Venganoor Co-operative Rural Development Society Ltd. No.1497 v. Joint Registrar of Co-operative Societies (General) and Unit Inspector, VATTIYOORKAVU Unit, Office of the Asst. Registrar of Co-operative Societies (G), Thiruvananthapuram

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V** **MONDAY, THE 19TH DAY OF OCTOBER 2020 / 27TH ASWINA, 1942** ## **WP(C).No.19598 OF 2020(Y)** ## **PETITIONERS:** **1 VENGANOOR CO-OPERATIVE RURAL DEVELOPMENT SOCIETY LTD. NO.1497, REPRESENTED BY SECRETARY, PANANGOD, VENGANOOR P.O. 2 MANAGING COMMITTEE, VENGANOOR CO-OPERATIVE RURAL DEVELOPMENT SOCIETY, LTD.NO.1497, REPRESENTED BY PRESIDENT, PANANGOD, VENGANOOR P.O.** **BY ADVS. SRI.P.N.MOHANAN SRI.C.P.SABARI SMT.AMRUTHA SURESH SRI.AJAYA KUMAR P.J.** ## **RESPONDENTS:** **1 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL)** **OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM - 695 001.** **2 UNIT INSPECTOR, VATTIYOORKAVU UNIT, OFFICE OF THE ASST.REGISTRAR OF CO-OPERATIVE SOCIETIES (G), THIRUVANANTHAPURAM - 695 001.** ## **SRI BIMAL K NATH, SR GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19.10.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.19598 OF 2020(Y)** **2** ## **JUDGMENT** The Venganoor Co-operative Rural Development Society and its Managing Committee are before this Court challenging the notice issued under Section 65 of the Kerala Co-operative Societies Act, 1969 (hereinafter referred to as “the Act”). In the notice under challenge, various irregularities in the functioning of the society were noticed by the Joint Registrar and being satisfied that it was necessary to conduct an enquiry into the constitution, working and financial condition of the society, ordered the same. 2. It is the case of the petitioners that Ext.P1 notice was issued purportedly on the basis of the report submitted by the Unit Inspector. Certain defects were noticed and the same was reported to the Assistant Registrar, who in turn issued report dated 20.3.2020 to the Joint Registrar. According to the petitioners, no inspection was conducted by the Unit Inspector as stated in the order. Much reliance is placed on Ext.P2 circular dated 12.1.1976 and Ext.P3 circular dated 27.8.1993 and it is contended that none of the directions issued by the Registrar in those circulars were complied with before proceeding to order the enquiry. It is contended that it is not enough if the Joint Registrar merely **WP(C).No.19598 OF 2020(Y)** **3** relies upon the report of the Registrar before ordering an enquiry. On the other hand, he should have initially discharged the statutory burden to subjectively assess whether it was necessary for ordering an enquiry under the circumstances and facts presented. It is in the above backdrop that the petitioners have approached this Court seeking to quash Ext.P1 and for incidental reliefs. 3. In the statement filed by the learned Senior Government Pleader it is stated that the records reveal that the Society had conducted its audit only upto the financial year 2012-2013. This, by itself, was enough material for the Joint Registrar to be satisfied to order an enquiry for mismanagement and for the violation of Section 63(5) of the Act which mandates that the Managing Committee will have to audit the accounts of every society at least once in a year. The accounts of every society is required to be audited within a period of six months of the close of the financial year to which such account relates. By referring to the order initiating the inquiry it is stated that grave violations were noted and this fact was brought to the notice of the Registrar. It is further contended that the Registrar being fully satisfied that a verification of cash balance will not yield any benefit in respect of a society which failed to conduct its audit for more than 8 years had ordered the enquiry. **WP(C).No.19598 OF 2020(Y)** **4** 4. I have heard Sri.P.N.Mohanan, the learned counsel appearing for the petitioners and Sri. Bimal K. Nath the learned Government Pleader. 5. Sri P.N. Mohanan, the learned counsel, strenuously submitted that that Ext.P1 order was passed in a mechanical manner by referring only to the reports of the Assistant Registrar that were made available before the 1st respondent and without any independent application of mind by the 1st respondent to the existence or otherwise of irregularities alleged against the petitioners. Much reliance was placed by the learned counsel on the report in **Melukkara Service Cooperative Bank Ltd.No.PT.152 and Another v. Joint Registrar (General), District Co-operative Society** [2018 (2) KHC 143] and **Ellakkal Service Co-operative Bank v. State of Kerala** [1997 (2) KLT 85]. It was argued that 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. 6. Sri Bimal.K.Nath, the learned Senior Government Pleader has opposed the prayer. He would contend that serious infractions including the non conduct of audit for over 8 years were noted and the **WP(C).No.19598 OF 2020(Y)** **5** Registrar in the impugned order had recorded his personal satisfaction as regards the existence or otherwise of the facts necessary for initiating an enquiry under Section 65 of the Act. It is the submission of learned Government Pleader that a perusal of Ext.P1 order, in the backdrop of the Inspection Report, would clearly reveal that the 1st 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. It is further submitted that unless an adverse report is submitted on the basis of the enquiry ordered, the petitioners cannot be said to be prejudiced by the order. 7. I have considered the submissions advanced by both sides and have carefully gone through the records. I find that the Unit Inspector had conducted an inspection and later the Assistant Registrar forwarded a report, based on which the 1st respondent found that there were irregularities in the matters relating to the society. It appears that the 1st respondent had 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.P1 order, an enquiry was ordered into the various aspects narrated therein, and an enquiry **WP(C).No.19598 OF 2020(Y)** **6** report was ordered to be placed before the said respondent. The reliance placed by the learned counsel on the report in **Melukkara** (supra) and **Ellakkal** (supra) was rendered under the factual circumstances in those cases. The 1st respondent in the instant case had access to material in the form of reports drawn up by the Assistant Registrar, and it was after the perusal of the said reports and being conscious about the failure of the petitioners to conduct the audit as aforesaid for a long period that the 1st respondent decided that it was necessary to hold an enquiry under Section 65 of the Act. In that view of the matter, the 1st respondent cannot be said to have acted illegally while passing Ext.P1 order. 8. As rightly submitted by the learned Government Pleader the petitioners are not put to any prejudice on account of Ext.P1 order that only directs the conduct of an enquiry. Even assuming that a report adverse to the interests of the petitioners is drawn up pursuant to the enquiry that is to follow Ext.P1 order, before the said report can be used against the petitioners, either for the purposes of proceedings under Section 68 (2) of the Act or under Section 32 of the Act, the petitioners have necessarily to be put on notice of the allegations/charges against them and given an opportunity to rebut the said charges, as also the material relied upon to support the said charges. In that view of the **WP(C).No.19598 OF 2020(Y)** **7** matter, no interference is called for. The Writ Petition in its challenge against Ext.P1 proceedings will stand dismissed. **Sd/-** **RAJA VIJAYARAGHAVAN V JUDGE** sru **WP(C).No.19598 OF 2020(Y)** **8** ## **APPENDIX** ## **PETITIONERS EXHIBITS:** **EXHIBIT P1 A TRUE COPY OF THE ORDER DATED 17/08/2020 OF THE JOINT REGISTRAR.** **EXHIBIT P2 A TRUE COPY OF THE CIRCULAR NO.1/76 DATED 12/01/1976.** **EXHIBIT P3 A TRUE COPY OF THE CIRCULAR 53/93 DATED 27/08/93 THE REGISTRAR.** **EXHIBIT P4 A TRUE COPY OF THE JUDGMENT AS REPORTED IN 1997(2) KLT 85. EXHIBIT P5 A TRUE COPY OF THE JUDGMENT AS REPORTED IN 2018(2) KHC 143 (DB).** ## **RESPONDENTS EXHIBITS:NIL**