W.P.(C) No.38822 of 2022: Rixson Prince & Others v. Joint Registrar of Co-operative Societies & Kuttanellur Service Co-operative Bank Ltd & Administrator

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ``` THE HONOURABLE MR.JUSTICE VIJU ABRAHAM ``` ``` TUESDAY, THE 17[TH] DAY OF OCTOBER 2023 / 25TH ASWINA, 1945 ``` ## **`WP(C) NO. 38822 OF 2022`** ## **`PETITIONERS:`** |**`1`**|**`RIXON PRINCE`**| |---|---| ||**`CHIRAMMAL HOUSE, KUTTANELLUR,`**| ||**`P.O.KUTTANELLUR, THRISSUR - 680014.`**| |**`2`**|**`AMBILI SATHEESAN,`**| ||**`KIZHAKKUTTU HOUSE, ELAMTHURUTHI,`**| ||**`P.O.KUTTANELLUR, THRISSUR - 680014.`**| |**`3`**|**`SHEEJA DAISON,`**| ||**`VALLACHIRAKKARAN HOUSE, SNEHATHEERAM STREET,`**| ||**`ANCHERYCHIRA, P.O.ANCHERY, THRISSUR - 680006.`**| |**`4`**|**`JINTO ANTONY,`**| ||**`MOZHIPARAMBIL HOUSE, MISSION NAGAR,`**| ||**`MARIAPURAM, P.O.ANCHERY, THRISSUR -680006.`**| |**`5`**|**`JOHN VAZHAPPILLY,`**| ||**`T.K.V.NAGAR, P.O.KUTTANELLUR,`**| ||**`THRISSUR - 680014.`**| |**`6`**|**`T.S.VASU`**| ||**`THARAYIL HOUSE, P.O.KUTTANELLUR,`**| ||**`THRISSUR - 680014.`**| - **`7 DEEPA BIJU,`** - **`MAROTTIKKAL HOUSE, SIVAPURI NAGAR, P.O.KUTTANELLUR, THRISSUR - 680014.`** - **`8 RASANA RAMAKRISHNAN KOTTAPPURATH HOUSE, P.O.ANCHERY, THRISSUR -680006.`** - **`9 M.R.RAJESH, MULLAPPILLY HOUSE, P.O.ANCHERY, THRISSUR -680006.`** - **`10 K.T.SASIDHARAN,`** ``` KUNDOLI HOUSE, P.O.KUTTANELLUR, THRISSUR-680014. ``` WP(C) No.38822 of 2022 2 ``` 11K.S.AJI, KUNDOLI HOUSE, P.O.ANCHERY, THRISSUR -680006. ``` ``` BY ADVS. P.N.MOHANAN C.P.SABARI AMRUTHA SURESH GILROY ROZARIO ``` ## **`RESPONDENTS:`** - **`1 JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, CIVIL STATION, IST FLOOR, AYYANTHOL, TRISSURE - 680 003.`** - **`2 KUTTANELLUR SERVICE CO-OPERATIVE BANK LTD. NO.758, REPRESENTED BY ITS SECRETARY, P.O.KUTTANELLUR, THRISSUR - 680014.`** - **`3 THE ADMINISTRATOR, KUTTANELLUR SERVICE CO-OPERATIVE BANK LTD. NO.758, P.O.KUTTANELLUR, THRISSUR - 680014. R1 BY SR.GP - BIMALK.NATH R2 & R3 BY ADV.P.C.SASIDHARAN`** ``` THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON ``` ``` 17.10.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` WP(C) No.38822 of 2022 3 ## **VIJU ABRAHAM, J.** **................................................................. W.P.(C) No.38822 of 2022 .................................................................** Dated this the 17[th] day of October, 2023 ## **JUDGMENT** The above writ petition is filed challenging Ext.P11 and for a consequential direction to the 3[rd] respondent to hand over the administration of Kuttanellur Service Co-operative Bank Ltd.758 to the petitioners forthwith. 2. Short facts necessary for the disposal of the above writ petition are as follows: Petitioners are the managing committee members of the 2[nd] respondent bank who came in office on 24.12.2018. Petitioners 1 to 5 were in the previous committee during the period from 31.12.2013 to 23.12.2018. Petitioners continued in the office upto 28.11.2022 till the Administrator assumed office. 1[st] respondent issued Ext.P1 order dated 27.04.2020 ordering an enquiry under Section 65 of the Kerala Cooperative Societies Act, 1969 (hereinafter referred to as “KCS Act”). In the light of Ext P1 order, the enquiry officer conducted a detailed enquiry and submitted a report to the 1[st] respondent Joint Registrar on 26.08.2020. The 1[st] respondent after four months of receipt of the enquiry report, by Ext.P2 notice dated 21.12.2020 sought an explanation from the petitioners on the said report. In Ext.P2 enquiry report it is specifically stated that the enquiry is conducted for the period from 2014- WP(C) No.38822 of 2022 4 2015 to 2018-2019 and they have verified only the books of accounts, minutes, audit report, etc. for the said period only. To the said Section 65 enquiry report, the 1[st] petitioner submitted Ext.P3 reply dated 18.01.2021. Likewise similar reply was submitted by other petitioners also. While the matters thus stood, the petitioners received Ext.P4 show cause notice dated 01.01.2022 under Section 32(1) of the KCS Act to show cause as to why the managing committee should not be superseded for the alleged lapse under Section 32(1)(a) and 32(1)(b) of the KCS Act. To Ext.P4 show cause notice, the 1[st] petitioner submitted Ext.P7 preliminary objection and the objection submitted by other petitioners is Ext.P8. While so, the department came to the bank and they verified whether remedial steps were taken in the bank in the light of Section 65 enquiry report and later as per the inspection conducted by the departmental officers, the 1[st] respondent issued Ext.P9 order dated 10.03.2022 directing to rectify the defects. Petitioners submit that on the basis of Ext.P9 directions steps were taken to rectify the defects one by one and that as of now all the defects noted by the 1[st] respondent in Ext.P9 have been rectified. Petitioners submit that though the managing committee rectified all the defects and there was no room for taking any further action against the committee, due to political reasons the 1[st] respondent issued Ext.P10 order dated 01.01.2022 under Section 68(1) of the KCS Act to conduct an enquiry on various points in order to surcharge the managing committee. In Section 68(1) enquiry, the WP(C) No.38822 of 2022 5 enquiry officer submitted a report dated 31.08.2022, a copy of which has not been served on the petitioners. While so, all of a sudden petitioners received Ext.P11 order dated 28.11.2022 superseding the committee under Section 32(1) of the KCS Act and appointing 3[rd] respondent as its Administrator. It is assailing Ext.P11 order that the petitioners have approached this Court filing the above writ petition. 3. The first contention raised by the petitioners is that for the lapse on the part of the previous managing committee, the present managing committee cannot be superseded. Petitioners would contend that the present committee came into office on 24.11.2018 and Ext.P2 enquiry report is for the period 2014-2015 to 2018-2019, for four years and the period of enquiry relating to the present committee is only from 24.11.2018 to 31.03.2019, i.e., for a period of three months and six days. On the basis of the same, it is the contention of the petitioners that the action evidenced by Ext P11 is bad in law. 4. Yet another contention raised by the petitioner is that an elected committee cannot be superseded under Sections 32(1)(a) and 32(1)(b) of the KCS Act without a show cause showing “persistent default” or “willful disobedience” to any lawful order. Petitioners would contend that Ext.P4 show cause notice was issued to supersede the committee. After Exts.P7 and P8 explanations were filed, time was granted to rectify the defects and accordingly, steps were taken to rectify the same. Subsequently by Ext.P9 dated 10.03.2022, direction was issued to WP(C) No.38822 of 2022 6 rectify some of the defects. In Ext.P4 show cause notice there are no ingredients mentioning any violation of Section 32(1)(a) or Section 32(1) (b) of the KCS Act such as “persistent default” or “willful disobedience” and therefore Ext.P4 is not a proper show cause as envisaged under Section 32(1). 5. Yet another contention taken by the petitioners is that by Ext.P9 communication dated 10.03.2022 defects were identified as minor and granted time to rectify the same and therefore the proceedings under Section 32(1) to supersede the committee is forbidden by Sub-section (6) of Section 65, which mandates that only if the Registrar on enquiry found that there is a major defect in the constitution or working or financial condition of the society, he may initiate action in accordance with the provisions of Section 32 of the KCS Act. 6. Finally, it is contended by the learned counsel for the petitioners that a managing committee cannot be superseded without effective consultation as provided under Section 32(1) of the KCS Act with the financing bank and the circle co-operative union who are to offer views on matters referred to by the Registrar as mandated in Rule 139 of the KCS Rules. 7. 1[st] respondent Joint Registrar of Co-operative Societies has filed a detailed counter affidavit in which it is contended that an enquiry under Section 65 of the KCS Act was ordered and the report submitted revealed serious allegations on the committee members of the bank WP(C) No.38822 of 2022 7 during the period from 2013-2018 and also the present committee which is elected in the year 2018 which continued till the date of supersession. It is further averred that the present committee which took charge on 24.12.2018 also carried out the same illegal activities committed by the previous committee by way of issuing loans to members outside the area of operation, renewing overdue loans for huge amounts with interest upon the same security including the issuance of loans by accepting security of land below five cents. It is further contended that after examining the explanation given by the present committee against the notice given under Section 32(1) of the KCS Act, the same was sent to the Assistant Registrar (General), Thrissur for getting the latest updates and the Assistant Registrar General submitted a report on 18.11.2022 wherein it was reported that the defects mentioned in the enquiry report and the audit report continues till date and it is on the basis of the same that Ext.P11 has been issued. As regards the contention raised by the petitioners regarding consultation with the financing bank and the Circle Co-operative Union it is stated that notice was issued to the Circle Cooperative Union and the financing bank but action had to be taken with immediate effect as the existence of the present committee would cause more loss to the society and to its assets and therefore the 1st respondent has invoked the power under Section 32(3) of the KCS Act without consulting the Circle Co-operative Union and the financing bank. 8. I have heard Adv.P.N.Mohanan, learned counsel appearing for the WP(C) No.38822 of 2022 8 petitioners as well as Adv.Bimal K.Nath, learned Senior Government Pleader appearing for the 1[st] respondent and also Adv. P.C.Sasidharan, learned counsel appearing for respondent Nos.2 and 3. 9. The matter came up for consideration on 01.12.2022 and no interim order was granted taking note of the fact that the Administrator has already taken charge and therefore opined that the matter will be heard after the respondents place on record their counter affidavit regarding the allegations in the writ petition. 10. Essentially four grounds have been raised by the learned counsel for the petitioners. The case of the petitioners is that the present committee came into office only on 24.12.2018 and Ext.P2 enquiry report is for the period from 2014-2015 to 2018-2019 for four years and on the basis of the same it is contended that the period of enquiry of the present committee is from 24.12.2018 to 31.03.2019, ie. only for a period of three months and six days and that the committee was superseded relying solely on Ext.P2 report. On the basis of the same petitioner would contend that it is for the lapses of the previous committee the present committee has been superseded which goes against the dictum laid down by this Court in **A.P.Ameer v. Deputy Director, 2010 (4) KHC 631** . The relevant portion of the judgment reads as follows: _“10. The question whether the present Managing Committee could be superseded for the acts of misdeeds committed by the previous Managing Committee of the Society has been considered by a Division Bench of this Court in Writ Appeal No.1363 of 2004. As per_ WP(C) No.38822 of 2022 9 _judgment dated 6.8.2004, this Court has held that no Managing Committee could be proceeded against for the misdeeds of a previous Managing Committee. Speaking for the Bench, Cyriac Joseph, J. (as he then was) has concluded the issue in the following words:_ _“Section 32 of the Kerala Cooperative Societies Act can be invoked only against a Committee which has committed the irregularities or defaults. Removal of a committee for the defaults and irregularities of a previous committee is not contemplated by Section 32. It may be pointed out that under Rule 44(1) (k) of the Kerala Co-operative Societies Rules, no member of the society shall be eligible for being elected or appointed as a member of the committee of the society under Section 28 if he was a member of the committee which has been superseded and a period of one year has not elapsed form the date of supersession. Thus removal of the committee under Section 32 casts a stigma and imposes a disqualification on the members of the committee and the removal visits such members with serious consequences. Therefore, we are of the view that the committee of a Cooperative Society cannot be superseded under Section 32 of the Kerala Cooperative Societies Act for the defaults and irregularities alleged to have been committed by a previous committee.”_ _11. In view of the above binding precedent, there cannot be any doubt that Ext.P6 cannot be sustained. The general purport of the Act and the Rules is to leave the administration of a Co-operative Society to its elected Managing Committee. It is only when the Managing Committee is guilty of gross irregularities or violations of law or is not in a position to carry on the administration smoothly that the drastic step of supersession is resorted to. Even when the Managing Committee is superseded, an Administrator is appointed only to_ WP(C) No.38822 of 2022 10 _ensure that the administration of the Society is carried on smoothly until an elected Managing Committee takes charge. In the present case, a proper election was conducted on 29.8.2009 and the Managing Committee headed by the petitioner took charge only on 30.8.2009. There are no grounds to supersede the said Committee and to order conduct of an election afresh, as sought to be done by Exts.P6 and P7. Therefore, it is absolutely necessary that the administration of the society is restored to the elected Managing Committee of which the petitioner is the President, without further delay. Exts.P6 and P7 proceedings are unsustainable and liable to be set aside._ _12. For the foregoing reasons, this writ petition is allowed, Exts.P6 and P7 are set aside. The administration of the society shall be restored to the elected Managing Committee of which the petitioner is the President, forthwith. No costs.”_ 11. In reply to the said contention, the learned Senior Government Pleader would submit that the present committee which took charge on 24.12.2018 has also carried out the same illegal activities committed by the previous committee and therefore the proceedings initiated under Section 32(1) of the KCS Act as per Ext.P11 is perfectly legal and valid. This Court in **Mohanan v. State of Kerala, 2004 (2) KLT 873** has considered a similar issue wherein action was taken to supersede the newly elected committee in respect of the alleged lapses committed by the erstwhile committee and the court held that the proceedings under Section 32(1) could be initiated against the new committee when it is found that in spite of the irregularities brought to the notice of the new committee, there were no effective steps taken to set right the position WP(C) No.38822 of 2022 11 and the defaults were persistent and continuing. In the present case also a similar contention has been taken in the counter affidavit that the present committee also continued with the irregularities that have been done by the previous committee. Section 32 of the KCS Act deals with the supersession of the committee, which reads as follows: _“_ _**32.Supersession of committee** .- (1)If the Registrar, after an inquiry by himself or through his subordinates or on a report of the financing bank, or the Vigilance and Anti corruption Bureau of the Government or the Vigilance Officer or otherwise, is satisfied that the committee of any society,(a)persistently makes default or is negligent in the performance of the duties imposed on it by this Act or the rules or bye-laws or does anything which is prejudicial to the interests of the society; or_ _(b) wilfully disobeys or fails to comply with any lawful order or direction issued under this Act or the rules; or_ _(c) makes any payment contrary to this Act or the rules or the bye- laws or causes any loss or damage to the assets of the society, by breach of trust or wilful negligence; or_ _(d)misappropriates or destroys or tampers with the records or causes the destruction of records to cover up any misconduct or malpractice,_ _He may, after giving the committee an opportunity to state its objections, if any, by order in writing, remove the committee and, appoint in its place, one administrator or an administrative committee consisting of not more than three individuals, one among them as convener, who need not be members of the society, to manage the affairs of the society for a period not exceeding six months._ _Provided that in the case of co-operative society, carrying on the business of banking the provisions of the Banking Regulation Act,1949 (Central Act 10 of 1949) shall also apply;_ _Provided further that in the case of a co-operative society, carrying on the business of banking, appointment of administrator/_ WP(C) No.38822 of 2022 12 _administrative committee shall not exceed one year in the aggregate:_ _Provided also that the board of a co-operative society shall not be superseded or kept under suspension where there is no Government share holding or loan or financial assistance or any guarantee by the Government or any Board or Institutions constituted by the Government._ _Explanation I.-For the purposes of this proviso, financial assistance includes any financial assistance from the Kerala Co-operative Development and Welfare Fund Board, Deposit Guarantee Scheme implemented by the Kerala Co-operative Deposit Guarantee Fund Board, Kerala Co-operative Risk Fund Scheme implemented by the Kerala Co-operative Development and Welfare Fund Board, National Bank for Agriculture and Rural Development, National Co-operative Development Corporation and any other financial institution under the control of the State or Central Government and also any financial assistance guaranteed by the said institutions._ _Explanation II: A notice and an order given as per this clause to the President, in his absence to the Vice President or any committee members who is holding charge of President or Vice President or to the Chief Executive of a society shall be treated as an order given to the committee of the society._ _(e) Every member of the committee superseded under this section shall from the date of order of such supersession stand disqualified to contest in the election to or to be nominated to the committee of any Society or to be appointed as an administrator in any society for two consecutive terms._ _- (2) The Registrar shall consult the financing bank and Circle Co - operative Union or State Co operative Union, as the case may be, before passing an order under sub-section (1)._ _(3) Notwithstanding anything contained in sub-section (1) or subsection (2) it shall not be necessary to give an opportunity to the committee to state its objections and to consult the Unions and financing banks, in cases where the Registrar is of the opinion that it is not reasonably practicable to do so, subject however to the_ WP(C) No.38822 of 2022 13 _condition that in such cases, the period of supersession shall generally be for six months and in case a new committee, cannot be constituted or enter upon office in accordance with the bye-laws of the society within the period of supersession the period may be extended for a further period not exceeding six months—_ _(a) in the case of a Co-operative society only after consulting the Circle Co-operative Union concerned; and_ _(b) in the case of an Apex Society or a Central Society only after consulting the State Co-operative Union._ _(4) The committee or administrator or administrators so appointed shall, subject to the control of the Registrar and to such instructions as he may from time to time give, have power to exercise all or any of the powers and functions of the committee or of any officer of the society and take such action as may be required in the interests of the society._ _(5) The committee or administrator or administrators shall, before the expiry of its or his or their term of office, arrange for the constitution of a new committee in accordance with the bye-laws of the society._ _(6) Every order made by the Registrar under sub-section (1) shall be communicated to the circle co-operative union._ _(underline supplied)_ 12. Section 32 mandates that an opportunity has to be given to the committee to state its objection before orders are issued to supersede a committee. Admittedly in the present case, a notice has been issued as Ext.P4. A perusal of Ext.P4 would reveal that the said notice was issued essentially on the basis of an enquiry report in the proceedings initiated under Section 65 of the KCS Act. As stated earlier, it is undisputed that the period of enquiry was between 2014-2015 to 2018-2019 whereby the period of enquiry in respect of the present committee is only for three WP(C) No.38822 of 2022 14 months and six days, ie. from 24.12.2018 to 31.03.2019. It is to be noted that after the issuance of Ext.P4 notice, Ext.P9 order has been issued by the 1[st] respondent which is a proceeding initiated on the basis of the enquiry conducted under Section 65 wherein directions were issued to rectify certain defects. Section 65(4) of the KCS Act specifies that when the enquiry reveals only minor defects, society should be intimated to cure the defects disclosed in the enquiry and going by Section 65 (6) after completion of the enquiry, if the Registrar feels that there are major defects he may initiate action under Section 32 of the KCS Act. Though Ext.P4 notice was solely based on the enquiry report in a Section 65 proceedings, in Ext.P11 order under Section 32 of the KCS Act by which the committee was superseded, it is stated that the explanation offered by the managing committee, ie. Exts.P7 and P8 have been examined and a request was made to the Assistant Registrar (General), Thrissur to go through the explanation and furnish a report and that the Assistant Registrar (General), Thrissur has submitted a report dated 18.11.2022 shown as reference No. 15 in Ext.P11 order and in the said report it is stated that the managing committee is still continuing with the irregularities in violation of the provisions of the KCS Act and the Rules and the circulars issued by the Registrar of Co-operative Societies and on the basis of the same the Assistant Registrar (General), Thrissur recommended to take action under Section 32 of the KCS Act. It is on the basis of the same, Ext.P11 order has been issued. So while issuing WP(C) No.38822 of 2022 15 Ext.P4 show cause notice, the only aspect that was taken into consideration by the 1st respondent is the report submitted under Section 65 enquiry. Admittedly, it relates only to about four months wherein the present managing committee was in office. But while issuing Ext.P11 order of supersession to bring in the violation as provided under Sections 32(1)(a) and 32(1)(b), the 1st respondent relies on the report of the Assistant Registrar (General), Thrissur dated 18.11.2022. If the 1st respondent wants to rely on the report dated 18.11.2022 for superseding the committee, it was incumbent on his part to issue a fresh show cause notice to the petitioners by enclosing a copy of the said report of the Assistant Registrar (General), Thrissur dated 18.11.2022 and call for their objection and ought to have issued Ext.P11 order after considering the objection of the petitioners in this regard. The said procedure is all the more important when the Assistant Registrar (General), Thrissur has issued Ext.P9 directing the managing committee to rectify certain defects and accordingly intimated the authorities that they have rectified the defects and therefore, before initiating any further proceedings under Section 32 of the KCS Act on the ground of Sections 32(1)(a) and 32(1) (b) based on the report of the Assistant Registrar (General), Thrissur dated 18.11.2022, the petitioners ought to have been put on notice of the said report and the allegations contained therein. It is not discernible from Ext.P11 or the counter affidavit filed by the 1st respondent that such an exercise has been undertaken before issuing Ext.P11 order. WP(C) No.38822 of 2022 16 Except for the four months period where the present committee was in the office all other allegations in the enquiry report in Section 65 enquiry are in respect of the previous committee and the specific finding that the present committee is also continuing with the same illegality was found out only as per the report of the Assistant Registrar (General), Thrissur dated 18.11.2022 and therefore to continue the proceedings against the new committee on the strength of **Mohanan** 's case cited supra, the 1st respondent ought to have issued a fresh show cause notice enclosing the report of the Assistant Registrar (General), Thrissur dated 18.11.2022. Therefore, I am of the opinion that Ext.P11 order has been issued without issuing a proper notice calling for objections as mandated in Section 32(1)(b) of the KCS Act. 13. Yet another contention raised by the petitioners is that Ext.P4 show cause notice issued is not in compliance with the provisions of Sections 32(1)(a) and 32(1)(b) of the KCS Act inasmuch as the show cause notice does not show or claim that there is persistent default or wilful disobedience of any lawful orders. The said contention raised by the petitioners is intrinsically connected with the contention raised regarding lack of show cause notice with regard to the report of the Assistant Registrar (General), Thrissur dated 18.11.2022 reporting that the present committee is continuing the same illegalities committed by the earlier committee. Section 32(1)(a) mandates that a committee could be superseded when the committee is persistently making default or is WP(C) No.38822 of 2022 17 negligent in the performance of its duties imposed on it by the KCS Act or the Rules or the bye-laws or does anything which is prejudicial to the interest of the society and Section 32(1)(b) mandates that they should wilfully disobey or fail to comply with any lawful order or direction issued under the Act or the Rules. It is the case of the petitioners that in Ext.P4, there are no ingredients mentioned in Sections 32(1)(a) and 32(1)(b) such as “persistent default” or “wilful negligence” and therefore Ext.P4 is not a proper notice. In support of their contentions, they rely on the judgment in **State of Kerala v. Urukunnu Service Co-operative Bank Ltd., 2013 (2) KLT 74** wherein it is held that to supersede a committee it is not sufficient that the managing committee has committed a default or negligence in performance of the duty but such default should be shown to be persistent and must be prejudicial to the interest of the society. Petitioners also rely on **Krishnan Nair v. Joint Registrar of Cooperative Societies, 2014 (1) KLT 116** which mandates that the notice which does not speak of any persistent default leading to extreme action of supersession is not a proper notice as contemplated under Section 32. Though in Ext.P11 order it is stated that going by the report of the Assistant Registrar (General), Thrissur dated 18.11.2022 the said irregularities committed by the earlier committee are continuing, such an allegation is not seen in Ext.P4 notice under Section 32. Though it is stated in the report submitted under Section 65 enquiry, there are allegations, it does not specifically state about any violation as WP(C) No.38822 of 2022 18 contemplated under Sections 32(1)(a) and 32(1)(b). In view of the same, I am of the opinion that the contention of the petitioners that there is no proper show cause notice is only to be upheld. 14. The further contention raised by the petitioners is that before issuing Ext.P11 order superseding a committee, there should be effective consultation as provided under Section 32(1) of the KCS Act with the financing bank and the Circle Co-operative Union whose one of the function is consultation at the time of supersession of the committee, in terms of Rule 139 of the KCS Rules. Petitioners rely on the judgment in **Urukunnu Service Co-operative Bank Ltd** .'s case cited supra. Paragraph 13 of which reads as follows: _“13. Of course, the learned Government Pleader had made a valiant attempt to justify the dispensing with the requirements, stating that it was logically not possible to consult the Financing Bank insofar as the Joint Registrar himself is the administrator of the Financing Bank and therefore, one cannot be found fault with for not consulting oneself. We are unable to agree with the same. As administrator of the Financing Bank, the third appellant Joint Registrar is in a better position than anybody else to state the opinion of the Financing Bank as to the financial implications which the Financing Bank may suffer on account of the supersession of the bank financed by the Financing Bank. It is all the more so, when the supersession was at a time when the society was running at a profit. Therefore, it is mandatory for the Joint Registrar to state in his order the opinion of the financing bank on the proposal to supersede the first respondent under S.32. Further no valid explanation is forthcoming as to why it was not reasonably practicable to consult the Circle Co-operative_ WP(C) No.38822 of 2022 19 _Union. Circle Co-operative Union is an expert body. Under R.139 of the Kerala Co-operative Societies’ Rules, one of the functions of a Circle Co-operative Union is to offer their views on matters relating to supersession of committees. When such functions are conferred on the Circle-Co-operative Union, which have been incorporated in the Rules with a purpose, the Joint Registrar cannot lightly exclude such consultation without very cogent and convincing reasons. Therefore, it was mandatory on the part of the Joint Registrar to consult that expert body before taking the drastic step of superseding a managing committee of a democratically elected managing committee of a Co-operative Society. For dispensing with the same, there must be very cogent and acceptable reasons. A learned single Judge of this Court has in Selvi v. District Industries Centre (2001 (2) KLJ 429), after noting several foreign decisions and the decisions of the Supreme Court held that a mere statement in the order that an 'alarming situation' is present is not enough to do away with procedural requirements while taking the drastic step of superseding a committee under S.32. A Division Bench of this Court has held in Sahadevan v. Padmanabhan (2004 (1) KLT 192 on the question of compliance with sub-s.2 of S.32 thus:_ _“Sub-s.(2) of S.32 provides that the Registrar shall consult the Financing Bank and the Circle Cooperative Union or the State Co-operative Union as the case may be before passing an order under subs.(1) of S.32. It is seen from Ext.P6 that a copy of the notice dated 24.9.2003 issued under sub-s.(1) of S.32 of the Act was sent to the General Manager, Palakkad District Co-operative Bank (Financing Bank) and the Secretary, Co-operative Union, Palakkad. Apart from sending a copy of the notice, no further request or direction was made. Ext.P8 order of the Joint Registrar shows that the views of the financing bank and the Circle Co-operative_ WP(C) No.38822 of 2022 20 _Union were not received on time and therefore, the Joint Registrar proceeded on the assumption that they had nothing to say in the matter. Learned Single Judge, relying on the decisions in Jose Kuttiyani v. Registrar, Co-operative Societies (1981 KLT SN.65 (C.No.121) = (AIR 1982 Ker.12) and Elakkal Service Co-operative Bank v. State of Kerala (1997 (2) KLT 85) held that the mere sending of the copy of the show cause notice to the consultees would not satisfy the requirement of the provisions contained in sub-s(2) of S.32 of the Act. According to the learned Single Judge, the notice, the reply and the tentative findings of the Joint Registrar should be forwarded to the consultees so that they can form an opinion and inform the same to the Joint Registrar. The learned Single Judge has also pointed out that the impugned order, Ext.P8, does not show that any such consultation was made. There is no case for the appellant that, apart from sending a copy of Ext.P6 notice to the Financing Bank and the Circle Co-operative Union, the Joint Registrar had forwarded to them the explanations/objections given on behalf of the Committee and the tentative findings arrived at by the Joint Registrar after considering the explanations/objections of the Committee. Therefore, we have to proceed on the basis that, apart from sending a copy of Ext.P6 to the Financing Bank and the Circle Co-operative Union, no further action was taken by the Joint Registrar as part of the consultation process contemplated under sub-s.(2) of S.32 of the Act. The consultation contemplated under sub-s.(2) of S.32 of the Act can be effective and meaningful only if the show cause notice issued under S.32(1), the explanations/objections given by the Committee to such show cause notice and the tentative findings arrived at by the Joint Registrar_ WP(C) No.38822 of 2022 21 _after considering such explanations/objections are also forwarded to the Financing Bank and the Circle Co-operative Union requesting them to offer their views on the proposal to supersede the Committee. Such a consultation process has not taken place in this case. Therefore, the provisions of sub-s.(2) of S.32 of the Act have been violated. Hence, Ext.P8 order was liable to be set aside on the second ground mentioned by the learned Single Judge.”_ ## Petitioners also rely on the judgment in **Sajeevan v. Joint Registrar of Co-operative Societies, 2015 (4) KLT SN 71 (C.No.87)** . Paragraphs 24 and 25 of which read as follows: _“24. On the other hand, the law has not contemplated different procedural parameters based on the gravity of the allegations. An official cannot be allowed to disregard the statutory mandate taking shelter under an excuse that the Managing Committee sought to be superseded has been facing grave allegations._ _25. A perusal of Section 32 leaves no manner of doubt in anybody's mind that it has been couched in mandatory terms that the first respondent shall consult the financing bank and the Circle Co-operative Union before inflicting any supersession. Further, if there were to be any dispensation of consultation, cogent reasons ought to be specified. In the present instance, neither of the safeguards has been complied with by the first respondent.”_ A Division Bench of this Court in **Sahadevan v. Padmanabhan, 2004** **(1) KLT 192** held that it is mandatory to have a consultation with the financing bank and circle co-operative union before proceedings for WP(C) No.38822 of 2022 22 ## superseding a committee are issued. Paragraph 5 of the said judgment reads as follows: _“5. “Sub-s.(2) of S.32 provides that the Registrar shall consult the Financing Bank and the Circle Co-operative Union or the State Co-operative Union as the case may be before passing an order under sub-s.(1) of S.32. It is seen from Ext.P6 that a copy of the notice dated 24.9.2003 issued under sub-s.(1) of S.32 of the Act was sent to the General Manager, Palakkad District Co-operative Bank (Financing Bank) and the Secretary, Co-operative Union, Palakkad. Apart from sending a copy of the notice, no further request or direction was made. Ext.P8 order of the Joint Registrar shows that the views of the financing bank and the Circle Co-operative Union were not received on time and therefore, the Joint Registrar proceeded on the assumption that they had nothing to say in the matter. Learned Single Judge, relying on the decisions in Jose Kuttiyani v. Registrar, Co-operative Societies (AIR 1982 Ker.12) and Elakkal Service Co-operative Bank v. State of Kerala (1997 (2) KLT 85) held that the mere sending of the copy of the show cause notice to the consultees would not satisfy the requirement of the provisions contained in subs(2) of S.32 of the Act. According to the learned Single Judge, the notice, the reply and the tentative findings of the Joint Registrar should be forwarded to the consultees so that they can form an opinion and inform the same to the Joint Registrar. The learned Single Judge has also pointed out that the impugned order, Ext.P8, does not show that any such consultation was made. There is no case for the appellant that, apart from sending a copy of Ext.P6 notice to the Financing Bank and the Circle Co-operative Union, the Joint Registrar had forwarded to them the explanations/objections given on behalf of the Committee and the tentative findings arrived at by the Joint Registrar after considering the explanations/objections of the_ WP(C) No.38822 of 2022 23 _Committee. Therefore, we have to proceed on the basis that, apart from sending a copy of Ext.P6 to the Financing Bank and the Circle Co-operative Union, no further action was taken by the Joint Registrar as part of the consultation process contemplated under sub-s.(2) of S.32 of the Act. The consultation contemplated under sub-s.(2) of S.32 of the Act can be effective and meaningful only if the show cause notice issued under S.32(1), the explanations/objections given by the Committee to such show cause notice and the tentative findings arrived at by the Joint Registrar after considering such explanations/objections are also forwarded to the Financing Bank and the Circle Co-operative Union requesting them to offer their views on the proposal to supersede the Committee. Such a consultation process has not taken place in this case. Therefore, the provisions of sub-s.(2) of S.32 of the Act have been violated. Hence, Ext.P8 order was liable to be set aside on the second ground mentioned by the learned Single Judge.”_ ## This Court in **Rajeevan v. Sukumaran, 2013 (3) KLT 253** has held in paragraph 11 as follows: _“11. In fact, in Urukunnu Service Co-operative Bank's case, this Court further held that it is mandatory on the part of the Joint Registrar to consult expert bodies like financing bank and circle co-operative union and for dispensing with the same, there must be very cogent and acceptable reasons and not just a single statement that an alarming situation is present. Here, along with the dispensing with the opportunity to the committee to state its objections, consultation with the financing bank and the circle cooperative union also has been dispensed with. The consultation has been held to be mandatory and serves a very important and vital purpose in the context of the action to supersede an elected managing committee of a Society. Therefore, when the dispensing with_ WP(C) No.38822 of 2022 24 _the opportunity to the committee to state its objections results in non-consultation with the financing bank and the circle cooperative union, that also is a reason to hold that dispensing with the opportunity to the committee to state its objections cannot be lightly resorted to.”_ 15. In Ext.P11 the only reason stated for not undertaking the mandatory consultation with the circle co-operative union and the financing bank is that it would delay the process of supersession. The said stand is supported by the 1st respondent in his counter affidavit stating that consultation could not be done since action has to be taken with immediate effect. Learned Senior Government Pleader would rely on the judgment in **Hameed Kutty v. Joint Registrar of Co-operative Societies, 2017 (1) KLT 511** which was confirmed in writ appeal in **Hameed Kutty v. Joint Registrar of Co-operative Societies (General), 2018 (3) KLT 149** which held that the dispensation with consultation will not vitiate the proceedings initiated under Section 32 of the KCS Act. But the facts of the said case would reveal that it was a case of suspension of the managing committee for a short period and the learned single Judge in the judgment in **Hameed Kutty** 's case cited supra has taken note of the fact that it is only a case of suspension and no final decision has been taken to remove the managing committee from the office and the consultation provided for under the statute can take place before final decision is taken in the matter. Therefore, I am of WP(C) No.38822 of 2022 25 the opinion that the said judgment is not applicable in the facts and circumstances of the present case. 16. It is true that the said consultation could be avoided if valid and cogent reasons could be given for the same. The only reason stated in Ext.P11 is that the proceedings could not be delayed and therefore, they have dispensed with the consultation. It is to be noted that the show cause notice was issued on 01.01.2022 whereas Ext.P11 supersession order was issued only on 28.11.2022 after almost ten months. Therefore, I am of the opinion that the said consultation could have been done within a period of 11 months which has not been done in the present case. Since no sufficient and cogent reason has been given to dispense with the consultation as mandated in Section 32 of the KCS Act, with the Circle Co-operative Union and the financing bank, I am of the opinion that Ext.P11 order issued without conducting such consultation is liable to be interfered with. In view of the above facts and circumstances of the case, I am inclined to set aside Ext.P11 with a consequential direction to the 3rd respondent Administrator to hand over the administration of the society to the petitioners forthwith. It is made clear that I have interfered with the order only on a finding that there are procedural lapses in issuing Ext.P11, violating the provisions of the KCS Act and therefore it is made clear that the setting aside of Ext.P11 order will not preclude the 1st respondent from initiating fresh proceedings against the petitioners with WP(C) No.38822 of 2022 26 a proper notice containing the exact allegations against them and after putting to them report by any of the authorities, which the 1[st] respondent would rely to render an adverse finding against the petitioners. With the above-said observations, the writ petition is allowed. Sd/- **VIJU ABRAHAM JUDGE** cks WP(C) No.38822 of 2022 27 ## **`APPENDIX OF WP(C) 38822/2022`** ``` PETITIONER EXHIBITS ``` ``` Exhibit P1A TRUE COPY OF THE ORDER DATED 27.04.2020 ORDERING SECTION 65 ENQUIRY, OF THE FIRST RESPONDENT. Exhibit P2A TRUE COPY OF THE NOTICE DATED ``` - `21.12.2020 OF THE JOINT REGISTRAR ALONG WITH ENQUIRY REPORT.` - `Exhibit P3 A TRUE COPY OF THE REPLY DATED 18.01.2021 SUBMITTED BY THE FIRST PETITIONER BEFORE THE FIRST RESPONDENT.` - `Exhibit P4 A TRUE COPY OF THE SHOW CAUSE NOTICE DATED 01.01.2022 OF THE JOINT REGISTRAR .` - `Exhibit P5 A TRUE COPY OF THE JUDGMENT AS REPORTED IN 2013 (2) KLT 74.` - `Exhibit P6 A TRUE COPY OF THE JUDGMENT AS REPORTED IN 2014 (1) KLT 116.` - `Exhibit P7 A TRUE COPY OF THE OBJECTION DATED 18.01.2022 OF THE FIRST PETITIONER TO THE FIRST RESPONDENT.` - `Exhibit P8 A TRUE COPY OF THE OBJECTION DATED 24.02.2022 OF THE PETITIONERS TO THE FIRST RESPONDENT.` - `Exhibit P9 A TRUE COPY OF THE ORDER DATED 10.03.2022 OF THE JOINT REGISTRAR .` - `Exhibit P10 A TRUE COPY OF THE ORDER DATED 01.01.2022 OF THE JOINT REGISTRAR .` - `Exhibit P11 A TRUE COPY OF THE ORDER DATED 28.11.2022 OF THE FIRST RESPONDENT.` - `Exhibit P12 A TRUE COPY OF THE JUDGMENT REPORTED IN 2013 (2) KLT 733 (SC) .` - `Exhibit P13 A TRUE COPY OF THE JUDGMENT REPORTED IN 2001 (2) KLJ 429.` - `RESPONDENT EXHIBITS Exhibit R1(a) True copy of the list containing the details of amount received by the` WP(C) No.38822 of 2022 28 ``` committee which was superceded on 28- 11-2022 as sitting fee for conducting Monthly Deposit schemes ``` ``` Exhibit R1(b)True copy of the vouchers regarding the receipt of the amount by the committee members Exhibit R1(c)True copy of the list of loans issued outside the area of operation of the bank Exhibit R1(d)True copy of the list of loans renewed with interest Exhibit R1(e)True copy of the list of loans issued with security of land below 5 cents Exhibit R1(f)True copy of the loan application Exhibit R1(g)True copy of the audit report for the year 2020-21 Exhibit R1(h)True copy of the board resolution No. 19 dated 08.08.2022 Exhibit R1 (i)True copy of the sub rule sanctioned to the bank for conducting Monthly Deposit Schemes Exhibit R1(j)True copy of the direction given by the Registrar of Co-operative Societies which was circulated among co-operative societies in the state through letter No. CG(2) 12003/2009 dated 24-01-2009 Exhibit R1(k)True copy of the subsection 1 to 44 in clause 44 of the bye laws of the bank Exhibit R1(l)True copy of the loan application Exhibit R1 (m)True copy of the loan ledger of the applicant in the other Service Co- operative bank in which the employee of the Kuttanelloor co-operative Bank has receipted the documents of the loanee for the process of takeover ``` ``` Exhibit R1(n)True copy of the letter from the Secreatry of Kuttanelloor Service Co- operative bank requesting for the copies of documents pledged in the bank ``` WP(C) No.38822 of 2022 29 ``` Exhibit R1(o)True copy of the Order No. JRGTSR/3340/2022- CRP1 dated 12.12.2022 ```