K.S.Purushothaman vs State Of Kerala on 17 January, 2025

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Kerala High Court

K.S.Purushothaman vs State Of Kerala on 17 January, 2025

1. Mr. T. P. Pradeep, learned Counsel appearing on behalf of the 6th respondent, Secretary-in-Charge of Kumplampoika Service Co-operative Bank Ltd., Pathanamthitta district, filed an affidavit pursuant to the order of this Court dated 15.01.2025. It is stated that one Praveen Prabhakaran, the Manager-in-Charge of the branch during the year 2018, had misappropriated an amount of Rs.4.33 Crore and on realizing this, the depositors had withdrawn an amount of Rs.14 Crores from the bank. A FIR bearing No.455/2018 had already been registered in Malayalappuzha Police Station against the above said Praveen Prabhakaran for commission of the offences WA.2045/2024 & con. cases 2 punishable under Sections 406, 409, 420, 465, 468 and 471 of IPC, much less, surcharge proceedings under Section 68(1) of the Co- operative Societies Act have also been initiated against three(3) former employees and eleven(11) former Managing Committee members and it has been found that a sum of Rs.9,65,06,958/- including the element of interest, is the loss sustained by the Bank. The details/breakup of the liabilities against the former Managing Committee members and employees have been enumerated in paragraph No. 3 of the Affidavit.

2. It has been also stated that about 547 loans were disbursed from the Bank for an outstanding amount with interest of Rs.33,94,79,074/- and now an amount of Rs. 31,01,92,216/- is defaulted from the loanees. The Bank has filed 280 arbitration cases against the defaulters for recovery of an amount of Rs 21,84,49,913/- and obtained 259 Awards for an amount of Rs.20,08,13,891/- and 232 execution proceedings are pending for realization of an amount of Rs.19,04,68,239/-. A Special Sale Officer, as per the Order of this WA.2045/2024 & con. cases 3 Court in W.P.(C) No. 22064 of 2021, was appointed for the recovery and an amount of Rs.2,38,40,531/- has been disbursed to 61 writ petitioners as 40% of their deposited amount and a balance amount of Rs.3,00,53,670/- is due to them. There are about 703 fixed deposits with the bank amounting to Rs.9,91,71,798/-, due to the deposit holders. An amount of Rs. 3,50,67,956/- is due to the savings bank account holders also. Only 61 deposit holders had approached this Court and till now, an amount of Rs. 89,58,996/- has been realized by the Bank. An amount of Rs.2,62,037/- was incurred for conducting the elections of the Managing Committee held on 31.12.2021. The appellant has already been disbursed Rs.8,00,000/- (Rupees Eight Lakhs only) and now, out of Rs.20,42,859/-, an amount of Rs.12,42.859/- is due to the appellant.

W.A. Nos. 2045 & 2028 of 2024

3. In these writ appeals filed on behalf of the depositors, Mr. Bimal K. Nath, learned counsel appearing on behalf of 5th respondent, WA.2045/2024 & con. cases 4 Mylapra Service Co-operative Bank Ltd., Pathanamthitta district, has filed an affidavit pursuant to the aforesaid order of this court dated 15.01.2025. The contents of the affidavit are not only alarming but, startling to notice that the financial status of the Society is at peril. It is stated that the Audit certificate of the society has shown a loss of Rs.36,72,03,760.80/- and the loan outstanding amount is Rs.72,43,85,797.25/-. As per the contents of paragraph No. 16 of the affidavit, the Society is in a serious financial crisis as the total overdue amount is about Rs.31.32 Crores. It was a leading Society but now, is on the verge of collapse due to various reasons including the mismanagement and irregularities committed by the erstwhile Managing Committee and former Secretary. Crime Case Nos. 0827/2023 and 553/2024 have been registered by the Pathanamthitta Police against the erstwhile Managing Committee members and Former Secretary and the matter is pending before the Crime Branch (Economics Offence Wing), Pathanamthitta. The properties of the former President and his family members have been attached by the WA.2045/2024 & con. cases 5 3rd respondent, Joint Registrar of Co-operative Societies, Pathanamthitta vide order dated 04.05.2024 and 07.05.2024 respectively.

4. Mr.D.Kishore, learned counsel representing the fixed depositors, has not only rendered assistance with regard to the grievance of the depositors but, in general, pointed out that even the Revival Scheme and the Minimum Guarantee Scheme are defective. In this regard, our attention had been brought to Section 12(3) of the Revival Scheme incorporated as per the provisions of Section 57E of the Kerala Co-operative Societies Act, 1969 whereby, either the Administrator or the existing members of the Managing Committee or the President have also been a part of the Monitoring Level Committee. In other words, there is no guarantee, even the newly elected Managing Committee may or may not indulge in this misappropriation and the element of ruling out of biasness has not been taken care of.

5. We have been also confronted with similar other claims WA.2045/2024 & con. cases 6 made by the fixed depositors. Learned Single Bench, vide common Order, had disposed of numerous writ petitions by issuing the following directions;

11. These writ petitions are accordingly disposed of with the following directions:-

(i) The Co-operative Societies/Banks in these writ petitions are directed to prepare a project document for revival under the Kerala Co-operative Revival Fund Scheme, 2024 and submit the same to the State High Level Committee through the Registrar with a recommendation from the District Level Monitoring Committee. The Co-operative Societies/Banks shall submit such Scheme within a period of six weeks from today.

(ii) The Scheme along with the recommendation of the District Level Monitoring Committee should be forwarded to the State High Level Committee through the Registrar within a further period of four weeks. The State High Level Committee shall scrutinise and process the Applications and make necessary recommendation for sanctioning of the amount in specified conditions.

(iii) The Societies/Banks are further directed to make a proposal/Scheme for availing funds under the Kerala Co-

operative Deposit Guarantee Scheme, 2018 in accordance with the provisions of the revised Regulations / Scheme under G.O.(P) No.175/2024/Co-Op dated 03.09.2024. Such proposal shall be made within a period of six weeks.

(iv) In the meanwhile, the Societies / Banks / Administrators / Administrative Committees will be at liberty to recover the amounts otherwise due to the Banks through the ordinary means under the Kerala Cooperative Societies Act, 1969 and the Societies will be at liberty to repay the Fixed Deposits / Savings Bank Deposits to the petitioners as per the priorities followed by the Societies.

WA.2045/2024 & con. cases 7 It has been pointed out that these directions would not serve the purpose at the best, under both the Schemes, the Minimum Guarantee or Revival Scheme, the amounts due to the depositor is in lakhs and will be compensated only Rs.2 lakhs each and it would not serve the purpose.

6. All the Societies have various assets and it is high time that the Government should come up with concrete process for liquidating the Societies for the reason that the role of the Centre has already been done away vide the Judgment of the Gujrat High Court and the control and management of the Society as per the VIIth Schedule, is the domain of the State. It is further pointed out that, since this Court has already attached the assets of the Society, they can be sold off and the dues of depositors including the employees, not more than 15 in every Society, can be taken care of, by giving them lump sum under the guise of VRS.

7. Mr.Jai Shankar, the learned Counsel for the Enforcement Department, who has been requested to appear in pursuance of the WA.2045/2024 & con. cases 8 Order, informed that there are more than 20 Societies who are already facing the proceedings under the Prevention of Money Laundering Act, 2002 and various orders under the provisions of the Act and few of the matters, in this court, are pending for consideration of bail. But the fact remains that there is a completely different procedure for attachment and disposal of the property, which can take place only when the trial is completed. W.A. Nos. 1845 and 1861 of 2024

8. In these matters an affidavit has been filed by the Collector, Kollam as directed by this Court vide Order dated 04.12.2024 pointing out that there have been a case where instead of availing the remedy under Section 69 of the Kerala Revenue Recovery Act, 1968 for obtaining the Arbitration Award by the depositors for realizing their dues, had approached the Ombudsman established and constituted under the Kerala Co-operative Societies Act, 1969 and as per the amendment in Section 76 of the Co-operative Societies Act, an order of the Ombudsman is equivalent to a decree WA.2045/2024 & con. cases 9 and the power to execute is with the Collector concerned under the Kerala Revenue Recovery Act, 1968. However, as per the contents of paragraph No. 6 of the Affidavit, the requisition from the concerned Requisition Authority i.e. the Joint Registrar in Form 24 under Section 69(2) of the Kerala Revenue Recovery Act, 1968 is still awaited.

9. An affidavit by the Superintendent of Police, Vigilance & Anti-Corruption Bureau, Southern Range, Thiruvananthapuram has also been filed as directed by this Court vide Order dated 04.12.2024 stating that the Investigating Officer has filed the report before the Court of Enquiry Commissioner and Special Judge (Vigilance), Thiruvananthapuram for adding more accused in the array of accused in VC No. 3 of 2021 and the investigation in the case is progressing and about 218 witnesses were examined as on today and 1650 documents have been seized including the suspected loan documents related to 187 loan recipients, out of which 1412 documents related to 128 forged loans, 30 undisputed loans and 19 doubtful loans. Specimen signatures of 128 individuals including 4 WA.2045/2024 & con. cases 10 accused have been collected along with admitted signatures of 114 persons from various documents. As per the investigation, it is borne out that by sanctioning 187 loans, an amount of Rs.15,26,82,428/- has been branded under suspicious circumstances; Rs.9,98,189/- had been not even remitted to the loan accounts concerned; fixed deposit of 4 account holders amounting to Rs.3,00,000/- has not been properly accounted; concession on interest with respect to one time settlement was granted illegally against 70 loan accounts without the knowledge and consent of the actual loanees resulting in a loss of Rs.37,11,786/-; an amount of Rs.2,17,74,061/- has been disbursed as loan to 14 ineligible 'A' Class members, creating mortgage loans totaling to Rs.3,13,42,994/- was illegally sanctioned against the properties owned by the relatives of the accused at a higher market rate than the prevailing rate; Rs.42,50,000/- was granted as loans to 9 members of the Society without obtaining any securities incurring a loss of Rs. 72,17,990/-; 10 numbers of loans are yet to be identified and questioned. The ledgers, minutes of books, WA.2045/2024 & con. cases 11 deposit account ledgers, cash books are yet to be collected. There is an undertaking that the remaining investigation shall be meticulously conducted.

10. Similar affidavit of the Secretary of the Edamulackal Service Co-operative Bank Ltd. has been filed stating that out of 70 ARC cases, 18 cases have already been adjudicated by the Arbitrator and there are 52 cases still pending for consideration of the Assistant Registrar, Co-operative Societies, Punalur. The amount involved in the 52 arbitration cases is Rs. 6,74,04,978/- and the amount involved in those 62 execution petitions is Rs. 2,29,19,254/-. The details of the case file list and the Arbitration Award have also been annexed.

11. Affidavit of the Joint Secretary to Government, Department of Co-operation has been filed and it has been stated that the Edamulackal Service Co-operative Society, for availing the financial assistance, has not filed any application for taking the benefit of Co- operative Revival Fund Scheme, though the application was submitted by the Society before the Office of the Assistant Registrar WA.2045/2024 & con. cases 12 (General) only on 10.12.2024 and had been returned due to certain defects. It has been resubmitted on 09.01.2025 and the same has been forwarded to the Joint Registrar, Kollam on 10.01.2025. Similarly, 18 applications of various Societies have also been received in the Office of the Registrar of the Co-operative Societies for availing the financial assistance from the Co-operative Revival Fund Scheme. But only seven applications have been submitted by the recommendation of the District Level Committee. The remaining eleven applications have been returned to the concerned Officer for submitting before the District Level Committee and scrutiny of the seven applications are in progress.

12. Looking into the dire states of the Societies and the conduct of the former and the present Managing Committee and on cumulative perusal of the contents of the Affidavits, we are of the view that it is a fit case where the Court should bring succor and needs the proper and transparent assistance. Accordingly, we appoint Mr. D. Kishore who is present in the Court as an Amicus WA.2045/2024 & con. cases 13 Curiae in all these matters and any other future matters which are of similar nature which would come before us against the Order of the Single Bench, as, numerous other writ petitions along with the writ petitions out of which the present writ appeals have been filed, have been disposed off. He has pointed out to us, the provisions of Section 71 of the Co-operative Societies Act, which empowers the Registrar to take action for winding up in case of financial condition of the Society.

13. He pointed out that while looking at the affidavits of the Society, all the aforementioned Societies would not be able to fall within the parameters and the guidelines of the already promulgated scheme as well as the Minimum Guarantee Scheme and Revival Scheme. There is no likelihood that the pending execution proceedings and the pending arbitration cases would culminate so soon rather are going at a very slow pace and there is no likelihood of coming to a logical conclusion and this mundane is likely to continue for infinite period, in case the order under challenge is permitted to WA.2045/2024 & con. cases 14 be kept in force. Accordingly, we, for the time being, stay the order of the learned Single Bench.

14. Since we have already passed the attachment orders of the properties of all the Societies and it is borne out from the affidavit of the Joint Registrar that 18 more Societies have also filed an application for revival scheme, we call upon on Mr. Vipin Das, Special Government Pleader to give the details of those Societies and also with the particulars of the outstanding amounts to be recovered from the debtors and as well as the amount due to the depositors. Let this affidavit be filed within a period of one week. It will also apprise stage of execution and non grant of permission to the collector in proceeding with pending execution petitions. It is made clear that, in case if the affidavit does not satisfy the conscience of this Court viz-a-vis the grievance of the depositors, this Court may be constrained to take suo motu action of appointment of a provisional liquidator with the assistance of the Amicus Curiae and other lawyers representing the parties.

WA.2045/2024 & con. cases 15

15. We also direct the Special Secretary to monitor the proceedings pending before the various authorities for execution and arbitration awards and issue directions to the competent authorities to fast-track the said proceedings and also give a reasoning as to why the concurrent authority as per the affidavit of the Collector is not sending the requisition as prescribed under Section 24 of the Section 69(2) of the Kerala Revenue Recovery Act, 1968.

16. Mr.Jai Shankar is also directed to assist this Court by filing an affidavit with regard to the pending cases before the Enforcement Directorate. The Affidavit shall also indicate the details of the Societies which are running under huge loss.

Post this matter for further consideration on 30.01.2025.

Sd/-

AMIT RAWAL, JUDGE Sd/-

                                              K.V JAYAKUMAR, JUDGE
       Svn




17-01-2025                     /True Copy/                           Assistant Registrar

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