M.R. Ajayan vs The Secretary on 20 December, 2024

[Cites 9, Cited by 0]

Kerala High Court

M.R. Ajayan vs The Secretary on 20 December, 2024

The present writ appeal is directed against the order of the Single Bench dated 17.10.2024 in WP(C) No.16206 of 2024 whereby the reliefs sought in the writ petition has been diposed by granting partial relief, by issuing directions to the respondent Nos.1 and 2 ie., Secretary, Ministry of Co-operation and Central Registrar of Co-operative Societies to decide the representation Exts.P8 and P9.

2. Succinctly, the facts in brief are that the appellant- petitioner claiming to be the member of Bharat Lajhna Multistate Housing Co-operative Society Ltd (BLM) having its operation in Chennai, Pondichery and Kerala (hereinafter called the 'Society') governed by the Multi state Co-operative Societies Act (2002) was set up with a prime object of land development and housing development and other activities but, over a period of time diversified into many other activities, not permissible in the bye- laws.

3. The Society had invested almost two hundred crores (200) crores with the Kerala State Civil Supplies Corporation. All other activities other than land development and housing WA NO. 1684 OF 2024 4 2024:KER:97153 development commenced without the decision of the general body. Its Chairman is highly influential person. It has been receiving the deposits ie., not from the members but from the 3 rd parties without intimation and compliance of norms of Central Registrar of Co-operative Society. Three(3) FIRs bearing Nos. 382 of 2023 dated 13.3.2023 of Thodupuzha Police Station, and 233 of 2023 dated 15.3.2023 of Nedumkandam Police Station and 305 of 2023 dated 17.3.2023 of Adimali Police Station have been registered under Section 3, 5 of the Banning of Unregulated Deposit Schemes Act (BUDS Act) 2019 and Section 406, 420 and Section 34 of IPC, Exts. P2 , P3 and P4 respectively. Even the proceedings were also initiated by the Central Registrar of Co-operative Societies whereby the Chairman of the Society had assured the Deputy Commissioner (Co-operation) of not taking the deposits or anything related to credit as indicated in the order dated 15.2.2021, Ext.P5. Even the Detective Inspector had also submitted a report dated 7.2.2022 stating that the investors who invest in the Society have a chances of being cheated, thus the Society is intending to get wrongful gain by accepting investment by violating the Rule that deposits can be accepted only from the members who have voting rights.

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4. It was also pleaded that the Society was also heading 'Winners Royal Credit Co-operative Society Ltd', which ultimately went into liquidation as evident from the list Ext.P7. It operates around 100 branches in the State of Tamilnadu, Kerala and Pondicherry. The State co-operative Registration Department has no authority for auditing, inspection or other controls on the Multi State Co-operative Societies and has no responsibilities regarding the investment therein. Representation dated 23.3.2024 has been submitted to the 1 st respondent and 2nd respondent but of no avail.

5. Learned Single Judge did not notice the fact that this is a clear cut case of fraud and misrepresentation and required deep probe by the Central Registrar for the reason that the Society failed to submit the balance sheet duly audited by the auditor which are lacking relevant information required under the law. Though the writ petition was disposed of without calling for the counter. However when the matter came up before us, we had issued notice and called the counter affidavit of the 6 th respondent as well as of the 2 nd respondent through Deputy Solicitor General.

6. Sri. George Poonthottam, learned Senior Counsel in support of the counter submitted that all the aforementioned WA NO. 1684 OF 2024 6 2024:KER:97153 FIRs have already been quashed by this Court. There is no predicate offence against the Society. The appellant-petitioner has not placed on record any proof showing to be the member of the Society much less the depositor. Therefore, challenged the locus standi on two accounts ie., in the absence of any membership or any proof, the relief aforementioned should fall within the realm of public interest litigation and there is no compliance of various parameters in sustaining the same. In fact it is an attempt to blackmail the Society by referring to the criminal proceedings Exts.P2, P3 and P4. As far as FIR 382 of 2023 is concerned, an investigation report was filed before the competent Registrar. There was a challenge against the sustainability of the Registration before this Court through Crl. MC No.2808 of 2023 and by order dated 21.5.2024, Ext.R6(a) after recording the submission of the Public Prosecutor, it was noticed that the final report has been filed and further action has been closed. Similarly with regard to the FIR No. 233 of 2023, Crl.M.C No.2775 of 2023 was filed, which has also been quashed by this Court vide order dated 21.5.2024, Ext.R6(b). As far as FIR No. 305 of 2023 is concerned, it has also been quashed in Crl.M.C No.4208 of 2024 vide order dated 21.5.2024, Ext.R6(c).

7. It was next contended that on the basis of the complaints WA NO. 1684 OF 2024 7 2024:KER:97153 preferred by the interested person before the competent authority, the writ petition was filed in this Court vide WP(C) No.17039 of 2023 which has been disposed of by the learned Single Judge by issuing directions to consider the matter on merit after affording the opportunity of hearing as evident from the judgment dated 8.6.2023, R6(d). Following the directions in the judgment aforementioned, competent authority under the BUDS Act issued an order Ext.P10 dated 26.8.2023 that there was no violation as alleged and the attachment order was revoked on 23.5.2023.

8. It was further contended that Central Registrar of Co- operative Societies had initiated the proceedings which were subject matter of the challenge in the various writ proceedings before the High Court of Madras and all those writ petitions were heard together and after hearing the Society, an order dated 23.8.2021, R6(e) was passed restraining the Society to receive the deposits from 3rd parties except from the members having voting rights in terms of the provisions of the Section 67 of the Societies Registration Act. Society has also been directed to provide all details to the Central Registrar, Respondent No.2 regarding the deposits collected along with the supporting materials with a further directions to respondent No.2 to hold an WA NO. 1684 OF 2024 8 2024:KER:97153 enquiry under Chapter 3 of the Act. Which have been adhered.

9. The Society is a multi State Co-operative Society having a certificate of registration dated 24.2.2006, Ext.R6(f). It has approved bye laws R6(g) and it is seen that the Society has complied all the requirements including the convening of Annual General Body Meeting, Auditing the accounts and giving dividends to the members and the bye-laws also permits not only the housing activities but various other activities like insurance business, construction of buildings/flats, construction of the go downs, cold-storage, works with Government and non Government organization and encourages and provide the business as package tour operators, daily passenger service operators, tour operators, ship booking, railway booking, airlines ticket booking, carrier service and courier service etc.

10. As per the counter affidavit filed by the Central Registrar of Society, 2nd respondent represented by Deputy Solicitor General of India, (incharge) it has been stated that in terms of the order of the Madras High Court, Government of TamilNadu had been requested to conduct an inspection of the Society as per the letter dated 27.1.2023 and RCS, Tamil Nadu vide letter dated 7.3.2023 noted that concerned society had already submitted details on the subject matter vide its letter WA NO. 1684 OF 2024 9 2024:KER:97153 dated 8.2.2023. Since the report was inclusive, the RCS Tamil Nadu was requested to conduct inspection of the Society. The reminders had also been given for completing the inspection.

11. It was also pointed out that in compliance of the order of this Court dated 14.11.2024, 2nd respondent was directed to file the status report and as per the report, it has been found that the Society had submitted the audit report for the financial year 2022-23, 2023-24. Section 67 of the Multi State Co-operative Society Act, 2002 provides receiving of the deposits only from its voting members and in this regard inspection report from RCS, Tamil Nadu under Section 8 of the Act is awaited to ascertain whether the deposits are from the voting members or from other persons. Though there has been a delay in filing the annual returns, Society vide letter dated 25.10.2021 provided the particulars of 7740 regular members whose deposits were refunded by the society on maturity/per-maturity of their deposits. The Society also submitted another list which had particulars of 20,658 regular members.

12. Sri. George Poonthottam, learned Senior Counsel further submitted that the deposits from the non members have already been returned and the intimation to this fact has already submitted to the RCS, Tamil Nadu who would be forwarding to WA NO. 1684 OF 2024 10 2024:KER:97153 the Central Registrar, Respondent No.2. The mere irregularities are rectifiable as per the provisions of the Act and cannot considered to be irregularities for issuing directions to the respondents to take action in as much as that there are not predicate offences other than the FIRs mentioned above which have already been quashed and submitted that the appellant - petitioner has not been able to place on record any proof with regard to the membership or depositors as indicated in the order of this Court dated 27.11.2024 and prays for dismissal of the writ petition with exemplary costs.

13. We have heard the learned counsel for the parties and appraised the paper book. On analysis of the facts noticed above, particularly, the orders of 21.5.2024, Exts.R6(a), R6(b) and R6(c) whereby all the FIRs registered against the Society have been quashed. In such circumstances in the absence of any predicate offence, the 2nd prayer in the writ petition for issuing directions to the Enforcement Director to take action no longer subsists. Even otherwise, the appellant-petitioner has not been able to place on record any proof with regard to the membership or depositors. In the absence of the same, the writ petition before the Single Bench would not lie as it would have a tinge and colour of the public interest litigation and to be filed before WA NO. 1684 OF 2024 11 2024:KER:97153 the First Bench with compliance of certain guidelines necessary for entertaining public interest litigation. No doubt, in the first blush this Court found that the Society was remiss in not conducting its business but the reply of the Society and status report would reveal that except for minor errors, there is nothing serious that the Society has been indulging into, leading to registration of the criminal offences or roving enquiry by the Enforcement Director. After having called upon the petitioner to submit the affidavit with regard to the membership, two adjournments have been sought but there has not been in compliance. It appears that the petitioner is neither a member or a depositor and therefore it appears to be having some predetermined motion or animosity against the Society but could not succeed in placing on the sufficient material for exercising the judicial review under Article 226 of the Constitution of India. The enquiry proceedings of 2020-2021 would also reveal that the Society had been taking the deposits only from the members and the deposits from the non members had already been returned. The bye-laws of the Society do not preclude the Society to only carry on the activity with the housing and building but various other activities noticed above. Central Registrar of Co-operative Society has already initiated steps for taking the assistance WA NO. 1684 OF 2024 12 2024:KER:97153 concerned RCS, Tamil Nadu for compliance of the provisions of the Act but that do not indicate or lead to a situation proving the allegations in the writ petitions prima facie to be true. It is also a matter of record that already various directions have been issued by the High Court of Madras. The same are reproduced herein below.

20. In view of the above discussion, all the writ petitions are disposed of with the following directions:-

a. The society is permitted to collect / receive deposits only from its voting members in accordance with Section 67 of the Act.

b. The society is prohibited from receiving any other deposit from any other category of members or from the general public.

C. The society shall repay back the deposits which have already matured to all those members who have made those deposits.

d. The society is directed to furnish all the particulars of the deposits collected till now along with supporting materials to the 2nd respondent, within a period of four weeks from the date of receipt of copy of this order.

e. The 2nd respondent on receipt of the particulars regarding the depositors and the materials pertaining to the same shall conduct an inquiry as contemplated under Chapter Vill of the Act and may also inspect the books / records maintained by the society and if any irregularities are identified / detected, shall proceed further strictly in accordance with law. It goes without saying that the society shall be given an opportunity if any adverse action is contemplated against the society, and f. The exercise shall be completed by the 2 nd respondent within a period of three months from the date of receipt of the particulars and materials pertaining to the deposits from the society. No costs. Consequently, all petitions are closed. connected miscellaneous petitions are also closed.

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14. As per the affidavit of the respondent No.2, there has already been a part compliance and other compliance is being followed up at the level of the Central Registrant of Co-operative Society, 2nd respondent with the assistance of RCS, Tamil Nadu.

We are of the view that it is not a case warranting interference for exercising judicial review for issuing directions to the Director, Enforcement Directorate to hold an enquiry. Writ Appeal is dismissed with a cost of Rupees one lakh (Rs.1,00,000/-).

sd/-

AMIT RAWAL JUDGE sd/-

sab                                             K. V. JAYAKUMAR
                                                      JUDGE
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                      APPENDIX OF WA 1684/2024

RESPONDENT EXHIBITS

Exhibit-R6(b)         Copy of the order dated 21.05.2024 in Crl.M.C

No. 2775 of 2023 passed by this Hon'ble Court Exhibit-R6(d) True copy of the judgment dated 08.06.2023 in WP(C)No. 17039/2023 passed by this Hon'ble Court Exhibit-R6(a) Copy of the order passed by this Hon'ble court in Crl.M.C No. 2808/2023 dated 21.05.2024.

Exhibit-R6(c) Copy of the order in Crl.M.C. No 4208/2024 dated 21.05.2024 passed by this Hon'ble Court Exhibit-R6(e) Copy of the order passed by the Hon'ble High Court of Judicature of Madras in WP Nos 1701/2021 and connected cases dated 23.08.2021 Exhibit-R6(f) True copy of the registration certificate issued by the Central Registrar of Cooperative Societies dated 24.02.2006 Exhibit-R6(g) True copy of the byelaws of the 6th respondent society, as approved by the Central Registrar. Annexure R2(a) True copy of the Circular dated 29.05.2013 issued by Government of India Annexure R2(b) True copy of the notice dated 08.11.2024 issued to the 6th respondent Annexure R2(c) True copy of notice dated 11.11.2024 6th respondent Exhibit R2(a) True copy of the Circular dated 29/05/2013 Exhibit R2(b) True copy of the notice dated 08.11.2024 issued to the 6th respondent Exhibit R2(c) True copy of notice dated 11.11.2024 6th respondent

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Kerala High Court