IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:05.01.2010 CORAM: THE HON'BLE MR.JUSTICE P.JYOTHIMANI WRIT PETITION NO.23867 OF 2008 and M.P.No.2 of 2008 K.Rajendran .. Petitioner vs. 1.The Registrar of Co.operative Societies, Kilpauk, Chennai 10. 2.The District Level Committee Vellore District rep. By The Joint Registrar of Co.operative Societies, Vellore 632 009. 3.The C.1278 Vaniyambadi Town Co.operative Bank Ltd., 52, Flower Bazaar Street Vaniyambadi 635 751 Vellore District by its Special Officer (full and Addl.Charge) .. Respondents Writ Petition filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorarified Mandamus calling for the records relating to the circular R.C.No.44784/2008 SF 3 dated 05.06.2008 of the 1st Respondent alongwith the consequential memo dated 31.07.2008 of the 3rd respondent, quash the same and consequently direct the respondents to permit the petitioner to retire from service on superannuation with effect from 31.07.2008 with all retirement benefits with penal interest. For petitioner : Mr.S.Venkataraman For respondents : Mr.T.Srinivasan Addl.Govt.Pleader for R.1 & 2 Mr.B.K.Girish Neelakandan for R.3 ORDER The writ petition is directed against the circular issued by the first respondent, the Registrar of Co-operative Societies along with the consequential memo issued by the third respondent, Co- https://hcservices.ecourts.gov.in/hcservices/ operative Bank dated 31.7.2008, by which the petitioner was allowed to retire on superannuation on 31.7.2008, but relieved on the said date without prejudice to the surcharge proceedings initiated under section 87(1) of the Tamil Nadu Co-operative Societies Act. The writ petition is also for direction against the respondents to permit the petitioner to retire from service on superannuation on 31.7.2008 with all retirement benefits. 2. Earlier, the petitioner filed W.P.No.19165 of 2008 against the impugned notice of the third respondent dated 31.7.2008. Since he had no other particulars and during the pendency of the said writ petition, in the counter affidavit it was informed that the third respondent passed the order only based on the circular issued by the first respondent wherein it is stated that the District Level Committee has to screen the retirement of persons employed in the Societies in all cadres, the said writ petition was withdrawn with liberty to file a fresh writ petition and thereafter, the present writ petition has been filed. 3. The petitioner was working as a Manager in the third respondent Society, against which an inquiry under section 81 of the Tamil Nadu Co-operative Societies Act,1983 (in short, "the Act") was ordered. Subsequent to the inquiry, surcharge proceedings were initiated against the petitioner under section 87 of the Act on 1.8.2005. The main charge was that the Society granted mortgage loans contrary to the bye-laws to the extent of Rs.1 crore. The explanation submitted by the petitioner was rejected and surcharge order came to be passed holding that the petitioner and 24 other persons are responsible for irregularities. 3(a). Aggrieved by the said surcharge order, the petitioner filed an appeal under section 152 of the Act, which is pending. The petitioner was due to retire on attaining the age of 58 years on 31.7.2008. However, the third respondent did not allow the petitioner to retire based on the instructions of the first respondent dated 29.7.2008, but relieved him from service. In the said order of the first respondent, the surcharge order dated 5.10.2007 passed under section 87 of the Act was taken note of and therefore, the entire monetary service benefits due to the petitioner were withheld. 3(b). The said order relieving the petitioner, but at the same time, retaining him in service for disciplinary proceedings is challenged on the ground that there are no powers available under section 87 of the Act. The circular of the first respondent dated 5.6.2008, is also challenged as contrary to law and affecting the fundamental rights of citizens, apart from the grounds that the first respondent has no jurisdiction to issue such circular and such circular has not been issued in public interest and that as per the https://hcservices.ecourts.gov.in/hcservices/ bye-laws, the petitioner is entitled to retire and such right cannot be taken away by the circular issued by the first respondent. 3(c). It is stated that for recovery of amount, the Tamil Nadu Co-operative Societies Act provides a mechanism and the constitution of any such Committee is illegal and that the payment of gratuity and provident fund amount is a basic right which cannot be detained under any circumstances. It is stated that the charge memo issued by the third respondent on 27.2.2006 against the petitioner was deliberately kept pending till the date of retirement in spite of the fact that the circumstance that the enquiry officer has given a finding to drop the charges. 4. In the counter affidavit filed by the first respondent, it is stated that the circular has been issued as per the powers conferred under section 181 of the Act in public interest and it was only based on the said circular, the second respondent, the District Level Committee which was constituted in respect of officers of the Co- operative Societies, convened a meeting and took a decision not to permit the petitioner to retire on 31.7.2008 pending the disciplinary proceedings. 5. In the counter affidavit of the second respondent it is also reiterated that the circular was issued by virtue of powers under section 181 of the Act, since crores of rupees were involved in the malpractice committed in the functioning of the third respondent Bank concerning public interest. The Co-operative Banks, especially the third respondent was established and is functioning with the funds contributed by the public and therefore, under the statutory provisions of section 181 of the Act, to control the gross irregularities, the impugned circular was issued. It is stated that the petitioner by granting loans in an illegal manner, violated the bye-laws and the provisions of law. 6. In the counter affidavit filed by the third respondent, it is stated that in the inquiry conducted under section 81 of the Act in respect of functioning of the third respondent, a gross irregularity in sanctioning of loans to the extent of Rs.1.05 crores was unearthed and that resulted in the consequential proceedings under section 87 of the Act and an award was passed by the Deputy Registrar of Co- operatives for an amount of Rs.61,68,648/-. It is stated that the disciplinary proceedings under section 81 of the Act was initiated and the General Manager of the Bank was dismissed from service and in respect of the petitioner, the inquiry proceeding was pending and the enquiry officer submitted his report on 23.7.2008 and final order has to be passed. 6(a). It is further reiterated that public interest is involved in this case and therefore, under section 181 of the Act, the first respondent issued the circular dated 5.6.2008 constituting the https://hcservices.ecourts.gov.in/hcservices/ District Level Committee. The third respondent being the appointing authority of the petitioner, issued the consequential order dated 31.7.2008 which is well within its powers. It is stated that as per the surcharge proceedings, the petitioner and other officials are jointly and severally responsible for the repayment. 6(b). It is stated that the enquiry officer completed the enquiry against the petitioner and submitted his report on 23.7.2008 and in the meantime, since the petitioner was to retire on superannuation, the order dated 31.7.2008 was passed. 6(c). In respect of the point raised on behalf of the petitioner that the similarly situated two persons viz., Mr.C.Mani and Mr.N.T.Raviraj were treated leniently, but the petitioner was targeted and therefore, a discrimination was shown, an additional counter affidavit is filed by the third respondent stating that the said persons were Special Officers working as Government servants and the Government initiated disciplinary proceedings against them and not by the third respondent and that the petitioner cannot compare himself with the above said individuals. 7. Mr.S.Venkataraman, learned counsel appearing for the petitioner would submit that as far as service condition of the petitioner is concerned, the same is governed by the bye-laws and if that is so, the powers conferred under the bye-laws cannot be usurped by the first respondent by issuing the impugned circular, by relying upon the judgment of the Supreme Court in Jaswant Singh Gill vs. Bharat Coking Goal Ltd., and others [(2007) 1 SCC (L&S) 584]. He would also submit that there is no public interest involved under section 181 of the Act, in respect of persons who are retiring on superannuation, by relying upon the judgment of the Apex Court in Co.operative Central Bank vs. Additional Industrial Tribunal, Andhra Pradesh, Hyderabad and others [AIR 1970 SC 245] and also the latest judgment of this Court in Nirvagam, Dharmapuri Mavatta Madhya Kooturavu Vangi, Dharmapuri and another vs. The Presiding Officer, Industrial Tribunal Chennai and others (W.P.Nos.29973 of 2004 and 31944 of 2006 dated 20.11.2009). 8. On the other hand, it is the contention of the learned Additional Government Pleader that the impugned circular/instructions are in accordance with section 181 of the Act. He would rely upon the judgment in Forest Department and others vs. Abdur Rasul Chowdhury [2009 (3) LLN 8 (SC)]. 9. In the impugned circular issued by the first respondent dated 5.6.2008, the first respondent provided certain guidelines in respect of retirement of employees of the Co-operative Societies and by forming a District Level Committee. As per the said circular, the District Level Committee was constituted consisting of the Regional Joint Registrar/ Additional Registrars of Co.operative Societies of https://hcservices.ecourts.gov.in/hcservices/ the concerned Region as the Chairman and the Managing Director/Special Officer of the District Central Co-operative Bank, Circle Deputy Registrar concerned, The Assistant General Manager of the District Central Co-operative Bank (Administration) and the Personal Officer to the Regional Joint Registrar of Co-operative Societies/Additional Registrars of Co-operative Societies of the concerned Region as Members, out of whom the Personal Officer to the Regional Joint Registrar is made as the Convenor-Member. 10. The guidelines are in the form of Annexure II to the said Circular, which prescribe that the service particulars of the employees to be retired are to be obtained six months in advance from the date of retirement and the Committee should scrutinize and find out whether there are any specific irregularity relating to the affairs of the Society. The annexure also prescribes about the periodical meetings of the Committee to be convened, etc. The annexure which contains the guidelines is as follows: "Annexure II 1)The Circle Deputy Registrars concerned shall obtain the service particulars of the employee/Officer concerned atleast 6 months in advance from the date of retirement on superannuation from the society where the employee/officer is working and employer shall also furnish the particulars of deputation of the employee/officer who are due to retire within next 6 months to the circle deputy registrars concerned. 2)In the Circle deputy Registrars shall scrutinise the particulars and also verify whether any petitions/allegations is pending against such person/any specific irregularity relating to the affairs of the society and incorporate the same in the list received from the society and send the details to the member convenor. 3)The member convenor shall place the list of persons who are due to retire on superannuation in the next 6 months before the said committee and the committee shall take decisions as regards to the course of action to be followed in respect of persons against whom criminal /Surcharge / disciplinary / DV & AC/Food Cell Complaints etc. are pending are being contemplated by any such agency on a complaint from members of the society or from public authority of similar nature. 4)The Committee shall convene the meeting by 3rd week of every month to clear the proposal or otherwise of the person due to retire in the month, duly recording the reasons therefore. https://hcservices.ecourts.gov.in/hcservices/ 5)The Committee shall communicate the minutes of the meeting to Registrar within 3 days from the date of such meeting. 6)The decisions taken in the meeting shall also be communicated to the employer concerned within 3 days for taking appropriate action at the societies end. 7)Any decisions of the Committee which would likely to affect the interest of the person who is due for retirement shall also be communicated to such person by the employer concerned." 11. That apart, Annexure-I prescribes a form for furnishing the service particulars of the employees/officers of Co.operative Societies, who are due to retire within next 6 months, for the purpose of scrutiny by the Committee. The domestic enquiry stated to have been ordered against the petitioner on 27.2.2006 was pending at the time of superannuation of the petitioner. In addition to that, it is not in dispute that an award in surcharge proceedings was passed on 5.10.2007 and the same was pending for recovery at the time of superannuation. It was, in those circumstances, the third respondent employer, by referring to the surcharge proceedings and the award passed under section 87(1) of the Act dated 5.10.2007 and on the basis that the said amount had to be recovered from the petitioner and by relying upon the District Level Committee’s resolution dated 29.7.2008, passed the order not allowing the petitioner to retire, however, relieving him without prejudice to the recovery proceedings under the Act. 12. On the whole, it is clear that the impugned order of the third respondent by relying upon the Circular of the first respondent has restrained the petitioner from retiring to face the surcharge proceedings under section 87 of the Act. The surcharge proceedings under section 87 must be initiated on the basis of audit conducted under section 80, or inquiry conducted under section 81 or inspection or investigation conducted under section 82 or inspection of books under section 83 of the Act. In the present case, it is not in dispute that the surcharge proceedings against the petitioner as well as other employees were initiated after the inquiry that was conducted under section 81 of the Act. Section 81 of the Act which is as follows: " Sec.81. Inquiry.- (1) The Registrar may, of his own motion and shall, on the application of a majority of the board or of not less than one-third of the members or on the request of the financing bank or of the District Collector, hold an inquiry or direct some person authorised by him by order in writing in this behalf to hold an inquiry into the constitution, working and financial conditions of a registered society or any alleged misappropriation, fraudulent retention of any money or property, breach of https://hcservices.ecourts.gov.in/hcservices/ trust, corrupt practice, or mis-management in relation to that society or into any particular aspect of the working of that society. (2) The Registrar or the person authorised by him under sub-section (1) shall have the following powers, namely:- (a) He shall, at all reasonable times, have free access to the books, accounts, documents, securities, cash and other properties belonging to, or in the custody of, the society and may summon any person in possession of, or responsible for the custody of, any such books, accounts, documents, securities, cash or other properties to produce the same at any place at the headquarters of the society or any branch thereof. (b) Where any person summoned under clause (a) fails or refuses to produce any record or property of the registered society as specified in the summons, any Metropolitan Magistrate or any Judicial Magistrate of the first class in whose jurisdiction the office of such society or the records and properties of such society is or are situated, shall, on application by the Registrar, or the person authorised by him under sub-section (1), direct the delivery to the Registrar or such person of the possession of the records and properties of such society: Provided that no such application shall be made by the person authorised under sub-section (1) without the previous sanction of the Registrar. (c) He may seize the books, accounts or documents of the society, if he considers that such seizure is necessary to ensure the safety of such books, accounts or documents or to facilitate his inquiry, and shall give the person from whose custody the books, accounts or documents have been seized a receipt for the same: Provided that the books, accounts or documents seized shall be retained by him only for so long as may be necessary for their examination and for the purpose of inquiry: Provided further that the books, accounts or documents shall not be retained for more than three months at a time except with the permission of the next higher authority. (d) He may summon any person who, he has reason to believe, has knowledge of any of the affairs of the society and may examine such person on oath and may summon any person to produce any books, accounts or documents belonging to him or in his custody if the Registrar, or the person authorised as aforesaid has reason to believe that such books, accounts or documents contain any entry relating to transactions of the society. (e)(i) He may, notwithstanding any Rule or bye-law specifying the period of notice for a general meeting of the society or for a meeting of the board require any officer or https://hcservices.ecourts.gov.in/hcservices/ officers of the society to call a general meeting or a meeting of the board at such time and place at the headquarters of the society or any branch thereof to consider such matters as may be specified by him and the provisions of sub-clauses (i) and (ii) of clause (b) of sub- section (4) of Section 32 shall apply to any meeting called under this sub-clause as if it were a meeting called in pursuance of a requisition under clause (a) of sub-section (3) of that section. (ii) If the officer or officers of the society refuses or refuse or fails or fail to call such meeting or if in the opinion of the Registrar there is no board or officer or officers competent under this Act, the rules or the bye-laws to call such meeting, or if there be an order of the Registrar or of the Civil court restraining the board to function, the Registrar or the person authorised by him under sub-section (1) shall have power to call the meeting himself and the provisions of clause (b) of sub-section (4) of Section 32 and sub-section (5) of that section shall apply to such meeting as if it were a meeting called under clause (a) of the said sub-section (4). (3) When an inquiry is held under this section, the Registrar shall, within such time as may be prescribed, communicate the result of the inquiry- (i)in case the Government have subscribed directly to the share capital of the registered society or in case any moneys are due from the registered society either to the Principal State Partnership Fund or to the subsidiary State Partnership Fund referred to in Chapter VI, to the Government or to any officer appointed by the Government in this behalf; (ii) to the financing bank, if any, to which the society is affiliated; and (iii) to the society concerned. (4) The inquiry shall be completed within a period of three months from the date of ordering the inquiry or such further period or periods not exceeding three months at a time as the next higher authority may permit, provided that such extended periods shall not exceed six months in the aggregate. (5) It shall be competent for the Registrar to withdraw any inquiry from the person authorised by him under sub- section (1) and to hold the inquiry himself or entrust it to any other person as he deems fit. (6) The Registrar may, by order in writing, direct the registered society or any officer of the society or its financing bank to take such action as may be specified in the order to remedy, within such time as may be specified https://hcservices.ecourts.gov.in/hcservices/ therein, the defects, if any, disclosed as a result of the inquiry." 13. The above said Section 81 of the Act enables an inquiry regarding constitution, working and financial condition of the Society including misappropriation, fraudulent retention of money, breach of trust, corrupt practice, etc. After the inquiry under section 81 was conducted, admittedly, surcharge proceedings were initiated under section 87 of the Act, which also contemplates the mode of recovery including the powers of the Collector under the Revenue Recovery Act, 1864. While conducting proceedings under section 87 of the Act, the powers of the Registrar are that of a civil Court. The said section 87 is as follows: " Sec.87.Surcharge.- (1) Where in the course of an audit under Section 80 or an inquiry under Section 81 or an inspection or investigation under Section 82 or inspection of books under Section 83 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 will-full negligence or has made any payment which is not in accordance with 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 board, liquidatory or any creditor or contributory may frame charges against such person or officer or servant and after giving a reasonable opportunity to the person concerned and in the case of a deceased person, to the representative who inherits his estate, to answer the charges, 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 as aforesaid thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, mis- application of funds, fraudulent retainer, breach of trust or will-full negligence or payments which are not in accordance with this Act, the Rules or the bye-laws as the Registrar or the person authorised as aforesaid thinks just: Provided that no action shall be commenced under this sub-section after the expiry of seven years from the date of any act or omission referred to in this sub-section: Provided further that the action commenced under this sub-section shall be completed within a period of six months from the date of such commencement or such further period or periods as the next higher authority may permit but such https://hcservices.ecourts.gov.in/hcservices/ extended period or periods shall not exceed six months in the aggregate. (2) Without prejudice to any other mode of recovery which is being taken or may be taken under this Act or any other law for the time being in force, any sum ordered under this section to be repaid to a registered society or recovered as a contribution to its assets may be recovered as if it were an arrear of land revenue and for the purpose of such recovery the Registrar shall have the powers of a Collector under the Tamil Nadu Revenue Recovery Act,1864 (Tamil Nadu Act II of 1864). (3) This section shall apply not withstanding that such person or officer or servant may have incurred criminal liability by his act. (4) The Registrar or the persons authorised by him shall, when acting under this section, have all the powers of a Civil Court while trying a suit under the Code of Civil Procedure,1908 (Central Act V of 1908) in respect of the following matters, namely:- (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of any documents; (c) reception of evidence on affidavits; (d) requisitioning any public record from any Court or office; (e) issuing Commission for examining of witnesses." 14. The question to be considered in this case is, as to whether the inquiry conducted under section 81