Madras High Court
M. Sambandam vs The Deputy Registrar (Credit) ... on 29 July, 1998
Equivalent citations: (1999)3MLJ310
Author: P. Sathasivam
Bench: P. Sathasivam
ORDER P. Sathasivam, J.
1. Aggrieved against the order of the third respondent dated 31.8.1989 the petitioner has approached this Court for quashing the said order on various grounds.
2. According to the petitioner, he was a President of the second respondent-Society in the year 1980 and continued the same position till April 1988 when the second respondent superseded the Board and appointed a Special Officer. The second respondent Society alleged that during the tenure as a President of the said Society certain irregularities have taken place, consequently an enquiry under Section 65 of the Tamil Nadu Act 53 of 1961 was conducted by the Special Investigation Squard of the Registrar of Co-operative Societies Office. A show-cause notice was issued to him and other members under Section 71 on 11.11.1987. He gave a reply in person in the form of written explanation with 12 documents to substantiate the defence claim. No enquiry report was sent to him either along with the show-cause notice or later at any point of time. The first respondent has passed an order in his proceedings Na.Ka.6414/87 holding the petitioner ex parte and directed the petitioner and four other members to pay the surcharge of Rs. 2,67,071.15 either jointly or severally. Against the order of the first respondent he preferred an appeal before the Special Tribunal for Co-operative Societies in S.T.CA.No. 94 of 1988, the third respondent herein. Before the tribunal the petitioner explained to the fact that he was not responsible for any of the commission or omission and also pointed out that there was no negligence on his part. It is also brought to the notice of the tribunal, the failure to supply enquiry report. Without considering all the material aspects, the third respondent by order dated 31.8.1989 confirmed the order of the first respondent and dismissed the appeal. Against which the petitioner filed the present writ petition.
3. The second respondent has filed a counter affidavit wherein it is stated that the petitioner was the Ex-President of the Society from July 1980 to April 1988. During the tenure of the office of the petitioner as President of the Society certain irregularities in the accounts and funds were noticed by the Department and an enquiry under Section 65 of the Act was ordered. The enquiry revealed that a sum of Rs. 2,67,017.15 was caused as loss to the Society. Based on the enquiry report, a notice under Section 71 of the Act was issued to all the Directors of the Society including the petitioner as to why they should not be surcharged to that extent. None of them have submitted their representation, accordingly the third respondent in his order dated 17.3.1988 has passed final orders directing them to make good the amount mentioned. Aggrieved by the surcharge proceedings the petitioner preferred an appeal before the third respondent tribunal and the same has been rightly confirmed. It is also stated that copy of the enquiry report was not furnished to the petitioner, since he has not demanded the same. It is also contended that, in as much as the surcharge order was passed by the Deputy Registrar on the basis of the records and confirmed by the tribunal the third respondent herein, there is no merit in the writ petition and prayed for dismissal of the same.
4. In the light of the above factual position, 1 have heard the learned Counsel appearing for the petitioner as well as the learned Government Advocate for respondent 1 and 3.
5. Mrs. N. Mala, learned Counsel appearing for the petitioner after taking me through the orders passed by the respondent 1 and 3 has raised the following contentions:
(i) The first respondent fails to furnish a copy of the claim petition and enquiry report, accordingly the ultimate order passed by the first respondent dated 17.3.1988 is vitiated;
(ii) In the absence of any allegation or breach of trust or misappropriation' of the funds of the Society, mere negligence would not attract Section 71 of the Tamil Nadu Co-operative Societies Act (Tamil Act 53 of 1961).
On the other hand, the learned Counsel appearing for the respondent 1 and 3 submitted that both the first respondent as well as the third respondent on the basis of the materials came to the conclusion that the petitioner was also responsible for the loss sustained by the Society along with the others, accordingly interference by this Court in this proceeding is not warranted.
6. I have carefully considered the rival submissions.
7. There is no dispute that the petitioner worked as a President of the second respondent Society from July 1980 to April 1988. Since the performance of the petitioner and others were not satisfactory an enquiry under Section 65 of the Tamil Nadu Co-operative Societies Act 1961 (hereinafter referred to as 'the Act') was initiated by the Registrar of the Co-operative Societies. In pursuance of the direction of the Registrar one Sub-Registrar enquired the matter and submitted his report. The Enquiry Officer found that the petitioner and other five Directors were responsible for the loss caused to the Society, accordingly found that necessary action may be taken against them. In pursuance of the said report the petitioner was asked to submit his explanation on 11.11.1987 by the Deputy Registrar. According to the first respondent, after receipt of the show-cause notice none of the Directors, nor the petitioner submitted any explanation for the show-cause notice. Accordingly, on the basis of the documents the first respondent passed an order dated 17.3.1988 and directed the petitioner as well as other directors to compensate the second respondent-Society to the extent of Rs. 2,67,071.15 with interest at the rate of 18 per cent per annum, jointly or severally. Against the said order, the petitioner alone preferred an appeal before the third respondent.
8. It is the definite case of the petitioner that on receipt of the show-cause notice he gave a reply in person in the form of written explanation with 12 documents in order to substantiate his defence. It is also stated that the clerk of the first respondent's office has affixed the seal of the first respondent's office on the papers given in reply by the petitioner, thereby acknowledging the receipt of the same. This aspect was considered by the third respondent. Before the third respondent, apart from reiterating the said contention the petitioner has also produced the acknowledgement given by the staff of the first respondent's office to show that apart from submitting his explanation also enclosed 12 documents in support of his claim. The tribunal after stating that there is no such initial or signature by the, Officer concerned, in the notes paper refused to accept the said contention. When the petitioner is able to show the acknowledgement of the staff of the first respondent, it is but, proper before passing any order, the explanation and the document said to have been furnished by the petitioner to be considered. The said procedure has not been followed. On the other hand, the authority suspected the acknowledgement made by the staff of the first respondent's office and erroneously rejected the claim made by the petitioner. The contrary conclusion made by the third respondent in para 5 of the order cannot be accepted.
9. Coming to the next aspect, it is stated that except the show-cause notice the petitioner was not provided with the claim made by the first respondent and the report of the enquiry Officer. In this regard, it is relevant to mention that if any surcharge proceeding is initiated under Section 71 of the Act the same has to be done in accordance with the said provision. The second proviso of Section 71(1) makes it clear that, No order shall be passed against any person referred to in this sub-section unless the person concerned has been given an opportunity of making his representations.
The said provision makes it clear that if any proceeding is initiated under Section 71, before passing final order, the person concerned must be given an opportunity to put forth his claim. In our case, even though an enquiry was conducted under Section 65 of the Act, at the instance of the Registrar of Co-operative Societies the copy of the said enquiry report has not been furnished to the petitioner. The said position is clear even from the order of the third respondent. In the light of second proviso to Section 71(1) in the absence of proof for furnishing copy of the enquiry report further action taken by the first respondent, in pursuance of the enquiry report cannot be sustained on the principles of violation of statutory provision as well as natural justice. Accordingly, I sustain the contention made by the learned Counsel appearing for the petitioner.
10. Regarding the merits of the charges levelled against him, the perusal of the charges, order passed by the first respondent clearly show that the first respondent failed to establish the conditions or ingredients adumbrated in Section 71 of the Act. As rightly argued by the learned Counsel appearing for the petitioner, there is no allegation or charge against the petitioner that he had misappropriated the funds of the Society. As stated earlier, the analysis of the charges and the conclusion arrived by the Enquiry Officer reveal that it would only be a negligence and not a wilful negligence. It is also clear from the records that, most of the debt transactions are taken place prior to the assumption of the office by the petitioner. Further, the main allegation was that the petitioner and other Directors fail to take steps to recover the amounts payable to the Society.
11. Taking note of all the materials as well as the conditions prescribed in Section 71 of the Act, I am of the view that there is no finding that the action of the petitioner would come within the mischief of that section. In this regard the learned Counsel appearing for the petitioner has very much relied on a decision of this Court reported in Sathyamangalam Co-operative Urban Bank Ltd. v. The Deputy Registrar of Co-operative Societies and another . While considering the scope of Section 71 of the Act, Rathnavel Pandian, J. (as His Lordship then was) has concluded thus:
The degree of negligence that is contemplated under Section 71 (1) of the Act is not a mere negligence, but wilful negligence. The word 'wilful' has not been defined in the Act. The work 'wilfulness' or 'wantonness' imports pre-meditation or knowledge and consciousness that an injury or loss is likely to result from the act done or from the omission to act. Thus, the term imports a constructive intention as to the consequences which, entering into the wilful act, the law imputes to the offender and in this way a charge, which otherwise would be mere negligence, becomes, by reason of a reckless disregard of probable consequences, a wilful wrong. In other words, the conduct of a person, to amount to 'wilful negligence', must be something more than ordinary negligence. To constitute wilful negligence, the act done or omitted to be done must be intended or must involve such reckless disregard of security and right as to imply bad faith. The wilful or intentional negligence is something distinct from mere carelessness or inattention, however gross, and consists of a wilful and intentional failure or neglect to perform a duty necessary to protect from harm or loss to any person or property of another. In examining whether there is wilful negligence, it has to be seen first whether the person concerned is guilty of negligence and if so, whether that negligence is wilful and secondly, whether the said wilful negligence is the proximate cause of the injury or loss sustained.
Ananthanarayanan, C.J., in Durairaj v. Rathnabai (1967)1 M.L.J. 324, pointing out that there is a sharp distinction between the 'default' and wilful default' quoted with approval the following observation made by Ramamurthi, J. in Khivraj Chordia v. Maniklal Bhattad, I.L.R. (1966)1 Mad. 431. "The principle that emerges from the several decisions is that for default to be regarded as wilful default, the conduct of the tenant should be such as to lead to the inference that his omission was a conscious violation of his obligation to pay the rents or a reckless indifference." Ramaprasada Rao, J., as he then was, in Rajagopal v. Saraswathi Ammal (1977)2 M.L.J. 8. explained the above words 'wilful default' occurring in the said Act, as follows: "Repeatedly the Courts here and else where have taken the view that the expression 'wilful default' is not an expression of art but a meaningful phraseology used by the statute with a definite purpose. The default committed by a tenant should be so telling and conspicuous that any reasonable person apprised of such circumstances and having the occasion to adjudicate upon such facts should come to the conclusion that the tenant was recalcitrant and supremely indifferent and purposely evading the performance of his legitimate obligation of sending the rents to the landlady in time. The wilfulness should be the result of recalcitrancy and deliberate-ness." Having regard to the interpretations and discussions in respect of the term 'wilful' appearing in various enactments, as found in the case-law decided by the learned English and Indian Judges which serve as a guide to the construction of the term 'wilful' used in Section 71(1) of the Act. I am of the view that in order to pass a surcharge order under that section against a person entrusted with the organisation and management of a co-operative society or an officer or servant thereof, such person should have done an actionable wrong, either by commission or omission, in a deliberate and reprehensible manner, with reckless callousness and with . . . . a supine indifference (but not by accident or inadvertence), without taking due care and precaution ordinarily expected from a reasonable and prudent man under those existing circumstances, that is to say, not caring what the result of his carelessness would be. To make it explicit, it may be stated that he should have acted in breach of legal obligations or in conscious disregard of duty or with an intentional failure to perform the manifest duty, in the performances of which the public have an interest and that such commission should be the proximate cause of the loss or deficiency in question.
12. Similar view has been taken by Nainar Sundaram, J. (as His Lordship then was) in a decision reported in Ramachandran v. The Deputy Registrar, Dairying, Trichy 1981 T.N.L.J. 292.
13. In S. Somasundaram vs. Thanjavur District Co-operative Supply Market Society Limited , Sathiadev, J. after considering the very same section and after following the law laid down in Sathyamangalam Co-operative Urban Bank Ltd. v. The Deputy Registrar of Co-operative Societies and another , the learned Judge has concluded, whenever a claim is lodged under Section 71, it is not mere negligence or callousness which would bring about a surcharge order, unless it be established that the acts committed were pursuant to any negligence wilfully or deliberately committed by the concerned person.
14. In the light of the above mentioned legal position, after considering the charges made against the petitioner. I am unable to accept the conclusion arrived by the respondent 1 and 3, It may be true that the petitioner failed to discharge the duties enjoined upon him with regard to direct scrutiny of accounts, examination of vouchers and passing of statement before he signed the minutes book but this failure cannot come within the expression "wilful negligence" which has been constructed as either by commission or omission, in a deliberate and reprehensible manner, with reckless callousness and with a supine indifference, without taking due care and precaution ordinarily expected from a reasonable and prudent man under those existing circumstances.
15. Net result, on the facts and circumstances of the present case, I have to hold that there has been a misconception of the ingredients of Section 71 of the Act especially with regard to the expression wilful negligence entertained by the first respondent and accordingly I am in agreement with the arguments advanced by the learned Counsel appearing for the petitioner. Accordingly the impugned order of the third respondent dated 31.8.1989 is quashed and the writ petition is allowed as prayed for. No costs.