Rajeev Koshy alias Reji K. Koshy v. State of Kerala and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE V.CHITAMBARESH** ## **&** **THE HONOURABLE MR. JUSTICE SATHISH NINAN** **TUESDAY ,THE 14TH DAY OF AUGUST 2018 / 23RD SRAVANA, 1940** **WA.No. 1014 of 2018 IN WP(C). 38713/2017** **AGAINST THE JUDGMENT IN WPC 38713/2017 of HIGH COURT OF KERALA DATED 16.03.2018** ## **PETITIONER/PETITIONER:** **RAJEEV KOSHY** **ALIAS REJI K. KOSHY, PRESIDENT, EDAMULACKAL SERVICE COOPERATIVE BANK, LIMITED NO. 2047., P.O EDAMULACKAL,KOLLAM DISTRICT - 691 321 (THE BOARD HAS NOW BEEN SUPERSEDED).** **BY ADV. SRI. K. RAMAKUMAR (SR.)** ## **RESPONDENTS/RESPONDENTS:** - **1 STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT,DEPARTMENT OF CO-OPERATION, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM - 695 001.** - **2 THE REGISTRAR OF CO-OPERATIVE SOCIETIES THIRUVANANTHAPURAM - 695 001.** - **3 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES(GENERAL), KOLLAM - 691 001.** - **4 THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL),PUNALUR,KOLLAM - 691 001.** **WA.No. 1014 of 2018** **2** **5 THE EDAMULACKAL SERVICE CO-OPERATIVE BANK LIMITED NO.2047,EDAMULACKAL P.O, PIN - 691 321, KOLLAM DISTRICT REPRESENTED BY ITS SECRETARY.** - **6 L.CHACKOCHAN,PARANKIMAMVILA HOUSE, PERUNGALLOOR, AYUR, KOLLAM DISTRICT, PIN – 691 533.** **R1 TO R4 BY SENIOR GOVERNMENT PLEADER SMT.K.R.DEEPA R5 & R6 BY SRI.P.C.SASIDHARAN, STANDING COUNSEL** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 08.08.2018, THE COURT ON 14.08.2018 DELIVERED THE FOLLOWING:** ## **JUDGMENT** ## **Sathish Ninan, J** An order of supersession under Section 32 of Kerala Co-operative Societies Act (herein after referred to as “the Act”), though challenged before the learned single judge was turned down as per the impugned judgment. 2. The appellant is the President of the Cooperative Bank. The present managing committee came into office on 21.08.2014. On the complaint by some of the members of the Society regarding grave irregularities and malpractices in the society regarding grant of loans, the Joint Registrar ordered an enquiry under Section 65 of the Act. The enquiry **WA.No. 1014 of 2018** **3** officer submitted an interim report dated 23.10.2017 pointing out the persisting default of the committee in performance of its duties. After issuing a notice to show cause and after personal hearing, and on the opinion of the District Co-operative Bank recommending initiation of action against the committee, the Joint Registrar issued Ext P6 order superseding the committee and appointing an administrator. 3. The grounds of challenge are two fold. Firstly, in terms of Section 65(6) of the Act, action can be taken under Section 32 only on completion of the enquiry. The present order of supersession, which is based only on an interim report, is bad in law. Secondly, all the allegations levelled are against the employees of the Society, for which there could not be an order of supersession of the committee. 4. Section 65(6) of the Act, no doubt, refers to initiation of action under Section 32 on completion of enquiry under Section 65. In the instant case, though **WA.No. 1014 of 2018** **4** the enquiry has since been completed, it is not in dispute that at the time when Ext P6 order of supersession was passed there was only an interim report. In the interim report the enquiry officer reported, 1) misappropriation of cash balance, 2) sanctioning of loan without the knowledge and consent of the members, 3) misappropriation by non accounting repayment of loan and 4) misappropriation by non accounting fixed deposits. Under Section 32 of the Act if the Registrar on an enquiry is satisfied that the committee of a 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 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 **WA.No. 1014 of 2018** **5** any loss or damage to the assets of the society, by breach of trust of wilfull negligence; or d) misappropriates or destroys or tampers with the records or causes the destruction of records to cover up any misconduct or malpractice, he may, after giving the committee an opportunity to state its objections, if any, by order in writing, remove the committee and appoint in its place, one administrator or an administrative committee consisting of not more than three individuals, one among them as convener, who need not be members of the society, to manage the affairs of the society for a period not exceeding six months. e) Every member of the committee superseded under this section shall from the date of order of such supersession stand disqualified to contest in the election to or to be nominated to the committee of any Society or to be appointed as an adminstrator in any society for two consecutive terms. **WA.No. 1014 of 2018** **6** 5. After complying with the formalities envisaged under the Section, committee could be superseded and an administrator appointed. The enquiry so contemplated, could be by himself, through subordinates, on a report of the financing bank or the Vigilance and Anti-corruption Bureau or the Vigilance Officer, or even otherwise. Therefore, the mere fact that the enquiry under Section 65 was not completed, does not disable the Registrar from passing an order superseding the committee. This is in consonance with the view expressed by this Court in **State of Kerala v. Sudarsanan** ( **1997 (2) KLT 522), Kandalloor Farmers Service Co-operative Bank Ltd. v. Joint Registrar** ( **2008 (4) KLT 856)** and **Gireesh Kumar v. Joint Registrar of Co-operative Societies** ( **2013(3) KLT SN 101 Case No.105)** also. To conclude, there is no infirmity with the action of the Registrar in initiating steps under Section 32 of the Act based on the interim report. **WA.No. 1014 of 2018** **7** 6. Coming to the contention that the interim report only points out irregularities or illegalities committed by its employees, and on it action could not be taken against the committee, in our opinion, the plea cannot be countenanced. The learned single Judge has noticed that in the personal hearing conducted by the Joint Registrar on 30.11.2017 the Presidents and eight members of the managing committee in their statements given in writing have admitted the malpractices that occurred in the Society. Their contention was that the Secretary and Assistant Secretary are responsible for such acts. The enquiry officer noticed that receipt of an amount of Rs.50 lakhs by the Secretary on 09.09.2017 is not reflected in the registers of the Society. It was also noticed that several loans were sanctioned in violation of Section 36A of the Act and Rule 51A of the Cooperative Societies Rules. It was noticed that decision regarding sanctioning of loans were taken **WA.No. 1014 of 2018** **8** subsequent to the disbursal of the loan amounts. There were also allegations regarding bogus sanctioning of loans which the concerned members denied of having availed. It was further noticed that details regarding the security offered for availing loans were not available in the loan files. Fixed deposits were not seen accounted, and the addresses and amounts in the registers were found not tallying with that in the fixed deposit receipts. It was also noticed that stock register was not maintained. The Joint Registrar found the managing committee guilty of persisting default in the performance of the duties imposed by the Act, Rules and Bye laws of the Society, thus causing financial loss to the Society. It is also found that the members of the managing committee did such acts with culpable mind. Rule 47(d) provides that the committee of the Society shall be primarily responsible for the maintenance and safety of all accounts, records, cash and other assets of the **WA.No. 1014 of 2018** **9** Society. It is the duty of the committee to see that the officers discharge their functions in terms of the Rules and Bye laws. Under Rule 47(e) it is a duty of the Chief Executive to see that the registers and accounts are properly maintained. As held by this Court in **Thrikkadavoor Service Co-operative Society Ltd. v. Sivasankara Pillai** ( **1990(2) KLT 594)** there is a statutory duty on the committee for the proper custody, accounting of cash and other assets of the Society, and they are answerable for any misappropriation during their tenure. As held therein, “they cannot wash off their hands of liability, by contending that there was a Secretary in office”. The committee is responsible for such conduct. 7. The learned Single Judge after considering the materials on record had concurred with the finding of the Joint Registrar that the committee was guilty of persisting default in the performance of the duties imposed under the Act, Rules and Bye laws and that the **WA.No. 1014 of 2018** **10** members of the committee did such acts with a culpable mind, thus justifying initiation of proceedings by supersession. We do not find any grounds warranting interference with the impugned judgment. The writ appeal fails and is accordingly dismissed. **Sd/V.CHITAMBARESH Judge Sd/SATHISH NINAN Judge** vdv