Annamma Mathew vs The Managing Committee Of The ... on 3 August, 2022

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Kerala High Court

Annamma Mathew vs The Managing Committee Of The ... on 3 August, 2022

The subject matter of challenge in these writ appeals filed under Section 5(i) of the Kerala High Court Act is the common judgment rendered by the learned Single Judge to the extent it relates to the dismissal of the instant Writ Petition (Civil), WP(C) Nos.15863/2021 and WP(C) No.25710/2021. As these matters arise out of a common judgment and as the issues are inter-related, these appeals are disposed of on the basis of a common judgment.

2. Heard Sri.B.S.Swathikumar, learned Counsel appearing for the appellants in WA No.234/2022, Sri.T.R.Harikumar, learned Counsel appearing for the appellant in WA No.278/2022, Sri.Saigi Jacob Palatty, learned Senior Government Pleader appearing for the official respondents in these appeals and Sri.Ashok B. Shenoy, learned Advocate appearing for the respondent Co-operative Society.

3. The Arbitration Reference case No. 1/2017 has been filed by WA No.234 of 2022 & WA No.278 of 2022 2 the respondent-Mavelikkara Taluk Co-operative Bank Ltd in March 2017, seeking for the recovery of an amount of Rs.34 Crores 81 lakhs, allegedly misappropriated by 3 of its employees, who have been originally arrayed as defendants in the above ARC proceedings. WP(C) No.15863/2021, which has led to WA No.234/2022 has been filed by the then members of the Managing Committee of the abovesaid respondent Co-operative Society Bank, whereas WP(c) No.25710/2021 (which has led to WA No.278/2022) is filed by the former Secretary of the respondent Co-operative Society. Certain other writ petitions have also been disposed of as per the common judgment and we are not concerned with the factual details of those writ proceedings. The gist of the allegations in the Arbitration Reference Case filed under Section 69 of the Kerala Co-operative Societies Act, (KCS Act) is that due to large scale misappropriation effected by manipulation of accounts and by penetrating into the hard disc of the computer maintained at the Thazhakkara Branch of the respondent Co-operative Society, the respondent Bank had lost huge amounts and the said amounts are sought to be recovered by filing the abovesaid ARC proceedings under Section 69, by proceeding against the persons said to be responsible for the same. The petitioners in the instant Writ Petitions were not WA No.234 of 2022 & WA No.278 of 2022 3 originally impleaded as defendants/respondents in the above ARC proceedings. They were sought to be impleaded as additional defendants in the ARC, subsequent to the institution of the above case. The impugned order passed by the adjudicatory forum dealing with monetary dispute is under challenge in these writ proceedings. According to the appellants/writ petitioners, the ARC was initially filed before the respondent Joint Registrar who is a notified Registrar and thereafter the said notified Registrar has transferred the case to the Assistant Registrar concerned, who is also a notified Registrar and that the Assistant Registrar has been appointed as an Arbitrator in this case, presumably as envisaged in Section 70(4)(c) of the KCS Act. Originally the impleading Application was allowed and the consequential pleas were permitted without notice to the persons sought to be impleaded. Later, on intervention of this Court, as per the judgment rendered on 22.09.2020 in WP(C) No.4425/2020 (produced as Ext.R2(a) in the WP(C) No.15863/2021, which has led to WA No.234/2022), this Court directed the Arbitrator to consider whether the persons so impleaded are necessary or proper parties to the proceedings and that such considerations may be made de hors any observations in the orders already passed on the impleading application and the appended WA No.234 of 2022 & WA No.278 of 2022 4 application and the contention of the petitioners regarding the maintainability of the pleas against them was also directed to be considered. It appears that it is in pursuance thereof that the Arbitrator/Assistant Registrar has passed the orders impugned in these writ proceedings, reiterating that the petitioners are liable to be impleaded as additional defendants in the ARC proceedings. The main contentions urged by the appellants are that they cannot be in any manner made liable for the alleged loss said to have been suffered by the respondent Bank and that the orders impleading them as additional defendants are thus plainly illegal and improper. Yet another contention is also raised that the total amount claimed in the ARC suit for recovery of money is about Rs.34.81 crores and therefore going by the stipulations in circulars no.23/2014 dated 24.11.2014, issued by the Registrar of Co- operative Societies, an officer of the rank of Assistant Registrar will have pecuniary jurisdiction to deal only with disputes of the value involving Rs.15 lakhs to Rs.25 lakhs in respect of Co-operative institutions, whose area of operation is one Taluk or the District concerned. Further that, even the respondent Joint Registrar's pecuniary jurisdiction is only for monetary disputes involving Rs. 25 lakhs to Rs.40 lakhs and unlimited pecuniary jurisdiction is conferred only with the Registrar of Co- WA No.234 of 2022 & WA No.278 of 2022 5 operative Societies. On this basis it is urged that the Assistant Registrar could not have been appointed as the Adjudicator/Arbitrator in the instant case, since the pecuniary value of the claim is much more than the maximum limits for both the Assistant Registrar and the Joint Registrar.

4. Initially we will have to deal with the first contention raised by the appellants. As regards the impleading of the petitioner in WP(C) No. 25710/2021 (which has led to WA No. 278/2021) the said party was the then Secretary of the respondent Co-operative Society Bank at the relevant time. The petitioners in WP(C) No.15863/2021 (which has led to WA No.234/2022) were the then members of the Managing Committee of the respondent Bank at the relevant time. There are no disputes regarding the said factual aspects. The main allegations raised by the respondent Co- operative Society Bank in their application for impleadment and amendment of the plaint in the ARC is that there has been grave dereliction of duty on the part of the abovesaid petitioners and that they are also involved in the alleged misappropriation. Hence in the light of these aspects, the view taken by the learned single Judge that having been in office at the relevant time as Secretary and the members of the managing committee of the respondent - Co-operative Society Bank and going by the nature of the factual allegations made in the abovesaid WA No.234 of 2022 & WA No.278 of 2022 6 applications, the order impleading them as additional defendants in the ARC cannot be said to be bad. Further the learned Single Judge has very cautiously and prudently held that whether these parties are liable or not, is a matter to be considered and adjudicated on merits by the adjudicatory forum. It should also be borne in mind that Rule 47(a) of the Kerala Co-operative Society Rules (KCS Rules for short) would mandate that it shall be the duty of the paid Secretary/Manager of every Society to maintain a statement in proper form, all the accounts, Registers, other records and seal of the Society, under his safe custody and shall be personally responsible for its safety and he shall also be the custodian of cash, security and all other properties of the Society, subject to the overall control of the President. Further Rule 47(d) of the KCS Rules would mandate that notwithstanding anything contained in the above clauses of Rule 47, the Committee of the Society shall primarily be responsible for the maintenance and safety of all accounts, records, cash and other assets of the Society and it shall be the duty of the Committee to see that the officers concerned discharge their functions and perform their duties as laid down in these Rules and the bye-laws.

5. In the light of the above factual aspects and also taking note of the abovesaid statutory provisions contained in the KCS Rules, more WA No.234 of 2022 & WA No.278 of 2022 7 particularly, Rule 47 thereof, we are of the firm opinion that the learned Single Judge was right in reaching the finding that the order of impleadment cannot be seriously faulted. The responsibility of the Secretary of the Committee of the Society in view of the provisions contained in Rule 47 has been dealt with by this Court in decisions as in Thrikkadavoor Service Co-operative Society Ltd v. Sivasankara Pillai, [1990 (2) KLT 594 = 1990 KHC 436], Rajeev Koshy @ Reji K. Koshy v. State of Kerala & Others [2018 KHC 237 = ILR 2018 (2) Ker 999]. Hence, we are not in a position to countenance the abovesaid main contentions urged by the appellants herein.

6. Now, we will have to deal with the second contention raised by the appellants. It is urged by the appellants that the Registrar of Co-operative Societies have issued circular No.53/2014 (bearing No.AEL.5132/14) dated 24.11.2014, wherein it has been inter alia laid down in Clause B of paragraph 4 thereof that in exercise of powers conferred under Section 66A of the KCS Act and intercession of the previous circulars issued in that regard, that all monetary disputes involving Rs.15 to 25 lakhs in respect of Co-operative institutions whose area of operation is one Taluk of district shall be dealt with by the WA No.234 of 2022 & WA No.278 of 2022 8 Assistant Registrar (General) of Co-operative Society of the Taluk concerned and that for monetary disputes involving Rs.25 to 40 lakhs etc will be dealt with by the Joint Registrar of Co-operative Society (General) concerned of the District and that all monitory disputes in respect of Co-operative institutions could be dealt with by the Registrar of Co-operative Societies. Hence it is urged that the Assistant Registrar or the Joint Registrar will have pecuniary jurisdiction only to deal with disputes of the values mentioned herein above and where the pecuniary value is above the said limits as in the instant case, then the pecuniary jurisdiction will be vested solely with the Registrar of Co-operative Societies, even if the Joint - Registrar of Co-operative Societies and the Assistant Registrar have been notified to exercise the powers of a Registrar under Section 3(2) of the Act.

7. Sri.Saigi Jacob Palatty, learned Senior Government Pleader appearing for the official respondents and Sri.Ashok B.Shenoy, learned Counsel appearing for the respondent Co-operative Society would point out that the abovesaid circular No.53/2014 has been subsequently modified by the issuance of circular No.11/2017 (bearing No. AEL.32950/2016) dated 23.01.2017, issued by the Registrar of Co- operative Societies etc. A copy of the subsequent circular No.11/2017 WA No.234 of 2022 & WA No.278 of 2022 9 dated 23.01.2017 has been produced as Ext.R2(d) in WP(C) No. 15863/2021 which has led to WA No.234/2022. A copy of the circular No.53/2014 has been made available for the perusal of this court. A reading of the abovesaid circulars, more particularly, the latter circular No.11/2017 would make it clear that the Registrar of Co-operative Societies have clearly ordered therein that the previous circulars referred to therein, will stand modified and that the instructions in circular no.11/2017 have been issued by codifying and modifying all the previous circulars including Circular No.53/2014 with instructions issued hitherto in the matter. A reading of the further contents of circular No.11/2017 would make it clear that no mention, whatsoever is made therein regarding any pecuniary limits or distribution of business on the basis of pecuniary value of the disputes etc. It is common ground that the instant ARC No.1/2017 has been filed on March 2017, at a time when circular no.11/2017 dated 23.01.2017 was in vogue. Hence we are not in a position to countenance the abovesaid plea of the appellants. Still further, even if it is assumed that the pecuniary value arrangements envisaged in circular No. 53/2014 dated 24.11.2014 are still in continuance, then the following aspects would be relevant.

8. The last part of subsection 1 of Section 69 of the KCS Act WA No.234 of 2022 & WA No.278 of 2022 10 would mandate that the disputes envisaged in that Section shall be referred to the Co-operative Arbitration Court constituted under Section 70A in the case of non-monitory disputes and the Registrar in the case of monitory disputes and further that the Co-operative Arbitration Court or the Registrar as the case may be, shall decide such disputes etc. In the instant case, what is involved is monitory dispute and therefore, the same will not come within the province of the Co-operative Arbitration Court, but would only come within the province of the Registrar as envisaged in the abovesaid provision contained in Section 69. Section 70, more particularly sub sections 4, 5 & 6 thereof may be pertinent. Sub Sections 4,5 & 6 of Section 70 provides as follows:

"[70. Award of disputes :-

                        (1).    xxxxxxxxxxxx.
                       (2).    xxxxxxxxxxxxx
                       (3).    xxxxxxxxxxxx
                       (4).    The Registrar may, on receipt of the reference of a
               dispute under sub-section (1) of Sec 69
                       (a)     elect to decide the dispute himself; or
                       (b)     transfer it for disposal to any person who has been

invested by Government with powers in that behalf; or

(c) refer it for disposal to an arbitrator appointed by the Registrar:

Provided that a transfer under Clause (b) or a reference under clause (c) shall not be made to a person equal or superior to him in rank.

(5) The Registrar may withdraw any reference transferred under clause (b) of sub-section (4) or referred under clause (c) of that sub-section and he may elect to decide the dispute himself or transfer it to any other person under clause

(b) of sub-section (4) or refer it to any other arbitrator under Clause (c) of that sub-section.

(6) The Registrar or the person invested with powers in this behalf shall, decide the dispute or the arbitrator shall pass an award in accordance with the provisions of this Act and WA No.234 of 2022 & WA No.278 of 2022 11 the rules and the bye-laws and such decision or award shall, subject to the provisions of Sec.82, be final. Pending decision or award, the Registrar, such person or the Arbitrator, as the case may be, may make such interlocutory orders, as he may deem necessary, in the interests of justice."

9. The name of the authority envisaged in the last part of Section 69(1) and in sub sections 4, 5 & 6 of Section 70 is "Registrar". Section 2(P) of the KCS Act would define "Registrar", to be Registrar of Co-operative Societies appointed under Subsection (1) of Section 3 and includes any person on whom all or any of the powers of the Registrar under this Act are conferred.

10. Section 3 deals with Registrar and Sub Section 1 thereof would stipulate that Government may appoint a person to be a Registrar of Co-operative Societies for the State. Sub Section 2 thereof would further stipulate that the Government by general or special order, confer on any person, all or any of the powers of the Registrar under the KCS Act. It is common ground that in exercise of the powers under Section 3(2) of the KCS Act, the State Government had earlier issued SRO No.198/1969, published as per Notification No.24314/C3/69/AD dated 12.05.1969, and published in Kerala Gazette No.19 dated 13.05.1969. In the said notification, it is stipulated that the same has been issued in exercise of the powers under Section 3(2) of the KCS Act and in supercession of the existing notification of the subject and that the State WA No.234 of 2022 & WA No.278 of 2022 12 Government thereby confers power on the officers specified in Column No.1 of the table below, the powers of the Registrar under the KCS Act specified in the corresponding entries in Column No.2 thereof. In the appended table thereunder, 4 categories are mentioned. Item No.1 and 2 thereof deals with additional Registrar and Joint Registrar and it is notified therein that all powers of the Registrar under the Act are conferred on those officers. Further, Item no.3 thereof deals with Deputy Registrar and it is stated therein that all powers of the Registrar under the Act except those referred to in Section 32, Section 71(1) and (3) and 87 etc are conferred on officers of that rank. We are more concerned with item no.4 which deals with Assistant Registrar, where it is stipulated therein that powers of the Registrar under the various Sections mentioned therein are conferred on the Assistant Registrar and some of the Sections mentioned therein are those under Sections 69, 70 etc of the KCS Act. Nobody has got a case that the abovesaid powers statutorily conferred on the Assistant Registrar has been in any manner varied or altered by the State Government in exercise of the powers under Section 3(2). Hence, we are proceeding on the premise and about which there is no dispute, that an officer of the rank of Assistant Registrar has been conferred by the State Government, statutorily in WA No.234 of 2022 & WA No.278 of 2022 13 terms of Section 3(2) to exercise all the powers of the Registrar in relation to the matters covered by Section 69, 70 etc of the KCS Act. So, an officer of the rank of Assistant Registrar of Co-operative Societies, is thus statutorily conferred with the powers in relation to the matters in Section 69 & 70 of the KCS Act.

11. Of course, Section 70(4) would empower the Registrar concerned, on receipt of a reference of a dispute under Section 69(1), (a). to elect to decide a dispute himself or (b). transfer it for disposal to any person who has been invested by the Government with powers in that behalf or (c). refer it for disposal to an Arbitrator appointed by the Registrar. Proviso thereto would indicate that a transfer under Clause (b) or a reference under Clause C shall not be made to a person equal or superior to him in rank. Section 70(5) would further stipulate that Registrar may withdraw any reference transferred under Clause (b) of sub section (4), who has referred under Clause (c) of that sub-section and he may elect to decide the dispute himself or transfer it to any other person under Clause (b) of Sub Section (4) or refer it to any other Arbitrator under Clause (c) of that sub section. Sub-section (6) of Section 70 would further stipulate that the Registrar or the person invested with powers in his behalf shall, decide the dispute or the Arbitrator shall pass WA No.234 of 2022 & WA No.278 of 2022 14 an award, in accordance with the provisions of this Act and the rules and the bye-laws and such decision or award shall, subject to the provisions of section 82, be final etc.

12. The case of the petitioners appears to be that the ARC was initially filed before the Joint Registrar, who is a notified Registrar, who had thereafter appointed the Assistant Registrar as the Arbitrator in terms of Section 70(4)(c) of the Act. Whether the Assistant Registrar was entrusted to decide the above dispute or it may be that the Assistant Registrar concerned was entrusted to decide the above dispute by following the course of action as envisaged in Clause (b) of Section 74 which empowers the notified Registrar like Joint Registrar to transfer the case for disposal to any person, who has been invested by the Govt., powers in that behalf. Irrespective as to whether the entrustment of the function to the Assistant Registrar was by Clause (b) or Clause (c) of Section 74, the indisputable aspect of the matter is that the Assistant Registrar is a notified Registrar and he has been duly entrusted to decide the dispute. Even if an Assistant Registrar is duly notified to exercise the powers of a Registrar as mentioned above, still a superior officer who is also a notified Registrar could have transferred the case to some other notified Registrar etc. That might have been permissible, going by the Scheme of Section 70 more particularly Sub sections 4 and 5 thereof. WA No.234 of 2022 & WA No.278 of 2022 15 The provisions of the KCS Act more particularly Section 3(2), Section 69 and Section 70 explicitly authorizes and empowers an officer of the Rank of Assistant Registrar to decide the dispute either as a notified Registrar or as an Arbitrator. Hence the said statutory arrangement envisaged in these provisions may not be amenable for any disturbance by issuing an administrative circular, purportedly in exercise of powers under Section 66A of the KCS Act. The issue before us as to whether even if the administrative circular No.53/2014 dated 24.11.2014, (even if it is assumed to be in force at the relevant time) can be said to have a mandatory effect to prescribe the pecuniary limits of exercise of jurisdiction so as to oust the jurisdiction of an officer who is otherwise empowered in terms of Section 69, 70, r/w Section 3(2) of the Act. It has to be borne in mind that the basic empowerment notification has been issued by the Statement Government in exercise statutory powers conferred under Section 2(p) r/w Section 3(2) of the KCS Act. Such a statutory empowerment made by a State Government, may not be amenable for any statutory disturbance by an administrative circular issued by the Registrar of the Co-operative Societies who is even otherwise sub-ordinate to State Government. So we are of the view that prescriptions or stipulations in the administrative circular No. WA No.234 of 2022 & WA No.278 of 2022 16 No.53/2014 dated 24.11.2014, cannot have the statutory effect of ousting the jurisdiction of a notified Registrar/Arbitrator like Assistant Registrar, merely on the basis of the pecuniary value arrangement envisaged the administrative circular. Our findings may not be construed to hold that the said circular No.53/2014 dated 24.11.2014 is of no effect at all. We are only saying that the said administrative circular cannot be held to have the force of mandatory nature so as to upset the statutory arrangement envisaged in terms of Sections 2(P), 3(2), 69 and 70 of the Act as above. Of course even if the above said norms in circular No.53/2014 is being continued, that may be an internal arrangement for managing the quasi-judicial work in relation to the disputes in terms of Section 69 etc. We are only saying that the above said administrative circular cannot be the basis to hold that the Assistant Registrar, who is the notified Registrar/Arbitrator will not have jurisdiction to deal with the ARC disputes or to pass orders on the amendment application or impleadment application etc. Hence for these reasons we are of the view that the above said contentions of the appellants would also fail, even if it is assumed that the administrative norms in circular No.53/2014 dated 24.11.2014 are still in vogue even after the issuance of the subsequent circular No.11/2017.

WA No.234 of 2022 & WA No.278 of 2022 17

13. However, as mentioned herein above we would reiterate that the learned Single Judge has correctly laid down the legal position that the impugned order impleading the petitioners as defendants or allowing the amendment application cannot by itself lead to the situation that the defendants should be assumed to be liable and the issue as to whether they liable or not is a matter to be adjudicated on merits in the ARC proceedings. In other words all contentions available to both sides in that regard are left open to be raised and decided at the appropriate time for the adjudicate Forum concerned.

14. The upshot of the above discussion is that no valid grounds have been made out by the appellants calling for the interdiction of the well considered verdict of the learned Single Judge in these WP(C)s.

Resultantly, the Writ Appeals will stand dismissed.

Sd/-

ALEXANDER THOMAS, JUDGE sd/-

SHOBA ANNAMMA EAPEN, JUDGE Nsd

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