V.J. Jose v. Joint Registrar of Co-operative Societies (General), Office of the Joint Registrar of Co-operative Societies (General), Assistant Registrar (General) – Meenachil, Unit Inspector Erattupetta, Teekoy Service Co-operative Factory No.K.143, Teekoy P.O, Kottayam District, and Vinod Joseph Puthanaprakunnel

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V** **TUESDAY, THE 01ST DAY OF DECEMBER 2020 / 10TH AGRAHAYANA, 1942** ## **WP(C).No.21999 OF 2020(Y)** ## **PETITIONER:** **V.J.JOSE, AGED 68 YEARS,** **S/O JOSEPH, VALIAVEETTIL HOUSE, ARUVITHARA P.O, CHAIRMAN, TEEKOY TEA FACTORY, CO-OPERATIVE SOCIETIES LTD. NO.K 143, TEEKOY P.O, KOTTAYAM DISTRICT.** **BY ADVS. SRI.LIJI.J.VADAKEDOM SMT.REXY ELIZABETH THOMAS SRI.RAJEEV JYOTHISH GEORGE** ## **RESPONDENTS:** - **1 JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL) OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), COLLECTORATE P.O, KOTTAYAM-686002.** - **2 ASSISTANT REGISTRAR** - **OF CO-OPERATIVE SOCIETIES (GENERAL)-MEENACHIL, OFFICE OF THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL)-MEENACHIL , PALA P.O, KOTTAYAM-686575.** - **3 UNIT INSPECTOR ERATTUPETTA,** - **OFFICE OF THE ASSISTANT REGISTRAR (GENERAL) OF COOPERATIVE SOCIETIES, MEENACHIL, ERATTUPETTA UNIT, PIN-686121.** - **4 TEEKOY SERVICE** **CO-OPERATIVE FACTORY NO.K.143, TEEKOY P.O, KOTTAYAM DISTRICT PIN-686580., REP BY ITS MANAGING DIRECTOR.** **5 VINOD JOSEPH PUTHANAPRAKUNNEL, THALANADU PO, MEENACHIL, KOTTAYA-686580.** **WP(C).No.21999 OF 2020** **2** ## **SRI KP HARISH, SR GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 01.12.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.21999 OF 2020** **3** ## **JUDGMENT** The petitioner herein is the President of the Teekoy Service Co-operative Factory Ltd. K - 143, a society registered under the provisions of the Kerala Cooperative Societies Act, 1969 [hereinafter referred to as ‘the Act']. He has approached this Court challenging Exhibit P22 order passed by the 1st respondent initiating surcharge proceedings under Section 68(1) of the Act. 2. It appears that by order dated 3.6.2020, the Unit Inspector, Erattupetta was ordered to conduct an inquiry under Section 66(2) of the Act to ascertain whether there were any irregularities in depositing the amount received consequent to a public auction and also concerning the appropriation of the amount so received for unauthorised purposes. A report was submitted before the Joint Registrar on 17.7.2020. On receipt of the report, the Joint Registrar, on being satisfied that certain payments have been effected contrary to the provisions of law and that the said acts has resulted in loss and damage to the assets of the society, ordered an inquiry under 68(1) of the Act. 3. The petitioner states that he had approached this Court on an earlier occasion challenging the notice issued under Section 66 of the Act and this **WP(C).No.21999 OF 2020** **4** Court, while dismissing the writ petition by Ext.P17 judgment, directed the respondent to consider the objections filed by the petitioner while passing final orders under Section 66(5) of the Act. The petitioner states that the inquiry under Section 68(1) was ordered without passing final orders under Section 66(5) of the Act and on that sole ground, Ext.P22 is liable to be interfered with. It is further contended that if, as directed by this Court in Ext.P17 judgment, the objections raised by the petitioner was considered, the respondent would not have proceeded to initiate an inquiry under Section 68(1). He has, in the said circumstances, filed this writ petition seeking the following reliefs: (i) To call for the records leading to the passing of Exhibit P22 and to quash the same by issuing a writ of certiorari or any other writ, order or direction. (ii) Issue a writ of mandamus, or any other appropriate writ or order or direction directing the 1st respondent to pass fresh orders on Exhibit P20 enquiry report after considering Exhibit P18 and P19 objections also as directed in Exhibit P17 judgment. 4. A statement has been filed by the learned Government pleader, wherein it is stated that the 1st respondent had initiated an inquiry into the irregularities perpetrated while conducting the sale of factory equipment which were damaged due to a fire; for depositing amounts in a Bank not authorised by the Registrar; and also for diversion of the amounts other than for a legitimate purpose. The inquiry officer submitted a report on 17.7.2020. On receipt of the **WP(C).No.21999 OF 2020** **5** report and after satisfying himself as to the necessity for ordering an inquiry into the conduct of the persons responsible for the same that the inquiry was ordered. It is stated that the directions to pass final orders under Section 66(5) of the Act in proceedings initiated under Section 66(2) cannot be taken to mean that no proceedings can be initiated under Section 68 (1) of the Act, as they are independent proceedings. 5. I have considered the submissions advanced. 6. In the instant case, the subjective satisfaction of the 1st respondent as regards the necessity for an enquiry is borne out by Ext.P20 report and Exhibit P22 proceedings. The petitioner contends that before proceeding to initiate inquiry under Section 68(1) of the Act, the respondent ought to have passed final orders in the Section 66 proceedings which were initiated earlier and that too after considering the objections raised by the petitioner. The contention appears to be that the enquiry was ordered as per Exhibit P22 proceedings without due application of mind. 7. Admittedly, an enquiry was initiated under S.66 of the Act, which deals with supervision and inspection. The supervision and inspection contemplated under S.66 deals with the working of every society and includes an inspection of the books of the society. Such inspection can be carried on by the Registrar on his own motion or on an application and empowers the Registrar, by **WP(C).No.21999 OF 2020** **6** sub-section (5) to direct the society or its officers to take such action as may be specified in the order within the time stipulated therein. What is indicated in S.66 definitely is an overall supervision of the working of the society, for which inspection can be conducted and any irregularities noticed therein can be directed to be rectified. 8. In so far as the ordering of an inquiry under Section 68 (1) is concerned, the statutory scheme under the Co-Operative Societies Act envisages that the Registrar has to be satisfied with regard to the necessity for conducting an enquiry as contemplated under Section 68 of the Act. The further requirement of S.68 is that the payment or deficiency in the assets of the society was made, or caused by breach of trust of wilful negligence or misappropriation or fraudulent retention of money. It is not the mere wrongful payment or causing of deficiency in the assets that attracts S.68, but the further fact that such payment or deficiency was made or caused by the breach of trust, wilful negligence, misappropriation or fraud of the person concerned. Unless the latter ingredient is found to exist, action under S.68 is ruled out ( **A.K. Francis v. Joint Registrar** (1990 (2) KLT 470). 9. From the records produced in the instant case, it appears that the respondent was satisfied that there are materials which were brought out in the course of the enquiry under Section 66 has caused damages and loss to the assets of the society. It is necessary to note that up to the stage when a notice **WP(C).No.21999 OF 2020** **7** is issued to the societies concerned, after the subjective satisfaction of the 1st respondent Registrar is arrived at, the society cannot be said to be an aggrieved person since there is no action initiated against the society which could prejudicially affect the society. The stage at which the petitioner is called upon to offer his comments or prefer his objections with regard to the drawing up of any report that is relied upon against him, or to comment upon the conduct of the enquiry itself, is when the notice is issued to him in terms of Section 68(2) of the Act. A reading of Section 68 in its entirety would indicate that after the Registrar is satisfied that an enquiry is necessary into the conduct of the persons, in the circumstances described, in Section 68(1) of the Act, he may by an order in writing enquire into the conduct of such person, and the order to be passed after the enquiry must be preceded by an opportunity to the affected person to raise his objections and voice the same before the Registrar. The contention of the petitioner that only after final orders are passed under Section 66 (5) of the Act , can proceedings for surcharge be initiated cannot be sustained. That is not what is contemplated under the statute. When an adverse order is passed against him under Section 68(2) of the Act, only then can the petitioner be said to be aggrieved by the order for the purposes of pursuing his remedies, either under the Statute or before the writ court. As held in **Santhosh V. v. Assistant Registrar of Co-operative Societies and Ors** [ILR 2015 (1) Ker.187], no opportunity for hearing is contemplated before passing an order under Section 68(1). The opportunity of hearing is available only at the stage of Section 68(2). **WP(C).No.21999 OF 2020** **8** In that view of the matter, I find no reason to interfere with the order at this stage. 10. In view of the grave apprehension raised by Sri. Liji J Vadakedom and in view of the statutory mandate, I direct that the petitioner may prefer his objections to Ext.P22 proceedings that have now been served on him, and such objections need not be only in respect of the contents of Ext.P22 proceedings but also with regard to the legality of any supporting material, such as the report under Section 66 or other material, relied upon by the 1st respondent while issuing the proceedings under Section 68(1) of the Act. The respondent shall on his part examine the said objections and satisfy himself of the necessity or otherwise of proceeding with the enquiry, in the face of the objections raised by the petitioner. Should he decide to proceed with the enquiry, then he shall follow the procedure contemplated under Section 68(2), hear the objections of the petitioner on the merits of the enquiry and thereafter pass orders as contemplated under Section 68(2) of the Act. The 1st respondent shall keep in mind that any adverse order to be passed against the petitioner under Section 68(2) could visit the petitioner with adverse consequences under the Kerala Cooperative Societies Act and hence, while passing the orders as aforesaid, the 1st respondent shall specifically advert to the objections raised by the petitioner to the proceedings under Section 68 of the Act and give clear reasons as to why the objections of the petitioner do not merit consideration. The said order shall be passed after hearing the petitioner as contemplated under Section 68(2) of the **WP(C).No.21999 OF 2020** **9** Act and expeditiously, at any rate, within a period of eight weeks from the date of production of a copy of this judgment. This Writ Petition is dismissed with the above observations. **Sd/-** **RAJA VIJAYARAGHAVAN V** **JUDGE** NS **WP(C).No.21999 OF 2020** **10** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 THE COPY OF THE RELEVANT EXTRACT OF THE BYE-LAW OF THE 4TH RESPONDENT SOCIETY.** - **EXHIBIT P2 THE COPY OF THE COMMON JUDGMENT DATED 14.1.2016 IN WPC 19154/2012 AND WPC.12855/2015** - **EXHIBIT P3 THE COPY OF THE COMMUNICATION NO.HM/1990/17 DATED 17.10.2017 ISSUED BY THE 1ST RESPONDENT.** - **EXHIBIT P4 THE COPY OF THE LETTER DATED 19.12.2017 GIVEN BY THE PETITIONER TO THE 1ST RESPONDENT.** **EXHIBIT P5 THE COPY OF THE ORDER NO.902/17 DATED 30.12.2017 ISSUED BY THE 2ND RESPONDENT.** - **EXHIBIT P6 THE COPY OF THE ORDER DATED 6.8.2018 ISSUED BY THE REGISTRAR OF CO-OPERATIVE SOCIETIES.** - **EXHIBIT P7 THE COPY OF THE LETTER DATED 7.9.2018 ISSUED BY THE 1ST RESPONDENT TO THE 2ND RESPONDENT.** - **EXHIBIT P8 THE COPY OF THE ORDER NO.5155/2018 DATED 6.9.2019 ISSUED BY THE 1ST RESPONDENT** - **EXHIBIT P9 THE COPY OF THE REPRESENTATION DATED 24.1.2020 SUBMITTED BY THE SOCIETY.** - **EXHIBIT P10 THE COPY OF THE REPRESENTATION DATED 26.01.2020.** - **EXHIBIT P11 THE COPY OF THE STATEMENT OF ACCOUNT SHOWING THE DISBURSAL OF THE ABOVE MENTIONED CHEQUES IN FAVOUR OF THE EMPLOYEES OF THE 4TH RESPONDENT-SOCIETY** - **EXHIBIT P12 THE COPY OF THE COMPLAINT DATED 29.02.2020 SUBMITTED BY THE 5TH RESPONDENT.** **WP(C).No.21999 OF 2020** **11** **EXHIBIT P13** **THE COPY OF THE NEWS ITEM PUBLISHED IN THE DESHABHIMANI DAILY DATED 15/06/2020.** **EXHIBIT P14** - **THE COPY OF THE ORDER NO. HM 5155/18 DATED 3.6.2020.** **EXHIBIT P15 THE COPY OF THE NOTICE DATED 18.6.2020 ISSUED BY THE 3RD RESPONDENT.** - **EXHIBIT P16 THE COPY OF THE NOTICE DATED 19.06.2020 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.** - **EXHIBIT P17 THE COPY OF THE JUDGMENT DATED 30/06/2020 IN WP(C) NO.12910/2020 BEFORE THE HONOURABLE HIGH COURT OF KERALA.** - **EXHIBIT P18 THE COPY OF THE OBJECTIONS DATED 8/7/2020 SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT ENQUIRY OFFICER.** - **EXHIBIT 18(a) THE COPY OF THE RECEIPT DATED 8/7/2020 ISSUED FROM THE OFFICE OF THE 2ND RESPONDENT SHOWING THE RECEIPT OF EXHIBIT P18 OBJECTION.** - **EXHIBIT 19 THE COPY OF OBJECTION SUBMITTED BY THE MANAGING DIRECTOR OF THE 4TH RESPONDENTSOCIETY.** - **EXHIBIT 20 THE COPY OF REPORT NO. AEL/1560/2020 DATED 19.08.2020 SUBMITTED BY THE 2ND RESPONDENT.** - **EXHIBIT 21 THE COPY OF THE SERVICE RECORDS WHICH WERE PRODUCED BEFORE THE 2ND RESPONDENT AT THE TIME OF ENQUIRY.** - **EXHIBIT 22 THE COPY OF THE ORDER NO HM/5155/18 DATED 9.9.2020 ISSUED BY THE 1ST RESPONDENT.** ## **RESPONDENTS EXHIBITS:NIL** **//TRUE COPY//** **P.A TO JUDGE**