IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE ELEVENTH DAY OF SEPTEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE RAMESH RANGANATHAN WRIT PETITION NO : 15628 of 2000 Between: M.Sambasiva S/o Sivaramaiah R/o Pyaparru, Amarathalur Mandal, Guntur District. ..... PETITIONER AND 1 Co.operative Tribunal Rep. by its Secretary. Vijayawada, Krishna District. 2 Special Cadre Deputy Registrar, (Diary) A.P.D.D.Co.operative Federation, Lalapet, Hyderabad. 3 Pyaparru Milk Producers Co.op Society Ltd., Rep. by its President. Pyaparru Village a Marthalur Mandal Guntur District. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Aﬃdavit ﬁled herein the High Court will be pleased to issue an order or direction or writ more particularly one in the nature of writ of Certiorari Calling for the records pertaining to O.A.No.19 of 98 of the Co.op Tribunal, Vijayawada wherein the order passed by the second respondent on 11-11-97 in Proc.No.443/97-p2 was conﬁrmed and declare the same as illegal, arbitrary and against the provisional of the A.p.Co.op Societies act and Rules framed therein and pass such other order or orders as this Hon'ble Court may deem fit and proper in the Circumstances of the Case. Counsel for the Petitioner:MR.S.NARASIMHA RAO Counsel for the Respondents: GP FOR COOPERATION The Court made the following Order: The order of the second respondent dated 11-11- 1997, conﬁrmed in appeal by the Cooperative Tribunal, Vijayawada, in O.A.No.19 of 1998, is impugned in this writ petition. The petitioner was the President of the third respondent-Society during the years 1985 to January, 1995. On a representation being made, alleging misappropriation on the petitioner’s part of a sum of Rs.1,00,000/-, the second respondent ordered for inspection and, on the basis of the inspection report, a show cause notice was issued to the petitioner and, thereafter, the surcharge order was passed for recovery of Rs.65,000/- at Rs.32,500/- each from both the Secretary and the petitioner herein. Aggrieved thereby, the petitioner preferred an appeal in O.A.No.19 of 1998 before the Cooperative Tribunal, Vijayawada. The Tribunal, while dismissing the O.A., held that the petitioner and the Secretary of the third respondent-Society were jointly and severally liable for payment of the said amount of Rs.65,000/-. While several grounds are raised in the aﬃdavit ﬁled in support of the writ petition, Sri L.J.Veera Reddy, learned counsel appearing on behalf of Sri S.Narasimha Rao, learned counsel for the petitioner, would restrict his submissions to the following grounds: i. that the petitioner had paid a sum of Rs.65,000/- towards protected water supply scheme in three consecutive years pursuant to the committee resolution and, though he remained ex parte before the authority under Section 60 of the A.P.Cooperative Societies Act, 1964 (for short ‘the Act’), the authority, nonetheless, ought to have examined the contents of the Managing Committee resolution and should have enquired from the Gram Panchayat, which was the beneﬁciary, as to whether they had, in fact, received the amount from the petitioner; and ii. while the authority under Section 60 of the Act had ﬁxed liability on the petitioner and the Secretary at Rs.32,500/- each, the Cooperative Tribunal, Vijayawada, in a joint appeal preferred by the petitioner and the Secretary, had erred in converting the individual liability to that of joint and several liability. Learned counsel would rely on a Division Bench judgment of this Court in Challa Sanyasinaidu v. Deputy Registrar of Cooperative Societies, Srikakulam[1]. In the case on hand, consequent upon inspection under Section 52 of the Act, and on receipt of the inspection report, surcharge proceedings were initiated under Section 60(1) of the Act. Under Section 60(1), where in the course of an inspection under Section 52, 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, had misappropriated or fraudulently retained any money or other property or had been guilty of breach of trust in relation to the society or had made any payment contrary to the provisions of the Act, the rules or the bye-laws, the Registrar himself, or any person authorized by him, has been empowered to 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 may think just. Under the proviso thereunder, no order shall be passed against any person referred to under sub-section (1) unless the person concerned has been given an opportunity of making his representation. The contention is not that the petitioner was denied the opportunity of making a representation. On the other hand, it is the admitted case of the petitioner that he remained ex parte. The contention, however, is that even though the petitioner remained absent, and was set ex parte, a duty, nonetheless, was cast on the Registrar to enquire into the conduct of the petitioner by examining the resolution of the Managing Committee, and to enquire with the Gram Panchayat, before holding the petitioner guilty of misappropriation or in directing him to return the said money. I n, Challa Sanyasinaidu1, the Division Bench of this Court observed thus: “…….The scheme of Section 60 of the Act in our view unfolds itself as follows:- In the course of inspection under Section 52 of the Act, the Registrar may cause the inspection of books of the Society with a view to ﬁnd out the irregularities, acts of omission and commission. This enquiry is only administrative in nature, and if the Registrar prima facie is satisﬁed of the irregularities on the basis of the report of the Enquiry Oﬃcer, he may initiate surcharge proceedings under Section 60. That report may form the basis for the Registrar to proceed under Section 60 and issue a surcharge order eventually. The person against whom a report is sent under Section 52 has no opportunity to squarely meet the allegations against him at that stage. He is not allowed to cross-examine the witnesses from whom statements are recorded implicating his involvement. He cannot also adduce rebuttal evidence. That is not the stage where a demand can be made against him to pay back the sum or liability fastened to him as per the report of the Enquiry Oﬃcer. On the contrary, Section 60 clearly contemplates an opportunity being given to the delinquent by making a representation. In our view, this is the proper occasion where the oﬃcer or the servant has to be given an opportunity of explaining his stand and allow him to participate in the enquiry before a ﬁnal order is passed. This is a valuable right given to the delinquent which cannot be brushed aside in a routine manner. After the show-cause notice is served and an explanation is called for, an opportunity should be given to the aﬀected person to cross-examine the witnesses examined in the course of enquiry under Section 52 or permit him to examine his witnesses to rebut their evidence. Until this is done, the spirit of making a representation, as contemplated under Section 60, cannot be fulﬁlled. Although Section 60 does not prescribe any particular procedure before passing surcharge order, nonetheless, it is mandatory that principles of natural justice shall be followed in the enquiry. Evidence recorded behind the back of the defaulter cannot be relied upon to fasten the liability on him without giving him an opportunity to cross-examine the witnesses. The Registrar in his surcharge proceedings is a Court whose order can very well form the subject matter of judicial review under Article 226 of the Constitution of India. Therefore, it is in the ﬁtness of things that an opportunity like supply of copy of enquiry report, statements of witnesses recorded during the said enquiry, and also an opportunity to cross- examine those witnesses, or permit him to examine his own witnesses by the delinquent by way of rebuttal should be allowed before an order under Section 60 is passed……..” As noted hereinabove, it is not even the petitioner’s case that he was denied an opportunity of participation in the enquiry for it is he who remained absent and was, consequently, set ex parte. It is only if the petitioner had appeared before the authority, and had participated in the enquiry, would the question of his being given a copy of the report, the statement of the witnesses recorded in the enquiry, an opportunity to cross-examine witnesses or being permitted to examine his own witnesses, arise. Neither Section 60(1) of the Act, nor the judgment in Challa Sanyasinaidu1, requires the Registrar to conduct a roving enquiry in order to ascertain whether there were any reasons justifying the action taken against the person against whom surcharge proceedings were issued. A perusal of the Inspection report dated 14-07-1997 shows that both the auditors had passed the expenditure of Rs.65,000/- (Rs.15,000/- + Rs.25,000/- + Rs.25,000/-) shown in the cash book as donations to the protected water scheme during the years 1992-93, 1993-94 and 1994-95 respectively without vouchers, which scheme was not related to the third respondent-Society, was from the undistributed proﬁts of the Society and was against the bye-laws. The report also reveals that these auditors were subsequently transferred and that their having passed the above expenditure was irregular. It is further stated in the report that the resolution passed in the Board Meeting of the third respondent-Society held on 15-11-1992 for payment of Rs.15,000/- for protected water scheme was against the bye-laws, that there was no quorum for the General Body Meeting held on 22-12-1993 wherein it was resolved to give donations to the protected water scheme and that the General Body Meeting dated 24-12- 1994, wherein it was resolved to donate Rs.25,000/- to the protected water scheme, was contrary to the bye-laws. It is further stated that the said amount of Rs.65,000/- shown in the cash book, as donations, was without vouchers and was against the bye-laws of the Society. It is necessary to note that the proceedings before the authorities also show that the so called claim made during the years 1992-93, 1993-94 and 94-95 was towards the protected water supply scheme which had been completed much prior thereto. These ﬁndings more than justify the action being taken against the petitioner for recovery of the misappropriated amount. Hence, I see no justiﬁcation in holding that the second respondent ought to have made a roving enquiry in this regard before liability could be fastened on the petitioner for repayment of the amount of Rs.65,000/-. In the show-cause notice dated 30-09-1997, issued under Section 60(1) of the Act, the petitioner’s attention was drawn to the inspection report and the ﬁndings therein including that the said amount of Rs.65,000/- was not paid to the protected water scheme of Pyaparru village etc. The petitioner was called upon to show cause why action should not be taken for recovery of Rs.65,000/- along with interest at 18% p.a. Though notices were served on him on 06-10- 1997, the petitioner failed to submit his explanation despite 30 days time having been granted to him to do so. It is thereafter that the authority passed the surcharge order against the petitioner and the paid Secretary for Rs.32,500/- each along with interest at 18% p.a. till the date of realization. The Cooperative Tribunal, Vijayawada, in its order dated 10-12-1999, while upholding the order passed under Section 60(1) of the Act, observed that the action was contrary to the bye-laws and the rules governing the third respondent- Society. The Tribunal interfered with the order of the second respondent to the limited extent, that as against the splitting up of the liability in equal halves, it held that the liability should have been fastened jointly and severally. An appeal, under Section 76 of the Act, is only by a person aggrieved by the decision made under Section 60 and it is only to the extent of the grievances espoused by the persons aggrieved could the appellate Tribunal have exercised jurisdiction under Section 76 of the Act. While the appeal preferred by the petitioner could have been dismissed in its entirety, the Tribunal had acted beyond the scope of Section 76 of the Act in mulcting joint and several liability, when the authority under Section 60 of the Act had split up the liability in equal halves of Rs.32,500/-. It is only to this limited extent that the order of the Cooperative Tribunal, Vijayawada, is set aside. The order of the second respondent is conﬁrmed and the petitioner, as held by the Special Cadre Deputy Registrar, in his proceedings dated 11-11-1997, shall pay Rs.32,500/- with interest at 18% p.a. till the date of realization. It is also made clear that the remaining amount of Rs.32,500/- with interest at 18% p.a. can, in accordance with the aforesaid order of the Special Cadre Deputy Registrar, be recovered from the paid Secretary. The Writ petition is disposed of accordingly. However, in the circumstances, without costs. RAMESH RANGANATHAN, J Dt:11-09-2008 usd To 1. The President, Pyaparru Milk Producers Co.op Society Ltd., Pyaparru Village a Marthalur Mandal Guntur District. 2. Two CCs to GP for Cooperation, Hihg Court Buildings, Hyderabad (OUT). 3. Two CD copies. [1] 1998(1) ALT 482 (DB)