Kerala High Court
G.Krishnan Nair vs Joint Registrar Of Co-Operative ... on 25 January, 2012
Author: K. Vinod Chandran
Bench: K.Vinod Chandran
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:-
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
FRIDAY,THE 20TH DAY OF DECEMBER 2013/29TH AGRAHAYANA, 1935
W.P.(C).No.2259 of 2013 (F)
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PETITIONER:-
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G.KRISHNAN NAIR, S/O GANGADHARAN NAIR,
MUNJINATTU HOUSE, OMALLUR,
PRESIDENT OF THE BOARD OF DIRECTORS OF THE OMALLUR
SERVICE CO-OPERATIVE BANK (UNDER ORDER OF SUSPENSION).
BY ADV. SRI.P.C.SASIDHARAN.
RESPONDENTS:-
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1. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES,
OFFICE OF THE JOINT REIGSTRAR OF CO-OPERATIVE SOCIETIES,
PATHANAMTHITTA - 689 645.
2. THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES,
OFFICE OF THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES,
PATHANAMTHITTA - 689 645.
3. JAYAKUMAR.J.,
ADMINISTRATOR, (UNIT INSPECTOR, KOZHENCHERY
ASSISTANT REGISTRAR (GENERAL), PATHANAMTHITTA - 689 641.
4. THE SECRETARY,
CIRCLE CO-OPERATIVE UNION, KOZHENCHERY,
PATHANAMTHITTA - 689 641.
R1 & R2 BY SPECIAL GOVERNMENT PLEADER SRI.D.SOMASUNDARAM.
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
17-12-2013, THE COURT ON 20-12-2013 DELIVERED THE FOLLOWING:-
W.P.(C).NO.2259 OF 2013
APPENDIX
PETITIONER'S EXHIBITS:-
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EXT. P1 TRUE COPY OF THE ORDER UNDER SECTION 66 OF THE
CO-OPERATIVE SOCIETIES ACT WAS ORDERED BY THE
2ND RESPONDENT DATED 25-01-2012.
EXT. P2 TRUE COPY OF THE NOTICE DATED 17-12-2012.
EXT. P3 TRUE COPY OF THE EXPLANATION SUBMITTED BY THE BANK.
EXT. P4 TRUE COPY OF THE NOTICE DATED 05-01-2013.
EXT. P5 TRUE COPY OF THE ORDER ISSUED BY THE
1ST REPSONDENT DATED 17-01-2013.
EXT. P6 TRUE COPY OF THE ORDER DATED 25-10-2011.
RESPONDENTS' EXHIBITS:-
----------------------------------------- NIL.
vku/ ( true copy )
"C.R."
K. Vinod Chandran, J
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W.P.(C).No.2259 of 2013-F
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Dated this the 20th day of December, 2013
JUDGMENT
The petitioner is a member of the Omallur Service Co-operative Bank Ltd., No.Q 228 (hereinafter referred to as "the Bank), who was elected to the Board of Directors and was occupying the post of President when the order impugned in this writ petition, Exhibit P5, was passed, superseding the elected Managing Committee under Section 32 of the Kerala Co-operative Societies Act, 1969 (for brevity "the Act"). The Managing Committee, of which the petitioner was the President, was elected on 24.12.2008 and has a term of 5 (five) years, which expires only on 24.12.2013. While the Managing Committee was in office, by Exhibit P1 an enquiry was instituted under Section 66 of the Act by the 2nd respondent, Assistant Registrar. The specific allegations, upon which the enquiry was initiated, need not be gone into. Suffice it to say that the enquiry ordered as detailed in Exhibit P2, was with respect to the cheque collection, certain malpractices which allegedly occurred in one of the Branches, the gold loan transactions, appointment of daily wage employees, division of labour between the existing employees, WP(C).No.2259 of 2013-F - 2 - reason for stoppage of rubber preservation unit, internal audit measures and certain malpractices said to have occurred in the transactions of employees' accounts. On the basis of Exhibit P1 enquiry, a report was submitted to the Joint Registrar dated 9.11.2012 and it is based on the said report that Exhibit P2 notice was issued to the Managing Committee of which the petitioner was the President. The notice was replied to by Exhibit P3 and a further notice was issued by the Joint Registrar (General) fixing a date for hearing the objections of the Managing Committee, by Exhibit P4. Pursuant to this, Exhibit P5 order was passed, superseding the Managing Committee and appointing an Administrator. The writ petition essentially seeks for a declaration that the supersession is illegal and arbitrary.
2. The learned counsel for the petitioner Mr.P.C.Sasidharan assails Exhibit P5 on the following grounds: It is contended that no notice was issued under Section 32 of the Act and the notice issued under Section 66, being Exhibit P3, could not have concluded in an order under Section 32, since an enquiry under Section 66 does not contemplate such a proceeding. The learned counsel draws a distinction with respect to the enquiry contemplated under Section 65 and Section 66 and specifically points out WP(C).No.2259 of 2013-F - 3 - sub-section (6) of section 65, which empowers the Registrar to initiate proceedings under Section 32 based on an enquiry report under Section 65. Such power not being conferred on the Registrar under Section 66, the learned counsel contends that Exhibit P3 notice, as one, which could not have led to an order under Section
32. It is also urged that the Deputy Registrar, who is named in Exhibit P3 objection as also in the writ petition, was not competent to pass any orders under Section 32 and it was that officer who heard the petitioner's objections to Exhibit P2 notice. The Joint Registrar, who has admittedly issued Exhibit P5, never had an occasion to hear the petitioner or any of the members of the Managing Committee and, hence, the order passed is vitiated, is the contention. Exhibit P5 order is also challenged in so far as the mandatory consultation with the Circle Co-operative Union and the Financing Bank was not effectively carried out by the Joint Registrar. The allegations raised in Exhibit P2 notice under Section 66 are all alleged to be that committed by the previous Managing Committee, for which the present Managing Committee cannot be held responsible. It is also asserted that even looking at the allegations, it does not reveal the necessary ingredients, which would enable the Registrar to proceed under Section 32 and supersede the Managing Committee. To WP(C).No.2259 of 2013-F - 4 - canvass the position of absence of effective consultation, the petitioner relies on the decisions reported in Rajeevan v. Sukumaran [2013 (3) KLT 253], State of Kerala v. Board of Directors of Urukunnu Service Co-op. Bank Ltd. [2013 (2) KHC 201] and State of M.P. v. Sanjay Nagayach [2013 (2) KLT 733 (SC)]. Based on the Supreme Court decision, it is also urged that a Managing Committee illegally kept away from management of the Society, by an order of supersession, has to be allowed to continue even after the expiry of its term, extending to the period in which they were so kept out of the office illegally.
3. The learned Special Government Pleader Sri.D.Somasundaram, however, points out that Exhibit P2 has the trappings of a notice and objections were called for on the specific allegations raised therein. Opportunity too was given to the petitioner and the Deputy Registrar, who has heard the petitioner, was holding the charge of the Joint Registrar. A perusal of the allegations levelled against the Managing Committee as also the order to show cause, why proceedings shall not be taken under the Act, would make it clear that what is proposed is an action under Section 32 and the mere mis-quoting or non-quoting of a provision cannot render the proceedings illegal.
WP(C).No.2259 of 2013-F - 5 -
4. The Managing Committee cannot wriggle out of the rigour of Section 32 merely on the contention of the allegations being related to a time prior to the present Managing Committee taking office. It was the incumbent duty of the Managing Committee who came to office on 24.12.2008 to have rectified the defects and in any event, 3 of the members of the present Committee were also members in the earlier Committee. Mohanan v. State of Kerala [2004 (2) KLT 873] is placed to advance the position that a Managing Committee can be ousted and superseded for the defects that occurred in the term of a previous Managing Committee. The learned Special Government Pleader relies on the decisions in State of Kerala v. Sudarsanan [1997 (2) KLT 522], Narayanan Nair v. Vaikom Palliprathusserry S.C.B. [2003 (2) KLT 44] and Union of India v. Guwahati Carbon Ltd. [(2012) 11 SCC 651] to contend that the petitioner has an efficacious alternate remedy, which he ought to have availed of before approaching this Court under Article
226. The limited scope of the power conferred under Article 226 is canvassed by placing reliance on Balakrishnan Nair v. State of Kerala [1973 ILR Kerala 511], Jt.Registrar, Co-op. Societies, Madras v. Rajagopal [AIR 1970 SC 992], Bachan Singh v. Union WP(C).No.2259 of 2013-F - 6 - of India [(2008) 9 SCC 161] and Rev.Dr.George Njarakunnel v. State of Kerala [2009 (3) KHC 322 (DB)]. It is also pointed out that the non-maintenance of records, appointment of daily wage employees against the specific restriction provided by Circular 18/1991 are all allegations against the present Managing Committee itself. The absence of consultative opinion mandated under Section 32, is sought to be explained on the premise that the order itself indicates the consultation attempted by the Joint Registrar, which, however, was not responded to either by the Circle Co-operative Union or the Financing Bank. Reliance is placed on the judgment of a learned Single Judge in W.P.(C). No.9752 of 2013 dated 17.07.2013 [Siddhikul Akbar & Others v. Joint Registrar of Co-operative Societies & Others] to sustain Exhibit P5 order in so far as the challenge on consultation is concerned. Sudarsanan (supra) is relied upon also to contend that the Registrar can take action individually under Section 32 even without a report under Section 63, 64, 65 or 66.
5. The preliminary objection is the limited scope for interference under Article 226 of the Constitution of India. W.P.(C). No.14604 of 2008 [K.V.Ummer & Others v. Joint Registrar of Co-operative Societies & Others] was a case in which WP(C).No.2259 of 2013-F - 7 - supersession was made on the basis of a report under Section 65 and this Court found the same to be permissible under sub-section (6) of Section 65. On the question of consultation, it was found that there was no mandate to go by the consultant's opinion and, on facts, found sufficient reasons in the order justifying the course adopted by the Joint Registrar. The jurisdictional aspect under Article 226 was dilated upon and found to be not one akin to an appeal. Rajagopal (supra) cautioned the High Courts from exercising jurisdiction under Article 226 as exercised in an appellate jurisdiction. That proposition was reiterated in Bachan Singh (supra) which declared the confinement of judicial review to the decision making process and not the decision itself.
6. Balakrishnan Nair (supra) considered the scope of interference under Article 226 and held so:
"If the contention is that the Registrar never applied his mind and therefore he could not have been satisfied, the court can enter into that question, the ingredient of satisfaction being a condition precedent to the exercise of the power, notwithstanding the satisfaction being subjective. Similarly, if the power conferred by the statute is exercised for a purpose or with an intention beyond the scope and contemplation of the instrument WP(C).No.2259 of 2013-F - 8 - creating it the action is liable to be interfered with on the ground that it constitutes a fraud on the power granted by the statute. The order of the statutory authority can also be challenged if it is shown that the action was taken on grounds totally irrelevant to the purpose and intention of the statute or that the grounds stated by the authority are such that no one can reasonably arrive at the opinion or satisfaction requisite under the legislation".
7. The 'Wednesbury test' was reiterated in the decision in Rev.Dr.George Njarakunnel (supra), but permitted interference when the decision is without basis, unfair, unjust or blatantly unreasonable. The aforesaid decisions need not detain this Court, since herein, this Court has restrained itself from considering the merits of the decision. The nature of the allegations or whether it has the ingredients contemplated under Section 32 has not at all been looked into. The defects in procedure alone is considered to understand as to whether there is a blatant illegality and a patent irregularity, violating the procedural safeguards put in place by the Statute.
8. Admittedly Exhibit P1 enquiry was initiated under Section 66 of the Act, which deals with supervision and inspection. WP(C).No.2259 of 2013-F - 9 - The supervision and inspection contemplated under Section 66 deals with the working of every society and includes an inspection of the books of the society. Such inspection can be carried on by the Registrar on his own motion or on an application and empowers the Registrar, by sub-section (5) to direct the society or its officers to take such action as may be specified in the order within the time stipulated therein. What is indicated in Section 66 definitely is an over all supervision of the working of the society, for which inspection can be conducted and any irregularities noticed therein can be directed to be rectified. Section 65 enquiry is more widely couched and the findings in such enquiry clothes the Registrar with the power to proceed under Section 32, if a major defect in the constitution, working or financial condition of the society is noticed; under sub-section (6).
9. Necessarily there is a distinction in the enquiry contemplated under Section 65 and Section 66, the former of which could lead to direct consequences, including supersession, while the latter could only result in compelling the society to cure the defects or irregularities pointed out therein. But, however, this does not at all militate against the Registrar proceeding under Section 32 on the basis of a report under Section 65 or Section 66. Section 32, as it is WP(C).No.2259 of 2013-F - 10 - worded, confers on the Registrar authority to proceed on the basis of an enquiry by himself or through his officers on the basis of a report of the financing bank, or the Vigilance and Anti-corruption Bureau and even in the absence of all these instances, if "otherwise satisfied that the committee of a society has committed any of the defaults pointed out in sub-clauses (a) to (d) of sub-section (1) of Section 32". Hence, even under Section 66, if an enquiry reveals major defects with respect to the working or financial situation of the society, the Registrar, if satisfied that the committee of the society is involved in any of the defects noticed in sub-clauses (a) to (d), can supersede the Committee under Section 32, but after giving an opportunity to the committee to state its objections.
10. Rajeevan (supra) considered a supersession, where sub-section (3) of Section 32 was invoked, denying even opportunity to the Managing Committee, before the order of supersession was passed. Noticing Sanjay Nagayach (supra) and Board of Directors of Urukunnu Service Co-op. Bank Ltd. (supra), it was declared that supersession under Section 32 was a power to be resorted to only in exceptional circumstances as the principle underlying the co-operative movement is the democratic functioning of societies by the elected representatives. Even in an instance of invocation of WP(C).No.2259 of 2013-F - 11 - sub-section (3), which conferred the authority to dispense with the opportunity for hearing, this Court refused to sustain such action, categorising such action to be a deprivation of the valuable right of hearing, and finding the same, on facts, to be not properly and rightly exercised. Admittedly, in the instant case, the enquiry was under
Section 66 and even the notice, Exhibit P2, issued to the Managing Committee was also under Section 66. The understanding that the proceedings were under Section 66 is further evident by the subsequent notice, Exhibit P4, fixing a date for hearing the objections.
11. What next assumes relevance is the satisfaction of the Registrar that the allegations reveal a major defect in the functioning of the society, which calls for interference by a drastic measure, under Section 32, of supersession. After reading the report of the Assistant Registrar, Exhibit P2 mechanically finds that there are major malpractices, misappropriations and dereliction of duties enjoined upon the Managing Committee as provided in the Act and Rules and calls for showing of cause as to why the Managing Committee shall not be proceeded against under the Act and the Rules. Board of Directors of Urukunnu Service Co-op. Bank Ltd. (supra) also dealt with invocation of sub-section (3) of Section WP(C).No.2259 of 2013-F - 12 -
32. With respect to the satisfaction to be recorded by the Registrar under sub-section (1) of Section 32, the Division Bench held:
"Therefore, for invoking sub-clause (a) of Section 32(1), it is not sufficient to merely hold that the managing committee had committed a default or is negligent in the performance of the duties imposed on it by its act or the rules or bye-laws, but such default should be shown to be persistent and must be prejudicial to the interest of the society as well".
The learned Judges also found favour with a decision of a learned Single Judge of this Court, which held that:
"... the mere finding that the committee has done the acts alleged alone is not sufficient; the same should be supported by a further finding that they did the same with a culpable mind, failing which the action of the Registrar would be improper".
The show cause herein is widely worded and cannot be considered as one intended at the consequence of supersession of the Managing Committee. It does not also speak of any persistent default leading to the extreme action of supersession. The satisfaction recorded by the Registrar is a mundane refrain of the WP(C).No.2259 of 2013-F - 13 - summary of the enquiry report and the action proposed in Exhibit P2 notice is as vague as possible, giving no indication of the drastic step of supersession. In such circumstance, it has to be held that there is no notice as contemplated under Section 32.
12. The next issue raised is, on Exhibit P5 order being passed by an officer who had not heard the objections of the petitioner. The petitioner specifically contends that on the show cause notice, Exhibit P2, the petitioner was heard by a Deputy Registrar and eventually the order was passed by the Joint Registrar. The Joint Registrar has filed a counter affidavit and with respect to the above contention, offers the following explanation in paragraph 6:
"6. The hearing scheduled to be held on 5.1.2013 was adjourned to 7.1.2013 due to an unavoidable circumstance. Since at that time 1st respondent was on leave, and handed over charge of Joint Registrar (General) to Deputy Registrar (Administration) on the basis of an order from the Registrar of Co-operative Societies. Hence he was holding full additional charge of the Joint Registrar. Hence the contention of the petitioner is irrelevant and devoid of merit. The reply furnished by the petitioner was not satisfactory, even after affording ample opportunity to be heard. Hence the 1st respondent has no other way than to supersede the Board under Section 32 of the Kerala Co-operative Societies Act, in the interest of the Bank and as per provision stipulated in the Act". WP(C).No.2259 of 2013-F - 14 -
By the above statements, it is clear that the Deputy Registrar, who was given the charge of the Joint Registrar, when the incumbent in that office was on leave, heard the petitioner. On rejoining duty, the incumbent in the office of the Joint Registrar passed the order. Exhibit P5 cannot be sustained on that count also.
13. On the issue of mandatory consultation under sub-section (2) of Section 32 also the Division Bench in Board of Directors of Urukunnu Service Co-op. Bank Ltd. (supra), held that when safeguards have been incorporated in the Statute while conferring the drastic and exceptional power of supersession on the Department; to oust a democratically elected body, the same has to be scrupulously followed. Consultation was held to have been incorporated with a purpose, avowed, insofar as the order of supersession is one which runs contrary and does offence to the tenor and spirit of the co-operative movement. The dispensation made by virtue of sub-section (4) was found to be bad, finding that there is a total absence of cogent and acceptable reasons in invoking such powers to make the drastic order of supersession.
14. Sanjay Nagayach (supra) looked at almost similar provisions of supersession in the background of the order ousting "a body elected to achieve social and economic democracy with WP(C).No.2259 of 2013-F - 15 - emphasis on weaker sections of the society" (sic). The Hon'ble Supreme Court was dealing with a provision which mandated prior consultation with Reserve Bank of India (RBI)which also by a proviso; gave authority to the Registrar to make an order; if no communication is received from the RBI within 30 days. Even then, previous consultation was held to be a condition precedent, which was to be an effective consultation since that would be a relevant material to consider the extreme step of supersession. The consultation, required by Statute, to oust a democratically elected body was construed as mandatory. In issuing directions, it was inter alia directed as under:
"Registrar/Joint Registrar are legally obliged to comply with all the statutory formalities, including consultation with the financing banks/Controlling Banks etc. Only after getting their view, an opinion be formed as to whether an elected Committee be ousted or not".
15. W.P.(C).No.9752 of 2013 [Siddhikul Akbar & Others v. Joint Registrar of Co-operative Societies & Others] noticed two Supreme Court judgments to understand what is meant by consultation, State of Gujarat and another v. Justice R.A.Mehta (Retd.) [(2013) 3 SCC 1] and Justice Chandrashekaraiah WP(C).No.2259 of 2013-F - 16 - Janekere C.Krishna and Others [(2013) 3 SCC 117], and found that what assumes relevance in such a process is not the form or venue of consultation; but the substance of such consultation. That was a case in which the consultants, both the Circle Co-operative Union and the Financing Bank, replied to the Registrar, concurring with his view as to the supersession of the Managing Committee. The challenge was mainly for the reason that the letter of the consultants were dated respectively, on the date of the order of the Registrar and subsequently. Hence the consultation was reduced to a farce, was the argument; which was negatived. The basis for negation of such contention can only be the fact that both the consultants agreed with the Registrar. That was the context in which the Court found that, in the factual circumstances involved in the matter, the consultants had replied to the process of consultation issued by the Registrar.
16. Such substantial compliance is not available in the instant case. It is argued that as in the cited case, here too a notice was issued to the consultants, seeking their opinion within 7 days, nothing having been received within that time, the Registrar proceeded with the action under Section 32. That sets apart the instant case. In Siddhikul Akbar (supra), the learned Single Judge WP(C).No.2259 of 2013-F - 17 - found that though the Registrar is not bound by the consultant's opinion, definitely it carries weight and if the opinion is contrary to what the Registrar intends there should be reasons disclosed in the order as to why the Registrar differs. The hedged-in safeguards cannot be reduced to an empty formality rendering the process a mere farce. Definitely it cannot also be assumed that the consultants, in the instant case would have concurred with the Registrar. Section 32 cannot be reduced to a naming ceremony, intended only at hanging the named one.
17. In the present case it is also pertinent that but for a bland statement that consultation was initiated and no reply was received; the date of initiation of such consultation is not mentioned nor is such letter referred to in Exhibit P5 order. Neither is there any attempt to disclose the details of the consultation in the counter-affidavit. Going by the binding precedents of the Supreme Court as also this Court, it cannot be gainsaid that the mandatory provision under sub-section (2) of Section 32 was complied with in the above case.
18. Mohanan (supra) was cited as a classic example which refused to interfere in a supersession challenged on the ground of irregularities having been committed by an earlier WP(C).No.2259 of 2013-F - 18 - Managing Committee. The Court at the outset noticed that there cannot be any "declaration, divorced from the specific circumstances of each case" and refused to answer the question posed, in the abstract. Looking at the facts it was noticed that the majority of the members of the earlier Committee continued in the new Committee and that the allegations despite being brought to the notice of the committee; were subsisting. The Court, on the facts disclosed therein, held that the action of the Registrar was perfectly in order looking at the "avowed objective of bringing discipline in the functioning of the institution". However, herein this Court is unable to decipher any such objective since the Joint Registrar has chosen to act on a report of enquiry under Section 66, without any application of mind. It is also pertinent that in the instant case the enquiry under Section 66 did not lead to any directions to cure defects and immediately chose supersession. Exhibit P2 reiterated mechanically the allegations to arrive at a prima facie satisfaction, which going by the language employed in Section 32 as also the judicially recognised "quality" of such satisfaction; falls short of the degree and gravity warranted.
19. For the aforesaid reasons, the supersession order Exhibit P5 is set aside. The Managing Committee elected to the WP(C).No.2259 of 2013-F - 19 - office on 24.12.2008 has to be restored to office, on the setting aside of Exhibit P5, the supersession order. The same shall be done expeditiously. It is made clear that this Court has not gone into the specific allegations raised in the notice issued on the basis of an enquiry under Section 66. This Court has restrained itself from enquiring into the allegations raised against the Managing Committee, on the accepted and binding propositions regulating the jurisdiction to be exercised under Article 226. Nor has this Court examined whether the ingredients of Section 32 are available, with respect to the allegations as listed out in sub-clauses (a) to (d) of the notice. The Joint Registrar is at liberty to initiate proceedings under the Act and the Rules on the basis of the report said to have been filed by the Assistant Registrar; but after serving a proper notice on the Managing Committee or its members, as stipulated and permissible in the Act and Rules.
The writ petition is allowed as above. No costs.
Sd/-
K.Vinod Chandran Judge.
vku/-
( true copy )