Madras High Court
S.Murugan vs The Deputy Registrar Of Co-Operative ... on 27 September, 2021
C.R.P.(PD)(MD).No.145 of 2021
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on: 07.07.2021
Pronounced on : 27.09.2021
CORAM:
THE HONOURABLE MR.JUSTICE K.MURALI SHANKAR
C.R.P.(PD)(MD).No.145 of 2021
and
C.M.P.(MD)No.887 of 2021
S.Murugan : Petitioner/Appellant
Vs.
1.The Deputy Registrar of Co-operative Societies (Housing),
A-15, 1st Street, K.K.Nagar,
Madurai District – 20.
2.G.Gopalakrishnan
3.B.Sheik Fareed
4.A.Chinnappar
5.R.Krishna Moorthy
6.A.Mohammed Ghouse
7.M.Pappayee
8.T.Daniel Markmillan Marckobola
9.M.Sikkandar Beevi
https://www.mhc.tn.gov.in/judis/
1/20
C.R.P.(PD)(MD).No.145 of 2021
10.Nagammal
11.S.Vijararani
12.L.M.R.Sudhakar
13.M.Pavul Arockia Doss
14.S.Vanitha
15.T.Ramachandran
16.N.Kannan : Respondents/Respondents
Prayer: Civil Revision Petition filed under Article 227 of the Constitution of
India, to set aside the fair and decreetal order made in C.M.A(CS)No.2 of 2016,
dated 05.09.2019 on the file of the Principal District Court, Dindigul.
For Petitioner : Mr.S.Kumar
For Respondents : Mr.J.Gunaseelan Muthiah, for R1 and R2.
: No Appearance, for R3 to R16.
ORDER
This Civil Revision Petition is directed against the order passed in C.M.A(CS)No.2 of 2016, dated 05.09.2019 on the file of the Principal District Court, Dindigul, dismissing the appeal filed against the order of the first respondent herein, dated 03.08.2015, under Section 87 of the Tamil Nadu Co-operative Societies Act, 1983.
https://www.mhc.tn.gov.in/judis/ 2/20 C.R.P.(PD)(MD).No.145 of 2021
2. The revision petitioner is the appellant. The first respondent has passed an order, dated 03.08.2015, impugned in the appeal, as against 16 persons, including the revision petitioner herein, holding that the petitioner and the respondents 13 to 16 are individually liable and the respondents 2 to 12 are jointly liable and directed them to make good the loss of the Society.
3.The facts not in dispute and that are necessary for the disposal of the present revision are as follows:
(i) The petitioner is the Secretary and the second respondent is the President of D.D.382, Nagal Nagar Co-operative Housing Society Limited, controlled by the Tamil Nadu Housing Federation, and the respondents 13 to 16 are the other staffs of the said Society. The object of the Society is to issue loan to the members to construct house. The said society based on the applications received from the members, after ascertaining the basic details required for issuing loan, would recommend to the Housing Federation. Thereafter, the Federation after proper scrutiny, extend the loan to the members.
(ii) The Housing Federation stopped its activities of extending loan to the Housing Society all over Tamil Nadu from 01.07.2009. Thereafter, the Housing Societies out of the loan recovery started to reissue fresh loans and recover the same with interest. The Registrar of Co-operative Societies https://www.mhc.tn.gov.in/judis/ 3/20 C.R.P.(PD)(MD).No.145 of 2021 (Housing) based on the streamlining committee report, issued a circular, dated 15.06.2009, for revision of the scale of pay to the employees of the Housing Societies all over Tamil Nadu. But the second respondent Society has not revised wages of its employees as per the circular, dated 15.06.2009.
4. The petitioner while working as a Special Officer received demands from their employees for revision of the wages during the year 2012. The Housing Societies all over Southern Districts either by way of resolution or by way of settlement, revised the wages of their employees in terms of the circular, dated 15.06.2009. Since the then Deputy Registrar (Housing) gave oral permission for revision of wages, a resolution was passed on 31.05.2013 for revising the scale of pay to the members of the said Society.
5.In pursuance of the said resolution, settlement dated 31.05.2013 was concluded under Section 18(1) of the Industrial Disputes Act and the scale of pay was revised to all the five employees of the society w.e.f from 01.01.2013. Since objections were made, the wages paid prior to the date of settlement till 31.05.2013 were remitted by the employees. Though the society has forwarded a letter for fixation of cadre strength, the scale of pay and the conditions made on 19.08.2009, there was no response. After assumption of the https://www.mhc.tn.gov.in/judis/ 4/20 C.R.P.(PD)(MD).No.145 of 2021 elected Board of Management, the settlement for revision of the scale of pay was concluded.
6.The Deputy Registrar, Madurai has passed an order dated 03.08.2015, to conduct enquiry under Section 81 of the Tamil Nadu Co- operative Societies Act with respect to the irregularities committed by the petitioner and others in revising the wages without approval and for non- recovery of the loans.
7.The enquiry officers had issued show cause notice for which, the appellant submitted his explanation. Since the explanation was not satisfactory, charges were framed. The enquiry officer after conducting enquiry, has concluded that the charges stood proved that the appellant and the respondents 2 to 16 were responsible for the loss by revising the scale of wages to the tune of Rs.7,48,698/- and caused loss to the tune of Rs.11,55,000/- while sanctioning and granting new loans to the staff and submitted her report, recommending for surcharge proceedings.
8.After serving the copies of the enquiry report, the appellant and the https://www.mhc.tn.gov.in/judis/ 5/20 C.R.P.(PD)(MD).No.145 of 2021 respondents 2 to 16 were directed to offer their explanations. Since the explanation of the revision petitioner was not satisfactory, the second respondent has issued surcharge proceedings against the petitioner and the respondents 2 to 16.
9.As already pointed out, the second respondent has passed an order dated 03.08.2015, directing the petitioner and the respondents to make good loss of the society. Aggrieved by the said order, the petitioner has preferred an appeal under Section 152 of Tamil Nadu Co-operative Societies Act, in CMA(CS)No.2 of 2016 before the Principal District Court, Dindigul. The Special Tribunal for Co-operative Cases/Principal District Court, on perusing the materials produced and on hearing the arguments, has passed the impugned judgment, dated 05.09.2019, dismissing the appeal. Challenging the judgment of dismissal, the appellant has come forward with the present revision.
10.Whether the Special Tribunal for Co-operative Cases/Principal District Judge, erred in dismissing the appeal, despite showing that the second respondent has not rendered any finding that the petitioner was guilty of willful negligence ? is the point for consideration.
https://www.mhc.tn.gov.in/judis/ 6/20 C.R.P.(PD)(MD).No.145 of 2021
11.Admittedly, the revision petitioner was the then Secretary; 13th respondent was the Accountant and the respondents 14 to 16 were the other staffs of D.D.382, Nagal Nagar Co-operative Housing Society. It is also not in dispute that the second respondent was the President, third respondent was the vice President and the respondents 4 to 12 were the Executive Committee Members of the said Society.
12.It is the specific case of the revision petitioner that though the Registrar of Co-operative Society (Housing), based on the streamlining committee report, has issued a circular, dated 15.06.2009 for the revision of wages to the employees of Housing Society all over Tamil Nadu, there was no revision of wages with respect to DD.382, Nagal Nagar Co-operative Housing Society, but subsequently, a resolution was passed, revising the wages of the employees of the said Society and in pursuance of the same, a settlement was concluded under Section 18(1) of the Industrial Disputes Act, on 31.05.2013.
13.According to the revision petitioner, after assumption of the elected Board of the Management, steps were taken and settlement was concluded for revising the scale of pay, but the Deputy Registrar, alleging that some irregularities had been committed in revising the wages and in non https://www.mhc.tn.gov.in/judis/ 7/20 C.R.P.(PD)(MD).No.145 of 2021 collection of loans due to the Society, had ordered for enquiry. It is not in dispute that after enquiry, the petitioner and others were held responsible and consequently, after hearing them, passed an order, issuing surcharge proceedings, which was challenged in the appeal and since the appeal was dismissed by the Special Tribunal, the same is now impugned in the present revision.
14.The main contentions of the revision petitioner are that the Appellate Court has failed to consider the scope of Section 87 of Tamil Nadu Co-operative Societies Act, that the Appellate Court has also failed to consider that there was no misappropriation or fraudulent retention of money of the Society or that payments were made against the Act, Rules or bylaws, that the Appellate Court has erred in deciding that the revision of wages was made without approval of the Registrar and that though the revision petitioner has not caused any financial loss to the Society, the surcharge order passed by the first respondent is legally unsustainabe.
15. At the outset, it is necessary to refer Section 87 of the Tamil Nadu Co-operative Societies Act.
''87. Surcharge.__ (1) Where in the course of an audit under section 80 or an inquiry under section 81 or an inspection or investigation under section 82 or inspection of books under section https://www.mhc.tn.gov.in/judis/ 8/20 C.R.P.(PD)(MD).No.145 of 2021 83 or the winding up of a society, it appears that any person who is or was entrusted with the organisation or management of the society or any past or present officer or servant of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the society by breach of trust or willful negligence or has made any payment which is not in accordance with this Act, the rules or the by – laws, the Registrar himself or any person specially authorised by him in this behalf, of his own motion or on the application of the board, Liquidator or any creditor or contributory may frame charges against such person or officer or servant and after giving a reasonable opportunity to the person concerned and in the case of a deceased person, to his representative who inherits his estate, to answer the charges, make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate as the Registrar or the person authorised as aforesaid thinks just or to contribute such sum to the assets of the society by way of compensation in respect to the assets of the society by way of compensation in respect of the misappropriation, misapplication of funds, fraudulent retainer, breach of trust or willful negligence or payments which are not in accordance with this Act, the rules or the by–laws as the Registrar or the person authorised as aforesaid thinks just:
Provided that no action shall be commenced under this sub section after the expiry of seven years from the date of any act or omission referred to in this sub section :
https://www.mhc.tn.gov.in/judis/ 9/20 C.R.P.(PD)(MD).No.145 of 2021 Provided further that the action commenced under this sub section shall be completed within a period of six months from the date of such commencement or such further period or periods as the next higher authority may permit but such extended period or periods shall not exceed six months in the aggregate.''
16.Now let us consider the legal position. The learned counsel for the revision petitioner has relied on the following decisions :
(i) 2011 (2) CWC 286 :
AR.Shanmugha Murthy Vs The Principal District Judge :
“21. That apart, as stated above, it is reiterated that it is not even the charge levelled against the petitioners that they have committed misappropriation with guilty intention. In the surcharge proceedings under Section 87 of the Act, there must be a categoric finding that there is wilful and deliberate misconduct on the part of the officer and in the absence of such a finding, it is not possible to mulct any monetary responsibility even if the loss has been caused to the co-operative society and that has been the judicial precedent throughout.
22. A Division Bench of this Court, to which I am a party, in K.Ajay Kumar Gosh and others v. Tribunal for Co-
operative Cases (District Judge of Kanyakumari District), Nagercoil and another, [2009] 4 MLJ 992, while referring to the plethora of decisions on this issue, held that to pass surcharge https://www.mhc.tn.gov.in/judis/ 10/20 C.R.P.(PD)(MD).No.145 of 2021 order under Section 87 of the Act, the officer should have done an actionable wrong either by commission or omission in a deliberate and reprehensible manner with reckless callousness and with a supine indifference. It is useful to extract paragraphs [18] to [20] of the said judgment, which are as follows:
"18. Reliance was also placed on P.N.Chockappan and others v. Special Tribunal for Co-operative Cases, High Court Campus, Madras and others (1999) 1 MLJ 587 wherein it is held thus at p. 593 of MLJ:
"13. In order to pass a surcharge order under Section 71(1) of the Act against a person entrusted with management of a cooperative society or an officer or a servant thereof, such person should have done an actionable wrong either by commission or omission in a deliberate and reprehensible manner with reckless callousness and with a supine indifference, without taking due care and caution ordinarily expected from a reasonable and prudent man under those existing circumstances. In the absence of such categorical finding by the second respondent, it is not possible to mulct the petitioners with the loss caused to the society".
19. A detailed discussion has been made by making reference to various judgments on this aspect in another judgment reported https://www.mhc.tn.gov.in/judis/ 11/20 C.R.P.(PD)(MD).No.145 of 2021 in Sathyamangalam Cooperative Urban Bank Ltd. v. Deputy Registrar of Cooperative Society and another, (1980) 2 MLJ 17. It is held thus:-
"The degree of negligence that is contemplated under Section 71(1) of the Tamil Nadu Cooperative Societies Act is not mere negligence, but wilful negligence. The word 'wilful' has not been defined in the Act. 'Wilfulness' or 'wantonness' imports pre-mediation or knowledge and consciousness that an injury or loss is likely to result from the act done or from the omission to act. It imports a constructive intention as to the consequences which, entering into the wilful act, the law imputes to the offender and in this way a charge, which otherwise would be mere negligence, becomes by reason of a reckless disregard of probably consequences, a wilful wrong. The act done or omitted to be done must be intended or must involve such reckless disregard of security and right as to imply bad faith. In examining whether there is wilful negligence, it has to be seen first whether the person concerned is guilty of negligence and if so, whether the said wilful negligence is the proximate cause of the injury or loss sustained."
20. In the light of the decisions referred to above, it is clear that to pass surcharge order https://www.mhc.tn.gov.in/judis/ 12/20 C.R.P.(PD)(MD).No.145 of 2021 under Section 87 of the Act, appellants should have done an actionable wrong either by commission or omission in a deliberate and reprehensible manner with reckless callousness and with a supine indifference, without taking due care and caution ordinarily expected from a reasonable and prudent man under those existing circumstances. In the absence of such categorical finding by the Respondents, it is not possible to mulct the appellants with the loss caused to the society."
23. In such view of the matter, I have no hesitation to hold that in the absence of any finding by the authority having jurisdiction under Section 87 of the Act that there has been a reckless or callous attitude on the part of the petitioners, it cannot be held that the petitioners are liable to the surcharge proceedings. In many of the cases, there has been a finding that there is no loss caused, which is admitted, and the plots have been sold not only as per the resolutions of the societies, but also as per the advice of the second respondent, who is a responsible official. In such circumstances, even if the act is a mistake, the same can at the most be held to be not a negligent one, but a bona fide act following the directions of the higher officials.
24. Whether action is taken against the official or not is not the material fact for deciding the liability under Section 87 of https://www.mhc.tn.gov.in/judis/ 13/20 C.R.P.(PD)(MD).No.145 of 2021 the Act, as the finding that has to be rendered is whether the official is liable for the wilful misconduct and in the absence of wilful misconduct, which is a question of mens rea, about which there is no finding anywhere by any of the authorities, including the first respondent, I am of the view that the petitioners are entitled to succeed.'
(ii) 2014 (1) CWC 66 :
V.Rajendran vs. The Deputy Registrar of Coop. Societies, Salem Circle, Cherry Road, Salem and others.
“17. As rightly contended by the learned counsel for the petitioner, Section 87 of the Act, makes it very clear that for an order to be passed under Section 87 of the Act directing an employee to pay the loss caused to the Society, there should be a categorical finding that the loss was caused due to 'willful' negligence and mere negligence is not sufficient. The authority should have held that the loss was caused due to willful action of the petitioner. The learned counsel for the petitioner has submitted that neither the first respondent nor the Tribunal went into this aspect and therefore, no finding was given by both the authorities as to the "willful" action of the petitioner. He has taken me through the order of the Tribunal and the Tribunal nowhere held that the loss was caused due to the willful act of the petitioner.
18. Action under Section 87 of the Act was initiated in respect of 10 items. The petitioner was concerned with Item Nos.
https://www.mhc.tn.gov.in/judis/ 14/20 C.R.P.(PD)(MD).No.145 of 2021 3-A, 3-B and 5. But the Special Officer was held responsible in all the items and the Superintendent was also held responsible for almost all the items. I am of the considered view that the clerk cannot be held responsible for the loss, while the Special Officer and the Superintendent are let off on unsustainable grounds.
(iii) M.Anbalagan vs Enquiry Officer (CRP(MD)No.947 & 948 of 2016, dated 06.04.2017.
“23.In the judgment reported in 1999 (3) MLJ 310 [cited supra] also, the Court has decided that mere negligence is not a ground for initiating surcharge proceedings.
24.In the present case, a reading of the report of the enquiry officer under Section 81 of the Act as well as the order of the second respondent in surcharge proceedings clearly shows that both the Officers have not stated that the petitioner has intentionally deliberately and wilfully omitted to discharge his duties as Special Officer, when he failed to verify the loan register with deliberate intention to permit the Secretaries to commit irregularity and misappropriate funds. The enquiry officer in his report under Section 81 of the Act recommended for surcharge proceedings against the petitioner on his mere negligence in his discharging duties. The second respondent, in his surcharge order, had repeatedly stated that the petitioner had acted negligently and caused loss to the Society. Nowhere in the order, he has stated that the petitioner was wilfully negligent in discharging his duties. The second respondent also failed to consider the https://www.mhc.tn.gov.in/judis/ 15/20 C.R.P.(PD)(MD).No.145 of 2021 statement of K.V.Selvaraj, Senior Clerk, who has stated on oath that (1) Secretary Murugesan and Sales-woman Pushpavalli used to prepare the documents staying in the Society till 9.30 p.m. in the night and forced to obtain the signature from him in the morning; (2) that all the acts were done by the Secretary without consulting others and without the knowledge of other Staff; and (3) that all the members used to meet the Secretary to transact all the business only with him. The learned District Judge as a Presiding Officer of the Co- operative Tribunal also failed to consider that the enquiry officer under Section 81 of the Act and the second respondent have not alleged that the petitioner by his wilful negligence permitted the irregularities and misappropriation. The learned District Judge was carried by the quantum of alleged misappropriation and failed to consider whether alleged negligence on the part of the petitioner is wilful negligence as contemplated in Section 87(1) of the Act.
25. In view of the various judgments relied on by the learned counsel for the petitioner as well as the learned Additional Advocate General and the facts and circumstances in which the petitioner was placed, the allegation against the petitioner in surcharge proceedings and impugned orders, I hold that the respondents have failed to allege and prove the wilful negligence on the part of the petitioner. In view of the fact that the second respondent has not alleged the wilful negligence in his proceedings that the petitioner has acted in a wilful negligent manner, the ratio in the judgment reported in 2002 (3) LW 185 https://www.mhc.tn.gov.in/judis/ 16/20 C.R.P.(PD)(MD).No.145 of 2021 [cited supra] is squarely applicable to the facts of the present cases.
17.Considering the above, it is very much clear that the position of law is well settled, that the surcharge proceedings can be initiated under Section 87 of the Tamil Nadu Co-operative Societies Act, only if the employee should have done an actionable wrong either by commission or omission in a deliberate and reprehensible manner with reckless callousness and with a supine indifference, without taking due care and caution ordinarily expected from a reasonable and prudent man. It is also settled law that a mere negligence is not sufficient and it must be willful negligence so as to attract Section 87 of the said Act.
18.Admittedly, it is not the case of the first respondent that the petitioner and others had committed misappropriation or fraudulently retained any money or other property of the society or guilty of breach of trust or caused any deficiency in the assets of the society by breach of trust or willful negligence or that payments were made not in accordance with the said Act, the Rules or the By-laws. As already pointed out, the Board of Management, as per its resolution, concluded the settlement under Section 18(1) of the Industrial Disputes Act, revising the wages of the employees of the said Society, but according to the first respondent, it is without the approval of the Registrar. https://www.mhc.tn.gov.in/judis/ 17/20 C.R.P.(PD)(MD).No.145 of 2021
19.As rightly contended by the learned counsel for the revision petitioner, though the Tribunal has incorporated the decisions cited by both the sides, has specifically observed that in the absence of any categorical finding with respect to willful negligence, it is not possible to mulct the appellant with the loss caused to the Society. But subsequently, recorded a finding that the surcharge proceedings were initiated against the appellant for revising the wages of employees without the approval of the Registrar and therefore, it is crystal clear that the payments were made not in accordance with the Act or Rule.
20.As rightly contended by the learned counsel for the revision petitioner, neither the first respondent nor the Tribunal has referred any provision of the Act or Rule or by-law, which were violated and that payments were made not in accordance with those provisions or Rules or bylaws. As rightly pointed out by the revision petitioner side, the first respondent has nowhere whispered that the revision petitioner was guilty of willful negligence and there is absolutely no finding of mens rea in the order passed by the first respondent.
https://www.mhc.tn.gov.in/judis/ 18/20 C.R.P.(PD)(MD).No.145 of 2021
21.The Tribunal even after referring to the decisions cited by the learned counsel for the revision petitioner and even after recording the finding, that in the absence of any categorical finding with respect to willful negligence, the appellant cannot be mulcted with liability, has proceeded to dismiss the appeal.
22.Considering the above, this Court has no hesitation to hold that the impugned judgment of the Special Tribunal is very much against the settled legal position and as such, the same is liable to be set aside.
23.In the result, the Civil Revision Petition is allowed and impugned judgment dated 05.09.2019 in C.M.A(CS)No.2 of 2016, on the file of the Principal District Court, Dindigul, is set aside and consequently, the order of the first respondent dated 03.08.2015, passed under Section 87 of the Co-operative Societies Act is set aside. No costs. Consequently, connected Miscellaneous Petition is closed.
27.09.2021 Index : Yes / No Internet: yes / No das https://www.mhc.tn.gov.in/judis/ 19/20 C.R.P.(PD)(MD).No.145 of 2021 K.MURALI SHANKAR, J., das To
1.The Principal District Court, Dindigul.
2.The Section Officer, V.R.Section, Madurai Bench of Madras High Court, Madurai.
Pre-delivery order made in C.R.P.(PD)(MD).No.145 of 2021 and C.M.P.(MD)No.887 of 2021 27.09.2021 https://www.mhc.tn.gov.in/judis/ 20/20