IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 05.05.2010 CORAM: THE HON'BLE MRS.JUSTICE R.BANUMATHI AND THE HON'BLE MR.JUSTICE M.VENUGOPAL W.A.Nos.717, 718 of 2009 and M.P.Nos.1, 1 of 2009 and 2/2009 K.R.Palaniswami .... Appellant in both W.As. Vs. 1.The Cooperative Societies Special Tribunal, Periyar District, Erode (The Principal District Judge-Periyar District, Erode). 2.The Deputy Registrar of Cooperative Societies, Gopichettipalayam, Erode District. 3.The Special Officer, Hills Living People 'Lamp' Cooperative Society, Sathyamangalam, Erode District. .....Respondents in both W.As. 4.A.Balasubramaniam, Co-operative Sub-Registrar, (Package), Sathyamangalam, Erode District. ...R4 in W.A.717/2009 Writ Appeals filed under Clause 15 of the Letters Patent against the orders passed by the Learned Single Judge in W.P.Nos.10424 and 10425 of 1999 dated 11.12.2008. Petitions filed under Article 226 of the Constitution of India praying this Court to issue a writ of certiorari calling for the records of the second respondent's Surcharge Order made in Na.Ka.No.8242/93 A dated 26.12.1995 and Na.Ka.No.15972 of 1994 A dated 12.6.1995 respectively as confirmed by the order of the first respondent – Co-operative Tribunal, made in CMA.No.4 of 1996 dated 11.11.1998 and C.M.A.No.146 of 1995, dated 11.11.1998 respectively and quash the same. https://hcservices.ecourts.gov.in/hcservices/ For Appellant : Mr.V.Bharathidasan in both W.As. For Respondents : Mr.A.Arumugham for R1 and R2 in both W.As. Special Government Pleader Mr.S.Kamadevan for R3 JUDGMENT M.VENUGOPAL,J. The Appellant/Petitioner has filed these Writ Appeals as against the orders dated 11.12.2008 passed in W.P.Nos.10424 and 10425 of 2009. 2. The Learned single Judge while passing orders in W.P.Nos.10424 and 10425 of 1999 had among other things observed that 'The Tribunal recorded a clear finding that the Petitioner has caused loss to the Society and despite opportunities were granted, he has not submitted his explanation and was repeatedly taking adjournments and his defence was not accepted by the Tribunal. Even before this Court, the Petitioner had tried to contend elaborately that he was not responsible for the loss or that the procedure followed by him was the same as the earlier procedure followed by everyone, which cannot be accepted and found that there was no violation of the principles of natural justice or any perversity of finding by the Tribunal in confirming the order of the Deputy Registrar, etc., and further was not inclined to go into the merits of the case as if this Court was a further Appellate Authority constituted under the Act and resultantly, dismissed the writ petitions.' 3. According to the Learned counsel for the Appellant/Writ Petitioner, the Learned single Judge had not considered the case of the Appellant in a proper perspective and in fact, he had not considered the grounds raised by him in a proper perspective. Moreover, the Original Authority as well as the Appellate Tribunal had not appreciated the defence of the Appellant properly, when in the enquiry proceedings none of the original documents were supplied to substantiate the charge levelled against the petitioner but only xerox copies were produced and not acceptable reasons were adduced for non production of the original documents. 4. It is the further contention of the Learned counsel for the Appellant that the Learned single Judge had failed to take into account of the fact that the Appellant was alone discriminated and singled out leaving others and indeed, the Appellant was punished in violation of Article 14 of the Constitution of India. 5. That apart, it is the stand of the Appellant/Writ Petitioner that the Learned single Judge committed an error in coming to the https://hcservices.ecourts.gov.in/hcservices/ conclusion that the time limit prescribed under the Tamil Nadu Cooperative Societies Act for completion of enquiry as per Section 81 is not mandatory, when the Act prescribed certain time limit which is mandatory in nature, which has to be followed by the Authority scrupulously. 6. Also, a plea is projected on the side of the Appellant that in the Audit Report, there was nothing to show that the Appellant had caused loss to the Society and no amount was mentioned as Sundry Debtor against him, but he was shown as a Sundry Creditor and therefore, it is quite clear that he had not caused any loss to the Society. 7. On the side of the Appellant, the Learned counsel submits that the Fourth Respondent (Deceased) worked as a Special Officer of the Sathy LAMP Society till 06.12.1991 and thereafter the Appellant/Writ Petitioner joined as a Special Officer of the said Society on 07.12.1991 till 24.08.1993 and he was transferred from the Society and further that the Appellant/Writ Petitioner submitted a special Report to the Deputy Registrar that the Fourth Respondent (Deceased) paid wages advance of Rs.3.50 lakhs when there was no collection of minor forest produces and on the basis of the Appellant/Writ Petitioner's Special Report, Enquiry under Section 81 of the T.N. Cooperative Societies Act was ordered and the Enquiry Officer submitted an Enquiry Report recommending to collect the illegal payment of wage advance and before ever the said amount was collected, the Fourth Respondent was appointed as an Inspection Officer under the Act and therefore, it is a clear case of bias and indeed, the Fourth Respondent ought not to have been appointed as an Inspection Officer to submit a Report against the Appellant. However such a thing was not resorted to and as such, the Enquiry Report of the Fourth Respondent dated 21.05.1993 against the Appellant is vitiated in Law and the same is not legally sustainable. 8. In view of the aforesaid factual and legal pleas raised by the Appellant/Writ Petitioner, the Learned counsel for the Appellant prays for allowing the writ appeals to promote substantial cause of justice. 9. In the writ petitions W.P.Nos.10424 and 10425 of 1999, the Appellant/Writ Petitioner had prayed for issuance of a writ of Certiorari in calling for the records of the Second Respondent's Surcharge Order made in Na.Ka.No.8242/93 A dated 26.12.1995 and Na.Ka.No.15972 of 1994 A dated 12.06.1995 respectively as confirmed by the order of the First Respondent/Cooperative Tribunal, made in C.M.A.Nos.4 of 1996 dated 11.11.1998 and 146 of 1995 dated 11.11.1998 respectively and to quash the same. 10. In W.P.Nos.10424 of 1999 arising out of C.M.A.No.4 of 1996, in the Enquiry Report of the Fourth Respondent (Since deceased) dated https://hcservices.ecourts.gov.in/hcservices/ 21.05.1983 under Section 82 of the Tamil Nadu Cooperative Societies Act, it was mentioned that the Loss was caused to the Society as hereunder: i)The Society has failed to publish the sale of Goose Berry (Nellikai) in an eminent Daily Papers and this publication is hided from may leading businessmen. ii)The Society failed to adopt the procedure of grading but accounted the grading has as per procedure. iii)It is failed to collect deposit and agreement has sale from merchants who purchased them from the Societies. iv)The Special Officer himself gives permits to being the forest products from collection centre to the Society and the entire collection products has not been accounted for in the Society. v)The Special Officer appointed Agents against department instructions and paid less wages besides to increase the expenditure for collection and then caused loss to the Society. vi)He not only paid Lorry freight to bring the collected Nelligai from Centre to Society and paid freight to lorries third various places with Nelligai and thus caused loss to the Society. vii)He failed to adopt the procedure as laid down by the Registrar besides above failed to maintain appropriate registers and thus caused loss to the Society. viii)He failed to adopt the procedures of collection and sales and caused loss to the Society. Further, the Appellant/Special Officer was found to be responsible for the loss caused and for the deficiency thereto. Moreover, T.Mohanraj, Clerk, N.Mohan, K.N.Subramanigounder, N.Mahadevan and K.Abeem Collection Managers were also responsible for the loss sustained by the Society. The Appellant/Cooperative Sub Registrar/Special Officer was found to be responsible for the entire collection and sales of the entire small forest produces and as such, there were all responsible jointly and severally in regard to the loss of Rs.13,34,975.20/- suffered by the Society. Therefore, to recover the Loss, surcharge proceedings was directed to be initiated as per Section 87 of the Tamil Nadu Cooperative Societies Act 1983. 11. The Fourth Respondent (since deceased) submitted his Enquiry Report in regard to the irregularity in collection and sales of goose berry during the year 1992 on the basis of the order of the Deputy Registrar dated 20.02.1993 in ordering for inspection under Section 82 of the Tamil Nadu Cooperative Societies Act in respect of the Society in which the Appellant was the Special Officer. 12. The Second Respondent on 26.12.1995 passed an order under Section 87 of the Tamil Nadu Cooperative Societies Act in regard to the deficiency caused to the Society to an extent of https://hcservices.ecourts.gov.in/hcservices/ Rs.13,34,975.20/- by the Appellant/Former Special Officer and the employees of the Society. 13. In W.P.No.10425/1999 arising out of C.M.A.No.146 of 1995, the affairs of Sathyamangalam LAMP Cooperative Society were found to be not satisfactory and therefore, an Enquiry was ordered by the Registrar of Cooperative Society one C.V.Mohana Ranganathan, Cooperative Sub-Registrar/Superintendents, Special Investigation Squad was authorised to conduct an Enquiry and submit his Report. 14. On 12.06.1995, the Deputy Registrar of Gopichettypalayam passed an order under Section 87(1) of the Tamil Nadu Cooperative Societies Act in regard to the functioning of Sathyamangalam Range Hill Tribes Large Sized Multi purpose Cooperative Society Ltd which was found to be not satisfactory and enquiry under Section 81 of the Tamil Nadu Cooperative Societies Act was ordered by the Registrar of the Cooperative Societies and an amount of Rs.2,73,843.50/- was found out to be the loss caused to the Society as per Enquiry Report dated 11.02.1994 and as mentioned hereunder:- SI.NO. Details Rs.Ps. The Persons who committed the deficiency to the asset of the Society. 1 Focus credit bill prepared in favour of CMS vegetables suppliers Puliampatty and caused loss. 71587.5 a) N.P.Krishnamoorthy, Asst. Of the said Society. b)R.Rathinam, Godown Keeper of the said Society. c) K.R.Palanisamy, Ex- Special Officer 2 Incentive paid for M.Mani of a member of the Society raising focus bills for the collection of Nelligai and minor forest produces. a) Incentive to Nelligai for collection Rs.1056/- b)Incentive to minor forest produce Rs.2104/- 3,160/- a) N.P.Krishnamoorthy, Asst. Of the said Society. b)M.Sampathkumar Driver of the said Society. c) K.R.Palanisamy, Ex- Special Officer and CSR of the said Society. https://hcservices.ecourts.gov.in/hcservices/ SI.NO. Details Rs.Ps. The Persons who committed the deficiency to the asset of the Society. 3 When the practice of the payment of incentive had not been paid since the Society's inception amount paid without departmental permission during the year 1992-93. a)2164.00 b)25810.25 c)67,794.75(1993-94) 95769/- K.R.Palanisamy, Ex- Special Officer and CSR of the said Society. 4 Lorry freight paid by increasing it. 1992-93 33139/- 1992-94 2534/- 34673/- K.R.Palanisamy, Ex- Special Officer and CSR of the said Society. 5 During the year 1993-94 minor forest products accounted as damaged and disposed for a reducing rates. 68654/- R.Rathinam, Godown Keeper and K.R.Palanisamy, Ex- Special Officer and CSR of the said Society. According to Section 81 Report, responsibility was fixed on the Appellant and the Appellant/Ex-Special Officer of the Society and Others. 15. In the said order of the Deputy Registrar of the Cooperative Societies, Gobi Circle, the Appellant and the employees were made responsible jointly and severally to recoupe the loss caused to the Society at the rate of 21% interest till its realisation and the same is extracted as below:- SI.NO. Details Amount Rs.Ps. Details of the order 1 During the year 1992-93 bogus bills created as suppliers were made to CMS vegetable suppliers at P.Puliampatty and caused loss. 71587 The amount had been realized to the Society and hence surcharge action is dropped on K.R.Palanisamy and R.Rathinam Godown Keeper. https://hcservices.ecourts.gov.in/hcservices/ SI.NO. Details Amount Rs.Ps. Details of the order 2 By creation of bogus bills in the name of M.Marimuthu, a member of the Society, at Mavanatham of the Society as he was paid incentive for the collection of Nelligai and minor forest product. 3160 N.P.Krishnamoorthy, Clerk, M.Sampathkumar Driver, K.N.Subramaniagounder , Asst.Maistry and K.R.Palanisamy, Ex Special Officer of the Society had remitted the amount. Hence the order of surcharge is dropped. A Incentive to the collection of Nelligai 1056 AA Incentive to the minor forest produce 2104 Total 74747.5 3A) Incentives paid during the year 1992-93 exlcuding the amount of Rs.43,188/- paid from 05.10.1992 to 16.02.1993 and included in the surcharge proceedings vide Na.Ka.No.8293/93 A dated 07.07.1993 a) Incentive paid to the Collections of Nelligai on 03.01.1993 Incentive paid to the collection of minor forest produces during 1992-93 Incentive paid to the collection of minor forest produce during the year 1993-94 2164 25,810.25 67,794.75 TheEx Special Officer K.R.Palanisamy, C.S.R. with interest at 21% p.a. till CA realisation to the Society. Total 95769 https://hcservices.ecourts.gov.in/hcservices/ SI.NO. Details Amount Rs.Ps. Details of the order 4 Lorry hire paid by increasing them and caused loss to the Society 1992-93 32139.00 1993-94 2534.00 34673 Total 1,30,442.00 5 During the year 1993-94 sales by a reduced rate as the Seevamarpulls damaged and caused loss to the Society 68654 R.Rathinam, Godown Keeper of the Society and K.R.Palanisamy the Ex Special Officer have to recoupe the loss to Society jointly and severally at the rate of 21% p.a. till its realisation. 16. Since Items 1 and 2 referred to above was realised to the Society, the action under Section 87(1) of the Tamil Nadu Cooperative Socities Act was dropped for Rs.74,747.50. In regard to the items 3 (A) (a,b,c and 4) and consists of loss of Rs.1,30,442/-. The Appellant was made responsible for the recoupement and in regard to the Item No.5 a sum of Rs.68,654/- one K.Rathinam Godown Keeper of the Society and the Appellant/Ex-Special Officer of the Society were made jointly and individually responsible for recoupement at the rate of 21% interest till its realisation of the Society. 17. According to the Learned counsel for the Appellant, the Appellant followed the procedure and called for tender and there was no finding rendered by the competent Authority that the Appellant had not called for tenders and as a matter of fact, the procedure followed by the Appellant was approved by the Deputy Registrar and in fact, the Appellant had given incentive to the members only. But the incentive was given without authorisation and the Appellant gave an incentive of one rupee and also during the year 1992-93, there was no loss to the Society. 18. Continuing further, it is the contention on the side of the Appellant/Writ Petitioner that he purchased small forest produces from the members and to say that the Appellant had violated the circular was not correct and in fact, there were no intermediary brokers. https://hcservices.ecourts.gov.in/hcservices/ 19. Advancing his arguments, the Learned counsel for the Appellant submits that the objections of the Appellant were not taken into account and therefore a perverse finding was rendered by the competent Authority. In regard to the gunny bags explanations were given and there was no finding that the Appellant sold the Goose berry wilfully for a lower amount and being a Hill area, there was no other option but to pay a higher rate to the Hiring of Lorry. Also, it is to be seen that there was no charge of misappropriation against the Appellant/Society. 20. A plea is also taken on behalf of the Appellant that on none of the occasions the committee was convened and fixed the price and in fact, the Committee was not functioning. At no point of time, the price was fixed by the Committee and also the elected members of the Society were dissolved and the Appellant's actions were bonafide and performed only in the interest of Society and he had not wrongfully gained from his actions. 21. It is the contention on the side of the Appellant that on a mere assumption, the liability could not be fastened on the appellant. 22. According to the Learned counsel for the appellant, against the Enquiry Officer, an enquiry was pending on a complaint given by the Appellant and therefore the Appellant alleged malafide against the Enquiry Officer but this aspect of the matter was not appreciated by the concern, which had resulted in an erroneous orders have been passed against the Appellant. 23. The next limb of the argument put forward on the side of the Appellant is that the enquiry commenced on 07.07.1993 and it went on for a period of one year viz., 06.07.1994 and the extension for time was obtained, and in fact a ratification was obtained only on 11.02.1995 viz., the time extended upto 31.12.1995 which against the time fixed under the Act. 24. The Learned counsel for the Appellant brings it to the notice of this Court that when the writ petitions were pending the fourth respondent (since deceased) was alive and since as against the fourth respondent, the Appellant had preferred a complaint and enquiry was pending against him, he could not be the Enquiry Officer and therefore, the entire proceedings were initiated in the eye of Law. 25. The Learned Special Government Pleader appearing for the respondents 1 and 2 supported the orders passed by the Authorities and the Judgment rendered in C.M.A.Nos.4 of 1996 and 146 of 1995 by the Cooperative Tribunal and also, the orders passed by the Learned Single Judge in W.P.Nos.10424 and 10425 of 1999 and submits that the https://hcservices.ecourts.gov.in/hcservices/ same need not be interfered by this Court. 26. In response, the Learned counsel for the Third Respondent submits that the Appellant was the Special Officer of the Society from 07.12.1991 to 21.04.1993 and during 1992-93, many irregularities were committed in the collection and sale of Goose berry and the Appellant had to call for tenders and he must ascertain the market price of goose berry and in fact, he loaded the goose berry in a lorry and sold it at Coimbatore. Thus, he failed to discharge his duties in terms of the Bye Laws and Circulars of the Society and by his conduct, the Society had sustained loss. 27. Further, it is the argument of the Learned counsel for the third respondent that the Board of the Society was dissolved and in short, a clear finding had been rendered by the Authorities concerned in their orders and even C.M.A.Nos.4 of 1996 dated 11.11.1998 and 146 of 1995 filed by the Appellant were dismissed by the Cooperative Tribunal and as such, the Appellant cannot establish from the predicament that he is presently inn and therefore prays for dismissal of the writ appeals. 28. The Learned counsel for the Appellant cites the decision of this Court M.SAMBANDAM V. THE DEPUTY REGISTRAR (CREDIT) CO- OPERATIVE SOCIETIES, MYLAPORE, MADRAS AND OTHERS, 1999(3) MLJ 310, wherein it is held as follows:- "It is stated that the petitioner, was furnished only the show cause notice but not the claim made by the Deputy Registrar and the copy of the Enquiry Report. If any surcharge proceeding is initiated under Section 71, the same has to be done in accordance with the said provision. The said provision makes it clear that if any proceeding is initiated under Section 71, before passing final order, the person concerned must be given an opportunity toputforth his claim. In the light of second proviso to Sec.71(1) in the absence of proof of furnishing of copy of enquiry report to the petitioner, further action taken by the first respondents, in pursuance of the enquiry report cannot be sustained on the principles of violation of statutory provision and natural justice." 29. He also cites the Division Bench decision of this Court S.SUBRAMANIAN V. THE DEPUTY REGISTRAR OF CO-OPERATIVE SOCIETIES (HOUSING) CUDDALORE AND OTHERS, (2002) 3 LW 185, wherein it is laid down as follows: "In the present case it has to be pointed out that no finding has been recorded by the first respondent or by the third respondent to establish that the deficiency had been caused wilfully or https://hcservices.ecourts.gov.in/hcservices/ deliberately or with a view to cause loss to the assets of the Society. Nowhere a finding has been rendered either by the first respondent or by the third respondent or with a view to cause loss to the assets of the Society. Nowhere a finding has been rendered either by the first respondent or by the third respondent in their proceedings that the petitioner is guilty of wilful negligence or wantonness, nor it has been recorded that omission or commission on the part of the petitioner is deliberate, reckless or callous or loss has been caused deliberately to the assets of the Society. In the absence of such a finding, as has been consistently held by this Court, that the petitioner is guilty of wilful or deliberate negligence or there is intention to cause loss to the assets of the Society, it follows that the impugned surcharge proceedings in so far as the petitioner is concerned are liable to be quashed." 30. The Learned counsel for the Appellant draws the attention to the Division Bench decision of this Court K.AJAY KUMAR GOSH AND OTHERS V. TRIBUNAL FOR COOPERATIVE CASES, (DISTRICT JUDGE OF KANYAKUMARI DISTRICT) NAGERCOIL AND ANOTHER, (2009) 4 MLJ 992, wherein it is observed as follows: "To pass surcharge order under Section 87 of the Tamil Nadu Cooperative Societies Act, the employees of the Cooperative Society should have done an actionable wrong either by commission or omission in a deliberate and reprehensible manner with reckless callousness and with a supine indifference without taking due care and caution ordinarily expected from a reasonable and prudent man under the existing circumstances. In the absence of such categorical finding, it is not possible to mulct the employees with the loss caused to the Society." 31. The Learned counsel for the third respondent cites the Division Bench decision of this Court S.V.K.SAHASRAMAM V. DEPUTY REGISTRAR OF COOPERATIVE SOCIETIES, TIRUVANNAMALAI CIRCLE, TIRUVANNAMALA AND OTHERS, (2008) 8 MLJ 231, at page 232, wherein it is observed as follows: "Where there are allegations of embezzlement and misappropriation of public funds, the members of general public who have been cheated have no control over those who hold the enquiry in respect of the time limit. To hold that such an enquiry that has been continued beyond the time limit is bad would cause great injustice. Therefore, enquiry continued beyond the time limit mentioned in the relevant https://hcservices.ecourts.gov.in/hcservices/ statute, the said time cannot be held to be mandatory in view of principles laid down in Montreal Street Railway Company v. Normandin AIR 1917 PC 142 which has been affirmed by Supreme Court." 32. At this stage, we aptly point out the decision of this Court GABRIEL V. THE DEPUTY REGISTRAR (HOUSING), CUDDALORE AND ANOTHER (2003) 2 MLJ 624, wherein it is held as follows: "The respondents had not made out that the petitioner had caused any loss to the Society. The petitioner has also given reasons for carrying out the work and the same cannot be rejected on the ground that they are not convincing but on the other hand, the explanation offered by the petitioner appears to be that he had acted only pursuant to the resolution passed in the General body and if there is any further latches in observing certain procedure, it would not amount to misappropriation of the amount. When there is no misappropriation of amount, then it would only amounts to mis-application and when the mis-application not having caused any loss to the Society, a surcharge proceeding is not justifiable. If any irregularity committed by the petitioner in failing to secure permission from the authorities concerned, it would not result in being surcharged but may result in any disciplinary action being taken as against him. It is left open to the authorities, if they consider that it is necessary, to take disciplinary action against the petitioner for failure on his part in not having followed certain procedures, but the order of surcharge is not legal and the same is liable to be set aside, accordingly, it is set aside." 33. Yet another decision of this Court P. KARUPPIAH V. THE DEPUTY REGISTRAR OF COOPERATIVE