IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 21.1.2011
CORAM:
THE HONOURABLE MR.JUSTICE P.JYOTHIMANI
W.P.Nos.38410 of 2003 and 38603 of 2004
V.M.Sivaraj .. Petitioner in both WPs.
Vs.
1. The Registrar of Co-operative Societies
Poonamallee High Road
Chennai 10.
2. The Additional Registrar of Co-operative
Societies (Credit)/ Chairman Common
Cadre Authority, Office of the Registrar
of Co-operative Societies, Chennai 10. .. Respondents 1 and 2 in
WP:38410/2003
3. The Vellore District
Central Co-operative Bank Ltd.,
Vellore, Officers Line, Vellore
rep. by its Special Officer. ..3rd Respondent in both WPs.
4. The Principal District Judge
(Co-operative Appellate Tribunal)
Vellore District, Vellore. ..1st respondent in WP:38603/2004
5. The Deputy Registrar of Co-operatives
Vellore. ..2nd respondent in WP:38603/2004
PRAYER in W.P.No.38410 of 2003: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorarified Mandamus to call for the records of the order dated 30.6.2001 and bearing Ref.No.138/01E-1 on the file of the third respondent, to quash the same insofar as it relates to withholding the petitioner's terminal benefits and to direct the respondents to pay the terminal benefits without any delay.
PRAYER in W.P.No.38603 of 2004: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorari to call for the records from the respondents and quash the order of the 2nd respondent dated 29.5.2003 bearing ref.No.Tha.Thee 20/2002-2003 insofar as it relates to the petitioner and the order of the 1st respondent dated 11.10.2004 in C.T.A.No.18/2003 as illegal, arbitrary and contrary to Section 87 of the Tamil Nadu Co-operative Societies Act, 1983.
For Petitioner : Mr.Balan Haridas
For Respondents : Mr.N.Senthil Kumar
Additional Govt. Pleader
for respondents 1 and 2
in WP:38410 of 2003
and 2nd respondent in
WP:38603 of 2004
Mrs.G.Thilakavathi
for 3rd respondent
in both writ petitions
ORDER
The petitioner has filed these writ petitions challenging the order of the third respondent dated 30.6.2001, insofar as it relates to withholding the petitioner’s terminal benefits and also the order of the Deputy Registrar of Co-operatives, Vellore dated 29.5.2003, as confirmed by the order of the Co-operative Appellate Tribunal, Vellore by order dated 11.10.2004, by which the petitioner and others were made jointly and severally liable to the third respondent/Bank to the extent of ` 11,07,050/- with interest at the rate of 18% from 27.2.2003 in surcharge proceedings initiated against them under the Tamil Nadu Co-operative Societies Act, 1983 (for brevity, “the Act”).
2.1. The petitioner was working as an Assistant Administrative Officer (Non Agricultural Loan) between 3.11.1994 and 23.7.1995 in the third respondent/Bank. On an application made by one Om Sakthi Brick Works on 8.5.1995 to the Special Officer of the third respondent/Bank, the petitioner was directed to conduct personal interview of the loan applicant and find out the value of the land given as collateral security for the loan sought. The petitioner was directed to find out the guideline value by the Special Officer of the third respondent/Bank in the order dated 16.5.1995.
2.2. It is stated that the petitioner has called for an interview of the applicant and verified the guideline value from the Sub Registrar Office, Ambur in respect of the land sought to be given as collateral security by the loan applicant. As per the guideline value, the value of the collateral security was arrived at ` 8,11,440/- and it is stated that the petitioner has submitted his report to the Special Officer of the third respondent/Bank on 24.5.1995. The loan was sanctioned to the applicant by the Special Officer on 21.6.1995 and disbursed in three instalments, viz., on 20.7.1995 a sum of ` 1,89,215/-, on 14.9.1995 a sum of ` 2,09,225/- and on 4.11.1995 a sum of ` 62,000/- and according to the petitioner, he had no role to play in the sanction of the loan and he has only valued the property based on the guideline value.
2.3. It is stated that when the third party failed to repay the amount, instead of making recovery an enquiry was directed in respect of disbursement of loan. It was on 23.2.2001 a show cause notice was issued to the petitioner and 8 others seeking explanation as to why disciplinary proceedings should not be initiated for irregularity in disbursement of loan. Out of nine persons, in respect of four persons, viz., K.Periyasamy, Sriram, M.Varadhan and D.J.Ambikapathy, show cause notice was issued for surcharge proceedings, and in respect of the petitioner and the other four persons, the show cause notice was as to why disciplinary proceedings should not be initiated.
2.4. The petitioner gave a reply on 22.3.2001 and thereafter, the third respondent has issued a charge memo on 11.4.2001 and the petitioner has given his reply on 5.5.2001. In the meantime, the petitioner has attained the age of superannuation on 30.6.2001 and his terminal benefits were not settled. It is in respect of the said terminal benefits which were withheld, the petitioner has filed W.P.No.38410 of 2003.
2.5. An enquiry under Section 81 of the Act was ordered, in which the petitioner has participated and thereafter, the second respondent in W.P.No.38603 of 2004 has issued a notice on 16.6.2002 for surcharge proceedings under Section 87 of the Act. Since the petitioner was away from India, after his return, by letter dated 20.10.2002, he requested the second respondent in W.P.No.38603 of 2004 to furnish the copy of the report of enquiry conducted under Section 81 of the Act to enable him to give his reply to the surcharge proceedings. The complaint of the petitioner is that such report was not furnished. However, the petitioner had to give his reply. The petitioner has also given deposition that he has nothing to do with the granting of loan. However, the second respondent in W.P.No.38603 of 2004, by order dated 29.5.2003, held that the petitioner is jointly and severally liable along with S.Nagarajan, Thandapani, Sriram and K.Periyasamy for the loss of ` 11,07,050/-.
2.6. It was against the said order of the second respondent in W.P.No.38603 of 2004, the petitioner filed appeal before the first respondent in W.P.No.38603 of 2004 (Co-operative Appellate Tribunal) in C.T.A.No.18 of 2003. The other three persons also preferred appeals before the Appellate Tribunal. All the appeals were heard together and by a common order dated 11.10.2004 the appeals were dismissed.
2.7. The charge was that the petitioner has failed to visit the spot by field inspection, which would show that a high voltage wire was passing through the land and in such circumstances, the land would not have fetched the value as that of the guideline value. However, it has been the case of the petitioner that as per the direction of the Special Officer of the third respondent/Bank dated 16.5.1995, the petitioner was only directed to find out the guideline value, which he has in fact done and in respect of the issuance of loan, the petitioner has no role to play.
2.8. The surcharge notice which imputes irregularity against the petitioner is that he should have returned the loan application as the same was not forwarded by Ambur Branch; and that in the basic documents relating to the property which was sought to be given as collateral security, the extent of land was mentioned in Cents, whereas the petitioner has not noticed the note placed by the clerk measuring the land in Square Feet and thereby aided the Special Officer in sanctioning the loan and for sanctioning the loan the land value was boosted.
2.9. It has been the case of the petitioner that the loan application was received by the Special Officer and not the petitioner and the petitioner was not entitled to return the application and in due obedience of the direction of the Special Officer, he has only got the guideline value from the Sub Registrar Office and gave the valuation report as per the guideline value.
2.10. It is the case of the petitioner that he found that on 24.6.1993 the land offered as collateral security was sold at the rate of ` 52/- per sq.ft. and thereafter on 24.5.1995 the same was sold at ` 63/- per sq.ft. and only on that basis he has valued the property given as collateral security at ` 8,11,440/-, which is genuine and bona fide and this aspect has not been considered by respondents 1 and 2 in W.P.No.38603 of 2004. It is further stated that when the guideline value of the property is ` 63/- per sq.ft., there is an improper finding that there are no supporting documents to that effect.
2.11. The impugned orders of respondents 1 and 2 in W.P.No.38603 of 2004 are challenged on various grounds, including that the same are illegal; that the petitioner has nothing to do with the receipt of loan application and only as per the direction of the Special Officer he has conducted the interview and found out the guideline value; that even during the time when he was working under the third respondent, viz., from 3.11.1994 to 23.7.1995, the loan was given to the borrower only to the extent of ` 1,89,215/- on 20.7.1995 and the remaining amounts were disbursed in the absence of the petitioner and in spite of it the petitioner has been made jointly liable for the entire amount; that it is the Special Officer who has received the application, processed the same and directed disbursement of the amount and therefore, he should have taken steps to recover the loan amount; that without taking such steps, including by way of arbitration, surcharge proceedings were initiated against the petitioner in haste; that the allegation against the petitioner is not covered under Section 87 of the Act and the petitioner has not caused any loss to the third respondent with wilful negligence; that the petitioner was not furnished with the copy of the enquiry report while defending himself in the surcharge proceedings and it is a violation of principles of natural justice; and that while in the show cause notice dated 23.2.2001 it was indicated that the surcharge proceedings would be initiated against four persons, viz., K.Periyasamy, Sriram, M.Varadhan and D.J.Ambikapathy, the petitioner has been included and it is only an afterthought.
2.12. It is the case of the petitioner, as it is seen in W.P.No.38410 of 2003, that there was no charge sheet pending against the petitioner as on the date of retirement and therefore, the order dated 30.6.2001 in allowing the petitioner to retire from service on attainment of age of superannuation on 30.6.2001 without prejudice to the disciplinary case pending against him is not valid in law; that for proceeding under Section 87 of the Act withholding of terminal benefits is unwarranted; that even in case of surcharge proceedings, it is not as if there was no security and the petitioner is owning property; and that the right of the third respondent in proceeding under Chapter 16 of the Act does not enable them to withhold the terminal benefits.
3.1. In the counter affidavit filed by the third respondent in W.P.No.38410 of 2003, it is stated that the petitioner was allowed to retire on attainment of age of superannuation reserving the right of the third respondent to proceed with disciplinary proceedings initiated against him under charge memo dated 11.4.2001. Since the charge memo was pending, the relieving of the petitioner was without prejudice to proceed further with the enquiry.
3.2. It is stated that on 30.1.1995, Om Shakthi Brick Works have sent a loan application directly to the third respondent/Bank without the recommendation of the Branch Manager, Ambur Branch, which is a necessary requirement. The petitioner has not noticed the same and simply recommended the loan application for sanction. If only it was referred to the Branch Manager, he would have enquired and assessed the value of the property offered as security. However, the petitioner had a duty to verify the property in person for assessment of the value and to ascertain the guideline value of the property. It is stated that the petitioner had never visited the property, but simply issued a valuation certificate valuing the property at ` 8,11,440/- on the basis of the guideline value and he should have assessed the present market value and for the purpose of sanctioning loan the value has been boosted. Since the petitioner has not properly inspected, it has resulted in sanctioning the loan to the extent of ` 4,40,450/-. Ultimately, when there was default in repayment of the loan, there was nobody to purchase the property and that shows that with the active connivance the value has been boosted.
3.3. It is stated that on an enquiry conducted under Section 81 of the Act, the petitioner along with others were found to be guilty of charges and responsible for the financial loss in equal proportion and against the surcharge proceedings an appeal was filed before the Tribunal. It is also stated that the petitioner’s gratuity amount of ` 3,91,160/- and earned leave benefit of ` 1,61,664/-, totaling ` 5,52,824/- has been retained and the petitioner’s proportionate share which he is liable to pay is ` 2,78,141/-. It is stated that in view of the pendency of the appellate proceedings, the terminal benefits were withheld.
4.1. In the counter affidavit filed in W.P.No.38603 of 2004, while reiterating about the loan application stated to have been processed by the petitioner to the effect that the value has been boosted, it is stated that it is based on the report of the petitioner the loan was sanctioned on 26.6.1995 and the first instalment of ` 1,89,225/- was released on 20.7.1995 and the second instalment of ` 1,89,225/- was released on 14.9.1995 and the loanee has not repaid any amount. It is stated that arbitration proceedings were initiated and a judgment and decree was passed and a total amount of ` 9,24,023/- was outstanding and in the auction which has been conducted there has been no purchaser.
4.2. It is stated that a statutory enquiry was ordered under Section 81 of the Act and the Enquiry Officer in his report dated 19.12.2001 has recommended surcharge proceedings against the petitioner and others for the fraudulent grant of the said loan. The surcharge proceedings were conducted by the second respondent in W.P.No.38603 of 2004, in which the petitioner has fully participated and the Surcharge Officer has found that the petitioner and others are jointly liable to make good the loss of ` 11,07,050/- with 18% interest and in the appeal filed before the Tribunal also the entire fact has been analyzed.
4.3. It is stated that the petitioner, who has conducted personal interview of the loan applicant, has submitted a report on 22.5.1995 stating that the applicant has got a land property house site at Ambur Town, whereas it was not a house site.
4.4. It is stated that as against the arbitration award steps have been taken for the purpose of bringing the mortgaged property for sale and no offerers are attracted since the value has been boosted up. It is stated that 30 Cents of land would value around ` 75,000/-, while as on 15.5.2001 the amount outstanding was ` 9,24,023/-.
5.1. Mr.Balan Haridas, learned counsel appearing for the petitioner would submit that respondents 1 and 2 in W.P.No.38603 of 2004 have failed to note that the copy of the report of the inquiry conducted under Section 81 of the Act has not been served on the petitioner and that is prejudicial to the interest of the petitioner. To substantiate his contention that prejudice has been caused vitiating the disciplinary proceedings, he would rely upon a judgment of the Supreme Court in Punjab National Bank v. K.K.Verma, 2010 (4) LLN 75.
5.2. It is his further submission that as per the direction of the Special Officer, when the petitioner has inspected the place, found the guideline value and has given his valuation, as long as it is not imputed that the petitioner has committed wilful negligence, the petitioner is not liable for surcharge proceedings under Section 87 of the Act.
5.3. It is his submission that there is no finding by the second respondent as well as the first respondent in W.P.No.38603 of 2004 about any wilful negligence on the part of the petitioner in the surcharge proceedings. He would rely upon the judgment of the Division Bench of this Court in V.Arulkumar v. Housing and Urban Development Corporation Ltd., 2010 (3) LLN 764 to substantiate his contention that the finding of wilful negligence is sine qua non for fixing liability under Section 87 of the Act.
6.1. On the other hand, it is the contention of the learned counsel appearing for the third respondent/bank that wilful negligence on the part of the petitioner is writ large and non furnishing of report of the proceedings under Section 81 of the Act is not prejudicial to the case of the petitioner, because in the notice issued under Section 87 of the Act, the gist of the report of the enquiry conducted under Section 81 of the Act has been given. According to her, no adverse material against the petitioner has been withheld and therefore, there has been a substantial compliance of furnishing of report under Section 81 of the Act.
6.2. It is her submission that the petitioner having not pleaded in the W.P.No.38410 of 2003 about the non furnishing of report of the enquiry under Section 81 of the Act, cannot be expected to raise the same for the first time.
6.3. It is her submission that the petitioner, being a responsible bank official from whom utmost honesty is expected, has violated the procedure and therefore, the act complained of against the petitioner is serious and she would rely upon the judgments in State Bank of India and others v. S.N.Goyal, [2008] 8 SCC 92 and M.Chella Nadar v. The Deputy Registrar of Co-operative Societies, Tuckalai and post, K.K.District, 2002 WLR 198.
7. I have heard the learned counsel for the petitioner and the learned counsel for the respondents and perused the entire records, including the file produced by the learned counsel for the third respondent.
8. As it is seen in the proceedings of the Joint Registrar of the third respondent/Bank dated 30.6.2001, which is impugned in W.P.No.38410 of 2003, the third respondent has allowed the petitioner to retire on superannuation on 30.6.2001 without prejudice to the disciplinary proceedings pending against him and also enquiry under Section 81 of the Act which was ordered by that time.
9. Admittedly, there is no disciplinary proceedings initiated against the petitioner. In the show cause notice dated 11.4.2001 issued by the third respondent to the petitioner and others, by which a charge has been framed, an explanation has been called for in respect of the delinquency, viz., the petitioner has failed to perform his function properly in recommending non agricultural loan resulting in loss to the bank. The actual charge is as follows:
“,th; jd; flik kw;Wk; bghWg;g[fspypUe;J tGtp bray;gl;L gz;iz rhuhf;fld; tH’;f ghpe;Jiu bra;jjd; K:yk;. t’;fpapd; epjpf;F ,Hg;g[ Vw;glf; fhuzkhf ,Ue;Js;shh;/”
10. The petitioner has submitted his explanation on 5.5.2001. In the explanation, he has stated that by a letter dated 16.5.1995, as per the direction of the Special Officer, the petitioner was asked to conduct an interview of the loan applicant and accordingly, the petitioner has visited the Sub Registrar Office, Ambur and referred to the guideline value stated as ` 63/- per sq.ft. and it was based on that for the collateral security in respect of the land to the extent of 12880 sq.ft. the petitioner has fixed the guideline value as ` 8,11,440/- and thereafter he has no obligation in respect of the granting of loan.
11. In the meantime, the enquiry has been conducted under Section 81 of the Act and admittedly, the Enquiry Officer, who has conducted enquiry, has filed a report before the second respondent in W.P.No.38603 of 2004 on 19.12.2001. It was based on the said report of the Enquiry Officer, proceedings were ordered under Section 87 of the Act for recovery by way of surcharge. Admittedly, the report of the Enquiry Officer dated 19.12.2001 has not been furnished to the petitioner. However, it is the case of the third respondent that the gist of the report of the Enquiry Officer finds place in the notice issued to the petitioner under Section 87 of the Act directing the petitioner to give explanation. In the said notice issued under Section 87 of the Act by the second respondent in W.P.No.38603 of 2004, insofar as it relates to the petitioner, the contents are as follows:
“nkw;go fld; fl;oid jpU tp/vk;/rptuh$;. cjtp eph;thf mYtyh; (gz;iz rhuhf;fld;) rhpghh;j;jJ mDg;g[k;nghjhtJ Mk;g{h; fpis nkyhsh; K:yk; tuntz;Lk;/ vdnt Mk;g{h; fpis nkyhsUf;F mDg;gt[k; vd vGjp ifbaGj;jpl;L nfhg;ig brayUf;F mDg;gp ,Uf;fntz;Lk;/ nkw;go braiy cjtp eph;thf mYtyh; (g/rh/f/) bra;atpy;iy vd;gJ mYtyff; Fwpg;gpd; K:yk; bjhpatUfpwJ/ vdnt. ,tUk; fld; nr’;c&d; bra;at[k; gl;Lthlh bra;at[k; jdp mYtyUf;F cle;ijahf ,Ue;Js;shh; vd;gJ cWjpahfpwJ/ gphpt[ vGj;jh; jpU ehfuh$d; fl;oid ghprPyidr; bra;J itj;jnghJ g[“;ir epyj;ij rJu mof;fzf;fpy; fpuhk eph;thf mYtyh; bfhLj;jij itj;J mYtyf Fwpg;g[ bra;J itj;Js;shh;/ ,th; gj;jpuj;jpy; 0/30 brd;l g[“;bra; epyk; vd;W cs;sij rhpahd Kiwapy; ghh;j;jjhf bjhpatpy;iy/
cjtp bghJ nkyhsh; (g/rh/f) mth;fs; cWg;gpdh; fld; bjhifia mjpf mstpy; bgWtjw;fhd g[“;bra; epyj;jpd; tpiyia rJu mo fzf;fpy; fzf;fpl;L 200 rJu moia U:/52f;F vd;Wk; mnj 200 rJu moia U:/63 cah;j;jp fhl;oaij kWf;fhky;. ,tUk; rJu mo fzf;fpy; kjpg;gpl;L 12880 x 63 = 8.11.440 vd mwpf;ifia rkh;g;gpj;jjpypUe;J ,tUk; fld; kdtpid rhptu ghprPyid bra;atpy;iy vd;gJ epU:gzk; MfpwJ vd tprhuiz mYtyh; bjhptpj;Js;shh;/”
This is stated to be the gist of the report of the Enquiry Officer.
12. After receiving the said notice under Section 87 of the Act, the petitioner has given a letter to the second respondent in W.P.No.38603 of 2004 on 20.10.2002 requesting him to furnish a copy of the report of the Enquiry Officer dated 19.12.2001. However, the same has not been furnished to the petitioner and it was in those circumstances, the petitioner has submitted his explanation on 27.1.2003, in which he has clearly stated that as per his letter dated 20.10.2002, he has not been furnished with the report of the enquiry conducted under Section 81 of the Act by the Enquiry Officer.
13. In the enquiry before the second respondent in W.P.No.38603 of 2004, the petitioner has stated, as it is found in the impugned order of the second respondent, that he has not helped the former Special Officer with any negligence and as an officer subordinate to the Special Officer he cannot reject the application and he was only directed to find out the guideline value and based on that he went to the Sub Registrar Office and found out the guideline value and there was no order directing the petitioner to inspect the place to find out the real value. Since he has submitted the guideline value after finding out from the Sub Registrar Office, there was no deliberate negligence on his part.
14. In the finding of the second respondent in W.P.No.38603 of 2004 insofar as it relates to the petitioner, it is observed that the petitioner has not personally inspected the land and if he had inspected he would have found the high tension wire which is running on the land, which would reduce the value and it was because of his non inspection of the place the higher amount of loan had to be sanctioned. It was also found that the petitioner has helped the Special Officer in granting the loan and it was in those circumstances, the second respondent in W.P.No.38603 of 2004 has passed the impugned order.
15. Even though in the grounds of appeal the point relating to non furnishing of report of the enquiry conducted under Section 81 of the Act has not been raised, the petitioner has raised a point that the wilful negligence on the part of the petitioner has not been made out by the second respondent in the order.
16. The first respondent in W.P.No.38603 of 2004 (Tribunal) has found that as per the records, the petitioner has inspected the property and report was given and the loan was ultimately sanctioned by the Special Officer in the proceedings dated 26.6.1995 and the Tribunal has also found that the petitioner has verified the value of the mortgaged property and given his report valuing the property at ` 8,11,440/- and legal opinion has also been obtained. The Tribunal has in categoric terms found in this regard as follows:
“Moreover before sanctioning the amount that Sivaraj the appellant in C.T.A.18/2003 has inspected the place of property and gave a report and that is find place in page No.87. On 3.11.1997 and of the borrower gave a requisition to Secretary to pay his amount. While considering the page No.135 loan has been sanctioned as per the Special Officer’s proceedings No.7778/26.6.95. In the notice it was clearly stated that A.E.O. with N.A.S. verified the value of the mortgaging property and given his report, as per the report the valuation of the property is Rs.8,11,440/- legal opinion also obtained. Hence Nagaraj followed all the procedures then he made office note, in pursuance of that loan has been approved by the Special Officer in his proceedings No.7778 dated 26.6.95.”
However, the Tribunal has ultimately found that the report of the petitioner has not been accompanied by the Registration Department Certificate and observed as follows:
“Moreover it is pertinent to note that the appellant in C.T.A.18/2003 Sivaraj has gone there and gave a report. But his report has not been accompanied by the Registration Department Certificate. It is also admitted by both sides that 30 cents is not situated in the heart of the city, which has clearly proved that the appellants have wantonly and wilfully with the instruction of Periyasamy Special Officer have sanctioned the loan, and disbursed the loan. Moreover on 24.5.95 Sivaraj has given a report stating that the value is Rs.8,11,440/- per square feet is Rs.63/-. But it is not supported by any document. No guide line value has been annexed.”
17. On the face of it, it is clear that the Tribunal has not considered the admitted fact that the petitioner has in fact submitted his report. In the absence of any wilful negligence on the part of the petitioner, it is not known as to how the Tribunal as well as the second respondent in W.P.No.38603 of 2004 have arrived at a conclusion as if the petitioner is jointly liable. There is not even a finding of wilful or wanton default or negligence on the part of the petitioner.
18. The file produced by the learned counsel for the third respondent does not contain the report of the Enquiry Officer, however the learned counsel would produce the xerox copy of the report of the Enquiry Officer which runs to 14 pages. On record, it is clear that there are no departmental proceedings initiated against the petitioner, even though originally a show cause notice was given to him, subsequently it has been ordered as an enquiry under Section 81 of the Act for the purpose of proceeding under Section 87 of the Act.
19. Under Section 87 of the Act, based on an inquiry conducted under Section 81 of the Act, surcharge proceedings can be initiated after giving reasonable opportunity to the person concerned to give explanation. In fact, such proceedings can be initiated against the legal representatives, if the person concerned dies in the meantime. While passing the order under Section 87 of the Act, there must be a finding that either there is a breach of trust or wilful negligence or a conduct which is not in accordance with the Act or Rules or Bye-laws or misapplication of funds.
20. A Division Bench of this Court, to which I am a party, in K.Ajay Kumar Gosh and others v. Tribunal for Co-operative Cases (District Judge of Kanyakumari District) and another, 2009 (4) MLJ 992, by referring to various decisions on the issue of wilful negligence, which is a requirement under the said provision, including the judgments in Sathyamangalam Cooperative Urban Bank Ltd. v. Deputy Registrar of Cooperative Society and another, [1980] 2 MLJ 17 and P.N.Chockappan and others v. Special Tribunal for Cooperative Cases, High Court, Madras and others [1999] 1 MLJ 587, has held the nature of callousness which has to be proved as under:
“20. In the light of the decisions referred to above, it is clear that to pass surcharge order under Section 87 of the Act, appellants 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 caution ordinarily expected from a reasonable and prudent man under those existing circumstances. In the absence of such categorical finding by the respondents, it is not possible to mulct the appellants with the loss caused to the society.”
21. While dealing with the importance of furnishing of report of the enquiry officer, of course in disciplinary proceedings, holding that the same is in continuation of the principles of natural justice, another Division Bench of this Court, to which I am a party, in V.Arulkumar v. Housing and Urban Development Corporation Ltd., 2010 (3) LLN 764 held as follows:
“21. It is not in dispute that the Disciplinary Authority is entitled to differ from the view of the Inquiry Officer. The principles of natural justice start at the time when the original charges are framed against the delinquent officer, for which the delinquent officer has submitted his explanation, and the said concept continues at the time of conducting inquiry by the Inquiry Officer, in which witnesses are examined. After appreciation of evidence, when the Inquiry Officer finds the delinquent officer not liable in respect of charges 1, 2, 4 and 5 and finds that he is liable only in respect of charge No.3, it is clear that in respect of those charges, in which the delinquent officer was exonerated, there was no sufficient proof or evidence to implicate him. Now, if the Disciplinary Authority wants to differ in respect of the charges, which were exonerated by the Inquiry Officer, giving of further notice to the delinquent officer asking him to submit further explanation in respect of those charges in which he was exonerated is certainly the continuation of the principles of natural justice and it is not merely a second opportunity. There is no doubt in our mind that, in such circumstances, conferring of an opportunity to the delinquent officer is not only in compliance of the principles of natural justice, but the same is a mandatory requirement, failing which it would mean that without giving opportunity, the Disciplinary Authority would impose punishment in respect of charges, regarding which, after full-fledged inquiry and appreciation of evidence, the Inquiry Officer found on fact that charges 1, 2, 4 and 5 stood not proved.”
22. By relying on an earlier judgment in M.Sambandam v. The Deputy Registrar (Credit) Cooperative Societies, Mylapore and others, 1999 (3) MLJ 310, it was held in L.Ranganathan v. The Deputy Registrar of Cooperative Societies, Salem, 2007 WLR 502 that non furnishing of enquiry officer’s report under Section 81 of the Act, which was akin to Section 71 of the Tamil Nadu Cooperative Societies Act, 1961 (Previous Act), is unsustainable and a violation of principles of natural justice, as follows:
“4. While referring to the provisions of Tamil Nadu Cooperative Societies Act, 1961 (Previous Act) this Court has held that in the absence of serving the copy of the enquiry report, the surcharge proceedings initiated under Section 71 of the earlier Act is not sustainable and it is violation of the principles of statutory provisions and also natural justice.”
23. In Punjab National Bank v. K.K.Verma, 2010 (4) LLN 75, while dealing with the relevancy of communicating the report of the Enquiry Officer to enable the delinquent to give his objections in contradiction to the second opportunity to be given for the proposed penalty, it was held that right to represent against the report of the Enquiry Officer has been inherent and has not been taken away by the 42nd Amendment Act to the Constitution. The Supreme Court in respect of the enquiry report, while tracing the historical events, has made following observations which are relevant for the purpose of this case:
“21. Counsel for the appellant submitted that appellant’s action was protected since the impugned order of removal was passed during this interregnum. On the other hand, the counsel for the respondent pointed out that though the observations in Managing Director, ECIL, Hyderabad v. B.Karunakar and others, 1994 (2) LLN 9 explained the prospective application of the propositions in Union of India and others v. Mohd. Ramzan Khan, 1991 (1) LLN 380, it also made it clear that where the service rules themselves made it obligatory, it was necessary to furnish a copy of the inquiry report to the employee. In this connection, counsel for the respondent pressed into service regulation 7(2) and regulation 9 of the above referred service regulations under which the inquiry was held. (Regulation 8 is about minor penalties with which we are not concerned in this matter). These two regulations read as follows:
7. Action on the Inquiry Report:
(1) The Disciplinary Authority, if it is not itself the Inquiry Authority may, for reasons to be recorded by it in writing, remit the case to the Inquiring Authority for fresh or further inquiry and report and the Inquiring Authority shall thereupon proceed to hold the further inquiry according to the provisions of Regulation 6 as far as may be.
(2) The Disciplinary Authority shall, if it disagrees with the findings of the Inquiring Authority on any article of charge, record its reasons for such disagreement and record its own findings on such charge, if the evidence on record is sufficient for the purpose.
(3) If the Disciplinary Authority, having regard to its findings on all or any of the articles of charge is of the opinion that any of the penalties specified in the regulation 4 should be imposed on the officer employee it shall, notwithstanding anything contained in regulation 8, make an order imposing such penalty.
(4) If the Disciplinary Authority, having regard to its findings on all or any of the articles of charge, is of the opinion that no penalty is called for, it may pass an order exonerating the officer employee concerned.
9. Communication of orders
Orders made by the Disciplinary Authority under Regulation 7 or Regulation 8 shall be communicated to the officer employee concerned, who shall also be supplied with a copy of the report of inquiry, if any.
…..
28. This being the position, in the instant case it is clear that the appellant had not followed their own regulations which clearly require the disciplinary authority to record the reasons where it differed from the inquiry officer. The regulations also clearly lay down that a copy of the inquiry report and the order of disagreement are to be provided to the employee. In the present case, we are concerned with the stage where the Disciplinary Authority differs with the inquiry officer on his findings. This is prior to arriving at the guilt of the employee. His right to receive the report and defend at that stage before the guilt is established is very much recognized as seen above. Counsel for the appellant submitted that Constitution Bench has held in Union of India and Anr. v. Tulsiram Patel, 1985 (2) LLN 488, that after the 42nd Amendment, the employees are not entitled in law to be heard in the matter of penalty. In Karunakar’s case (supra), another Constitution Bench has referred to Tulsiram Patel in paragraph 4 and then explained the legal position in this behalf in paragraph 7 as follows:
‘While the right to represent against the findings in the report is part of the reasonable opportunity available during the first stage of the inquiry viz., before the disciplinary authority takes into consideration the findings in the report, the right to show cause against the penalty proposed belongs to the second stage when the disciplinary authority has considered the findings in the report and has come to the conclusion with regard to the guilt of the employee and proposes to award penalty on the basis of its conclusions. The first right is the right to prove innocence. The second right is to plead for either no penalty or a lesser penalty although the conclusion regarding the guilt is accepted. It is the second right exercisable at the second stage which was taken away by the 42nd Amendment.’
Thus, the right to represent against the findings in the inquiry report to prove one’s innocence is distinct from the right to represent against the proposed penalty. It is only the second right to represent against the proposed penalty which is taken away by the 42nd Amendment. The right to represent against the findings in the report is not disturbed in any way. In fact, any denial thereof will make the final order vulnerable.
…..
30. It was then submitted that non supply of inquiry report is inconsequential if the employee does not show as to how he is prejudiced thereby. Karunakar (supra), S.K. Singh v. Central Bank of India and Ors., 1997 (2) LLN 2 and Haryana Financial Corporation and Anr. v. Kailash Chandra Ahuja, 2008 (4) LLN 133 were relied upon in support. There cannot be any grievance with respect to the proposition. In the present case however, we are concerned with a situation where the finding of the inquiry officer on a charge has been reversed by the Disciplinary Authority, which was not the case in any of the three cases. Besides, by not giving the inquiry report and the adverse order of the disciplinary authority, the respondent was denied the opportunity to represent before the finding of guilt was arrived at and thereby he was certainly prejudiced.”
24. P.K.Misra,J., as His Lordship then was, in M.Chella Nadar v. The Deputy Registrar of Co-operative Societies, Tuckalai and post, K.K.District, 2002 WLR 198, under similar circumstances, has held that wilful negligence must be proved by clinching evidence of hand in glove in the following paragraph:
“11. In view of the legal position indicated above there cannot be any doubt that the impugned order directing recovery from the present petitioner in the absence of any categorical finding that the petitioner was wilfully negligent in the matter relating to payment made on the basis of false vouchers submitted by the salesman-cum-clerk cannot be sustained. There is nothing to indicate that the petitioner was hand in glove with the salesman-cum-clerk. As a matter of fact the petitioner had joined duty only five days earlier to the alleged date of incident. The fact that he has been subsequently acquitted from the criminal case cannot be lost sight of in the peculiar facts and circumstances of the present case. Even though it can be said that he had not supervised properly, it cannot be said that he was wilfully negligence in the matter.”
25. In such view of the matter, I am of the considered view that non furnishing of the enquiry report under Section 81 of the Act to the petitioner before surcharge proceedings so as to enable the petitioner to give proper explanation is fatal to the surcharge proceedings and accordingly, W.P.No.38603 of 2004 stands allowed and the impugned orders of respondents 1 and 2 in W.P.No.38603 of 2004 stand set aside, however with liberty to the second respondent in W.P.No.38603 of 2004 to furnish the report of the Enquiry Officer to the petitioner and then proceed in accordance with law.
26. Inasmuch as there are no disciplinary proceedings initiated nor it is the case of the respondents that as per the bye-law even after allowing the petitioner to retire the disciplinary proceedings could continue or that he was not allowed to retire for the purpose of facing the disciplinary proceedings as per the bye-law and the only proceedings which were initiated against the petitioner was in respect of the enquiry under Section 81 of the Act by way of surcharge proceedings under Section 87 of the Act, the impugned order challenged in W.P.No.38410 of 2003 has no legal basis and the third respondent has no manner of right to withhold the terminal benefits due to the petitioner. In such view of the matter, W.P.No.38410 of 2003 stands allowed with a direction to the third respondent to pay the retirement benefits to the petitioner, which of course shall be without prejudice to the right of the third respondent to proceed with the surcharge proceedings, as stated above, if so advised.
In the result, these writ petitions are allowed. No costs.
sasi
To:
1. The Registrar of Co-operative Societies
Poonamallee High Road
Chennai 10.
2. The Additional Registrar of Co-operative
Societies (Credit)/ Chairman Common
Cadre Authority, Office of the Registrar
of Co-operative Societies, Chennai 10.
3. The Principal District Judge
(Co-operative Appellate Tribunal)
Vellore District, Vellore.
4. The Deputy Registrar of Co-operatives
Vellore
