IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 6.6.2011 CORAM: THE HONOURABLE MR.JUSTICE P.JYOTHIMANI W.P.Nos.47776, 49118 and 50020 of 2006 and 7764 of 2007 AR.Shanmugha Murthy .. Petitioner in WPs:47776, 50020 of 2006 and 7764 of 2007 M.Jayaraman .. Petitioner in WP:49118 of 2006 Vs. 1. The Principal District Judge/ Co-operative Tribunal Cuddalore. 2. The Deputy Registrar of Co-operative Societies, Housing, Cuddalore. .. Respondents 1 and 2 in all WPs. 3. The Tittakudi Taluk Co-operative Housing Society, rep. by its President, now Special Officer. .. 3rd respondent in WPs:47776 and 49118 of 2006 4. The Secretary The Vanur Taluk Co-operative House Building Society Vanur, Villupuram District. .. 3rd respondent in WP:50020 of 2006 5. The Tindivanam Co-operative Housing Society Ltd., rep. by its Special Officer, Tindivanam. .. 3rd respondent in WP:7764 of 2007 PRAYER in W.P.Nos.47776 and 49118 of 2006: Petitions under Article 226 of the Constitution of India for issue of a writ of Certiorari to call for the records of the first respondent in Co-op.C.M.A.No.7 https://hcservices.ecourts.gov.in/hcservices/ of 2000, dated 31.7.2006, confirming the order of the second respondent in Na.Ka.No.4427/98 Sa.Pa dated 12.11.1999 and quash the same. PRAYER in W.P.No.50020 of 2006: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorari to call for the records of the first respondent in Co-op.C.M.A.No.39 of 2000, dated 31.7.2006, confirming the order of the second respondent in Na.Ka.No.815/99 Sa.Pa dated 1.3.2000 and quash the same. PRAYER in W.P.No.7764 of 2007: Petition under Article 226 of the Constitution of India for issue of a writ of Certiorari to call for the records of the first respondent in Co-op.C.M.A.No.33 of 2000, dated 31.7.2006, confirming the order of the second respondent in Na.Ka.No.116/99 Sa.Pa dated 13.12.1999 and quash the same. For Petitioners : Mr.M.S.Palaniswamy For Respondents : Mr.D.Geetha Additional Government Pleader for 2nd respondent in all WPs. Mr.K.Balu for 3rd respondent in WPs:49118 and 47776/2006 Mr.G.Sankaran for 3rd respondent in WP:50020/2006 Mr.D.Seenivasan for 3rd respondent in WP:7764 of 2007 ORDER These writ petitions arise from the orders passed by the Co- operative Tribunal under Section 152 of the Tamil Nadu Co-operative Societies Act, 1983 (for brevity, "the Act") confirming the orders of the Deputy Registrar of Co-operative Societies (Housing) passed in the surcharge proceedings initiated under Section 87 of the Act. 2.1. The petitioner in W.P.Nos.47776 and 50020 of 2006 and 7764 of 2007, who is one and the same, was in additional charge as Co-operative Sub Registrar/Special Officer of the Tittakudi Taluk Co-operative Housing Society between 4.10.1995 and 14.7.1996, and from 1.11.1996 to 17.4.1997. Between 15.7.1996 and 31.10.1996, M.Jayaraman (petitioner in W.P.No.49118 of 2006) was in additional https://hcservices.ecourts.gov.in/hcservices/ charge of the Tittakudi Taluk Co-operative Housing Society as Special Officer. 2.2. The Tittakudi Taluk Co-operative Housing Society was constituted for purchasing lands, forming house sites and selling the plots to its members. Insofar as W.P.No.47776 of 2006 is concerned, according to the petitioner therein, as the said Housing Society was inactive, as per the direction of the Deputy Registrar of Co-operative Societies (Housing), Cuddalore, he has identified 95200 Sq. Ft. of gramanatham lands in Perangiam Village belonging to one R.Krishnasamy Padayachi and as per the advice of the second respondent, he proceeded to negotiate with the owner for purchase and the price was fixed at ` 17.50 per Sq.Ft.. 2.3. It is stated that since the Tittakudi Taluk Co-operative Housing Society was not having sufficient funds, the second respondent has advised the petitioner (AR.Shanmugamurthy) to borrow money from the Tamil Nadu Electricity Board Employees Co-operative Building Society, Swami Sagachananda Co-operative House Sites Society, Gingee Co-operative Housing Society, Tindivanam Co- operative House Building Society, Vanur Taluk Co-operative Housing Society, and Padaleeswarar Co-operative Building Society on interest basis. Based on the advise, it is stated that he has placed the matter before the general body of the Tittakudi Taluk Co-operative Housing Society, which has passed an unanimous resolution to purchase lands from R.Krishnasamy Padayachi and form layout, authorizing him to get permission from the Registrar of Co-operative Societies (Housing), Chennai. 2.4. In W.P.No.47776 of 2006, the petitioner has sent a letter to the Registrar of Co-operative Societies (Housing), Chennai on 1.12.1995 through the second respondent seeking permission, which was accorded on 4.1.1996 with various conditions, namely: (i)that the general fund of the society should not be utilised for the purchase of land; (ii)that the vendor should get permission from Director, Urban Development to form house sites; (iii)that the guideline value and the market value should be furnished; (iv)that the engineer's certificate should be obtained; and (v)that the legal opinion with regard to the marketable title of the land should be obtained from the local Government Pleader. 2.5. It is stated that in W.P.No.47776 of 2006, the petitioner has obtained loan from Tindivanam Co-operative Building Society and https://hcservices.ecourts.gov.in/hcservices/ the said society has paid the vendor directly a sum of ` 4 Lakhs as advance and an agreement was entered into with the vendor. The time for completing the contract was one year. It is stated that in W.P.No.47776 of 2006, the petitioner himself has entered into a contract, as there will be delay in getting permission from the Registrar and by that time the price will be increased. According to him, there was no material loss to the society because of the contract of sale and it was conducted in the best interest of the Tittakudi Taluk Co-operative Housing Society and the conditions imposed by the Registrar of Co-operative Societies (Housing), Chennai were strictly adhered to. 2.6. It is stated that, in the meantime, R.Krishnasamy Padayachi died and therefore, the consent had to be obtained from his legal heirs and funds had to be mobilized for payment of balance of purchase money and hence, there was delay in the execution of the sale deed. It is stated that as per the direction of the second respondent, the petitioner has also borrowed amount from the said six societies and completed the sale transactions on 12.3.1997, 19.3.1997, 4.4.1997 and 9.4.997. According to him, the permission was granted by the second respondent for forming house sites on 27.11.1995. 2.7. It is stated that the petitioner was however suspended from service on 18.4.1997 on the ground that there is technical irregularity committed by the petitioner in W.P.No.47776 of 2006 by utilizing the general fund of the Tittakudi Taluk Co-operative Housing Society for purchasing the land in contravention of the permission granted by the Registrar. 2.8. The second respondent who has granted permission for forming house sites, according to the petitioner, has directed an enquiry to be conducted under Section 81 of the Act and the main charge in W.P.No.47776 of 2006 was that the petitioner has utilized the general fund of the society to purchase the property and caused loss to the interest of the society. The Enquiry Officer appointed by the second respondent is stated to have found that there was no general fund available with the Tittakudi Taluk Co-operative Housing Society, however he has stated that the general fund has been utilized by the petitioner in W.P.No.47776 of 2006, even though the entire sale consideration was paid through the borrowing from other co-operative societies, as per the direction of the second respondent. 2.9. In W.P.No.47776 of 2006, the petitioner was placed under suspension and a charge was framed against him on 31.1.2001 and enquiry was conducted by the Joint Registrar of Co-operative Societies, Villupuram. The charges were that (i) as a Special https://hcservices.ecourts.gov.in/hcservices/ Officer, the petitioner in W.P.No.47776 of 2006 has given wrong information to his superiors and formed house sites, and (ii) the petitioner in W.P.No.47776 of 2006 has utilized the general fund of the society and purchased the property, apart from seven more charges. It is stated that the Joint Registrar of Co-operative Societies has found that the petitioner in W.P.No.47776 of 2006 was not guilty of the charges and exonerated him. However, the second respondent, on receiving the report of enquiry conducted under Section 81 of the Act, ignored the same and passed a surcharge order directing the petitioner in W.P.No.47776 of 2006 to pay a sum of ` 3,32,074/-. 2.10. Aggrieved by the said order, the petitioner in W.P.No.47776 of 2006 has filed an appeal under Section 152 of the Act in C.M.A.No.7 of 2000 before the first respondent and the said appeal was dismissed on 31.7.2006. Exasperated by the said order of the Tribunal, W.P.No.47776 of 2006 has been filed. 3.1. Likewise, in respect of the Vanur Taluk Co-operative House Building Society, which is the third respondent in W.P.No.50020 of 2006, the petitioner (AR.Shanmugha Murthy) is stated to have taken additional charge on 19.6.1996. The petitioner in W.P.No.49118 of 2006 (M.Jayaraman), the Co-operative Sub Registar, Cuddalore Housing Society was in additional charge of the Vanur Taluk Co-operative House Building Society between 27.3.1995 and 18.6.1996 and during that time, he has identified 7 Acres of land in Survey Nos.118/1A, 116/4A, 116/1 and 43/1A2 at Tiruchitrambalam Kottu Road and proposed for purchase of the land and division of the same into house sites for sale to its members, after obtaining approval from the general body of the Vanur Taluk Co-operative House Building Society and placing it before the Registrar of Co-operative Societies (Housing) and getting his permission. 3.2. After obtaining permission, the petitioner in W.P.No.49118 of 2006 (M.Jayaraman) entered into an agreement with the owners of the land on 13.1.1996 and paid advance of ` 1 Lakh and subsequently paid ` 10,81,000/- as part payment of purchase money to the vendors and the said money was borrowed by M.Jayaraman from various housing societies as per the direction of the second respondent. 3.3. The petitioner in W.P.No.49118 of 2006 (M.Jayaraman) was relieved of his additional charge and the petitioner (AR.Shanmugha Murthy) took additional charge on 19.6.1996 and afterwards, the petitioner on coming to know about the agreement dated 13.1.1996 took further steps to pay the balance purchase money. There was pressure since, as per the agreement, the contract has to conclude https://hcservices.ecourts.gov.in/hcservices/ by 13.1.1997 and out of the total sale consideration of ` 26,04,013/-, the petitioner in W.P.No.49118 of 2006 (M.Jayaraman) has paid ` 11,81,000/- and the petitioner, on the direction of the second respondent, has borrowed ` 1 Lakh from Tindivanam Co- operative House Building Society and paid the same to the vendors. He has also used some of the fixed deposits and share capital to pay the vendors. The elected Board thereafter paid the balance sale consideration being ` 9,34,013/- to the vendors during February-March, 1999 and got the sale deeds registered in the name of Vanur Taluk Co-operative Housing Society on 9.2.1999, 5.3.1999 and 10.3.1999. 3.4. It is stated that as per the letter of the Registrar of Co-operative Societies, the general fund of the society should not be utilized for the purchase of land, even though there was no mention about the source from which the money has to be obtained. The term "general fund" has not been defined under the Act or the Rules framed thereunder or in the bye-laws of the society and no authority has defined and stated as to what constitutes a general fund. 3.5. An enquiry under Rule 17(b) of the Tamil Nadu Civil Services (Discipline and Appeal) Rules was initiated by the Joint Registrar of Co-operative Societies, Villupuram. Even though the Enquiry Officer found the petitioner in W.P.No.50020 of 2006 not guilty of the charges levelled against him, the Joint Registrar of Co-operative Societies has held the petitioner in W.P.No.50020 of 2006 guilty of contravention of the directions of the Registrar. Though the Joint Registrar has found that there was no loss to the Vanur Taluk Co-operative Housing Society because of the said transaction, the Joint Registrar has found that the land was purchased for ` 26,40,013/- and admittedly it will fetch a price of ` 28,14,000/- and therefore, there was no loss to the society and the society has in fact enjoyed a profit of ` 9,42,119/-. However, it was found that there was disobedience of the orders of the higher authorities. 3.6. An enquiry was ordered by the second respondent under Section 81 of the Act and the Enquiry Officer has submitted report on 10.9.1997 more than four months after the order, even though the limitation under the Act for filing the report is three months. Therefore, according to the petitioner in W.P.No.50020 of 2006, based on the time barred report no action can be taken. Even though the Enquiry Officer in the report has stated that he has completed the enquiry on 31.8.1997, the report was actually submitted after the expiry of the period of limitation. https://hcservices.ecourts.gov.in/hcservices/ 3.7. As against the finding given against the petitioner in W.P.No.50020 of 2006 under Section 87 of the Act, he has filed C.M.A.No.39 of 2000 before the first respondent and the same was dismissed on 31.7.2006. 4.1. In respect of the third respondent in W.P.No.49118 of 2006, viz., Tittakudi Taluk Co-operative Housing Society, which is the third respondent in W.P.No.47776 of 2006, the petitioner in W.P.No.49118 of 2006 (M.Jayaraman) was in additional charge as Special Officer between 15.7.1996 and 31.10.1996 and prior to him, the petitioner in other writ petitions (AR.Shanmugha Murthy) was holding the additional charge as Special Officer and he initiated steps to purchase lands from Ramasamy Padayachi and entered into agreement with the permission of the second respondent and under his guidance. In the meantime, AR.Shanmugha Murthy was transferred and the petitioner in W.P.No.49118 of 2006 (M.Jayaraman) was given additional charge and he continued the proceedings and paid the land owner a sum of ` 5 Lakhs and that amount was paid from the fixed deposits made by various persons. The balance amount of ` 1,80,000/- was paid from previously existing fixed deposits. 4.2. It is stated that as per the bye-laws of the Tittakudi Taluk Co-operative Housing Society, he was authorised to raise the funds from share subscriptions, loans from government or other financial agencies approved by the Registrar of Co-operative Society (Housing), fixed deposits with the bank, and donation, etc. received by the bank. Therefore, according to him, the payment has been made in accordance with the bye-laws of the Tittakudi Taluk Co-operative Housing Society by utilizing the amount in the fixed deposits. It is also stated that the term "general fund" has not been defined. 4.3. An enquiry under Section 81 of the Act was conducted and surcharge order under Section 87 of the act was passed against the petitioner for using the general fund. It is stated that in the enquiry under Rule 17(b) of the Tamil Nadu Civil Services (Discipline and Appeal) Rules with respect to the same set of charges, the Joint Registrar of Co-operative Societies, Cuddalore, a superior officer to the second respondent, has found that the petitioner was not guilty and discharged him. In the proceedings of the Joint Registrar, there was a finding that the second respondent has inspected the Tittakudi Taluk Co-operative Housing Society and gave permission to the previous Special Officer, AR.Shanmugha Murthy, for formation of housing sites. The Joint Registrar has also found that there was no monetary loss caused and on the other hand, there has been gain to the Tittakudi Taluk Co- operative Housing Society. https://hcservices.ecourts.gov.in/hcservices/ 4.4. However, in the surcharge proceedings, the petitioner in W.P.No.49118 of 2006 was held responsible for the loss of ` 66,666.65. Against the same, the petitioner filed C.M.A.No.7 of 2000 before the first respondent, who has dismissed the appeal on 31.7.2006. 5.1. Similarly, during the tenure of the petitioner in W.P.No.7764 of 2007 (AR.Shanmugha Murthy) as Special Officer of the Tindivanam Co-operative Housing Society between 8.6.1995 and 31.10.1996, he has taken steps to purchase lands for the purpose of the benefit of the members and he has identified the properties adjacent to G.S.T.Road and contacted the owners Safiyulla Basha and Malliga Begam and offered to purchase the property for ` 17,29,073/- with the approval of the General Body of the Tindivanam Co-operative Housing Society. He sought permission of the Registrar and the same was granted on 21.8.1995. He has paid ` 3,10,000/- to vendors and entered into an agreement with them on 14.8.1995. He purchased the properties from the vendors under two sale deeds on 15.3.1996 and under various sale deeds on 11.4.1996, 26.7.1996 and 18.9.1996. He has also sold various plots and the last plot was sold on 21.3.1997 and a total sale consideration of ` 19,09,305/- was collected by the Tindivanam Co-operative Housing Society and he has submitted the account to show that the society earned a profit of ` 1,79,332/- from the sale of house sites and there was no loss to the Tindivanam Co-operative Housing Society. 5.2. However, the second respondent ordered enquiry under Section 81 of the Act and there was no mention about the date of the order either in the enquiry report or in the surcharge order. It is mandatory that the enquiry should be completed within three months from the date of order for enquiry and without stating the date of ordering enquiry, the enquiry report was signed on 29.5.1998. The surcharge enquiry was taken up by the second respondent and an order was passed on 13.12.1999 imposing a surcharge of ` 2,81,284/-. The main ground for levying surcharge being that the general fund of the society has been used and as per bye-law 45(1)(2) of the Tindivanam Co-operative Housing Society, the land must be purchased only out of the funds generated by the advance payment by members/prospective buyers. It is stated that the term "general fund" has not been defined. 5.3. It is stated that the society can raise funds from the share subscriptions, loans from Government/Federation/Housing and Urban Development Corporation/any other financial corporation approved by the Registrar, etc. and therefore, the petitioner in W.P.No.7764 of 2007 is not liable for any surcharge. https://hcservices.ecourts.gov.in/hcservices/ 5.4. As against the surcharge proceedings passed against the petitioner in W.P.No.7764 of 2997, the petitioner has filed appeal in C.M.A.No.33 of 2000 to the first respondent and the appeal was dismissed on 31.7.2006. Aggrieved by the same, W.P.No.7764 of 2007 is filed. 6. These writ petitions are filed on the grounds that in spite of the fact that no actionable wrong has been committed by the petitioners, there has been a finding as if the petitioners are liable for surcharge under Section 87 of the Act; that in spite of the finding that there is no loss to the societies, the surcharge has been imposed on the petitioners, which is against the decision of this Court in Gabriel v. The Deputy Registrar (Housing), Cuddalore, 2003 (3) CTC 23; that there is no bar for the purpose of diverting the amount from the fixed deposits, since the bye-laws of the societies enable the same; that in the absence of any definition of the term "general fund" anywhere in the Act, surcharge proceedings cannot be initiated against the petitioners; and that there is no finding that the petitioners were negligent in respect of the activities of the societies. 7.1. In the counter affidavit filed by the third respondents, it is stated that even though the second respondent has recommended the proposals for formation of housing sites and the Registrar has accorded permission subject to the condition that the general fund of the society should not be utilised for the purchase of land, the petitioners have utilised the general fund and the same amounts to wilful negligence of duty causing loss to the assets of the societies. It is stated that the writ petitioners have intentionally violated the directions given by the Registrar of Co- operative Societies. 7.2. It is stated that on the enquiry conducted under Section 81 of the Act, there was a finding that the petitioners have committed wilful negligence and caused loss to the assets of the societies and therefore, they are liable for surcharge proceedings under Section 87 of the Act. 7.3. It is stated that even if the term "general fund" is not defined, when there is a specific direction by the first respondent not to use the general fund, it is the duty of the petitioners to obey the same and according to the third respondents, the same has been considered by the first respondent in proper perspective and there is no reason to interfere with the said orders. It is further stated that the first respondent has heard the appeals in accordance with the provisions of the Code of Civil Procedure and elaborate orders have been passed and no interference is warranted. https://hcservices.ecourts.gov.in/hcservices/ 8.1. The main contention of the learned counsel for the petitioners is that in respect of the petitioner in W.P.No.7764 of 2007, even though there are many charges levelled, it is the sixth charge which relates to interest loss that has been proceeded against and other charges are not proceeded with and as per the sixth charge, in respect of the purchase of the plot, there is a loss of interest to the tune of ` 2,79,370/-. According to the learned counsel, there was actually no interest loss as on 23.9.2005. 8.2. It is also submitted that in respect of the third respondents/ societies, there was no general fund as such in existence and therefore, the finding as if there is a violation of the direction of the Registrar of Co-operative Societies has no meaning. 8.3. It is his submission that in respect of the petitioner in W.P.No.49118 of 2006, the charges framed under Rule 17(b) of the Tamil Nadu Civil Services (Discipline and Appeal) Rules have been dropped and the Joint Registrar has found that there is no substance in the charges. 8.4. Mr.M.S.Palaniswamy, learned counsel appearing for the petitioners would submit by placing reliance on the decisions in K.Ajay Kumar Gosh and others v. Tribunal for Co-operative Cases (District Judge of Kanyakumari District), Nagercoil and another, [2009] 4 MLJ 992 and S.Pitchumani v. The Deputy Registrar, Co- operative Societies and others, 2010 (4) CTC 13 that unless there is an actionable wrong done by a reprehensible or reckless or callous conduct, surcharge order cannot be passed under Section 87 of the Act and therefore, it is his submission that the first respondent/Tribunal has failed to consider the same. 9. In W.P.No.7764 of 2007, it is seen that there has been a specific finding in the enquiry conducted under Section 81 of the Act that the petitioner being a Special Officer has facilitated payment of more salary to one Sekar, who was admittedly in service, and there is also a finding that the amount has been paid based on the resolution of the General Body. However, the first respondent/Tribunal, in the impugned order, has found that the petitioner cannot take shelter under the resolution passed by the General Body, which is not valid in law. 10. The first respondent has also relied upon Bye-Law Nos.45 (1) and 45(2) of the third respondent/society, which are as follows: "45(1). The Board may undertake the work of buying or acquiring land either from or through Government or https://hcservices.ecourts.gov.in/hcservices/ otherwise for formation of housing colony by allotting house sites to the members within the area of operations of the society, if the Board is satisfied that such a scheme will facilitate the development of the society and that sufficient number of members are coming forward to secure house sites so as to make the scheme economical and advantageous to the members and to the society by incurring such expenditure as may be necessary or pay advance for the purchase of land, within the approval of the general body and with prior permission of the Registrar. (2) The Board shall arrange for collection of the probable cost of a house site in advance from every one of the members intending to join the scheme before embarking upon it. The land should be purchased only from the advance amount so collected. The Board shall also obtain a written undertaking from such members agreeing to pay to the society any further cost that may arise while fixing the price of the