Thrikkatiri Multipurpose Co-operative Society Ltd. No.P.1332 v. Joint Registrar of Co-operative Societies (General), Palakkad

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT** **THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN** **TUESDAY, THE 30TH DAY OF OCTOBER 2018 / 8TH KARTHIKA, 1940** ## **WP(C).No. 18325 of 2017** ## **PETITIONER:** **THRIKKATIRI MULTIPURPOSE CO-OPERATIVE SOCIETY LTD. NO.P.1332, KIZHOOR ROAD, THRIKKATIRI (PO), OTTAPALAM, PALAKKAD-679 502, REPRESENTED BY ITS PRESIDENT, ALI M.** **BY ADVS.** **SRI.GEORGE POONTHOTTAM SMT.NISHA GEORGE** ## **RESPONDENT:** **THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), PALAKKAD - 678 001.** ## **SMT C.S.SHEEJA, SENIOR GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 30.10.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** 2 W.P.(C) No. 18325 of 2017 ## **Anil K. Narendran, J.** **- - - - - - - - - - - - - - - - - - - - - - - - W.P.(C) No. 18325 of 2017 - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 30[th] day of October, 2018** ## **JUDGMENT** The petitioner, which is a multi purpose Co-operative Society, registered under the provisions of the Kerala Co-operative Societies Act, 1969 (for brevity the Act) has filed this writ petition under Article 226 of the Constitution of India seeking a writ of certiorari to quash Ext.P11 order dated 04.05.2017 issued by the respondent Joint Registrar of Co-operative Societies and seeking a declaration that the petitioner is entitled to make appointment as per the Staff Pattern fixed in Appendix III without prior approval and the communications given as per Ext.P11 order dated 04.05.2017 is illegal. 2. On 02.06.2016 when this writ petition came up for admission, the learned Government Pleader was directed to get instructions and the matter was ordered to be listed on 07.06.2017 for further consideration. It was also ordered that, in the meantime, the time granted by the 1[st] respondent for production of the list of 3 W.P.(C) No. 18325 of 2017 employees, after cancelling their appointment will stand deferred for a period of three weeks. The said interim order, which was extended from time to time, is still in force. 3. A counter affidavit has been filed by the respondent opposing the reliefs sought for in this writ petition. The petitioner has filed a reply affidavit, reiterating the contentions raised in the writ petition. 4. Heard the learned counsel for the petitioner and also the learned Senior Government Pleader appearing for the respondent. 5. The sole issue that arises for consideration in this writ petition is as to whether any interference is warranted on Ext.P11 order dated 04.05.2017 issued by the respondent Joint Registrar of Co-operative Societies. 6. The pleadings and materials on record would show that petitioner society was registered on 22.02.2012, with an objective to undertake business activities and raising funds to its members for non-agricultural purpose. It was registered as Class-I miscellaneous society, with area of operation extending to three Grama Panchayats, namely, Thrikkatiri, Anaganadi and Chalvara, as borne 4 W.P.(C) No. 18325 of 2017 out from Ext.P1 statement issued by the respondent Joint Registrar. The Society started functioning on 11.04.2012. The Managing Committee of the petitioner Society, vide resolution No.3 dated 03.10.2013 decided to obtain approval for classification from the Registrar of Co-operative Societies and to adopt the staff pattern, as indicated in Appendix III, by making necessary applications. 7. The application preferred by the petitioner Society for classification and approval of staff pattern, as indicated in Appendix III, was initially rejected by the respondent Joint Registrar. Against the order of rejection, the petitioner submitted a representation dated 15.07.2014 before the Registrar of Co-operative Societies. Thereafter, vide Ext.P2 order dated 27.07.2015 the respondent approved the classification of the petitioner society. In Ext.P2 order, it has been ordered that from 01.04.2013 the petitioner society has been classified as Class-I miscellaneous society and that, the feeder category rules has also been approved. As per Ext.P2 order, one post each of Secretary, Accountant and Clerk (Senior); three posts of Clerk/Typist (Junior); and two posts of Attender are sanctioned in the petitioner society. 5 W.P.(C) No. 18325 of 2017 8. Going by the averments in the writ petition, as the work load of the petitioner Society increased, the Managing Committee decided to appoint paid employees in the post of Secretary, Peon/Attender and Watchman. Pursuant to the said decision, the Society issued Ext.P3 notification dated 18.12.2013 inviting applications for one post each of Secretary, Peon and Watchman. On the basis of the applications received, the Committee vide Ext.P4 resolution dated 25.10.2014 decided to conduct written test. The Committee decided to appoint a Sub Committee to conduct interview, vide Ext.P5 resolution dated 25.10.2014. Based on the written test and interview, Ext.P6 rank list for the post of Secretary and Ext.P7 rank list for the post of Peon/Attender were published on 27.12.2014. The rank lists were also approved by the Managing Committee, vide Ext.P8 resolution dated 30.12.2014. 9. According to the petitioner, based on the rank in Exts.P6 and P7 rank lists, the Managing Committee, vide resolution Nos.4 and 5 dated 30.12.2014, decided to appoint Mr.S.Prasad as a Secretary and Shri.Ushaibah as the Peon and they were issued with Exts.P9 and P10 orders of appointment dated 30.12.2014. They 6 W.P.(C) No. 18325 of 2017 joined duty on 01.01.2015. According to the petitioner, the appointment of the said persons are in terms of the relevant rules and after proper competition among the qualified persons. However, the respondents issued Ext.P11 order dated 04.05.2017, whereby the petitioner has been asked to terminate the service of the persons, who were appointed in terms of Exts.P9 and P10, earlier to the date of obtaining Ext.P2 approval, and to report the same to the respondent Joint Registrar. 10. In the counter affidavit filed by the respondent, it is contended that the petitioner society was registered as miscellaneous society as per Rule 15(12)(3) of the Kerala Cooperative Societies Rules, 1969, (for brevity 'the Rules'), on 22.02.2016, and the staff pattern and Feeder Category Rules were approved only on 22.07.2015. According to the respondent, as per Rule 188 and Appendix III, every society should adopt the staff pattern according to the type and class to which it belongs. In Circular No.32/2013 issued by the Registrar of Co-operative Societies dated 02.04.2013, it has been made clear that prior approval of the Joint Registrar is essential for implementing the 7 W.P.(C) No. 18325 of 2017 classification order. In the instant case, the petitioner society obtained approval for its staff pattern only on 27.07.2015. However, the society appointed staff even before the approval and as such, the appointments were irregular and illegal. 11. In the counter affidavit, the respondent has pointed out that the application made by the petitioner for classification was originally rejected because the society submitted that application at the time of completion of audit for the first year. At that time, the actual financial viability of the Society could not be ascertained. The net loss of the petitioner society was Rs.15,85,555/- and if approval was granted to the staff pattern and Feeder Category Rules, it may lead the society paying the salary and other allowances from its deposits, which will be contrary to the provisions in Circular No.73/2013. 12. The specific stand taken by the respondent in the counter affidavit is that, at the time of appointment no post was sanctioned and as such, the appointments so made were irregular. In such circumstances, the respondent issued Ext.P11 order, whereby the petitioner Society was asked to terminate the service of the 8 W.P.(C) No. 18325 of 2017 employees. The respondent would point out that, in the special report, the Auditor has clarified that the appointments made are irregular, because the posts were filled even before sanctioning of posts. Hence, there was an audit objection for an amount of Rs.3,42,000/-, which was spent without authority. Once the staff pattern is approved, the society will be free to appoint staff as per the approved staff pattern. However, in the instant case, the recruitment process was started on 18.12.2013 and the appointments were made on 30.12.2014, at a time when no posts were sanctioned in the petitioner Society. 13. A reply affidavit has been filed by the petitioner Society, producing therewith Ext.P12 certificate of registration issued under the provisions of the Rules. Relying on the judgment of this Court in _**Elampal Service Co-operative Bank Ltd. vs. Government of Kerala**_ **(2000 (3) KLT 389)** it is contended that, as per Rule 188 in Appendix III staff pattern is fixed by the rules itself. Therefore, normally, a society will be free to appoint staff as per the staff pattern fixed in Appendix III. The second proviso makes it obligatory for the society to get prior approval from the Registrar 9 W.P.(C) No. 18325 of 2017 only if there is need for change in the staff pattern, including the scale of pay under the special circumstance. The petitioner would also point out that in Ext.P2 order, approval has been granted with effect from 01.04.2013 as class-I miscellaneous society. 14. In **Elampal Service Co-operative Bank's case (** _**supra**_ **)** , a decision relied on by the learned counsel for the petitioner, the Division Bench of this Court, after referring to the provisions under Section 80 of the Act and Rule 188 of the Rules, held that for appointing staff as per the staff pattern fixed in Appendix III and the Rules according to the type and class to which the Society belongs, no prior approval of the Registrar is necessary. Approval is required only if a change in the pattern is necessary. Therefore, working on profit is not a criteria for classification under class III. Paragraphs 3 and 9 of the said decision read thus: “3. A reading of the above Rule and Appendix III makes it clear that staff pattern is fixed by the Rule itself. Therefore, normally Society will be free to appoint staff as per the staff pattern fixed in Appendix III. Ist proviso allows the Society from not adopting the staff pattern due to financial position and allows the members of the committee to work in a honorary capacity. That is for the Society to decide. Second proviso only 10 W.P.(C) No. 18325 of 2017 makes it obligatory for the Society to get prior approval from the Registrar only if there is a 'need of any change in the pattern of staff including the scale of pay under special circumstances.' The above wordings make it clear that for appointing staff as per the staff pattern fixed in Appendix III and the rules according to the type and class to which the Society belongs, no prior approval is necessary. Only if a change in the pattern is necessary, approval is required. In this connection we refer to the decision reported in Sherthallai Urban Co-operative Bank v. State of Kerala (1984 KLT 971). A similar view was taken in O.P.No.8097/90 decided on 28.2.91 and O.P.No.10078/85 decided on 27.3.1987. xxxx xxxx xxxx xxxx 9. In Ext.P5, reclassification is not set aside. It is also not stated that in this Society there is a need for financial constraint as it is continuing in the red and there is maladministration and unless restraints are made, it may go with liquidation. Here prior approval for appointment was rejected solely on the ground that there is a net loss of Rs.19 lakhs in the audit certificate. Ext.P6 Audit Certificate dated 31.3.99 shows that loss was reduced in the subsequent year. When Working Capital is more than Rs.1.8 crores and deposits are more than Rs.2.1 crores, the loss suffered is not so alarming. The Registrar has to look into the questions whether the conditions specified in the Column 3 of Appendix-III are satisfied and whether reclassification is correct or not. We also note that for agricultural credit Societies for grading as Class I as per 11 W.P.(C) No. 18325 of 2017 Appendix III, it should have declared dividend on share at least for one year during the 5 preceding years and should have worked on profit for two years in the previous 5 year period. For Class II Society should have work on profit at least for one year during the preceeding 3 years (No declaration of dividend is necessary). But for Class III and downward working on profit or declaration of dividend is not made a condition at all. What is necessary for classification as Class III is stated as follows : “CLASS II 1. Working Capital - Rs.1.50 Crores & above - but below Rs.2.5 Crores. Secretary - 2. Deposits Rs.1 Crore & above Assistant Secretary 3. Loans outstanding Rs.1 Crore & above Internal Auditor 4. Audit Classification - for previous year Not less than 'C' Clerk/Cashier/ Jr.Clerk/Cashier. - 5. Over due under Should not exceed Attender, Peons Loans 2.5% of the demand Night-watchman.” Therefore, working on profit is not a criteria for classification under Class III. If the Society is not satisfying the conditions of classification as per the resolution, it is for the Registrar to act under Rule 176 and Society needs no previous approval for appointment of staff strictly as per staff pattern without any change as prescribed under Appendix III according to it's classification and type.” ## 15. In **Subair V.A. v. Anicadu Service Co-operative Bank** ## **Ltd. and another [2013 (2) KLT SN 64: 2013 KHC 248]** , another decision relied on by the learned counsel for the petitioner, following the law laid down in Elampal Service Co-operative Bank's 12 W.P.(C) No. 18325 of 2017 case (supra), another Division Bench of this Court held that Rule 188 of the Rules does not provide for prior approval in all cases of reclassification of the Societies. That applies only to cases where a particular Society, because of the peculiar circumstances to that Society, wants to change the pattern of the staff, including the scale of pay, from what has been stipulated in Appendix III. Paragraphs 6 and 7 of the said decision read thus : “6. We have considered the rival contentions in detail. First of all we are not in agreement with the counsel for the appellant that the second proviso to Rule 188 of the Kerala Co-operative Societies Rules provides that in every case of change of classification approval from the Registrar of Co-operative Societies is mandatory. Rule 188 reads thus : “188. Staff Pattern.- Every Society shall adopt the staff pattern indicated in Appendix-III to these Rules, according to the type and class to which it belongs: Provided that where any Society cannot adopt such staff pattern due to its financial position, the members of the committee may work in an honorary capacity in lieu of appointing any paid employee: Provided further that where any Society is in need of any change in the pattern of staff including the scale of pay under special circumstances the same may be made by the Society with the prior approval of the Registrar of Co-operative Societies.” We are of opinion that the second proviso applies only when a Society under special circumstances peculiar to that Society, 13 W.P.(C) No. 18325 of 2017 wants a change in the pattern of staff including scale of pay as provided in Appendix-III and not when the Society is reclassified from one class to another. In fact that is exactly what the Division Bench of this Court held in Elampal Service Cooperative Bank Ltd.'s case. Paragraph 7 of that judgment reads thus : “We have already held that no prior approval is necessary for appointment of staff as per staff pattern and scale of pay mentioned in Appendix-III depending upon the classification and type of Society in view of Section 80 and Rule 188. Question of approval arises only when society need a change in the pattern as laid down in Appendix III depending upon special circumstances and not otherwise. Therefore, we agree with the views expressed in the judgment reported in 1984 KLT 971 (supra) and not with the decision in 1992 (2) KLT 77 (supra) with regard to the prior approval of appointment and hold that no prior approval from the Registrar is necessary for appointment of staff unless such a condition is mentioned specifically in respect of any classes of Society in Appendix -III.” 7. Of course the learned counsel appearing for the appellant relies on the very same paragraph to contend that, that paragraph would hold that in case of change of classification prior approval is mandatory. As we have already said we are unable to agree with the learned counsel for the appellant. We are of opinion that paragraph 7 of the judgment in Elampal Service Co-operative Bank Ltd.'s case is perfectly in tune with the second proviso to Rule 188. That Rule does not provide for prior approval in all cases of re-classification of Societies. That applies only to cases where a particular Society, because of the 14 W.P.(C) No. 18325 of 2017 special circumstances peculiar to that Society, wants to change the pattern of staff including the scale of pay, from what has been stipulated in Appendix-III. Therefore, we do not find any merit in the contentions of the appellant that since the first respondent Society was re-classified from Class-I Society to Class - III Society, the appointments to the post of peon could not have been made without obtaining prior approval for the re-classification itself from the Registrar of Co-operative Societies.” 16. Per contra, the learned Senior Government Pleader, with reference to the provisions of the Kerala Co-operative Societies (Amendment) Rules, 2004, would point out that classification made by the Societies should be got certified and approved by the Registrar of Co-operative Societies before being implemented and as such, the contention of the learned counsel for the petitioner that even without certification and approval by the Registrar of Cooperative Societies, a Society can make appointment, cannot be sustained. The learned Senior Government Pleader would also point out that, in **Elampal Service Co-operative Bank's case** and **Subair's case** referred to _supra_ , the Division Bench of this Court was dealing with reclassification of Soceities and as such, the law 15 W.P.(C) No. 18325 of 2017 laid down in those decisions has no application to the issue involved in this Writ Petition. 17. By the Kerala Co-operative Societies (Amendment) Rules, 2004, Note-4 was appended to Appendix III under Sl.No.2(m) under Class IV of the Kerala Co-operative Societies Rules, 1969, which reads as under : “Note 4-Classification made by the Societies should be got certified and approved by the Registrar of Co-operative Societies before being implemented.” 18. After referring to the decision of this Court in **Elampal Service Co-operative Bank's case (** _**supra**_ **)** and also Note-4 appended by the Amendment Rules of 2004, which provides that the classification made by the Societies should be got certified and approved by the Registrar of Co-operative Societies before being implemented, the Apex Court in **Subha B.Nair v. State of Kerala [(2008) 7 SCC 210]** held that, it may not be entirely correct that the Registrar will have no say in the matter and that, the financial health of the Society is a relevant factor. Paragraphs 11 and 12 of the said decision read thus : “11. A Division Bench of the Kerala High Court in Elampal 16 W.P.(C) No. 18325 of 2017 Service Co-op. Bank Ltd. opined that the power of the Registrar either to rescind a resolution or reclassification made by the Cooperative Society can be exercised so as to enable him to set them aside, stating : “If reclassification made by the petitioner Bank is incorrect, the Registrar is not helpless in setting aside the resolution passed.” 12. The Rules appear to have undergone a change in 2004 by way of the Kerala Co-operative Societies (Amendment) Rules, 2004. Note 4 appended to Appendix II under Sl.No.2(m) under Class IV of the 1969 Rules reads as under : “Note 4- Classification made by the Societies should be got certified and approved by the Registrar of Co-operative Societies before being implemented.” Thus, it may not be entirely correct that the Registrar will have no say in the matter. Financial health of a Bank is a relevant factor.” 19. As held by the Apex Court in **Subha B. Nair's case** _**(supra)**_ , the financial health of the Society is a relevant factor in the matter of classification of that Society. Moreover, the 1[st] proviso to Rule 188 of the Kerala Co-operative Societies Rules makes it explicitly clear that where any Society cannot adopt staff pattern indicated in Appendix-III, due to its financial position, the members of the Committee may work in an honorary capacity _in lieu_ of 17 W.P.(C) No. 18325 of 2017 appointing any paid employee. In the instant case, the application made by the petitioner Society, pursuant to the decision taken on 03.10.2013 for classification and approval of staff pattern, as indicated in Appendix-III, was initially rejected by the respondent Joint Registrar. Against the said order, the petitioner Society approached the Registrar of Co-operative Societies by submitting a representation dated 15.07.2014. Despite the rejection of the application for classification and approval of staff pattern, the petitioner Society conducted the process of selection, based on Ext.P3 notification dated 18.12.2013 and conducted written test and interview, vide Exts.P4 and P5 resolutions dated 25.10.2014. Based on the written test and interview, Exts.P6 and P7 rank lists were published on 27.12.2014 and appointments were made on 01.01.2015, vide Exts.P9 and P10 orders dated 30.12.2014, based on the approval granted to Exts.P6 and P7 rank lists, vide Ext.P8 resolution dated 30.12.2014. In such circumstances, the order of the respondent Joint Registrar, whereby the petitioner Society is directed to cancel the irregular appointments made vide Exts.P9 and P10 orders warrants no interference at the hands of this Court. 18 W.P.(C) No. 18325 of 2017 Moreover, none of the appointees have challenged Ext.P11 order. In such circumstances, the Writ Petition fails and it is accordingly dismissed. No order as to costs. No order as to costs. Sd/- **ANIL K. NARENDRAN** **JUDGE** **csl** 19 W.P.(C) No. 18325 of 2017 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE CATEGORICAL STATEMENT** **EXHIBIT P2 TRUE COPY OF THE ORDER NO.6315/2015/S.T/K.DIS DATED 27.07.2015 PASSED BY THE RESPONDENT** **EXHIBIT P3 TRUE COPY OF THE NOTICE PUBLISHED IN THE MATHRUBHUMI DAILY ON DECEMBER 18, 2013.** **EXHIBIT P4 TRUE COPY OF THE RESOLUTION DATED 25.10.2014 EXHIBIT P5 TRUE COPY OF THE RESOLUTION NO.8 DATED 25.10.2014 FOR APPOINTING SUB-COMMITTEE EXHIBIT P6 TRUE COPY OF THE RANK LIST FOR THE APPOINTMENT TO THE POST OF SECRETARY DATED 27.12.2014. EXHIBIT P7 TRUE COPY OF THE RANK LIST FOR THE APPOINTMENT TO THE POST OF PEON/WATCHMAN DATED 27.12.2014** - **EXHIBIT P8 TRUE COPY OF THE RESOLUTION NO.3 DATED DECEMBER 30, 2014.** - **EXHIBIT P9 TRUE COPY OF THE APPOINTMENT ORDER DATED DECEMBER 30, 2014 ISSUED TO MR. S.PRASAD** - **EXHIBIT P10 TRUE COPY OF THE APPOINTMENT ORDER DATED 30.12.2014 ISSUED TO SMT.USHAIBA T.H.** - **EXHIBIT P11 TRUE COPY OF THE ORDER NO.7793/2016/ST DATED 04.05.2017 ISSUED BY THE RESPONDENT** - **EXHIBIT P12 TRUE COPY OF THE REGISTRATION CERTIFICATE NO.155/2012/O. DATED 22.02.2012.** ## **RESPONDENTS' EXHIBITS: NIL** **TRUE COPY** **PA TO JUDGE**