Andhra Pradesh High Court - Amravati
M.Chandramouli Reddy vs The State Of Andhra Pradesh on 31 July, 2019
Author: M. Ganga Rao
Bench: M.Ganga Rao
HONOURABALE SRI JUSTICE M. GANGA RAO
Writ Petition No.3994 of 2018
ORDER:
Challenging surcharge order in Rc.No.507/2016.C1, dated 16.10.2017 passed under Section 60 (1) of the A.P. Cooperative Societies Act, 1964 by the 3rd respondent ordering recovery of Rs.23,65,287.92ps excess expenditure from the Managing Committee Members of Narasingapuram FSCS along with 18% interest per annum from the date of excess expenditure till the date of recovery of the amount, the present writ petition is filed.
2. Heard Sri N. Jayasurya, learned counsel for the petitioner and the learned Government Pleader for Cooperation.
3. The case of the petitioner is that the 4th respondent- Narasingapuram Farmers Service Cooperative Society was established in 1976. As the society was financed by the Indian Bank with substantial amounts, an officer of the said bank was deputed to act as Managing Director of the 4th respondent society. The present Managing Committee of the society was elected in the year 2013. The petitioner was elected as President of the Managing Committee and discharged his functions in strict adherence to the provisions of the Andhra Pradesh Cooperative Societies Act, 1964 and rules made thereunder and followed circular instructions of the Government. It is stated that the term of the present Managing Committee expired on 03-02-2018, but the same was extended by six months vide G.O.Ms.No.8 Agriculture and Cooperation Department, dated 29-01-2018 as per the provisions of Section 32 (7) (1) of the A.P. Cooperative Societies Act, 1964. The present 2 MGRJ W.P.No.3994 of 2018 Managing Committee continued the practice of making payment of salaries to staff of the society. Every year the Audit Wing of Cooperative Department deputes their officials for auditing the accounts of the society and on completion, the District Cooperative Audit Officer, Chittoor District approves the said audit. The audit of the society was completed up to 2016-17. In the audit, no misuse of funds was made out except for the year 2015-16, wherein it is found that the excess expenditure incurred towards staff salaries over and above prescribed limit. It is further stated that pursuant to a Special Audit Report dated 29-09-2016 submitted by the officers of the Audit Wing regarding Final Audit Report for 2015-16, a surcharge notice dated 07-06-2017 was served on the Managing Committee to show cause as to why action should not be initiated for recovery of Rs.25,64,529.32 along with interest at 18% p.a. The members of the Managing Committee were also directed to attend enquiry on 05.07.2017. Pursuant to the said surcharge notice, the petitioner along with other Directors submitted their explanation on 27-06-2017 setting out various facts with regard to incurring expenditure towards cost of management and staff cost including the reason for incurring expenditure due to availing the services of an officer of the Indian Bank as Managing Director of the society and requested to drop the proposed recovery of expenditure incurred towards salary of Managing Director. The petitioner along with other Directors attended the enquiry on 05.07.2017, during the course of which, the petitioner raised various objections in respect of failure of the auditors in following the norms laid down by the circulars issued in 3 MGRJ W.P.No.3994 of 2018 Rc.No.1043/2003/PCI, dated 14.05.2010 and the Circular Memo Rc.No.1372/10/CR2, dated 30.10.2010, besides pointing out various discrepancies. However, the Surcharge Officer, without properly considering the explanation submitted by the Managing Committee in its proper perspective issued the impugned Surcharge Order vide proceedings in Rc.No.507/2016.C1, dated 16-10-2017, ordering recovery of Rs.23,65,287.92ps. excess expenditure incurred towards management and staff salaries from the Managing Committee members of the 4th respondent society with interest at 18% p.a. from the date of excess expenditure till the date of recovery of the amount. Assailing the said surcharge order, the present writ petition came to be filed.
4. Sri N. Jayasurya, learned counsel for the petitioner would contend that the impugned order is passed purely based on the Revised Audit Report submitted during the course of surcharge proceedings and the said impugned surcharge order is not preceded by any show cause notice to the petitioner calling for objections to the Revised Audit Report. He contended that the impugned surcharge order is passed without giving any adequate and reasonable opportunity either to the petitioner or the members of the managing committee. He further contended that the conducting of surcharge proceedings is contrary to law laid down by this Court. The learned counsel further contended that during the course of enquiry, the authority has considered sworn statements of some officers with regard to final audit report. In support of his contention, the learned counsel has placed a reliance on S. Ramu v. A.P. 4 MGRJ W.P.No.3994 of 2018 Cooperative Tribunal, Visakhapatnam, represented by its Registrar and others1 to contend that the surcharged officer has a right to cross-examine the witnesses examined in the course of enquiry under Section 52 of the Act and also entitled to examine his witness to rebut their evidence. He further contends that before passing the impugned surcharge order, the authority has not given opportunity to cross-examine the witnesses and not followed the procedure as contemplated under Section 60 (1) of the Andhra Pradesh Cooperative Societies Act, 1964. But, in the instant case, the authority has not followed the procedure as contemplated under the provisions of Section 60 (1) of A.P. Cooperative Societies Act amounting to violation of principles of natural justice.
Having regard to the facts and circumstances of the case and various contentions raised by the learned counsel, this court found that the impugned surcharge order dated 16-10-2017 passed under Section 60 of the Act is not preceded by any notice or opportunity for making a representation to the petitioner and the members of the society. Section 60 of the Cooperative Societies Act stipulates that no order under this section shall be passed against the person referred therein unless the person concerned has been given an opportunity of making his representation and considering the same and giving full opportunity, in strict adherence to the principles of natural justice. But, contrary to the said stipulation, the authority straight away passed the impugned surcharge order without giving any notice or opportunity, violating the principles of natural justice. In 1 2015 (1) ALT 742 5 MGRJ W.P.No.3994 of 2018 support of this contention, the learned counsel has placed a reliance on S. Ramu v. A.P. Cooperative Tribunal, Visakhapatnam, represented by its Registrar and others (stated supra), to contend that the officer holding the surcharge proceedings should give opportunity to the surcharged officer. In the said judgment, this court held that section 60 of the Act imposes obligation on the officer holding the surcharge proceedings that the surcharged officer should be given opportunity and that the enquiry conducted under Section 52 of the Act is only administrative in nature. It is further held that Section 60 of the Act contemplates an opportunity to the delinquent for making a representation and the said right to file representation is a valuable one given to the person likely to be affected and the said right cannot be brushed aside in a routine and mechanical manner. It was further held that after issuance of show cause notice and after calling for the explanation and after submission of the same by the delinquent, the delinquent is entitled to cross-examine the witnesses examined in the course of enquiry under Section 52 of the Act and also entitled to examine his witnesses to rebut their evidence and that unless and until the same is done, the spirit of making a representation as contemplated under Section 60 of the Act cannot be said to be fulfilled.
In the instant case, as seen from the impugned surcharge proceedings, it shows that after careful examination of the final audit report 2015-2016, special audit report, sworn depositions of the concerned officers the authority came to the conclusion that an amount of Rs.23,65,287.92 ps shall be recovered from the members 6 MGRJ W.P.No.3994 of 2018 of the 4th respondent managing committee jointly and severally as the managing committee has incurred excess expenditure for management and payment of salaries to the staff of the society during the year 2015-2016. In fact, the authority has not given any notice or opportunity of making a representation to the petitioner before passing the impugned surcharge order. Even the authority has not given any opportunity of cross-examining the witnesses, who gave sworn statements, during the course of enquiry. Hence, the authority has not followed the procedure as contemplated under Section 60 of the Act and the law laid down by this Court in the decision stated supra and hence, the authority has grossly violated the principles of natural justice. The surcharge order is passed based on revised audit report said to be under Section 52 of the Act, wherein the surcharged persons were not allowed to participate in the enquiry. Hence, the petitioner is entitled for opportunity before passing surcharge order, surcharge proceedings has to be conducted akin to civil court procedure, as the jurisdiction of the civil court is barred under Section 121 of the A.P. Cooperative Societies Act, as the surcharge order is passed in utter violation of the provisions of Section 60 (1) of the Act and contrary to the decisions laid down in Challa Sanyasinaidu v. Deputy Registrar of Cooperative Societies, Srikakulam (1998(1) ALT 482 (DB) and Kolluri Bhaskara Rao v. Deputy Registrar of Cooperative Societies, Gudivada, Krishna District (1998 (3) ALD 154 (DB). Therefore, the impugned surcharge proceedings are not sustainable in law and the same liable to be set aside.
7 MGRJ W.P.No.3994 of 2018 Accordingly, the writ petition is allowed and the surcharge order in Rc.No.507/2016-C1, dated 16-10-2017 is set aside. However, the 3rd respondent-Deputy Registrar of Cooperative Societies is given liability to conduct an enquiry by following the procedure as contemplated under Section 60 of the A.P. Cooperative Societies Act, 1964 before passing the surcharge order as per law.
As a sequel thereto, miscellaneous petitions, if any, pending shall stand closed.
________________ M. GANGA RAO, J Date: 31-07-2019 Note: Issue C.C. in three days B.O./Ksn