IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C) No. 25731 of 2006(L)
1. A.K.MANI, PRESIDENT,
... Petitioner
Vs
1. THE JOINT REGISTRAR OF CO-OPERATIVE
... Respondent
2. THE ASSISTANT REGISTRAR OF CO-OPERATIVE
For Petitioner :SRI.P.RAMAKRISHNAN
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :15/03/2007
O R D E R
S. SIRI JAGAN, J.
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W.P.(C)NO.25731 OF 2006
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DATED THIS THE 15th DAY OF FEBRUARY, 2007
JUDGMENT
Over the past two decades, the Co-operative sector in Kerala has
been afflicted with the malady of over – politicisation to such an extent
that, a tendency is widely experienced whereby the political party
which is in power in the State is constantly attempting to wrest control
of societies which are administered by rival political parties. It is seen
that as soon as a particular political party comes into power in the
State polity notices are being issued under the Co-operative Societies
Act and Rules for supersession of the Board of management of the
Society, so that the ruling party can take control of the administration
of the society through an administrator or administrative committee
appointed by them. This infact is a malady which tends to affect the
progress of the Co-operative movement in this State and also the very
democratic fabric of a Co-operative Society. The public are the really
aggrieved persons when the political parties fight with each other to
wrest power and control of a Society for their political or other gains.
This particular case is an example of such a tendency in this State.
2. The petitioner is the President of the Devikulam Taluk
W.P.(c)No.25731/06 2
Plantation Workers Co-operative Credit Society registered under the
Kerala Co-operative Societies Act. He is challenging Ext.P1 notice
issued to him under Section 32(1) of the Kerala Co-operative
Societies Act directing the President of the Society to file his
explanations as to why proceedings under section 32 should not be
taken against the managing committee of the Society for the
irregularities enumerated in the notice. Although the petitioner had
drafted Ext.P2 reply for filing, apprehending that the same would be
a meaningless exercise in so far as Ext.P1 itself would amply prove
that the 1st respondent has already taken a decision to supersede
the managing committee, he has filed this writ petition challenging
Ext.P1 notice, without filing the same, the petitioner contends.
3. Accepting the fact that Ext.P1 is only a notice to show
cause, the learned counsel for the petitioner would submit that in
so far as from the facts disclosed, it is very evident that the
intention of the 1st respondent is to pass orders of supersession,
whatever be the reply submitted by the petitioner, he is perfectly
justified in invoking the jurisdiction of this Court under Article 226 of
the Constitution of India, challenging Ext.P1 notice. He would
submit that in Ext.P1 itself, the 1st respondent has stated that he
has initiated these proceedings only on the basis of a report
obtained by him under Rule 66 of the Kerala Co-operative Societies
Rules. The petitioner’s contention is that for obtaining a report
W.P.(c)No.25731/06 3
under Section 66 of the Co-operative Societies Act, the Rule 66 of
the Kerala Co-operative Societies Rules prescribes certain procedure
which are mandatory in nature and if that report is obtained without
complying with the mandatory provisions contained in Rule 66., that
report cannot be the basis of any proceedings under Section 32.
Reading out the irregularities narrated in Ext.P1, he would submit
that the same itself would prove the malafide nature of the
proceedings initiated by Ext.P1. He took each one of the
irregularities mentioned therein and tried to convince me that the
same have no factual basis. He would further say that the present
managing committee which took charge on 29.8.04 is entitled to
continue in office till 18.8.09. According to him the Society has no
dues to any organisation or the Government. The tentative profit of
the Society for the present year is Rs.34,00,000/-. He points out
that the alleged irregularities in Ext.P1 themselves would show that
they are not irregularities at all, but action taken by a managing
committee, which is interested in the welfare of the committee, for
the betterment of the Society itself. He particularly points out
irregularities 4 and 5 and those mentioned in Ext.P1 which
according to him is so flimsy and vague and in fact does not spell
out any irregularity on any factual basis.
4. The learned counsel for the petitioner also refers to the
decision of this Court in Dr. Vijayalakshmi Kunjamma Vs. State
W.P.(c)No.25731/06 4
of Kerala and others (1978 KLT 62), in support of his
contention that even against a notice, aggrieved person has invoked
the jurisdiction of this Court under Article 226 in proper case and
according to him this is an eminently fit case for such interference.
5. He particularly refers to the insufficiency of the
satisfaction of the 1st respondent against any irregularities
committed by the managing committee warranting issuance of
Ext.P1 notice. According to him when Ext.P1 itself categorically
stated that the satisfaction of the Joint Registrar has been arrived
at on the basis of a report under Section 66, unless that report is
obtained in accordance with the mandatory provisions prescribed
under Rule 66, the very basis of Ext.P1 falls down and therefore
Ext.P1 is liable to be interfered with. The contention is that under
Rule 66, an order authorizing enquiry under Section 66 should
contain 5 details mentioned in Sub rule 1 of Rule 66. Sub rule 2
further mandates that the order authorizing enquiry under Section
66 has to be issued to the President or the Secretary of the Society
concerned by registered post with acknowledgment due. The
petitioner categorically asserts that no such notice whatsoever has
been served on the President or the Secretary of the Society at any
time. In the above circumstances, according to the counsel for the
petitioner, the 1st respondent could not have legally come to a
satisfaction required for initiation of proceedings under Section 32
W.P.(c)No.25731/06 5
while issuing Ext.P1 notice and therefore Ext.P1 is unsustainable
and liable to be interfered with.
6. In this connection, he refers to the decision in Ellakkal
Service Co-operative Bank Vs. State of Kerala (1997(2) KLT
85) wherein a single bench of this Court had categorically held that
the provisions of Rule 66 is mandatory in nature. He also submits
that for invoking provisions of Section 32, the committee of the
Society should have been guilty of any of the four irregularities
mentioned therein and according to him Ext.P1 notice would not
reveal that any of the four irregularities has been committed by the
Committee headed by the petitioner. In this connection, the petition
also refers to the decision in Govindan Kutty Vs. Viyyur Service
Co-op.bank (1990(1)KLT 513), Rajagopalan Nair Vs. State of
Kerala (1995 (2) KLT 184), Sudarsanan Vs. State (1997(1)
KLT 957). On the above grounds, the learned counsel for the
petitioner seeks quashing of Ext.P1 as arbitrary, illegal and
unsustainable .
7. A counter affidavit has been filed on behalf of the 1st
respondent fully justifying the issuance of Ext.P1 notice. It is
submitted therein that the procedure contemplated in Rule 66 has
been substantially complied with and therefore Ext.P1 notice issued
on the basis of a report obtained under Section 66, fully complying
with provisions of Rule 66 is perfectly valid and proper. It is also
W.P.(c)No.25731/06 6
submitted that the writ petition is premature, in so far as Ext.P1 is
only a show cause notice to which the petitioner can file his reply,
which would be considered and then only orders passed. According
to the learned Government pleader there is absolutely no basis for
apprehension that the reply to be filed by the petitioner would not
be considered in the correct perspective. In this respect in support
of the contention of the learned Government pleader that no writ
petition would lie against a show cause notice, the following
decisions are also relied upon, Executive Engineer Bihar State
Housing Board Vs. Ramesh Kumar Singh and others (1996
(1) SCC 327), Chanan Singh Vs. Registrar, Co-op.Societies,
Punjab and others (1976 SCC 361), State of U.P. and another
Vs. Anil Kumar Ramesh Chandra Glass Works and another
(2005 (11) SCC 451). On these grounds, the learned
Government pleader would want me to sustain Ext.P1 and dismiss
the writ petition.
8. The learned counsel for the additional 3rd respondent
would try to argue that the irregularities mentioned in Ext.P1 have
actually been committed by the managing committee headed by the
petitioner. He would submit that in respect of the resolution adopted
by the general body to raise credit limit from 10,000/- to 15,000/-
he had filed a complaint before the Registrar which is still pending, I
do not think that in so far as the complaint of the petitioner still
W.P.(c)No.25731/06 7
remains as complaint without any orders thereon, I can take note of
such a contention to decide this case.
9. I have considered the rival contentions in detail. Since I
am particularly impressed with the contention of the petitioner that
the report relied upon by the 1st respondent for issue of Ext.P1
notice under Section 32 is not one validly obtained complying with
the provisions of Rule 66, I shall first deal with that question. Sub
rules 1 and 2 of Rule 66 read thus:
“66. Procedure for the conduct of inquiry
and inspection:- (1)(i) An order, authorising
inquiry under Section 65 or inspection under
Section 66 shall among other things, contain the
following:
(a) the name of the society whose affairs
are to be inquired into or whose books of accounts
are to be inspected:
(b) the name of the person authorised to
conduct the inquiry or inspection;
) in specific point or points on which the
inquiry or inspection is to be made, the period
within which the inquiry or inspection is to be
completed and report submitted to the Registrar;
(d) costs of inquiry or inspection;
(e) any other matter relating or pertaining
to the inquiry or inspection.
(2) A copy of every order authorising
inquiry under Section 65 or inspection under
section 66 shall be issued to the President or the
Secretary of the Society concerned by registered
post with acknowledgment due. A copy of the
order shall also be made available to the Central
Society or societies, to which the society in respect
W.P.(c)No.25731/06 8
of which the order is issued, is affiliated.”
10. The fact that Rule 66 stipulates that an order
authorizing inspection under Section 66 shall contain the 5 details
mentioned therein would go to show that the same is not an empty
formality. This is with the purpose to enable the managing
committee of the Society to be put on notice regarding the matters
in respect of which they have to provide the authorised officer
information during the inspection. So also, the very wording, of Sub
rule 2 would make it abundantly clear that the procedure of sending
copy of the order authorizing the enquiry under Section 66 to the
President or the Secretary of the Society is mandatory in nature. It
specifically states that, that order shall be issued to the President or
the Secretary of the Society concerned by registered post with
acknowledgment due. It is settled law that when a statute
prescribes that a particular thing should be done in particular
manner, it should be done in that manner only and in no other
manner. [See Thodupuzha Taluk Co-op. Marketing Society
Vs. Joint Registrar of Co-op. Societies (2002 (1) KLT 638)]
When Sub rule 2 of Rule 66 prescribes the mode of issuing copy of
the order authorizing inspection under Section 66 by registered post
acknowledgment due, unless the order is so issued by registered
post acknowledgment due, it cannot be held that even if the order is
issued in some other manner, the same would be in due compliance
W.P.(c)No.25731/06 9
with the provisions of Rule 66. The mandatory nature of the
provisions of Rule 66 has been considered by Sri. J.B. Koshy,J in the
decision in Elakkal Service Co-operative Bank’s case. In
paragraph 8 of the said decision, the learned Judge had held as
follows:
“First question is whether the
procedure prescribed under R.66 are
mandatory or mere directory. Sub-r 91)
of R.66 says that an order authorizing
inquiry under S.65 shall among other
things contain the following. The word
used is ‘shall’. Therefore, it is contended
by the petitioners that question of
prejudice or non-prejudice cannot be
looked into because the word ‘shall’ used
indicates that there are mandatory
procedural rules. The name of the
inquiry officer should be intimated is a
mandatory requirement of the statute.
Whether any prejudice at all was caused
is entirely a different matter. Joint
Registrar who is a creature of the statute
cannot say that such a rule is
unnecessary as informing the name of
the person who is authorised to conduct
the inquiry makes no different and no
prejudice will be caused. There is clear
violation of sub-r (1) (b) of R.66. It is
specifically mentioned in R.66(1) (b) that
the name of the person authorised to
conduct the inquiry shall be informed.
According to me, this is a mandatory
provision. Whether that provision is
unnecessary or whether that provision
should have been deleted or not, is a
question before me. So long as that rule
stands, Joint Registrar should have
complied with the same. For any reason
if Joint Registrar was unable to inform the
name question of substantial compliance
could have been considered. But, in no
W.P.(c)No.25731/06 10
such circumstances, Joint Registrar can
say that such a rule is not necessary as
no purpose will be served by mentioning
the name. Admittedly, R.66(1)(d) was
not complied with. But, with regard to
the contention that the notice was not
served by registered post
acknowledgment due as provided under
R.66(2). It is true that there is non-
compliance of the above rule which is
mandatory. Notice was sent by ordinary
post only. S.104 of the Act also provides
that such notice shall be served by
registered post. I cannot understand
why notice in this case was not served by
Joint Registrar as provided under S.104
or R.66(2). However, since the petitioner
accepted notice and replied the same on
merits, on that ground alone enquiry
cannot be set aside as no prejudice is
caused by non-observance of the above
procedure.
11. I am in full agreement with the view expressed by the
learned Judge as above. I also hold that the provisions of Rule 66
particularly, Sub rule 2 is mandatory in nature.
12. The learned Government pleader appearing for the 1st
respondent would point out that in paragraph 3 of the counter
affidavit filed on behalf of the 1st respondent. It has been stated
thus:
“3. As to the averments in paragraph 3 of
the writ petition that, procedure contemplated in
Rule 66 was not complied with for conducting an
enquiry under Section 66, it is submitted that
the 2nd respondent has authorised the Adimaly
Unit Inspector to conduct an enquiry vide
proceedings No.G.496/06 dated 28.8.2006. In
compliance of Rule 66 of the K.C.S. Rules,
W.P.(c)No.25731/06 11
petitioner Society was informed about the
enquiry. The enquiry was conducted on
28.8.2006 and 29.8.2006 in the petitioner
society, and the report was filed. No procedural
irregularities occurred in this regard. The
findings were not a figment of imagination of
this respondent as raised by the petitioner. On
the basis of Sec.66 enquiry report only Ext.P1
notice is issued.”
She submits that since in compliance with Rule 66 the petitioner
Society was informed about the enquiry, there is substantial
compliance of the provisions of Sub rule 2 of Rule 66. Not only am
I not convinced about compliance of Rule 66 by the 1st respondent,
I am also far from being convinced that any intimation has been
issued at all to the President or the Secretary of the Society. The
sentence “in compliance of Rule 66 of Kerala Co-operative Service
Rules, petitioner-Society was informed about the enquiry” in
paragraph 3 of the counter affidavit is as vague as vague can be.
The 1st respondent does not say how the Society was informed
about the enquiry, he does not say when the Society was informed
about the enquiry, he does not say to whom that information was
conveyed; and does not say by what communication the Society
was informed about the enquiry. As such by the counter affidavit
itself the 1st respondent has amply proved that the provisions of
Rule 66 has been blatantly violated by the 1st respondent while
ordering an inspection under Section 66. If at all there is such an
order, I am constrained to say that in spite of filing a counter
W.P.(c)No.25731/06 12
affidavit, the 1st respondent has not found it necessary to support
the same with copies of documents in support of the contentions
therein, like the order authorizing enquiry under Section 66, the
copy of the letter issued to the President or Secretary forwarding
copy of the order authorizing enquiry under Section 66, receipt
evidencing service of the order on the Society, or any other
communication what so ever in this regard.
13. The learned Government pleader would submit that for
a valid initiation of proceedings under Section 32 it is not necessary
that there should be a Section 66 report at all and what is necessary
to invoke the jurisdiction of the Registrar under Section 32 is only
the satisfaction of the registrar after an enquiry by himself or
through his subordinates or on a report of the financing bank or the
Vigilance and Anti-Corruption Bureau of the Government or the
Vigilance Officer or otherwise that the committee of the Society has
committed any of the four irregularities mentioned in Section 32.
According to her, Ext.P1 would prima facie discloses such a
satisfaction by the Registrar and therefore evenif it is assumed that
the report under Section 66 has not been validly obtained that
would not in any way initiate Ext.P1 notice.
14. I have no doubt that for initiating proceedings under
Section 32, the decision of the registrar as contemplated under
Section 32 need not necessarily be on the basis of a report under
W.P.(c)No.25731/06 13
Section 66. Certainly a reading of Section 32 would show that other
materials mentioned in Section 32 would also can be the basis of
the satisfaction contemplated under Section 32. But since in Ext.P1
notice, the 1st respondent himself, categorically states that his
satisfaction about the irregularities mentioned in Ext.P1 is based on
a report under Section 66 itself. That being so, unless the 1st
respondent satisfies me that the report under Section 66 has been
obtained validly and in compliance with the procedure prescribed
under Rule 66, I would have no hesitation to hold that the Ext.P1
notice has not been issued validly. As I have held earlier, the
learned Government pleader was not able to satisfy me that Section
66 report has been obtained after complying with the mandatory
requirements of Rule 66.
15. In this connection it is worthwhile to extract a passage
from the decision of a Single judge of this Court in Sudarsanan’s
Case supra, paragraph 13 of which reads thus:
“13. Coming to the facts of the case, the
impugned order Ext.P8 sets out the main
irregularities and states that on the basis of the
reports submitted under S.66 of the Act, the
Registrar is convinced that action under S. 32
should be taken to remove the committee. The
Joint Registrar did not independently consider the
explanation furnished by the petitioners.
Nowherein the order, it is seen, that the Joint
Registrar has discussed the alleged irregularities in
reference to the explanation furnished by the
petitioner. On the contrary, the Joint Registrar was
proceeding on the basis that he intends to confirm
the recommendations of the Assistant Registrar.
W.P.(c)No.25731/06 14
This, in my view, is a clear abdication of the power
conferred under S.32 of the Act. Besides the Joint
Registrar has failed to come to his independent
satisfaction on the alleged irregularities. The Joint
Registrar had failed to see that he was not sitting in
appeal or for considering whether the decision
taken by the Assistant Registrar in superseding the
society is to be confirmed or not. The Joint
Registrar should have independently considered the
charges levelled in the show cause notice and the
reply furnished by the petitioners. In Jose
Kuttiyani Vs. Registrar of Co-operative
Societies (AIR 1982 Ker. 12) a Division Bench of
this Court held that Registrar does not appear to
have weighed the facts independently. The
Division Bench further held that the Registrar must
be satisfied that the conditions precedent for the
exercise of the power of supersession are in
existence or not. No doubt the satisfaction may be
subjective, but it shall not be arbitrary. If the
contention is that the Registrar never applied his
mind and therefore, he could not have been
satisfied, the court can enter into that question, the
ingredient of satisfaction being the condition
precedent to the exercise of power. In the decision
of the Supreme Court in Joint Registrar of Co-
operative Societies, Madras and Ors. Vs. P.S.
Rajagopal Naidu and Ors. (AIR 1970 SC 992)
referred above, the Supreme Court held that even
though the opinion of the Registrar is purely a
subjective process, there must be cogent material
on which the Registrar has to form his opinion that
the society was not functioning properly in order to
sustain the subsequent supersession of the
committee after considering its representation on
that ground. The requisite opinion has indisputably
to be formed honestly and after applying his mind
by the Registrar to the relevant materials before
him the only condition precedent for taking action
is that the Registrar must consult the financing
bank.”.
It must be noted here that this decision itself is based on an earlier
Division Bench decision. In this case except quoting the Assistant
W.P.(c)No.25731/06 15
Registrar’s report under Section 66, which itself has not been
obtained validly there is nothing to show that before issuing Ext.P1,
the Joint Registrar has not even applied his mind to the same, which
is obvious from Ext.P1.
16. Coming to the contention of the learned Government
pleader, regarding the maintainability of the writ petition, on the
ground that a show cause notice cannot be the subject matter of a
challenge in a writ petition under Article 226 of the Constitution of
India, I am inclined to hold that the petitioner has made out
sufficient grounds for interference at the stage of notice itself
because of the conduct of the 1st respondent himself. When it has
been pointed out to me and I have been convinced about the fact
that the issuance of Ext.P1 itself is without the required satisfaction
of the 1st respondent as provided under Section 32, I am inclined to
hold that the very initiation of the proceedings itself is bad and
violation of the Kerala Co-operative societies Act and Rules
thereunder. This is all the more so since the power of supersession
should be invoked only in exceptional and rare cases. The rule that
a show cause notice cannot be subject to a challenge under Article
226 of the Constitution of India is not an absolute rule without any
exceptions. This Court can certainly exercise its discretionary
jurisdiction in appropriate cases where this Court is satisfied that
while issuing a show cause notice a violation of law has been
W.P.(c)No.25731/06 16
perpetrated by statutory authority in violation of the mandatory
provisions of the rules. The hands of this Court cannot be held to be
tied down on the ground that what is challenged is only a show
cause notice in such cases.
17. The petitioner also contends that the four irregularities
mentioned in Section 32(1) is not present in the case of the Society.
Going by the irregularities mentioned in Ext.P1 notice, although I
am prima facie impressed with the contention of the petitioner in
this regard, I am not going in detail into that question since I am
satisfied that Ext.P1 is liable to be quashed on the other ground
itself. The result of the above discussion is that Ext.P1 notice issued
to the managing committee of the Society headed by the petitioner
is patently illegal and unsustainable and is liable to be quashed. I
do so.
The writ petition is allowed as above.
S. SIRI JAGAN, JUDGE
Acd
W.P.(c)No.25731/06 17