IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 14657 of 2007(T)
1. THE MANAGING COMMITTEE OF VALLAPPUZHA
... Petitioner
Vs
1. THE JOINT REGISTRAR OF CO-OPERATIVE
... Respondent
For Petitioner :SRI.GEORGE POONTHOTTAM
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :20/07/2009
O R D E R
S. Siri Jagan, J.
=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-=
W. P (C) No. 14657 of 2007
=-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=
Dated this, the 20th July, 2009.
J U D G M E N T
The petitioner in this writ petition is the present managing
committee of the Vallappuzha Service Co-operative Bank Ltd., a co-
operative Society registered under the Kerala Co-operative Societies
Act, 1969, (hereinafter referred to as ‘the Act’, for short), represented
by its President Sri. P.K. Koya. As originally constituted, the
challenge in the writ petition was against Ext. P1 show cause notice
issued under Section 32(1) of the Act, directing the committee to
show cause why the committee should not be superseded under that
Section for the 12 irregularities detailed therein. By interim order
dated 8-5-2007, this Court directed that the implementation of any
order pursuant to Ext. P1 shall be kept in abeyance for three weeks.
Subsequently, after several extensions of the said order, the same was
extended until further orders on 13-11-2007. Thereafter, Ext. P5
order dated 6-12-2007 was passed by the 1st respondent , superseding
the Society and appointing an administrator for the Society. By Ext.
P10 intimation dated 20-12-2007, the administrator appointed by Ext.
P5, informed the Secretary of the Society that he has taken charge on
29-12-2007. The petitioner has subsequently got the writ petition
amended to include a challenge against Ext. P5 order also. By interim
order dated 1-1-2008, this Court stayed Exts. P5 and P10 until
further orders.
2. The present committee was elected on 28-1-2006 and they
took charge on 30-1-2006. The committee of the Society consists of
11 members. Out of the 11 members elected on 28-1-2006, 7 were
new members who were not members of any of the previous
committees. On the basis of a complaint received from 4 members of
the Society, the 1st respondent ordered an inspection into the affairs
of the Society under Section 66 of the Act, by Ext. P3 order dated 30-
W.P.C. No. 14657/2007 -: 2 :-
9-2006. Pursuant thereto, the Unit Inspector of the Office of the Asst.
Registrar (G), Ottappalam submitted Ext. R1(f) report dated 14-3-
2007, wherein the Unit Inspector reported that his inspection
revealed the irregularities detailed in the report. Based on that
report, the 1st respondent-Joint Registrar of Co-operative Societies
(G), Palakkad issued Ext.P1 show cause notice, to which the petitioner
submitted Ext. P2 reply stating that the committee has not committed
any of the irregularities mentioned in Ext. P1 and therefore further
proceedings pursuant to Ext. P1 may be dropped. Anticipating
supersession despite the reply and alleging that Ext. P1 itself is
lacking in the essential requirements of Section 32, the petitioner
filed this writ petition and as stated earlier, after Ext. P5 order was
passed confirming Ext. P1, the writ petition was got amended as per
which the petitioner seeks the following reliefs:
“(i) Issue a writ in the nature of certiorari calling for the
records leading to Ext. P1 and to quash the same.
(ii) Issue a writ declaring that the notice issued as per Ext. P1
and the allegations contained therein are not grounds for the
invoking of the power under Section 32 of the KCS Act as against
the committee now in office and therefore the proceedings are
vitiated.
(iii) Issue a writ declaring that Ext. P1 is in violation of the
essential requirements mandated under Section 32(1) of the
KCSW Act and therefore the same is bad.
(iv) Issue a writ of certiorari calling for the records leading to
Ext. P5 and to quash the same.
(v) Issue a writ declaring that Ext. P5 order has been issued
based on irrelevant consideration and taking into account factors
which are beyond the scope of Section 32 of the KCS Act and
therefore bad in the eye of law.”
3. The petitioner challenges the proceedings evidenced by
Exts.P1 and P5 on the main ground that out of the 12 allegations in
Ext. P1, 10 are in respect of actions of the previous committee, of
W.P.C. No. 14657/2007 -: 3 :-
which only 4 are members of the present committee and for the
action of the previous committee, no proceedings for supersession
can be initiated against the present committee. As far as the
allegations against the actions of the present committee are
concerned, the petitioner would contend either that they have not
committed the same or that they are not irregularities and the same
were taken in the best financial interests of the Society. The second
contention is that an action under Section 32 should be invoked only
as a last resort, that too only if the committee commits persistent
defaults or is persistently negligent in the performance of its duties
and that the findings in Ext. P5 do not contain the essential
ingredients for an action under Section 32. It is further contended
that the impugned action is an abuse of prower and mala fide, insofar
as the same has been initiated on account of the change of political
climate in the State, resulting from a new political alliance opposed to
the members of the committee coming into power in the State, on
whose directions the inspector and the 1st respondent have embarked
on a pre-determined action for unseating the committee from power
in the Society on some pretext or other.
4. Two members of the Society have got themselves impleaded
as respondents 2 and 3 to support the impugned action of the 1st
respondent.
5. The 1st respondent has filed counter affidavits to the writ
petition before and after amendment, supporting the impugned
action. According to the 1st respondent, the action has been taken on
finding the committee guilty of very serious irregularities and the
allegations of political interference and mala fides are without any
basis. It is contended on behalf of all the respondents that the
requirement that the default or negligence should be persistent is
applicable only to sub section (a) of Section 32(1) and in respect of
W.P.C. No. 14657/2007 -: 4 :-
the actions referred to in sub sections (b) to (d), one single instance
would suffice. According to them, the findings in Ext. P5 are referable
to sub sections (b) to (d) and the allegations in respect thereof are
proved by adequate materials on record. The counsel for the 1st
respondent elaborates further that prior to amendment of Section 32
in 2000, sub section (a) alone was there in the statute book, to which
alone the requirement of persistent default or negligence applies and
while adding sub-sections (b) to (d), the legislature consciously did
not add such requirement and therefore for a single instance of the
action of the committee referable to those sub sections, action under
Section 32 is maintainable.
6. I have considered the contentions of both sides.
7. Since elaborate arguments were advanced on the scope of
Section 32(1) before and after amendment, I shall extract the Section
as obtaining before and after amendment. Before amendment,
Section 32(1) read thus:
“(1) If the Registrar is satisfied that the committee of any
society persistently makes default or is negligent in the
performance of the duties imposed on it by this Act or the rules or
bye-laws or commits any act which is prejudicial to the interest of
the society or wilfully disobeys or wilfully fails to comply with any
lawful order or direction issued under this Act or the rules, the
Registrar may, after giving the committee an opportunity to state
its objections, if any, by order in writing remove the committee
and-
(a) appoint a new committee consisting of not more than
three members of the society in its place; or
(b) appoint one or more administrator or administrators
who need not be a member or members of the society,to manage the affairs of the society for a period not exceeding one
year as may be specified in the order, which period may, at the
discretion of the Registrar, be extended from time to time, so
however that the aggregate period does not exceed two years.”
After amendment, the same reads now thus:
W.P.C. No. 14657/2007 -: 5 :-
“32. Supersession of Committee:- (1) If the Registrar,
after an inquiry by himself or through his subordinates or on a
report of the financing bank, or the Vigilance and Anticorruption
Bureau of the Government or the Vigilance officer or otherwise is
satisfied that the committee of any society,–
(a) persistently makes default or is negligent in the
performance of the duties imposed on it by this Act or the rules or
bye-laws or does anything which is prejudicial to the interests of
the society; or
(b) wilfully disobeys or fails to comply with any lawful order
or direction issued under this Act or the rules; or
(c) makes any payment contrary to this Act or the rules or
the bye-laws or causes any loss or damage to the assets of the
society by breach of trust of wilful negligence; or
(d) misappropriates or destroys or tampers with the records
or causes the destruction of records to cover up any misconduct or
malpractice,he may, after giving the committee an opportunity to state its
objections, if any, by order in writing, remove the committee and
appoint a new committee consisting of not more than three
members of the society in its place or, appoint not more than three
administrators, who need not be members of the society, to manage
the affairs of the society for a period not exceeding six months, as
may be specified in the order, which period may, at the discretion
of the Registrar, be extended from time to time, so however that
the aggregate period does not exceed one year.
Prior to the amendment in 2000, Section 32(1) contained only the
provisions contained in sub sections (a) and (b) of the present Section,
but rolled into the same sub section. In Rajagopalan Nair v. State
of Kerala, 1995 (2) KLT 184, a learned Judge of this Court held that
the words ‘persistent’. ‘negligent’, ‘wilful’, and ‘lawful’ occurring in
the Section are the key words to guide the normal understanding of
the satisfaction that is required of the Registrar for an action for
superseding the committee. Another learned Single Judge of this
Court has, in Krishnan v. Joint Registrar, 1997 (1) KLT S.N. 16
(Case No. 20), held that the relevant ingredients for satisfaction of the
W.P.C. No. 14657/2007 -: 6 :-
Registrar under Section 32 are persistent negligence in the
performance of the duties imposed by the Act or Rules or bye-laws,
acting against the interests of the Society and wilful disobeying and
wilfully failing to comply with the orders and directions issued under
the Act or Rules. But, those decisions were rendered construing the
Section as it obtained prior to the amendment in 2000. After
amendment also, a learned Judge of this Court had in Ashok Kumar
v. State of Kerala, 2003(3) KLT 86 (Case No. 114) held that it is not
negligence alone which authorises interference under Section 32 (1),
but the same should be persistent, deliberate and also at times fit to
be characterized as culpable. Then again that related only to
negligence and not to the other ingredients of Section 32(1).
8. As far as sub section (b) is concerned, the action is qualified
by the word ‘wilfully’. Therefore, although it can be held that such
action need not be persistent, the same should be wilful, no doubt.
9. As far as sub sections (c) and (d) are concerned, the same are
also not qualified by the word ‘persistent’. Sub section (c) is qualified
by the words ‘by breach of trust or wilful negligence’.
Misappropriation or destruction or tampering with records or causing
destruction of records to cover up any misconduct or malpractice
mentioned in sub section (d), for obvious reasons, are not qualified by
any such words, since such actions are per se culpable and only one
single instance would be so disastrous to the Society that the
Registrar would certainly be justified in taking action for that single
instance itself. Therefore, I am of opinion that the acts mentioned in
sub sections (c) and (d) being by the very nature of those acts, such
that a single instance would be extremely prejudicial to the interests
of the Society, the Registrar can invoke Section 32 even for a single
instance.
10. The next question that arises for consideration on the facts
W.P.C. No. 14657/2007 -: 7 :-
of this case is as to whether for the action of the previous committee,
even if some of the members of the present committee were also
members of the previous committee, Section 32 can be invoked. That
question is no more res integra, since that issue has been settled by
two Division Bench decisions of this Court . In Sivadasan Nair v.
Registrar of Co-operative Societies, 19997 (2) KLT 710, a Division
Bench of this Court held in paragraphs 13 and 19 thus:
13. It can be seen from Ext.P2 notice as well as Ext.P4 order
of the Registrar that none of the conditions mentioned in S.32
of the Act was relied upon to supersede or remove the present
Committee in office. What has been done by the Registrar is
that 11 members out of the present Board of Directors were
removed by him and then the Registrar removed the
Committee on the ground that the remaining members cannot
form sufficient quorum for the Managing Committee. Thus,
the Registrar had exercised his power under S.32(1) of the Act
to remove 11 members from the Managing Committee of the
Bank and thereafter, the entire committee was superseded.
Therefore, the question is whether the Registrar has got
power to remove the individual members under S.32 of the
Act. The heading of the Section itself is supersession of
Committee. Further the body of the Section says that the
Registrar may by order in writing remove the committee and
appoint a new committee or an arbitrator to manage the
affairs of the Society. Sub-s.(3) of S.32 of the Act says that
notwithstanding anything contained in sub-s.(1) or sub-s.(2) it
shall not be necessary to give an opportunity to the committee
to state its objections and to consult the Union and financing
banks, in cases where the Registrar is of the opinion that it is
not reasonably practicable to do so. Thus, a plain reading of
S.32 of the Act shows that the power is given to the Registrar
under S.32 to remove the entire body of Committee as a
whole.
xx xx xx
19. The second stage of the enquiry did not commence so far.
The effect of Ext.P4 order is that the present Managing
Committee is superseded for the faults of the previous
Managing Committee. The power under S.32 of the Act can
be invoked only if the existing Managing Committee is guilty.
It may be that many of the members of the previous Managing
Committee could have come back having been reelected and
would be continuing as members of the existing Managing
Committee. As already stated, what is to be adjudged is
whether the existing committee is guilty of the conditions
mentioned in S.32 of the Act and not whether some individualW.P.C. No. 14657/2007 -: 8 :-
members of the Committee, were guilty of any act of
corruption while they were members of the previous
Committee.
Again, by judgment dated 6-8-2004 in W.A. No. 1363 of 2004 (K.V.
Mohanan v. State of Kerala and others), another Division Bench of
this Court has held thus in paragraph 4:
“4. From a perusal of Ext.P1 notice and Ext.P3 order
and the averments in the writ petition and the counter affidavit
it is abundantly clear that the alleged irregularities and
defaults were committed by the Board of Directors which was
in office from 27.6.1998 to 17.5.2003. The present Board of
Directors took charge only on 18.5.2003. Therefore the only
question to be considered is whether the present Board of
Directors can be removed under Section 32 of the Kerala Co-
operative Societies Act for the irregularities and defaults
alleged to have been committed by the previous Board of
Directors. Section 32 of the Kerala Co-operative Societies Act
can be invoked only against a committee which has committed
the irregularities or defaults. Removal of a committee for the
defaults and irregularities of a previous committee is not
contemplated by Section 32. It may be pointed out that under
Rule 44(1)(k) of the Kerala Co-operative Societies Rules, no
member of the society shall be eligible for being elected or
appointed as a member of the committee of the society under
Section 28 if he was a member of the committee which has
been superseded and a period of one year has not elapsed
from the date of supersession. Thus removal of the committee
under Section 32 casts a stigma and imposes a disqualification
on the members of the committee and the removal visits such
members with serious consequences. Therefore we are of the
view that the committee of a Co-operative Society cannot be
superseded under Section 32 of the Kerala Co-operative
Societies Act for the defaults and irregularities alleged to have
been committed by a previous committee. In this view of the
matter Exts.P1 and P3 are liable to be quashed.”
In view of these decisions, it is settled law that proceedings under
Section 32 can be invoked only for actions of the present committee
as a whole, who is sought to be proceeded against under the Section,
even if some of the members of the previous committee which is guilty
of the action are also members of the present committee and not for
actions of the previous committee.
W.P.C. No. 14657/2007 -: 9 :-
11. Perhaps, being aware of the above legal position, the 1st
respondent has, in his counter affidavits, sought to justify his action
only on the basis of the actions alleged against the present committee.
Respondents 2 and 3 also advanced arguments to justify Ext. P5 only
on that basis.
12. Supersession of a democratically elected committee is a
very drastic and extreme step. It is not necessary to cite any judicial
precedents to hold that action under Section 32 cannot therefore be
taken lightly for mundane violations. Only if the findings against the
committee are such that the continuance of the committee would be
extremely prejudicial to the interests of the Society, the exceptional
and rare action under Section 32 shall be taken. Findings on the
culpability of the committee on their improper action should inform
the action of the Registrar while initiating proceedings under Section
32. In other words, the mere finding that the committee has done the
acts alleged alone is not sufficient; the same should be supported by
a further finding that they did the same with a culpable mind, failing
which the action of the Registrar would be improper.
13. I shall examine the validity of Ext. P5 in the light of the
above legal position. In Ext. P5, the findings of irregularities
attributable to the present committee out of the 12 charges are only
the following, the others being clearly attributable to the previous
committee:
(a) A jeep purchased by the Bank on 24-10-2002 for
Rs. 3,68,850/- was sold by the present committee on
25-07-2006 for Rs. 2,31,676/-, which was without a
performance certificate of a mechanical engineer and
violating the instructions in Circular No. 55/03 dated 3-
10-2003 of the Registrar.
W.P.C. No. 14657/2007 -: 10 :-
(b) The vehicle belonging to the Bank was used for
going to Mannarghat on 20-07-2006 as per trip sheet no.
834, to Thrissur on 13-07-2006 as per trip sheet no. 829
and to Mannarghat, Perinthalmanna and Malappuram on
18-07-2006, without specifying the purpose in the log
book sheet.
(c) The minutes book of the committee was
tampered with by fraudulently adding the words ‘also
decided to give the gold coin of 8 grams given by the
Company as gift to the lady director Smt. Vilasini teacher’,
in resolution no. 43 of the committee meeting held on
26-10-2002, to the word ‘approved’ which alone was there
in the original minutes.
(d) Although the place Kuruvattoor is excluded from
the area of operation of the Society, many persons of that
locality have been given membership in the Society without
ascertaining whether they are members of the Kayiliyad
Service Co-operative Bank and one Alavi, of Kuruvattoor
member no. 13483, was given a loan of Rs. 16,000/- on 1-3-
2005. Although as per bye-law no. 55(2)(b) of the bye-laws
of the Bank, for marriage, maintenance of house and
seeking employment abroad, the maximum loan which can
be sanctioned is Rs. 1 lakh, 11 loans detailed in Ext. P5
order were sanctioned in excess of the prescribed limit.
(e) An amount of Rs. 84,447/- due from the former
President of the Society has been transferred to suspense
account, without recovering the same.
(f) Two employees of the Bank, namely, the former
Secretary Sri. P. Mohammed, and the Manager of the
Marayamangalam Branch of the Bank, Sri. T.P.
W.P.C. No. 14657/2007 -: 11 :-
Unnikrishnan were allowed to be kept under suspension
beyond one year in violation of Rule 198(6) of the Kerala
Co-operative Societies Rules, 1969.
14. Since, out of the above charges, charge (c) narrated above
is the most serious one, a decision regarding the sustainability of
which against the petitioner may even obviate the necessity to
consider the sustainability of the other charges, I shall consider the
same first.
15. The details of the charge as given in Ext. P1 show cause
notice roughly translated into English are as follows:
“When the Bank purchased a vehicle, the Company from
which the vehicle was purchased presented a gift of a gold
coin weighing 8 grams. Although records have been kept in
the Bank to the effect that the President of the Bank Sri.
P.K. Koya had taken it on 29-11-2002, in the resolution of
the committee meeting held on 26-12-2002, to the word
‘approved’ originally included in the minutes, it has been
added by writing later that ‘also decided to give the gold
coin of 8 grams given by the Company as gift, to the lady
director Smt. Vilasini teacher.’ Adding by writing later in
the minutes of the resolution of the committee that as per
resolution dated 16-10-2002, the 8 grams’ gold coin was
decided to be given to another director, is clear evidence to
show that the Bank records have been fraudulently
fabricated. As to what should be done with the said gold
coin was not part of the agenda for the meeting. Three
committee members who took part in the meeting has
stated that in that meeting no such resolution was taken.
The receipt of the gold coin was not included in the stock
register. By tampering with the minutes book of the bank,
fraudulently record has been created by giving gold coin to
Vilasini teacher. In the minutes of 26-10-2002, there is
marked difference in the ink used for adding the same by
writing later. The inspecting officer has reported that it is
clear that the same has been added in the minutes between
30-9-2006 and 28-2-2007. When as per the report of charge
transfer between the Secretary and the Assistant Secretary
on 27-1-2003, it is clear that the gold coin is with the
President, it is dubious as to how the lady director received
the same on 26-10-2002. The gold coin received when
buying the vehicle is the asset of the Bank and that shouldW.P.C. No. 14657/2007 -: 12 :-
be brought in the accounts of the Bank. Because of failure
to do so, giving it to a director and tampering with the
records for the same, it is found that very serious
misconduct has been committed.”
16. This is answered by the petitioner in Ext. P2 reply, which
roughly translated into English would read thus:
“The gold coin scandal by misinterpreting the
resolutions of the managing committee is another allegation
designed to draw us to surcharge proceedings . When jeep
no. KL 9L/1386 was purchased from the TVS agencies,
Palakkad, a gold coin of 8 grams was promised as gift. That
cannot be linked to the price of the jeep. In the managing
committee meeting held on 26-10-2002, when the price of
the jeep and other expenses were ratified, the meeting had
decided to give the present to be received as gift to Vilasini
teacher. The receipt written by Vilasini teacher in her own
handwriting for receipt of the gold coin on 23-12-2002 is
kept in the Bank. It is not stated in the notice that it has
been checked with Vilasini teacher for ascertaining whether
the same is true. The allegation that it has been added in
the minutes by writing later is a foisted allegation and
cannot be justified. It is seen that a true copy of the said
minutes had been given by the Bank as per the request of
Smt. Vilasini teacher on 19-3-2004. At the time of
inspection, the said certified copy had been shown to the
inspecting officer by the Secretary-in-charge Sri.
Ramanunni and senior clerk of the H.O., Sri. Asharaf Ali,
which was verified by him and he was satisfied about the
same. Formerly and now also, there is no procedure of
recording by number in the agenda all things carried out by
the managing committee of the Bank. The normal
procedure followed is that things connected with one
subject are included in the agenda relating to that subject
and decisions taken. No director had recorded any
objections in respect of the decisions of the resolution taken
by the Managing Committee with Sri. P.K. Koya as the
President from 2002. It is submitted that the complaint of 3
persons, who though members of the Managing Committee
then, for political reasons fell apart and lost in the election
held to the Managing Committee on 28-1-2006 contesting
against the panel headed by Sri. P.K. Koya, has been
prepared for making a sustainable charge deliberately, by
the inspecting officer. The document included in the
charge transfer list given to the Assistant Secretary Sri. K.
Ramachandran by Sri. P. Mohammed, the Secretary
suspended on 27-1-2003, is one fabricated by him. It is
W.P.C. No. 14657/2007 -: 13 :-
dubious that the inspecting officer has accepted the
statement of only the former Secretary P. Mohammed who
has been suspended for charges relating to fabricating
documents also to show that four members of the Managing
Committee had not attended four meetings, for disqualifying
them, during the Managing Committee of the period 1999-
2004.”
17. This is dealt with by the 1st respondent in Ext. P5 order
thus:
(Translation by the Court)
“I am satisfied that as per the abovesaid second
charge, although in the charge handover memo, it is shown
that a jeep registered as no. KL9L.1386 has been purchased
on 24-10-2002 from the establishment named T.V.
Sundaram Iyangar Sons for the Vallapuzha Service Co-
operative Bank, that the bank Secretary had accepted a gold
coin weighing 8 grams from that establishment as gift, and
that the said gold coin was taken by Sri. P.K. Koya, the
President of the Bank on 29-11-2002 by adding to the 43rd
resolution of the bank of the Managing Committee meeting
of the Bank held on 26-10-2002 that ‘also decided to give the
gold coin of 8 grams given by the Company as gift to the
lady director Smt. Vilasini teacher’, document has been
fabricated in the minutes book, which is the most important
record of the Bank.
The inspecting officer, as per Section 66, has
submitted a report that difference in ink used for adding
later by writing later in the minutes book of the Bank dated
26-10-2002 is clear and that the adding by writing has been
done between 30-9-2006 and 28-2-2007 by the present
Managing Committee of the Bank. For the following
reasons, it is clear that it has been fraudulently added to the
Managing Committee Resolution dated 28-10-2002, by
writing later by the present committee:
(1) When the gold coin was received in the Bank on
28-11-2002, it is false and unbelievable that a decision
regarding that had been taken on 26-12-2002.
(2) In the agenda for the meeting of the Managing
Committee on 26-10-2002, there is no agenda relating to the
gold coin.
(3) Out of the ten managing committee members,
who participated in the meeting held on 26-10-2002, three
members namely, Sri. C. Vijayakumar, Sri. A. Moideenkutty
and Sri. M. Moidoothy have given a written statement thatW.P.C. No. 14657/2007 -: 14 :-
in the meeting held on 26-10-2002, no decision relating to
the gold coin has been taken.
(4) The Bank President has produced only a true
copy of the resolution no. 43 dated 26-10-2002 in which the
decision relating to the gold coin has been taken. The
original minutes or the photocopy of the minutes has not
been produced.
(5) A receipt has been produced to the effect that the
gold coin received in the Bank on 28-11-2002 was received
by Smt. Vilasini teacher only on 23-12-2002. If that be so,
no clear evidence has been produced to show as to in whose
possession the gold coin was, during the interim period.
It is provided in sub section (1)(d) of Section 32 of
the Kerala Co-operative Societies Act, 1969 (Act 21 of 1969)
that the managing committee which tampers with the
records to cover up any misappropriation, irregularities and
other misconducts, can be superseded. The present
managing committee has tampered with the minutes book,
which is the most important record of the Bank. Therefore,
this office is fully satisfied that the managing committee is
liable to be suspended.”
18. From the above, it is abundantly clear that out of the
above,the only charge for which the present managing committee has
to answer, is the charge regarding tampering with the minutes book.
As far as the allegations regarding the gold coin itself is concerned,
the same has to be answered by the previous committee. As per the
direction of this Court, the original minutes book was produced in
Court. On perusing the same, this Court could not find any
noticeable difference in the ink used for the two parts of the
resolution, first consisting of one word and the other one sentence,
except the initial extra flow of the ink usually noticed at the start
when a fountain pen is used for writing. Both writings are in the same
handwriting using green ink. In fact, throughout in the minutes book
for recording the agenda, blue ink is used and for recording
resolutions green ink is used. Along with Ext. P2 explanation, the
petitioner has produced a photo copy of a certified copy of the very
W.P.C. No. 14657/2007 -: 15 :-
same resolution issued during the time when the present committee
was not in charge. It is seen signed by Sri. K. Abdullakkutty,
President, Sri. K. Ramachandran, Secretary and a Director (name not
decipherable). The Secretary has also put the date below his
signature as 19-3-04. The same contains both the decisions of the
committee regarding approval of the purchase of the vehicle as well
as the decision to give the gold coin to Smt. Vilasini teacher. The
genuineness of this document is not even disputed by any of the
respondents before me. All what is stated in Ext. P5 by the 1st
respondent is that only a true copy of the resolution is produced and
the original or a photocopy is not produced. When the purpose of
producing the certified copy issued on 19-3-2004 is to show that the
sentence alleged to have been added by the present committee
between 30-3-2006 and 28-2-2007 was present in the minutes book on
19-3-2004, one fails to understand how the same can be discredited
by stating that the original minutes book or a photocopy of the same
has not been produced. Further, nothing prevented the 1st respondent
from summoning the original minutes book, if he wanted to see the
same. In the above circumstances, I am fully satisfied that the
petitioner has fully succeeded in proving that the charge of tampering
with the minutes book is false and is a fabricated charge.
19. In Ext. R1(f), the inspecting officer has stated that the
managing committee headed by Sri. P.K. Koya has added now what
was not there, when he inspected the minutes book earlier. He has
also stated that there is difference in the ink used for writing the two
parts of the resolution. Both these findings are totally unsustainable
in view of my above finding. Therefore, it is clear that the inspecting
officer’s intentions were not bona fide. Clearly, he had approached
the issue with a prejudiced mind after taking a decision to return a
finding of guilt. To that end, he has made a false statement in his
W.P.C. No. 14657/2007 -: 16 :-
report that when he inspected the minutes book the first time, the
second sentence was not there. Ext. P5 order was passed by the
respondent relying on Ext. R1(f) report. Ext. R1(f) having been
prepared by a mind prejudiced against the petitioner, without any
reason, no part of his report can be relied upon for the purpose of
finding the petitioner guilty of any irregularity whatsoever, since the
entire report is therefore tainted. The fact that even after the
certified copy dated 19-3-2004 was brought to the attention of the 1st
respondent by the petitioner in Ext. P2 reply, without disputing the
genuineness of the same, he was prepared to hold the petitioner guilty
on the totally perverse reason that the original or a photocopy of the
minutes book had not been produced, shows that he also approached
the issue with a prejudiced mind, with the pre-determined intention
of holding the petitioner guilty of the charge against them, in which
he sadly failed. For this reason alone, Exts.P1, P5 and P10 are liable
to be quashed. However, I shall consider the sustainability of the
other charges also for the sake of completion.
20. Next, I shall consider charge no. (d) detailed above. It has
three parts. The first is that the present managing committee had
given membership to persons residing outside the area of operation of
the Society. The second is that the managing committee gave loan to
a person outside the area of operation without ascertaining whether
he was a member of another Society. The third is that the committee
sanctioned loan in excess of the ceiling limit.
21. Regarding the fist limb of the charge, some numbers of
members have been given in Ext. P1, but the same are not referred to
in Ext. P5. There is also no reference as to when they were admitted
as members. It does not show that they were admitted as members
by the present committee. In the absence of details regarding the
same, the 1st respondent could not have concluded that the act was
W.P.C. No. 14657/2007 -: 17 :-
that of the present committee. Further, in Ext. P5, I do not find any
reference to the explanation given in Ext. P2.
22. Regarding the second limb of the charge, it is admitted that
the borrower was an existing member of the Society. If that be so,
when he applied for a loan, if loan is given, the fact that later it was
found that he is residing outside the area of operation is hardly
relevant to find the managing committee guilty of any culpable act
relevant for an action under Section 32.
23. The third limb is that the managing committee sanctioned
11 loans in excess of the ceiling limit of Rs. 1 lakh. In Ext. P2 reply, it
is specifically stated by the petitioner that by circular no. 20/04 of the
Registrar, the ceiling limit has been enhanced and no loan has been
granted in excess of the enhanced ceiling limit. That circular is
produced as Ext. P7 and true copy of the resolution dated 13-9-04 of
the managing committee recording the said circular is produced as
Ext. P8. From a perusal of the amounts of the 11 loan so detailed in
Ext. P5, there cannot be any doubt that the same is within the limit
prescribed in Ext. P7. The fact that despite the petitioner relying
upon Ext. P7 circular in Ext. P2 to prove that no loan was sanctioned
in excess of the enhanced ceiling limit, the 1st respondent has not
chosen to even refer to the same in Ext. P5 shows that the 1st
respondent approached the issue with a closed mind, with a pre-
determined intention to return a verdict against the petitioner. In
any event, I do not find any wilful negligence or breach of trust on the
part of the petitioner in that regard. For this reason, the findings in
Ext. P5 in this regard is also unsustainable.
24. I shall next consider charge (a) detailed above. The charge
is that the Society sold a vehicle purchased on 24-10-2002 for
Rs. 3,68,850/- on 25-7-2006 for Rs. 2,31,676/-, without obtaining a
performance certificate. In Ext. P2, the petitioner has stated that
W.P.C. No. 14657/2007 -: 18 :-
before sale, performance certificate of the mechanical engineer and
valuation certificate have been obtained. In Ext. P5 that statement is
not even referred to. Further, in Ext. P2, it is stated that as per the
bye-laws approved by the Registrar, the managing committee is
authorised to sell old vehicles, which is also not referred to in Ext. P5.
In Ext. P5, it is admitted that the vehicle is almost four years old and
had run 86400 kilo meters. The question as to when the vehicle
becomes old enough to be sold, to the best advantage of the Society
is a subjective opinion, which depends on many factors. By that sale,
63% of the original price had been realised, after using the vehicle
for 3 years and 9 months, which vehicle has run 86,400 kms. In Ext.
P2, it is stated that as per the audit finalisation by the department, the
depreciation allowed for the vehicle works out to Rs. 3,31,966/- and
taking into account the same, the sale for Rs. 2,31,676/- has resulted
in a profit of Rs. 1,94,792/- to the Bank, which has also not been
considered in Ext. P5. In such circumstances, that charge also could
not have been finalised against the petitioner. In any event, the same
hardly qualifies for the extreme action of supersession under Section
32.
25. Then comes charge (b). In that charge, the only allegation
is that the Bank’s vehicle has been used without recording the
purpose in the log book of the vehicle. There is no allegation that the
use of the vehicle is not for the purpose of the Bank. There is also no
allegation that the vehicle has been used for personal purposes of the
members of the managing committee and that the same is prohibited.
Even though non-recording of the purpose in the log book sheet is an
irregularity, that cannot be regarded as serious enough to warrant an
action for supersession under Section 32.
26. Charge (c) relates to transferring to the suspense account
an amount of Rs. 84,447/- due from the former President, without
W.P.C. No. 14657/2007 -: 19 :-
recovering the same. In Ext. P2, it is stated that proceedings have
been initiated to recover the amount and that the same was done
during 1999-2004 with the connivance of the former Secretary Sri.
P. Mohammed, who has been suspended for this charge also. These
explanations are not seen considered in Ext. P5. In any event, by
transferring the amount to the suspense account, the amount is not
lost to the Bank and still the same can be recovered. Therefore, the
said allegation even if established, also cannot be considered to be
capital enough to warrant proceedings under Section 32.
27. The last charge is that two employees of the Society have
been kept under suspension beyond one year without prior permission
from the Registrar. In this respect, both Ext. P1 show cause notice
and Ext. P2 reply are vague. In Ext. P1, nothing is mentioned about
non-compliance with 198(6), except that in the matter of suspension
and disciplinary proceedings , appropriate procedural formalities have
not been complied with. From the documents, I find that one of the
suspended employee is charged with the misconduct of fabricating
documents. The same being a very serious charge, it is in the
interest of the Society not to reinstate him pending finalization of the
disciplinary proceedings. Nothing also prevented the 1st respondent
from directing the petitioner to complete the disciplinary proceedings
expeditiously. Even if the charge is proved to be correct, I do not
think that, that charge is also serious enough to warrant proceedings
under Section 32 against the committee.
28. For all the above reasons, I am satisfied that Ext. P5 and all
proceedings pursuant thereto are unsustainable. Accordingly, the
same are quashed and the writ petition is allowed.
29. Before parting with the case, I would like to comment on a
very serious malady plaguing the co-operative movement in the
State. Over politicization is the bane of the co-operative movement in
W.P.C. No. 14657/2007 -: 20 :-
Kerala. Politics has permeated all aspects of the co-operative sector
so badly that the movement itself is slowly dying in the State.
Elections to co-operative societies are also fought on political lines
and political parties resort to all sorts of legal and illegal methods to
win the majority in managing committees of co-operative societies.
Once in power, they admit members owing allegiance to their political
parties in order to ensure a win for themselves in the next election. If
they do not win the majority, as soon as their party comes into power
in the State, they resort to every legal and illegal means to dethrone
the other side and wrest power even physically. Every time the
political climate in the State changes, there is a spate of litigation
against proceedings under Section 32 of the Kerala Co-operative
Societies Act in respect of societies under the control of the opposition
parties. They make the officers of the co-operative department who
has control over the co-operative societies as tools in the process of
overthrowing the other side from power. These officers often do
their bidding and pass orders as dictated by their political bosses
without any respect for natural justice and fair play. Once the
managing committees having control thus having been unseated, they
appoint persons who do their bidding as administrators and starts a
process of wresting control through all sorts of means without respect
for democratic values. The process is reversed when the political
alliance supporting the opposite side comes into power in the State.
In the process, the genuine co-operator is driven out of the scene.
Public money is squandered or misappropriated with impunity. When
the same is detected, the Secretary is the one who is made a scape
goat. Courts and other quasi-judicial institutions are mere onlookers,
since often evidences are manufactured with the help of officers of
the department, who are only too willing to toe the line for their
political masters. In the process, societies die a slow death. Good
W.P.C. No. 14657/2007 -: 21 :-
money of the investors are no longer safe in the co-operative Banks.
Therefore, I am of opinion that it is high time that co-operative
societies are made free from State control and made autonomous
bodies like local bodies. Otherwise, instances like the present one
would ultimately choke and kill the co-operative movement in the
State conclusively and decisively. With the solemn hope that wisdom
would dawn on the politicians at least now, to save the movement in
Kerala, I conclude.
S. Siri Jagan, Judge.
Tds/