V. T. Thomas v. Secretary to Government, Co-operation, Secretariat, Trivandrum; Joint Registrar of Co-operative Societies, Kottayam; Enquiry Officer, Asst. Registrar of Co-operative Societies (General), Kanjirappally; Elangulam Service Co-operative Bank Ltd.

IN THE HIGH COURT OF KERALA AT ERNAKULAM THE HONOURABLE MR. JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN MONDAY, THE 2ND DAY OF JULY 2018 / 11TH ASHADHA, 1940 W.A.No. 1283 of 2018 IN WPC. 6060/2004 AGAINST THE JUDGMENT IN WP(C).NO.6060/2004 OF HIGH COURT OF KERALA DATED 27-07-2016 APPELLANT/PETITIONER IN THE WRIT PETITION: V.T. THOMAS, S/O. THOMAS, VAYALUMKAL HOUSE, CHENGALAM P.O., KOTTAYAM. BY ADVS.SRI.LIJI J.VADAKEDOM SMT.REXY ELIZABETH THOMAS SRI.RAJEEV JYOTHISH GEORGE RESPONDENTS/RESPONDENTS IN THE WRIT PETITION: 1. THE SECRETARY TO GOVERNMENT CO-OPERATION, SECRETARIAT, TRIVANDRUM - 695 001. 2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, KOTTAYAM - 686 001. 3. THE ENQUIRY OFFICER, ASST. REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), KANJIRAPPALLY - 686 513. 4. ELANGULAM SERVICE CO-OPERATIVE BANK LTD.NO. 3576, KOORALI P.O., KOTTAYAM DISTRICT - 686 507. R1 TO R3 BY SENIOR GOVERNMENT PLEADER SMT.K.R.DEEPA R4 BY ADV. SRI.TOM JOSE THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ALONG WITH W.A.NO.1284/2018 ON 02-07-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: “CR” ## V. CHITAMBARESH & SATHISH NINAN, JJ. = = = = = = = = = = = = = = = = = = = = = = = = ## W.A.Nos.1283 & 1284 of 2018 = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 2[nd] day of July, 2018 ## Judgment ## Chitambaresh, J. 1.Proceedings were initiated against the appellants for surcharge under Section 68 of the Kerala Co-operative Societies Act, 1969 ['the Act' for short] on the basis of an inquiry under Section 65 of the Act. The appellants filed objection to the notices under Section 68(1) of the Act specifically seeking for a copy of the report of the inquiry conducted in order to defend the action. The Joint Registrar issued a reply merely stating that the appellants are at liberty to peruse the inquiry report between 10.30 a.m. and 1 p.m. on 24.6.2000 at his office. The appellants though failed to turn up in the office at the stipulated time did file a representation to the Joint Registrar reiterating the request WAs.1283 & 1284 of 2018 -: 2 :- for a copy of the inquiry report. The Joint Registrar without acceding to the request of the appellants proceeded to pass the order dated 14.7.2000 under Section 68(2) of the Act making the appellants liable. An appeal filed under Section 83(1)(j) of the Act to the Government was dismissed by order dated 14.10.2003 directing each of the appellants to pay a sum of `29,15,176/- as surcharge. The challenge to the orders in the writ petitions was futile and hence these writ appeals contending that the failure to furnish a copy of the inquiry report has vitiated the proceedings. 2.We heard Mr.Liji J.Vadakkedom, Advocate for the appellants, Mrs.K.R.Deepa, Senior Government Pleader and Mr.Tom Jose, Advocate on behalf of the bank on notice. - 3.Section 68 of the Act is as follows: “ 68. Surcharge:- (1) If in the course of an audit, inquiry, inspection or the winding up of a society, it is found that any person, who is or was WAs.1283 & 1284 of 2018 -: 3 :- entrusted with the organisation or management of such society or who is or has at any time been an officer or an employee of the society, has made any payment contrary to the Act and the rules or the bye-laws, or has caused to any loss or damage in the assets of the society by breach of trust or wilful negligence or mismanagement or has misappropriated or fraudulently retained any money or other property belonging to such society or has destroyed or caused the destruction of the records, the Registrar may, of his own motion or on the application of the committee, liquidator or any creditor, inquire himself or direct any person authorised by him by an order in writing in this behalf, to inquire into the conduct of such person. (2) Where an inquiry is made under subsection (1), the Registrar may, after giving the person concerned an opportunity of being heard, by order in writing, require him to repay or restore the money or other property or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such extent, as the Registrar may consider just and equitable. WAs.1283 & 1284 of 2018 -: 4 :- (3) Where the money, property, interest, cost or compensation is not repaid or restored as per sub-section (2), the Registrar shall take urgent steps to recover such amounts from the concerned persons as arrears of public revenue due on land as specified in Section 79 of the Act.” The proceedings for surcharge can be initiated either on the basis of an audit under Section 63 or an inquiry under Section 65 or an inspection under Section 66 or during winding up under Section 71 of the Act. The report of an audit, inquiry or inspection is the basis on which the action is initiated and is relied on heavily by the Department to fasten financial liability. The persons on whom liability is sought to be fastened had either been entrusted with the management of the society or had at any time been an officer or an employee of the society. 4.There is a subtle distinction between 'enquiry' and 'inquiry' since to 'enquire' means to ask and to 'inquire' means to WAs.1283 & 1284 of 2018 -: 5 :- investigate and the inquiry report is the result of a quest for truth, information and knowledge. Several data will be incorporated in the inquiry report which is an item of evidence in the proceedings for surcharge to substantiate the allegations levelled. The charge is that those persons caused loss or damage to the assets of the society by breach of trust or wilful negligence or mismanagement or misappropriation or destroyed the records. The inquiry report containing minute details rested on collection of several data cannot be memorized by a perusal for 2-3 hours by an untrained legal mind. The inquiry report cannot be withheld or relied on in evidence behind the back of the persons proceeded against without furnishing a copy of the same to them when sought. Fairness demands that a copy of the inquiry report is supplied when applied for so that the persons who are sought to be surcharged get an opportunity to collect evidence for rebuttal. The fact that the inquiry report is voluminous is no excuse since the copy can be WAs.1283 & 1284 of 2018 -: 6 :- furnished to the persons on terms and a mere opportunity to peruse the same is not a substitute. We are inclined to hold that the 'opportunity of being heard' in Section 68(2) of the Act takes within its fold the obligation to furnish a copy of the inquiry report when applied for. All these should precede the order in writing under Section 68(2) of the Act by the Registrar requiring the persons to repay or restore the money or property or any part thereof. 5.It is true that a person against whom an inquiry has been ordered under Section 68(1) of the Act need not be heard before passing an order to conduct an inquiry. [See Santhosh v. Assistant Registrar and others (2014 KHC 686)]. But when once an inquiry is ordered the Registrar is duty bound to adhere to the principles of natural justice by furnishing copy of the audit, inquiry or inspection relied on to the persons concerned. We should bear in mind that the proceedings for surcharge may culminate in imposing heavy WAs.1283 & 1284 of 2018 -: 7 :- liability on persons and amounts due can be recovered as arrears of public revenue due on land. The appellants in the instant case were concededly not served with a copy of the inquiry report though applied for and were instead given a mere opportunity for a bare perusal. The order of the Joint Registrar dated 14.7.2000 and the order of the Government dated 14.10.2003 are passed in negation of the principles of natural justice and hence quashed. We set aside the impugned judgment and remit the case to the Joint Registrar who shall issue a copy of the inquiry report to the appellants and proceed therefrom as per law. The writ appeals are allowed. No costs. Sd/- V. CHITAMBARESH, JUDGE Sd/SATHISH NINAN, JUDGE Sha/030718 -true copy- PS to Judge