The Managing Committee of Pallikkunnu Service Cooperative Bank Ltd No. C.350 v. Joint Registrar of Co-operative Societies (General) and T. K. Dhanil Rajani

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **MONDAY, THE 13TH DAY OF JANUARY 2020 / 23RD POUSHA, 1941** ## **WP(C).No.22071 OF 2019(H)** ## **PETITIONER:** **THE MANAGING COMMITTEE OF PALLIKKUNNU SERVICE CO OP BANK LTD NO. C.350, REPRESENTED BY PRESIDENT, CHALAD P.O., KANNUR - 670 014.** **BY ADVS. SRI.P.N.MOHANAN SRI.C.P.SABARI SMT.AMRUTHA SURESH** ## **RESPONDENTS:** **1 THE JOINT REGISTRAR OF CO-OP SOCIETIES (GENERAL) OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, KANNUR - 670 001. 2 T. K. DHANIL RAJANI, MANAL, CHALAD, KANNUR, PIN - 670 008.** **R1 BY GOVERNMENT PLEADER SRI.BIMAL K.NATH** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13.01.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.22071 OF 2019(H)** 2 ## **JUDGMENT** The petitioner Managing Committee of the Pallikkunnu Service Cooperative Bank has approached this Court aggrieved by Ext.P3 proceedings of the 1[st] respondent, whereby the 1[st] respondent directed an enquiry in terms of Section 65 of the Kerala Co-operative Societies Act (hereinafter referred to as “the Act”) to various irregularities that were noticed in the conduct of affairs by the bank. In the Writ Petition, it is the contention of the petitioner that Ext.P3 order was passed pursuant to a complaint, that was filed against the petitioner bank by the 2[nd] respondent in his individual capacity, and after consideration of the reports that were made available before the 1[st] respondent by the Assistant Registrar of the Co-operative Society. The petitioner contends that Ext.P3 order was passed in a mechanical manner by referring only to the reports of the Assistant Registrar that were made available before the 1[st] respondent and without any independent application of mind by the 1[st] respondent to the existence or otherwise of irregularities alleged against the petitioner. In support of his contention he relies on the judgment of this Court in **Melukkara Service Co-operative Bank Ltd.No.PT.152 and Another v. Joint Registrar (General), District Co-operative Society [2018 (2) KHC 143 (DB)]** and **Ellakkal Service Co-operative Bank v. State of Kerala [1997 2 KLT 85]** . In the first mentioned case, a Division Bench of this Court while **WP(C).No.22071 OF 2019(H)** 3 considering the nature of the function to be discharged by the Registrar in terms of Section 65 of the Act observed as follows:- “ 22. What was required for the Registrar to have done was to take into account all relevant factors and circumstances and to have caused at least an inspection of the records and materials maintained by the society before recording his satisfaction as to whether an inquiry under Section 65 of the Act was required. It was not proper on his part to merely rely upon the report of the Assistant Registrar and then to say that he is prima facie satisfied, when it is obvious from Ext.P1 that there was nothing before him, except that report, which could have led him to such a satisfaction and obviously going by the provisions of the Statute, the satisfaction of the Assistant Registrar cannot be in lieu of the satisfaction to be personally arrived at by the Registrar, who is vested with the powers to cause an inquiry under section 65 of the Act.” 2. It was found in the said case that the Registrar, who had to record his personal satisfaction as regards the existence or otherwise of the facts necessary for initiating an enquiry under 65 of the Act ,could not have merely gone by the recommendation of the Assistant Registrar, without independently considering the report of the Assistant Registrar and recording his personal satisfaction as to the necessity of an enquiry **WP(C).No.22071 OF 2019(H)** 4 in terms of Section 65 of the Act. In the second mentioned case, a Single Judge of this Court considered the submission of the petitioners, that a complaint from members that had to be the acted upon by the Registrar under Section 65 of the Act had necessarily to be by a majority of the members of the Committee of the society or by not less than 1/3 of the quorum for the General Body Meeting, whichever is less. The point that came up for consideration in that case was whether a complaint by a single member would suffice for the Registrar to initiate an enquiry in terms of Section 65 of the Act. This Court while answering in the negative, also observed that there is no provision under Section 65 of the Act to initiate an enquiry on a mere recommendation of an Assistant Registrar. In other words the ratio of the said judgment is essentially that the Registrar cannot, without recording his subjective satisfaction as regards the need for an enquiry, merely rely on a report of an Assistant Registrar or on a complaint, for the purposes of ordering such an enquiry. 3. In the instant case, on a perusal of Ext.P3 order, which is impugned in the Writ Petition, I find that pursuant to the complaint received from the 2[nd] respondent, the 1[st] respondent caused an enquiry to be conducted into the matter through the Assistant Registrar. Thereafter, on receipt of the report by the Assistant Registrar, which runs into six pages, the 1[st] respondent found that there were **WP(C).No.22071 OF 2019(H)** 5 irregularities in the matter of recruitment and appointment to various posts under the petitioner bank. He also referred to another report of the Assistant Registrar, which was in turn drawn up after obtaining a report from the Unit Inspector as regards certain discrepancies noticed in the Consumer Store. On this aspect too, the 1[st] respondent appears to have applied his mind to the contents of the report, and thereafter, arrived at a subjective satisfaction as regards the necessity for conducting an enquiry into the irregularities alleged against the petitioner society. It was thereafter that by Ext.P3 order an enquiry was ordered into the three aspects narrated therein, and an enquiry report ordered to be placed before the said respondent. As already noticed Ext.P3 order is impugned in this Writ Petition in which, by an interim order dated 22.08.2019, further proceedings pursuant to Ext.P3 were directed to be deferred pending disposal of the Writ Petition. The said interim order continues to be in force even today. 4. In the counter affidavit filed on behalf of the 1[st] respondent, it is stated as follows at paragraphs 5, 6, 7 and 8:- “5. It is respectfully submitted that the petitioner raised allegations in issuance of the impugned order merely on the basis of complaints made by an individual. This averment is incorrect rather than **WP(C).No.22071 OF 2019(H)** 6 intended to vitiate the lawful order of this respondent. One Mr.T.K.Dhanil made a complaint regarding the irregular appointment made by the petitioner managing committee. Upon receipt of the complaint, an inspection was conducted by the Unit Inspector, Chirakkal Unit, Office of the Assistant Registrar (G) Kannur submitted a detailed report before this authority on 28.05.2019. In the said report, the Unit Inspector states that the allegations enumerated in the complaint are prima-facie found true. Hence, a detailed enquiry under Section 65 is highly essential to unveil the grave irregularities committed by the petitioner Managing committee. The petitioners hastily approached this Hon'ble court before completing the enquiry with a deliberate intention to interdict the lawful enquiry process and thereby get away from the further proceedings to be initiated. Based on the aforesaid report, this authority is satisfied that an enquiry under Section 65 of the Kerala Co-operative Societies Act is essential to find out the irregularities and malpractice committed by the Managing committee. Hence, this respondent suo moto issued the impugned order after complying all legal formalities. Therefore, Exhibit P3 order is lawful and sustainable under the eye of law. 6. It is respectfully submitted that the petitioner is the President of the Pallikkunnu Service Co-operative Bank which is registered and functioning under the Kerala **WP(C).No.22071 OF 2019(H)** 7 Co-operative Societies Act and Rules made thereunder. The managing committee in office assumed charge on 20.05.2018. Considering all facts enumerated in the inspection report, this authority satisfied that the findings are very serious in nature, and therefore invoking the provisions under Section 65(1) issued the said order. True copy of the inspection report is produced herewith and marked as Exhibit R1(a). 7. It is submitted that this respondent initiated steps not on the basis of political enmity or the issue related to Municipal Corporation administration. The impugned order has issued invoking the power under section 65 of the Kerala Co-operative Societies Act. Therefore, the said order is lawful. The petitioner raised flimsy allegations intending to vitiate the aforesaid lawful order with a deliberate intention to stall the enquiry proceedings thereby get away from the further proceedings to be initiated on findings of the enquiry report. 8. It is respectfully submitted that while perusing the detailed inspection report and the relevant records, it is found that the managing committee of the petitioner society promoted an employee from sub staff category without complying the provisions of Rule 185 (1). The incumbent who has completed only 1 year in the post of Peon is promoted as Junior Clerk in an irregular **WP(C).No.22071 OF 2019(H)** 8 manner. The Rule stipulates that promotion from sub staff category to the post of Junior Clerk shall be made only if such employees are having the required qualification and minimum 3 years of service in feeder category. Moreover, the vacancy aroused in the post of peon by way of promotion has been filled up from the rank list published to appoint for the appointment of peons. it is pertinent to note that the managing committee of the society invited applications from the eligible candidates for 2 vacancies in the post of night watchman on 21.11.2016. A rank list in this regard was published and the 2 vacancies were filled up from the aforesaid list. Thereafter, additional 2 posts were sanctioned and 2 candidates were appointed from the same rank list without complying any recruitment procedures. Therefore, the aforesaid appointments made by the managing committee are irregular and without complying the norms stipulated in Kerala Cooperative Societies Rules, circular, guidelines and directions of this Hon'ble Court made in various precedent judgments. The consumer store working under petitioner bank incurred stock deficit of Rs.1,16,500.62 for the year ended 31.03.2019. The managing committee has not taken any measures to recover the deficit amount. As per Rule 31 of the Kerala Co-operative Societies Rules, the society which is engaged in sale of consumer article shall maintain Salesman Liability Register as prescribed. In the instant case, the petitioner society has not kept any Register in this regard. Being an institution **WP(C).No.22071 OF 2019(H)** 9 incorporated under statute the petitioner society is liable to keep those records as stipulated in the Rules. Therefore, this respondent satisfied that an enquiry is highly essential to found out the malpractice. Hence, this respondent issued the impugned order as per the provisions of the Act.” 5. It is the submission of learned Government Pleader appearing on behalf of the 1[st] respondent that a perusal of Ext.P3 order, in the backdrop of Ext.R1(a) Inspection Report, would clearly reveal that the 1[st] respondent had applied his mind to the contents of the report before him, and it is thereafter that he arrived at the subjective satisfaction as regards the necessity for an enquiry in terms of Section 65 of the Act. 6. I have heard the learned counsel appearing for the petitioner and also the learned Government Pleader appearing for the respondents. 7. On a consideration of the rival submissions and on a perusal of the pleadings in this case, I am of the view that the Writ Petition in its challenge against Ext.P3 order must necessarily fail. Although the learned counsel for the petitioner would place reliance on the decisions in **Melukkara Service Co-operative Bank Ltd.No.PT.152 and Another v. Joint Registrar (General), District Co-operative Society [2018 (2) KHC 143 (DB)]** and **Ellakkal Service Co-operative Bank** **WP(C).No.22071 OF 2019(H)** 10 **v. State of Kerala [1997 2 KLT 85]** referred above, I find from a perusal of the said decisions that the factual circumstances that obtained in the said decisions are entirely different from what is pleaded in the instant case. Contrary to what was noticed in the said judgments, the 1[st] respondent in the instant case had access to material in the form of reports drawn up by the Assistant Registrar, and after a perusal of the said reports, in the backdrop of the complaint that triggered the enquiry, the 1[st] respondent decided that it was necessary to hold an enquiry under Section 65 of the Act. In my view, the 1[st] respondent cannot be said to have acted illegally while passing Ext.P3 order. At any rate, the petitioner is not put to any prejudice on account of Ext.P3 order that only directs the conduct of an enquiry. This is because, even assuming that a report adverse to the interests of the petitioner is drawn up pursuant to the enquiry that is to follow Ext.P3 order, before the said report can be used against the petitioner, either for the purposes of proceedings under Section 68 (2) of the Act or under Section 32 of the Act, the petitioner has necessarily to be put on notice of the allegations/charges against him and given an opportunity to rebut the said charges, as also the material relied upon to support the said charges. Taking note of the apprehension of the petitioner as regards hasty action by the respondents, possibly by acting under political pressure, I make it clear that, in the event of any notice being issued to the petitioner under Section 32 or under Section 68 of the Act, and the petitioner being asked to file his objections **WP(C).No.22071 OF 2019(H)** 11 thereto, it would be open to the petitioner to submit his objections not only to the averments in the notice served on him but also to the documents or other material relied against him while issuing the said notice, including objections to the satisfaction recorded in Ext.P3, and the report drawn up pursuant thereto. The first respondent shall thereafter, in any order to be passed by him, specifically advert to the objections raised by the petitioner and give reasons for his decision on the said objections. The Writ Petition in its challenge against Ext.P3 proceedings is therefore dismissed, reserving the liberty to the petitioner as aforementioned, and directing the first respondent to take note of the observations in this judgment while continuing the proceedings under the Act. Sd/- ## **A.K.JAYASANKARAN NAMBIAR JUDGE** mns **WP(C).No.22071 OF 2019(H)** 12 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 A TRUE COPY OF THE COMPLAINT DATED 24.01.2017 FILED BY THE SECOND RESPONDENT BEFORE THE FIRST RESPONDENT. EXHIBIT P2 A TRUE COPY OF THE REPLY DATED 21.05.2019 SUBMITTED BEFORE THE CO-OPERATIVE INSPECTOR FOR ONWARD TRANSMISSION TO JOINT REGISTRAR. EXHIBIT P3 A TRUE COPY OF THE NOTICE DATED 16.07.2019 OF THE FIRST RESPONDENT. RESPONDENT'S/S EXHIBITS:** **EXHIBIT R1 A TRUE COPY OF THE INSPECTION REPORT.** **//TRUE COPY//** **P.A TO JUDGE**