IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. CWP No.: 1757/2002 Reserved on:27.6.2008 Decided on: 28.7.2008 Smt. Sushma Sharma …Petitioner. Versus Secretary (Cooperation) and others. …Respondents Coram The Hon’ble Mr. Justice Rajiv Sharma, J. Whether approved for reporting ?1. yes. For the petitioner : Mr. Shrawan Dogra, Advocate. For the respondents : Mr. Rajinder Dogra, Additional Advocate General for respondents No.1 and 2. Mr. Ashwani K. Sharma, Advocate for respondent No.3. Rajiv Sharma, J. The brief facts necessary for the disposal of this writ petition are that Sh. Jagjiwan Sharma (deceased) husband of the petitioner was appointed as Sub Inspector, Cooperative and was posted in the office of the District Cooperative and Supply Officer, Kullu. He was promoted to the post of Inspector. The disciplinary proceedings were initiated against Shri Jagjiwan Sharma vide memorandum dated 8.12.1994. The Deputy 1 Whether the reporters of Local Papers may be allowed to see the judgment? yes. 2 Registrar, Cooperative Societies, Central Division Mandi was appointed as an Inquiry Officer. The Registrar, Cooperative Societies issued a letter dated 30.10.1996 whereby proceedings under section 69 (1) of the Himachal Pradesh Cooperative Societies Act, 1968 (hereinafter referred to as ‘the Act’ for convenience sake) for alleged misappropriation of a sum of Rs. 1,30,440.73 paise were initiated. Sh. Jagjiwan Sharma died on 24.6.1997. The inquiry proceedings against Shri Jagjiwan Sharma were dropped vide office order dated 5.7.1997. The text of letter dated 5.7.1997 reads thus: “According to CCS (CCA) Rules, 1965 sub rule 15, after the death of Sh. Jagjiwan Lal, Inspector Scale-I Civil Supplies on 24.6.97, the disciplinary proceedings pending against him as per OM dated 8.12.1994 is dropped from the date of death.” The Assistant Registrar, Cooperative Societies sought a clarification from the Registrar Cooperative Societies regarding the payment of gratuity to the legal heirs of Sh. Jagjiwan Sharma. The Registrar, Cooperative Societies vide letter dated 17th September, 1997 directed that since the disciplinary proceedings were not complete against Sh. Jagjiwan Sharma before his death and nothing was established against him, the pensionary benefits be finalized immediately. The text of letter dated 17th September, 1997 reads thus: “Sh Jagjiwan Lal Inspector Gr.I Cooperative Societies against whom disciplinary proceeding were initiated, expired on duty (24.6.97). Since these disciplinary proceeding were not completed before his sudden death and nothing was established against him.” You are, therefore, directed to finalize the pensionay benefits of deceased official immediately under intimation to this Directorate.” 3 It will be pertinent to note at this stage that after the death of Sh. Jagjiwan Sharma, the petitioner was made a party in the proceedings under section 69 (1) of the Act. The proceedings were conducted by the Deputy Registrar, Cooperative Societies under section 69 (1) of the Act (Annexure R-1). Initially, the proceedings under section 69 (1) of the Act were being conducted by the Assistant Registrar but vide order dated 30.4.1998 issued by the Additional Registrar, Cooperative Societies, Dharamshala, the same were transferred to Deputy Registrar. The Deputy Registrar submitted the report to the Additional Registrar, Cooperative Societies, Dharamshala for taking further action. Thereafter as per the pleadings of the parties, the Additional Registrar, Cooperative Societies, Dharamshala himself took up the case to assess the liability of the petitioner under section 69 (2) of the Act. The petitioner was held liable to pay a sum of Rs. 1,30,440.73 paise vide order dated 7.8.2000. The petitioner feeling aggrieved by the order dated 7th August, 2000 preferred an appeal before the Secretary Cooperative. The Secretary Cooperation dismissed the appeal on 17.8.2002. Mr. Shrawan Dogra, Advocate had strenuously argued that orders dated 7.8.2000 and 17.8.2002 are not sustainable in the eyes of law. He also contended that the proceedings under section 69 (1) of the Act could not continue after the death of Sh. Jagjiwan Sharma on 24.9.1997. He further contended that the liability could not be fastened on the petitioner. Mr. Rajinder Dogra, Additional Advocate General and Mr. Ashwani K. Kumar, Advocate had supported the orders dated 7.8.2000 and 17.8.2002. 4 I have heard the learned counsel for the parties and perused the pleadings of the parties carefully. What emerges from the pleadings of the parties is that the audit of the accounts for the year 1992-93 and 1993-94 was done in the year 1995. The disciplinary proceedings were initiated against the petitioner on 8th December, 1994. The Deputy Registrar was appointed as an Inquiry Officer. During the pendency of the disciplinary proceeding, Sh. Jagjiwan Sharma died on 24.6.1997. The proceedings were closed by the Registrar as is evident from letter dated 5.7.1997. The legal heirs were held entitled to pensionary benefits as per Annexure P-4 dated 17.9.1997. During the pendency of the disciplinary proceedings, the Registrar, Cooperative Societies had initiated proceedings under section 69 (1) of the Act. Initially the Assistant Registrar was holding the inquiry, but vide letter dated 30.4.1998 issued by the Additional Registrar, Cooperative Societies, the same were entrusted/transferred to the Deputy Registrar, Cooperative Societies, Central Division Mandi. The Deputy Registrar conducted the inquiry (Annexure R-4) dated 31.3.1999. It is evident from the contents of the report dated 31.3.1999 (Annexure R-1) that the Deputy Registrar has concluded that the petitioner’s husband has embezzled a sum of Rs. 1,30,440.73 paisa. The relevant portion of the findings recorded by the Deputy Registrar in his report reads thus: “In connection with above discussion and documents placed before me and verbal arguments which were got recorded I have reached at this conclusion that it is a clear-cut embezzlement conducted by the respondent i.e. late Sh. Jagjiwan Lal while working as Accountant in the H.P. State Handloom and Handicrafts Weavers Apex Cooperative Society Limited Kullu.” 5 In view of the findings recorded by the Deputy Registrar on 31.3.1999, the liability has been fastened on the petitioner. Thereafter the matter was taken up, as noticed above, by the Additional Registrar, Cooperative Societies under section 69 (2) of the Act. It is clear from the order dated 7th August, 2000 that a plea was raised by the petitioner that after the death of her husband on 24.6.1997, the proceedings under sections 69 (1) and (2) could not continue, more particularly, when the departmental proceedings had already been dropped on 5.7.1997. The Additional Registrar, Cooperative Societies had come to a conclusion that the departmental proceedings and surcharge proceedings were two separate and distinct proceedings and the surcharge proceedings under section 69 (2) could continue. The petitioner preferred an appeal under section 93 (G) of the Act against the order dated 7.8.2000. The thrust of the petitioner’s argument before the Secretary Cooperation was that she has not been afforded an opportunity of being heard during the proceedings. The Secretary Cooperation as is evident from his order dated 6th October, 2002 came to a conclusion that opportunity was afforded to the delinquent official. The disciplinary proceedings initiated against the petitioner vide memorandum dated 8th December, 1994 were dropped on 5.7.1997. The closing of the disciplinary proceedings against Sh. Jagjiwan Sharma after his death was in accordance with law. The purpose of the departmental proceedings was to impose penalty if misconduct was established against him. This could only be achieved if he continued to be in service. The disciplinary proceedings are quasi-criminal in nature. In view of the character of the proceedings and the nature of the penalty which can be imposed, it has nexus to the contract of service. If the person, who has undertaken that contract, is not available, it would follow 6 that no proceedings should continue. These proceedings are personal in relation to such a contract of service and the same should abate upon the death of delinquent. Such proceedings are bound to terminate and abate. If the disciplinary proceedings abate and stand terminated on the death of the employee, the moot question is whether the proceedings initiated under section 69 (1) and (2) of the Act will continue or abate after the death of an employee. There is a detailed procedure under section 69 of the Act the manner in which the surcharge proceedings are to be initiated. Sub section (1) of section 69 provides that if in the course of audit, inquiry, inspection or winding up of a cooperative society, it is found that any person who is or was entrusted with the organization or management of such society, or who is or has at any time been an officer or an employee of the society, has made any payment contrary to the provisions of this Act, the rules or the bye-law or has caused any deficiency in the assets of the society by breach of trust, or willful negligence or his misappropriated or fraudulently retained any money or other property belonging to the society, the Registrar may, of his own motion or on the application of the committee, liquidator, or any creditor, inquire himself or direct any person authorized by him, by an order in writing in this behalf to inquire into the conduct of such person. In the present case the proceedings under section 69 (1) of the Act have been conducted by the Deputy Registrar, Central Division Mandi on 31.3.1999. Sub section (2) of Section 69 provides that where an inquiry is made under sub-section (1), the Registrar may, after giving the person concerned an opportunity of being heard, make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate, or to pay contribution and cost or compensation to such extent, as the Registrar may consider just and equitable. The combined 7 reading of sub-sections (1) and (2) of section 69 clearly postulate that the conduct of such person has to be inquired into and such person has to be given an opportunity of being heard before any order is passed against him to repay or restore the money or the property etc. Sub – section (3) of section 69 provides that this section would apply notwithstanding that Act is one for which the offender may be criminally responsible. This section gives very wide powers to the Registrar. It is in this backdrop now the Court has to determine whether the petitioner could be added as party to the proceedings under section 69 (1) and (2) of the Act or the proceedings have abated or terminated on the death of Sh. Jagjiwan Sharma on 24.6.1997. The proceedings were initiated against Sh. Jagjiwan Sharma under section 69 (1) vide order dated 30.10.1996. During the pendency of these proceedings, he died on 24.6.1997. The petitioner was substituted after the death of her husband. I am of the considered opinion that the name of the petitioner could not be substituted in view of the language employed in section 69 of the Act. The expression ‘person’ denotes an employee of the cooperative society. The petitioner cannot be substituted for ‘such person’ since she could not be held liable for the actions of her husband. It is only such person i.e. an employee of the cooperative society whose conduct is to be inquired into and only such person has to be heard before any order is passed against him. The matter can be viewed from another angle as well. The findings recorded in the inquiry report under section 69 (1) have already been discussed in detail hereinabove. It is clear from the order dated 31.3.1999 that the same is not based on facts. There is non-application of mind by the Deputy Registrar. There is no mention of any document and the manner in which the arguments, if any, were advanced before 8 him. The Inquiry Officer was bound to take into consideration the documents and was supposed to note down the submissions of the parties and without observing these two principles, the finding could not be given that Sh. Jagjiwan Sharma had misappropriated a sum of Rs. 1,30,440.73 paise. The petitioner in an inquiry conducted by the Additional Registrar has specifically taken up a plea that since the disciplinary proceedings have been dropped, the proceedings under section 69 of the Himachal Pradesh Cooperative Societies Act, 1968 could not continue. The Hon’ble Supreme Court in Narinder Mohan Arya versus United India Insurance Company Limited and others, (2006) 4 SCC 713 has held that the disciplinary proceedings are quasi-criminal. Their Lordships have held as under: “In paragraph 13 of the memorial the appellant at the first opportunity raised a contention that the order of the appellate authority was not a speaking order at all, besides drawing the attention of the Chairman-cum Managing Director to the subsequent event namely the judgment and decree passed by the civil court. The said authority again did not apply its mind while passing his order dated 31st March, 1981. When such a contention was raised, it was obligatory on the part of the Chairman-cum-Managing Director while exercising its statutory jurisdiction to show that he had applied his mind to the contentions raised. Such application of mind on his part is not apparent from the order. The departmental proceedings are quasi criminal in nature. Since the departmental proceedings are quasi criminal in nature a fortiori surcharge proceedings initiated under section 69 of the Act are also quasi-criminal in nature. It is settled principle of criminal jurisprudence that a prosecution abates on the death of an accused 9 person regardless what a nature of allegations may be or what the record may indicate, one cannot come to a conclusion that had the trial ended, the accused would most certainly have been convicted. This is hypothetical situation. The presumption of innocence that holds good in the case of criminal trial is equally applicable in these proceedings where the onus to prove shifted to the department. In the present case, the authorities had to establish that Sh. Jagjiwan Sharma (deceased) had misappropriated the amount. The allegations made against Sh. Jagjiwan Sharma were serious in nature and could not be refuted in any manner by the petitioner. The petitioner was not aware of the audit report and its contents. She could not lead any evidence without being familiar with the facts, more particularly, when a serious allegation of misappropriation has been made against her husband. The Secretary Cooperation in his order dated 17.8.2002 has not assigned any reason how the principles of natural justice had been followed during the proceedings. The only submission made during the course of hearing before the Secretary Cooperation was that the delinquent official was asked to sign the cash balance, but he refused to sign the same. Merely that the delinquent official has refused to sign the cash balance it will not amount that the principles of natural justice have been complied with. To follow the principles of natural justice is not an ample formality. The basic facet of the principles of natural justice is to ensure that a citizen has been dealt with in a just and fair manner. The principles of natural justice are also one of the ingredients of rule of law. Their Lordships of the Hon’ble Supreme Court in Rajesh Kumar and others versus Dy. CIT and others, (2007) 2 SCC 181 have held that when by reason of an action on the part of statutory authority, civil or evil consequences ensure, principles of natural justice are required to be 10 followed. Their Lordships have further held that in case of denial of natural justice in a statute, the same may be held ultra vires of Article 14 of the Constitution of India. Their Lordships have held as under: “Effect of civil consequences arising out of determination of lis under a statute is stated in State of Orissa v. Dr. (Miss) Binapani Dei and Others [AIR 1967 SC 1269: (1967) 2 SCR 625]. It is an authority for the proposition when by reason of an action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice are required to be followed. In such an event, although no express provision is laid down in this behalf compliance of principles of natural justice would be implicit. In case of denial of principles of natural justice in a statute, the same may also be held ultra vires Article 14 of the Constitution. The applicability of the principles of natural justice, on the other hand, has been highlighted in Peerless General Finance & Investment Co. Ltd. (supra), West Bengal Co-Op. Bank Ltd (supra) Bata India Limited v. CIT [2002 (257) ITR 622], Joint Commissioner of Income Tax v. I.T.C. Ltd. and Another [239 ITR 921] and Muthootu Mini Kuries v. Deputy Commissioner of Income-Tax and Another [250 ITR 455]. In Swadeshi Cotton Mills v. Union of India [(1981) 1 SCC 664], Chinnappa Reddy, J., in his dissenting judgment summarized the legal position in the following terms: "The principles of natural justice have taken deep root in the judicial conscience of our people, nurtured by Binapani, Kraipak, Mohinder Singh Gill, Maneka Gandhi etc. etc. They are now considered so fundamental as to be 'implicit in the concept of ordered liberty' and, therefore, implicit in every decision making function, call it judicial, quasi-judicial or administrative. Where 11 authority functions under a statute and the statute provides for the observance of the principles of natural justice in a particular manner, natural justice will have to be observed in that manner and in no other. No wider right than that provided by statute can be claimed nor can the right be narrowed. Where the statute is silent about the observance of the principles of natural justice, such statutory silence is taken to imply compliance with the principles of natural justice. The implication of natural justice being presumptive it may be excluded by express words of statute or by necessary intendment. Where the conflict is between the public interest and the private interest, the presumption must necessarily be weak and may, therefore, be readily displaced." In Delhi Transport Corporation v. D.T.C. Mazdoor Congress and Others [1991 Supp (1) SCC 600], Ray, J. opined: "_It is now well settled that the 'audi alteram partem' rule which in essence, enforces the equality clause in Article 14 of the Constitution is applicable not only to quasi-judicial orders but to administrative orders affecting prejudicially the party-in-question unless the application of the rule has been expressly excluded by the Act or Regulation or Rule which is not the case here. Rules of natural justice do not supplant but supplement the Rules and Regulations. Moreover, the Rule of Law which permeates our Constitution demands that it has to be observed both substantially and procedurally_" [See also Basudeo Tiwary v. Sido Kanhu University and Others, (1998) 8 SCC 194 and Uptron India Ltd. v. Shammi Bhan, (1998) 6 SCC 538] 12 9 [See also Haji Abdul Shakoor & Co. v. Union of India and Others, (2002) 9 SCC 760] Exceptions, therefore, are required to be provided for either expressly or by necessary implication.” Their Lordships of the Hon’ble Supreme Court in Dev Dutt versus Union of India and others, 2008 (7) Scale-403 have held that natural justice has an expanding content and is not stagnant. It is open to the Court to develop new principles of natural justice in appropriate cases. Their Lordships have held as under: What is natural justice? The rules of natural justice are not codified nor are they unvarying in all situations, rather they are flexible. They may, however, be summarized in one word: fairness. In other words, what they require is fairness by the authority concerned. Of course, what is fair would depend on the situation and the context. Lord Esher M.R. in Voinet vs. Barrett (1885) 55 L.J. QB 39, 39 observed: "Natural justice is the natural sense of what is right and wrong." In our opinion, our natural sense of what is right and wrong tells us that it was wrong on the part of the respondent in not communicating the 'good' entry to the appellant since he was thereby deprived of the right to make a representation against it, which if allowed would have entitled him to be considered for promotion to the post of Superintending Engineer. One may not have the right to promotion, but one has the right to be considered for promotion, and this right of the appellant was violated in the present case. A large number of decisions of this Court have discussed the principles of natural justice and it is not necessary for us to go into all of them here. However, we may consider a few. 13 Thus, in A. K. Kraipak & Ors. vs. Union of India & Ors. AIR 1970 SC 150, a Constitution Bench of this Court held : "The concept of natural justice has undergone a great deal of change in recent years. In the past it was thought that it included just two rules, namely (1) no one shall be a judge in his own cause (Nemo debet csse judex propria causa), and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem). Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice". The aforesaid decision was followed by this Court in K. I. Shephard & Ors. vs. Union of India & Ors. AIR 1988 SC 686 (vide paras 12-15). It was held in this decision that even administrative acts have to be in accordance with natural justice if they have civil consequences. It was also held that natural justice has various facets and acting fairly is one of them. In Kumaon Mandal Vikas Nigam Ltd. vs. Girja Shankar Pant AIR 2001 SC 24, this Court held (vide para 2): The doctrine (natural justice) is now termed as a synonym of fairness in the concept of justice and stands as the most accepted methodology of a governmental action". In the same decision it was also held following the decision of Tucker, LJ in Russell vs. Duke of Norfolk (1949) 1 All ER 109: "The requirement of natural justice must depend on the circumstances of the case, the nature of the enquiry, the rules under which the tribunal is acting, the subject- matter that is being dealt with, and so forth". 14 In Union of India etc. vs. Tulsiram Patel etc. AIR 1985 SC 1416 (vide para 97) a Constitution Bench of this Court referred to with approval the following observations of Ormond, L.J. in Norwest Holst Ltd. vs. Secretary of State for Trade (1978) 1, Ch. 201 : "The House of Lords and this court have repeatedly emphasized that the ordinary principles of natural justice must be kept flexible and must be adapted to the circumstances prevailing in any particular case". Thus, it is well settled that the rules of natural justice are flexible. The question to be asked in every case to determine whether the rules of natural justice have been violated is: have the authorities acted fairly? In Swadesh Cotton Mills etc. vs. Union of India etc. AIR 1981 SC 818, this Court following the decision in Mohinder Singh Gill & Anr. vsT he Chief Election Commissioner & Ors. AIR 1978 SC 851 held that the soul of the rule (natural justice) is fair play in action. In our opinion, fair play required that the respondent should have communicated the 'good' entry of 1993-94 to the appellant so that he could have an opportunity of making a representation praying for upgrading the same so that he could be eligible for promotion. Non-communication of the said entry, in our opinion, was hence unfair on the part of the respondent and hence violative of natural justice. Originally there were said to be only two principles of natural justice: (1) the rule against bias and (2) the right to be heard (audi alteram partem). However, subsequently, as noted in A.K. Kraipak's case (supra) and K.L. Shephard's