IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN MONDAY, THE 9TH JUNE 2008 / 19TH JYAISHTA 1930 WP(C).No. 2581 of 2008(G) ------------------------------------ PETITIONER: ------------------- THE PRESIDENT, THE VELLINAZHI PANCHAYAT SERVICE CO-OPERATIVE BANK LIMITED, THIRUVAZHIYODE, PALAKKAD DISTRICT. BY ADV. SRI.K.RAMAKUMAR (SR.) SMT.SARITHA DAVID CHUNKATH SRI.A SAMEER SRI. R.JAYACHANDRAN RESPONDENTS: ----------------------- 1. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES, PALAKKAD. 2. THE VELLINAZHI PANCHAYAT SERVICE CO-OPERATIVE BANK LIMITED, THIRUVAZHIYODE, PALAKKAD DISTRICT. 3. THE ADMINISTRATOR, VELLINAZHI PANCHAYAT SERVICE CO-OPERATIVE BANK LIMITED, THIRUVAZHIYODE, PALAKKAD DISTRICT. R1 BY SPL. GOVERNMENT PLEADER SMT.A.G.ANEETHA R2 BY ADV. SMT. SMITHA GEORGE THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23/05/2008,ALONG WITH WP.C NO.34180 OF 2007 THE COURT ON 09/06/2008 DELIVERED THE FOLLOWING: W.P.(C) NO.2581/2008 APPENDIX PETITIONERS EXHIBITS EXT.P1:- COPY OF THE ORDER DT. 18.10.2007 ISSUED BY THE SIT RESPONDENT. EXT.P2:- COPY OF THE SHOW CAUSE NOTICE DT. 18.10.07 ISSUED BY THE IST RESPONDENT. EXT.P3:- COPY OF THE STAY ORDER DT. 20.11.07 IN WPC. 34180/07 PASSED BY THIS HONOURABLE COURT. EXT.P4:- COPY OF THE REPLY TO THE SHOW CAUSE NOTICE SUBMITTED BY THE SOCIETY. EXT.P5:- COPY OF THE ORDER DT. 15.1.2008 ISSUED BY THE IST RESPONDENT. EXT.P6:- COPY OF THE ORDER APPROVING STAFF PATTERN OF THE SOCIETY ISSUED BY THE JOINT REGISTRAR. /TRUE COPY/ P.S. TO JUDGE tss Thottathil B. Radhakrishnan, J. ================================== W.P.(C)No.2581 of 2008 ================================== Dated this the 9th day of June, 2008. JUDGMENT This writ petition is filed challenging Ext.P5 order superseding the committee of the second respondent, a Service Co-operative Bank. 2. Ext.P2 notice was issued enlisting 11 grounds and calling upon the committee to show cause against supersession as per Section 32 of the Kerala Co-operative Societies Act, 1969, hereinafter referred to as the “Act”. Ext.P5 states that on 5-11-2007 and 6-11-2007, the Secretary and the President submitted replies. Ultimately, Ext.P5 supersession order is issued on the basis of three findings. The findings are: (1) That appointments to different posts were made following the decision of the bank on 25-8- 2005, without following the provisions of Section WPC2581/2008 -:2:- 80B of the Act and binding circulars, namely Circular Nos.18 of 1991 and 11 of 1999 issued by the Registrar and such appointments in the category of Secretary, Clerk, Peon etc. have been made in violation of the said provisions and it results in wilful and persistent default in obeying the laws relating to co-operative societies. (2) The share value amount of three persons were refunded before a period of three years in violation of Clause 15 of the bye-laws of the bank. (3) 65 persons who were members of another Service Co-operative Bank were given membership in violation of Rule 27 of the Rules. 3. In support of the writ petition, it is argued that even in the objections it was pointed out that the appointments forming the foundation for the allegation were temporary appointments WPC2581/2008 -:3:- conducted after due selection and were later approved and regularized by the Joint Registrar as per decisions which are specifically referred to in Ext.P4 reply and that the said contention has not been found against in the impugned Ext.P5 and that the said situation cannot be treated as a ground for supersession under Section 32. Regarding the allegation and finding in Ext.P5 that the share contribution of three persons were refunded, it is contended that the specific reply in that regard as is contained in Ext.P4 was not at all considered and at any rate the same is not a ground to hold that there was persistent failure to comply with the statutory provisions calling for supersession under Section 32 of the Act. In so far as the allegation regarding admission of 65 persons resulting in dual membership for such persons without the permission of the Registrar, it is argued on behalf of the petitioner that, admission of members are made on due application and WPC2581/2008 -:4:- consideration of the applications and if they are found to have obtained dual membership, statutory provisions provide for their removal and such course has to be adopted rather than hold it a situation for supersession under Section 32. The decisions of this Court in Rajagopalan Nair v. State of Kerala (1995 (2) KLT 184) and Ellakkal Service Co-operative Bank v. State of Kerala (1997 (2) KLT 85) as also the decision of the Apex Court in Pollachi C-operative Marketing Society v. K.N.Valuswami and others (1994 Suppl.(3) SCC 134) were referred to. 4. Per contra, the learned special Government Pleader for Co-operation argued that the case in hand would fall within Clauses (b) and (c) of sub- section 1 of Section 32 while the decisions referred to on behalf of the petitioners would apply only to cases that fall under Clause (a) of WPC2581/2008 -:5:- that sub-section. It is pointed out that by the issuance of Circulars 18/91 and 11/99, there were lawful orders and directions apart from the provisions in Section 80B and that failure to comply with those provisions while making the appointments in question has resulted in an unimpeachable ground for supersession. The impugned order, in so far as it is issued under the other two grounds, is also sought to be supported in the same manner. 5. As held in Rajagopalan Nair's case (supra), the provision for supersession is to be considered as an exceptional and rare action and the words “persistent”, “negligent”, “wilful” and “lawful” are the key words in Section 32, which would act as a guiding factor for the exercise of power to supersede. 6. The fact that the appointments in question WPC2581/2008 -:6:- fell for decision of the Joint Registrar at an earlier point of time, that is, in early 2006, is not a matter in dispute. Such statement in Ext.P4 has been noted by the Joint Registrar while issuing the impugned Ext.P5 in the first sentence of the 6th paragraph under Item No.1, where the allegation regarding appointments in violation of the Rules is discussed. That statement of the bank is not found against. As a matter of fact, that is not disputed even before me at any point of time. If that be so, the action taken at one point of time, thereby regularizing the appointments, cannot thereafter be ignored, to make such appointments the foundation for action under Section 32. Not only that, the benefit of such regularization and continuance in appointment was being enjoyed by those employees, seven of whom have filed WP(C)No.34180 of 2007, which is being decided as per separate judgment today. The quality of appointment of those persons, having been dealt with by the Joint WPC2581/2008 -:7:- Registrar at one point of time, any decision that ought to have been taken on the basis of such appointments ought to have flowed then and there. That cannot survive to form the foundation of proceedings for supersession under Section 32 which has drastic consequences. So much so, the impugned order superseding the committee on the ground of alleged appointments in violation of the Act, Rules and Circulars, is arbitrary, unreasonable and hence illegal and unconstitutional. 7. In so far as the allegation of having refunded the share subscription of three members is concerned, Ext.P5 does not contain any consideration of the reply contained in Ext.P4. The mere fact that the share amounts of three persons were returned before a lock-in period prescribed by the bye-laws of the society, even if true, is insufficient a ground to exercise authority under Section 32 of the Act, having WPC2581/2008 -:8:- regard to the jurisdictional facts required to exercise such authority and consequences that flow out of such exercise of power. 8. As regards the ground of admission of 65 persons, who allegedly were already members of another Service Co-operative Bank, the finding in Ext.P5 has been rendered without considering any of the objections in Ext.P4 in that regard. Consideration of objections and explanations given to a show cause notice is absolutely necessary to arrive at a conclusion while exercising the powers under Section 32. The decision should reflect as to why the explanation is not being accepted. 9. That apart, even if it is seen on an inspection that disqualified persons are enrolled as members, the Act and Rules provide effective mechanism for their removal. That is the action contemplated by the statute in the best interest of WPC2581/2008 -:9:- the society. The provision of Section 32 cannot be invoked on flimsy grounds to be followed by supersession. Exercise of such power must be to strengthen the co-operative institutions by maintaining democratic set up. The power is not to be normally exercised in relation to situations which can be cured or rectified effectively by recourse to other provisions in the Act and Rules. 10. The foregoing discussions will show that the impugned order is arbitrary and cryptic in as much as it has been issued without objective consideration of the objections. The same is therefore a non-speaking one. That apart, in so far as grounds 2 and 3 are concerned, there was no jurisdictional fact available at all to invoke Section 32. As regards Ground No.1 relating to the alleged illegal appointments, that issue had fallen for consideration of the Joint Registrar in 2006. The stand of the superseded committee that the WPC2581/2008 -:10:- Registrar had approved the appointments and regularized those appointments, has not been found against on facts, in the impugned order. Not only that, no action followed even in 2006 on the basis of those facts, other than the regularization of the appointments. Therefore, such allegations cannot form the foundation for exercise of authority under Section 32. 11. For the foregoing reasons, the impugned Ext.P5 has been issued in excess of authority under Section 32 of the Act and is liable to be set aside. In the result, this writ petition is allowed quashing Ext.P5. All consequential decisions would also stand set aside. Thottathil B.Radhakrishnan, sl. Judge.