*THE HON'BLE MR JUSTICE G. BIKSHAPATHY +WRIT PETITION NO : 16136 of 1993 %23-03-2005 #S.U.M.PRASAD ..... PETITIONER Vs. $1. THE ANDHRA PRADESH STATE FEDERATION OF COOPERATIVE SPINNING MILLS LIMITED, POSNETT BHAVAN, 4TH FLOOR, RAMKOTE, HYDERABAD, REP. BY ITS MANAGING DIRECTOR. 2. THE BOARD OF DIRECTORS OF THE A.P. STATE FEDERATION OF COOPERATIVE SPINNING MILLS LIMITED, HYDERABAD REPRESENTED BY ITS CHAIRMAN. 3. M.S.B. CHALAPATRHI RAO. .....RESPONDENTS !COUNSEL FOR THE PETITIONER: M/S M. PANDU RANGA RAO ^COUNSEL FOR THE RESPONDENT NO.1: MR. V.T.M. PRASAD ^COUNSEL FOR THE RESPONDENT NOs.2 & 3: MR. G. SHIV KUMAR. <GIST >HEAD NOTE ?CASES REFERRED: Nil IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE TWENTY THIRD DAY OF MARCH TWO THOUSAND AND FIVE PRESENT THE HON'BLE MR JUSTICE G. BIKSHAPATHY WRIT PETITION NO : 16136 of 1993 Between: S.U.M.Prasad S/o Rachaiah, aged 47 years, formerly Managing Director of Rajahmundry Cooperative Spinnign Mills Limited,R/o H.No. 25-4-6, Jaikrishnapuram, Rajahmundry, East Godavari District. ..... PETITIONER AND 1. The Andhra Pradesh State Federation of Cooperative Spinning Mills Limited, POSNETT Bhavan, 4th floor, Ramkote, Hyderabad, rep. by its Managing Director. 2. The Board of Directors of the A.P. State Federation of Cooperative Spinning Mills Limited, Hyderabad represented by its Chairman. 3. M.S.B. Chalapatrhi Rao, Executive Director, A.P. Spinfed & Enquiry Officer, Hyderabad. .....RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court may be pleased to issue a writ Order or direction particularly one in the nature of writ of certiorari after calling for the records in proceedings Ref. No. 863/90-A dated:: 30.3.1990 of the A.P. State Federation of Cooperative Spinning Mills Limited, Hyderabad and quash the proceedings as being illegal, arbitrary and violative of the principles of natural justice apart from being violative of Articles 14,16 and 311 of the Constitution of India. Counsel for the Petitioner: M/s M. PANDU RANGA RAO Counsel for the Respondent No.1 : MR. V.T.M. PRASAD Counsel for the Respondents No.2 and 3 : MR. G. SHIV KUMAR. The Court made the following: J U D G M E N T : 1. The Writ Petition is filed challenging the Order of dismissal passed by the 1st respondent in proceedings No. 863/90-A, dated: 30.8.1990 as confirmed by the appellate authority. 2. Petitioner was selected as Mill Manager by the Federation of Andhra Pradesh Cooperative Spinning Mills Limited and he was posted to Rajahmundry Spinning Mills by an Order dated: 28.7.1987. He was appointed in the scale of Rs. 1800-75- 2400 with other allowances as admissible. He was governed by the Rules and Regulations framed by the Federation. The appointment Order, however, contained that the appointment was on contract basis for a period not exceeding three years and he was put on probation for a period of one year. After completion of the probation, increments were also released to him. 3. While so, he was placed under suspension on 25.4.1990 alleging certain irregularities in discharge of his duties. Thereafter, an Enquiry Officer was appointed to conduct enquiry into the misconducts alleged against the petitioner. The Enquiry Officer visited the Rajahmundry mill on 19.6.1990 and gathered some information. Thereafter, he issued a charge sheet on 22.6.1990. Petitioner submitted an explanation to the said charge sheet on 30.6.1990. Thereafter, the Enquiry Officer only recorded the statement of the petitioner and found the petitioner guilty of the charges vide Enquiry Officer dated: 22.7.1990. A show cause notice was issued on 23.7.1990 enclosing the report of the Enquiry Officer and petitioner submitted his representation seeking grant of extension of time. But, however, on 30.8.1990, the Orders were passed by the Vice-Chairman and Managing Director dismissing him from service. Thereafter, he filed an appeal before the Board of Directors under Rule 19 of Service Rules on 20.9.1990. The appeal was not considered for a considerable time. In the meanwhile, a criminal case was filed against the petitioner before the II Judicial First Class Magistrate, Rajahmundry for the offence under Section 405 IPC. But, however the criminal case was withdrawn on the ground of mistake of law. Therefore, he filed Writ Petition challenging the Order of dismissal dated: 30.8.1990 passed against him. 4. A preliminary objection was taken as to the maintainability of the Writ Petition against Cooperative Society. A learned Single judge of this Court on the basis of the decision reported in BARODA COTTON SPINNING MILLS LIMITED Vs. A.P. STATE COOPEATIVE SPINNING MILLS LTD. (AIR 1991 A.P. 320) referred the matter to Full Bench. A Full Bench of this Court on 12.10.2001 held that the Writ Petition was not maintainable against a Cooperative Society as it did not fall within the definition of State or instrumentality of State under Article 12 of Constitution of India. Against the said judgment of the Full Bench, the matter was carried in appeal by the petitioner before the Supreme Court and the Supreme Court in SLP No.6446 lof 2002 set aside the judgment of the Full Bench and remanded the matter for consideration on merits. When the matter was listed before the Full Bench, it was directed that the same should be placed before the learned Single Judge for disposal as to how the case was come up for final disposal before this Court. 5. In the counter filed on behalf of the respondents, it is stated that the petitioner has committed serious misconduct and therefore, an enquiry was conducted giving opportunity to him to defend his case and finally the competent authority dismissed him from service. Under those circumstances, the Order of the dismissal cannot be said to be illegal or contrary to Rules. 6. It is also brought to the notice of this Court that the Liquidator has been appointed for Cooperative Spinning Mills Federation and he has been impleaded as a party respondent. 7. As far as the maintainability of the Writ Petition is concerned, it is no more res integra. When the Full Bench of this Court held that the Writ Petition was not maintainable against the Society, the matter was carried in appeal before the Supreme Court and the Supreme Court has set aside the Order and remanded the matter for consideration on merits. The following is the Order of the Supreme Court: “Leave granted. A Writ Petition filed by the petitioner herein was not entertained by the High Court on a finding that the Andhra Pradesh State Federation of Cooperative Spinning Mills is not a ‘State’ within the meaning of Article 12 of the Constitution. There is already a judgment of this Court in A.P. State Fed. of Coop. Spinning Mills Ltd. & Anr. Vs. P.V. Swaminathan (Civil Appeal No. 5037 of 1997) dated: 31st January, 2001, wherein it has been held that a Writ Petition against the Federation would be maintainable. There has also been a larger Bench decision of this Court in Pradeep Kumar Biswas Vs. Indian Institute of Chemical Bilogy & ors. (2002 (5) S.C.C. 111) that it is a ‘State’ within the meaning of Article 12 of the Constitution. At any rate, a petition under Article 226 of the Constitution is entertainable not only against the State, but also against other authorities. This being the position, we are of the opinion that the High Court committed error in not deciding the merits of the petition and dismissing the petition on the ground of maintainability. We, therefore, set aside the impugned Order and remit the matter to the High Court for consideration on merits. The civil appeal, is accordingly, disposed of. No costs.” 8 . Therefore, the only issue that has to be considered is whether the Order of dismissal passed by the respondent NO.1 is legal and valid? 9. As can be seen from the records, the petitioner was appointed on 28.7.1987 as Mill Manager on contract basis for a period of three years with the following terms and conditions: “1. He shall be on trial for a period of one year on duty from the date of his joining which may be extended at the discretion of the Management at any time for further period or periods not exceeding one year. During the extended period or periods of trial if any, his increment will also be stopped for a like period without cumulative effect. 2. During the period of trial, including the extended period or periods if any, his appointment will be liable for termination at any time without notice or assigning reasons. 3. The contract appointment shall be for a period not exceeding three years commencing from the date of his joining the post. 4. During the contract period, he shall not take up any employment elsewhere without specific consent of the federation. 5. At the end of the contract period, the Federation and the employee may renew the service contract for a further period of three years at mutually agreeable terms and conditions. 6. The services of the employee are liable for termination at any time during the period or periods of the service contract with one month’s notice or salary in lieu thereof. 7. He shall be liable to be transferred to any office/Member Mills of the Federation. 8. He shall be governed by the Rules and Regulations of service, conduct rules, discipline and appeal rules and standing Orders of the concerned Member Mills/Federation, which are in force now or as may be framed, amended, altered, or extended from time to time. 9 . He shall not engage or interest himself either directly or indirectly in any trade or business or take up any employment with any other company, firm, individual concern or body, while he is in service of the Federation. 10. If, at any time, it comes to the notice of the Federation that false information has been furnished or that there has been suppression/concealment or evasion of any factual; information, notwithstanding anything contained in clauses (2), (3) and (6) above, his services will be terminated forthwith without any notice or assigning reasons. 11. No T.A./D.A. shall be paid for joining the service or on terminating thereof. 12. He will be entitled to the benefit of the Contributory Provident Fund as per the Rules of the Federation in force from time to time. 13. The Security Deposit of Rs.15,000/- furnished by him shall be forfeited to the Federation along with interest accrued thereon in case he leaves the service of the Federation/its Member Mills before completion of a period of three years on duty from the date of joining subject to satisfactory work and performance.” However, while he was continued in service an Enquiry Officer was appointed to cause the enquiry in respect of certain irregularities. Accordingly, one Mr. Chalapathi Rao was appointed as Enquiry Officer. After preliminary inquiry, he issued the following charge sheet dated: 23.7.1990: “1. He has made purchase of Cotton lint from the open market in gross violation of the instructions of the Federation and without approval from the Managing Committee of the Rajahmundry Cooperative Spg. Mills. More over, transaction of procurement of cotton was found to be not advantageous to the mills and not in the interest of the mills since it involved excessive expenditure in the procurement of cotton lint while ginning of cotton worked out to be cheaper and when cotton lint was available at lesser rates he has resorted to ginning operations at higher cost. 2. He has resorted to sale of Yarn to private parties at rates less than the rates fixed by the Federation for ‘APCO’ in violation of the instructions issued by the Federation vide their Circular No. 7078/86/C-2, dated: 9.1.87. He has not obtained specific permission of the Federation for sale of Yarn at lesser rates. This has resulted in avoidable loss of Rs. 3,84,880/- to the mills. 3. Due to his failure to make use of the funds available within the mills judiciously keeping in view the priorities the mills had to pay an amount of Rs. 6.81 lakhs towards carrying charges to the C.C.I. from 1988-89. This has resulted an avoidable loss of Rs. 6.81 lakhs to the mills. 4. He has made purchase of Stores material worth Rs. 10,000/- at a time and Rs. 1,00,000/- in a year without the approval of the Board of Directors as provided for in clause No.12 of Bye-Law No. 28 of the Rajahmundry Cooperative Spg. Mills. 5. He has failed to convene meetings of the Managing Committee of the Mills once in a quarter as required under Bye- Law No.29 of the mills. As a result the Managing Committee of the mills could not discharge its functions as laid down in the provisions of the Bye-laws. 6. During the year 1988-89, he has sold cotton seed worth Rs. 18.62 lakhs to private parties in the open market without calling for tenders in violation of the instructions issued by the Federation. 7. He has failed to review the utility or otherwise of the Guest House maintained by the mills and allowed to continue it by spending an amount of Rs. 60,618/- during the year 1987-88 to 1989-90. 8. He has away from the mills on tours for un-duly long periods resulting in ineffective supervision on working of various departments in the mills and resulting in abnormal expenditure in the maintenance of Car and telephone. 9. He has failed to take effective action for the recovery of a huge amount of Rs. 95.45 lakhs recoverable towards credit sales allowed by the mills.” Petitioner submitted the explanation denying the charges. After taking the explanation of the petitioner, the Enquiry Officer recorded the statement of the petitioner and found the petitioner guilty of the charges on the basis of which the Order of dismissal was passed by the authorities dated: 30.8.1990. it was the principal contention of the learned counsel for the petitioner that the procedure adopted by the Enquiry Officer is illegal and in gross violation of principles of natural justice as also the rules framed by the Federation. He refers to one incident that the Enquiry Officer gathered the information behind his back and did not record the statements of any witnesses. He also refers to the admissions made in the counter in para 7 filed by the A.P. Federation, it has been categorically accepted that no statement of the witnesses were recorded and the only deposition of the petitioner was recorded and the following is the deposition: “With regard to para 7 it is true that the enquiry was fixed at Rajahmundry and that is was only at the request of the petitioner, the enquiry was scheduled to be conducted at Hyderabad. The Enquiry Officer recorded the sworn statement from the charged officer on 15.7.1990 at Hyderabad on the various allegation in the presence of seven witnesses or whom the Chief Accounts Officer who conducted the preliminary enquiry was one.No depositions or statements were however recorded by the Enquiry Officer from the witnesses present on 16.9.1990 at Hyderabad. The Enquiry Officer having conducted the enquiry with reference to the examination of the connected records and other material at the Mills level concluded that the petitioner was guilty of the allegations.” 10. The issue that arises for consideration is whether the enquiry conducted by the Enquiry Officer was legal and valid? and whether it is in violation of the principles of natural justice? 11. As can be seen from the report of the Enquiry Officer, he appears to have visited R.C.S. Mills and examined the records relating to procurement of cotton etc. He also contacted the incharge Managing Director and gathered necessary information and framed the allegations against the petitioner. After receiving his explanation, the Enquiry Officer recorded the deposition of the petitioner only and held the petitioner guilty of the charges. In such circumstances, can it be said that the enquiry is fair and proper and petitioner was given fair opportunity. We need not go into the allegations and the explanation, but the very preamble of the report of the Enquiry Officer reveals that the procedure as adopted by the Enquiry Officer is in gross violation of the principles of natural justice. When once the charge sheet has been framed by the Enquiry Officer, even assuming that the Enquiry Officer is competent to frame charges, it is for the department to establish the charge, but it is not open for the Enquiry Officer to hold the petitioner guilty of the charges on the basis of the explanation and the deposition. The following is the extract from the Enquiry Officer’s report: “I have been appointed as Enquiry Officer to conduct departmental enquiry (vide proceeding Rc. No. 863/90-A, dt. 16.6.1990) enquiry into the work and conduct of Sri S.U.M. Prasad, Mill Manager under suspension Rajahmundry Cooperative Spinning Mills, Rajahmundry. I have visited to the R.C.S. Mills on dt. 19.6.90 and examined the records relating to procurement of cotton, sale of yarn, final audit reports issued by Chief Auditor and certain other records available in the mills. I have also contacted the incharge managing director of the mills, the accounts officer and also examined the junior assistants dealing with procurement of cotton and sale of yarn and gathered necessary information for the enquiry. On the basis of the evidence gathered during my visit to the R.C.S. Mills I have framed certain allegations against Sri S.U.M. Prasad and issued a notice along with a statement of allegations and called upon him to offer his explanation for the allegations levelled against him. As the whereabouts of the accused officer are not known, I had to send special messenger to the addresses given by him for the serving of this notice and also to publish the notice in the newspapers also. Shri S.U.M. Prasad has sent his explanations thrugh a messenger to reach me on2.7.90 at Hyderabad. I have issued notice to Shri S.U.M. Prasad and also to several other officers of the Rajahmundry Cooperative Spinning Mills and of the Federation to appear before me on 16.7.1990 at the Rajahmundry Cooperative Spinning Mills, Rajahmundry and to give evidence in the matter. Shri S.U.M. Prasad has requested in his telegram dated: 13.7.1990 for holding the enquiry at Hyderabad in view of certain personal difficulties. At his request, the venue of the enquiry has been changed to the office of the A.P. State Federation of Cooperative Spinning Mills Limited, Hyderabad. Shri S.U.M. Prasad appeared before me at 11.00 A.M. on 16.7.1990 at the office of the A.P. State Federation of Cooperative Spinning Mills Limited, Hyderabad. (emphasis added) I have examined him on oath and taken his deposition on the evidence he proposed to give against the charges levelled against him. (emphasis added) The Enquiry report along with my findings is given hereunder:- Sri S.U.M. Prasad has stated in his sworn deposition that he worked as Managing Director of the R.C.S. Mills from 31.7.1987 to 24.5.1990 and that he discharged his functions as Chief Executive of the mills in accordance with the byelaws of the mills. He has stated that he is aware of the provisions of the bye- laws of the mills.” Thereafter, the Enquiry Officer referring to the allegations and explanation offered and findings were recorded. It is pertinent to note that he did not record the evidence of any departmental witness nor placed any documents in the enquiry. But, however, he referred to various documents and statements of other persons without allowing the petitioner to cross-examine the person whose statement was relied on by him. In respect of the allegation No.2, the Enquiry Officer records finding as follows: “On the strength of the incidence produced before me by the charge sheeted Officer and the witnesses and the information available on record placed before me, it is clear that the charge sheeted officer had resorted to the sale of yarn during 1987-88 to private parties at rates lesser than those fixed by APCO because of tight financial position and slackness in the open market.” It is also noticed from the report, he referred to various documents, which were neither put in the enquiry nor put on to the notice of the petitioner. It is appropriate to extract the discussion of the Enquiry Officer relating to the allegations, which are as follows: “1. ALLEGATIONS: a) during the year 1987-88, the Managing Director of the Mills has purchased 11,480 quintals of cotton lint (40s count) at a cost of 2,71,32,000/- and 654 Qtls. (40s count) of cotton kappas from the growers at a cost of Rs. 14.14 lakhs. But, the Federation has given clear instructions to all the mills including the R.C.S. Mills (vide Rc.No.4406/88/C-2 dated: 19.12.1988 of the Federation) to the effect that cotton should be procured in the form of kappas from the growers only and that cotton in any other form should not be procured and that violation of these instructions would attract disciplinary action by the Federation. During the year 1988-89, the Managing Director of the mills has purchased 5,981 quintals of cotton lint at a cost of Rs. 1,35,00,000/- and 3,655 bales of cotton kappas from the growers. Again during the year 1989-90 the Managing Director of the mills has purchased 13,379 quintals of cotton lint at a cost of Rs. 3,13,72,000/- as against 3,200 bales of cotton kappas from the growers purchase of cotton lint has been done in sheer violation of the instructions issued by the Federation. More over, during the year 1987-88 the per kg cost of cotton ginned by the mills works out to Rs. 21.55 paise of a cotton lint purchased from the open market, thus, paying Rs. 2.08 per kg in excess and Rs. 21.65 lakhs on 10,82,600 kgs of cotton lint purchased from the market during 1987-88 and the mills was put to a loss of Rs. 21.65 lakhs on this transactions. b . During the year 1988-89 the rate per kg cost ginned at Ganapavaram ginning unit was Rs. 22.75 while the cotton lint purchased from the market was costing only Rs. 2257 – thus an amount of Rs. 0.18 was incurred in excess per kg of cotton resulting in a loss of Rs. 65,790/- on the transaction of purchase and ginning of 3,655.00 kgs of cotton. EXPLANATION OFFERED: The mill is not able to purchase kappas on each and carry basis because of adverse financial position. In the interest of the mills, because of the fact that the mill has been dealing in the purchase of cotton and kappas since a long time and established reputation in the area, some of Ryots (Growers) of the area came forward to supply lint on credit basis allowing 60 to 70 days credit and therefore, lint was purchased at Ginning unit and the stock forwarded to the mills. It is only to continue the activity of the mills without a grinding halt on account of financial disability, this was adopted. When I took over the mills in /August, 1987 there was no cotton and the then Managing Director of the Federation has deputed the Administrative officer and Manager (Commercial) to Rajahmundry to hold negotiations with the growers for purchase of lint bales. When this system was thought to be advantageous to the Mills, the issue was placed before Federation Chairman for effective purchase in the above manner and he orally agreed and asked the Mill Manager to go ahead with the system as it is beneficial to the Mill without the need to barrow funds from the outside. The quantity of Cotton purchased was very good and the yarn produced was acceptable to all the weaver societies. There were no complaints on the yarn produced and the yarn was the best amongst all the Cooperative Spinning Mills and stood the competition of private sector mills. The cotton was purchased only to bring the mill out of financial problems and save from closure. FINDINGS OF THE ENQUIRY OFFICER ON ALLEGATION-I: He has stated that purchase of cotton is one of the basic activities of the mills and that he used to purchase cotton in the form of