HON’BLE SRI JUSTICE P.S. NARAYANA W.P.No.27578 of 2008 and W.P.No.7959 of 2008 % 21.8.2009 W.P.No.27578 of 2008 #The Punadipadu Primary Agricultural Cooperative Credit Society Ltd., Punadipadu village, Kankipadu mandal, Krishna District, rep. By its President D. Jalachandrudu. … Petitioner And $1. The Deputy Registrar of Cooperative Societies, Vijayawada, Krishna District and 2 others. …. Respondents !COUNSEL FOR PETITIOINER: Smt. Bobba Vijayalakshmi COUNSEL FOR RESPONDENT NO.1: G.P. FORCOOPERATION COUNSEL FOR RESPONDENT NO.2: SRI B. AUDINARAYANA COUNSEL FOR RESPONDENT NO.3: SRI VENKATESWARLU POSANI * * * W.P.No.7959 of 2008 Between: P.V.S. Ramabrahmam. … Petitioner And 1. The Deputy Registrar of Cooperative Societies, Vijayawada, Krishna District and 2 others. …. Respondents * * * COUNSEL FOR PETITIONER: SRI POSANI VENKATESWARLU COUNSEL FOR RESPONDENT NO.1: G.P. FORCOOPERATION COUNSEL FOR RESPONDENT NO.2: SRI B. AUDINARAYANA COUNSEL FOR RESPONDENT NO.3: SMT. BOBBA VIJAYALAKSHMI <GIST >HEAD NOTE: ?CASES REFERRED: 1. AIR 1985 SC 582 2. AIR 1977 MADRAS 92 HON’BLE SRI JUSTICE P.S. NARAYANA W.P.No.27578 of 2008 and W.P.No.7959 of 2008 Friday the 21st day of August 2009 W.P.No.27578 of 2008 Between: The Punadipadu Primary Agricultural Cooperative Credit Society Ltd., Punadipadu village, Kankipadu mandal, Krishna District, rep. By its President D. Jalachandrudu. … Petitioner And 1. The Deputy Registrar of Cooperative Societies, Vijayawada, Krishna District and 2 others. …. Respondents * * * W.P.No.7959 of 2008 Between: P.V.S. Ramabrahmam. … Petitioner And 1. The Deputy Registrar of Cooperative Societies, Vijayawada, Krishna District and 2 others. …. Respondents * * * COMMON ORDER: In view of the interdependency and commonality of the questions involved, both these writ petitions are being disposed of by a common order. 2. Heard Smt. Bobba Vijayalakshmi and Sri Venkateswarlu Posani and the learned Government Pleader for Cooperation and also Sri B. Adinarayana Rao, representing the parties in both these writ petitions. 3. P.V.S. Ramabrahmam, writ petitioner in W.P.No.7959 of 2008 prayed for issuance of a writ of Mandamus directing the respondents to pay gratuity amount of Rs.2,81,375/- to the said writ petitioner along with interest at 12% with effect from 31.8.2002 and pass such other suitable orders. 4. The said writ petitioner is the second respondent in W.P.No.27578 of 2008. The Punadipadu Primary Agricultural Cooperative Society, third respondent in W.P.No.7959 of 2008, is the writ petitioner in W.P.No.27578 of 2008. The said writ petition was filed praying for issuance of a writ of Certiorari calling for records pertaining to the orders in O.A.No.70 of 2004 on the file of A.P. Co- operative Tribunal, Vijayawada, dated 08.12.2006, and quash the same and pass such other suitable orders. 5. In W.P.No.7959 of 2008, on 28.4.2008, Rule Nisi was issued and in W.P.M.P.No.10473 of 2008 the following order was made. “It is stated that the third respondent has been served with notice and he did not choose to enter appearance. When the petitioner was in service, surcharge proceedings were initiated against him and others and he was jointly and severally liable to pay a sum of Rs.2,81,000/-. Aggrieved thereby, the petitioner filed O.A.no.70 of 2004 in A.P., cooperative Tribunal, Vijayawada. Through its judgment, dated 08.12.2006, the Tribunal had set aside the surcharge order against the petitioner. When the petitioner approached the second respondent for payment of gratuity, a memo, dated 24.01.2008, was issued stating that a sum of Rs.2,81,000/- was paid to the third respondent-society towards surcharge amount. Since the order of surcharge was set aside, the third respondent-society would be under obligation to pay the amount to the petitioner. Hence, there shall be interim direction to the third respondent-society to release a sum of Rs.2,81,000/-, provided there are no orders of stay as regards the order passed by the Tribunal in O.A.No.70 of 2004.” 6. In W.P.No.27578 of 2008 this Court issued Rule Nisi on 18.12.2008 and in W.P.M.P.No.36140 of 2008 interim suspension had been granted on the said date. 7. The writ petitioner in W.P.No.7959 of 2008, who is the second respondent in W.P.No.27578 of 2008, being aggrieved of the interim suspension granted in W.P.M.P.No.36140 of 2008 in W.P.No.27578 of 2008 filed W.V.M.P.No.1278 of 2009 praying for vacation of the said order. When the said application was taken up for hearing, the counsel on record in both the writ petitions made submissions in elaboration and also further made a request for final disposal of these writ petitions and, hence, these writ petitions are being disposed of finally. 8. Smt. Bobba Vijayalakshmi, the learned counsel representing the writ petitioner in W.P.No.27578 of 2008 made elaborate submissions taking this Court through the contents of the order under challenge in the said writ petition and further had drawn the attention of this court to different provisions of the Andhra Pradesh Co-operative Societies Act, 1964 (hereinafter in short referred to as “the Act” for the purpose of convenience) and would maintain that in the light of the clear evidence available on record, the Andhra Pradesh Co-operative Tribunal at Vijayawada (hereinafter in short referred to as “the Tribunal” for the purpose of convenience) having recorded clear findings relating to the recklessness and negligence, totally erred in coming to the conclusion that the same would not amount to wilful negligence. The learned counsel also pointed out to the proceedings relating to surcharge inquiry and also the findings recorded by the Tribunal at paras 42, 43, 46 and 51. The learned counsel also would submit that the allegations are serious allegations relating to misappropriation and further public money is involved and in the light of clear evidence available on record, especially, the same being in pursuance of the inspection under Section 53 of the Act, the findings recorded by the Tribunal being unsustainable, the same is liable to be quashed. The learned counsel also would further maintain that the result of writ petition W.P.No.7959 of 2008 would depend upon the order, which may be made in W.P.No.27578 of 2008. The learned counsel also would maintain that in the light of the same, both these writ petitions may be disposed of by a common order. The learned counsel also relied on certain decisions. 9. Sri Posani Venkateswarlu, the learned counsel representing the writ petitioner in W.P.No.7959 of 2008 and the second respondent in W.P.No.27578 of 2008 would maintain that the Punadipadu Primary Agricultural Cooperative Credit Society Limited (hereinafter in short referred to as “the Society” for the purpose of convenience) had chosen to challenge the order made in O.A.No.70 of 2004 on the file of the Tribunal alone. The counsel also further pointed out that almost the entire evidence is common and further pointed out to issue Nos.7 and 8 and also would further maintain that the Assistant Manager is not the employee of the Society. The learned counsel also further pointed out to the evidence available on record and also had taken this Court through the findings recorded by the Tribunal, in particular, certain of the findings at para 40. The learned counsel also explained under what circumstances the second respondent in W.P.No.27578 of 2008 filed W.P.No.7959 of 2008. The counsel also relied on certain decisions to substantiate his submissions. 10. Learned Government Pleader for Cooperation had pointed out to the respective stands taken by the parties, the evidence available on record and the findings recorded by the Tribunal and also further explained the scope and ambit of Section 60 of the Act. 11. Sri B. Audinarayana Rao also pointed out to the relevant portions of the order under challenge and made certain submissions. 12. Heard the counsel on record, perused the respective pleadings of the parties, the evidence available on record and also the findings recorded by the Tribunal in O.A.No.70 of 2004 and batch. 13. The Punadipadu Primary Agricultural Co-operative society filed W.P.No.27578 of 2008 for a writ of Certiorari calling for records pertaining to the orders in O.A.No.70 of 2004 on the file of A.P. Co- operative Tribunal, Vijayawada, dated 08.12.2006. It is averred in the affidavit filed in support of the said writ petition that the second respondent worked as Assistant Manager of Kankipadu Branch of the District Cooperative Central Bank Ltd., Krishna District and retired from service on 31.8.2002 on attaining superannuation. It is also stated that when he was working at Kankipadu Branch, he was implicated in misappropriation to a tune of Rs.1,81,800/-. The District Cooperative Officer, Krishna District ordered an inspection under Section 53 of the Act into the affairs of the petitioner society vide Rc.No.5861/2002-D1, dated 05.9.2002. A report was submitted on 05.11.2002 revealing a total fraud of Rs.28,39,560/- and so far as second respondent is concerned, liability of Rs.1,81,800/- is found against him. 14. Further it is averred that the first respondent conducted an inquiry under Section 60 of the Act and issued proceeding in Rc.No.2388/2002-E, dated 20.01.2004, fixing joint liability against the second respondent and three others for Rs.1,81,800/-. He was found guilty of being negligent in supervising the loans of the society and SAO loans were drawn by forging the signatures of the loanees. 15. It may be appropriate to have a glance at Section 60 of the Act and the same reads as hereunder. “Surcharge:- (1) [Notwithstanding anything contained in any other law for the time being in force] where in the course of an audit under Section 50 or an inquiry under Section 51 or an inspection under Section 52 or Section 53, or the winding up of a society, it appears that any person who is or was entrusted with the organization, affairs or management of the society or any past or present officer or servant of the society has misappropriated or fraudulently retained any money or other property or has been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has made any payment contrary to the provisions of this Act, the rules or the bye-laws, the Registrar himself, or any person specially authorized by him in this behalf, of his own motion or on the application of the committee, liquidator or any creditor or contributor, may inquire into the conduct of such person or officer or servant and make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate as the Registrar or the person authorized as aforesaid thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, misapplication of funds, fraudulent retention, breach of trust, or wilful negligence as the Registrar or the person authorized as aforesaid thinks just: Provided that no order shall be passed against any person referred to in this sub-section unless the person concerned has been given an opportunity of making his representation. (2) Any sum ordered under this section to be repaid to a society or recovered as a contribution to its assets may be recovered on a requisition being made in this behalf by the Registrar to the Collector in the same manner as arrears of land revenue. (3) This section shall apply notwithstanding that such person or officer or servant may have incurred criminal liability by his act.” 16. Further it is averred that respondent No.2 filed O.A.No.70 of 2004 on the file of the A.P. Cooperative Tribunal, Vijayawada, and the said appeal along with other appeals filed by others delinquents were allowed on 08.12.2006 setting aside the surcharge orders, dated 20.01.2004. Challenging the same, the present writ petition is filed. 17. It is also averred that the second respondent was entitled for a gratuity of Rs.2,91,808/- and leave encashment of Rs.97,526/-, in total Rs.3,89,334/-. The petitioner filed E.P.No.26 of 2004-05, Rs.1,74,972/- for recovery of an amount of Rs.1,35,900/- along with interest and E.P.No.31 of 2004-05 for Rs.59,097/- for recovery of Rs.45,900/- with interest before the Deputy Registrar/OSD, DCCB, Krishna District. An amount of Rs.2,87,000/- was deposited at Machilipatnam Branch in the name of the second respondent under the lien of the bank as per his consent letter submitted on 20.12.2004 for Rs.2,87,000/-. The amount accrued to Rs.3,47,168/- with interest as on 23.6.2005 when an amount of Rs.2,81,375/- was paid to the society based on the consent letter of the second respondent and the balance amount of Rs.65,793/- was credited to his Account No.134999 at Machilipatnam Branch of DCCB. Having agreed to pay the amounts due to the society, the second respondent, after his appeal O.A.No.70 of 2004, filed W.P.No.7959 of 2008 seeking the amount of Rs.2,81,375/- without disclosing the fact that he had already withdrawn the balance of Rs.65,793/- which was credited to his account on 23.6.2005. This Court, in W.P.M.P.No.10473 of 2008, dated 28.4.2008, granted interim direction to release an amount of Rs.2,81,000/-. Since the orders are not implemented, a contempt case C.C.No.1253 of 2008 is filed. 18. It is also stated that the petitioner society could not file the writ petition immediately after the second respondent appeal being allowed due to financial strain and loss to the society. In view of the Debt Relief Scheme also the petitioner society was also not in a position to approach the Court in time. Further it is stated that the Tribunal allowed the appeal of the second respondent on the ground that it would not fall within the wilful negligence. The inspection report as well as surcharge proceeding reveals that the second respondent along with three other employees as having involved in forging the instruments in the names of the members, who sold away the lands and whose documents were returned, SAO loans were drawn by forging the signatures of the loanees. 19. Further stand had been taken that the petitioner society will suffer irreparable loss and hardship, if the order in I.A.No.70 of 2004, dated 08.12.2006, is not suspended. The society is running at loss to a tune of Rs.40.00 lakhs for the year 2006-2007. There is no money in the society to pay salaries to the employees. In fact, as of now the society is not having any employees. In such circumstances the said writ petition had been filed. 20. It is needless to say that the second respondent in this writ petition, as writ petitioner in W.P.No.7959 of 2008, filed writ petition for a writ of Mandamus directing the respondents to pay gratuity amount along with interest. It is needless to say that the said direction was prayed for in the light of the order made by the Tribunal specified supra and the said order is being challenged in W.P.No.27578 of 2008. 21. In the counter-affidavit filed along with W.V.M.P.No.1278 of 2009 by the second respondent it is averred at para 3 that the second respondent in W.P.No.27578 i.e., writ petitioner in W.P.No.7959 of 2008, retired as Assistant Manager of Krishna District Cooperative Central Bank Limited on 31.8.2002. When he was Assistant Manager of the Bank, he functioned as incharge Branch Manager of the bank, when the regular bank manager was on leave. The members of the society used to obtain agricultural loans from their bank through the said cooperative society. An inspection under Section 53 of the Act was conducted into the affairs of the society. Section 53 of the Act reads as hereunder. “Inspection of books by financing bank or federal society:- A financing bank or a federal society shall have the right to inspect the books of any society, which is indebted to it. The inspection may be made either by an officer of the financing bank or federal society authorized by the committee of such bank or society or by a member of its paid staff certified by the Registrar as competent to undertake such inspection. The officer or member so [authorized to conduct inspection] shall at all reasonable times have free access to the books, accounts, documents, securities, cash and other properties belonging to or in the custody of the society and may also call for such information, statements and returns as may be necessary to ascertain the financial condition of the society and the safety of the sums lent to it by such bank or society. [The Officer or Member so authorized to conduct the inspection shall prepare a report of inspection, which shall be communicated to the Managing Committee of the society together with the findings of the Registrar thereon. It shall be he responsibility of the Managing Committee to place the Inspection Report together with the findings of the Registrar before the General Body or Special General Body convened for the purpose for its information, within a period of one month of the communication of the Inspection Report by the Registrar. The Registrar shall be competent to initiate action under the provisions of this Act, if the Committee fails to take action as aforesaid: Provided that such action shall not be nullified even if the General Body of the Society passes a resolution negativing the findings of the Registrar: Provided further that notwithstanding anything contained in this Act and Rules made thereunder the bye-laws of a Society and the action of the Society in placing the Inspection Report along with findings of the Registrar, the Registrar shall not be precluded from taking, follow up action as may be required on the basis of Inspection Report. Explanation:- For the purposes of this section, “Managing Committee” include a Committee constituted under Section 31 (1)(a), and a person-in-charge appointed under Section 32 (7)(a), and also a Special Officer appointed under Section 34 of this Act.] 22. Thereafter, the first respondent-Deputy Registrar of Cooperative Societies, issued surcharge order, dated 21.01.2004, under Section 60 of the Act. The said Section 60 of the Act already had been referred to supra. Ultimately he was made liable for a loss of Rs.1,81,800/- jointly and severally. There is no allegation of misappropriation against him and the only allegation made against him is that he did not properly scrutinize and identify the documents of the loanees. As against the said order, an appeal was filed O.A.No.70 of 2004 before the Tribunal as contemplated under Section 76 of the Act. Section 76 of the Act reads as hereunder. “Appeal:- (1) Any person or society aggrieved by any 5decision passed or order made under Section 6, Section 9A, Section 9B, Section 9C, Section 12A, Section 13, Section 15A, Section 16, Section 17, Section 19, Section 21, Section 21A, Section 21AA, Section 23, sub-section (3) of Section 32, Section 34, Section 34A, Section 60, Section 62, Section 64, Section 66, Section 70, Section 71, Section 73 and Section 117 may appeal to the Tribunal: Provided that nothing in this sub-section shall apply to any order of withdrawal or transfer of a dispute under sub-section (3) of Section 62. (2) On a reference made by the Registrar of Cooperative Societies, the Tribunal shall call for and examine the records of any proceeding which is appealable to it for the purpose of satisfying itself as to the legality or propriety of any decision or order passed and where it appears to the Tribunal that any such decision or order should be modified, annulled or reversed, the Tribunal may pass such order thereon as it may deem fit: (3) Any appeal under sub-section (1) shall, subject to the other provisions of this Act, be preferred within sixty days from the date of communication to the appellant of the decision, refusal or order complained of but the Tribunal may admit an appeal preferred after the said period of sixty days, if it is satisfied that the appellant has sufficient cause for not preferring the appeal within the said period. (4) In disposing of an appeal under this section, the Tribunal may, after giving the parties an opportunity of making their representations, pass such order thereon as it may deed fit, (5) The decision or order of the Tribunal on appeal `shall be final, (6) The Tribunal may pass such interim orders pending the decision on the appeal as may deem fit, (7) The Tribunal may award costs in any proceedings before that authority to be paid either out of the funds of the society or by such party to the appeal as the Tribunal may deem fit.]” 23. The Ex-Secretary of the society, Ex-Supervisor of the Central Bank and Ex-Manager of the Central Bank also filed separate appeals against the same surcharge order. The Tribunal made a common order, dated 08.12.2006. The appeal filed by the second respondent and the appeal filed by the Ex-Manager of the Bank were allowed and the appeals filed by the Ex-Secretary of the society and the Ex- Supervisor of the Central Bank were dismissed confirming the order of surcharge passed by the first respondent. 24. It is also the case of the second respondent in W.P.No.27578 of 2008 the Tribunal specifically recorded a finding that he had not committed any misappropriation and there was no wilful negligence on his part in scrutinizing the loans. There was no deliberate or intentional negligence on his part. Mere non-verification of the genuineness of the original documents of the loanees, who had been regularly borrowing money, cannot be termed as wilful negligence, especially, in the absence of any allegation of misappropriation and, hence, he was not liable for surcharge. The Tribunal specifically found that the Ex-Secretary, Ex-President of the society and the Ex- Supervisor of the bank are liable for surcharge. It is also his case that the society had not chosen to assail the validity and correctness of the common order made by the Tribunal for about two years. After his retirement, Inspection Report was submitted on 05.11.2002 and surcharge order was passed on 20.01.2004. After his retirement his son died in an accident. Out of shock, his right portion of the body became paralytic. The bank did not release his gratuity on the ground of pendency of inspection into the affairs of the petitioner society. When he was on bed taking treatment, the bank transferred his gratuity amount of Rs.2,81,275/- to the petitioner society towards discharge of the surcharge amount. 25. Further it is stated that he had submitted representation to the bank for release of his gratuity. The bank in turn, vide Memo dated 24.01.2008, intimated that his gratuity amount was transferred to the society to comply with the order of surcharge. Then he submitted representation to the society to return his gratuity amount appropriated by them. The society did not respond to the said request. Then, he filed W.P.No.795 of 2008 before this Court and this Court by order dated 28.4.2008 directed the society to release a sum of Rs.2,81,000/-, provided there is no order of stay regarding the order made by the Tribunal. As there was no response, he filed contempt case C.C.No.1253 of 2008 in which appearance of the president of the society was ordered. At this stage, the society thought of filing the present writ petition challenging the order of the Tribunal after a lapse of two years. Surcharge order was passed against 5 persons making them jointly and severally liable. The Tribunal confirmed the order of the surcharge against 3 persons and dismissed as against the manager of the bank and this Assistant Bank Manager. It is also specifically pointed out that the society had not chosen to assail the order of the Tribunal in so far as the manager of the bank is concerned. Several other further facts also had been narrated and the relevant portions of the order under challenge also had been specifically pointed out. 26. It is needless to say that the respective pleadings of the parties, the averments made in the affidavit filed in support of the writ petition W.P.No.7959 of 2008 and the stand taken by the second respondent in the said writ petition in the counter-affidavit again need not be repeated in elaboration. 27. Smt. Bobba Vijayalakshmi laid emphasis on the words “it appears that any person who is or was entrusted with the organization, affairs or management of the society” in Section 60 of the Act and made submissions in elaboration relating to the aspect how the said bank officers, who