ORDER
P. Sathasivam, J.
1. Aggrieved by the surcharge order passed by the second respondent dated 10.9.1987, as confirmed by the common judgment dated 28.2.1990 made in S.T.C.A.Nos.66 to 71 of 1988 on the file of the first respondent, the petitioners numbering 6 have approached this Court by way of the present writ petition.
2. The case of the petitioners is briefly stated hereunder: First petitioner herein is the President, second petitioner is Ex. Vice-President and petitioners 3 to 6 are Ex-Directors of the third respondent-Society. It is stated that when the first petitioner was the President, the erstwhile Secretary, now dead, was in sole charge of the entire business of the society as per the Bye-law and resolution, and thus making use of that opportunity, he had defalcated the funds of the said society and caused loss to the assets of the same. Neither the first petitioner nor the other petitioners was negligent or careless in supervising, checking the accounts and deducting the misappropriated amount from the delinquent. An enquiry under Section 65 of the Tamil Nadu Co-operative Societies Act, 1961 (hereinafter referred to as “the Act”) was ordered by the 2nd respondent and it was found that that the erstwhile Secretary had misappropriated a total sum of Rs. 21,668.78 including interest. That being so, the second respondent sent a notice in and by his proceedings No. Na.Ka. 14435/84 G(3), dated 2.4.1985 directing the petitioners to make good the loss namely Rs.21,668.78 and also directed the first petitioner to take necessary action based on the enquiry report. Immediately on receipt of the said notice he has taken all necessary steps to recover the above amount from the erstwhile Secretary. Since they were not able to recover the said amount from him, they have suspended the erstwhile Secretary in and by a resolution of the Society dated 8.5.1985. In the meantime, immediately after his suspension, he died. Hence the petitioners were disabled from recovering the said amount from the Secretary.
3. It is further stated that the third respondent Society preferred an application before the second respondent seeking to recover the defalcated amount from them. On the said application, the second respondent initiated surcharge proceedings against the petitioners. The second respondent without furnishing any document as claimed by them and without considering all the relevant points raised has arbitrarily passed surcharge order by his proceedings dated 10.9.1987 directing them to pay the entire amount, in utter violation of the principles of natural justice. Aggrieved by the said surcharge order of the second respondent, the petitioners herein filed separate appeals before the Special Tribunal for Co-operative Cases, Madras, the first respondent herein, in S.T.C.A.Nos.66, 68, 70, 67, 69 and 71 of 1988 respectively. The first respondent without considering the case of the petitioners and on misconception of law and facts, dismissed the appeals by a common judgment dated 28.2.1990. Aggrieved by the said decision and having no other alternative remedy, the petitioners are obliged to file the present writ petition for quashing the said proceedings.
4. Even though all the 3 respondents were duly served notices from this Court, even in the year 1990, none of them has chosen to file counter-affidavit disputing various averments made by the petitioners. As a matter of fact, the third respondent has not chosen to engage a counsel to contest the above writ petition.
5. In the light of the above factual position, I have heard the learned Counsel for the petitioners and the learned Government Advocate for second respondent.
6. After taking me through the surcharge proceedings passed by the second respondent as well as the order of the Co-operative Tribunal the first respondent herein, the learned Counsel for the petitioners raised the following contentions:
(i) Inasmuch as the first petitioner being the Ex.President of the third respondent-Society had taken necessary steps on receipt of the letter from the second respondent against the Secretary of the Society as per the Bye-laws even on 24.4.1985, the contrary conclusion arrived at by respondents 1 and 2 cannot be sustained;
(ii) In the light of the action taken by the petitioners and in view of Section 71 of the Act, absolutely there is no wilful negligence on the part of the petitioners; accordingly the surcharge proceedings initiated by the 2nd respondent is liable to be set aside;
(iii) Even though the alleged loss/commission or omission took place during the period from 1977-78 to 1984-85 the action was taken only in the year 1987; accordingly the same is barred by limitation;
(iv) Inasmuch as the 2nd respondent passed the surcharge proceedings without providing required documents as claimed by the petitioners, the order of the second respondent as well as the order of the appellate authority are liable to be set aside. On the other hand, learned Government Advocate on the basis of the instructions has contended that inasmuch as the petitioners were incharge of the Society at the relevant time, in view of the loss caused to the said Society, they were responsible for the same; accordingly, the surcharge proceedings initiated by the 2nd respondent and the/ultimate order by the first respondent are in accordance with the statutory provisions and there is no merit in the writ petition.
7. I have carefully considered the rival submissions.
8. Even though the learned Counsel for the petitioners has raised several contentions, except the first contention, namely, no wilful negligence or omission on the part of the petitioners in terms of Section 71 of the Act, it is unnecessary for this Court to consider the other contentions. Accordingly, I shall first consider the above said contention. It is the definite case of the petitioners that as per the Bye-laws and resolution passed by the third respondent Society, the Secretary of the Society was in sole charge of the entire business. On receipt of letter from the 2nd respondent on 2.4.1985 pointing out the loss to an extent of Rs. 21,668.78, action had been taken by the first petitioner against the Secretary of the Society even on 24.4.1985. It is not in dispute that during the said enquiry the Secretary died immediately after his suspension on 8.5.1985. In view of the death of the Secretary, further proceedings could not be pursued. Thereafter, the 2nd respondent issued a show-cause notice dated 10.9.1987. It is the case of the petitioners that in order to submit their defence/explanation, they requested the 2nd respondent copies of the documents referred to by the second respondent. It is also their case that in the absence of those documents, they could not submit or place effective representation; accordingly they did not participate in the enquiry. All of them were set ex parte on 10.9.1987; accordingly the surcharge order was passed by the 2nd respondent without hearing the petitioners. No doubt, the petitioners preferred appeal before the first respondent which according to them, confirmed the surcharge order by way of a common judgment dated 28.2.1990.
9. In order to appreciate the first and foremost contentions, I shall refer the relevant provision, namely, Section 71 of the Tamil Nadu Co-operative Societies Act, 1961 (Tamil Nadu Act 53 of 1961).
Section 71(1): Where in the course of an audit under Section 64 or an inquiry under Section 65 or an inspection under Section 66 or Section 67 or the winding up of a society, it appears that any person who is or was entrusted with the organisation or management of the society or any past or present officer or servant of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has made any payment contrary to this Act, the rules or the Bye-laws, the Registrar himself, or any person specially authorised by him in this behalf, of his own motion or on the application of the committee, liquidator or any creditor or contributory may inquire into the conduct of such person or officer or servant and 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 authorized as aforesaid thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, misappropriation of funds, fraudulent retainer, breach of trust or wilful negligence as the Registrar or the person authorized as aforesaid thinks just: Provided that no such inquiry shall be commenced after the expiry of six years from the date of any act or omission referred to in this sub-section;
Provided further that no order shall be passed against any person referred to in this subsection unless the person concerned has been given an opportunity of making his representations.
10. In the light of the conditions prescribed in the above referred section, I shall now consider the various decisions rendered by this Court. Learned Counsel for the petitioner has brought to my notice a decision of Venkataswami, J. (as His Lordship then was) reported in Ambalam Sakthivel Thever v. Secretary, Co-operative Agricultural Credit Society (1991)1 L.W. 402. In that decision, His Lordship has referred all the earlier decisions with reference to Section 71 of the Act. The relevant passage is extracted hereunder:
7. In Subbammal alias Bajammal v. President, The Tenkasi Co-operative Urban Bank Ltd. 89 L. W. 641, Ramanujam, J., after noticing number of earlier cases, has taken the following view:
The above decisions clearly indicate that the use of the phrase wilful negligence’ in Section 71 of the Act is for the purpose of holding a person in management liable if he has caused loss to the society by his intentional and purposeful omission. Therefore, the learned Counsel for the petitioners is right in his submission that mere negligence, however, gross it may be, may not be sufficient to attract the section.
11. In Sathyamangalam Co-operative Urban Bank Ltd. v. The Deputy Registrar of Co-operative Society and Anr. , Ratnavel Pandian, J., as he then was, after noticing the judgment upto that date, has held as follows:
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 word “wilfulness” or “wanton-ness” imports pre-meditation or knowledge and consciousness that an inquiry 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, wilful wrong. In other words, the conduct of a person to amount to “wilful negligence” must be something more than 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 intention, 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. 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 Judge, 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 explicit, it may be stated that he should have acted in breach of legal obligation or in a conscious disregard of duty or with an intentional failure to perform the manifest duty, in the performance of which the public have an interest, and that such commission should be the proximate cause of the loss or deficiency in question.
12. In Ramachandran v. The Deputy Registrar, Dairying, Tricky and two Ors. 1981 T.L.N.J. 292, Nainar Sundaram, J., after referring to the judgments of Ramanujam, J. and Ratnavel Pandian, J. (as he then was),” has observed as follows:
It may be true that the petitioners failed to discharge the duties enjoined upon them with regard to direct scrutiny of the accounts, examination of the vouchers and the passing of the statement before they signed the minutes book. But this failure by itself cannot come within the expression ‘wilful negligence’ which has been construed as meaning something done 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 the existing circumstances. After all, the petitioner filled in the characters of Directors of the third respondent Secretary at the relevant point of time. The affairs of the third respondent Society were admittedly manned by the President, Secretary and the Manager and as stated above that if the petitioners reposed confidence in the said officials and they merely affixed the signature in the minutes book, that by itself would not constitute wilful negligence so as to bring them within the mischief of Section 71 of the Act.
13. On the question whether the shifting of the proceedings from Section 71 to Section 73 of the Act, was justified and sustainable, the learned Counsel relied on a decision of Ramaprasada Rao, Chief Justice in Kunjithapatham v. Thiruvilaiyattam Co-operative Agricultural Credit Society (1979)1 M.L.J. 6. In case, the learned Chief Justice has held as follows:
…The only question for consideration therefore is whether the surcharge proceedings initiated by the society under Section 71 of the Act ignoring and setting at naught the statutory award passed by the Registrar under Section 73 over the same subject-matter, can be sustained. I refer to it as “the same subject-matter, in the sense that it is common ground that the loss claimed by the society as against Deenadayalu Naidu which was the subject-matter of the decision under Section 73, is the same claimed in the surcharge proceedings also. It is in this sense that there is similarly in the subject-matter. This is not disputed before me, one other peculiar feature is that, the audit report rendered, which touched upon and highlighted the loss sustained by the society, which was later traced to certain acts of misconduct of the quondam officers, was the basis for both the proceedings under Section 73 as well as under Section 71 of the Act. If therefore the same audit report propelled the officers of the society to approach the Registrar for a decision on the question as to who should be mulcted with the responsibility for the loss which accrued to the society, then it appears to me to be unreasonable once again to initiate proceedings under cover of the same subject-matter, but under Section 71 of the Act. There is an exhaustion of the power of the society or its officers when they invited a decision from the Registrar under Section 73 and when it resulted in an award being passed by the Registrar under the above section. It is that award which is equitable to a decree of a competent court that can be executed by the society thereafter for realisation of money due and payable by the misconducting officials as per the award rendered by the Registrar. It would be travesty of procedure, if the Board which came into the picture after the previous Board had to quit because of the earlier events which had happened and which had caused loss to the society, could seek to circumvent the executable award available to the society and seek umbrage under Section 71 of the Act, merely because it is an independent provision under the same enactment. It is not strange for an enactment to contain two or more remedies for the assertion of a common of single right. But unless otherwise provided for in the statute, if one such available remedy is exhausted, then in my view, the invocation of the other remedy, which is provided for as an ancillary to the first remedy already exhausted, cannot be sought for, for that would mean that the authorities in power can at their convenience and pleasure invoke one provision after another in a particular statute for purpose of availing of the remedies at different times. This would not be conducive to an orderly application and understanding of the laws. In my view, therefore, if there has been an invocation of one or two or more remedies available in law, such an invocation results in a decision rendered by the appropriate statutory authority, then a resurrection of the very same subject-matter through another available remedy contemplated in the very same enactment would lead to a violation of principles of natural justice as well as the accepted canons of common law. In this view, though Mr. Rajan is right in his submission, that Sections 73 and 71 are independently in the respective fields, yet if one provision is taken advantage of by the society for securing its rights, and if such a reference to the Registrar, as in the this case, under Section 75, has resulted in an award, it cannot be thrown overboard and by passed by invoking once again the provisions of Section 71, as if fresh surcharge proceedings could be initiated by the society which is armed with an award which is executable in the eye of law. In the peculiar circumstances of the case, I am of the view that the award passed by the Registrar under Section 73 when the petitioners herein took prompt action under Section 73 of the Act against the miscreant and against the Secretary who was in charge of such amounts and brought him to book and secured an award from the statutory authority namely, the Registrar, under Section 73 they cannot still be said to be guilty of wilful negligence nor can they be characterised as persons who misappropriated the funds of the society. Even on merits therefore there is no justification for the institution, of fresh action against the petitioners.
The above referred conclusion in all the above decisions makes it clear that in order to pass a surcharge order under Section 71(1) of the Act against a person entrusted with management of a co-operative society or an officer or a 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, without taking due care and precaution ordinarily expected from a reasonable and prudent man under those existing circumstances. In the absence of such categorical finding by the second respondent, it is not possible to mulct the petitioners with the loss caused to the society. I have already observed that on receipt of an intimation from the 2nd respondent on 2.4.1985, the first petitioner who was the President at the relevant time had initiated action against the Secretary even on 24.4.1985. It is also clear that because of the death of the Secretary during the pendency of the enquiry, further proceedings could not be pursued. Apart from this, it is also brought to my notice that for the alleged commission or omission, which took place in the year 1977-78 to 1984-85 action was initiated only on 10.9.1987. Undoubtedly, at least a portion of the claim that is for the period 1977-78 is barred by limitation as per first proviso of Section 71(1) of the Act. It is also brought to my notice that admittedly the accounts of the Society are being audited every year by the second respondent. It is not shown why no such steps were taken immediately by the second respondent. Further, a duty is cast on the second respondent before relying on a particular document or instance, the copy of that document or the particulars therein have to be furnished to the person aggrieved. In this case, even though the petitioners have made proper request for supply of those particulars, it is not clear as to why the same were not furnished to them. In this regard, a reliance is placed on the decision reported in Venkataraman v. Deputy Registrar of Co-operative Societies (1978)1 M.L.J.284. In a similar circumstance, his Lordship has observed thus:
Undoubtedly if a liability was sought to be fastened to the petitioner on the basis of certain statements, he should be given an opportunity to cross-examine those witnesses. But no such opportunity was ever afforded to the petitioner. Merely because the petitioner did not specify the documents which he wanted to peruse, it would not mean that it would cure the failure to afford an opportunity, So also, the fact that he had a remedy by way of appeal to the Co-operative Tribunal was not a substitute for not affording an opportunity since the same handicap which was prevailing before the original authority would continue to prevail. In the result, on the simple ground of violation of the principles of natural justice, the writ petition was liable to be allowed and the impugned order quashed.
In the light of the said decision, it is clear that unless the parties before the 2nd respondent were given proper and reasonable opportunity of answering the claim made by them, it is not possible for the 2nd respondent to use those documents/materials against them. It is clear that such recourse has not been followed by the second respondent before passing the impugned order.
14. Even the appellate authority, namely, the Cooperative Tribunal has not considered the above mentioned aspect, more particularly, the compliance of conditions/ingredients enunciated in Section 71 of the Act and merely affirmed the order of the second respondent; accordingly the said order is also liable to be set aside.
15. Under these circumstances, I am satisfied that the orders of the Deputy Registrar, original authority and the appellate authority cannot be sustained in the light of the factual and legal position narrated above, particularly, in the light of the decisions referred to above. Accordingly, both the impugned orders are set aside and writ petition is allowed. No costs.
16. In view of quashing both the orders of respondents 1 and 2, it is made clear that amount if any is paid by the petitioners before the 3rd respondent-Society, they are entitled to get back the same.