IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 10255 of 2010(F)
1. P.V.MARKOSE, S/O.VARGHESE,
... Petitioner
2. JOSE JACOB, VANIYUPURAKKAL HOUSE,
Vs
1. THE DEPUTY DIRECTOR OF DIARY DEVELOPMENT
... Respondent
2. NETTITHOZHU KSHEEROLPADAKA SAHAKARANA
For Petitioner :SRI.V.G.ARUN
For Respondent :SRI.P.C.SASIDHARAN
The Hon'ble MR. Justice K.SURENDRA MOHAN
Dated :01/07/2010
O R D E R
K.SURENDRA MOHAN, J
...........................................
WP(C).NO.10255 OF 2010
............................................
DATED THIS THE 1st DAY OF JULY, 2010
JUDGMENT
The petitioner is the President and the second petitioner is one of
the members of the Managing Committee of the second respondent,
Society. The Committee of which petitioners are members took charge
on 31.12.2009. The petitioners were members of the previous
committee also. The Society is functioning profitably with its area of
operation spread over Ward Nos.7, 8, 9 and portions of Ward Nos.6,10
and 11 of Vandanmedu Panchayat.
2. The Society is functioning from its own building which is
situate in an extent of land admeasuring 6.5 cents. The office of the
Society, Milk Collection Centre and Cattle Feed Godown are all
functioning in the said building. As the building was old and
dilapidated, the former Committee in office decided to renovate the
building after obtaining permission from the departmental authorities,
as per Ext.P1 resolution.
3. Since there was no Vetenary Hospital in Vandanmedu Grama
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Panchayat, there was a persistent demand from the public for starting a
Vetenary Hospital. It was felt that the functioning of the Vetenary
Hospital would be beneficial to the members of the second respondent,
Society also. Though a Vetenary Hospital had been sanctioned by the
Government, there was no building for using the same. In the above
circumstances, the Grama Panchayat as well as other Government
officials requested the second respondent to provide a portion of its
building for the purpose of housing the newly sanctioned Vetenary
Hospital. Acceding to the said request, the then Managing Committee
of the second respondent Society decided to provide a portion of its
building for housing the Vetenary Hospital. Accordingly, a Committee
was constituted for the purpose of collecting funds and for starting the
Vetenary Hospital. The Society accordingly carried out the renovation
of its building expending an amount of Rs.3,63,298.80 from its own
funds.
4. After completion of the renovation, which was conducted
under the periodic supervision of the authorities, the Vetenary Hospital
was inaugurated on 9.11.2008, as evidenced by Ext.P2, by the Minister
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for Food and Civil Supplies. It is submitted by the petitioner that the
second respondent Director, Diary Development Department was
himself among the persons who had felicitated the second respondent
Society.
5. After the present Committee took charge, there were
differences of opinion with the Secretary of the Society. The Secretary
started abusing the Committee members in public and his conduct
finally lead to his suspension. It is alleged that at his instance therefore
allegations were raised that the Society had expended amounts for
renovation of the building without proper sanction from the authority
and that it had accepted the donation of Rs.25,779/- without sanction
from the Department. Though the first respondent had issued an order
on 11.2.2010 requiring the first petitioner to reinstate the Secretary,
which is Ext.P3, he did not yield to the said request. According to the
petitioners, the above stand antagonized the first respondent.
6. Shortly thereafter, the first respondent issued Ext.P5 asking
them to show cause why proceedings should not be initiated under
Section 68 of the Kerala Co-operative Societies Act, 1969( `the Act for
Wpc 10255/2010 4
short) and the Rules thereunder. The petitioners submitted their reply,
Ext.P6 explaining the allegations. On the basis of Ext.P6, the
petitioners were heard on 17.3.2010. However, as per Ext.P7 order
which bears the same date, 17.3.2010, the petitioners have been
surcharged under Section 68 of the Act. As per another order dated
19.3.2010, the petitioners have also been disqualified under Rule 44(1)
of the Rules. The petitioners have filed this writ petition challenging
Exts.P7 and P8.
7. As per Ext.P7, the amounts spent for revocation is directed to
be recovered from the eight persons who were the members of the
Managing Committee at the relevant time. According to the counsel for
the petitioners, there are absolutely no allegations of misappropriation
or misutilization of the funds of the Society. The only allegation is that
the sanction of the authorities were not obtained before expending the
amount for renovation of the building. In view of the fact that there are
no circumstances justifying invocation of the power under Section 68
present, there is absolutely no justification for the issue of Exts.P7 and
P8 in the present case. The counsel for the petitioner places particular
Wpc 10255/2010 5
reliance on the decision of this court by which it has been held that
unless the specific conditions stipulated by Section 68 are present,
invocation of the power under the said provision is not justified.
Therefore, the counsel prays for quashing Exts.P7 and P8.
8. As per order in I.A.No.4669 of 2010, additional third
respondent, the person who had made the complaint, referred to in
Ext.P7, has got himself impleaded. The additional third respondent has
filed a counter affidavit justifying Exts.P7 and P8 proceedings.
According to the additional third respondent, Ext.P7 is an order issued
after hearing the affected parties. It has been found in Ext.P7 that an
amount of Rs.3,63,298.80 has been misappropriated from the general
funds of the Society and therefore an order of surcharge has been
passed on the petitioners. According to the additional third respondent,
even the amounts spent without sanction of the authorities, are amounts
misappropriated. The only funds that a Co-operative Society can spend
without sanction of the authorities, are amounts for which provision
has been made in the budget adopted by the General Body of the
Society. Therefore, any amounts expended without budgetory
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provision would have to be with prior special sanction obtained by the
competent authorities. In the present case, it is submitted that amounts
were spent without budgetory provision and the construction itself was
undertaken without any sanction from the PWD. Therefore, it is
pointed out that the action initiated is perfectly justified.
9. The learned Senior Government Pleader, K.C.Santhosh
Kumar pointed out that the order Ext.P7 being one issued under
Section 68 of the Act, is appealable under Section 83(1)(e) of the Act.
Therefore, it is submitted that the petitioner is not entitled to challenge
this order in this writ petition. It is also submitted that considering the
gravity of the allegations raised against the petitioners, the impugned
orders Exts.P7 and P8 are perfectly justified. It is also pointed out that
Ext.P7 was issued after hearing the petitioners and that no opportunity
for any further hearing is contemplated by the Act or Rules. Since the
impugned orders were issued after considering all the contentions of
the petitioners, it is submitted that the orders are justified both in law
and fact. Therefore, he prays for the dismissal of this writ petition.
10. I have heard Adv.Sri.V.G.Arun, who appears for petitioners,
Wpc 10255/2010 7
Sri.K.C.Santhosh Kumar, learned Government Pleader and
Adv.P.C.Sasidharan, who appears for the third respondent, in detail. I
have gone through the facts of the case and have considered the rival
contentions of the parties.
11. The petitioners are the only two members of the present
Managing Committee who have been proceeded with under Section 68
of the Act. This writ petition is filed by them. According to the
petitioners, as per the decisions reported in A.K.Francis V. Joint
Registrar (1990(2) KLT 470), it has been held as follows:-
“The first requirement of the section, which
constitutes the condition precedent for its
operation, is that the payment contemplated or
the deficiency in the assets of the society should
have been found in the course of audit, inquiry,
inspection or the winding up of the society. The
section can be invoked by the Registrar only if
the finding was made in this manner and not
otherwise”.
12. With reference to Ext.P7, it is pointed out by the counsel for
the petitioner that in the present case, the proceedings are initiated
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pursuant to a complaint made by the additional third respondent cited
as reference No.1 therein. Since the preliminary conditions required for
initiating proceedings under Section 68 are absent, it is submitted that
there is no illegal payment or deficiency in assets that has been found
in the inspection that was conducted. What has been found is only that
money was expended without previous sanction, which is not
sufficient for initiation of action under Section 68. The counsel for the
petitioners also complain that no opportunity of being heard was
afforded before issuing Ext.P8 disqualifying the members.
13. As rightly pointed out by the learned Senior Government
Pleader, Ext.P7 is an order against which a remedy by way of appeal
has been specifically provided by Section 83(1)(e) of the Act. Since the
petitioners have an alternative and effective remedy for challenging
Ext.P7, it is sufficient that they are relegated to the said remedy.
Therefore, I do not venture to consider the contentions raised on behalf
of the petitioners on the merits.
14. Ext.P8 order has been passed three days after the issue of
Ext.P7. As per Ext.P8, the petitioners have been disqualified to be
Wpc 10255/2010 9
members of the committee under Rule 44(1)(l) of the Co-operative
Societies Rules, 1969(`the Rules’ for short). It is the case of the
petitioners that they were not heard before Ext.P8 order was passed.
The learned Senior Government Pleader as well as the counsel for the
additional third respondent submits that the disqualification suffered
by the petitioners was a consequence of being surcharged under
Section 68 of the Act. Therefore, immediately on being surcharged
under Section 68, the disqualification under Rule 44(1)(l) takes effect,
without there being any further proceedings to declare such
disqualification. Since the petitioners were disqualified, even in the
absence of Ext.P8, issuance of the said order does not in any way affect
the said legal position one way or the other. Therefore, it is submitted
that there was no necessity of the petitioners being heard before the
issuance of Ext.P8. The counsel for the petitioner places particular
reliance on the decision in T.P.Paulose V. Joint Registrar (1993(2)
KLJ 36).
15. It cannot be disputed that the petitioners are persons who
were qualified to be members of the Managing Committee as on the
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dates on which they were elected to the said posts. Having been
eligible members, they could be disqualified from holding the said post
only when they are disqualified in accordance with the provisions of
Rule 44 of the Rules. Therefore, the disqualification of the petitioners
cannot be considered to be automatic on the issue of surcharge
proceedings under Section 68 of the Act. A further declaration that he
was ceased to be a member of the Committee of the Society is
necessary for the said purpose. The said declaration can be issued
under Rule 44(3) of the Rules. It is the said declaration that has been
made as per Ext.P8 proceedings. However, before any such
proceedings is issued under the said provision, it is mandatory that an
opportunity to state his objections against the proposed action should
be given to the said person. In the present case, nobody has a case that
any such opportunity of hearing was given to the petitioners. Since a
hearing is mandatory under Section 44(3) of the Act, Ext.P8
proceedings cannot be sustained. For the above reason alone, Ext.P8 is
unsustainable and is liable to be set aside.
16. In the above circumstances, the impugned proceedings
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Ext.P8 are quashed. However, the first respondent would be at liberty
to initiate fresh action against the petitioners under Rule 44(3) of the
Rules, if circumstances insist such action. The petitioners shall be at
liberty to challenge Ext.P7 proceedings by filing an appeal against the
same under Section 83(1)(e) of the Act. If such an appeal is filed
within ten days of receipt of a copy of this judgment, the same shall be
entertained without any objection as to limitation, treating the period
during which this writ petition has been pending before this court as
time spent pursuing the other legal remedies and such appeal shall be
considered and disposed of in accordance with law, on merits.
Writ petition is disposed of as above. No costs.
K.SURENDRA MOHAN, JUDGE
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