Venjaramoodu Service Co-operative Bank Ltd & Board of Directors v. Unit Inspector, Office of the Assistant Registrar of Co-operative Societies (General), Nedumangad; Assistant Registrar of Co-operative Societies (General), Nedumangad; Joint Registrar of Co-operative Societies (General), Thiruvananthapuram; Registrar of Co-operative Societies, Thiruvananthapuram; State of Kerala; Rajendran Nair

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN** ## **TUESDAY,THE 29TH DAY OF JANUARY 2019 / 9TH MAGHA, 1940** ## **WP(C).No. 13145 of 2017** ## **PETITIONERS:** - **1 THE VENJARAMOOD SERVICE CO-OPERATIVE BANK LTD REPRESENTED BY ITS SECRETARY, VENJARAMOODU P.O., THIRUVANANTHAPURAM DIST- 695 607.** - **2 THE BOARD OF DIRECTORS OF THE VENJARAMOOD SERVICE CO-OPERATIVE BANK LTD NO.2419 REPRESENTED BY ITS PRESIDENT, VENJARAMOODU P.O., THIRUVANANTHAPURAM- 695 607** **BY ADV. SRI.T.R.HARIKUMAR** ## **RESPONDENTS:** - **1 THE UNIT INSPECTOR, VENJARAMOODU, OFFICE OF THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), NEDUMANGAD, THIRUVANANTHAPURAM- 695 541.** - **2 THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), NEDUMANGAD, THIRUVANANTHAPURAM- 695 541.** - **3 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), THIRUVANANTHAPURAM- 695 001.** - **4 THE REGISTRAR OF CO-OPERATIVE SOCIETIES THIRUVANANTHAPURAM- 695 001.** - **5 STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, CO-OPERATION (C) DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM- 695 697.** **WP(C).No. 13145 of 2017** -2- **6 RAJENDRAN NAIR .K. KOKOTTUKONATHU VEEDU, VENJARAMOODU P.O. THIRUVANANTHAPURAM- 695 697.** **BY ADVS. SRI.K.K.RAVINDRANATH, ADDL.ADVOCATE GENERAL SRI.ASWIN.P.JOHN SMT.MERCIAMMA MATHEW SRI.THOMAS ABRAHAM** **SRI.MOHAMMED HASHIM, SPECIAL GOVERNMENT PLEADER** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29.01.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No. 13145 of 2017** -3- ## **JUDGMENT** The 1[st] petitioner is a Primary Agricultural Credit Society registered under the Kerala Co-operative Societies Act, 1969 and the Rules made thereunder and the 2[nd] petitioner is the Board of Directors of the 1[st] petitioner Society. The petitioners have filed this writ petition under Article 226 of the Constitution of India, seeking a writ of certiorari to quash Ext.P4 order dated 13.02.2017 issued by the 3[rd] respondent Joint Registrar, whereby the 1[st] respondent Unit Inspector in the office of the 2[nd] respondent Assistant Registrar of Co-operative Societies has been appointed as Inquiry Officer to conduct inquiry under Section 65 of the Act in the working of the 1[st] petitioner Society, for the matters enumerated in the said order. 2. On 11.04.2017, when this writ petition came up for admission, this Court admitted the matter on file and issued notice to the respondents by speed post. This Court ordered that inquiry pursuant to Ext.P4 can go on, but **WP(C).No. 13145 of 2017** -4- action based on the report of inquiry shall not be taken without further orders from this Court. 3. A counter affidavit has been filed by the 3[rd] respondent Joint Registrar, opposing the reliefs sought for in this writ petition. The 6[th] respondent, another member of the 1[st] petitioner Society, who was the complainant before the 3[rd] respondent Joint Registrar, has also filed a counter affidavit, opposing the reliefs sought for in this writ petition. Along with the counter affidavit filed by the 6[th] respondent, a copy of the inquiry report dated 11.05.2017 of the 1[st] respondent Inquiry Officer is placed on record as Ext.R6(a). 4. Heard the learned counsel for the petitioners, the learned Special Government Pleader appearing for respondents 1 to 5 and also the learned counsel for the 6[th] respondent. 5. The sole issue that arises for consideration in this writ petition is as to whether any interference is warranted on Ext.P4 order dated 13.02.2017 of the 3[rd] respondent **WP(C).No. 13145 of 2017** -5- Joint Registrar, whereby the 1[st] respondent has been appointed as Inquiry Officer, in exercise of the powers under Section 65 of the Act, to conduct inquiry in the working of the 1[st] petitioner Society, for the matters enumerated in the said order. 6. The procedure for conduct of an inquiry and inspection is provided under Rule 66 of the Kerala Cooperative Societies Rules. Sub-rule (1) of Rule 66 deals with inquiry under Section 65 or inspection under Section 66 of the Act and sub-rule (7) of Rule 66 deals with an inquiry under sub-section (1) of Section 68 of the Act. Subrules (1) and (7) of Rule 66 read thus: 66. Procedure for the conduct of inquiry and inspection:- (1)(i) An order, authorising inquiry under Section 65 or inspection under Section 66 shall among other things, contain the following: (a) the name of the society whose affairs are to be inquired into or whose books of accounts are to be inspected; (b) the name of the person authorised to conduct the inquiry or inspection; (c) in specific point or points on which the inquiry **WP(C).No. 13145 of 2017** -6- or inspection is to be made, the period within which the inquiry or inspection is to be completed and report submitted to the Registrar; (d) costs of inquiry or inspection; (e) any other matter relating or pertaining to the inquiry or inspection. (2) A copy of every order authorising inquiry under Section 65 or inspection under Section 66 shall be issued to the President or the Secretary of the Society concerned by registered post with acknowledgment due. A copy of the order shall also be made available to the Central Society or societies, to which the society in respect of which the order is issued, is affiliated. xxxx xxxx xxxx (7)(i)The order in writing for an inquiry under subsection (1) of section 68 of the Act shall among other things contain the following:- (a) name of the society whose affairs are to be inquired into or whose books of accounts are to be inspected; (b) name of the person authorised to conduct the inquiry; (c) the specific point or points on which the inquiry is to be made; (d) the period within which the inquiry is to be completed and report submitted to the Registrar; **WP(C).No. 13145 of 2017** -7- (e) costs of inquiry or inspection; (f) any other matter relating or pertaining to the inquiry. (ii) On getting the inquiry report, the Registrar shall give the person or persons concerned an opportunity of being heard before issuing an order for surcharge. The order for surcharge shall be in writing and shall be sent under registered post with acknowledgment due. The order shall among other things contain the following: (a) name of society; (b) name/names of person/persons responsible or repay or restore the money or any property or any part thereof, by mentioning clearly the total amount involved due from each; (c) the rate of interest if any, to be clearly specified; (d) the amount of cost or compensation to be specified; (e) the period within which the amount is to be realised; (f) in case the person responsible is not remitting the amount within the time-limit so fixed, the society shall report the matter to the Registrar forthwith and the Registrar shall realise the amount as per the Revenue Recovery Act. 7. A reading of provisions under clause (i) of subrule (1) of Rule 66 would make it explicitly clear that the **WP(C).No. 13145 of 2017** -8- order authorising inquiry under Section 65 of the Act shall among other things, contain the matter enumerated in subclauses (a) to (e) of clause (i) of sub-rule (1), which includes specific point or points on which the inquiry or inspection is to be completed and report submitted to the Registrar. 8. In the context of the provisions under Section 65 of the Act and sub-rule (1)(i) of Rule 66 of the Rules, this Court in **Cheranellur Co-operative Society Ltd v. Deputy Registrar [1976 KLT 353]** held that, under Section 65 of the Act, the Registrar or any other officer of the department to whom the powers of the Registrar are delegated by the notification can order an inquiry. But in ordering an inquiry the specific point or points on which the inquiry is to be made are to be made known in the proceedings that is issued. This is what is insisted by Rule 66(1)(c) of the Rules. Not only that, without indicating the proceedings that is to precede an inquiry, the point or points on which inquiry is to be conducted, it goes without **WP(C).No. 13145 of 2017** -9- saying that no proper inquiry will be possible. Again, for the society and its office bearers to face the inquiry in a just manner the indication of the point or points on which the inquiry is to be conducted in the proceedings is only essential. Paragraphs 4 and 5 of the said decision reads thus: 4. Shri Siby Mathew, learned counsel for the petitioner, contends that the 2[nd] respondent cannot overlook the mandatory provisions contained in Rule 66 (1) of the Rules in issuing the proceedings like Ext.P1 ordering an enquiry under Section 65 of the Act. Rule 66 (1) of the Rules reads: - “66. Procedure for the conduct of inquiry and inspection.-(1)(i) An order, authorising inquiry under Section 65 or inspection under Section 66 shall among other things, contain the following: - (a) the name of the society whose affairs are to be inquired into or whose books of accounts are to be inspected; - (b) the name of the person authorised to conduct the inquiry or inspection; - (c) the specific point or points on which the inquiry or inspection is to be made, the period within which the inquiry or inspection is to be completed and report submitted to the **WP(C).No. 13145 of 2017** -10- ## Registrar; ## (d) costs of inquiry or inspection; ## (e) any other matter relating or pertaining to the inquiry or inspection.” Learned Government Pleader has no specific answer to the above contention raised by the learned counsel for the petitioner. The stand taken by the learned Government Pleader is that there are charges of misappropriation in the petitioner-society which are being enquired into by the Vigilance Department and in the above circumstances an enquiry under Section 65 of the Act cannot be said to be out of place. 5. No doubt, under Section 65 of the Act, the Registrar or any other officer of the department to whom the powers of the Registrar are delegated by the notification can order an enquiry. But in ordering an enquiry the specific point or points on which the enquiry is to be made are to be made known in the proceedings that is issued. This is what is insisted by Rule 66 (l)(c) of the Rules. Not only that, without indicating in the proceedings that is to precede an enquiry, the point or points on which enquiry is to be conducted, it goes without saying that no proper enquiry will be possible. Again, for the society and its office bearers to face the enquiry in a just manner the indication of the pointer points on which the enquiry is to be conducted in the proceedings is only essential. In this view of the matter, Ext.Pl proceedings cannot be sustained. Hence I quash Ext.Pl.” **WP(C).No. 13145 of 2017** -11- 9. Having considered the law laid down by this Court in **Cheranellur Co-operative Society Ltd case (supra)** and also the statutory provisions as contained in sub-rule (1) of Rule 66, this Court finds that, no interference is warranted on Ext.P4 order of the 3[rd] respondent Joint Registrar, since it cannot be said that, such an order has been passed without following the statutory mandate of Rule 66 of the Kerala Co-operative Societies Rules. 10. As already noticed, by the interim order dated 11.04.2018, this Court has permitted the 1[st] respondent to proceed with the inquiry, however, it was made clear that action based on the report of inquiry shall not be taken without further orders from this Court. The inquiry has culminated by the filing of Ext.R6(a) report of the 1[st] respondent Inquiry Officer. 11. The learned counsel for the petitioners, after making reference to the findings in Ext.R6(a), would contend that no further action is required, based on the **WP(C).No. 13145 of 2017** -12- findings in that report. 12. The question as to whether any further action is required based on the findings of the 1[st] respondent Inquiry Officer in Ext.R6(a) inquiry report in a matter, which has to be dealt with by the 3[rd] respondent Joint Registrar, after considering the explanation, if any, offered by the petitioners. 13. In **State of M.P. v. Sanjay Nagayach [(2013) 7 SCC 25]** the Apex Court, in the context of Section 53 of the Madhya Pradesh Co-operative Societies Act, 1960 held that, the Registrar/Joint Registrar, while exercising powers of supersession has to form an opinion and that opinion must be based on some objective criteria, which has nexus with the final decision. A statutory authority shall not act with preconceived notion and shall not speak his masters' voice, because the formation of opinion must be his own, not somebody else in power, to achieve some ulterior motive. There may be situations where the Registrar/Joint Registrar are expected to act in the best interest of the **WP(C).No. 13145 of 2017** -13- society and its members, but in such situations, they have to act bona fide and within the four corners of the Statute. In paragraph 42 of the judgment (SCC @pages 44 & 45), the Apex Court laid down the general directions in the matter of supersession of the elected committee. 14. In **Sanjay Nagayach's case (supra)** , the order of supersession was passed by the Joint Registrar after a period of two and a half years of the issuance of show cause notice and most of the charges levelled against the Board of Directors were related to the period when the previous committee was in office and even the charges based on the audit report dated 25.9.2008 were also rectified by the Board of Directors by addressing the primary societies. Based on the decision of the Apex Court in **Sanjay Nagayach's case** , the Registrar of Co-operative Societies has issued Circular No.45/13 dated 12.07.2013. 15. The learned counsel for the petitioners would submit that the petitioners shall submit their explanation to Ext.R6(a) report of the 1[st] respondent Inquiry Officer, within **WP(C).No. 13145 of 2017** -14- two weeks from the date of receipt of a certified copy of this judgment. 16. The learned counsel for the 6[th] respondent would submit that the petitioners may be directed to submit such explanation before the 3[rd] respondent Joint Registrar, after furnishing a copy of the same to the 6[th] respondent. 17. The learned Special Government Pleader would submit that, the explanation, if any, submitted by the petitioners to Ext.R6(a) report, within a time limit to be specified by this Court, shall be considered by the 3[rd] respondent before taking a decision as to the further course to be taken in the matter. In such circumstances, this writ petition is disposed of with the following directions; i) Within two weeks from the date of receipt of a certified copy of this judgment, the petitioners shall submit their explanation, if any, before the 3[rd] respondent Joint Registrar, to the findings in Ext.R6(a) report dated 11.05.2017 of the 1[st] respondent Inquiry Officer, after serving a copy of the same to the 6[th] respondent. **WP(C).No. 13145 of 2017** -15- ii) Thereafter, the 3[rd] respondent Joint Registrar shall consider the explanation offered by the petitioners, with notice to the petitioners and also to the 6[th] respondent, and after affording them an opportunity of being heard, and take an appropriate decision as to the further course to be taken in the matter. iii) While taking such a decision, the 3[rd] respondent Joint Registrar shall take into consideration the law laid down by the Apex Court in **Sanjay Nagayach's case** ( _supra_ ). iv) A decision in this regard shall be taken as expeditiously as possible, at any rate, within a further period of one month. Sd/- **ANIL K. NARENDRAN JUDGE** bpr **WP(C).No. 13145 of 2017** -16- ## **APPENDIX** ## **PETITIONERS' EXHIBITS:** **EXHIBIT P1 A TRUE COPY OF THE RELEAVANT PAGES OF THE FINAL REPORT DATED 26-11-2012 IN CRIME NO.953 OF 2011 OF THE VENJARAMMOODU POLICE STATION.** **EXHIBIT P2 A TRUE COPY OF HE INTERIM ORDER DATED 20-09-2011 IN WP(C)NO.24052 OF 2011.** **EXHIBIT P3 A TRUE COPY OF THE ORDER DATED 12-10-2012 IN B.A NO.7106 OF 2012.** **EXHIBIT P4 A TRUE COPY OF THE OREDER NO.CRP(2) 7332/16 DATED 13-02-2017 ISSUED BY THE 3RD RESPONDENT.** **EXHIBIT P5 A TRUE COPY OF THE COMPLAINT DATED 13-08-2016 SUBMITTED BY THE 6TH RESPONDENT BEFORE THE HON'BLE MINISTER FOR CO-OPERATION.** **EXHIBIT P6 A TRUE COPY OF THE REPORT NO.VJD/1814/16 DATED 15-12-2016 OF THE 2ND RESPONDENT.** **EXHIBIT P7 A TRUE COPY OF THE NOTICE REQUIRING DEFAULTERS TO AVAIL THE BENEFITS UNDER THE ASWAS SCHEME 2016.** **EXHIBIT P8 A TRUE COPY OF CIRCULAR NO.50/2008 DATED 30-07-2008 ISSUED BY THE REGISTRAR OF CO-OPERATIVE SOCIETIES.** **EXHIBIT P9 A TRUE COPY OF THE ORDER NO.CRP (2)3615/13 DATED 22-11-2014 ISSUED BY THE 3RD RESPONDENT. EXHIBIT P10 A TRUE COPY OF THE JUDGMENT IN WP(C) NO.21664 OF 2014 DATED 02-12-2016.** ## **RESPONDENTS' EXHIBITS:** **EXHIBIT R6(A) THE TRUE COPY OF THE REPORT OF THE ENQUIRY UNDER SECTION 65 OF THE ACT SUBMITTED BY THE 1ST RESPONDENT AS EARLY AS ON 11-05-2017.** **//TRUE COPY//** **P.A. TO JUDGE**