IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.1.2011 CORAM: THE HONOURABLE MR.JUSTICE P.JYOTHIMANI W.P.Nos.38410 of 2003 and 38603 of 2004 V.M.Sivaraj .. Petitioner in both WPs. Vs. The Registrar of Co-operative Societies Poonamallee High Road Chennai – 10. The Additional Registrar of Co-operative Societies (Credit)/ Chairman Common Cadre Authority, Office of the Registrar of Co-operative Societies, Chennai – 10. .. Respondents 1 and 2 in WP:38410/2003 The Vellore District Central Co-operative Bank Ltd., Vellore, Officers Line, Vellore rep. by its Special Officer. .. 3rd Respondent in both WPs. The Principal District Judge (Co-operative Appellate Tribunal) Vellore District, Vellore. .. 1st respondent in WP:38603/2004 The Deputy Registrar of Co-operatives Vellore. .. 2nd respondent in WP:38603/2004 PRAYER in W.P.No.38410 of 2003: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorarified Mandamus to call for the records of the order dated 30.6.2001 and bearing Ref.No.138/01E-1 on the file of the third respondent, to quash the same insofar as it relates to withholding the petitioner's terminal benefits and to direct the respondents to pay the terminal benefits without any delay. PRAYER in W.P.No.38603 of 2004: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorari to call for the https://hcservices.ecourts.gov.in/hcservices/ records from the respondents and quash the order of the 2nd respondent dated 29.5.2003 bearing ref.No.Tha.Thee 20/2002-2003 insofar as it relates to the petitioner and the order of the 1st respondent dated 11.10.2004 in C.T.A.No.18/2003 as illegal, arbitrary and contrary to Section 87 of the Tamil Nadu Co-operative Societies Act, 1983. For Petitioner : Mr.Balan Haridas For Respondents : Mr.N.Senthil Kumar Additional Govt. Pleader for respondents 1 and 2 in WP:38410 of 2003 and 2nd respondent in WP:38603 of 2004 Mrs.G.Thilakavathi for 3rd respondent in both writ petitions ORDER The petitioner has filed these writ petitions challenging the order of the third respondent dated 30.6.2001, insofar as it relates to withholding the petitioner's terminal benefits and also the order of the Deputy Registrar of Co-operatives, Vellore dated 29.5.2003, as confirmed by the order of the Co-operative Appellate Tribunal, Vellore by order dated 11.10.2004, by which the petitioner and others were made jointly and severally liable to the third respondent/Bank to the extent of ` 11,07,050/- with interest at the rate of 18% from 27.2.2003 in surcharge proceedings initiated against them under the Tamil Nadu Co-operative Societies Act, 1983 (for brevity, "the Act"). 2.1. The petitioner was working as an Assistant Administrative Officer (Non Agricultural Loan) between 3.11.1994 and 23.7.1995 in the third respondent/Bank. On an application made by one Om Sakthi Brick Works on 8.5.1995 to the Special Officer of the third respondent/Bank, the petitioner was directed to conduct personal interview of the loan applicant and find out the value of the land given as collateral security for the loan sought. The petitioner was directed to find out the guideline value by the Special Officer of the third respondent/Bank in the order dated 16.5.1995. 2.2. It is stated that the petitioner has called for an interview of the applicant and verified the guideline value from the Sub Registrar Office, Ambur in respect of the land sought to be given as collateral security by the loan applicant. As per the guideline value, the value of the collateral security was arrived at ` 8,11,440/- and it is stated that the petitioner has submitted his report to the Special Officer of the third respondent/Bank on 24.5.1995. The loan https://hcservices.ecourts.gov.in/hcservices/ was sanctioned to the applicant by the Special Officer on 21.6.1995 and disbursed in three instalments, viz., on 20.7.1995 a sum of ` 1,89,215/-, on 14.9.1995 a sum of ` 2,09,225/- and on 4.11.1995 a sum of ` 62,000/- and according to the petitioner, he had no role to play in the sanction of the loan and he has only valued the property based on the guideline value. 2.3. It is stated that when the third party failed to repay the amount, instead of making recovery an enquiry was directed in respect of disbursement of loan. It was on 23.2.2001 a show cause notice was issued to the petitioner and 8 others seeking explanation as to why disciplinary proceedings should not be initiated for irregularity in disbursement of loan. Out of nine persons, in respect of four persons, viz., K.Periyasamy, Sriram, M.Varadhan and D.J.Ambikapathy, show cause notice was issued for surcharge proceedings, and in respect of the petitioner and the other four persons, the show cause notice was as to why disciplinary proceedings should not be initiated. 2.4. The petitioner gave a reply on 22.3.2001 and thereafter, the third respondent has issued a charge memo on 11.4.2001 and the petitioner has given his reply on 5.5.2001. In the meantime, the petitioner has attained the age of superannuation on 30.6.2001 and his terminal benefits were not settled. It is in respect of the said terminal benefits which were withheld, the petitioner has filed W.P.No.38410 of 2003. 2.5. An enquiry under Section 81 of the Act was ordered, in which the petitioner has participated and thereafter, the second respondent in W.P.No.38603 of 2004 has issued a notice on 16.6.2002 for surcharge proceedings under Section 87 of the Act. Since the petitioner was away from India, after his return, by letter dated 20.10.2002, he requested the second respondent in W.P.No.38603 of 2004 to furnish the copy of the report of enquiry conducted under Section 81 of the Act to enable him to give his reply to the surcharge proceedings. The complaint of the petitioner is that such report was not furnished. However, the petitioner had to give his reply. The petitioner has also given deposition that he has nothing to do with the granting of loan. However, the second respondent in W.P.No.38603 of 2004, by order dated 29.5.2003, held that the petitioner is jointly and severally liable along with S.Nagarajan, Thandapani, Sriram and K.Periyasamy for the loss of ` 11,07,050/-. 2.6. It was against the said order of the second respondent in W.P.No.38603 of 2004, the petitioner filed appeal before the first respondent in W.P.No.38603 of 2004 (Co-operative Appellate Tribunal) in C.T.A.No.18 of 2003. The other three persons also preferred appeals before the Appellate Tribunal. All the appeals were heard together and by a common order dated 11.10.2004 the appeals were https://hcservices.ecourts.gov.in/hcservices/ dismissed. 2.7. The charge was that the petitioner has failed to visit the spot by field inspection, which would show that a high voltage wire was passing through the land and in such circumstances, the land would not have fetched the value as that of the guideline value. However, it has been the case of the petitioner that as per the direction of the Special Officer of the third respondent/Bank dated 16.5.1995, the petitioner was only directed to find out the guideline value, which he has in fact done and in respect of the issuance of loan, the petitioner has no role to play. 2.8. The surcharge notice which imputes irregularity against the petitioner is that he should have returned the loan application as the same was not forwarded by Ambur Branch; and that in the basic documents relating to the property which was sought to be given as collateral security, the extent of land was mentioned in Cents, whereas the petitioner has not noticed the note placed by the clerk measuring the land in Square Feet and thereby aided the Special Officer in sanctioning the loan and for sanctioning the loan the land value was boosted. 2.9. It has been the case of the petitioner that the loan application was received by the Special Officer and not the petitioner and the petitioner was not entitled to return the application and in due obedience of the direction of the Special Officer, he has only got the guideline value from the Sub Registrar Office and gave the valuation report as per the guideline value. 2.10. It is the case of the petitioner that he found that on 24.6.1993 the land offered as collateral security was sold at the rate of ` 52/- per sq.ft. and thereafter on 24.5.1995 the same was sold at ` 63/- per sq.ft. and only on that basis he has valued the property given as collateral security at ` 8,11,440/-, which is genuine and bona fide and this aspect has not been considered by respondents 1 and 2 in W.P.No.38603 of 2004. It is further stated that when the guideline value of the property is ` 63/- per sq.ft., there is an improper finding that there are no supporting documents to that effect. 2.11. The impugned orders of respondents 1 and 2 in W.P.No.38603 of 2004 are challenged on various grounds, including that the same are illegal; that the petitioner has nothing to do with the receipt of loan application and only as per the direction of the Special Officer he has conducted the interview and found out the guideline value; that even during the time when he was working under the third respondent, viz., from 3.11.1994 to 23.7.1995, the loan was given to the borrower only to the extent of ` 1,89,215/- on 20.7.1995 and the remaining amounts were disbursed in the absence of the petitioner and in spite https://hcservices.ecourts.gov.in/hcservices/ of it the petitioner has been made jointly liable for the entire amount; that it is the Special Officer who has received the application, processed the same and directed disbursement of the amount and therefore, he should have taken steps to recover the loan amount; that without taking such steps, including by way of arbitration, surcharge proceedings were initiated against the petitioner in haste; that the allegation against the petitioner is not covered under Section 87 of the Act and the petitioner has not caused any loss to the third respondent with wilful negligence; that the petitioner was not furnished with the copy of the enquiry report while defending himself in the surcharge proceedings and it is a violation of principles of natural justice; and that while in the show cause notice dated 23.2.2001 it was indicated that the surcharge proceedings would be initiated against four persons, viz., K.Periyasamy, Sriram, M.Varadhan and D.J.Ambikapathy, the petitioner has been included and it is only an afterthought. 2.12. It is the case of the petitioner, as it is seen in W.P.No.38410 of 2003, that there was no charge sheet pending against the petitioner as on the date of retirement and therefore, the order dated 30.6.2001 in allowing the petitioner to retire from service on attainment of age of superannuation on 30.6.2001 without prejudice to the disciplinary case pending against him is not valid in law; that for proceeding under Section 87 of the Act withholding of terminal benefits is unwarranted; that even in case of surcharge proceedings, it is not as if there was no security and the petitioner is owning property; and that the right of the third respondent in proceeding under Chapter 16 of the Act does not enable them to withhold the terminal benefits. 3.1. In the counter affidavit filed by the third respondent in W.P.No.38410 of 2003, it is stated that the petitioner was allowed to retire on attainment of age of superannuation reserving the right of the third respondent to proceed with disciplinary proceedings initiated against him under charge memo dated 11.4.2001. Since the charge memo was pending, the relieving of the petitioner was without prejudice to proceed further with the enquiry. 3.2. It is stated that on 30.1.1995, Om Shakthi Brick Works have sent a loan application directly to the third respondent/Bank without the recommendation of the Branch Manager, Ambur Branch, which is a necessary requirement. The petitioner has not noticed the same and simply recommended the loan application for sanction. If only it was referred to the Branch Manager, he would have enquired and assessed the value of the property offered as security. However, the petitioner had a duty to verify the property in person for assessment https://hcservices.ecourts.gov.in/hcservices/ of the value and to ascertain the guideline value of the property. It is stated that the petitioner had never visited the property, but simply issued a valuation certificate valuing the property at ` 8,11,440/- on the basis of the guideline value and he should have assessed the present market value and for the purpose of sanctioning loan the value has been boosted. Since the petitioner has not properly inspected, it has resulted in sanctioning the loan to the extent of ` 4,40,450/-. Ultimately, when there was default in repayment of the loan, there was nobody to purchase the property and that shows that with the active connivance the value has been boosted. 3.3. It is stated that on an enquiry conducted under Section 81 of the Act, the petitioner along with others were found to be guilty of charges and responsible for the financial loss in equal proportion and against the surcharge proceedings an appeal was filed before the Tribunal. It is also stated that the petitioner's gratuity amount of ` 3,91,160/- and earned leave benefit of ` 1,61,664/-, totaling ` 5,52,824/- has been retained and the petitioner's proportionate share which he is liable to pay is ` 2,78,141/-. It is stated that in view of the pendency of the appellate proceedings, the terminal benefits were withheld. 4.1. In the counter affidavit filed in W.P.No.38603 of 2004, while reiterating about the loan application stated to have been processed by the petitioner to the effect that the value has been boosted, it is stated that it is based on the report of the petitioner the loan was sanctioned on 26.6.1995 and the first instalment of ` 1,89,225/- was released on 20.7.1995 and the second instalment of ` 1,89,225/- was released on 14.9.1995 and the loanee has not repaid any amount. It is stated that arbitration proceedings were initiated and a judgment and decree was passed and a total amount of ` 9,24,023/- was outstanding and in the auction which has been conducted there has been no purchaser. 4.2. It is stated that a statutory enquiry was ordered under Section 81 of the Act and the Enquiry Officer in his report dated 19.12.2001 has recommended surcharge proceedings against the petitioner and others for the fraudulent grant of the said loan. The surcharge proceedings were conducted by the second respondent in W.P.No.38603 of 2004, in which the petitioner has fully participated and the Surcharge Officer has found that the petitioner and others are jointly liable to make good the loss of ` 11,07,050/- with 18% interest and in the appeal filed before the Tribunal also the entire fact has been analyzed. 4.3. It is stated that the petitioner, who has conducted personal interview of the loan applicant, has submitted a report on 22.5.1995 stating that the applicant has got a land property – house site at Ambur Town, whereas it was not a house site. https://hcservices.ecourts.gov.in/hcservices/ 4.4. It is stated that as against the arbitration award steps have been taken for the purpose of bringing the mortgaged property for sale and no offerers are attracted since the value has been boosted up. It is stated that 30 Cents of land would value around ` 75,000/-, while as on 15.5.2001 the amount outstanding was ` 9,24,023/-. 5.1. Mr.Balan Haridas, learned counsel appearing for the petitioner would submit that respondents 1 and 2 in W.P.No.38603 of 2004 have failed to note that the copy of the report of the inquiry conducted under Section 81 of the Act has not been served on the petitioner and that is prejudicial to the interest of the petitioner. To substantiate his contention that prejudice has been caused vitiating the disciplinary proceedings, he would rely upon a judgment of the Supreme Court in Punjab National Bank v. K.K.Verma, 2010 (4) LLN 75. 5.2. It is his further submission that as per the direction of the Special Officer, when the petitioner has inspected the place, found the guideline value and has given his valuation, as long as it is not imputed that the petitioner has committed wilful negligence, the petitioner is not liable for surcharge proceedings under Section 87 of the Act. 5.3. It is his submission that there is no finding by the second respondent as well as the first respondent in W.P.No.38603 of 2004 about any wilful negligence on the part of the petitioner in the surcharge proceedings. He would rely upon the judgment of the Division Bench of this Court in V.Arulkumar v. Housing and Urban Development Corporation Ltd., 2010 (3) LLN 764 to substantiate his contention that the finding of wilful negligence is sine qua non for fixing liability under Section 87 of the Act. 6.1. On the other hand, it is the contention of the learned counsel appearing for the third respondent/bank that wilful negligence on the part of the petitioner is writ large and non furnishing of report of the proceedings under Section 81 of the Act is not prejudicial to the case of the petitioner, because in the notice issued under Section 87 of the Act, the gist of the report of the enquiry conducted under Section 81 of the Act has been given. According to her, no adverse material against the petitioner has been withheld and therefore, there has been a substantial compliance of furnishing of report under Section 81 of the Act. 6.2. It is her submission that the petitioner having not pleaded in the W.P.No.38410 of 2003 about the non furnishing of report of the enquiry under Section 81 of the Act, cannot be expected to raise the same for the first time. https://hcservices.ecourts.gov.in/hcservices/ 6.3. It is her submission that the petitioner, being a responsible bank official from whom utmost honesty is expected, has violated the procedure and therefore, the act complained of against the petitioner is serious and she would rely upon the judgments in State Bank of India and others v. S.N.Goyal, [2008] 8 SCC 92 and M.Chella Nadar v. The Deputy Registrar of Co-operative Societies, Tuckalai and post, K.K.District, 2002 WLR 198. 7. I have heard the learned counsel for the petitioner and the learned counsel for the respondents and perused the entire records, including the file produced by the learned counsel for the third respondent. 8. As it is seen in the proceedings of the Joint Registrar of the third respondent/Bank dated 30.6.2001, which is impugned in W.P.No.38410 of 2003, the third respondent has allowed the petitioner to retire on superannuation on 30.6.2001 without prejudice to the disciplinary proceedings pending against him and also enquiry under Section 81 of the Act which was ordered by that time. 9. Admittedly, there is no disciplinary proceedings initiated against the petitioner. In the show cause notice dated 11.4.2001 issued by the third respondent to the petitioner and others, by which a charge has been framed, an explanation has been called for in respect of the delinquency, viz., the petitioner has failed to perform his function properly in recommending non agricultural loan resulting in loss to the bank. The actual charge is as follows: ",th; jd; flik kw;Wk; bghWg;g[fspypUe;J tGtp bray;gl;L gz;iz rhuhf;fld; tH';f ghpe;Jiu bra;jjd; K:yk;. t';fpapd; epjpf;F ,Hg;g[ Vw;glf; fhuzkhf ,Ue;Js;shh;/ " 10. The petitioner has submitted his explanation on 5.5.2001. In the explanation, he has stated that by a letter dated 16.5.1995, as per the direction of the Special Officer, the petitioner was asked to conduct an interview of the loan applicant and accordingly, the petitioner has visited the Sub Registrar Office, Ambur and referred to the guideline value stated as ` 63/- per sq.ft. and it was based on that for the collateral security in respect of the land to the extent of 12880 sq.ft. the petitioner has fixed the guideline value as ` 8,11,440/- and thereafter he has no obligation in respect of the granting of loan. 11. In the meantime, the enquiry has been conducted under Section 81 of the Act and admittedly, the Enquiry Officer, who has conducted enquiry, has filed a report before the second respondent in W.P.No.38603 of 2004 on 19.12.2001. It was based on the said report https://hcservices.ecourts.gov.in/hcservices/ of the Enquiry Officer, proceedings were ordered under Section 87 of the Act for recovery by way of surcharge. Admittedly, the report of the Enquiry Officer dated 19.12.2001 has not been furnished to the petitioner. However, it is the case of the third respondent that the gist of the report of the Enquiry Officer finds place in the notice issued to the petitioner under Section 87 of the Act directing the petitioner to give explanation. In the said notice issued under Section 87 of the Act by the second respondent in W.P.No.38603 of 2004, insofar as it relates to the petitioner, the contents are as follows: "nkw;go fld; fl;oid jpU tp/vk;/rptuh$;. cjtp eph;thf mYtyh; (gz;iz rhuhf;fld;) rhpghh;j;jJ mDg;g[k;nghjhtJ Mk;g{h; fpis nkyhsh; K:yk; tuntz;Lk;/ vdnt Mk;g{h; fpis nkyhsUf;F mDg;gt [k; vd vGjp ifbaGj;jpl;L nfhg;ig brayUf;F mDg;gp , Uf;fntz;Lk;/ nkw;go braiy cjtp eph;thf mYtyh; (g/rh/f/) bra;atpy;iy vd;gJ mYtyff; Fwpg;gpd; K:yk; bjhpatUfpwJ/ vdnt. ,tUk; fld; nr';c&d; bra;at[k; gl;Lthlh bra;at[k; jdp mYtyUf;F cle;ijahf ,Ue;Js;shh; vd;gJ cWjpahfpwJ/ gphpt [ vGj;jh; jpU ehfuh$d; fl;oid ghprPyidr; bra;J itj;jnghJ g[";ir epyj;ij rJu mof;fzf;fpy; fpuhk eph;thf mYtyh; bfhLj;jij itj;J mYtyf Fwpg;g[ bra;J itj;Js;shh;/ ,th; gj;jpuj;jpy; 0/30 brd;l g [";bra; epyk; vd;W cs;sij rhpahd Kiwapy; ghh;j;jjhf bjhpatpy;iy/ cjtp bghJ nkyhsh; (g/rh/f) mth;fs; cWg;gpdh; fld; bjhifia mjpf mstpy; bgWtjw;fhd g[";bra; epyj;jpd; tpiyia rJu mo fzf;fpy; fzf;fpl;L 200 rJu moia U:/52f;F vd;Wk; mnj 200 rJu moia U:/63 cah;j;jp fhl;oaij kWf;fhky;. ,tUk; rJu mo fzf;fpy; kjpg;gpl;L 12880 x 63 = 8.11.440 vd mwpf;ifia rkh;g;gpj;jjpypUe;J , tUk; fld; kdtpid rhptu ghprPyid bra;atpy;iy vd;gJ epU:gzk; MfpwJ vd tprhuiz mYtyh; bjhptpj;Js;shh;/ " This is stated to be the gist of the report of the Enquiry Officer. 12. After receiving the said notice under Section 87 of the Act, the petitioner has given a letter to the second respondent in W.P.No.38603 of 2004 on 20.10.2002 requesting him to furnish a copy of the report of the Enquiry Officer dated 19.12.2001. However, the same has not been furnished to the petitioner and it was in those circumstances, the petitioner has submitted his explanation on 27.1.2003, in which he has clearly stated that as per his letter dated 20.10.2002, he has not been furnished with the report of the enquiry conducted under Section 81 of the Act by the Enquiry Officer. 13. In the enquiry before the second respondent in W.P.No.38603 https://hcservices.ecourts.gov.in/hcservices/ of 2004, the petitioner has stated, as it is found in the impugned order of the second respondent, that he has not helped the former Special Officer with any negligence and as an officer subordinate to the Special Officer he cannot reject the application and he was only directed to find out the guideline value and based on that he went to the Sub Registrar Office and found out the guideline value and there was no order directing the petitioner to inspect the place to find out the real value. Since he has submitted the guideline value after finding out from the Sub Registrar Office, there was no deliberate negligence on his part. 14. In the finding of the second respondent in W.P.No.38603 of 2004 insofar as it relates to the petitioner, it is observed that the petitioner has not personally inspected the land and if he had inspected he would have found the high tension wire which is running on the land, which would reduce the value and it was because of his non inspection of the place the higher amount of loan had to be sanctioned. It was also found that the petitioner has helped the Special Officer in granting the loan and it was in those circumstances, the second respondent in W.P.No.38603 of 2004 has passed the impugned order. 15. Even though in the grounds of appeal the point relating to non furnishing of report of the enquiry conducted under Section 81 of the Act has not been raised, the petitioner has raised a point that the wilful negligence on the part of the petitioner has not been made out by the second respondent in the order. 16. The first respondent in W.P.No.38603 of