M/S. Tejas Constructions vs Mr. Vandan Kohade on 8 June, 2010

Bombay High Court
M/S. Tejas Constructions vs Mr. Vandan Kohade on 8 June, 2010
Bench: R. M. Borde
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                             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                      NAGPUR BENCH AT NAGPUR.




                                                                                                                         
                                            WRIT PETITION NO. 183 OF 2000
                                                        WITH
                                            WRIT PETITION NO. 815 OF 2000




                                                                                         
    W. P. NO. 183 OF 2000:




                                                                                        
               M/s. Tejas Constructions,
               a registered partnership firm carrying
               on the business as Contractor at Chalisgaon,
               Tq. Chalisgaon, Distt. Jalgaon
               through partner Ramesh Mangilalji Agrawal,
               aged 57 yrs., Occp. Business, R/o Chalisgaon,




                                                                   
               Tq. Chalisgaon, Distt. Jalgaon.              ::                                           PETITIONER

                        -: Versus :-
                                         
          1. Mr. Vandan Kohade, 
             Advocate & Authorised Enquiry Officer
                                        
             appointed under Sec. 88 of Mah. State
             Co-op. Societies Act, 1960 in the matter
             of Akola Zilla Sahkari Sakhar Karkhana Ltd.,
             Akola, R/o Gupta Marg, Jatharpeth,
             Akola.
      


          2. The Akola Zilla Sahkari Sakhar Karkhana Ltd.,
   



             Civil Lines, Akola.                        ::                                               RESPONDENTS

    W. P. NO. 815 OF 2000:

               ATV Projects India Ltd.,





               D-8, M. I. D. C. Street No. 16,
               Marol Andheri (East),
               Mumbai - 400 093
               By Umashankar R. Pande,
               Adult, Occp. Service                                                 ::                   PETITIONER 





                        -: Versus :-

         1. Authorised Enquiry Officer,
            Advocate Mr. Vandan Kohade
            Adult, Legal Practitioner,
            R/o Gupte Marg, Jatharpeth
            Akola, Tq. & Distt. Akola.

         2. Akola Zilla Sahakari Sakhar Karkhana 
            Maryadit, at post Vizora, Tq. Barshitakli,
            Distt. Akola.




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         3. Sugar Commissioner,
            Office of Sugar Commissioner,
            Maharashtra State,




                                                                                                                         
            Pune - 42.                                                              ::           RESPONDENTS

         ------------------------------------------------------------------------------------------------------------




                                                                                        
                              Shri R. S. Agrawal,  Advocate for the petitioner.
                                Mr. D. B. Patel, A. G. P. for respondent No. 1.
         Smt. I. L. Bodade, Adv. with Mr. Gopal Mishra, Advocate for respondent No. 2.
         ------------------------------------------------------------------------------------------------------------




                                                                                       
                                                                    CORAM:  R. M. BORDE, J.

DATE : 8th June, 2010.

Oral Judgment

1.

Heard the respective Counsel appearing for the parties.

2. The petitioners herein are challenging the order passed by Authorised

Enquiry Officer dated 25/12/1999 thereby directing to conduct enquiry as

contemplated by Section 88 of the Maharashtra Cooperative Societies Act, 1960

(hereinafter referred to as “the Act”). The Enquiry Officer by rendering the impugned

order has turned down the application presented by the petitioners objecting for

continuing with an enquiry as contemplated under Section 88 of the Act. The

petitioner in writ petition No. 183 of 2000 is a firm entrusted with the contract of

erection of the sugar factory whereas the petitioner in writ petition No. 815 of 2000 is

a Company dealing with supply of machinery and equipments to respondent No. 2. It

is needless to go into the factual aspects of the matter in this case, however, it will be

suffice to note that the authorities of the Cooperative Department thought it fit to

initiate an enquiry as contemplated under Section 88 of the Act against the office

bearers of the sugar factory. The Enquiry Officer was also of the opinion that the

petitioners herein who were entrusted with the contract in respect of erection of the

factory or supply of necessary plant and equipments to the factory were also

responsible for certain misdeeds. The enquiry initiated by the authorities of the

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Cooperative Department by taking recourse to Section 88 of the Act is on the basis of

preliminary enquiry conducted under Section 83 of the Act. The report submitted by

the authorities of the Department after holding an enquiry under Section 83 of the

Act is stated to be a basis for initiation of the enquiry proceedings under Section 88 of

the Act. The petitioners herein have objected for continuation of enquiry against

them on the ground that they cannot be proceeded with and also cannot be held

responsible for any act or omission alleged against them in an enquiry initiated under

Section 88 of the Act. The petitioners contend that they are either the contractors

appointed by the office bearers of the factory or the supplier of machinery in

pursuance of the order placed on behalf of the society. The petitioners herein have

no role to play the management or the conduct of business of the specified society. It

is contended that the scope of enquiry under Section 88 of the Act is totally different

and the enquiry can be initiated only as against the past or present office bearers of

the society or against the persons who have taken part in the organization or

management of the society. It is the contention of the petitioners that they are not

the persons who have taken any part in the organization or the management of the

society and as such they cannot be held responsible to answer the charges in the

enquiry initiated under Section 88 of the Act.

3. It would be appropriate to refer to the provisions of Section 88 of the

Maharashtra Co-operative Societies Act, 1960 and the same is quoted as under:

“88. Power of Registrar to assess damages against delinquent
promoters, etc.
(1) Where, in the course of or as a result of an audit under
section 81 or an inquiry under section 83 or an inspection under section
84
or the winding up of a society, the Registrar is satisfied on the basis
of the report made by the auditor or the person authorised to make
inquiry under section 83 or the person authorised to inspect the books
under section 84 or or the Liquidator under section 105 or otherwise

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that any person who has taken any part in the organization or
management of the society or any deceased, or past or present officer of

the society has, within a period of five years prior to the date of
commencement of such audit or date of order for inquiry, inspection or

winding up, misapplied or retained, or become liable or accountable for,
any money or property of the society, or has been guilty of misfeasance
or breach of trust in relation to the society, the Registrar or a person

authorised by him in that behalf may frame charges against such person
or persons, and after giving a reasonable opportunity to the person
concerned and in the case of a deceased person to his representative who

inherits his estate, to answer the charge, make an order requiring him
to repay or restore the money or property or any part thereof, with

interest at such rate as the Registrar or the person authorised under this
section may determine, or to contribute such sum to the assets of the

society by way of compensation in regard to the misapplication,
retention, misfeasance or breach of trust, as he may determine.

(2) The Registrar or the person authorised under sub-section (1)
in making any order under this section, may provide therein for the

payment of the cost or any part thereof, as he thinks just, and he may

direct that such costs or any part thereof shall be recovered from the
person against whom the order has been issued.

(3) This section shall apply, notwithstanding that the act is one for

which the person concerned my be criminally responsible.”

The enquiry under Section 88 can be initiated on the basis of audit under

Section 81 or an enquiry under section 83 or an inspection under section 84 or the

winding up of a society. Section 83 of the Act contemplates preliminary enquiry by

the Registrar in respect of constitution, working and financial conditions of a society.

An enquiry under Section 83 of the Act is essentially directed against the persons who

are in-charge of the management of the society. So also, audit under Section 81 of

the Act or an inspection of accounts under Section 84 of the Act is essential for

determining the legality or otherwise of the transaction of the society or the

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constitution and functioning of the society. Thus, on perusal of relevant provisions of

the Act, it can be said that the powers invested with the Registrar to assess the

damages against the delinquents/promoters conferred by Section 88 is essentially

required to be invoked as against the persons who have taken part in the organization

or management of the society and not against the strangers or the contractors,

architects or others who are entrusted certain job work or contract work by the

society. On bare perusal of Section 88 of the Act it reveals that the petitioners, who

are not concerned with the management or who have not taken any part in the

society, cannot be held responsible in an enquiry under Section 88 of the Act.

4.

Reliance can be placed on reported judgment in the matter of Shriram

Dhonduji Raut Vs. Bahu Uddesiya Sahakari Sanstha, Virsi & others reported in 2003

(4) ALL MR 1121. In the reported matter some financial liability was determined

against the petitioner by the Cooperative Appellate Court dealing with the appeal

raising exception to the order passed under Section 91 of the Act by the Cooperative

Court. The petitioner in the reported matter was Manager of the society and in the

audit conducted by the officials of the Department some discrepancy in the stock was

revealed and the management, therefore, proceeded against the Manager. The

Cooperative Court came to the conclusion that the petitioner was not responsible

whereas the Appellate Court on consideration of the appeal presented by the

Management held that the petitioner was responsible for the shortage and thereby

allowed the appeal. The argument was advanced by the petitioner in the reported

matter that the provisions of Section 91 of the Act would not have applicability and

the dispute could not have been entertained and the proper remedy available to the

society was to proceed against the Manager by taking recourse to Section 88 of the

Act. While dealing with the challenge raised in the petition this Court has held that

the provisions of Section 88 of the Act cannot be invoked against the Manager and the

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same are required to be invoked essentially against the office bearers who are

entrusted with the task of administering the management of the society. This Court

has observed in paragraph 8 of the reported Judgment as under:

“…….Therefore, applying the above observations to the facts of the
present case, I am of view that the petitioner who was placed in charge
of one of the cloth shops of the society was not a person who was

empowered to give directions in regard to the business of such society.
Directions in regard to the business of such society normally emanate
from the Managing Committee of the society or an officer empowered

to give such direction. The directions contemplated are directions in
regard to the business of the “society” and not merely directions,

therefore, would be in regard to the manner in which the society
should do its business, etcetera and not merely the selling of cloth in

one of the shops of the society. In fact, the petitioner in his deposition
stated that he was appointed as a salesman and was working as a
salesman in the branch at Shenduwafa. That the goods in his shop
were purchased by the President and Manager of the head office and

salesman of the head office. From the above, it is clear that the

petitioner had nothing to do with giving directions regarding the
business of the society. The submission on behalf of the petitioner that
the subject matter was capable of being inquired into under section 88

is not tenable. Section 88, in my view, is not attracted to the facts of
the preset case at all….”

5. In the instant matter also the petitioners were not entrusted with the

functions either of the organization or management of the society. The nature of

function carried out by the petitioners gives rise to contractual relationship. If at all,

there is any breach of the terms of the contract, the petitioners can be proceeded

against by the Management and claim in the nature of recovery of damages can be

lodged against them. However, the petitioners who have nothing to do with the

management of the society, cannot be proceeded in any enquiry by invoking

provisions of Section 88 of the Act.

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6. For the reasons stated above, I am of the view that the impugned order

dated 25/12/1999 passed by the Authorised Enquiry Officer is illegal and liable to be

quashed and set aside and the same is accordingly quashed and set aside. It is hereby

declared that the petitioners cannot be proceeded against in an enquiry under Section

88 of the Act. Both the petitions are allowed. Rule is accordingly made absolute.

However, in the facts and circumstances of the case, there shall be no order as to

costs.

JUDGE

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