IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN THURSDAY, THE 22ND JULY 2010 / 31ST ASHADHA 1932 WP(C).No. 37441 of 2009(A) -------------------------------------- PETITIONER: ------------------- MOHANAN, S/O.SUKUMARAN @ MOHANAN, `CHITHRAM' MANNADI THAZATHU, ADOOR, PATHANAMTHITTA DISTRICT. BY ADV. SRI.P.K.SOYUZ. RESPONDENTS: ------------------------ 1. STATE OF KERALA, REPRESENTED BY THE SECRETARY, CO-OPERATION (C) DEPARTMENT, GOVERNMENT SECRETARIAT, TRIVANDRUM. 2. THE JOINT REGISTRAR (GENERAL) CO-OPERATIVE SOCIETIES, OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, PATHANAMTHITTA DISTRICT. 3. MANNADI SERVICE CO-OPERATIVE BANK LTD.NO.3849, MANNADI P.O., ADOOR, PATHANAMTHITTA-691 530, REPRESENTED BY ITS SECRETARY. R1 & R2 BY SR. GOVT. PLEADER SRI. K.S. MUHAMMED HASHIM, R3 BY ADV. SRI.D.KISHORE. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/03/2010, ALONG WITH W.P.(C). NO.2592/2010 AND CONNECTED CASES, THE COURT ON 22/07/2010 DELIVERED THE FOLLOWING: W.P.(C). NO.37441/2009-A: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE AUDIT REPORT DTD. 30/04/09. EXT.P.2: COPY OF THE NOTIFICATION PUBLISHED IN DESHABIMANI DAILY DTD. 07/12/09. EXT.P.3: COPY OF THE REPRESENTATION DTD. 11/12/09 SUBMITTED TO THE R.2. EXT.P.4: COPY OF THE REPRESENTATION SEND ON 10/12/09 TO THE R.2. EXT.P.5: COPY OF THE COMPLAINT DTD. 21/12/09 SUBMITTED TO THE R.2. EXT.XI: REPRESENTATION BY THE PRESIDENT, DT. 17/03/10 AS DIRECTED BY H/C. IN JUDGMENT DT. 22/07/10. RESPONDENTS' EXHIBITS: NIL. //TRUE COPY// P.S. TO JUDGE. Prv. K. SURENDRA MOHAN, J. ------------------------------------------------------------ W.P(C) NOS: 37441/09, 37748/09, 2592/10 & 3286 OF 2010 ----------------------------------------------------------- Dated this the 22 nd July, 2010. 'CR' JUDGMENT The petitioners in all these writ petitions challenge the selection and appointment to 3 posts namely; one Attender, one Peon and one Salesman that is sought to be made by the Mannady Service Co-op. Bank Ltd.No: 3849, a Society registered under the Kerala Co-operative Societies Act, 1969 (the 'Act' for short) and Rules thereunder. Since all the writ petitions challenge very same selection, these writ petitions are considered and disposed of together. 2. The petitioner in W.P(C) 37748/2009 is a member of the managing committee of the first respondent bank (third respondent in W.P(C) 37441/2009) while the petitioners in W.P(C) Nos: 2592/2010 and W.P(C) 37441/2009 are members of the Society. The petitioner in W.P(C) 3286/2010 was one of the applicants for selection and appointment to the post of Attender and Salesman. For the sake of convenience, the parties are referred to hereafter, in the order in which they appear in W.P(C) 37748/2009. The various WPC 37441/09 etc. 2 exhibits are also referred to in the order in which they are exhibited in the said writ petition. 3. As per Ext.P1 notification, the first respondent invited applications for selection and appointment to one post of Attender, one salesman and one Peon. The first respondent is a Class III bank as classified in Appendix III read with Rule 188 of the Rules. At present, the Bank has five permanent employees and three temporary employees working for the past seven years. The bank is running at a loss and according to the petitioner, the loss at present is Rs.36 lakhs as per the audited balance sheet. According to the petitioner, Ext.P1 notification was published in the Deshabhimani and Deepika dailies, which are not newspapers having wide circulation in the area. Therefore, only 42 candidates applied. A written test and interview were decided to be held on 2/1/2010. The written test was scheduled to be held from 10 a.m to 11.30 a.m and the interview from 1.30 p.m onwards. Ext.P2 is one of the call letters issued for such written test and interview. 4. According to the petitioner the managing committee has already decided to appoint one Smt. Suharma, W/o. Viswambaran, one Pradeep Kumar, Pradeep Bhavan and one Smt. Subha Sajan, W/o. Sajan to the notified posts. Therefore, it is contended that the written test and interview are only a farce. Protesting against the WPC 37441/09 etc. 3 proposed action three members of the Managing Committee, one Abdul Azeez, Sasidharan and Nanu Pillai had sent a fax message to the Joint Registrar on 5/12/2009. However, no action was taken. It is alleged that a faction of the committee members were about to appoint three persons of their choice by illegal methods though the society was running at a loss. 5. It is further contended that the procedure for conducting test and interview has been stipulated by the Registrar of Co- operative Societies by Circular No:18/91 dated 7/6/1991, which is Ext.P3. However, in violation of the provisions contained in Ext.P3, the selection is conducted by the Bank itself, without entrusting the same to an outside agency. The interview is proposed to be conducted by three members of the managing committee and all steps are being taken to complete the appointments in a hasty manner. As per the audited balance sheet of the bank for the year 2007-08 the loss incurred by the bank is Rs.36 lakhs. In view of the losses, the petitioner has also challenged the propriety of even making the appointments itself, which would further increase the financial burden of the bank. It is also pointed out that since the appointing authority is the managing committee, three members cannot conduct the interview excluding the other six members thereof. The procedure is also attacked as illegal and WPC 37441/09 etc. 4 unsustainable. Similar contentions are raised by the petitioners in the other writ petitions also. In W.P(C) 37441/2009 the names of the persons who are allegedly going to be appointed, are different. But the general allegations appears to be that persons who are members of the ruling CPI(M) political party to which the majority of the managing committee members belong are sought to be appointed. 6. The legal contention raised in all these writ petitions relate to the manner in which the selection and appointment can be made. According to the petitioners, Circular No:18/91 which is Ext.P3 issued by the Registrar of Co-operative Societies prescribes the procedure to be followed. The circular prescribes that the applications for the posts are to be invited through advertisements in leading dailies having wide circulation in the area. The maximum marks to be allotted for the written test are to be 100 and 20 for the interview. False numbers should be assigned to the answer scripts and the written test itself has to be conducted by an outside agency. According to the petitioners, the above stipulations have been violated in the present selection process. The action of the President in constituting a sub committee comprising of three members of the managing committee is alleged to be bad. It is also contended that on implementation of the norms for re- WPC 37441/09 etc. 5 classification, the first respondent would be brought down to a lower class whereupon, the staff strength would be reduced and it would not be necessary for making the proposed appointments. Therefore, the petitioners seek to set aside the notification Ext.P1 as well as all the proceedings initiated pursuant thereto. 7. The first respondent has filed a counter affidavit disputing the contentions of the petitioners. According to the first respondent bank, as per its approved staff pattern, the bank is entitled to 14 posts. However, the bank has only five employees. They are, an Assistant Secretary, Internal Auditor and three Clerks. The rest of the posts are vacant. Therefore, it was decided by the bank to fill up the post of Attender, one post of Peon and one post of Salesman. According to the first respondent, the fact that the bank is running under loss and that the quantum of such loss is Rs.36 lakhs, is not relevant in deciding whether to make fresh appointments to the vacant posts or not. It is contended that the selection notification was published in accordance with Ext.P3 circular and the selection procedure contemplated is in conformity with the Kerala Co-operative Societies Act, the Rules thereunder as well as Ext.P3 circular. 8. It is the further contention of the first respondent that the written test was conducted by an outside agency as contemplated WPC 37441/09 etc. 6 by Ext.P3. The total marks for the written test is 100 and 20 marks are allotted for the interview. A sub committee was constituted for conducting the interview of the candidates. The sub committee members are highly qualified and competent. Since neither Ext.P3 nor the Co-operative Societies Rules prohibit the conduct of interview by the sub committee, it is contended that there are no grounds to attack the interview that is proposed to be conducted. The posts of a Peon, an Attender and Salesman are necessary for the proper conduct of the business of the bank. It is also contended that the bank cannot function without the said posts being filled up. For the above reasons, it is contended by the first respondent that the petitioners are not entitled to any of the reliefs claimed in the writ petition and therefore, pray for dismissal of the writ petitions. 9. The petitioner has filed a reply affidavit refuting the contentions of the first respondent. It is pointed out that though the post of Secretary is lying vacant, the bank does not want to fill up the said post. If a competent person were to be appointed as the Secretary, that would have improved the functioning of the bank. Instead of doing that, the bank has taken steps to appoint a Peon, an Attender and a Salesman, who have no role in improving the functional efficiency of the bank. According to the petitioners, WPC 37441/09 etc. 7 the appointments to the said posts are not of interest to the first respondent because it is the Co-operative Service Recruitment Board that would conduct the written test for selection and appointment to the said post. Since the society could conduct selection to the notified posts according to their whims and fancies, they have issued Ext.P1 notification. It is also pointed out that three apprentices have been working with the first respondent on daily wages for the past seven years. 10. According to the petitioners, the written test in the present case has been conducted by the President himself, in the name of someone else. According to them the test was not conducted by an outside agency, as contemplated by the circular. Though the names of the persons who are going to be appointed have been mentioned by the petitioners, there is only a vague denial of the said allegation. Since the appointment has to be made by the managing committee, it is contended that the interview should also be conducted by the same body and not by its sub committee. It is therefore contended that the procedure adopted is wrong, unsustainable and liable to be set aside. 11. I have heard Mr. P.N.Mohanan, Mr. P.K.Soyuz, Mr. Joice George and Mr. Sumesh.V for the petitioners, Mr. D.Kishore for the first respondent as well as the learned senior Govt. Pleader Mr. WPC 37441/09 etc. 8 K.S.Mohammed Hashim. I have also perused the records of the case and have given anxious consideration to the contentions raised by the parties. 12. It is an admitted fact that the first respondent bank is running under loss and that for the year 2007-08, its loss amounted to Rs.36 lakhs. Though it is contended by the counsel for the first respondent that the losses incurred by the bank is not a relevant factor to be taken into account for deciding whether or not to make appointments to the posts that are remaining vacant, it cannot be disputed that appointment of any additional staff would cast additional financial burden on the society. The fact that the society is incurring losses is certainly a relevant factor to be taken into account while deciding whether to burden the society with additional financial commitments. In the said view of the matter, it has to be held that the losses of the society is certainly a relevant factor that should be taken into account while deciding whether fresh appointments are to be made or not. In the present case, the above aspect does not appear to have been taken into account by the Managing Committee while deciding to make the appointments. This is because, according to the counter affidavit of the first respondent, the financial position of the society is not a relevant factor to be taken into account while deciding whether to make WPC 37441/09 etc. 9 fresh appointments. Therefore, the managing committee does not appear to have taken into consideration all the relevant aspects before issuing Ext.P1 notification. 13. The counsel for the first respondent has relied on a Divison Bench decision of this Court in N.Gouthaman v. Joint Registrar and others {1998(1) KLT 275} to submit that the financial condition of a society is not relevant in deciding whether to make fresh appointments to the society or not. It has been observed by Division Bench at page 282 in paragraph 19 of the said decision as follows:- “There is no presumption or materials available in this case to come to a conclusion that there is no scope for the society to improve even after filling up the post of the secretary. In these circumstances, we are of the considered opinion that the society is well within its powers to proceed with the process of appointment of secretary and attender which are statutorily sanctioned posts as already referred to. Filling up of such vacancies can only be considered as an act in the nature of day-today administration/ Internal administration of the society and there may not be any reason for the respondents to interfere in this process. No illegality or irregularity is alleged by the respondents in the selection process.” 14. Rule 182(5) lays down that in respect of societies and WPC 37441/09 etc. 10 posts not covered by Section 80(3)(a) and 80B of the Act, appointments shall be made by the committee after conducting the written examination and interview as per the guidelines issued by the Registrar. The procedure that is to be followed while making appointments to the posts that are notified as per Ext.P1 have been laid down by the Registrar of Co-operative Societies. Circular No: 18/91 dated 7/6/1991 (Ext.P3 in W.P(C) 37748/2009) has laid down the procedure to be followed in this regard. 15. Paragraph 4 of the said circular stipulates as follows:- “The following procedure shall be strictly followed while making direct recruitments for appointment to employees a) Applications for the posts shall be invited through advertisement in leading dailies having wide circulation in the area b) Selection shall be made only after conducting written test and interview, allotting 100 marks for written test and 20 marks for interview. c) The written test shall be conducted by an outside agency. d) False numbers should be assigned to the answer scripts. e) The condition with regard to age limit, qualifications mode of appointment etc., as laid down in the rules framed under Section 80 viz., rules 183, 186, 187 of the KCS Rules shall be strictly followed. WPC 37441/09 etc. 11 f) Ten per cent of the vacancies should be reserved for candidates belonging to scheduled castes/tribes.” It is clear from the above that applications have to be invited through advertisements in leading newspapers having wide circulation in the area. The selection can be made only after conducting a written test and interview in which, 100 marks are to be allotted for the written test and 20 marks for the interview. It is further submitted that the written test shall be conducted by “an outside agency”. Therefore, it has to be considered whether the procedure followed in the present case is in accordance with the above stipulations. It is clear from the passage in 1988(1) KLT 275 quoted above that the observations have been made with reference to the facts of that case. In the present case however, there are allegations against the selection process also and therefore, the financial condition of the society has to be certainly considered as a relevant factor. 16. According to the counsel for the first respondent, the written test in the present case was conducted by an “outside agency”. However, the counter affidavit does not disclose the details of the said outside agency. In the counter affidavit filed by the first respondent in I.A.21653 in W.P(C) 37748/2009 it is submitted as follows:- WPC 37441/09 etc. 12 “The examination was conducted by a competent outside agency. As per resolution of Managing Committee of 1st respondent society dated 5/12/2009, the Board has resolved to authorize the President to entrust the conduct of written test to the posts notified as per Exhibit P1 to a competent outside agency. Accordingly the task of conducting the written test was entrusted to an outside agency, the details of which will be placed before this Honourable Court confidentially if so directed. It is submitted that the outside agency is a cluster of persons retired from Co- operative Department having more than 25 years of experience in the field. The outside agency is not an individual. The averment that the test was conducted by the bank itself since the question paper contains the seal of the bank is not correct.” Therefore, it is clear that instead of appointing an outside agency to conduct the written test, the managing committee of the society had passed a resolution on 5/12/2009 authorizing the President to entrust the conduct of written test to a competent outside agency. The president is said to have appointed an outside agency, which according to the first respondent is a cluster of persons retired from the Co-operative department. 17. The details of the said outside agency has been furnished to this Court by the President, Adv. S.Manoj in a sealed cover. According to the first respondent the identity of the outside agency WPC 37441/09 etc. 13 was kept secret so that the candidates would not come to know of the same. The communication referred to above is admitted in evidence and is marked as Ext.X1. 18. The name of the outside agency that was entrusted with the duty of conducting the written test is 'Service Helpline', Near Pulamon Bridge, Pulamon P.O.,Kottarakkara, Kollam district. The above description does not disclose any details about the nature and constitution of the establishment. There is also no indication as to the nature of the activity in which the establishment is engaged. The name of one M.K.Geervarghese is shown as the Chief Consultant describing him as a retired Assistant Registrar. The names of one S.Gopalakrishna Pillai, retired Joint Registrar, K.Ramachandran Nair, retired Assistant Registrar and K.Prabhakaran Pillai, retired Assistant Registrar are shown as consultants. Therefore, the organisation 'Service Helpline' appears to be an establishment engaged in providing consultancy services. Absolutely no data regarding the nature of the organisation, whether it is a proprietory or partnership concern, what is the nature of its activities, what is its expertise in conducting written tests, what is its expertise and what is its reputation etc are available for perusal. The probability of the organisation being only a paper organisation also cannot be lost sight of. It is contended WPC 37441/09 etc. 14 that the question paper was set by the said agency. But, the venue of the examination was fixed by the first respondent. The staff of the first respondent was present at the venue of the examination with the bank seal, and the seal was affixed on the question papers allegedly for the purpose of identification. The above explanation has to be considered in the context of the allegation of the petitioners that no outside agency was involved in the conduct of the written examination for the reason that the question papers on which the answers also had to be written, bore the seal of the first respondent bank. When the explanation of the first respondent is viewed in the background of the above allegation, one fails to understand why the outside agency could not affix its own seal on the question paper. Or why the candidates could not have been directed to fill in the name of the examination and the bank in the answer papers, for the purpose of identification. 19. The procedure adopted by the Managing Committee in the present case cannot be accepted as correct or proper in the above circumstances. Instead of the Managing Committee appointing a competent outside agency to conduct the written test after satisfying itself of the competence of the said agency, the committee has in the present case simply entrusted the matter to the President. The President appears to have entrusted the most WPC 37441/09 etc. 15 important and responsible task of conducting the written examination to an agency whose identity is unknown to even the members of the Managing Committee. The name of the agency was not disclosed even in the counter affidavit allegedly with the object of maintaining secrecy. The said outside agency appears to be an organisation with no seal of its own or even a letterhead. The whole episode gives an impression that there is more to it than what meets the eye. One wonders whether Ext.X1 is only an attempt to cover up the irregularities in the face of the allegations made in the writ petitions. To say the least, the written test could have been conducted by an outside agency of repute, which could have been entrusted with the said task by the Managing Committee rather than leaving the same to the personal discretion of the President. The allegation that the notification itself was published only in two newspapers, the Deepika and Deshabhimani that does not have wide circulation in the area also assumes importance in this context. 20. The organisation, 'Service Helpline' does not give any indication of being an outside agency of repute as contemplated by the circular. While considering the question as to what is the outside agency that is contemplated, it has been held by this Court in Sabu Kurian v. Meenachil East Urban Co-operative Bank Ltd. WPC 37441/09 etc. 16 {1999 (2)KLT 180} that the action of the Registrar of Co-operative Societies in the said case, of entrusting the task of making appointments to various posts to the institute of management was fully justified. Therefore, what is meant by an outside agency is not any organisation that is formed by retired employees of the co- operative department but agencies of repute involved in the matter of conducting such examinations and selection procedures. The Institute of Co-Operative Management or the Productivity Council or some other such reputed agency is what is contemplated by Ext.P3 circular. The object of the provision being to ensure fairness in the selection process, it is necessary that the same is conducted by an independent agency of repute that would not succumb to the influence of either the members of the Managing Committee or the persons in power. Such an agency of repute is what is contemplated by the expression 'outside agency'. Therefore, the contention that the agency was manned by retired employees of the co-operative department or that the same was constituted by a cluster of persons is not sufficient. 21. It is clear from the facts and circumstances referred to above that the written test in the present case has not been conducted in a proper manner or in accordance with the stipulations in Ext.P3 circular. The written test conducted therefore WPC 37441/09 etc. 17 is not in order and is liable to be set aside. The question as to whether fresh appointments at all are necessary to be made is also to be decided. Since complaints in this regard as evidenced by Exts.P3 to P5 in W.P(C) 37441/09 are pending before the Joint Registrar of Co-operative Societies. I direct the said authority to consider the matter and take appropriate decision thereon in accordance with law. 22. For the foregoing reasons these writ petitions are allowed. Ext.P1 notification and all proceedings based on or pursuant thereto including the conduct of the written test on 2/1/2010 are quashed. In the circumstances of the case there will be no order as to costs. K. SURENDRA MOHAN Judge jj WPC 37441/09 etc. 18