Kerala High Court
Hameed Kutty M.S vs The Joint Registrar Of Co-Operative ... on 7 December, 2016
Author: P.B.Suresh Kumar
Bench: P.B.Suresh Kumar
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR
WEDNESDAY, THE 7TH DAY OF DECEMBER 2016/16TH AGRAHAYANA, 1938
WP(C).No. 33027 of 2016 (C)
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PETITIONER(S) :
--------------------------
1. HAMEED KUTTY M.S.,
PAZHUVELIL, KULAYATTIKARA P.O.,
ERNAKULAM.
2. RAJAN P.,
PANATTIL HOUSE, KULAYATTIKKARA P.O.,
ERNAKULAM.
3. SUNIL K.P.,
KOLLAMTHADATHIL HOUSE, KULAYATTIKKARA P.O.,
ERNAKULAM.
4. SURYA PRASAD,
KANNAMMYALIL HOUSE, KULAYATTIKKARA P.O.,
ERNAKULAM.
5. M.M.REMESAN,
GOURISANKARAM, KULAYATTIKKARA P.O.,
ERNAKULAM.
6. BABU N.K.,
NAYARAMBALATHIL, KULAYATTIKKARA P.O.,
ERNAKULAM.
7. RADHAMANI V.G.,
IYYAKUNNEL, KULAYATTIKKARA P.O., ERNAKULAM.
8. M.D.VARGHESE,
MALAYIL, KULAYATTIKKARA P.O.,
KEECHERI, ERNAKULAM.
BY ADVS. SRI.P.N.MOHANAN
SRI.C.P.SABARI
..2/-
..2..
WP(C).No. 33027 of 2016 (C)
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RESPONDENT(S) :
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1. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL)
ERNAKULAM-683 544.
2. KEECHERI SERVICE CO-OPERATIVE BANK LTD.NO.668,
REPRESENTED BY ITS SECRETARY, KULAYITTINKARA P.O.,
ERNAKULAM-682 317.
3. PART TIME ADMINISTRATOR OF KEECHERI SERVICE
CO-OPERATIVE BANK LTD.NO.668, KULAYITTINKARA P.O.,
ERNAKULAM-682 317.
* ADDITIONAL R4 IMPLEADED
4. KOCHUNARAYANAN, AGED 66 YEARS,
S/O. VELAYUDHAN, VELUTHAMKUNNEL HOUSE,
KULAYETTIKARA P.O., ARAYANKAVU, ERNAKULAM.
* ADDITIONAL R4 IS IMPLEADED AS PER ORDER DATED 07.12.2016 IN
I.A.NO. 16998 OF 2016.
R1 BY SPL. GOVERNMENT PLEADER SRI. K.S.MOHAMMED HASHIM
ADDL.R4 BY ADVS. SRI.THAMPAN THOMAS
SMT.HENA BAHULEYAN
THIS WRIT PETITION (CIVIL) HAVING BEEN COME UP FOR ADMISSION
ON 08-11-2016, THE COURT ON 07-12-2016 DELIVERED THE FOLLOWING:
Msd.
WP(C).No. 33027 of 2016 (C)
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APPENDIX
PETITIONER(S)' EXHIBITS :
EXHIBIT P1 A COPY OF THE REPORT OF THE RETIRED JOINT REGISTRAR.
EXHIBIT P2 A COPY OF THE JUDGMENT DATED 12.8.2016 IN
W.P(C).NO. 22832/2016.
EXHIBIT P3 A COPY OF THE JUDGMENT DATED 12.8.2016 IN
W.P(C).NO. 22833/2016.
EXHIBIT P4 A COPY OF THE ARC NO.216/2015 DATED 17.6.2015.
EXHIBIT P5 A COPY OF THE ARC NO.217/2015 DATED 19.6.2015.
EXHIBIT P6 A COPY OF THE ARC NO.218/2015 DATED 27.6.2015.
EXHIBIT P7 A COPY OF THE ARC NO.1338/2015 DATED 21.7.2015.
EXHIBIT P8 A COPY OF THE ARC NO.1339/2015 DATED 22.7.2015.
EXHIBIT P9 A COPY OF THE ATTACHMENT ORDER DATED 6.7.2015.
EXHIBIT P10 A COPY OF THE RELEVANT PORTION AUDIT REPORT OF
THE YEAR 2015-2016.
EXHIBIT P11 A COPY OF THE ORDER DATED 06.10.2016 OF THE JOINT
REGISTRAR.
EXHIBIT P12 A COPY OF THE INTERIM ORDER DATED 31.3.2015 IN
W.P(C).NO. 10533/2015.
EXHIBIT P13 A COPY OF THE W.A NO.850/2015 DATED 10.04.2015.
RESPONDENT(S)' EXHIBITS :
NIL
//TRUE COPY//
P.S.TOJUDGE.
Msd.
C.R.
P.B.SURESH KUMAR, J.
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W.P.(C) No.33027 of 2016
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Dated 7th December, 2016.
J U D G M E N T
Ext.P11 order of the first respondent is under challenge in this writ petition. The matter arises under the Kerala Co-operative Societies Act ('the Act').
2. The short facts relevant for decision are the following:
The petitioners are 8 out of the 12 members of the managing committee of the second respondent co-operative society which is engaged in banking business. By Ext.P11 order, the first respondent, who is exercising the powers of the Registrar under the Act in relation to the affairs of the second respondent co-operative society (`the bank') has placed the managing committee of the bank under suspension for a period WPC 33027 of 2016 2 of six months. It is alleged in Ext.P11 order that it is revealed in the inspection conducted in the bank under Section 66 of the Act that the bank has sanctioned and disbursed gold loans to the extent of Rs.1,70,50,394/- to three persons on the strength of fake gold ornaments for purposes other than the purposes for which gold loans could be disbursed, far in excess of the maximum limits prescribed as also the limits prescribed with reference to the quantity of the ornaments to be pledged; that the said persons being persons who are accused in similar criminal cases, the bank will not be in a position to realise the loan outstanding from them and that therefore, the members of the managing committee of the bank are responsible for the loss caused to the bank in that connection. It is also alleged in Ext.P11 order that there are no records in the bank indicating the manner in which pledged gold ornaments were sold in auction on 12.03.2016; that the managing committee of the bank has not taken any action to realize the loan outstanding of one of its members and that the bank is taking hasty steps to make appointments in its service without following the WPC 33027 of 2016 3 directives of the Registrar of Co-operative Societies. It is further alleged in Ext.P11 order that though the report of inspection under Section 66 of the Act has been forwarded to the bank, the bank has not taken steps to rectify the defects noted in the report and that even now the bank is disbursing gold loans contrary to the rules approved by the Department and the circular issued by the Registrar of Co-operative Societies in this connection. According to the petitioners, the first respondent has no authority to place the managing committee of a society under suspension. As regards the allegation in Ext.P11 order concerning the gold loans disbursed from the bank, the case set up by the petitioners is that the Branch Managers of the bank as also its Secretary are responsible for the sanction and disbursement of gold loans as per the approved gold loan rules; that action has already been taken against the erring officers; that proceedings have also been initiated against the loanees for realization of the loan outstanding and that therefore, the managing committee of the bank cannot be superseded or suspended on that ground. As WPC 33027 of 2016 4 regards the allegation in Ext.P11 order concerning the gold loan auction, the case set up is that auction of the pledged gold ornaments was conducted after giving due publicity and the amounts due to the bank as outstanding in the respective loan accounts have been realised. As regards the allegation in Ext.P11 order concerning the inaction on the part of the managing committee in initiating action for realising the outstanding in the loans of the member of the managing committee referred to in the order, the case set up is that the first respondent who is empowered to disqualify the member of the managing committee on that ground cannot suspend the managing committee for that reason. In other words, according to the petitioners, the reasons stated in Ext.P11 order are not sufficient to remove or to suspend the managing committee of the bank. The petitioners, therefore, seek orders quashing Ext.P11 order of the first respondent.
3. A statement has been filed by the first respondent in this matter. The stand taken by the first respondent in the statement as regards the power to suspend WPC 33027 of 2016 5 the managing committee is that the power to remove the managing committee as provided for under Section 32 of the Act includes the power to suspend the managing committee as well. According to the first respondent, if circumstances mentioned in Section 32(1) of the Act exist, the Registrar need not, in all cases remove the managing committee and that in appropriate cases, the Registrar is competent to place the managing committee under suspension also. As regards the merits, the stand of the first respondent is that the facts disclosed in Ext.P11 order warrants immediate removal of the managing committee from office.
4. A member of the bank has got himself impleaded as additional fourth respondent.
5. Heard the learned counsel for the petitioners, learned Special Government Pleader as also the learned counsel for the additional fourth respondent.
6. The learned counsel for the petitioners vehemently contended that there is no provision in Section 32 of the Act enabling the Registrar to suspend an elected WPC 33027 of 2016 6 managing committee and that therefore, such a power cannot be conceded to the Registrar exercising the power under Section 32 of the Act. As regards the reference concerning suspension contained in the third proviso to Section 32(1) of the Act, it is contended by the learned counsel for the petitioners that a proviso cannot be interpreted as stating a general rule. According to the learned counsel, if the language of the enacting part of the statute does not contain necessary provision, one cannot derive such provision by implication. The learned counsel for the petitioners also contended that even if it is conceded that the Registrar has the power to place the managing committee of a society under suspension, an order in the nature of Ext.P11 should not have been issued without consulting the financing bank and the concerned circle cooperative union, in the light of the specific provision contained in Section 32 of the Act. It was also contended that at any rate, an order in the nature of Ext.P11 should not have been issued without affording the petitioners an opportunity of hearing.
WPC 33027 of 2016 7
7. Per contra, the learned Special Government Pleader reiterated the stand adopted by the first respondent in the statement, viz, that the power conferred on the Registrar under Section 32 of the Act is a power to remove a managing committee of a society from office and that the said power takes in within its scope, the power to suspend the managing committee as well. According to the learned Special Government Pleader, power is conferred on the Registrar to dispense with notice before orders are passed under Section 32 (1) of the Act in appropriate cases and that therefore, the impugned order cannot be attacked on the ground of violation of the principles of natural justice.
8. The learned counsel for the additional fourth respondent supported the contentions of the learned Special Government Pleader and added that the factual allegations referred to in Ext.P11 order are sufficient for the Registrar to invoke his power under Section 32 of the Act to supersede the managing committee and therefore, the order of suspension cannot be said to be illegal.
WPC 33027 of 2016 8
9. I have anxiously considered the contentions of the parties. Though Ext.P11 recites that the same is one issued under Section 32(1) of the Act as also under Article 243ZL of the Constitution, the learned Special Government Pleader clarified that the power invoked is the power under Section 32(1) of the Act. The first and foremost issue, in the circumstances, is whether the first respondent has the authority to place the managing committee of a society under suspension, in exercise of the powers under Section 32(1) of the Act. Section 32 of the Act reads thus :
Section 32: Supersession of Committee.
32 [(1) If the Registrar, after an inquiry by himself or through his subordinates or on a report of the financing bank, or the Vigilance and Anti Corruption Bureau of the Government or the Vigilance Officer or other wise is satisfied that the committee of any society,-
(a) persistently makes default or is negligent in the performance of the duties imposed on it by this Act or the rules or bye-laws or does anything which is prejudicial to the interests of the society; or
(b) willfully disobeys or fails to comply with any lawful order or direction issued under this Act or the rules; or WPC 33027 of 2016 9
(c) makes any payment contrary to this Act or the rules or the bye-laws or causes any loss or damage to the assets of the society by breach of trust of willful negligence; or
(d) misappropriates or destroys or tampers with the records or causes the destruction of records to cover up any misconduct or malpractice, he may, after giving the committee an opportunity to state its objections, if any, by order in writing, remove the committee and appoint in its place, one administrator or an administrative committee consisting of not more than three individuals, one among them as convener, who need not be members of the society, to manage the affairs of the society for a period not exceeding six months.
Provided that in the case of co-operative society, carrying on the business of banking, the provisions of the Banking Regulation Act, 1949 (Central Act 10 of 1949) shall also apply:
Provided further that in the case of a co-operative society, carrying on the business of Banking, appointment of administrator/administrative committee shall not exceed one year in the aggregate:
Provided also that the board of a co-operative society shall not be superseded or kept under suspension where there is no Government share holding or loan or financial assistance or any guarantee by the Government or any Board or Institutions constituted by the Government.] WPC 33027 of 2016 10 Explanation:-A notice and an order given as per this clause to the President, in his absence to the Vice President or any committee member who is holding charge of President or Vice President or to the Chief Executive of a society shall be treated as an order given to the committee of the society.] [(e) Every member of the committee superseded under this section shall from the date of order of such supersession stand disqualified to contest in the election to or to be nominated to the committee of any Society or to be appointed as an administrator in any society for two consecutive terms.] (2) The Registrar shall consult the financing bank and Circle Co-
operative Union or State Co-operative Union as the case may be before passing an order under sub-section (1). (3) Notwithstanding anything contained in sub-section (1) or sub- section (2) it shall not be necessary to give an opportunity to the committee to state its objections and to consult the Unions and financing banks, in cases where the Registrar is of the opinion that it is not reasonably practicable to do so, subject however to the condition that in such cases the period of supersession shall generally be for six months and in case a new committee, cannot be constituted or enter upon office in accordance with the bye-laws of the society within the period of supersession the period may be extended for a further period not exceeding six months -
(a) in the case of a Co-operative society only after consulting the Circle Co-operative Union concerned; and WPC 33027 of 2016 11
(b) in the case of an Apex Society and a Central Society only after consulting the State Co-operative Union. (4) The Committee or administrator or administrators so appointed shall, subject to the control of the Registrar and to such instructions as he may from time to time give, have power to exercise all or any of the powers and functions of the committee or of any officer of the society and take such action as may be required in the interests of the society.
(5) The Committee or administrator or administrators shall, before the expiry of its or his or their term of office, arrange for the constitution of a new committee in accordance with the bye- laws of the society.
(6) Every order made by the Registrar under sub-section (1) shall be communicated to the Circle Co-operative Union. It is explicit from the provision quoted above that if the Registrar is satisfied of the existence of any of the grounds mentioned in Clauses (a) to (d) of sub-section (1) of Section 32 of the Act, he may remove the committee of a society from office and appoint in its place, one Administrator or an administrative committee. The third proviso to Section 32(1) clarifies that the managing committee of a co-operative society WPC 33027 of 2016 12 shall not be superseded or kept under suspension where there is no Government share holding or loan or financial assistance or any guarantee by the Government or any Board or institutions constituted by the Government. True, in the absence of any direct provision in the Section which enables the Registrar to suspend the managing committee of a society for a period, a doubt may arise as to whether the legislature intended to confer such a power on the Registrar. It is relying on the words "kept under suspension" as contained in the third proviso to Section 32(1) of the Act that the first respondent maintains the stand that the power to remove the managing committee under Section 32(1) of the Act includes the power to keep the managing committee under suspension as well. The scope of the third proviso therefore, needs to be examined. The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. In other words, as a general rule, a proviso is added to an enactment to qualify or create an exception to WPC 33027 of 2016 13 what is in the enactment and therefore, a proviso cannot, ordinarily be interpreted as stating a general rule. But, in a case where the enacting part is susceptible to several possible meanings, it may also be controlled by the proviso. It is so held by the Apex Court in Haryana State Coop. Land Development Bank Ltd. v. Banks Employees Union, (2004) 1 SCC 574, following Jennings v. Kelly (1940 Appeal Cases 206). Paragraph 10 of the decision of the Apex Court in the said case reads thus:
"A proviso to a section cannot be used to import into the enacting part something which is not there, but where the enacting part is susceptible to several possible meanings, it may be controlled by the proviso. "
The relevant passage in Jennings v. Kelly (supra) reads thus :
"Of course, a proviso may be used to guide you in the selection of one or other of two possible constructions of the words to be found in the enactment and show when there is doubt about its scope, when it may reasonably admit of doubt as to its having this scope or that, which is the proper view to take of it."
In S. Sundaram Pillai, etc v. V. R. Pattabiraman (AIR 1985 SUPREME COURT 582), the Apex Court, quoted with WPC 33027 of 2016 14 approval, a passage from Sarathi on 'Interpretation of Statutes', dealing with the principles relating to provisos. Paragraph 29 of the said judgment reads thus :
29. Sarathi in 'Interpretation of Statutes' at pages 294-295 has collected the following principles in regard to a proviso :-
"(a) When one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject-matter of the proviso.
(b) A proviso must be construed with reference to the preceding parts of the clause to which it is appended.
(c) Where the proviso is directly repugnant to a section, the proviso shall stand and be held a repeal of the section as the proviso speaks the later intention of the makers.
(d) Where the section is doubtful, a proviso may be used as a guide to its interpretation; but when it is clear, a proviso cannot imply the existence of words of which there is no trace in the section. (underline supplied)
(e) The proviso is subordinate to the main section.
(f) A proviso does not enlarge an enactment except for compelling reasons.
(g) Sometimes an unnecessary proviso is inserted by way of abundant caution.
(h) A construction placed upon a proviso which brings it into general harmony with the terms of section should prevail.
(i) When a proviso is repugnant to the enacting part, the proviso will not prevail over the absolute terms of a later Act directed to be read as supplemental to the earlier one.
(j) A proviso may sometimes contain a substantive provision." WPC 33027 of 2016 15
The paragraph quoted above also reiterates the principle that where the Section is doubtful, a proviso may be used as a guide to its interpretation. The third proviso to Section 32(1) has to be understood in the light of the aforesaid principles. As noted above, Section 32(1) provides that if any one of the circumstances referred to in clauses (a) to (d) of Section 32(1) exists, the Registrar may remove the managing committee from office. Going by the tenor of Section 32(1), the removal contemplated by the statute is perpetual removal. If the Registrar is empowered to remove the managing committee of a society perpetually on satisfaction of the existence of the circumstances referred to in Section 32(1), there is no reason for me to think that the Registrar is not empowered to remove the managing committee for a short period. It is, therefore, clear that the expression 'remove' contained in Section 32(1) of the Act is susceptible to different meanings and therefore, the third proviso to the said provision can certainly be used as a guide to its interpretation. Further, since the word used in the main part of the statute is "removal", according to me, even in WPC 33027 of 2016 16 the absence of the words "kept under suspension" in the third proviso, it is possible to infer that the power of removal takes in within its scope removal for a short period as well, where a perpetual removal of the managing committee is not warranted. Above all, I am unable to find any reason for the use of the words "kept under suspension" in the third proviso to Section 32(1) of the Act, if such a power was not intended to be conferred on the Registrar. Further, while Section 32 of the Act provides that the committee shall be given an opportunity to state their objections and the financing bank and the concerned circle co-operative union have to be consulted before the power under Section 32(1) is invoked by the Registrar, Section 32(3) clarifies that it shall not be necessary to comply with the said provisions in cases where the Registrar is of the opinion that it is not reasonably practicable to do so. In the light of the said provisions, the interpretation of the provision as aforesaid will also take care of situations where the managing committee of a society needs to be removed forthwith and it is necessary to hear the managing committee WPC 33027 of 2016 17 and consult the financing bank and the circle co-operative union before a final decision is taken as to whether they are to be removed perpetually from office. In such cases, the managing committee can be heard and the financing bank and circle co-operative union can be consulted after placing the managing committee under suspension before a final decision is taken as to whether the managing committee is to be removed perpetually. In the said circumstances, I am constrained to hold that the power of the Registrar to remove a managing committee from office includes the power to place the managing committee under suspension also. Needless to say that the said power can be exercised only in exceptional cases where such a course is necessary to protect the interests of the members of the society.
10. The learned counsel for the petitioners, placing reliance on Ext.P12 order passed by this Court in W.P.(C) No.10533 of 2015, contended that a learned Judge of this Court has already taken a contrary view and the said decision has been upheld by the Division Bench in appeal. I am not WPC 33027 of 2016 18 impressed by the said argument. Ext.P12 is only an interim order passed in an identical matter. Ext.P13 is the judgment of the Division Bench confirming Ext.P12 interim order. In Ext.P13, it is clarified that the Division Bench has not examined the correctness of the prima facie finding rendered by the learned Single Judge in Ext.P12 order that the power under Section 32(1) of the Act does not include the power to place the managing committee under suspension and that the said issue is an issue to be decided finally in the writ petition.
11. Now, I shall deal with the contentions raised by the learned counsel for the petitioners that the impugned order is passed without affording the managing committee an opportunity of hearing and without consulting its financing bank and the concerned circle co-operative union. It is seen from Ext.P11 order that the officer who conducted the inspection in the bank under Section 66 of the Act has submitted his report on 17.07.2015. It is also seen that Ext.P11 order has been passed based on the findings in the said report after about fifteen months. As such, at the first blush, it would appear that WPC 33027 of 2016 19 there was no reason at all for the first respondent to dispense with the requirement of notice before passing Ext.P11 order. But, on a close scrutiny of Ext.P11 order indicates that the bank is continuing to disburse gold loans violating the Rules approved by the Department as also the circular issued by the Registrar even after detection of the fake security loans running to crores. The recital to that effect contained in Ext.P11 reads thus:
"Ix^NVV" (1)_f\ y_gM^VGm \M_:n gVW" Ix^NVV" (2) _f\ 5Jm L^Cm dIX_Aam/fXd5Gy_ .K_UVAm HW5_O_GaUD^Cm.e.K^W ?_ HcbHD5Z IaVHN^O_ Ix_Yx_:n_G_\o .Ka N^dDN\o U`Ia" Da?xaKa .KDm 7axaDxN^Cm.eL_X_HTm g7^ZAm g\^Y HW5aKDm hLg\^ LYa: XY5xC X"8" x<_Xmd?^yaf? XVAa\V .K_UOmAm .D_x^fCKm 5fIJ_O_Ga" Da?xaKD^O_ 5^CaKa.e'dI5^x"
'Da X"Lt_:nm HW5_O H_VggV" NH:IbVUn"
%HaXx_A^fDO_x_Aa5Oa" H_\U_\aU XY5xC X"8"
H_ON" :G", )IH_LtH5Z LYa: XY5xC X"8"
x<_Xmd?^yaf? H_VggVBZ .K_UOHaXx_:nm MxCXN_D_
:aND\fM?aJfMG 5VJUcBZ f:OnaKD_W H_xLx U`]m:5 {a", & :aND\ H_ygUxaKD_W %\"M^U" 5^C_Aa5Oa"
L^C_fa D^WMxcJ_Hm Y^H_5xN^O U_GJ_W WPC 33027 of 2016 20 dIUVJ_Aa5Oa" gL^GcfMGD_H^W D^f] IyOaK )JxUm IayfM?aU_AaKa."
I could not find any averment in the writ petition that the said statement is incorrect. If the statement in Ext.P11 order as extracted above is correct, the first respondent cannot be found fault with for having placed the managing committee of the bank under suspension to avert perpetuation of further illegality in the matter of disbursing gold loans which would affect the very existence of the bank. The conduct of the managing committee referred to above would certainly fall under the specific clauses referred to in Section 32(1) of the Act. Since a final decision has not been taken to remove the managing committee from office, the hearing and the consultation provided for under the statute can take place before a final decision is taken in this matter. In the said view of the matter, there is no substance in the contention raised by the learned counsel for the petitioners that the managing committee was not heard and that its financing bank and the concerned circle co-operative union were not consulted before the impugned WPC 33027 of 2016 21 order passed.
In the result, the writ petition is disposed of directing the first respondent to take a final decision as to whether the managing committee of the bank is liable to be removed under Section 32(1) of the Act, after affording an opportunity of hearing to the managing committee, untrammelled by the findings and observations made in this judgment. This shall be done within six weeks from the date of receipt of a copy of this judgment.
Sd/-
P.B.SURESH KUMAR, JUDGE.
tgs (true copy)