wp1513­10.doc 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.1513 OF 2010 Kirtimalini Vasantrao Naik .. Petitioner Versus State of Maharashtra & Ors. .. Respondents Mr.D.V.Sutar for petitioner Mr.S.N.Bhosale AGP for respondent Nos. 1 to 4 Mr.Ashutosh Gole for respondent No.5 Mr.S.P.Thorat with Kiran Thorat for respondent No.11 Mr.M.L.Patil for respondent No.12. CORAM : S.C.DHARMADHIKARI, J. 6th JUNE 2011. P.C.: 1] The petitioner has impugned the order passed by the Minister of Cooperation, Government of Maharashtra, quashing and setting aside the decision of the Additional Commissioner and Special Registrar of Cooperative Societies (Competent Authority for short) dated 19th July 2006. By the order dated 19th July 2006, the Authority had appointed an Enquiry Officer to conduct an enquiry under section 88 of the Maharashtra Cooperative Societies Act, 1960 (Act for short) to assess the damages against the delinquent promoters etc. The petitioner is a member of 5th respondent society. Respondent Nos. 6 to wp1513­10.doc 2 12 were at the relevant time Directors on the Board of 5th respondent bank. 2] The Competent Authority observed that the result of the inspection and audit of the accounts for the year 2004-05 reveal gross illegalities and irregularities on the part of the Directors of the bank. Therefore, he appointed the enquiry officer to conduct the said enquiry and assess the damages. 3] That order was impugned by the respondent Nos.6 to 12 before me, before the State Government by invoking its appellate jurisdiction. Two contentions were raised before the appellate authority. The first contention was that respondent No.5 has since merged with Dombivali Nagri Sahakari Bank vide amalgamation order dated 13th September 2007 and Dombivali Nagri Sahakari Bank being multi state cooperative society, governed by Multi-State Cooperative Societies Act, 2002, post merger, therefore, the affairs of respondent No.5 bank cannot be said to be governed by the Maharashtra State Cooperative Societies Act, 1960. Such being the position, section 88 of the MCS Act would have no application to the facts and circumstances of this case. 4] The second contention which was raised and found favour with the appellate authority is that principles of natural wp1513­10.doc 3 justice have been violated. The competent authority proceeded to appoint the enquiry officer without complying with Rule 72(1) of the Maharashtra Cooperative Societies Rules, 1961. Before, he took the decision to appoint the enquiry officer, he ought to have called for explanation from the delinquent officers and if at all the same was unsatisfactory, only then, could he have proceeded to order enquiry and appoint enquiry officer. 5] Finding that the contentions raised before him are legal and valid, the Minister (Appellate Authority) proceeded to set aside the order of the competent authority. It is this order of the appellate authority which is challenged and impugned in this petition. 6] I have heard Mr.Sutar learned Advocate for petitioner, learned AGP for State and other authorities so also Mr.Patil and Mr.Thorat for contesting respondents. With their assistance I have perused both the orders. 7] The competent authority had before him the audit report for the year 2004-05. On perusing the same he was of the opinion that the report indicates gross irregularities and financial mis-management. On account of the contents of the report, in the opinion of the Competent Authority, the 5th respondent bank has suffered losses and this loss should be wp1513­10.doc 4 made good or recovered from the Board of Directors so also the Chairman of the same. That is why and recording prima facie opinion that the report does indicate gross irregularities and financial mis-management, that he proceeded to appoint the enquiry officer. 8] On a perusal of section 88 read with Rule 72 of the MCS Rules, it is apparent that the Registrar or the person authorised in that behalf may frame charges against such person or persons and after giving him reasonable opportunity to answer the same, make an order in terms of section 88. The Authority can proceed to exercise the discretion and frame charges on perusal of the result of the audit or the enquiry under section 83 or inspection under section 84 or winding up of the society. Rule 72(2) prescribes that the Registrar on receipt of the report referred to in section 88 or otherwise may make further enquiries as he may deem necessary regarding the extent to which the person or persons have taken part in the management of the society and on completion of the further enquiry where necessary, he shall issue a notice to the person or persons concerned by furnishing him or them with particulars of act and calling upon him or them to put in a statement on his or their part within fifteen days from the date of issue of notice. 9] Mr.Sutar would contend that this part has to be wp1513­10.doc 5 complied with by the enquiry officer and the order appointing the enquiry officer is not vitiated for want of compliance with this sub-rule. However, on a perusal of the order passed in the instant case by the Additional Commissioner, it is clear that he has concluded that prima facie case is made out and there are serious irregularities and financial mis-management. He has already indicated that the bank has suffered losses on account of financial mis-management. The enquiry officer has also been given clear directions to assess and recover the loss after making detailed enquiries. Therefore, this is a case where the Additional Commissioner and Special Registrar has not left any discretion with the enquiry officer whether to frame or not to frame the charges. Further, there is clear direction to assess and recover the damages and loss. This could not be said to be in compliance with the requirements prescribed by the Act and the Rules. Therefore, the Minister being appellate authority has rightly interfered with this order and set aside the same on the ground of want of compliance with principles of natural justice. 10] However, the second ground on which the Minister has interfered with the order cannot be said to be a valid and legal basis or foundation to set aside the order of the Additional Commissioner and Special Registrar. On the own showing of the Minister, the order of merger/ amalgamation is dated 13th wp1513­10.doc 6 September 2007. The irregularities or financial mis- management is for the period 2004-05, i.e., prior to the amalgamation with Dombivali Nagri Sahakari Bank. Further, the order of amalgamation itself is clear inasmuch as any past acts or proceedings are not affected by the amalgamation and they can continue. When the period for which the audit was conducted and the report was forwarded is during the subsistence of registration of respondent No.5 as a Cooperative Society under the MCS Act, nothing prevented the Additional Commissioner from exercising its powers under section 88 of the MCS Act. The Minister should not have interfered with the order on that ground and proceeded to set aside the same. In the peculiar facts of this case, the order of amalgamation and merger does not affect the case of irregularities of the erstwhile Board of respondent No.5 bank. In these circumstances, on this ground the conclusion of the Minister cannot be sustained. 11] However, his ultimate conclusion can be upheld as the Additional Commissioner has failed to comply with the requirement of MCS Rules in that behalf. The petition is, therefore, not liable to succeed insofar as the challenge to the order of the Minister and his final conclusion. 12] Mr.Sutar's apprehension that the Minister has wp1513­10.doc 7 quashed the proceedings themselves and has not left anything to be done by the Additional Commissioner is not well founded and rather misplaced. The Minister could have only set aside the order for want of compliance with section 88 and Rule 72(1) and (2). That is precisely what has been done. It is not as if the authority competent to initiate proceedings under section 88 cannot do so after the order of the appellate authority. It is open to the Additional Commissioner to set in motion the law again. In other words, after compliance with section 88 and Rule 72 of the MCS Rules, it will be open for the authority to initiate proceedings under section 88 of the MCS Act against the respondent Nos. 6 to 12. In these circumstances and by clarifying that the order of the Minister does not prevent the competent authority from exercising its powers and initiate enquiry even now, this petition is disposed of. 13] The argument of Mr.Patil and Mr.Thorat that the present petition at the instance of the petitioner is not maintainable because she is defaulter and there is recovery certificate issued against her under section 101 of the MCS Act, is not enough to dismiss this petition on the ground of petitioner's conduct and locus. The petitioner is a member of the 5th respondent bank. She may have availed of loans and defaulted in repayment thereof. Those proceedings can continue against her and merely because such proceedings are wp1513­10.doc 8 initiated the present petition to challenge the order of the Minister, cannot be dismissed. The petitioner is interested in the affairs of the bank being conducted smoothly in accordance with law and cooperative principles. If she has pointed out to this court a breach of the duties and obligations of respondent Nos.6 to 12 in law, merely because she herself is a defaulter does not mean that this Court cannot take cognisance of her grievance. Therefore, by clarifying that all remedies and rights of respondent Nos. 5 to 12 against the petitioner are unaffected by the order of the Minister, the present petition can be disposed of in the above terms. 14] The Registrar, Cooperative Societies to take necessary decision with regard to initiation of the enquiry after compliance with the aforesaid directions within a period of six weeks from the date of receipt of copy of this order. All contentions of parties on merits are kept open. Petition disposed of. No costs. (S.C.DHARMADHIKARI, J)