IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 21..10..2009 C O R A M The Honourable Mrs. Justice PRABHA SRIDEVAN and The Honourable Mr. Justice C.T. SELVAM Writ Appeal Nos.256 and 257 of 2008 1. The Registrar of Co-operative Societies, Kilpauk, Chennai-10. 2. The Additional Registrar of Co-operative Societies (Credit), Chairman-Common Cadre Authority, Office of the Registrar of Co-operative Societies, .. Appellants/ Respondents Kilpauk, Chennai-10. 1 & 2 in both W.As. versus G. Manoharan .. 1st Respondent / Petitioner in W.A.256/2008 & W.A.257/2008 Villupuram District Central Co-operative Bank, Rep. By its Special Officer, .. 2nd Respondent / 3rd No.2, Hospital Road, Villupuram. respondent in W.A.257/2008 (Respondent 3 impleaded as per the order of this court dated. 07.11.05 in W.P.M.P.No.5388 of 2005) - - - - - Prayer : Writ Appeals against the order dated 19.12.2006 passed by a learned single Judge of this Court in Writ Petition Nos.19349 of 2003 and 34352 of 2004. Writ Petition No.19349 of 2003: This Writ Petition filed for the issuance of a writ of certiorari to call for the records of the second respondent pertaining to his proceedings Rc.No.16/2002/CCA.1 dated. 30.6.2003 and quash the said order, dated. 30.6.2003 and consequently direct the respondents to settle all the retrial benefits to the petitioner. Writ Appeal No.34352 of 2004: This writ petition filed for the issuance of a writ of certiorarified mandamus to call for the records of the second respondent in proceedings No.Na.Ka16/02 Po.Pa.KV.1 dated. 03.08.2004 quash the same https://hcservices.ecourts.gov.in/hcservices/ and consequently direct the respondents to settle all the retirement benefits which the petitioner is entitled to. - - - - - For Appellants : Mr. M. Dhandapani, Spl. Govt. Pleader and Mr. P. Gurunathan, Govt. Advocate. For Respondent-1 : Mr. R. Vijay Narayan, Senior Counsel for Mr. R. Parthiban - - - - - J U D G M E N T The Co-operative Movement was started in our country with a philosophy behind it and Co-operative Societies were formed with an object of infusing in the minds of people, the spirit of working in a group so that the members of the group gain benefit through collective contributions. It was truly Gandhian in its ideals. In its preamble, the Tamil Nadu Co-operative Societies Act, 1983 very nobly states that it is meant to provide an orderly development of co-operative movement in accordance with principles like open membership, democratic management, thrift, self-help and mutual aid among persons with common socio-economic needs. It is intended to bring about improvement in agriculture and industry, better methods of production, better business and better living. But the objects have not been achieved. There has been a great deal of politicisation of the co-operative movement; there has also been widespread misappropriation and diversion of the funds generated from the common man by the persons in charge. Our hearts cannot but be dismayed at this fact. The funds in a co-operative bank are meant to advance the democratic goal based on socio-economic principles. If they are allowed to be diverted, dissipated or frittered, it is betrayal of public trust. 2. In this case, the first respondent, in charge of the affairs of a Co-operative Bank, is charged with acts of grave misconduct, including causing huge financial loss to the Bank and has challenged the disciplinary proceedings on the ground that he has attained the age of superannuation. He must face the proceedings and establish that he has not caused such loss. He cannot get away merely because he has reached a certain age. He must prove that he is innocent of causing loss to the Co-operative Society. 3. The first respondent was the General Manager of the Nilgiris District Central Co-operative Bank ('Bank' in short). He had joined the services of then South Arcot Central Co-operative Bank in the year 1968-69 and when he attained the age of superannuation on 30.6.2003, he was the General Manager of the Bank. On that day, an order in Rc. NO.16/2002/CCA.1 of the same date was served on him by the Special Officer of the Bank along with the endorsement No.Rc.5580/2003/E1. By this letter, the first respondent was informed that the Common Cadre Authority, under Section 76(1)(b) of the Tamil Nadu Co-operative Societies Act, 1983 ('Act' in short) was https://hcservices.ecourts.gov.in/hcservices/ placing him under suspension with effect from 30.6.2003. He immediately filed Writ Petition No.19349 of 2003 alleging that this order of suspension was served on him without any valid reasons and with mala fide intention to deny him his retiral benefits. The writ petition was admitted. On 3.8.2004, the second appellant framed two charges against the first respondent. The first respondent submitted his explanation. An Enquiry Officer was appointed. The first respondent, therefore, filed the second writ petition challenging the action on the ground that after the attainment of the age of superannuation, framing of the charge memo was illegal and consequently, the charge memo is liable to be quashed. A counter affidavit was filed by the appellants. In this, it is stated that an enquiry was conducted by an appropriate authority into the allegations against the first respondent regarding serious irregularities in the issuance of cooking gas loan, promotion and transfer of Bank staff and purchase and installation of computers in the Bank, causing heavy loss to the Bank to the extent of Rupees 13.94 Lakhs. It was stated that while the materials were being gathered, he attained the age of superannuation and therefore, he was placed under suspension even before the date of his retirement and he was not allowed to retire and the terminal benefits were also not paid to him. The Chairman, Common Cadre Authority initiated disciplinary action against the first respondent. The first respondent submitted his explanation denying all charges by his letter dated 30.8.2004. The learned single Judge, relying on Bhagirathi Jena vs. Board of Directors, O.S.F.C. & Others, (1999) 3 S.C.C. 666 and Partap Singh vs. State of Punjab, A.I.R. 1964 S.C. 72, allowed the writ petition. Against that, these writ appeals have been filed. 4. The learned Special Government Pleader appearing on behalf of the appellants submitted that the misconduct of the first respondent was of such grave nature and he had caused so much loss to the Bank that the appellants must be permitted to continue the proceedings to its logical conclusion. He referred to U.P. State Sugar Corporation Ltd. vs. Kamal Swaroop Tondon, (2008) 2 S.C.C. 41, where the Supreme Court held that departmental enquiry could be continued for recovery of the loss caused by the employee and the same could be recovered from the retiral benefits. He also referred to R.P. Kapur vs. Union of India, A.I.R. 1964 S.C. 787. He referred to Section 75 of the Act and vehemently urged that the first respondent deserves no indulgence in view of the huge financial loss that was caused to the Bank by the misconduct of the first respondent. He pointed out that the first respondent had not been permitted to retire. He further submitted that there were enough materials to justify a prima facie conclusion of the first respondent's misconduct. He submitted, as laid down in 2008 (2) S.C.C. 41 (supra), that this Court must reach out to remove injustice. 5. Learned senior counsel appearing for the first respondent, on https://hcservices.ecourts.gov.in/hcservices/ the other hand, submitted mainly that there can be no continuance of disciplinary proceedings after the age of superannuation and so, the writ appeals must be dismissed. He referred to the following decisions to support his case : S. Natarajan vs. Government of Tamil Nadu, 1987 Writ L.R. 191 Mahadevan vs. The Special Officer/Deputy Registrar, South Arcot, etc. Stores Ltd., 1997 Writ L.R. 120 General Manager, Adilabad District Co-operative Central Bank Ltd. vs. K. Ranga Rao, 2002 (II) L.L.J. 983 G. Ramamoorthy vs. Hindustan Photo Films Manufacturing Company Ltd., 2003 (2) L.L.N. 719 Ramesh Chandra Sharma vs. Punjab National Bank, (2007) 9 S.C.C. 15 UCO Bank vs. Rajinder Lal Capoor, (2007) 6 S.C.C. 694 6. We called for the files, since it is specifically alleged that an enquiry conducted by an appropriate authority revealed serious irregularities and also that the Government had the power to give directions, in public interest, to act on the basis of such discreet enquiry. What we see in the files is quite depressing. It is seen that right from January 2002, there have been communications to the Registrar of Co-operative Societies complaining about all the misdeeds of the first respondent. On 1.2.2002, a detailed complaint of what was done by the first respondent has been sent to the Registrar. On 4.4.2002, members of the Union have again given a complaint. On 1.2.2002, the Minister for Adi Dravidar Welfare has in fact referred to the misdeeds of the first respondent. On 24.9.2002, the Special Secretary to the Government has addressed a letter to the Additional Registrar of Co-operative Societies, Common Cadre Authority referring to the petitions to the Directorate of Vigilance and Anti Corruption that it is better to transfer the first respondent to a far off place for the conduct of a fair and free enquiry. So he was transferred to Nilgiris Branch where he was serving when he attained the age of superannuation. On 1.11.2002, again the Special Secretary to the Government had addressed a letter to the Registrar of Co-operative Societies regarding the transfer of the 1st respondent. On 28.5.2003, details of the report from Directorate of Vigilance and Anti Corruption were asked for. The report of the Directorate of Vigilance and Anti Corruption is dated 29.5.2003 and what is stated therein is very disturbing. And, the advice is that an appropriate decision must be taken regarding the retirement of this individual, viz. the first respondent. 7. The records show that at least from 2002, the Registrar of Co- operative Societies as well as the Secretary to the Government have exchanged frantic correspondences regarding the very serious and grave acts of misconduct committed by the first respondent. In fact, the general tenor of the correspondence indicates that the Villupuram Co-operative Society must be saved from the first respondent. There is also an indication in the correspondence that he claims to be https://hcservices.ecourts.gov.in/hcservices/ close to someone in power. The Registrar and the Additional Registrar are aware of this and with a view to save the Co-operative Society from further loss, they seek orders for transferring the first respondent to a far off place where he can cause no harm. 8. On 2.6.2003, i.e., before the retirement of the first respondent, a charge memo was issued by the Bank and he has replied to it by his letter dated 16.6.2003, which was received by the Bank on 18.6.2003. He had given his reasons for each of the charges mentioned therein. There are three charges. The first charge relates to the failure of the first respondent to adhere to the Registrar's Circular for purchasing computers worth Rs.30.11 lakhs for the Bank. The second charge is also an allied charge, viz., that a contract had been entered into with M/s. Suvitha Computers for purchasing computer software worth Rs.17 lakhs without purchasing the computers for the branches. While explaining the charges, in the charge memo, it is stated that the first respondent had entered into an arrangement with Suvitha Computers for purchase of computers worth Rs.17 lakhs. In the agreement, it is agreed that only after all the branches, including the Head Office, are fully computerised, this software should be installed. It is a condition found in the agreement entered into between the first respondent with Suvitha Computers and yet, he did not take steps to computerise the other branches. Further, in the agreement in paragraph 10, it is stated that the software should be installed within 15 weeks in all the concerned branches. But even after two years, this had not been done. In addition, apart from other violations, Rs.11.90 lakhs had been given to Suvitha Computers from the funds of the Bank. Generally, only after all the computers have been purchased steps are taken to purchase software for operation of the computers, but curiously in this case, the first respondent had paid Rs.11.90 lakhs for the software, after entering into an agreement with the company for purchase of software worth Rs.17 lakhs, even without fully computerising the Bank and its branches and therefore, it is alleged that for this loss of Rs.11.90 lakhs, he alone is responsible. The charge memo was issued and the reply received before his date of superannuation. 9. On 6.6.2003, the Additional Registrar of Co-operative Societies had addressed a letter to the Secretary to the Government informing him that the Directorate of Vigilance and Anti Corruption has advised to take an appropriate decision on the retirement of this individual on account of various allegations against him and the main allegations are referred to therein. The Additional Registrar has also stated that since there is no provision to continue his services after the date of superannuation, it has been decided to allow him to retire, but withholding all his terminal benefits till the outcome of the enquiry. To this, there is a response from the Special Secretary to the Government to place him under suspension immediately. This is dated 11.6.2003. To this, the Chairman, Common Cadre Authority has https://hcservices.ecourts.gov.in/hcservices/ stated that it is not possible to place the first respondent under suspension, but it has been decided to withhold his terminal benefits. A charge memo had been issued on 2.6.2003. In response thereto, on 16.6.2003, the first respondent had submitted his explanation. The Registrar of Co-operative Societies, on 28.6.2003, directed the Common Cadre Authority to place the individual under suspension immediately pending enquiry into grave charges. Accordingly, he was placed under suspension with effect from 30.6.2003 (forenoon). On 14.11.2003, the first respondent submitted a mercy application asking the Registrar of Co-operative Societies to revoke the suspension orders, enabling him to get the retirement benefits. On 30.4.2004, the Secretary to the Government directed the Registrar of Co-operative Societies to proceed with the action already initiated against the first respondent. Therefore, this would show that the proceedings initiated in 2004 are only continuation of the earlier proceedings and not fresh proceedings. It is also important to note that by this order, Suvitha Computers, whose name had been changed to Core Quest Software, was blacklisted by the Government. 10. In the charge memo dated 3.8.2004, the first charge is with regard to acceptance of bribe in the matter of transfers and granting promotions. The second charge is with regard to Suvitha Computers and the charge is that there is a condition for installation of the software within 15 weeks, failing which penalty should be imposed and though there is the condition that only after installation of the hardware in the Bank, including its 12 branches, the software should be installed and yet, the software had been purchased and that in three instalments, a sum of Rs.11.90 lakhs had been paid to Suvitha Computers, though Suvitha Computers had not fulfilled its commitment of installation of the software within 15 weeks as per the agreement. Therefore, by recommending the payment of Rs.11.90 mala fide and with a view to cause loss to the Bank, the Bank has suffered loss. 11. We have already seen that after the first charge memo had been issued on 2.6.2003, a reply had been received from the first respondent and on 27.6.2003, after receipt of the letter from the Directorate of Vigilance and Anti Corruption, the individual was placed under suspension. On 29.7.2003, in Na.Ka. No.5539/97/E1, there is reference to the charge memo dated 2.6.2003 and the explanation dated 16.6.2003, and it is recommended therein that the enquiry should be concluded at the earliest and that the result should be informed. An Enquiry Officer was also appointed. The first respondent was asked to appear before the Enquiry Officer on 15.11.2003. It is thereafter that the notice dated 10.6.2004 was issued, framing the charges afresh. From the records, we see that after his explanation was received, there was silence until the date of his retirement, when he was placed under suspension, till 2004 when the fresh charge memo was issued. Considering the urgency expressed in the correspondence of the year 2002, we do not https://hcservices.ecourts.gov.in/hcservices/ understand this silence and apparent inaction. A look at the two charge memos shows that they are almost identical. Therefore, the proceedings have actually been initiated even before his retirement and he had also given his reply. Not only that, he prayed that he might be treated with indulgence and he may not be denied his monetary benefits. 12. After orders were reserved in the writ appeals, we perused the files. Then, we called the counsel for both sides in the chambers and also listed the matter in open court to ask them whether they had any explanation to offer or any written submissions to make regarding the charge memo dated 6.6.2003 and the reply about which the writ petitioner/first respondent had maintained a strategic silence. Learned counsel for the first respondent submitted that it is true that a show cause notice was issued and a reply was given thereto, but the proceedings were dropped. Learned Special Government Pleader also submitted the same. 13. We will now look at the relevant provisions of the Tamil Nadu Co-operative Societies Act, 1983. Section 81 of the Act contemplates an inquiry to be held by the Registrar on his own motion or on the application of the majority, into any alleged misappropriation, fraudulent retention of any money, breach of trust etc. Section 81 (4) fixes the time frame within which such enquiry shall be completed. Section 82 deals with inspection and investigation by the Registrar on his own motion or on application of a creditor of the Registered Society and for doing this, he will have all the powers under Section 81 of the Act. Rule 104 sets down the procedure regarding the inquiry, inspection and investigation. Section 87 is an important provision which deals with surcharge proceedings and it can be initiated if, "it appears that any person who is or was entrusted with the organisation 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 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 which is not in accordance with this Act". The facts relating to misappropriation, fraudulent retention of money or breach of trust may have come to light either in the course of an audit under Section 80 or during the course of the inquiry under Section 81 or an inspection and investigation under Sections 82 or 83. If such fraudulent retention of money, misappropriation, breach of trust or wilful negligence becomes apparent, the Registrar or a person authorised by him is empowered to frame charges against such person and after giving opportunity, an order can be made to repay or restore the money and such action cannot be commenced after the expiry of seven years from the date of the Act or omission. This section empowers the Registrar to proceed against a person who is or was entrusted with the organisation or management of the society, a past or a present officer of the https://hcservices.ecourts.gov.in/hcservices/ society, and a past or present servant of the society. In fact, even the representative who inherits the estate of such a person who is deceased shall answer the charges. The retirement of such person or officer or servant is not a deterrent to the proceedings that can be initiated under Section 87. Section 87 is only to recover and make good the financial loss caused to the society by the individual concerned by his fraudulent retention of money, misappropriation, wilful negligence or breach of trust, as the case may be. In this case, a notice had already been issued which showed clearly that it had come to light that the first respondent had caused loss of Rs.11.90 lakhs to the Bank and even before his retirement, the charge memo had been issued and his answer had also been obtained. Further, Section 87 gives the authority, the right to proceed against a person whether he was an officer or a servant, either past or present. 14. In the book "The Nature of Judicial Discretion", Justice Aharon Barak, the Chief Justice of the Supreme Court of Israel writes, "A statute is to be interpreted in light of the fundamental values of the democratic regime and of the legal system. These fundamental values include, among others, accepted principles such as equality, justice, and morality. They include policies such as the existence of the state, its democratic character, separation of powers, personal freedom, freedom of expression, freedoms of procession, religious worship, property, and occuption, human dignity, integrity of the judicial process, and public welfare and safety. These fundamental values include within them standards of good faith, natural justice, fairness, reasonableness, impartiality, lack of conflict of interest. Justice Menachem Elon discussed this in the following terms : "We have an important rule, that a legal system cannot sustain itself on the body of the law alone. The body of the legal system needs a soul, and perhaps even a super-soul. The legal system will find this soul in the character and image of various value norms"." 15. We are unable to see what is the legal hurdle for the proceedings to continue. As rightly contended by the learned Special Government Pleader, even if the first respondent cannot be imposed with the punishment of dismissal or reduction in rank since he has already attained the age of superannuation, if the charges are proved, the amount of loss caused to the Society by the first respondent can always be recovered. Learned senior counsel for the first respondent submitted by referring to paragraph 40 of (2008) 2 S.C.C. 41 (supra) that right from Bhagirathi Jena (supra), the law laid down by the Supreme Court prevents continuation of proceedings. https://hcservices.ecourts.gov.in/hcservices/ 16. In the present case, we have found that a charge memo had been issued to the first respondent and he had also given a reply thereto before the date of his superannuation. Therefore, the disciplinary proceedings had already commenced. The first respondent was not permitted to retire. He was suspended. But no order was passed permitting him to retire either. Further, the language of Section 87 of the Act clearly shows that proceedings can be initiated even in respect of a person who has retired, if he has committed the acts specified in Section 87 or is guilty of misconduct as mentioned in the same section, then we cannot restrain the appellants from proceeding with the action against the first respondent. As rightly held in (2008) 2 S.C.C. 41 (supra), the appellants may proceed against the first respondent for the financial loss caused by him to the Society, if it is proved in the enquiry. In this particular case, we have seen from the facts that even before the date of retirement of the first respondent, the charge memo had been issued and therefore, the condition precedent for initiation of departmental proceedings, and which is the first step according to (2008) 2 S.C.C. 41, has been taken in this case, since even before he retired, the first respondent was served with a charge memo and he had also replied to the charge memo. In the proceedings which continued after 2004, one of the earlier charges had been dropped, but mainly the allegation regarding the illegal payment to Suvitha Computers is the main charge. The loss is not a small amount, it was a sum of Rs.11.90 lakhs which was unauthorisedly paid by the first respondent. Definitely the proceedings can be continued and completed. Sections 75 and 76 of the Act deal with the powers that can be exercised over paid officers and servants of the society. This