[st] respondent that this is an instance where on the basis of complaint received, an enquiry was conducted wherein it was reported that there are serious irregularities in the procedure in giving advance to another person for purchase of land without proper agreement, the sale of land proposed to be purchased etc. It was after considering the preliminary report that a notice under W.P.(C) No. 1801 of 2013 - A 6 S. 65 was issued which came to be challenged in W.P.(C) No. 31317/2011. By judgment dated 8.8.2012, a Division Bench of this Court directed to complete the enquiry within two months. The report of S. 65 enquiry was submitted to the Joint Registrar within the prescribed time, the report was accepted and notice was issued to the petitioners for submitting their statement. Petitioners submitted their statements and after consulting the Circle co-operative union, consultation with the financing bank was avoided as the Joint Registrar (General) is the Administrator of the financing bank and therefore the consultation to himself was meaningless. Pursuant to which the order of supersession was passed. It is pointed out that the main complaint is relating to purchase of an extent of 41.15 ares of property when the bank was having substantial loan outstanding compared to the deposit outstanding during the financial years 2009-10, 2010-11, 2011-12. It is therefore submitted that for opening of branch, such a large extent of property was totally unnecessary. The 1[st] respondent relied upon S. 65(6) of the Act by which it was possible for the Registrar on completion of an enquiry and on finding that there is a major defect in the constitution or working W.P.(C) No. 1801 of 2013 - A 7 on financial condition of the society to initiate action in accordance with the provisions of S. 32. 11. It was also contended that the very act of purchase of the land had caused substantial loss to the society as the factual situation as evident from Ext.P19 report proves the said fact. 12. The 3[rd] respondent supports the stand taken by the departmental authority. He is a person who had filed the complaint before the Joint Registrar. According to him, the entire purchase of land was actuated with corruption. He relied upon various documents to indicate that a report was obtained showing an inflated value and was purchased by the Society only for the purpose of making unlawful gain for the members of the committee. According to him, the value of the property was confirmed by the committee based on a report of Tahsildar who relied upon document No.6516/2004 wherein the value of the property having an extent of 10.12 Ares was Rs. 5,76,000/-. Ext.R3(c) is the said document which would show that the value of the land was only Rupees One lakh and there was a building in the said property which is valued at Rs.4,76,000/-. Therefore, according to the 3[rd] respondent the very report of Tahsildar was W.P.(C) No. 1801 of 2013 - A 8 only to enable the petitioners to commit a fraud on the society. 13. The learned Government Pleader also relied upon various judgments. **Vallapuzha Service Co-operative Ltd. v. Joint Registrar (2009 (3) KLT 838)** is relied upon to contend that as far as sub-section (c) and (d) of S. 32(1) of the Act is concerned even a single instance would be sufficient to invoke S. 32. 14. Reference is also made to an unreported judgment of this Court in W.P.(C) No. 18016/2012, wherein I had occasion to consider the effect of consultation under S. 32(2) of the Act. That was a case where there was no consultation at all and no reason was stated as to why such a consultation was not made. 15. Another Division Bench of this Court in W.A. No. 1599/2012 is relied upon to contend that every investment by the society in land and building can be only from profits retained in the form of reserve and no investment should be made in land and building or for any other capital outlay, from public deposits retained by the society which have to be used only for business purpose. W.P.(C) No. 1801 of 2013 - A 9 16. Learned counsel appearing for the Administrator also supported the impugned order by contending that this is an instance where there is clear breach of trust and violation of statutory provision by which loss had been caused to the society and therefore the action impugned is perfectly justified. 17. The 1[st] question that requires to be considered is whether the Joint Registrar had made meaningful consultation to the Circle Co-operative Union and the finaning bank as provided under S. 32(2) of the Act. In the impugned order it is stated that the Joint Registrar had consulted with Kothamangalam Circle Co-operative Union. Ext.P22 is the opinion expressed by the Circle Co-operative Union. Therefore the consultation with the Circle Co-operative Union is perfectly in order. In regard to the financing bank, it is stated that the Joint Registrar (General) who passed the impugned order is the Administrator of the Dist. Cooperative Bank during the relevant time and therefore consultation would be meaningless. When the same officer is the Joint Registrar as well as the Administrator of the financing bank, definitely further consultation would be meaningless and when that is reflected in the impugned order, the impugned order W.P.(C) No. 1801 of 2013 - A 10 cannot be set aside on the ground that there is non-compliance of S.32(2) of the Act. 18. Another contention that requires to be considered is whether the acts complained warrants a supersession under S. 32(1) of the Act. Several allegations are raised against the petitioners. Ext.P14 is the notice under S. 32(1) in which several allegations are referred to. Ext.P15 is the reply. It is after considering the reply of the petitioners that Ext.P19 order came to be passed. The question is whether the findings in Ext.P19 amounts to acts which are coming within the provisions of S. 32 (1) (a) to (d) which reads as under: “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 W.P.(C) No. 1801 of 2013 - A 11 (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 causes any loss or damage to the assets of the society by breach of trust of wilful negligence; or (d)misappropriates or destroys or tampers with the records or causes the destruction of records to cover up any misconduct or malpractice, 19. On a perusal of the findings in Ext.P19, the main allegation is with reference to misappropriation of amounts based on illegal purchase of land and there is a finding of breach of trust. If there is a different view possible from what is stated in Ext.P19, according to me, the petitioner will have to approach the appellate authority concerned under section 83(J) of the Act. This Court's jurisdiction cannot be invoked to consider disputed questions of fact. There is a finding by a competent authority that in respect of matters relating to purchase of land and as well as other activities, there has been persistent default, misappropriation of amount and breach of trust. If these findings are correct, I do not think that the exercise of jurisdiction W.P.(C) No. 1801 of 2013 - A 12 under section 32(1) by the 1[st] respondent was bad in any fashion. The learned senior counsel relying upon the judgment at Ext.P13 submits that there is no evidence to indicate that the market value of the land was more than the amount shown in the sale deed. In Ext.P19 there is specific reference to the manner in which the valuation has been done after having formed an opinion that the report of the Tahsildar was based on incorrect material. There is a clear finding that the Society suffered huge loss which was on account of the default committed by the managing committee. Such being the position, I do not think that there is reason to interfere with the findings of fact in Ext.P19. Reliance on earlier views expressed by the authorities cannot come to the aid of the petitioners, as Ext.P19 is preceded by a detailed enquiry. Hence I do not find any reason to interfere with the impugned order. Accordingly the writ petition is dismissed. Sd/A.M.SHAFFIQUE, JUDGE. rka /true copy/