The Managing Committee of Kumbla Service Co-operative Bank Ltd. v. Joint Registrar of Co-operative Societies (General), Kasaragod; Kariya; Damodaran

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** ## **FRIDAY, THE 10TH DAY OF NOVEMBER 2017/19TH KARTHIKA, 1939** ## **WP(C).No. 29435 of 2017 (D)** **----------------------------** **PETITIONER(S): -------------------------** **1. THE MANAGING COMMITTEE OF KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, REPRESENTED BY ITS PRESIDENT, SHANKARA ALVA.K, KUMBLA P.O., KASARAGOD-671 321.** **2. PRANAB KUMAR ALVA.U., DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **3. MURALEEDHARA.K., DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **4. SADANANDA KAMATH,DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **5. KAMALAKSHA.K., DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **6. KRISHNA SHETTY .U.,DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **7. RAMA.K., DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **8. VEDAVATHI, DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **9. VASANTHI,DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321. 10. LEELA, DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** **2/-** **-2-** ## **WP(C).No. 29435 of 2017 (D)** ## **11. VASANTHAKUMAR, DIRECTOR, KUMBLA SERVICE CO-OPERATIVE BANK LTD. NO. C 324, KUMBLA P.O., KASARAGOD-671 321.** ## **BY ADV. SRI.P.N.MOHANAN** ## **RESPONDENT(S):** **--------------------------** **1. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), KASARAGOD-671 001.** ## **2. KARIYA,** - **S/O KORAGA, PATTU HOUSE, BAMBRANA, KASARAGOD.** ## **3. DAMODARAN,** **S/O.AMBADI VELICHAPPADU, ARIKADY VILLAGE, KUMBLA P.O., KASARAGOD.** **R1 BY SPL.GOVERNMENT PLEADER SRI.K.S.MOHAMMED HASHIM R2 & R3 BY ADV. SRI.JAWAHAR JOSE** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 25-10-2017, THE COURT ON 10-11-2017 DELIVERED THE FOLLOWING:** **sts** ## **WP(C).No. 29435 of 2017 (D)** **-----------------------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS ---------------------------------------EXHIBIT P1 A TRUE COPY OF THE CAUSE NOTICE DATED 12.01.2016 OF THE JOINT REGISTRAR. EXHIBIT P2 A TRUE COPY OF THE JUDGMENT DATED 27.01.2016 IN WPC NO. 2957/2016. EXHIBIT P3 A TRUE COPY OF THE SHOW CAUSE NOTICE DATED 02.02.2016 EXHIBIT P4 A TRUE COPY OF THE SHOW CAUSE NOTICE DATED 16.2.2017 OF THE FIRST RESPONDENT. EXHIBIT P5 A TRUE COPY OF THE JUDGMENT DATED 31.05.2017 IN WPC NO. 5656/2017. EXHIBIT P6 A TRUE COPY OF THE EXPLANATIONS DATED 30.06.2017 AND 09.08.2017. EXHIBIT P7 A TRUE COPY OF THE ORDER DATED 25.08.2017 OF THE JOINT REGISTRAR. EXHIBIT P8 A TRUE COPY OF THE NOTIFICATION PUBLISHED IN KANNADA NEWS PAPER ALONG WITH ENGLISH TRANSLATION DATED 21.12.2013. EXHIBIT P9 A TRUE COPY OF THE COMPLAINT DATED 27.05.2014. EXHIBIT P10 A TRUE COPY OF THE RESOLUTION DATED 22.09.2015 ALONG WITH APPOINTMENT ORDER. EXHIBIT P11 A TRUE COPY OF THE ORDER DATED 07.05.2013 TO MAKE EXPENDITURE FROM THE BANK'S FUND.** **RESPONDENT(S)' EXHIBITS: NIL ------------------------------------------/TRUE COPY/ P.S.TO JUDGE** **sts** ## **SHAJI P. CHALY, J.** -------------------------------------------------- ## **W.P.(C) No.29435 of 2017 ----------------------------------------------Dated this the 10[th] day of November, 2017** ## **JUDGMENT** This writ petition is filed by the petitioners, challenging Ext.P7 order passed by the 1st respondent dated 25.08.2017, under Sec.32 of the Kerala Co-operative Societies Act, 1969 (hereinafter called, 'Act 1969), whereby the managing committee of the petitioner society was removed and an Administrator was appointed to carry on with the day-to-day affairs of the society. Material facts for the disposal of the writ petition are as follows: 2. Petitioners are the President and managing committee members of the Kumbla Service Co-operative Bank Ltd., registered under the Act and Rules, 1969. Ext.P4 show cause notice was issued by the 1st respondent, directing to show cause why the managing committee shall not be superseded. The said show cause notice was challenged before this Court in W.P.(C) No.5656 of 2017 and this Court as per Ext.P5 judgment, restrained the 1st respondent from implementing any order superseding the committee for a **W.P.(C) No.29435 of 2017** 2 period of two weeks, however, the Joint Registrar issued Ext.P7 order of supersession alleging that: (1) Bank appointed only two candidates in the two notified vacancies viz., one Manjunath (SC/ST category) and Lolakshi (from general category). It is also stated that, Bank did not appoint one Vineethkumar, who is the son of a managing committee member viz., Thimmappa, who resigned from managing committee on 21.11.2015 in order to secure appointment to his son. (2) Appointment of Manjunath in the SC/ST category is bad, since he is the son of younger sister of one Rama, a managing committee member and (3) Delay in starting a branch of the bank at Kalathur area, in spite of permission obtained from the Department. 3. According to the petitioners, Ext.P7 order is bad, since the allegations made against the present committee are all done by the previous managing committee, and that, two of the allegations out of the 3 allegations are relating to service matters which are outside the jurisdiction of the 1st respondent, in view of the declaration of law by the Larger Bench in _**'Chirayinkeezhu Service Co-operative Bank Ltd. v. Santhosh'**_ [2015 (4) KLT 163], and thirdly, the allegation **W.P.(C) No.29435 of 2017** 3 relating to the disqualification of the committee member if any can be done by the Joint Registrar only either _suo motu_ or on the basis of a complaint under Rule 44(3) of Rules, 1969 and not by superseding the committee. Yet another contention raised is that, the consultation with the Circle Co-operative Union and the Financing Bank was not done as declared by this Court as well as the Supreme Court in various cases. 4. A statement is filed by the 1st respondent, refuting the allegations and claims and demands raised by the petitioners. Among other contentions, it is stated that, Ext.P7 is a validly constituted order passed by the 1st respondent, against which, an appeal is provided under Sec.83(j) of the Kerala Co-operative Societies Act, and the petitioners can also file a revision before the appropriate authority as contemplated under the Act. Therefore, the contention is that, the petitioners are not entitled to invoke the discretionary remedy conferred on this Court under Article 226 of the Constitution of India. That apart, it is stated that, one Kariya, a former director of Kumbla Service Co-operative Bank had submitted a petition on 10.06.2014 regarding the malpractices in the working of the Bank, and accordingly, an enquiry was 4 **W.P.(C) No.29435 of 2017** conducted under Sec.65 of the Act. The report pointed out many irregularities, corruption in the working of the Bank, and therefore, the Joint Registrar had issued notice dated 12.01.2016 to the Bank and the Bank thereupon, approached this Court by filing W.P.(C) No.2957 of 2016, however, the same was disposed of on 27.01.2016 with a direction. On 10.06.2014, another petition was filed by a member Damodara regarding the misappropriation in the Bank, and on this complaint, an inspection under Sec.66 was conducted through the Unit Inspector. The report of the inspection revealed that the serious irregularities pointed out under Sec.65 enquiry report were still existing in the Bank and the managing committee did not take any action to rectify the defects pointed out. 5. It is also stated that, the managing committee gave false information to the enquiry officer to hide the misappropriation and malpractices committed in the Bank. That apart, it is stated that, the present managing committee took charge on 17.06.2013 and three years have elapsed. The irregularities pointed out in the inspection/enquiry reports are related to the present Board to the effect that the managing **W.P.(C) No.29435 of 2017** 5 committee had destroyed and tampered the minutes of the society to make appointment from illegally prepared rank list. The managing committee interpolated its resolutions and Attendance Register to cover up the malpractices committed. The committee failed to comply with the lawful directions issued by the 1st respondent in respect of the termination of illegally appointed Peons. 6. It is submitted that, the President of the Bank was functioning as Vice President of the Bank from 17.06.2013 to 23.12.2015, and thereafter he was elected as President. Moreover, the committee members are one and the same from 17.06.2013 till date, except two members nominated according to the provisions of the Act and Rules, 1969. It was thereupon, the 1st respondent issued notice calling for explanation from the Bank, but the Bank instead of submitting any reply, approached this Court by filing W.P.(C) No.5656 of 2017, which was disposed of directing the 1st respondent to hear the Bank before taking further action and also to keep in abeyance the order that may be issued on the basis of the explanation submitted by the Bank. **W.P.(C) No.29435 of 2017** 6 7. It is also stated that, show cause notice dated 16.02.2017 was sent to the Financing Bank and Circle Cooperative Union along with copy of the report under Sec.65 enquiry, and Sec.66 inspection report for their opinion. A hearing was conducted and the Bank attended the hearing and submitted their explanations. The explanations submitted by the Bank was again given to the Circle Co-operative Union and the Financing Bank as per the communication dated 10.08.2017, inviting their objection in superseding the committee of the Bank, and the Circle Co-operative Union as per their resolution dated 17.08.2017 had given their opinion that tampering the records of the society and conducting malpractices to appoint relatives as employees in the Bank is serious irregularity and Sec.32(1) can be invoked. 8. Similarly, the Kasaragod District Co-operative Bank, which is the Financing Bank of the Kumbla Service Cooperative Bank also informed that since the Bank indulged in malpractices by interpolating the minutes and records and misappropriating Bank funds, they have no objection in invoking Section 32(1) against the Bank in question. Therefore, according to the 1st respondent, it was after **W.P.(C) No.29435 of 2017** 7 observing all statutory formalities alone, the order dated 25.08.2017 was issued, superseding the managing committee of the Bank and appointed an administrator. 9. That apart, it is submitted that, the Bank in question is enjoying various Government aids and assistance, such as, Deposit Guarantee Scheme, Co-operative Risk Fund and financial assistance from NCDC. Thereupon, the Bank is not entitled to act against the provisions of the Act and Rules, 1969. It is also contended that, the managing committee has indulged in interpolating documents so as to cover up the malpractices. It is further stated that, the managing committee of the Bank was not ready to rectify the defects and they were not ready to comply with the orders issued by the 1st respondent, regarding the termination of the employees who are illegally appointed. On the other hand, the records were manipulated for the purpose of hiding up the illegalities on the part of the managing committee. 10. Yet another prime contention advanced is that, the Bank prepared two rank lists for the post of Peon. In the rank list prepared for SC/ST candidates, Bank gave 1st rank to one Manjunatha, who is the sister's son of a managing committee **W.P.(C) No.29435 of 2017** 8 member viz., Rama K. The said Rama participated in the interview and awarded high marks to Manjunatha. Similarly, in the rank list for the general category, the Bank gave 2nd rank to one Vineethkumar, who is the son of managing committee member Thimmappa. The Bank on 22.09.2015 resolved to appoint three persons, one from SC/ST rank list and 1 & 2 rank holders from General Category. Appointment letters were given to all the three. Thereafter, the managing committee interpolated the Board resolution by removing the third name in the resolution, using whitener. It has also tampered the Attendance Register in the Mogral Branch, where the third person selected has signed the attendance for 2 ½ days. Therefore, according to the 1st respondent, such activities of the managing committee are criminal in nature and liable to be prosecuted under law. It is also contended that, even though permission was granted to open up branches for the convenience of the members, the Bank did not take any action. Therefore, according to the 1st respondent, petitioners are not entitled to get any reliefs as is sought for in the writ petition. 9 **W.P.(C) No.29435 of 2017** 11. Respondents 2 and 3 are the complainants specified earlier. They have filed a counter affidavit in detail. I am not reciting the statements in the counter affidavit, since they are similar to the statements made by the 1st respondent. The sum and substance of the contentions advanced by 2nd and 3rd respondents is that, appointments were made to the Bank violating the provisions of the Act and the Rules. Other circumstances are also pointed out, and according to the said respondents, Ext.P7 order is passed in accordance with law. 12. Heard learned counsel for the petitioners, learned Special Government Pleader and the learned counsel appearing for respondents 2 and 3. Perused the documents on record and the pleadings put forth by the respective parties. 13. The paramount contention advanced by learned counsel for the petitioners is that, in Ext.P7 order, the circumstances contemplated under Sec.32 of Act, 1969 are not evident. According to the learned counsel, to pass an order of supersession, there should be persistent, negligent, wilful and unlawful acts on the part of the managing committee. However, on a reading of Ext.P7 order, no such allegations are made against the petitioners. Therefore, the supersession is **W.P.(C) No.29435 of 2017** 10 bad. Learned counsel has also invited my attention to the judgments of this Court and the apex court in ' _**Rajagopalan Nair v. State of Kerala**_ ' [1995 (2) KLT 184], ' _**Kandalloor Farmers Service Co-operative Bank Ltd. v. Joint Registrar**_ ' [2008 (4) KLT 856], ' _**State of M.P. v. Sanjay Nagayach**_ ' [2013 (2) KLT 733 (SC)], ' _**Vallappuzha Service Co-operative Bank Ltd. v. Joint Registrar**_ ' [2009 (3) KLT 838] and _**'Krishnan Nair v. Joint Registrar of Cooperative Societies**_ ' [2014 (1) KLT 116]. The said decisions are pressed into service by the learned counsel for the petitioners to canvass the proposition that there is no “persistent act” on the part of the managing committee, which is a necessary corollary for suffering with an order under Sec.32(1) of Act, 1969. 14. Learned Senior Government Pleader as well as the learned counsel appearing for respondents 2 and 3 submitted that, Ext.P7 order is issued as per Sec.32(1)(d) of the Act, wherein the phraseology used in clause (a) of Sec.32(1) is not at all required. The requirement under clause (d) is only misappropriation, or destroys or tampers with the records or causes destruction of records to cover up any misconduct or **W.P.(C) No.29435 of 2017** 11 malpractice. I find force in the said contention. Misappropriation and destruction or tampering of records even once can suffer with the consequences under Sec.32 of Act, 1969. Section 32 of Act, 1969 stipulates various circumstances for invocation of the same. The 1st respondent as well as respondents 2 and 3 had always a consistent case that there is destruction or tampering of records so as to make appointment and remove the appointment of a third person. Categoric and specific allegations are also made against the managing committee in Ext.P7 order, in respect of misappropriation on the part of the petitioners. 15. Having evaluated the fact situations, I am of the considered opinion that, before issuing Ext.P7 order, enquiries were made, defects were noted and direction was issued to rectify the defects, however, the managing committee of the society did not take care to take steps to do so. Even though learned counsel for the petitioners relied heavily on the word “persistently” used in Sec.32(1)(a), the action is initiated by the 1st respondent also on the basis of destruction and tampering of records. In that view of the matter, I am of the considered opinion that there is no illegality or arbitrariness on 12 **W.P.(C) No.29435 of 2017** the part of the respondents in issuing Ext.P7 order. 16. I also find that sufficient opportunity was provided to the petitioners to submit objection to the show cause notice and they were heard also. That apart, Ext.P7 order is appealable as provided under Sec.83(j) of the Kerala Cooperative Societies Act, 1969. Resultantly, I do not find any justifiable circumstances enabling this Court to invoke the discretionary jurisdiction conferred under Article 226 of the Constitution of India to interfere with Ext.P7 order passed by the 1st respondent. Therefore, the writ petition fails, accordingly, it is dismissed. Sd/- **SHAJI P. CHALY JUDGE** St/08.11.2017