Kerala High Court
Johny Kachappally vs The Joint Registrar Of Co-Operative ... on 6 June, 2019
Author: Devan Ramachandran
Bench: Devan Ramachandran
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN
THURSDAY, THE 06TH DAY OF JUNE 2019 / 16TH JYAISHTA, 1941
WP(C).No. 14689 of 2019
PETITIONER:
JOHNY KACHAPPALLY,
PRESIDENT, MANAGING COMMITTEE, THE THUMBOOR SERVICE
CO-OPERATIVE BANK LIMITED NO.359, HEAD OFFICE,
THUMBOOR P.O, VELLANGALLOOR (VIA),
THRISSUR DISTRICT, PIN CODE - 680 662.
BY ADVS.
SRI.GEORGE POONTHOTTAM (SR.)
SMT.NISHA GEORGE
SRI.RIJI RAJENDRAN
SRI.ARUN CHANDRAN
RESPONDENTS:
1 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES,
OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE
SOCIETIES(GENERAL), AYYANTHOLE,
THRISSUR DISTRICT - 680 003.
2 ADDL.R2 ANWAR A.A,
AGED 38 YEARS, S/O ABOOBACKER,
ALUVAKKARAN HOUSE, VATTEPPADAM, KOTTAMALLUR P.O,
MUKUNDAPURAM TALUK, THRISSUR DISTRICT.
(ADDL.R2 IS IMPLEADED AS PER ORDER DATED 06/06/2019
IN IA.NO.01/2019)
3 ADDL.R3 BIJOY.K.R,
MEMBER NO.5432, THUMBOOR SERVICE CO-OPERATIVE BANK
LTD NO.359, THUMBOOR, RESIDING AT KOLLAMPARAMBIL
HOUSE, VELLANGALLOOR P.O, THRISSUR.
(ADDL.R3 IMPLEADED AS PER ORDER DATED 06/06/2019 IN
IA.NO.02/2019)
BY ADVS.
SRI.M.SASINDRAN - R2
SRI.P.C.SASIDHARAN - R3
SRI. MUHAMMAD HASHIM -SPECIAL GOVERNMENT PLEADER
W.P. (C) No.14689/2019
2
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
06.06.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P. (C) No.14689/2019
3
CR
JUDGMENT
The inviolably imperative requirement for the Competent Authority to seek an effective consultation with the statutorily enumerated consultees, before action for supersession of the elected Managing Committee of a Co-operative Society, has been emphasisingly stated by the Hon'ble Supreme Court time and again.
2. The most recent emphatic declaration of the Hon'ble Supreme Court in this area is available in paragraph 23 of the judgment in State of Madhya Pradesh v. Sanjay Nagayach [(2013) 7 SCC 25]; which I am fully aware will guide me while assessing the dialectical contentions in this writ petition and I, therefore, deem it necessary to extract the same as below to enable full reading:
"24.The mere serving a copy of the show-cause notice on RBI with supporting documents is not what is contemplated under the second proviso to Section 53(1). For a meaningful and effective consultation, the copy of the reply filed by the Bank to the various charges and allegations levelled against them should also W.P. (C) No.14689/2019 4 be made available to RBI as well the action proposed by the Joint Registrar, after examining the reply submitted by the Bank. On the other hand, RBI should be told of the action the Joint Registrar is intending to take. Only then, there will be an effective consultation and the views expressed by RBI will be a relevant material for deciding whether the elected board be superseded or not. In other words, the previous consultation is a condition precedent before the forming of an opinion by the Joint Registrar to supersede the Board of Directors or not."
3. As I will presently record, the contentions impelled in this writ petition, based on the facts available, which I will first record compendiously as under, are edificed on the afore extracted holdings of the Hon'ble Supreme Court.
4. The Managing Committee of the Thumboor Service Co-operative Bank Ltd., (hereinafter referred to as 'the Bank' for brevity), a Co-operative Society registered under the provisions of the Kerala Co-operative Societies Act (hereinafter referred to as 'KCS Act' for short), was superseded on 25.05.2019, through an order, which has been placed on record as Ext.P11. The validity of this order has been called into question in this writ W.P. (C) No.14689/2019 5 petition by the erstwhile President of the Managing Committee, asserting that he is representing the other members also, on various grounds but focally that the said order has been issued in violation of Section 32 of the KCS Act and in gross affront to the directions of this Court in Exts.P2 and P9 judgments.
5. When this matter was taken up today for admission, the learned Senior Counsel for the petitioner, Sri.George Poonthottam, instructed by Sri.Arun Chandran, pressed for an interim order; but sensing that this Court was not so inclined, requested that this writ petition be heard finally and disposed of today itself, since the election to the Managing Committee of the Bank is scheduled on 16.06.2019, in which his client intends to offer himself as a candidate and consequently, that any further delay in disposal of this writ petition would render it virtually infructuous. I, therefore, asked the learned Senior Government Pleader and the other counsel for the respondents if this request of Sri.George Poonthottam could be acceded to and they answered in unison that this writ petition may be heard and disposed of finally today itself.
6. I thus proceed to dictate this judgment.
7. Before I can comprehensively evaluate the syllogistical W.P. (C) No.14689/2019 6 pleadings and contentions of the parties in this case, it is necessary that I glance through the previous litigative history this matter has gone through.
8. The competent Joint Registrar of Co-operative Societies, namely, the 1st respondent herein, initially began action against the Bank under Section 66(1) of the KCS Act, which lead to a report being obtained by the said Authority, wherein allegedly, very grievous allegations were made against its Managing Committee, particularly with respect to the manner in which its fiscal affairs were being managed. The allegations varied from the accusation that they had illegally and without authority expended much more what was sanctioned for the construction of certain buildings; that excess interest than what was legally permissible had been paid to certain persons on their Fixed Deposits; that gold articles/ornaments pledged were not released to borrowers even after their loans had been closed; and that the Managing Committee has splurged in buying expensive complements for the members of the Bank by using its funds, in violation of Section 56 of the KCS Act, to an extent of about 20.76 lakhs.
9. The Joint Registrar, therefore, appears to have W.P. (C) No.14689/2019 7 initiated action under Section 32 of the KCS Act for supersession of the Managing Committee and a statutory notice issued to its members, which was challenged by them in W.P.(C) No.20804/2017, leading to Ext.P2 judgment, wherein a learned Single Judge issued the following directions:-
"17. Having considered the submission made by the learned counsel on both sides, this writ petition is disposed of with the following directions;
i) The 1st respondent shall issue notice to the petitioners and others referred to in Ext.P1 notice requiring them to appear for a personal hearing, in terms of Ext.P1 notice.
ii) On receipt of such notice, the petitioners and others referred to in Ext.P1 notice shall appear before the 1st respondent and offer their explanations, based on Ext.P7 explanation.
iii) After considering the explanation, the 1st respondent shall take an appropriate decision as to the further course to be taken in the matter, taking note of the law laid down by the Apex Court in Sanjay Nagayach's case (supra).
iv) A decision in this regard shall be taken, as expeditiously as possible, at any rate, within a period of two weeks from the date of such personal hearing.
All legal and factual contentions raised by the W.P. (C) No.14689/2019 8 petitioners are left open to be raised before the 1st respondent at appropriate stage."
10. The pleadings and records available, then reveal that the Managing Committee and the petitioner herein, as its President, thereupon assailed Ext.P2 judgment before a Division Bench of this Court which ended in Ext.P3 judgment, wherein the following observations were made:-
"The notice for supercession under Section 32 of the Kerala Co-operative Societies Act, 1969 based on a report of the inspection under Section 66 of the Act cannot be nipped in the bud as stated by the learned single Judge. Many factual disputes arise particularly when the parties are at variance and an opportunity has been afforded to the appellants to respond to the notice. Any order passed finally can also be challenged statutorily and the writ petition challenging Ext.P1 notice of supercession was rightly not entertained.
The writ appeal fails. Dismissed."
11. It is also conceded that this judgment was taken up before the Hon'ble Supreme Court; but that it was withdrawn, with liberty to file a review petition before this Court, as is evidenced from Ext.P4 order; and that in the subsequent review W.P. (C) No.14689/2019 9 which was filed, Ext.P6 judgment was delivered, affirming Ext.P2 and directing the Statutory Authority to act under its terms implicitly.
12. The petitioner submits that subsequent to these developments, the respondent-Joint Registrar of Co-operative Societies issued Ext.P7 notice to him and to the other members of the erstwhile Managing Committee; and that on the apprehension that their explanation, namely Ext.P8, would not be properly evaluated, they approached this Court by filing W.P.(C) No.13200/2019, which culminated in Ext.P9 judgment, wherein the conclusions afore extracted in Ext.P2 judgment was affirmed and the following directions issued.
"I have considered the contention of the counsel. The Honorable Apex Court in State of Madhya Pradesh V. Sanjay Nagayach ((2013) 7 SCC 25) has specifically held that the democratic running of Co-operative Societies is the rule and the supersession of such duly elected committees exercising the extra ordinary power by the controlling officers is in exemption which is to be resorted to only in cases of extreme necessity. I am of the opinion that the reply submitted by the petitioners to Ext.P7 show cause -4- WP(C).No. 13200 of 2019 notice is liable to be W.P. (C) No.14689/2019 10 considered by the respondents in accordance with law and inform the decision to be taken, taking note of the directives of the Apex Court in Sanjay Nagayach Case (supra). The question whether it is necessity to supersede the committee will be considered by the respondents taking note of the contentions of the petitioners also. It is made clear that the respondents shall consider the reply submitted by the petitioners and pass an appropriate resent order in accordance with law. The order shall be duty communicated to the petitioners and action on the same shall be deferred for a period of ten days after the order is communicated to the petitioners."
13. The petitioner asserts that subsequent to the above directions in Ext.P9 judgment, they preferred Ext.P10 objections to the action proposed against the erstwhile Managing Committee under Section 32 of the KCS Act; but that without considering any of such objections and in complete disregard to the directions in Exts.P2 and P9 judgments, Ext.P11 order has been issued, ordering supersession of the Managing Committee and the appointment of a Part-time Administrator to take charge of the affairs of the Bank. The petitioner says that, this order is wholly illegal, both on facts and in law; and therefore, that it be W.P. (C) No.14689/2019 11 set aside by this Court.
14. Sri.George Poonthottam, the learned Senior Counsel appearing for the petitioner, began his submissions by asserting that Ext.P11 is vitiated for two broad reasons; firstly, because the process of consultation, as mandated under Section 32 of the KCS Act, with the Circle Co-operative Union and the District Co- operative Bank, has not been done in the manner as is statutorily required; and secondly, that in spite of the specific directions in Exts.P2 and P9 judgments, the objections raised by them have not been considered or answered by the Authority before the order of supersession had been issued; and therefore that the said order looses its legs to stand on, thus rendering it untenable and illegal in law.
15. On the contention first afore recorded, Sri.George Poonthottam submits that a reading of Ext.P11 order would make it limpid that the Joint Registrar had issued a letter, dated 20.05.2019, to the concerned District Co-operative Bank and the Circle Co-operative Union, which are admittedly the consultees in this case, and that the alleged replies from the said consultees were received by him only on 23.05.2019. He then shows me that it is also recorded in Ext.P11 that, thereafter, based on the W.P. (C) No.14689/2019 12 views and opinion of the consultees, the Joint Registrar has issued another order, dated 21.05.2019, which has been referred as item No.18 therein, recording that he has arrived at a "tentative decision" to supersede that Managing Committee and he vehemently asserts that this is impossible going by the normal flow of time. He contends, therefore, that the process prescribed under Section 32 of the KCS Act has been completely violated, since the opinion of the consultees having been obtained only on 23.05.2019, the Joint Registrar could not have taken a "tentative decision" to supersede the Committee as early as on 21.05.2019 and that he has had the temerity to mention in the order that this decision was based on the opinion of the consultees.
16. Sri.George Poonthottam then continued with his corollary submissions by asserting that, in any event of the matter, it is only after the Joint Registrar had entered into a tentative opinion to supersede the Managing Committee, could he have asked the consultees for their opinion and that since he had not informed them, while addressing them on 20.05.2019, that he had decided tentatively to take action against the Managing Committee under Section 32 of the KCS Act, the W.P. (C) No.14689/2019 13 process of such consultation is totally vitiated and rendered otiose. He relies in support of their submissions on the judgment of a Division Bench of this Court in Sahadevan v. Padmanabhan [2004 (1) KLT 192].
17. After predicating as above, the learned Senior Counsel beseeched that the haste in the process afore recorded must also not be lost sight of by this Court, because even though the consultees were addressed only on 20.05.2019, they gave their opinion immediately on 23.05.2019 and the Joint Registrar, thereafter, issued Ext.P11 on 25.05.2019 itself. He accusatorily submits that this was possible only because one of the consultees, namely the District Co-operative Bank, is also administered by the same Joint Registrar who has issued Ext.P11; while the Circle Co-operative Bank is under the administration of an Assistant Registrar, who, he alleges, is a willing collaborator, being an inferior Authority. Sri.George Poonthottam thus submits that the opinions of the consultees are also tainted for these reasons; and consequently, that the consultation, as is required mandatedly under Section 32 of the KCS Act, cannot be seen to have been obtained validly and properly in this case.
W.P. (C) No.14689/201914
18. Sri.George Poonthottam, thereafter, entered into his second line of argument saying that a mere reading of Ext.P11 would establish that none of the objections raised by the petitioner in Exts.P8 and P10 have been even looked into, let alone being answered specifically; and therefore, that the directions afore extracted of this Court have been grossly disregarded and violated. He says that, resultantly, Ext.P11 must be construed to have been issued in contempt for the orders of this Court by the Joint Registrar and prays that this Court set it aside.
19. In answer to the submissions of the learned Senior Counsel as recorded afore, Sri.Muhammad Hashim, the learned Special Government Pleader, began by asserting that Ext.P11 order was issued after specifically noticing all the objections raised by the petitioner in Exts.P8 and P10. He says that, as is clear from page 10 of the said order, the Joint Registrar has unequivocally recorded that he has considered all the objections in detail, but found them to be unworthy of credence. On the question of statutory consultation, the learned Special Government Pleader concedes that there are some clerical errors in the dates shown in Ext.P11 and that the original records, W.P. (C) No.14689/2019 15 which are available with him, would show that the consultees were addressed by the Joint Registrar not on 20.05.2019 but on 21.05.2019 and that their opinions were received on 23.05.2019, thereafter, leading to a tentative decision being taken by the respondent-Joint Registrar on 24.05.2019 and not on 21.05.2019 as mentioned therein is in error. He prayed that the original records may be examined by this Court, which would make this position incontrovertible. He, therefore, prayed that Ext.P11 be allowed to operate and that this Court issue no interdiction against it.
20. Sri.M.Sasindran, the learned counsel for the 2nd respondent, refuted the contentions of the petitioner asserting that Ext.P11 is without fault, because the allegations made and established against the petitioner and the erstwhile Managing Committee are extremely grave in nature. He says that, going by the tenor of the allegations, any action by the Joint Registrar of Co-operative Societies, except under Section 32 of the KCS Act, would be inadequate and resultantly untenable. Sri.M.Sasindran, thereafter, proceeded to say that whatever be the contentions of the petitioner as recorded above, the fact remains that he and the erstwhile Managing Committee has expressly conceded to at W.P. (C) No.14689/2019 16 least one of the allegations against them, namely, they had illegally offered valuable complements to the members, worth nearly Rs.20.5 lakhs, during the period they were in office, in total violation of Section 56(1) of the KCS Act, and therefore, that this one admitted charge is sufficient to supersede them under Section 32 of the KCS Act. He relies on the judgment of this Court in State of Kerala v. Raju (1973 KLT 589) in support.
21. Sri.P.C. Sasidharan, the learned counsel appearing for the 3rd respondent in this case, more or less adopted the submissions made by Sri.M.Sasindran, adding that the statutory procedural irregularities now complained of by the petitioner, even if assumed to be true, would be of no avail at all because what is important in law is that the consultees should have understood what the Joint Registrar intended to do, so that they can then put their minds to it to decide whether such an action is necessary or to be permitted. He says that whatever be the discrepancies in the dates shown in Ext.P11, the truth remains that both the District Co-operative Bank and the Circle Co- operative Union have granted their imprimatur to the action proposed by the Joint Registrar, as is manifest from their letters W.P. (C) No.14689/2019 17 dated 23.05.2019, mentioned as item Nos. 16 and 17 in Ext.P11 order. He, therefore, says that de hors the technicalities pressed into service, the petitioner cannot be heard to allege that Ext.P11 is illegal, because the proven allegations against him and other erstwhile members of the Managing Committee are so grievous in nature, that it warrants nothing less than supersession.
22. After all the learned counsel completed their submissions, I put a question at the Bar as to whether any party would object to this Court examining the original records available with the learned Senior Government Pleader and I must state that not merely did none of them so object; but that Sri.George Poonthottam prayed that this Court do so, so as to get to the truth of the opposing allegations of the rival parties. I, therefore, record that this Court, thereupon, obtained the original files from the learned Special Government Pleader and inspected it in detail and have evaluated its contents in the light of the pleadings on record, as also the above submissions made on behalf of the petitioner and respondents.
23. I, thus, proceed to indite this Court's opinion and views on the various aspects involved as below.
24. As has been seen above, the submissions of W.P. (C) No.14689/2019 18 Sri.George Poonthottam, the learned Senior Counsel, are broadly that Ext.P11 order is bad for the reasons that the statutory consultation was not proper and because his client's objections, as recorded in Exts.P8 and P10, were not considered or specifically answered therein by the Joint Registrar, even though it was so directed through Exts.P2 and P9 judgments.
25. Since the allegations in law, if established, would make Ext.P11 unsustainable even without this Court having to enter into consideration of the other factual aspects, I propose to consider the first contention before treading into the evaluation of the other.
26. It is indubitable from Ext.P11 order that the Joint Registrar of Co-operative Societies had issued a letter to the competent consultees, namely the District Co-operative Bank and the Circle Co-operative Union, on 20.05.2019 and that they had replied to this through their letters dated 23.05.2019. Of course, Ext.P11 then goes on to state that a "tentative decision" was taken by the Joint Registrar to supersede the Managing Committee of the Bank, through his order dated 21.05.2019, based on the opinion of the consultees and that the final decision to supersede the Committee was taken on 25.05.2019. The W.P. (C) No.14689/2019 19 contentions of Sri.George Poonthottam based on these facts and dates are certainly legitimate because the Joint Registrar could not have taken a tentative decision on 21.05.2019, based on the opinion of the consultees dated 23.05.2019. It is doubtless that if the dates, as recorded in Ext.P11, are correct then this order will certainly have to go. I, therefore, examined the original files, from which I see that the Joint Registrar had not addressed the consultees on 20.05.2019, as mentioned in Ext.P11, but only on 21.05.2019 and a reading of this clearly indicates that he proposed an action under Section 32(2) of the KCS Act. That letter also says that if the consultees do not give their opinion within a period of seven days, the Joint Registrar would take necessary action under Section 32 of the KCS Act without any further opportunity being offered to them. The original records would further show that this letter was received by the consultees on 21.05.2019 itself and that they had furnished their respective replies on 23.05.2019, wherein they have opined that they have no objection to the action under Section 32 of the KCS Act being taken against the erstwhile Managing Committee of the Bank; and in fact, further recommending that such action was apposite.
W.P. (C) No.14689/201920
27. The files further reveal that after receipt of the replies from the consultees, the Joint Registrar initiated further proceedings, dated 24.05.2019; but not on 21.05.2019, as incorrectly recorded in Ext.P11, apparently to place on record his "tentative decision" to supersede the Managing Committee of the Bank. It is this proceeding, the date of which is recorded incorrectly in Ext.P11, that is now being used by the petitioner to allege its invalidity.
28. Though I am unhappy at the casual and careless manner in which Ext.P11 order has been written, which is manifest from the various admitted errors in the dates recorded therein, I do not deem it prudent to set it aside solely for such reason and feel it necessary to test the contentions impelled by Sri.George Poonthottam against the correct dates as are available from the original files.
29. As I have seen above, the Joint Registrar of Co- operative Societies issued his letter, dated 21.05.2019, to the consultees asking for their opinion, stating unequivocally that he intended to initiate action against the Managing Committee of the Bank under Section 32 of the KCS Act and this letter was accompanied by the report under Section 66 of the KCS Act W.P. (C) No.14689/2019 21 obtained by him, along with all other necessary records. The consultees replied to this, with their affirmative opinion favouring such action, on 23.05.2019.
30. Obviously, therefore, a further "tentative decision"
need not have been recorded by the Joint Registrar through another proceedings dated 24.05.2019, incorrectly shown in Ext.P11 as 21.05.2019. This proceeding certainly is superfluous, since what is required in law is that the Joint Registrar ought to have informed the consultees of his tentative findings and of his intention to take action against the Managing Committee of the Bank under Section 32 of the KCS Act, so that they could thereafter respond properly, taking note of all the relevant facts.
31. When I say this, I am not being obvious to the submissions of Sri.George Poonthottam, the learned Senior Counsel, that the Joint Registrar could have issued final orders under Section 32 of the KCS Act only after his "tentative decision" had also been forwarded to the consultees and only after obtaining their opinion on such decision. I am also aware that he hinges these assertions on the observations of a Division Bench of this Court in Sahadevan (Supra). I, therefore, feel it necessary to read the observations in the said judgment, in full; W.P. (C) No.14689/2019 22 for which purpose, extract it as under:
"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 24.09.2003 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 sub-s(2) of S.32 of the Act. According to the learned Single Judge, the notice, the reply W.P. (C) No.14689/2019 23 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 how show cause notice and the "tentative findings" arrived at by the Joint Registrar after considering such explanations/objections are also forwarded to W.P. (C) No.14689/2019 24 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."
(Emphasis supplied)
32. When one reads the above observations carefully, it would leave no doubt that what the learned Division Bench has required is that the Registrar/Joint Registrar furnishes all relevant and germane documents, reports and materials to the consultees, along with his tentative findings so that they can form an informed opinion. The judgment does not refer to any "tentative decision" by the Registrar/Joint Registrar, but only to "tentative findings" so that the consultees clearly comprehend what action is proposed by the Registrar/Joint Registrar and the reasons that have lead to such proposal being made by him. In fact, the declaration by the Hon'ble Supreme Court in Sanjay Nagayach (Supra), extracted in para 2 of this judgment; also affirms this position beyond any doubt.
33. Hence, it is luculent that the submission of Sri.George W.P. (C) No.14689/2019 25 Poonthottam, that the Joint Registrar in this case ought to have first forwarded his "tentative decision" to the consultees and ought to have waited for their opinion on it, before Ext.P11 order had been issued is devoid of merit. The sole pertinent requirement is that the consultees must have known of the "tentative findings" of the Joint Registrar and the action proposed by him; and it is clear from the letter, dated 21.05.2019, issued by the Joint Registrar to them, that these criterion were satisfied and that they have, thereafter, issued their unmistakable opinion / views, agreeing to the supersession of the Managing Committee, on 23.05.2019; whereupon the Joint Registrar issued Ext.P11 order. I, therefore, repel these contentions of Sri.George Poonthottam, reiteratingly holding that the proceedings of the Joint Registrar, dated 24.05.2019, recording his "tentative decision" to be unnecessary and superfluous and declaring that such proceedings have, therefore, no legal bearing on the validity of Ext.P11 order.
34. Even when I hold so, I must answer the last limb of this contention, which is more or less an insinuation that the consultation by the consultees has been a farce in this case because one of them, the District Co-operative Bank is managed W.P. (C) No.14689/2019 26 by the same Joint Registrar who issued Ext.P11 and since the other, namely, the Circle Co-operative Union, is under a willing inferior officer who will agree to everything that the Joint Registrar would ask him to do. I am afraid that I cannot countenance these submissions because they have been made at the Bar without any such allegation being made in the pleadings, even sotto voce; and since no accusation of mala fides of any kind, except feebly on the alleged speed at which the process of consultation was completed, having been shown anywhere in the writ petition. As regards the alleged speed in completing the process, even if true, it cannot per se be conclusively be a test of the validity of Ext.P11 order in the absence of other vitiating factors .
35. At this time, Sri.George Poonthottam submitted that his client also has a case that Ext.P11 order is unsustainable since he and the other members of the erstwhile Managing Committee of the Bank had not been heard after the opinion of the consultees had been obtained by the Joint Registrar and after he had entered into a "tentative decision" to supersede the Committee. This submission, again, does not appeal to me since the statutory scheme of Section 32 of the KCS Act provides for W.P. (C) No.14689/2019 27 no such hearing, particularly because the petitioner concedes that he was served with Ext.P7 notice and heard before Ext.P11 had been issued. This is all that the KCS Act provides and hence the contrary assertions of the petitioner are incapable of finding favour in law.
36. Having answered the contentions of the petitioner with respect to the process of consultation in the aforesaid manner, I now move forward to assess the validity of Ext.P11 from the manner in which it has been issued in the backdrop of the directions in Exts.P2 and P9 judgments of this Court. Even without the need of detailed expatiation, I must say that a mere ex-facie reading of Ext.P11 is completely unsatisfactory from this point of view. This is because, even though this Court has clearly directed that each of the objections of the petitioner must be taken into account, considered and answered in the final order, such consideration, contemplation and reflection is woefully lacking in Ext.P11 order. As is manifest from it, all that the Joint Registrar has done is to state that he has considered all the objections raised by the petitioner in Exts.P8 and P10, but without, in any manner, dealing with such objections individually or overruling them with cogent reasoning. Going by the strict W.P. (C) No.14689/2019 28 nature of the directions of this Court in Exts.P2 and P9 judgments, he ought to have discussed the merits of each of such objections and to have recorded his reasons for rejecting them. Normally, therefore, in such circumstances, this Court would have been fully justified in setting aside the said order for this sole reason since, it is ineluctable that it has been issued without adequate and sufficient regard to the directions in Exts.P2 and P9 judgments.
37. However, one thing that stops me from doing so in this case is the fact that the petitioner has, in Ext.P8 objections, conceded that the erstwhile Managing Committee had spent large amounts, as alleged against them, for offering various complements to its members. This certainly being in violation of Sections 55 and 56 of the KCS Act and being contrary to the directions of the Registrar of Co-operative Societies in circular No.MP521840/99, dated 20.01.2000, wherein the Managing Committees of all Societies were strictly directed not to expend the profits of the Societies for offering compliments to their members, it becomes a very relevant factor in favour of the order of supersession. Of course, the defence to this by Sri.George Poonthottam is that this practice is common place and W.P. (C) No.14689/2019 29 routine in all Societies; but even if this is true, it would not justify it because Section 55 of the KCS Act prohibits distribution of such largesse and since Section 56 thereof does not include distribution of complements to its members as being one among the enumerated permissible modes in which a Society can deal with its funds or profits. A well considered and comprehensive binding precedent in this area is not difficult to find, since a learned Division Bench of this Court in Raju (supra) has spoken on it at great length. The unequivocal declaration by this Court in the said judgment is as below:
"we find force in the contention urged on
behalf of the appellants that the aforesaid
view taken by the learned Single Judge is not correct. It is no doubt true that S.55 of the Act prohibits only payment or distribution of any part of the funds of the Society other than the net profits by way of bonus for dividend amongst its members. But the very next section
- S.56 - prescribes the only permissible modes in which the Society shall deal with its net profits. Under clauses (a) and (b) of Sub-S.(1) of S.56 the Society is enjoined to transfer an amount not being less than 15% of the net profits to the reserve fund, 'and to credit such portion of the net profits, not exceeding W.P. (C) No.14689/2019 30 5%, as may be prescribed, to the Co-operative Education Fund. Sub-S.(2) lays down that the balance of the net profits may be utilised for all or any of the purposes enumerated in clauses (a) to (e) thereof, ft is manifest that no portion of the balance of the net profits remaining after complying with the provisions of sub-sec. (I) can be utisised for the Society for any purpose falling outside the scope of clauses (a) to (e). Clause (a) permits payment of dividends to the members on their paid-up share capital at such rate not exceeding 10% as may be prescribed. Under clause (b) the Society is empowered to make payment of bonus to members on the amount or volume of business done by them with the society, to the extent and in the manner specified in the bye-laws.
Clause (c) permits the constitution of, or contributions to, such special funds as may be specified in the bye-laws. Under clause (d) the society can make donations of amounts not exceeding ten per cent of the net profits for any charitable purpose as defined in S.2 of the Charitable Endowments Act, 1890. And clause (e) empowers the society to make payment of bonus to employees of the society to the extent and in the manner specified in the bye-laws or in the Payment of Bonus Act, 1965 as the case may be.
The ex gratia distribution of stainless W.P. (C) No.14689/2019 31 steel utensils to members of the Society on the occasion of the General body meeting will not fall within any of the clauses (a) to (e) and it was not, therefore, competent for the Committee of the Society to incur any expenditure out of the net profits of the Society for making such ex gratia gift of articles to the members of the Society. With respect, we hold that the contrary view taken by the learned single Judge cannot be accepted as correct. Exts.P1 to P3 did not, therefore, call for any interference by this Court."
38. Thus, apart from the fact that these actions are in violation of the statutory principles and the applicable circulars, it can also be viewed and suspected to be a method of inducement of members to vote for the same persons to the Managing Committee in the next elections. I am not saying that in this case this has been so found, but I am only postulating that this could also be one of the reasons why the circular aforementioned has been issued and why the Act prohibits dealing of the funds and profits of any Society in contravention of the modes enumerated therein.
39. Pertinently, Sri.George Poonthottam also is unable to point out any provision of law that justifies distribution of such W.P. (C) No.14689/2019 32 largesse from out of the funds of the Society or why I should not follow the conclusions in Raju (Supra).
40. The only remaining aspect is whether this admitted violation by itself should warrant supersession of the Manging Committee. I am of the firm view that these admissions of the Managing Committee justify an order of supersession, since they have acted with full knowledge of the legal provisions prohibiting it, which is evident because they do not say in the pleadings or even during making submissions that they were not aware of such legal prohibition; and add to this the fact that more than Rs.20 lakhs was so illegally spent, the matter assumes grave proportions, thus fully justifying Ext.P11 order. Further, as rightly contended by Sri.M.Sasindran, the position is now well settled that even one of the several allegations being proved would be sufficient to invoke powers by the Statutory Authority under Section 32 of the KCS Act.
41. Therefore, in this particular case even when I am prima facie of the view that Ext.P11 has been issued without sufficient advertance to the directions in Exts.P2 and P9 Judgments, it cannot be set aside because the sole allegation therein, which is conceded by the petitioner, would be sufficient W.P. (C) No.14689/2019 33 to warrant an action under Section 32 (2) of the KCS Act. Further, as regards the conceded allegations, I cannot find that the directions in Exts.P2 and P9 judgments have been violated, since it is only when the charges are contested that the Joint Registrar would have to repel with specific reasons.
In the afore circumstances and even though I must record that this Court is not happy with the manner in which the respondent has acted with respect to the directions in Exts. P2 and P9 judgments, I dismiss this writ petition solely since one of the findings against the petitioner, which is expressly conceded, is sufficient to warrant an action under Section 32 (2) of the KCS Act.
After I dictated this judgment, Sri.George Poonthottam, the learned Senior Counsel for the petitioner, submitted that he has an additional submission to make, that the supersession of the erstwhile Managing Committee having been done on 25.05.2019, after the notification for elections to the new Managing Committee of the Society was published on 10.05.2019; his client apprehends that the said elections will be attempted to be now adjourned on account of this judgment. I make it clear that Ext.P11 order of supersession has no bearing on the notification W.P. (C) No.14689/2019 34 for elections issued by the Co-operative Election Commission and I, therefore, direct the said Commission to ensure that elections are conducted as per the schedule presently notified, and not to adjourn it solely on account of this judgment.
Sd/-
DEVAN RAMACHANDRAN JUDGE YKB W.P. (C) No.14689/2019 35 APPENDIX OF WP(C) 14689/2019 PETITIONER'S/S EXHIBITS:
EXHIBIT P1 TRUE COPY OF THE NOTICE BEARING NO.C.R.P. 5427/2016 DATED 08.06.2017 ISSUED BY THE JOINT REGISTRAR.
EXHIBIT P2 TRUE COPY OF THE JUDGMENT DATED 16.01.2019 IN WPC NO.20804 OF 2017 PASSED BY THIS HON'BLE COURT.
EXHIBIT P3 TRUE COPY OF THE JUDGMENT DATED 12.02.2019 IN WA NO.315 OF 2019 PASSED BY THIS HON'BLE COURT.
EXHIBIT P4 TRUE COPY OF THE ORDER IN SPECIAL LEAVE PETITION NO.5333 OF 2019 DATED 20.02.2019.
EXHIBIT P5 TRUE COPY OF THE NOTICE NO.C.R.P.5427/16 DATED 22.02.2019 ISSUED BY THE JOINT REGISTRAR.
EXHIBIT P6 TRUE COPY OF THE ORDER DATED 12.03.2019 IN RP NO.203 OF 2019 IN WA 315/2019 PASSED BY THIS HON'BLE COURT.
EXHIBIT P7 TRUE COPY OF THE NOTICE BEARING NO.C.R.P.5427/16/KDIS DATED 30.04.2019.
EXHIBIT P8 TRUE COPY OF THE EXPLANATION SUBMITTED BY THE MEMBERS OF THE MANAGING COMMITTEE DATED 04.05.2019.
EXHIBIT P9 TRUE COPY OF THE JUDGMENT DATED
07.05.2019 IN WPC NO.13200/2019 PASSED
BY THIS HON'BLE COURT.
EXHIBIT P10 TRUE COPY OF THE WRITTEN REPLY
SUBMITTED BY THE PETITIONER BEFORE THE
JOINT REGISTRAR WITHOUT ENCLOSURES.
EXHIBIT P11 TRUE COPY OF THE ORDER NO.C.R.P.5427/16
DATED 25.05.2019 PASSED BY THE JOINT
REGISTRAR AND SERVED THROUGH SPECIAL
MESSENGER.
EXHIBIT P12 TRUE COPY OF THE NOTIFICATION NO.E(1)
W.P. (C) No.14689/2019
36
1970/2019/S.C.E.C DATED 10.05.2019
ISSUED BY THE ELECTION COMMISSION.
EXHIBIT P13 TRUE COPY OF THE NOTICE PUBLISHED BY
THE ELECTORAL OFFICER DATED 22.05.2019.
EXHIBIT P14 TRUE COPY OF THE AUDIT REPORT OF THE
BANK FOR THE YEAR 2005-2006.
EXHIBIT P15 TRUE COPY OF THE LIST OF SOCIETIES,
WHICH HAD EXCEEDED THE LIMIT OF
SANCTION WHILE EFFECTING CONSTRUCTION.
EXHIBIT P16 TRUE COPY OF THE LETTER
NO.C.R.P.146/92/2018 DATED 22.02.2019
ISSUED BY THE JOINT REGISTRAR.
RESPONDENT'S/S EXHIBITS:
NIL
//TRUE COPY//
PA TO JUDGE
YKB