IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 02.08.2011 CORAM: THE HONOURABLE MR.JUSTICE M.M.SUNDRESH W.P.No.19851 of 2003 and W.P.M.P.No.24814 of 2003 The Management, Tamilnadu Cooperative Marketing Federation Ltd., (rep. by its Secretary) 91, St. Mary's Road, Chennai - 600 018. ...Petitioner -Vs- 1.V.Gunasekaran 2.The Special Deputy Commissioner of Labour, Chennai - 600 006. ...Respondents PRAYER: Writ Petition filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorari praying to call for the records of the Second Respondent pertaining to the order TSE No.1/8/2001 dated 30.04.2003 of the Second Respondent and quash the same. For Petitioner : Shri.Vijayanarayanan Senior Counsel for Shri.P.Anbarasan For 1st Respondent: Ms.Vaigai Senior Counsel for Shri.M.Ramesh For 2nd Respondent: Shri.P.Chinnadurai Government Advocate O R D E R Challenge in the Writ Petition is to the order passed by the respondent No.2 in TSE.No.I/8/2001 dated 30.04.2003, allowing the appeal filed under Section 41(2) of the Tamil Nadu Shops and Establishment Act https://hcservices.ecourts.gov.in/hcservices/ by setting aside the order of dismissal passed against the respondent No.1. 2. The facts in brief: An agreement was entered into between one M/s. Maxwell Exim Ltd. and the petitioner under Ex.A.8, which is a buy-back arrangement towards the sale of cashew nuts worth Rs.13,02,31,056.15. Admittedly, the firm has failed to honour its commitments and a huge loss running to several Crores was caused to the petitioner. The said agreement has been entered into by the top level four officers of the petitioner, including the respondent No.1. All the four had participated in the execution of the agreement in one way or another. As per the agreement, the petitioner has to purchase cashew nuts from various parties identified by the firm. The bye-laws of the petitioner clearly mandated that any transaction has to be made only between the petitioner and its member co-operative societies and a huge stock maintained by the firm was clandestinely bought by the petitioner at the instance of the top level four officers as if they were purchased from various producers by also creating bogus sale through cooperative societies. The loss has also occurred since no proper safeguards were said to have been taken. 3. According to the petitioner, the respondent No.1 has committed a series of irregularities in acting contrary to the bye-laws, resulting in a transaction that is not authorised by not obtaining the prior permission from the Government as the normal transactions are permitted only after getting financial clearance when they exceed monetary limit fixed, suppression of material facts including various reports given by the Regional Managers and rushing through the agreement without considering the market feasibility and market situation. Therefore, charges have been framed against the respondent No.1, who was working at the relevant point of time as the Manager (Marketing) in and by the charge memo issued in Rc.No.16162/96/E3 dated 18.08.1996. As per the said charges, the petitioner had entered into a buy-back arrangement and purchased Cashew nuts through M/s. Maxwell Exim Ltd. to the extent of 3406.466 MTs worth Rs.13,02,31,056.15 at the instance of the respondent No.1. After entering into buy-back arrangement, M/s. Maxwell Exim Ltd. has failed to honour its commitments. The delay in lifting caused deterioration in the quality of stocks and the petitioner was forced to shoulder the responsibilities of disposing the stocks expeditiously and realise the money locked up in the transaction. Based upon these facts, the following charges have been framed: (i) (a) Charge No.1: Thiru. V. Gunasekaran, the then Manager (Marketing) while putting forth the Schemes for purchase of ready lots of 3000 MTs (Fully https://hcservices.ecourts.gov.in/hcservices/ dried) raw cashew through M/s. Maxwell Exim Ltd. has not taken care to examine the viability profitability and risk-free marketability of the commodity and thus committed dereliction of his duties. (b) Basis of Charge No.1 : Charge No.1 has been framed against the respondent No.1 on the ground that the respondent No.1 has sent letters to various Regional Managers in Cuddalore, Villupuram, Trichy, Pudukottai and Mannargudi, calling for the particulars of the season, market availability and rate of cashew nuts and he got approval of General Manager (Marketing) on 01.10.1995. Thereafter, he called for the above particulars from the other Regional Managers on 16.10.1995. The Regional Managers have sent their reports. Some of the Regional Managers have not sent any reply. Even though the reports of the Regional Managers were not in favour of the proposed agreement, without taking those particulars for consideration, the respondent No.1 has chosen to arrange for the purchase of cashew nuts in ready lots at Tuticorin through M/s. Maxwell Exim Ltd. to the extent of 3000 Metric Tonnes, more so when there is no market surplus as per the report of the Regional Manager, Tuticorin. The discouraging feed back reports of some of the Regional Managers were deliberately suppressed while initiating the move for purchase of ready lots on 10.01.1996. He has failed to bring the said fact to the notice of Special Officer before taking a major purchase decision. The respondent No.1 has failed to examine the cost price of the raw cashew, problems in storing the cashew, marketing feasibility, out turn of kernels, market situation in the event of M/s. Maxwell Exim Ltd. and has failed to take back the stock and the consequential element profitability in the transaction. Thus he has misled the authorities by assured outlet for the produce to be bought, increased turnover and definite margin. The entire transaction was fictitious and the purchase was directly made from the firm M/s. Maxwell Exim Ltd. Thus the respondent No.1 has acted against the interest of the petitioner. (ii) (a) Charge No.2 : He has not properly guided the management while submitting proposals for purchase of raw cashew for Crores of Rupees and managed to present the proposals as if it would result in a definite net earnings to the tune of Rs.17.50 lakhs. (b) Basis of the charge No.2: The respondent No.1 was wilfully negligent in the discharge of his legitimate duties. The matter of tie up procurement has been decided mechanically without examining the merits and demerits of this new venture. The erratice and the sluggish cashew market trend has not been https://hcservices.ecourts.gov.in/hcservices/ taken into consideration. The respondent No.1 has failed to examine whether the price offered is justifiable, reasonable and competitive in the open market. The entire transaction was commenced and concluded in a shabby manner. As a Manager (Marketing), he has failed to supervise and oversee the entire operation regarding the quality, quantity, origin, storage and material condition of stocks. He has suppressed this crucial information to the Management and to his superior Officers. He simply recommended for the transfer of funds to Regional Manager, Tuticorin in haste and without examining the basic market conditions. (c) The first respondent sent a proposal for the coverage of further quantities even without huge quantity of raw cashew already covered. This is a pre-planned attempt to purchase stocks of raw cashew remaining in the hands of M/s. Maxwell Exim Ltd. No assessment was made to substantiate the procurement of cashew suggested was a genuine one. The buy-back arrangement was a bogus arrangement for which respondent No.1 is the root cause for initiation. He has not carefully scrutinized the proposal as to whether the transaction was a genuine transaction. No intimation was given to the Management as to the purchases have been made only after checking the samples. No proper safeguard was made to assess the quality and price and genuineness of the stock. The procedure in this regard has not been followed. No safeguard has been made regarding the action to be taken when there is default in liftment. (d) When it was found that 34 bags of stock was damaged, no steps have been taken to find out the truth. When an inspection was made on 30.01.1996, he deliberately avoided reporting to the Management to stop further purchases. In spite of the report made by the Field Staff of Regional Manager, Tuticorin regarding the poor quality of the lots, he has given a justifying note in favour of firm. After the subsequent visit on 13.02.1996, he accelerated the procurement and expedited the transfer of funds hastily at times even in the absence of General Manager (Marketing). (iii) (a) Charge No.3 : He has violated the objects of TANFED envisaged in bylaws No.2 (i) and the norms fixed by the Registrar in his letter Rc.43310/95 IP3 dated 17.05.1995 in the purchase of raw cashew. (b) Basis of Charge No.3: The purchase was made from a third party which is contrary to bylaw No.2(i), even though the petitioner has represented the Registrar, in the absence of any final order to modify the guidelines that all purchases of agricultural commodities exceeding Rs.10 Lakhs should be https://hcservices.ecourts.gov.in/hcservices/ done only with the approval of the committee constituted by the Registrar, the transaction was made contrary to the same. (iv) (a) Charge No.4: The then Manager (Marketing) has not made any discreet enquiry about the reported reputation of M/s. Maxwell Exim Ltd. with regard to honouring of its commitment in its buy-back arrangements with other institutions on similar purchase of other commodities. Further he has not obtained and examined the latest Balance Sheet of the said firm before entering upon this new venture of purchase of raw cashew nut. He simply obtained the pamphlets of the Company and endorsed full support and engineered the management to enter into an agreement for procurement of cashew. (b) Basis of Charge No. 4: He has merely reproduced the words of the 5th Annual Report of M/s. Maxwell Exim Ltd. No discreet enquiry about its reputation has been done. He has mislead the management resulting in huge loss of money. He has failed to obtain the latest balance sheet and other financial statements of the firm. (v) (a) Charge No.5 : That he has suppressed certain vital facts and thus caused irreparable damages to TANFED. He acted against the interests of TANFED. He has been wilfully negligent in handling a very crucial issue. (b) Basis of Charge No.5 : Knowing fully well that cashew crop is not cultivated in Tuticorin area and they are available in the Port Godown of Tamilnadu Warehousing Corporation, the respondent No.1 has suppressed those facts. He was responsible for the sale of the stock owned by none other than M/s. Maxwell Exim Ltd. at Tuticorin. He had full knowledge about this, because he inspected the Tuticorin godown when the purchases are in full swing. There was no procurement at all, but only a mere procurement of stock was made. He suppressed the fact that M/s.MVR Industries, the sister concern of M/s.Maxwell Exim Ltd. has surrendered the Warehouse space at Tuticorin Port was already with the ready lots of raw cashew of M/s. Maxwell Exim Ltd. 4. The Respondent No.1 gave his explanation to the charges framed. However, not satisfied with the same, an enquiry was ordered and an Enquiry Officer was appointed. 5. Proceedings before the Enquiry Officer: https://hcservices.ecourts.gov.in/hcservices/ A retired District and Sessions Judge was appointed as the Enquiry Officer. The Enquiry Officer sent notices to both the petitioner and respondent No.1. The documents relied upon by the petitioner have been furnished to the respondent No.1. Two witnesses have been examined on behalf of the petitioner as P.Ws.1 and 2. The copies of the statements have been furnished to the respondent No.1. The respondent No.1 was permitted to peruse the files. The copies of the documents required by him have been furnished. Even though the petitioner has examined two witnesses as P.Ws.1 and 2, the respondent No.1 has not chosen to examine himself. However, he filed a detailed written statement along with the documents. Considering the entire materials available on record and affording sufficient opportunities with the parties, the Enquiry Officer by a detailed order found that the charges have been duly proved against the respondent No.1. 6. Findings of the Enquiry Officer: Considering the fact that all the charges are overlapping covering the very same issue, the Enquiry Officer clubbed all of them and gave his detailed report. The Enquiry Officer found that the draft agreement prepared in the petitioner office was approved and initiated by the respondent No.1 also. The respondent No.1 was aware of the transaction from the beginning resulting in the execution of the agreement. The Enquiry Officer, placing reliance upon the report filed under Ex.B.14 came to the conclusion that the respondent No.1 took an active part in the initiation, discussion, approval and conclusion of the draft agreement under Ex.A.8. He has put up a favourable note in favour of the firm. 7. It has been held by the Enquiry Officer that Ex.A.8 - Agreement speaks about buy-back system which was totally contrary to the bye-laws. Therefore, the top four officers, including the respondent No.1 had no authority to enter into the agreement under Ex.A.8 and their roles in those execution cannot be accepted. It has also been held that the object of the petitioner as espoused in bye-law 2(1) is to effectively promote, sustain and support all round economic development of its members in agricultural and allied sectors. The respondent No.1 and other officers have involved in a transaction with the third party acting against the bye-law 2(1). What was purchased by them was nothing but the stock belonging to M/s. Maxwell Exim Ltd. as seen from Ex.A.12. 8. The respondent No.1 has acted contrary to the letter dated 17.03.1995 from the Registrar of Co-operative Societies and the G.O.No.325, Co-operation, Food and Consumer Protection Department, dated 15.04.1993 in not obtaining the prior approval from the Government for the present transaction. The said process being mandatory, the consequential failure to obtain approval would show that the respondent https://hcservices.ecourts.gov.in/hcservices/ No.1 and others wanted to push through the matter hurriedly and those files have not been circulated among the Junior Officers. No proposal had emanated from the Regional Manager level and the entire transaction has been completed by the top level four officers in order to get over the provisions by which the bye-laws mandated that it should be through the member co-operative societies or from Primary Agricultural Co- operative Banks. To get over the technicalities, instructions have been given to raise their bills in the name of Co-operative Societies even though the produce had been secured from M/s. Maxwell Exim Ltd. No enquiry was conducted about the credit worthiness of the firm. The firm was not functioning subsequently and it had no assets. The conditions stipulated under Ex.A.8 - Agreement are in total violation to the bye- laws. The funds have been released even before the request of the Regional Officer was made. 9. The Enquiry Officer rejected the written statement filed by the respondent No.1 in Ex.B.28 holding they do not help his case. It was further held that for the reasons known to him, the respondent No.1 had not given any oral evidence or subjected himself to cross examination. Ex.A.2 clearly indicates that even in September, 1995, all the Regional Managers except few have clearly stated in their report that it is not possible or feasible to procure or market cashew nuts. A specific report has been given by the Regional Manager, Tuticorin under Ex.B.18. The respondent No.1 has suppressed all those reports and gave a note that the petitioner would surely make a profit of Rs.17.5 lakhs from out of the transaction. He also made an office note in the note file to purchase 2000 M.T. cashew nuts more, when the initial entry itself was sufficiently bad and risky without any re-thinking or plan in order to lift the stock. 10. The contention of the respondent No.1 is that it is the Special Officer, who was responsible being the decision making authority cannot be accepted as it was he who put up the favourable notes. He has not taken into consideration the erratic and sluggish cashew market and has suppressed certain material facts. All these things have been done since M/s. Maxwell Exim Ltd. manipulated the same as their own cashew nuts by selling them to the petitioner through the created false records as if they have been purchased through different parties. Therefore, on a consideration of the relevant materials, the Enquiry Officer found that the charges levelled against the respondent No.1 are duly proved. A specific finding has been given by the Enquiry Officer that there is clear case of collusion between the top level four officers including the respondent No.1. 11. On a consideration of the report of the Enquiry Officer dated 22.02.1999, a Show Cause Notice was issued to the respondent No.1 https://hcservices.ecourts.gov.in/hcservices/ dated 08.03.1999, to show cause as to why action should not be taken based upon the same. A reply was given by the respondent No.1 denying the allegations. Thereafter, by the order dated 10.11.1999, the petitioner considering all the charges in the light of the report of the Enquiry Officer vis-a-vis, the respondent No.1 found that the charges have been duly proved. Accordingly, an order of dismissal was passed. 12. Findings of the respondent No.2: Being aggrieved against the dismissal of the petitioner, a challenge was made by the respondent No.1 by filing an appeal before the second respondent under Section 41(2) of the Tamil Nadu Shops and Establishments Act, 1947. By the order dated 30.04.2003, in TSE No.I/8/2001, the appeal filed the respondent No.1 was allowed by the second respondent herein. The subject matter of the present writ petition is the challenge to the validity of the order passed by the second respondent dated 30.04.2003. 13. The second respondent while allowing the appeal has given the following findings: (a) Charge No.1 : In so far as the charge No.1 is concerned, it has been held by the second respondent that considering the fact that a decision has been made in the presence of the Special Officer, the blame cannot be individualized against the respondent No.1 alone and the arrangement being a buy-back arrangement the question of examination of the marketability of the commodity does not arise. The Enquiry Officer does not deal expressly on the charge levelled against the respondent No.1. The Enquiry Officer has come to the conclusion by taking into account the extraneous factors and by inferences. The charge has not been proved beyond reasonable doubt. (b) Charge No.2 : The respondent No.2 while exonerating in so far as charge No.2 is concerned, has held that the Indemnity Bond under Ex.R.7 contains a clause by which the indemnifier - M/s. Maxwell Exim Ltd. has agreed and undertook to indemnify the petitioner. Similarly in the agreement, it has been stated that any loss suffered by the petitioner in the process of disposal of the said stocks to any other party will be realisable from the receiver, namely M/s. Maxwell Exim Ltd. Therefore, it has been held by the second respondent that in view of the averments contained under Exs.R.7 and R8, the charge levelled against the respondent No.1 cannot be sustained. It was further held that in the absence of any specific responsibility fixed upon the first respondent, charge No.2 https://hcservices.ecourts.gov.in/hcservices/ cannot be sustained. (c) Charge No.3 : In so far as charge No.3 is concerned, which deals with the conclusion of the agreement contrary to the bye-laws and without prior approval of the Government as required under law, it has been stated that respondent No.1 cannot be squarely made responsible as it was the chief responsibility of the Special Officer. (d) Charge No.4 : Regarding discreet enquiry, which sought to be made by respondent No.1, which is the subject matter of charge No.4, the respondent No.2 has held that considering the fact that the meeting was held in a short notice it was not possible for the respondent No.1 to produce the latest balance sheet. (e) Charge No.5 : In so far as charge No.5 is concerned, which pertains to supervision of market availability on the part of the respondent No.1, the respondent No.2 has held that considering the fact that the marketing of cashew nuts, being a new product, the respondent No.1 alone cannot be blamed. It was further held that the charges are not supported by any materials. There is no finding as to how the respondent No.1 has colluded with the firm. Mere inspection made by the respondent No.1 would not ipso-facto fix the responsibility on him. The fact that the stamp papers were dated 09.01.1996, indicating the pre- planned attempt to have the agreement cannot be put against the respondent No.1, since it is possible to infer that it was maant for some other transaction but actually used in the agreement with the firm subsequently. Therefore, it was held that charge No.5 has not been proved beyond reasonable doubt. Another finding has been given that the blame cannot be squarely put on the respondent No.1 alone. 14. Conclusion of Respondent No.2: By way of conclusion, the second respondent has held that the findings of the enquiry has been highly generalized and based upon new facts. Since, the respondent No.1 cannot be squarely and singlely responsible for the entire fiasco and the charges are not supported by proper evidence, the order of the termination is liable to be set aside as it cannot be sustained in the eye of law. Accordingly, the respondent No.2 has allowed the appeal filed by the first respondent herein. 15. Challenging the decision made by the respondent No.2, the petitioner has come forward to file this Writ Petition. https://hcservices.ecourts.gov.in/hcservices/ 16. Submissions of the learned counsel appearing for the petitioner: Shri.Vijaya Narayanan, learned Senior Counsel appearing for the petitioner submitted that a huge fraud has been committed by the respondent No.1 resulting in the loss of several crores of rupees. The Enquiry Officer, after affording sufficient opportunities and on a proper analysis of the materials placed before him gave a detailed report holding that the charges framed against the delinquent i.e. respondent No.1 are duly proved. The charges levelled are very serious in nature and the respondent No.1 has not disproved the charges, which have been supported by sufficient materials. The Enquiry Officer has found that there is a clear case of collusion of top level four officers, including the respondent No.1. Being the Manager (Marketing), the respondent No.1 is a person in charge of initiating transactions. The entire transaction was tainted with fraud and collusion. The respondent No.1 has acted against the bye-laws and Government Orders and suppressed the material facts. Considering the Enquiry Officer's Report, after affording sufficient opportunities a detailed order of dismissal was passed by the petitioner. It is the respondent No.2, who has set aside the order of dismissal on mere surmises without any basis. He has not understood the mere ambit of Section 41(2) of Tamil Nadu Shops and Establishment Act. He has treated it as the criminal proceedings by holding that the charges are not proved beyond reasonable doubt. In fact even the respondent has held that the first respondent was also responsible, but nevertheless set aside the order passed by the second respondent on the ground the blame cannot be fixed squarely on the appellant. The second respondent has not reversed the specific finding of the Enquiry officer as well as that of the petitioner, but merely held that the charges are not proved. Being the final fact finding authority, the second respondent ought to have gone into the merits, instead of allowing the appeal based on irrelevant consideration. 17. The learned Senior counsel has further submitted that the fact that some of the subordinate officers have been exonerated would not enure to the benefit of the first respondent, since they have either an insignificant role or no role in the entire transaction as against respondent No.1. The Secretary of the petitioner was exonerated because admittedly he had no role to play even as per the report of the Enquiry Officer. As against the Special Officer and the General Manager, the proceedings are still pending. In so far as the General Manager (Marketing) is concerned, since he has