IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.03.2010 CORAM: THE HON’BLE MR. JUSTICE K.CHANDRU W.P.Nos.3725 and 7217 of 2004 & WPMP No.4383 of 2004 in W.P.No.3725 of 2004 J.Bhagiraj ..Petitioner in W.P.No.3725/2004 1. C.Packia Rani 2. C.Senthil Rajesh 3. C.Senthil Dinesh 4. C.Jayanthi ..Petitioners in W.P.No.7217/2004 Vs. 1. The Deputy Registrar, Cooperative Societies, Nagercoil, Kanniakumari District. 2. The General Manager, K.D.C.C.Bank, Nagercoil. 3. District Judge (Special Appellate Tribunal for Cooperative case), Kanniyakumari District at Nagercoil. ..Respondents Prayer in both W.Ps.: Petitions under Article 226 of the Constitution of India praying for a Writ of Certiorari calling for the records of the third respondent relating to his order dated 7.10.2003 passed in C.M.A.Nos.8 and 9 of 2000 confirming the order of the 1st respondent in his proceedings Ta.Va.No.6/98 dated 29.11.1999 and quash the same dated 7.10.2003. For Petitioners :: Mr.R.Kannan For Respondents :: Mr.P.Subramanian, A.G.P.for R1 Mr.S.M.Subramanian for R2 https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDER These two Writ Petitions are filed against the order of the third respondent Cooperative Tribunal made in C.M.A.Nos.8 and 9 of 2000 respectively. By these two orders, the Tribunal dismissed the appeal and confirmed the order passed by the 1st respondent Deputy Registrar in Surcharge Proceedings made in A.R.C.No.6/1998 dated 29.11.1999. 2. In the first Writ Petition, the petitioner Bhagiaraj had worked in various capacities and finally retired as General Manager on 31.12.1998. He had also worked as Secretary of the Kanniyakumar District Central Cooperative Bank for 6 years. 3. In the second Writ Petition, the petitioners are wife and two sons and one daughter of late Chelladurai, who was working as Assistant General Manager in Kanniyakumar District Central Cooperative Bank. During the pendency of the appeal, the said Chelladurai passed away on 24.5.2003. Therefore, on an application being taken out, the legal representatives have come on record to prosecute the appeal. 4. The surcharge proceedings were initiated against the said Chelladurai and Bhagiaraj as well as the other employees, namely the Assistant Secretary, Clerk, Manager, Assistant Manager, Special Officer, Supervisor and several others. The surcharge proceedings came to be issued under section 87(1) of the Tamil Nadu Cooperative Societies Act, 1983 and suo motu cognizance was taken by the 1st respondent/Deputy Registrar. After Notice to the parties, by his order dated 29.11.1999 he concluded that the petitioners and others are liable for surcharge and the total loss caused to the Bank was arrived at Rs.9,70,518/-. 5. In the surcharge proceedings, the late Chelladurai was arraigned as respondent No.2 and Bhagiaraj was arraigned as respondent No.8. The surcharge Officer found that the late Chelladurai was responsible for the loss to the extent of Rs.50,000/- in respect of the first item along with another person. In respect of item No.5, he along with Bhagiaraj were made responsible for the loss of Rs.8,69,668/-. However, in respect of the item No.2, Bhagiaraj was responsible for the loss along with 7th respondent in the surcharge proceedings to the extent of Rs.38,200/-. 6. In the present case, the substantial loss was under item No.5, which related to granting of cash loan to the extent of Rs.6 Lakhs for the period from 2.12.1993 to 15.2.1994. Even before that, the Headquarters of Khadi Board had granted Rs.1.5 Lakhs, the State Government had given Rs.1,64,500/-. Without noting these, two loans were granted by the District Central Cooperative Bank. The said loan was not repaid. Because of the non-repayment upto 31.3.1997, the due https://hcservices.ecourts.gov.in/hcservices/ from that loan account became Rs.8,69,668/-. It was charged that the two petitioners herein along with several other employees were the root cause for the loss. 7. When an enquiry under section 81 of the Tamil Nadu Cooperative Societies Act was made, with reference to the Banking operations, it also came to the notice that the Semmanvilai Cashewnut Processing Industrial Cooperative Society was not even functioning. Therefore, the Surcharge Officer after going into the details came to the conclusion that the two petitioners had a crucial role in sanctioning the loan and in not taking any due recovery steps in accordance with law. In fact, he found that the said Cashewnut society is stated to have been started during the year 1993-1994. They installed the machineries. An inaugural function was allegedly conducted and the processing work was started on 14.12.1993. But in the application form, though it was given that the society was started on 17.8.1990 and the Assistant Executive Officer when he visited the place on 19.11.1993, he stated that the society is functioning and 25 workmen are working. The society also owns a substantial land. 8. Later, it transpires that such a certification was done without even visiting the place. The loan application, which was sent to the Bank was processed by the clerical department and kept for orders on 18.11.1993. On 19.11.1993, the petitioners have signed their field report dated 22.11.1993 and it was remarked that the society is functioning. Nowhere it was indicated that from which date the society was functioning. But, Bhagiaraj, the Writ Petitioner in the first Writ Petition gave an Inspection Report stating that from 17.11.1993, the society has been functioning. In fact, in the office note, it was stated that the society was registered on 17.8.1990 and has been functioning from 17.11.1993. From this, it was found that without even visiting the place, the reports were filed with the Bank. Further, it was stated that the Camp file from 11.10.1993 to 10.4.1994 was missing. It was only with a view to hide the fact that he had never visited the factory, the files were made to disappear. 9. It was also stated that while Chelladurai, who was the Assistant Secretary in order to help the President, then Board of Directors has given a false statement. It was only because of that, he certified against the bye-laws as if that society was functioning and because of their recommendation, they have given such sticky defense, which could not be finally recovered. Each time when a report was filed, there was variation in the number of workers worked in the Semmanvilai Cashewnut Processing Industrial Cooperative Society originally it was stated that there are 25 workers. But subsequently, it was mentioned that on an average, 50 workmen are working in the Factory. It was later found out that the said society purchased the raw cashews and selling it in the market contrary to https://hcservices.ecourts.gov.in/hcservices/ the bye-laws. In the result, one of the Officers, namely the Surcharge Supervisor by name Rajaian found that the society used to buy cashews in retail. The society was running only name sake. Since no proper enquiries regarding the society having received, loans from the Khadi Board as well as from the Government were made and not brought to the notice of the District Bank. 10. During the course of the proceedings, the first Writ Petitioner moved this Court in W.P.No.4067 of 1998. In that case, by an order dated 21.8.1998, this Court directed the Surcharge Officer to give opportunity before passing orders. Subsequently, opportunities were given to the first Writ Petitioner. Thereafter on detailed examination of the relevant papers and taking into account the statement made by the two petitioners and also having regard to the enquiry held under section 81 of the Tamil Nadu Cooperative Societies Act, the surcharge order came to be passed. 11. Before the Tribunal, the petitioners raised the following issues: i) The time taken for submitting the enquiry was beyond the time provided under the Act. ii) Bhagiaraj was not the loan sanctioning authority. iii) The Special Officer is the competent authority to sanction the loan and he was not made as a party in the surcharge proceedings. iv) The arbitration proceedings were held against the society by the Arbitration Award dated 28.2.1986. v) Decree to the loan amount including interest was passed by the Deputy Registrar. vi) The properties belonging to the society was brought under auction. The Sale Officer had made publication on 29.12.1998 in the Daily Thanthi Tamil Newspaper bringing the property into auction. vii) When the decree was made on 28.2.1996, it is not explained as to why the Execution Proceedings were initiated only after one year and thereafter the auction notice was issued only in December 1998. If the properties are brought under auction and it was sold, loss would have been avoided. When it was not proceeded against the defaulter, it was not open to them to proceed against the two petitioners. viii) In fact, the first petitioner Bhagiaraj had taken steps to get the decree passed against the defaulting society. Similar contentions were also raised by late Chelladurai. https://hcservices.ecourts.gov.in/hcservices/ 12. The Tribunal by the impugned order dealt with the objections raised by the petitioners and held that the surcharge order passed by the Deputy Registrar was proper. The petitioners were responsible for recommending the loan. The loan has also been issued from December 1993 to February 1994. Inspite of the fact that the society was running at a loss and the Government got encumbrance on account of their advancing loan, these facts are not brought to the notice of the society. The first writ petitioner and the second Writ Petitioner late Chelladurai inspected the society and only after recommending the loan, on various dates the cheques were given. Inspite of the fact that the properties were brought to sale, as it was encumbered, the society could not realise its loan amount. The Semmanvilai Cashewnut Processing Industrial Cooperative Society, to which the loan was advanced was not functioning from 1995. Therefore, there was nothing wrong in surcharging the two petitioners. It is against the order of the Tribunal, the two petitioners have come to file the present Writ Petitions. 13. The first Writ Petition was admitted on 23.2.2004 and the second Writ Petition was admitted on 23.3.2004. On notice from this Court, the 1st respondent has filed a counter affidavit on 29.3.2005. The 2nd respondent has filed a counter affidavit on 15.7.2004. Pending the Writ Petitions, this Court granted an interim stay on condition that each of the petitioner pays 50% of the amount demanded by the respondents within four weeks from the date of the order. However, it is stated by Mr.Kannan, learned counsel for the petitioners that amounts have not been deposited by the two petitioners. 14. Though elaborate arguments were submitted by taking this Court through various proceedings of the authorities, it is suffice to state that the contention that the time limit prescribed under the Act was not followed, cannot be accepted by this Court. 15. This Court in G.Paneerselvam vs. Deputy Registrar of Cooperative Society, Tirupur reported in 2009 (2) MLJ 901 has taken a view that the time limit prescribed thereunder is only directory and not mandatory. This view was confirmed by a Division Bench of this Court in A.Balaraman vs. Deputy Registrar of Cooperative Society, Cheyyar, Tiruvannamalai reported in (2009) 3 MLJ 1032. Therefore, the objection raised by the petitioners is rejected. 16. However, on the question that they did not proceed against the defaulter on time cannot be accepted because though a decree was passed, attachment proceedings were also made and the properties were brought to auction sale, it was subsequently found that the properties were encumbered towards the Government loan and because of the encumbrance on the properties, auction proceedings could not be proceeded with. https://hcservices.ecourts.gov.in/hcservices/ 17. With reference to the individual role played by the petitioner Chelladurai, Section 87 proceedings had made threadbare analysis of the roles played by each individual and fixed the primary responsibility against the two petitioners. One such petitioner had attacked the validity of the surcharge proceedings as being opposed to the principles of natural justice in W.P.No.4067 of 1998. Pursuant to the directions given by this court to grant proper opportunities, it was also granted. 18. The learned counsel for the respondent society brought to the notice of this Court the findings in respect of the two Notices as found in page 19 of the surcharge report, wherein all the three firms had filed an application. The two firms M/s.Kalyani Electronics and Nanji Electronics did not exist and they were bogus firms. He also brought to the notice of this Court the passage found page 49 of the Surcharge Report, wherein it was held that quotations themselves were given by one person in the name of three firms. The Special Officer has also deposed to that effect. Therefore, the transaction with reference to the other two items were proved beyond doubt. With reference to the major transaction, namely advancing of money to the Semmanvilai Cashewnut Processing Industrial Cooperative Society also, this Court had elaborately dealt with the role played by these two petitioners elsewhere. 19. Therefore, there is no case made out to interfere with the order passed by the Tribunal. Hence, both the Writ Petitions stand dismissed. No costs. The connected Miscellaneous Petition stands closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ajr To 1. The Deputy Registrar Cooperative Societies Nagercoil, Kanniakumari District. 2. The General Manager, K.D.C.C.Bank, Nagercoil. https://hcservices.ecourts.gov.in/hcservices/ 3. The District Judge, (Special Appellate Tribunal for Cooperative case) Kanniyakumari District at Nagercoil. + 2 c.c. to Mr. R. Kannan, Advocate. S.R.No.17982. + 1 c.c. to Mr. S.M. Subramaniam, Advocate. S.R.No.18159. + 1 c.c. to The Government Pleader. S.R.No.18206. W.P.Nos.3725 and 7217 of 2004 KS (CO) GSK 24.03.2010. https://hcservices.ecourts.gov.in/hcservices/