Vaniamkulam Panchayath Vanitha Sahakarana Sangham Ltd vs The Kerala Co-operative Tribunal, Thiruvananthapuram; Shibi K.N; Sankaranarayanan; Arbitrator/Joint Registrar (General) of Co-operative Societies, Palakkad

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU MONDAY, THE 21ST DAY OF MARCH 2016/1ST CHAITHRA, 1938 WP(C).No. 10875 of 2015 (H) ---------------------------- AGAINST THE ORDER/JUDGMENT IN APPEAL NO. 80/2014 of KERALA COOP.TRIBUNAL, THIRUVANANTHAPURAM. DATED 18-03-2015 PETITIONER: ------------- VANIAMKULAM PANCHAYATH VANITHA SAHAKARANA SANGHAM LTD NO. 1051, PO MANISSARI, OTTAPALAM, PALAKKAD DISTRICT, REPRESENTED BY ITS SECRETARY. BY ADV. SRI.C.E.UNNIKRISHNAN RESPONDENT(S): -------------------- ## 1. THE KERALA CO-OPERATIVE TRIBUNAL, THIRUVANANTHAPURAM, REPRESENTED BY ITS SECRETARY - 695 001. ## 2. SHIBI K.N W/O. SANKARANARAYANAN, KOOTHPARAMBIL HOUSE, P.O.MANASSIRI, OTTAPALAM, PALAKKAD DISTRICT - 678 001. 3. SANKARANARAYANAN, KOOTHUPARAMBIL HOUSE, P.O MANASSIRI, KOOTHUPARAMBIL HOUSE - 678 001. 4. ARBITRATOR/JOINT REGISTRAR (GENERAL) OF CO-OPERATIVE SOCIETIES, PALAKKAD - 678 001. R2&3 BY ADV. SRI.P.P.JACOB R BY SRI. T.R. RAJESH, GOVERNMENT PLEADER THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-03-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 10875 of 2015 (H) -------------------------------- : 2 : ## **APPENDIX** ## PETITIONER'S EXHIBITS: ---------------------------- P1 - A TRUE COPY OF THE INDEMNITY AGREEMENT DT. 12.10.12 SUBMITTED BY THE RESPONDENTS 2 & 3. P2 - A TRUE COPY OF THE AUDIT REPORT FOR THE YEAR 2010-11 DT. 17.5.14. P3 - A TRUE COPY OF THE AUDIT REPORT FOR THE YEAR 2011-12 DT. 17.5.14. - P4 - TRUE COPY OF AUDIT REPORT FOR THE YEAR 2012-13 DT. 17.5.14. - P5 - TRUE COPY OF PLAINT IN ARC 1/2013. P6 - TRUE COPY OF THE PROCEEDINGS OF THE 4TH RESPONDENT DT. 18.7.14. P7 - TRUE COPY OF THE JUDGMENT OF THE 1ST RESPONDENT DT. 18.3.15 IN APPEAL NO. 80/2014. ## RESPONDENT(S)' EXHIBITS: NIL ----------------------------------- /True Copy/ P.A to Judge. rv DAMA SESHADRI NAIDU, J. ---------------------------------W.P. (C) No. 10875 of 2015 (H) ---------------------------------Dated this the 21[st] day of March, 2016. ## JUDGMENT The issue in this writ petition is as follows: Can the spouse of an employee be sued by the society under Section 69 of the Kerala Co-operative Societies Act ('the Act') on the premise that he or she has indemnified the other partner, the employee, for what is said to be the misappropriation committed by the said employee? 2. At the outset, I make it clear that I do not intend to get into the merits of the matter, for any adjudication of the matter on merits would prejudice the cause of either of the parties before the Arbitration Court, where the matter is pending. 3. The scope of the present adjudication is to examine whether the third respondent, the husband of the second respondent, the employee, could be sued along with his wife, and whether his property can be attached on the basis of Ext.P1, the alleged indemnity bond executed jointly by respondents 2 and 3. 4. The facts in brief are that the second respondent is one of the two collection agents working on a contract basis in the respondent Bank. For the financial year 2010-2011, in the audit W.P.(C.) No. 10875/2015 -2- conducted, it came to light that the Bank suffered a loss of more than `12,00,000/- on account of improper maintenance of records and misappropriation allegedly committed by the collection agents, who include the second respondent. In the next year, i.e., 2011-2012, the loss was quantified at about `10,45,000/-. The reason assigned was the same. Finally, in the audit report for the financial year 20122013, the cumulative loss was quantified at `27,00,000/-. In fact, the audit report has recommended appropriate action against the erring employees, apart from the steps to be taken for the recovery of the allegedly misappropriated amounts. 5. In the above context, the respondent society called on the second respondent to show cause why she should not be proceeded against departmentally for the recovery of the amounts in question. It is the specific case of the respondent Bank that at that juncture, to ward off any disciplinary proceedings, the second respondent submitted Ext.P1 indemnity bond to the respondent Bank undertaking that she would clear within three months the amounts alleged to have been misappropriated by her. Till then, she has offered, with the consent of her husband, the property belonging to him as security. A W.P.(C.) No. 10875/2015 -3- perusal of Ext.P1 shows that it was signed by both respondents 2 and 3, the wife and husband. Apparently, as the second respondent did not keep her word as per Ext.P1 indemnity bond, the respondent Bank initiated arbitration proceedings under Section 69 of the Kerala Cooperative Societies Act ('the Act'). The Bank has arrayed not only the employee, the wife, but also her husband, the third respondent, as parties to the proceedings. Later, the respondent Bank filed an interlocutory application seeking attachment of the third respondent's property pending adjudication of the arbitration proceedings. 6. As can be seen, respondents 2 and 3 filed another interlocutory application, as I gather, to declare that the arbitration proceedings against the third respondent cannot be sustained and that the attachment of his property is illegal. On merits, the Arbitration Court rejected the claim of respondents 2 and 3 through Ext.P6 order. Eventually, impugning Ext.P6 order of the Arbitration Court, respondents 2 and 3 filed Appeal No. 80 of 2014 before the Co-operative Tribunal, the first respondent. It has rendered Ext.P7 judgment upholding the contention of respondents 2 and 3: that arbitration proceedings are not maintainable against the third W.P.(C.) No. 10875/2015 -4- respondent and that his property ought not to have been attached. Aggrieved, the respondent Bank filed the present writ petition. 7. The learned counsel for the petitioner has strenuously contended that in terms of Section 69 of the Act, proceedings against both respondents 2 and 3 are eminently maintainable. He has also submitted that in the light of Ext.P1 indemnity bond jointly executed by both the respondents, the attachment is unexceptional. In support of his submissions, the learned counsel has placed reliance on Sekharan v. State of Kerala and others[1] . 8. Per contra, the learned counsel for respondents 2 and 3 has, with equal vehemence, contended that no proceedings should lie against the third respondent. Having taken me through Section 69 of the Act, the learned counsel has further contended that the respondent Bank has resorted to sheer abuse of process in arraying the third respondent as a party to the arbitration proceedings. 9. In elaboration of his submissions, the learned counsel has further contended that respondents 2 and 3 have never executed Ext.P1. In the alternative, he has submitted that it was executed under coercion and threat. > 1 1976 KLT 137 W.P.(C.) No. 10875/2015 -5- 10. Laying specific emphasis on Nalunnakkal Service Co-op. Bank . P.V. John[2] , which seems to have been relied on by the Tribunal as well, the learned counsel would further contend that Ext.P1 cannot be treated as any guarantee or surety offered by the third respondent. Under none of the clauses of Section 69 of the Act, could the third respondent be subjected to arbitration proceedings. He has further contended that in paragraph 5 of the judgment in reference, this Court has clearly held that on a mere allegation that a person has become beneficiary of any misappropriated amounts from the Bank, no person can be made to suffer. In this regard, the learned counsel has specifically referred to Section 69(1) (a) to (h) of the Act. 11. Heard the learned counsel for the petitioner and the learned counsel for respondents 2 and 3, apart from perusing the record. 12. At the outset, I have made it clear that this Court has no intention to get in to the merits of the matter. Accordingly, I refrain from going into the validity or the authenticity of Ext.P1. 13. P.V. John, as has been contended by the learned counsel for the respondents, to some extent accords with the facts of the present case. In both instances, an employee has been accused of 2 1991(1) KLT 7 W.P.(C.) No. 10875/2015 -6- misappropriation and his or her spouse has come forward to indemnify the debt. Nevertheless, two factors distinguish P.V John: (1) that was the judgment rendered prior to 02.01.2003, when an amendment to Section 69 came into force; (2) the judgment proceeds on the lines that a beneficiary of an alleged fraud could not be made a party to the proceedings under Section 69 of the Act. 14. On the other hand, the learned counsel for the petitioner has laid heavy emphasis on Sekharan (supra). According to him, P.V John was rendered in ignorance of Sekharan's case. In this context, the learned counsel has further contended that the subsequent judgment should be treated as per incuriam in the light of the judicial pronouncement by the Hon'ble Supreme Court in Sundeep Kumar Bafna v. State of Maharashtra[3] . On a perusal of the Sekharan, I am afraid, the said judgment does not seem to have any relevance to the facts at hand. 15. That said, I may further proceed to examine the singular issue, namely whether the third respondent can be made a party to the arbitration proceedings under Section 69 of the Act; the corollary to the said issue being whether his property can be attached. > 3 2014(2) KLT 809 W.P.(C.) No. 10875/2015 -7- 16. With the amendment to Section 69 of the Act, clause (d) to sub-section 2 has been incorporated expanding the jurisdiction of the Arbitration Court to include all service disputes. It is profitable to examine clause (d) of sub-section (2) of Section 69 of the Act, which reads as follows: “(d) any dispute arising in connection with employment of officers and servants of the different classes of societies specified in sub-section (1) of Sec. 80, including their promotion and inter se seniority.” 17. On more than one occasion, this Court has declared that clause (d) is quite comprehensive and indeed an efficacious remedy concerning the service disputes of whatever nature. In my considered view, even a dispute concerning the misappropriation by an employee, an allegation though, is squarely covered by clause (d) of sub-section (2) of Section 69 of the Act. In that context, I am of the considered opinion that the proceedings have been rightly initiated against the second respondent. Still, the question remains: whether the same proceedings could be extended and whether the third respondent, the husband, who is not an employee could be made a party to the proceedings. 18. As seen from Ext.P1, the third respondent has volunteered W.P.(C.) No. 10875/2015 -8- to indemnify the Bank. At the cost of the repetition, I place on record that this observation cannot be taken as any judicial imprimatur by this Court concerning the validity and the authenticity of Ext.P1. Taking it on its prima facie value, this Court proceeds to observe that so long as Ext.P1 has not been judicially interdicted, the consequences, pending adjudication, flowing therefrom cannot be arrested. 19. In the present instance, once a person has volunteered to indemnify another person, his obligation under the statute becomes co-extensive. Whatever the law that applies and whatever the proceedings that can be taken against the principal can as well be applied and taken against the person who has volunteered to indemnify him. An indemnifier is a co-obligant, a guarantor with a co-extensive liability. Under these circumstances, I am of the considered opinion that there is no error committed by the primary authority in declaring that the third respondent is a necessary party to the proceedings. 20. True, the third respondent may not have any direct complicity in the alleged misconduct by the second respondent. But W.P.(C.) No. 10875/2015 -9- Ext.P1 belies the respondents' contentions. The binding nature of Ext.P1 or for that matter, whether it has been executed by both the respondents voluntarily or otherwise, is a matter for trial. 21. In the alternative, I may observe that if the third respondent prefers to take the consequences flowing from Ext.P1, especially its effect on his property, none may have any objection, including the respondent Bank, to exclude him from the purview of litigation. 22. The respondent bank, as a matter of abundant caution, has ensured that the third respondent should be made a party, so that he could be heard about his executing Ext.P1 and also his offering the property to indemnify the respondent Bank, the employer. 23. In the facts and circumstances, this Court declares that all the issues are left open before the Primary authority, including the validity of Ext.P1. I reckon that so long as Ext.P1 indemnity bond stands, it does not, in fact, necessitate any further attachment of the property by the respondent Bank. It has, however, taken the measure, perhaps, out of abundant caution. 24. Under these circumstances, I declare that Ext.P7 order cannot be sustained and is accordingly set aside. It is further made W.P.(C.) No. 10875/2015 -10- clear that the competent adjudicatory forum shall proceed with the matter considering all the pleas raised by both the parties to the litigation, including the validity of Ext.P1, while rendering its findings on the issues raised therein. It is made clear that all pleas available to either of the parties are left open. 25. The learned counsel for the respondent, at this juncture, has contended that if at all it is a service dispute, it shall be raised before the Arbitration Court, rather than the Arbitrator, who can decide only monetary disputes. 26. In this context, this Court observes that it is open for the respondents to raise the same issue before the Arbitrator, the 4[th] respondent, who shall decide it after affording an opportunity of hearing to the parties concerned. 27. This Court is somewhat taken aback by the belated representation as regards the jurisdiction of the 4[th] respondent. This objection, going to the root of the matter, does not seem to have been raised by respondents 2 and 3 at any stage, save now. First the writ petition was filed by the employer; second, the respondents ought to raise the objection before a competent forum—even before W.P.(C.) No. 10875/2015 -11- this Court by way of a writ of prohibition—even the 4[th] respondent inherently lacks jurisdiction. For nullity of proceedings can be raised even collaterally. Since the writ petition is in the nature of certiorari at the behest of the employer, the plea of jurisdiction of the primary authority is beyond the scope of the writ petition. With the above observations, this writ petition stands disposed of. sd/- DAMA SESHADRI NAIDU, JUDGE. rv