Thuravoor Service Co-Operative Bank Ltd v. Joint Registrar of Co-operative Societies, Ernakulam & Others

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** # **`PRESENT`** ``` THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR ``` ## **`&`** ``` THE HONOURABLE MRS. JUSTICE C.S. SUDHA ``` ``` TUESDAY, THE 7[TH] DAY OF DECEMBER 2021 / 16TH AGRAHAYANA, ``` ## **`1943`** ``` WA NO. 1646 OF 2020 ``` ``` AGAINST THE ORDER/JUDGMENT IN WP(C) 20210/2020 OF HIGH ``` ## **`COURT OF KERALA`** ## **`APPELLANT/PETITIONER:`** ``` THURAVOOR SERVICE CO-OPERATIVE BANK LTD NO.E69 THURAVOOR P.O., ANGAMLY - 683 586 REPRESENTED BY ITS PRESIDENT. ``` ``` BY ADVS. A.JAYASANKAR SRI.MANU GOVIND ``` ## **`RESPONDENTS/RESPONDENTS:`** - **`1 JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES ERNAKULAM CIVIL STATION, KAKKNAD, COCHIN - 682 030.`** - **`2 ASSISTANT REGISTRAR OF COOPERATIVE SOCIETIES ALUVA - 683 101.`** - **`3 SPECIAL GRADE SENIOR INSPECTOR/SPECIAL SALE OFFICER`** - **`KADUNGALLOORE SCB GROUP, OFFICE OF THE ASSISTANT REGISTRAR OF COOPERATIVE SOCIETIES, NORTH PARAVUR - 683 513.`** - **`4 K.P.RAJAN, S/O.PAPPU, KUNNUMPURATH HOUSE, THURAVOOR P.O. - 683 586.`** ``` BY ADV SRI.G.SANTHOSH KUMAR (P). ``` ## **`OTHER PRESENT:`** ## **`SR.GP.V.K.SUNIL`** ``` THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 07.12.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` Writ Appeal No.1646 of 2020 ..2.. ## _C.R._ **P.B.SURESH KUMAR & C.S.SUDHA, JJ. ----------------------------------------------Writ Appeal No.1646 of 2020 -----------------------------------------------** ## **Dated this the 07[th] day of December, 2021** ## **JUDGMENT** ## **P.B.Suresh Kumar, J.** This writ appeal is directed against the judgment dated 2.12.2020 in W.P.(C) No.20210 of 2020. The appellant is the petitioner in the writ petition. 2. The appellant is a Primary Agricultural Credit Society (the Society), a co-operative society registered under the Kerala Co-operative Societies Act, 1969 (the Act). The last election to the managing committee of the Society took place on 06.05.2018 and the managing committee elected on 10.05.2018 is therefore entitled to continue in office till 09.05.2023. During 2020, on the basis of a complaint lodged by the fourth respondent and a few others, the first respondent, the jurisdictional Joint Registrar of Co-operative Societies, directed the second respondent to inspect the books Writ Appeal No.1646 of 2020 ..3.. of the Society under Section 66(2) of the Act. Later, on the basis of the report of the said inspection, the Joint Registrar issued Ext.P4 notice calling upon the managing committee of the Society to show cause why they shall not be superseded under Section 32(1)(c) of the Act. Ext.P4 notice was challenged by the appellant in the writ petition mainly on the ground that the power under Section 32(1) of the Act cannot be invoked on the basis of a report of inspection under Section 66(2). The learned Single Judge dismissed the writ petition in limine, placing reliance on the decision of this Court in **Krishnan Nair v. Joint Registrar of Co-operative Societies,** 2014 (1) KLT 116. The appellant is aggrieved by the said decision of the learned Single Judge. Hence, this appeal. 3. Heard the learned counsel for the appellant as also the learned Government Pleader. 4. The learned counsel for the appellant contended that a proceedings under Section 32 of the Act can be invoked only based on an inquiry conducted under Section 65 or on a report of the financing bank or the Vigilance and Anti-corruption Bureau of the Government or the Vigilance Officer and a proceedings under that provision cannot be Writ Appeal No.1646 of 2020 ..4.. invoked based on the report of an inspection conducted under Section 66(2) of the Act. It was conceded by the learned counsel that sub-section (1) of Section 32 empowers the Registrar to initiate proceedings under that provision otherwise as well, but, according to the learned counsel, the word 'otherwise' used in sub-section (1) of Section 32 can only be understood ejusdem generis, that is to say, similar to the group made mention of in sub-section (1) of Section 32. The learned counsel pointed out that a report of inspection conducted under Section 66(2) of the Act cannot be equated to a report of an inquiry under Section 65 or the reports of the financing bank or Vigilance and Anti-corruption Bureau of the Government or Vigilance Officer made mention of in subsection (1) of Section 32. The learned counsel elaborated the said submission pointing out that the reports of the authorities made mention of in sub-section (1) of Section 32 are reports from which the competent authority would be able to satisfy the existence of any one or more of the jurisdictional grounds referred to in clauses (a) to (d) of sub-section (1) of Section 32, for the purpose of invoking the power conferred thereunder. It was argued by the learned counsel that Section 66(2) of the Writ Appeal No.1646 of 2020 ..5.. Act, on the other hand, confers only a limited power on the Registrar to inspect the books of the society on an application made by a creditor of the society and the purpose of inspection provided for under Section 66(2) is only to ascertain whether any debt is due to the creditor from the society and also whether the society has satisfied the demand of the creditor for payment of the debt within a reasonable time. According to the learned counsel, insofar as the purpose of inspection under Section 66(2) has nothing to do with any of the jurisdictional grounds made mention of in clauses (a) to (d) of sub-section (1) of Section 32, there cannot be any subjective satisfaction as to the existence or otherwise of any of the jurisdictional grounds based on a report under Section 66(2). If that be so, according to the learned counsel, there cannot be any proceedings under Section 32 of the Act based on the report of inspection under Section 66(2). On a query from the Court as to the decision of this Court in **Krishnan Nair** relied on by the learned Single Judge to render the judgment impugned in the appeal, the learned counsel for the appellant submitted that the question has not been considered by this Court in **Krishnan Nair** and there is only a passing observation in the Writ Appeal No.1646 of 2020 ..6.. said case about the contention raised by him. 5. Per contra, the learned Government Pleader submitted that the writ petition from which the appeal arises being one instituted challenging a show cause notice, the learned Single Judge was justified in dismissing the writ petition, for such a writ petition is not maintainable. It was also submitted by the learned Government Pleader that for the purpose of initiating a proceedings under Section 32, it is not necessary that the Registrar should have a report of inquiry under Section 65 of the Act or reports of the financing bank or the Vigilance and Anti-corruption Bureau of the Government or the Vigilance Officer. According to the learned Government Pleader, even without such reports, the expression 'otherwise' used in sub-section (1) of Section 32 confers authority on the Joint Registrar to initiate action under Section 32 of the Act. It was also argued by the learned Government Pleader that the question whether the material relied on for the purpose of initiating action under Section 32 is sufficient is one to be considered by the Joint Registrar, if objections are raised to the show cause notice on that ground and it cannot be said as a proposition of law that there cannot be any proceedings under Writ Appeal No.1646 of 2020 ..7.. Section 32 of the Act based on a report of inspection under Section 66(2). 6. We have examined the arguments advanced by the learned counsel for the parties on either side. 7. Before proceeding to deal with the arguments advanced by the learned counsel for the appellant, it is necessary to mention that the learned counsel for the appellant did not raise any argument as regards the sufficiency or otherwise of the factual allegations levelled against the managing committee in Ext.P4 show cause notice. The short question, therefore, is as to whether a proceedings under Section 32 of the Act could be initiated based on a report of inspection under Section 66(2). 8. In order to answer the question formulated for decision, it is necessary to refer to the relevant part of Section 32 and Section 66 of the Act. The relevant part of Section 32 of the Act reads thus: “ **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,-- Writ Appeal No.1646 of 2020 ..8.. (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 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, 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. Provided that in the case of Co-operative Society, carrying on the business of banking, the provisions of the Banking Regulation Act, 1949, (Central Act 10 of 1949) shall also apply; Provided further that in the case of a Co-operative Society, carrying on the business of Banking, appointment of Administrator/administrative committee shall not exceed one year in the aggregate: Provided also that the Board of Co-operative Society shall not be superseded or kept under suspension where there is no Government share holding or loan or financial assistance or any guarantee by the Writ Appeal No.1646 of 2020 ..9.. Government or any Board or Institutions constituted by the Government. Explanation I. For the purpose of this proviso, financial assistances includes any financial assistance from the Kerala Co-operative Development and Welfare Fund Board, Deposit Guarantee Scheme implemented by the Kerala Co-operative Deposit Guarantee Fund Board, Kerala Co-operative Risk Fund Scheme implemented by the Kerala Co-operative Development and Welfare Fund Board, National Bank for Agriculture and Rural Development, National Co-operative Development Corporation and any other financial institution under the control of the State or Central Government and also any financial assistance guaranteed by the said institutions. Explanation II. - A notice and an order given as per this clause to the President, in his absence to the Vice President or any committee members who is holding charge of President or Vice President or to the Chief Executive of a society shall be treated as an order given to the committee of the society. (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 administrator in any society for two consecutive terms; x x x x x x ## Section 66 of the Act reads thus: ## “ **66. Supervision and Inspection.** - (1) The Registrar shall supervise or cause to be supervised by a person authorised by him by general or special order in writing in this behalf, the working of every society as frequently as he may consider necessary. The supervision under Writ Appeal No.1646 of 2020 ..10.. this sub-section may include an inspection of the books of the society. (2) The Registrar may, on his own motion, or on the application of a creditor of a society, inspect or direct any person authorized by him by order in writing in this behalf to inspect the books of the society: Provided that no such inspection shall be made on the application of a creditor unless the applicant,- (a) satisfies the Registrar that the debt is a sum then due and that he has demanded payment thereof and has not received satisfaction within a reasonable time and (b) deposits with the Registrar such a sum as security for the costs of the proposed inspection as the Registrar may require. (3) Where the inspection under sub-section (2) is made on the application of the creditor, the Registrar shall communicate the result of such inspection to such creditor. (4) The Registrar or any person authorised by him under sub-section (1) or subsection (2) shall at all reasonable time have free access to and have power to inspect the books, records, accounts, documents, securities, cash balance and other properties, belonging to the society and may summon any person in possession of or responsible for the custody of such books, records, accounts, documents, securities, cash balance and other properties, to produce the same for inspection at any place at the Headquarters of the society or any branch thereof or where there is no working office for the society, at the office of the Registrar or at the office of any of his subordinate officers. Writ Appeal No.1646 of 2020 ..11.. (4A) It shall be the duty of every officer and employee of the society to cooperate with and assist in such supervision or inspection, to furnish any information that may be required for the purpose and to produce the books, records, cash balance etc. referred to in sub-section (4), on demand by such officer, failing which it shall be treated as an offence under sub-section (4) of section 94. (5) The Registrar or the person authorized by him under sub-section (1) or sub-section (2) may, by order in writing, direct the society or its officers to take such action as may be specified in such order within the time that may be mentioned in such order. (6) The Circle Co-operative Union shall have the power to direct that a non-official member thereof shall be present at an inspection under sub-section (2) : Provided that such non-official member shall not have the power to make the inspection himself. (7) Apex Society or Federal Co-operative Society or a financing bank shall have the right to inspect the books of any registered society which is affiliated to it, through its officers. (8) An officer of an Apex Society or Federal Cooperative Society or a financing bank, inspecting the books of a society shall at all reasonable times have the access to the books, accounts, documents, securities, cash and other properties belonging to the society and may call for such information, statements and returns as may be necessary to ascertain the financial condition of the society and the safety of the sums lent to it. (9) An officer referred to in sub-section (8) shall also have power to summon any person in possession of or responsible for the custody of any books, accounts, documents, securities, cash and other properties Writ Appeal No.1646 of 2020 ..12.. referred to in that sub-section to produce the same for inspection or verification at any place at the headquarters of the society or any branch thereof. (10) Apex Society or Federal Co-operative Society or the financing bank may also report to the Registrar about the action to be taken against the society as a result of the inspection by its officers. (11) Notwithstanding anything contained in subsections (1) and (2) above, the Registrar or his subordinate officers authorized by him under subsection (1) shall have power to hold an enquiry with necessary records of a society, on any petition received, and to inspect the affairs of a society periodically, in such cases the inspecting officers shall have the same powers as specified in sub-section (4). Explanation 1. - The "affairs of a society" for the purpose of this sub section includes, among other things, matters relating to administration, management and the business of a society. Explanation 2. - The duty of the officers and chief executive of a society and the nature of offences and penalties mentioned in [sub-section (4A)] shall be applicable to this sub-section also.” As rightly contended by the learned counsel for the appellant, the word “otherwise” contained in sub-section (1) of Section 32 of the Act is to be read ejusdem generis, that is to say, in group similar to those mentioned therein, since it follows a list of specifics. But, that does not mean that proceedings cannot be initiated under Section 32 based on a report of inspection under Section 66(2). If one reads Section 32 keeping in mind Writ Appeal No.1646 of 2020 ..13.. the object of the Act, viz, regulation of the functioning of the co-operative societies, it can be seen that the word “otherwise” is used in sub-section (1) of Section 32 in the context of the power of the Registrar to supersede a society, with a view to reserve a power of supersession with the Registrar, even in the absence of the specific reports made mention of preceding the same, if the Registrar is satisfied about the existence of any one or more of the jurisdictional grounds specified in clauses (a) to (d) to sub-section (1) of Section 32 based on other materials disclosing existence of the said jurisdictional grounds, as otherwise, in the absence of a report of an inquiry under Section 65 or reports of financing bank or the Vigilance and Anti-corruption Bureau of the Government or the Vigilance Officer, the Registrar would be powerless to exercise the authority under Section 32 of the Act, even if the Registrar is satisfied that one or more of the jurisdictional grounds specified in clauses (a) to (d) of subsection (1) of Section 32 exist in a given case. Of course, the question whether the materials disclosed in the report under Section 66(2) of the Act are sufficient for initiating action under Section 32 is a matter for the Registrar or for the court to Writ Appeal No.1646 of 2020 ..14.. consider in the event of a challenge. Needless to say, a proceedings under Section 32 can be initiated on the basis of a report of inspection under Section 66(2), provided there are materials sufficient therein for the Registrar to arrive at the subjective satisfaction as to the existence or otherwise of any one of the grounds specified in clauses (a) to (d) of sub-section (1) of Section 32 of the Act. The writ appeal, in the circumstances, is devoid of merits and is accordingly, dismissed. **Sd/P.B.SURESH KUMAR, JUDGE.** **Sd/C.S.SUDHA, JUDGE.** ds 02.12.2021