Madras High Court
Vallipattu Primary Agricultural ... vs The Registrar Of Co-Op. Societies, ... on 24 April, 1998
Equivalent citations: 1998(2)CTC351
ORDER
1. Petitioner seeks issuance of writ of certionari to call for the records relating to Roc. 9000 of 1997/ A-2, dated 3.9.1997 of the 2nd respondent, and quash the same as illegal, incompetent and without jurisdiction.
2. In the affidavit filed in support of the writ petition it is stated that the society was formed in the year 1956 for the purpose of giving loans to members so as to enable them to purchase agricultural instruments and domestic items in and around Vallipattu area. After a long time, election was held for various Co-operative Societies, and the defendant contested for the office of the Vice President and took charge on 17.6.1997. On the strength of the financial services of the society, it is classified as a 'B' class Co-operative Society containing over 2000 members. Before 1997, the affairs of the society was in the hands of the Government, and was not properly managed. In order to revitalize the society, the dependent alleges that various records were perused and it was found that the secretary of the. society one Anbarasu has misappropiated huge funds, and decided to lake action. A notice was issued to him calling upon him to explain as to why action should not be taken against him for the misappropriation of funds and a charge menu was also issued against him on 18.2.1997 and 1.4.1997. Though sufficient time was given to him to submit his explanation, he did not choose to do so, and the Board was constrained to dismiss him from service, and a resolution was passed on 26.4.1997, removing him from the post of secretary of the Society. Anbarasu filed a revision before the 2nd respondent, and even without notice to the petitioner, the revision was allowed on 27.5.1997, and Anbarasu was directed to be reinstated. On coming to know about the facts, a review petition was moved before 2nd respondent, bringing to his notice that Society ought to have been given an opportunity before adverse orders are passed against it. But the review petition was dismissed without adherence to the principles of Natural Justice. Even though the order was illegal, the secretary was reinstated on 30.5.1997. It is said that the petitioner has also filed a revision before the 2nd respondent and the same was dismissed on 4.8.1997; the copy of order was received by it on 16.8.1997. In the meanwhile, the Society received a notice under Section 88(1) (a) of the Tamil Nadu Co-operative Societies Act, 1983 (in short 'Act'), to show cause as to why the Board should not be superseded. The reasons stated for superseding the Society are as follows:
(1) The secretary of the society was dismissed without notice;
(2) The order of the Respondents directing the society to reinstate Anbarasu was not obeyed;
(3) Five persons were inducted without following the procedures laid down under the Act;
(4) A pro-term daily wage worker was appointed as secretary in charge; and (5) Audit report was not submitted after considering the objections raised for the year 1993-94.
3. A detailed reply was sent on 12.8.1997, stating that Anbarasu was dismissed only after strictly following the procedures and that he has been reinstated immediately after the receipt of the orders of the respondents. It was further said that the appointment of Secretary was necessary and the society could not function without a secretary and the pro-term Secretary, since he is a graduate with Co-operative training , The Society was not in a position to submit revised audit report for the year 1993-94, since such a report was never served on the Board. It is said, that after sending this reply, the petitioner expected that the 1st respondent would drop all the proceedings. But to the shock and surprise, an order superseding the Board was passed by the 2nd respondent.
4. In the various grounds challenging the impugned order, it is said that the order is violating the principles of Natural Justice, and the 2nd respondent ought to have given opportunity to the petitioner to urge their case. Since the respondents are exercising quasi judicial powers, reasonable opportunity must have been given, especially when drastic action is taken by removing the selected members. The action is without jurisdiction. It is also said that the elementary principles of Natural Justice have been violated and an opportunity of making a representation was denied to them. It is further said that audit report cannot be submitted since during the relevant time, the society was under the control of the Government, and the Special- Officer was in-charge of the society. It is also said that prior permission of the Central Co-operative Bank, Vellore was not obtained and without the effective consultation, the power under Section 88 of the Act cannot be exercised. It is said that Under Rules 105 of the Tamil Nadu Co-operative Societies Rules, 1988 (hereinafter refer to 'Rules') a duty is cast on the Registrar to consult the financing bank by sending a letter along with the show cause notice, a copy of the explanation and the tentative conclusion arrived at by the Registrar, and only after submission of these papers, the financing bank also could give any reply on consultation. Therefore, it is said that the entire procedure adopted by the respondents is void and the order is liable to be quashed.
5. A detailed counter affidavit has been filed by the 2nd respondent, wherein it is stated that no ground has been made out to invoke the jurisdiction under Article 226 of the constitution of India, It is said that as against the President, there are various allegations and even resolutions are passed against him. Regarding the case of Anbarasu, it is said that even though certain charges were framed against him, the delinquent officer wanted to peruse some records and file his explanation. The President did not permit the delinquent officer to peruse the records, even though time and again representations have been made for the same. No enquiry officer was also appointed for conducting any domestic enquiry, and therefore, the action taken by the President, dismissing Anbarasu is void and violates the principles of Natural Justice. When the Secretary was dismissed, he moved a revision under section 153 of the Act, and the order of removal was set aside asking the petitioner to reinstate Anbarasu in service. It is said that the President has not permitted Anbarasu to act as a Secretary. One Ravichandran, clerk of the society was acting as Secretary till 2.8.1997, though the order directing the president to reinstate Anbarasu was passed in May 1997. There is a wilfull disobedience of the orders of the respondent by the president of the society.
6. It is said that an enquiry was ordered under section 81 of the Act, and the Co-operative Sub-Registrar, Tirupattur, was authorised to conduct the statutory enquiry. It is said that a memorandum was submitted by 36 members of the Primary Co-operative Bank, to the Deputy Registrar, who ordered enquiry. On enquiry, it was found that the President was acting against the interest of the society and he was violating alt norms and that he has exceeded his powers and has acted arbitrarily. It was pursuant to that direction, in the enquiry a show cause notice was issued under Section 88 of the Co-operative Societies Act, and the notice of the proposed supersession was communicated to the Board. They were asked to explain why action should not be taken under Section 88 of the Act. Out of the 9 members, five members submitted their explanation and four others did not file any explanation. The facts of issuing show cause notice and the receipt of the explanation submitted by five members were intimated to the financing bank. It is said that Rule 105 of the Rules has been fully complied with. It is said that the financing bank was consulted in the matter on 6.8.1997, when show cause notice was issued. Again on 19.8.1997, the explanations received from the 5 members was also intimated, alongwith the proposed action to be taken. Till 3.9.1997, the financing bank did not express its opinion, and therefore, the impugned order was passed. It is said there is sufficient compliance of Rule 105 of the Rules and section 88(6) of the Act. It is also said that special officer assumed charge and the present writ petition is without any merit, and grounds have been made out for ordering supersession of the Board. It prayed for the dismissal of the writ petition.
7. The petitioner has given a detailed reply for the allegations. I heard the counsel on bothsides in details.
8. One of the main contentions that was raised by learned counsel for the petitioner is that the respondents have violated section 88(6) of the Act. Section 88(6) of the Act runs as follows:
Before passing an order under sub-section (1)(a)(i) in respect of any registered society, the Registrar shall consult, in the manner prescribed the board of the financing bank to which the society is indebted:
Provided that if the financing bank does not communicate its comments within fifteen days of the receipt of a communication from the Registrar in this regard, the board of the financing bank shall be deemed to have no comments to make on the order proposed to be passed under sub-section (1).
9. Rule 105 of the Rules, provides the manner of consulting the financing bank under Section 88 of the Act. It reads thus:
The Registrar, shall, in consulting the board of the financing bank under sub-section (6) of section 88,send to the board of the financing bank a copy of the notice of supersession issued by. the Registrar and a copy of the reply, if any, to the said notice received from the board or any member of the board of the society together with the tentative conclusion arrived at by the Registrar or the gist thereof.
10. Counsel for the petitioner relied on the decision reported in K. Thangavelu v. The Joint Registrar of Co-operative Societies, Tiruchirapalli and others, A.I.R. 1976 Mad. 280 wherein learned judge of this court followed the earlier decision of this Court reported in P.M. V. Credit Society v. Registrar of Co-operative Society, wherein it was held thus:
"Obviously such consultation begins after the Registrar is subjectively satisfied on objective materials placed before him that a prima facie case has been made out for the purpose of superseding the Co-operative society. It is only at that point of time that the necessity for consulting the financing bank arises. This has been held to be a mandatory requirement by the highest court of the land. Such a consultation, therefore, cannot be avoided. Though consultation is not equivalent to concurrence, yet, there must be material on record to show that, after the Registrar entertained an opinion about the unsatisfactory working of a registered society, he should consult the financing bank to whom the society is indebted before he family passed an order of supersession under section 72 of the Act.
11. Learned counsel for the petitioner brought to my notice the decision of the Kerala High Court reported in Jose Kuttiyani And Others v. The Registrar of Co-Operative Societies, Kerala, Trivandrum And Others, 4 Co-op. Cases 363 : 1981 K.L.T.S.N.65, wherein also the mandatory duty on the part of the Registrar of Co-operative Societies to consult the financing bank is made as a condition precedent. Counsel for the petitioner also relied on the decision of the Orissa High Court reported in Sarat Chandra Pande v. State of Orissa and Others, 4 Co-op. cases 450 wherein also the similar view has been taken.
12. According to the counsel, a reading of these decisions would make it clear that consultation contemplated in section 88(6) of the Act, by the Registrar with the financing bank is not a formality, but the same is mandatory to be complied with, But, in this case, the explanations submitted on 12.8.1997 was not placed before the financing bank with the tentative opinion of the Registrar. The consultation was only on 6.8.1997, long before the explanation was submitted and so long as there is no effective consultation as contemplated under the Act, the action of the respondents is without jurisdiction,
13. As against the said contention, learned additional Government Pleader submitted that after 6.8.1997, as per letter dated 19.8.1997, copy of the explanation of the petitioner dated 12.8.1997 was submitted to the financing bank with the tentative opinion of the Registrar. As per the proviso to sub-section (6) of Section 88 of the Act, the financial bank has to give its opinion within a period of fifteen days from the date of receipt of the communication from the Registrar. It is said that within the said period, if the Registrar is not getting any reply or comments, he need not further wait for taking action. In this case, Rule 105 of the Rules, has been fully complied with.
14. Learned Additional Government Pleader also produced the entire file concerning the case. Page 45 of the file is the letter dated 19.8.1997. A reading of the said letter makes it clear that on 6.8.1997, the financing bank was informed about the proposed action and the copy of show cause notice was also placed before the financing bank. Later when the explanation was received on 12.8.1997, the same was also sent to the financing bank (Ref.No.3 in that letter). The Registrar has further stated in that letter that since the explanation submitted by the members is not satisfactory and the mis-management of the society continues, he has expressed the view that action under section 88 of the Act is necessary and the comments of the financing bank was called for the said letter reads thus:
15. In the decision reported in Sarat Chandra Pande v. State of Orissa and Others, 4 Co-op. cases 450, a Division Bench of the Orissa High Court held that even before taking any action of supersession, the matter has to be informed to the financing bank. The decision of this Court reported in P.M.V. Credit Society v. Registrar of Co-operative Society, and Thangavelu v. The Joint Registrar of Co-operative Societies, Tiruchirapalli and others, A.I.R.1976 Mad. 280 were dissented. This Court in the above cases held that when final orders are passed, the consultation of the financing bank is necessary. Kerala High Court has also taken the same view. In the above decisions of this court and the Kerala High Court, on actual basis it was held that there was no effective consultation. In the case reported in Thangavelu v. The Joint Registrar of Co-operative Societies, Tiruchirapalli and others, A.I.R.1976 Mad. 280, after the proposed action was communicated to the financing bank show cause notice was issued, and in fact approval has also been obtained. But after the explanation was submitted by the Board, the same was not placed before the financing bank alongwith the tentative opinion. The learned judge held that the earlier consent is not an effective consultation and not a statutory compliance. Similar was the case of the Kerala High Court referred to above. But in this case, on facts I find a difference not only before the proposed action, but also after the receipt of explanation, the Registrar alongwith a copy of explanation and his tentative opinion sent a letter to the financing bank, calling for its comments, for action under section 88 of the Act. This, according to me is a sufficient compliance of the Act. Therefore, the first argument of the learned counsel for the petitioner is only to be rejected and I do so.
16. The other allegations are regarding the dismissal of the secretary of the society without reason and disobeying the order of the respondents directing reinstatement of Anbarasu, as secretary, non-submission of audit report, after considering the objections raised in the earlier period, and employment of some persons against the procedures and the appointment of daily wage worker as pro-term Secretary. Learned counsel for the petitioner submitted that the orders of the respondents was complied with by reinstating Anbarasu as Secretary, and he also submitted that Anbarasu has assumed charge on 30.5.1997 as Secretary, which fact was also informed to the respondent. Counsel for the petitioner also relied on certain letters alleged to have been written by the dismissed employee on 30.5.1997, the attendance register, the leave letter of the employee dated 2.7.1997 and his claim for wages for the period for which he has served. He has claimed subsisting allowances only for the period upto 30.5.1997. Counsel submitted that all these documents would show that the order of the respondents had been complied with long before the impugned order was passed. It is also represented by learned counsel for the petitioner that when reinstatement has been ordered, no notice was given to the society, and a review petition was filed alongwith the stay application. It is the case of the petitioner that the very same officer dismissed the stay petition, on the ground that the secretary has assumed charge and there is no necessary for stay. When the respondents themselves have passed an order accepting the case of re-instatement, passing an order superseding the Board on the ground of disobedience of its order was most improper.
17. It is also represented that till 30.5.1997, the post of secretary was vacant, and the society cannot function without a substituted hand, and therefore, another qualified person was appointed and the same was also not against the provisions of law. These contentions are seriously posed by learned Additional Government Pleader.
18. According to the respondents, the documents are only created and the attendance registers are retained by the Vice-President for his convenience. These are not the attendance registers kept in the society, and therefore, no reliance could be placed on the same. It is also said that from the various other documents it could be seen that pro-term daily wage worker-Secretary-in-charge was transacting the financial activity till 30.5.1997 and has signed various registers of the society. These are all disputed questions of fact. In such cases, what is the jurisdiction of the Court under Article 226 of the Constitution of India. In Joint Registrar of Co-operative Societies, Madras and others v. P.S. Rajagopal Naidu and others, , Their Lordships have held that this Court will not act as a Court of appeal and to reappraise the facts. In paragraph 10 of the Judgment, it was held thus:
The High Court could not act as an appellate Court and reappraise and re-examine the relevant facts and circumstances which led to the making of the orders of supersession as if the matter before it had been brought by way of appeal. The limits of the jurisdiction of the High Court under Article 226 when a writ in the nature of certionari is to be issued are well known and well settled by now and it is pointless to restate the grounds on which any such writ direction can be issued.
19. If the dispute of facts cannot be considered by this Court under Article 226 of the Constitution of India, then what is the remedy? Section 88(1) of Act says that the power of registration of society should be given an opportunity of making a representation. What is the scope of an opportunity of making a representation? Will it be sufficient by sending a show-cause notice and getting an explanation. I do not think that alone will be sufficient. Under Co-Operative Societies Act and the Rules, it is clear that in a democratic set up unless grounds are made out, the management must be within the elected members. Supersession of the election Board is a serious stop and the authorities are not expected to interfere with the management of the society. If that is the intention, I feel that the opportunity of making a representation includes a reasonable opportunity before final orders are passed. When there are disputed questions of fact, a duty is cast on the authorities to verify whether the facts stated by it alone are sufficient to supersede an Election Board.
20. A reading of the entire provisions of the Act makes it clear that the Registrar and the authorities under the Act have to act very cautiously. It is also clear that it is an extra-ordinary power which could resorted to unless there is extra- ordinary situation. If an elected body feels certain acts taken are in the best interests of Society, that is the matter the authority will have to consider very seriously. They are not expected to stick on to their views, all that the society has done is against the provisions of the Act or Rules. Only after reasonable opportunity is given to the Board, the satisfaction has to be entered that supersession is necessary and if the authorities feel that the grounds have been made out for supersession, it shall not look back, except to supersede. May be the satisfaction is subjective, but it cannot be exercised arbitrarily. The principle of natural justice has to be fully applied in such cases. Even though the court cannot act as an appellate authority, when from the file it is clear that there was no real consideration of the explanation and when reasonable opportunity is also not given to the Board, I feel that the action of the respondent require reconsideration.
21. In a decision of Kerala High Court in The president of the Common Wealth Co-operative Society Ltd., Ernakulam v. The Joint Registrar (General) of Co-Operative Societies, Trivandrum and Another, His Lordship K.K. Mathew, J. (as he then was) held that even when there is no provision in the statute for a prior notice, the principle of natural justice will have to be followed. In that case, His Lordship further held thus:
"Section 4 of the Act provides for registration of a cooperative society and section 24 says that on registration it will become a body corporate. You cannot visualise an act of a more serious nature to a 'person' than the one which will inevitably put an end to his or its very existence. Dissolution is the ultimate consequence of an order of winding up. That is made clear by section 54(1) which states:
When the affairs of a registered society for which a liquidator has been appointed under section 51 or section 52 have been wound up or where no liquidator has been appointed, after two months from the date of an order under S.51, or after confirmation of such order in appeal, or after two months from the date of an order under section 52, the Registrar shall make an order cancelling the registration of the society, and the society shall be deemed to be dissolved from the date of such order.
The passing of an order of winding up is analogous to the passing of capital sentence of an individual. In either case, if the order or sentence is carried out, the extinction of the 'person' will be the result. Normally, a society will be wound up only for reasons connected with its functioning. The order impugned says:
The enquiry revealed that the working of the society is quite unsatisfactory. At the time of enquiry there were 74 members with a paid-up share capital of Rs.3,300 General Body meetings were not convened regularly. The only activity undertaken by the society is the running of Ration Shops and even this business is working on heavy loss. The members in general are not benefited by the society. The accounts have not been maintained properly and the affairs are managed by the Secretary, contrary to the provisions under the Act, Rules and bye-laws of the society. The financial position of the society is bad. The committee and the members are not interested in the working of the society. The enquiry Officer as well as the Deputy Registrar of Co-operative Societies, Ernakulam has therefore recommended to wind up the affairs of the society...."
Every one of the reasons mentioned in the order might be capable of being explained if an opportunity for being heard were given to the society. The fact that an ex parte enquiry was conducted by a nominee of the Registrar under sec.45 of the Act and that the conclusions in his report were arrived at bona fide by him would not guarantee the truth of his conclusions.
"Generally for adjudicating truth of adjudicative as distinct from legislative facts, notice and an opportunity of being heard are essential. I mean by adjudicative facts in the context, those facts concerning a person on the basis of which an action is proposed to be taken, as whether he, or it did, or did not, do a particular act. The question whether the society has committed the acts or is guilty of the omissions is a question of fact. An adjudication of the facts without notice and an opportunity of being heard, when the adjudication will have serious civil consequences to the society, is against the principles of natural justice. And even if the statute does not expressly provide for notice, the justice of the common law will supply the omission and would require notice and an opportunity of being heard. No person shall be condemned without being heard. Even if the ultimate conclusion is to be formed on the basis of the subjective satisfaction of the Registrar, I can conceive of very many advantages in formation of his opinion if an opportunity of being heard is given to the society. The fact that the expression used in Section 51(1) is : 'If the Registrar ...... is of the opinion,' it does not per se negative a duty to act judicially.
In Durayappah v. Fernando, 1967 (2) All. ER. 152 at P.155 the Privy Council said :-
" On the question of audi atteram partem the Supreme Court followed and agreed with the earlier decision of Sugathadapa v. Jayasinghe, 1958 (59) NLR 457 a decision of three judges of the Supreme Court on the same section and on the same issue, namely, whether a council was not competent to perform its duties. That decision laid down (at P.471):
"as a general rule that words such as 'where it appears' or 'if it appears to the satisfaction of' or 'if the ..... considers it expedient that' or 'if the .... is satisfied that' standing by themselves without other words or circumstances or qualification, exclude a duty to act judicially."
Their Lordships disagree with this approach. These various formulas are introductor of the matter to be considered and give little guidance on the question of audi alteram partem. The statute can make itself clear on this point, and if it does, cadit quaestio. If it does not, then the principle stated by Byles, J. in 1863 (14) CBNS 180 at P.194 must be applied."
"It must be admitted that the great majority of decisions deal with cases where some deficiency or default on the part of the person affected has to be found. But the principle is that drastic powers cannot lawfully be exercised against particular people without giving them an opportunity to stale their case." (Italics supplied)
22. If I follow the above said legal principle I feel that the order of the respondent require reconsideration. In this case, the petitioner alleges that before dismissal of service explanation was sought for from the secretary he did not give any explanation and consequently, he was dismissed. It is also stated that he must be reinstated pursuant to the order of the revision. The same is disputed by the respondent. Photostat copies of the documents are filed by the petitioner to show that the secretary was reinstated and he was taking subsistence allowance only after the period of reinstatement. He has taken leave after he joined service on 13.5.1997 etc. The order of supersession was passed only long thereafter. One of the main reasons for supersession is the alleged disobedience of the order of the respondents. If the society has really complied with the order of reinstatement, I feel that that is a matter which requires reconsideration. It is also well-known fact that without a secretary a society cannot function. One of the employees was asked to discharge the duties of the Secretary on daily wages. He was also fully qualified. If in the absence of a Secretary, any other person is substituted, that too provisionally, prima facie I am of the view that the action of the Board cannot be stated as against the interest of society. Regarding the non submission of orders, they have valid explanation. It was the Government who was managing the affairs of the society during that time and they have not given a copy of the order in the grievance. But without considering any of the facts, the authorities thought of sticking on to their view at the time when they issued final orders. This was not proper. The authorities under the Act must also be amenable to the reasons and if there are justified causes and the action of the Board cannot be treated as actions against interests of society, supersession should not be ordered. The decisions of the respondent should not be arbitrary.
23. In this case, I feel that the impugned order has not been taken into consideration the explanation submitted by the petitioner. Under the above circumstances, it is only proper to quash the impugned order. Though I hold that the financing bank has been consulted and that question cannot be reopened regarding the factual position the entire matter requires reconsideration by the respondents.
24. It is submitted even before the writ petition was filed, a special officer has been appointed and he has taken charge. The said factual position is disputed by the petitioner. According to the petitioner, even subsequent to the duty, the special officer was asking the Board to handover the charge. Now that I have quashed the impugned order, it is only proper that the elected body be given charge of the management of the society forthwith.
25. The question whether the Board has to be superseded or not will be considered by the respondent afresh. After complying with all the formalities and with the principles of the natural justice, fresh orders will be passed. I will make it clear that the petitioner must also be given a reasonable opportunity to substantiate its case against any proposed action by the respondents.
26. In the result, the writ petition is allowed as indicated above. No costs. Consequently, connected W.M.P. is closed.