Dismissed

Bolem Srinivasa Rao, v. The Dy.Register of Cooperative Societies

Andhra Pradesh HC4 Mar 2024WP/6775/2009

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition challenging a surcharge order against a cooperative society chairman. The court held that despite the petitioner failing to submit explanations or cross-examine witnesses after multiple opportunities were granted, no violation of natural justice occurred under Section 60 of the A.P. Cooperative Societies Act.

What did the court decide?

The writ petition was dismissed, finding no violation of natural justice as the petitioner failed to submit explanations or witnesses despite repeated opportunities.

Bolem Srinivasa Rao, Vs The Dy.Register of… — Cooperative Societies | Andhra Pradesh HC (2024)

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IN THE HIGH COURT OF ANDHRA PRADESH::AMARAVATUv^ (Special Original Jurisdiction)

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TUESDAY, THE FIFTH DAY OF MARCH TWO THOUSAND AND TWENTY FOUR

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PRESENT

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THE HONOURABLE SMT JUSTICE V.SUJATHA

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WRIT PETITION NO: 6775 OF 2009

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Between:

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Bolem Srinivasa Rao, S/o. Late Ramachandradu Ex-Chairman of Janakiramapuram PACS, Kusarlapudi, Rolugunta Mandal, Visakhapatnam District.

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...Petitioner

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AND

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^ distic/' Societies, Yelemanchili, Visakhapatnam

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Lramunaidu, Secretary (Retd) Janikrampuram Primary AgrI Cooperative Society, Kusarlapudi, Rolugunta Mandal, Now at Cherlopalem, Natavaram Mandal, Visakhapatnam District.

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Secretary, Kusarlapudi, Rolugunta Mandal Visakhapatnam District.

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Janakiramapuram Primary AgrI Cooperative Society, Kusurlapudi Rolugunta Mandal, Visakhapatnam district. Rep by its Secretary. ’

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T^Dharma Raju, Senior Clerk, Janakiramapuram Primary AgrI Cooperative Society, Kusurlapudi, Rolugunta Mandal, Visakhapatnam district,

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G. Rajulu Naidu, Clerk, Janakiramapuram Primary AgrI Cooperative Society, Kusurlapudi, Rolugunta Mandal, Visakhapatnam district,

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M. Demudu, Clerk, Janakiramapuram Primary AgrI Cooperative Society Kusurlapudi, Rolugunta Mandal, Visakhapatnam district

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K. Srinivasa Rao, Clerk, Janakiramapuram Primary AgrI Cooperative Society, Kusurlapudi, Rolugunta Mandal, Visakhapatnam district,

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L. Ramana, Attender, Janakiramapuram Primary AgrI Cooperative Society, Kusurlapudi,Rolugunta Mandal, Visakhapatnam district,

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The President, Janakiramapuram Primary AgrI Cooperative Society Kusurlapudi,Rolugunta Mandal, Visakhapatnam district,

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Sri Srinivasa Raju, Supervisor, District Coop Central Bank Ltd Branch Narsipatnam, Visakhapatnam District.

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The Manager, District Cooperative Central Bank Limited Branch, Narsipatnam, Visakhapatnam District. (Respondents No.3, 4, 9 and 10 are dismissed for default vide High Court’s Order dated 26.04.2013)

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...Respondents

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Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, order or direction more particularly one in the nature of Writ of Certiorari calling for the records in O.A.No.83/2005 DATED 27-1-2009 on the file of the A.P. Co-operative Tribunal, Visakhapatnam confirming the orders passed by the 1st respondent herein in Rc.No.1564/2004(c)^dated28-9- 2005 as Illegal, arbitrary and violation of principles of natural justice and set aside the same

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I.A. NO: 1 OF 2009(WPMP. NO: 8851 OF 20091

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay of all further proceedings in pursuance of the procds Rc.No.1564/2004(C) dated 28-9-2005 of the 1st respondent which was confirmed by the Hon'ble A.P. Cooperative Tribunal, Visakhapatnam in O.A.No.83/2005 dated 27-1-2009 pending disposal of the above writ petition

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Counsel for the Petitioner: SRI VV N NARAYANA RAO

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Counsel for the Respondents: GP FOR COOPERATION

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Counsel for the Respondents: BOBBA VIJAYALAKSHMI

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Counsel for the Respondents: V UMA DEVI

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The Court made the following: ORDER

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APHC010093982009

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IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction)

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[3333]

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TUESDAY ,THE FIFTH DAY OF MARCH

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TWO THOUSAND AND TWENTY FOUR

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PRESENT

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THE HONOURABLE SMT JUSTICE V.SUJATHA

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WRIT PETITION NO: 6775/2009

Between;

Bolem Srinivasa Rao,

...PETITIONER

AND

The Dy Register Of Cooperative Societies and Others ...RESPONDENT(S)

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Counsel for the Petitioner:

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1.VVN NARAYANA RAO

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Counsel for the Respondent(S):

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1.7116A/ UMA DEVI

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2.GPFOR COOPERATION

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3.1150/BOBBA VIJAYALAKSHMI

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The Court made the following:

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ORDER.

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The present Writ Petition came to be filed under Article 226 of the

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Constitution of India seeking the following relief:-

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.to issue a writ, order or direction more particularly^{oneinthenatureofWritof} Certiorari calling for the records in O.A.No.83/2005^{dated27.1.2009onthefileof} the A.P. Co-operative Tribunal, Visakhapatnam confirming^{theorderspassedby} the 1 respondent herein in Rc.No.1564/2004© dated 28.09.2005^as illegal, arbitrary and violation of principles of natural justice^{andsetasidethesame} "

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The case of the petitioner is that while he was discharging^hisdutiesas Chairman and Person-in-Charge of Janakiramapuram Primary AgrI. Cooperative Society, an enquiry under Section 51 of^{theA.P.Cooperative} Societies Act was conducted into the affairs of the Society, to probe into certain financial irregularities. After enquiry, the^{EnquiryOfficersubmittedhis} report stating that the respondent while acting as^{SecretaryInchargeofthe} Society has committed serious financial irregularities^{likediversificationofloan} collections, fictitious debt made in cash book, payment^{ofcharges,byviolating} the rules. Basing the said report, the 1^ respondent^{issueddirectionstothe} petitioner under Section 59(1) of the A.P. Cooperative^{SocietiesAct,1964} vide proceedings dated 24.02.2005 to place the 3 rd respondent under suspension for a period of four months in the interest^{ofsocietypending} investigation. Surprisingly, the 1®* respondent issued^{surchargenoticeunder} Section 60(1) of the A.P. Cooperative Societies Act^on24.05.2005 to the petitioner and as well as the 3'^ respondent for submitting^{theirexplanations}

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for the allegations mentioned therein. However, the petitioner having received the said notice, requested the 1®* respondent to grant time for submitting his explanation as he met with an accident.

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The grievance of the petitioner is that without giving any opportunity or without following the due procedure as contemplated under Section 60(1) of the A.P. Cooperative Societies Act, the respondent issued impugned surcharge orders, fixing liability on the petitioner for payment of Rs.4,37,004/-, while dropping the charges against the 3'*^ respondent. Challenging the said surcharge proceedings, the petitioner filed O.A. No.83^{of2005beforetheA.P.} Cooperative Tribunal, Visakhapatnam. However, the Tribunal^dismissedthe said O.A. vide its order dated 27.01.2009. Assailing the said order, the present writ petition is filed.

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The 1®‘ respondent filed his counter while, inter-alia, contending that the petitioner continued as Chairman of the Person In-Charge Committee up to 07.07.2004 and during his said tenure, the petitioner^{hascommittedfinancial} irregularities contrary to the Act, Rules and Bye-laws^{andcausedlosstothe} assets of the Society. The Janakirampuram PACS submitted proposals to the Deputy Registrar of Cooperative Societies, Yelamanchili-lst respondent under Section 116-C of the Act for approval of staff pattern and for payment of salaries. In turn, the 1®‘ respondent approved the said proposals in respect of staff pattern and rejected the same for payment of pay scales as the Society^is not earning Gross profit as per Rule 36(B). However, the employees of the

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Society filed W.P.No.22604 of 2003, wherein this Court^{passedinterimorders} directing the Society to pay the salaries to the employees^{notexceeding2%of} working capital. Accordingly, the petitioner called for Board meeting on 24.06.2004 for taking necessary action where only the^{petitioneralonehas} attended and he alone has passed a resolution, to pay^{thesalariestothe} employees of the Society without having sufficient^{quorumandpassedpay} orders on the voucher for payment to a tune of Rs.4,37,004/-.^{Meanwhile,the} writ petition filed by the employees, was dismissed^{onthegroundthatthe} same is not maintainable under the provisions of the Act. Therefore, the Society is liable to pay salaries as per G.O.Ms.No.94^{(Agril&Coop(Coop-IV),} dated 28.02.2004 and thus the employees are not entitled^{toreceivepayand} allowances from the funds of the society as per the provisions laid down under Section 116-C of the Act. As the petitioner paid the^{salariestotheemployees} of the respondent society, contrary to the provisions^{ofSection116-C,asper} Rule 36(B) and if any excess expenditure incurred by^{thesocietytowards} salaries of the staff over and above the limit fixed by the Act, the entire excess expenditure shall be recovered from, the managing committee of the respective society jointly and severally. 5. It is further submitted that in fact the petitioner acknowledged the Surcharge notice and filed Memo on the ground that^{heisunabletoattendon} 22.08.2005 due to motor accident on 16.5.2005. Later^he was^givenseveral opportunities to appear before the 1®‘ respondent but^the petitioner have intentionally avoided to attend before the 1®‘ respondent^{andfailedtosubmit}

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his explanation to the surcharge proceedings. After giving sufficient time to the petitioner to submit his explanation, the impugned surcharge proceedings were issued against him, which is legally valid. The petitioner has acted contrary to the provisions of the Act, Rules and Bye-laws and as such, he is alone responsible for the financial irregularities committed and the said meeting is null and void.

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Heard learned counsel for the petitioner and the learned Government Pleader for Cooperation and learned Standing Counsel appearing for the respondents.

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Learned counsel for the petitioner contended that the 1 respondent issued present impugned surcharge proceedings without giving any opportunity and without following the procedure as contemplated under Section 60(1) of the A.P. Cooperative Societies Act, 1964 and contrary to the Judgment of this Court in Challa Sanyasinaidu vs. Deputy Registrar of Co op. Societies, Srikakulam\ He further contended that while conducting enquiry under Section 60 of the Act, the 1®* respondent was not supplied the enquiry report to the petitioner to putforth his case. In fact, the 3^'' respondent had collected an amount of Rs.4,37,004/- and disbursed the same towards pay and allowance to the staff of the society for the period from 01.4.2003 to 30.6.2004, and hence, the petitioner is not at all responsible for the diversification of funds.

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' 1998(1) ALT 482 (D.B.)

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On the other, learned Government Pleader for Cooperation vehemently contended that since there are several financial irregularities committed by the petitioner and as well as 3’’'^ respondent, basing on the enquiry report, the Surcharge proceedings were initiated against the petitioner finding him^guilty, while exonerating the respondent from the liability.^{Hefurthercontended} that the petitioner called for Board Meeting on 24.06.2004 for taking necessary action in respect of the payment of pay scales,^{andhealonehas} passed resolution to pay salaries to the employees^{ofthesocietywithout} having sufficient quorum and passed orders to a tune^{ofRs.4,37,004/-.Before} issuance of impugned Surcharge proceedings, the petitioner^was afforded several opportunities to submit his explanation to^{theSurchargenoticebuthe} did not avail such opportunities. Hence, the issuance^{ofimpugnedsurcharge} proceedings is valid and sustainable in law.

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As seen from the material on record and submissions^ofthelearned counsel on both sides, the main grievance of the petitioner is that the Surcharge proceedings were issued without giving any opportunity and without following due procedure as contemplated under^{Section60(1)ofthe} A.P. Cooperative Societies Act, 1964.

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It is appropriate to refer Section 60 of the A.P. Cooperative^Societies Act, 1964;

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Surcharge. -

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(1) [Notwithstanding anything contained in any other^{lawforthetimebeingin} force] where in the course of an audit under Section^{50oraninquiryunder}

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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 ivas entrusted with the organisation, affairs or management of the society or any past or present officer or secant 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 willful 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 authorised 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 authorised 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 oftrusf or willful negligence as the Registrar or the person authorised as aforesaid thinks JUSl.

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Provided that no order shall be passed against any person referred to in this sub section unless the person concerned has been gi given an opportunity of making his representation.

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(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.

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(3) This section shall apply notwithstanding that such person or officer or servant may have incurred criminal liability by his act

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It IS also the contention of the petitioner that issuance of surcharge proceedings is contrary to the principles laid in Judgment in Challa Sanyasmaidu vs. Deputy Registrar of Co-op. Societies, Srikakuiam , the relevant portion of which, is extracted hereunder;

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“11. The scheme of Sec.60 of the Act in our view unfolds itself as follows:-

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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

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opportunityevenlually The personto sguarely ageinsimeet thewhorr,allegationsa reportagainstis sent underhim at Sectiontha, stage52 hasHe nois reco^TLn-l ‘"’O'” statements are recorded implicating his involvement He cannot also adduce rebutlal evidence^ That is not the stage where a demand can be made against him^to oLeTon lh r "“‘f'' "S’ "’0 ooport of Ihe Enquiry Officer On Ihe contrary. Section 60 cleariy contemplates an opportunity beZ given to the delinquent by making a representation, in our vL Ih Zs the proper occasion where the officer or the servant has to be gL" an beZZZi ° “"'P-nmo hts stand and allow him to participate^intheenquiry wZh can , T[ “ f " ''“'"”"0 "9" S™" <» "’P iiblinqunlZ ZZ sT H a ° '”“""0 ''"P” '"P show-cause notice IS served and an explanation is cailed for, an opportunity should be given to the affected person to cross-examine the vritnesses examined in the course of enquiry under Section 52 or permit him to examine his v^itnesses to as of making a representation, as contempiated under Section 60, cannot be fulfiiled. Aithough Section 60 I particular procedure before passing surcharge order nonetheless, it is mandatory that principles of natural justice shali be followed in he 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 nZ ZZ" ZZ of judicial review under Mide 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 crossexamine 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 ou IS passed.

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A reading of the above provision makes it clear that if any person who is

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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 either 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 willful negligence or has made any payment contrary to the provisions of the Act. the rules or bye-laws, the Registrar . or any person authorized by him, of his own inquire into the conduct of such person or officer or servant and make an order requiring him to repay or

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restore the money or property or any part thereof with^{interestatsuchrateas} the Registrar thinks it fit and that no such order^{shallbepassedthatthat} person unless the person himself has been given an^{opportunityofmakinghis} representation.

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In reply to the said principle, as seen from the impugned^Surcharge order, it appears that, basing on the report submitted^{bytheEnquiryOfficer,} 3^'^ respondent surcharge notice was issued to the petitioner as well^as directing them to appear before the Registrar on 22.08.2005^{alongwiththeir} explanations to answer the issues found in the enquiry^{report.However,the} / 3'^'^ respondent has attended and requested for 10^{daystimeforsubmittinghis} explanation, while the petitioner failed to appear though adequate opportunities were given to him thereafter also to^{putforthhiscase.Though} the petitioner was given several opportunities to submit^{hisexplanationtothe} allegations made in the surcharge notice, he did not^{availsuchopportunities.} After affording several opportunities to the petitioner^{only,thesurchargeorder} was passed against the petitioner fixing the liability^{topayRs.4,37,004/-.}

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As contended by the learned Government Pleader for^{Cooperationand} as seen from the material, in fact, the petitioner called for^{Boardmeetingon} 24.06.20Q4 for taking necessary action in respect of^{rejectionofproposalsfor} payment of salaries to the employees of the society^{butnoonehasattended} the said meeting except the petitioner and that the petitioner himself unilaterally passed a resolution to pay salaries to^{theemployeesofthe}

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society without sufficient quorum and passed pay orders on the voucher for payment to a tune of Rs.4,37 004/- which i IS not disputed or denied. In order to rebut or to deny such allegations •Pe petitioner did not submit any explanation or any written submissions inspite of oivi giving several opportunities. 15. It is also to be noted that the petitioner has paid salaries to the employees of the Society contrary to the provisions of Section 116(c) which mandates that any expenditure towards pay and allowances of the employees shall not exceed 2% of the working capital or 30% gross profit in terms o the actuals in a year whichever is less.

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A perusal of the Judgment between C/7a//a Sanyasinaid^ vs. Deputy Registrar of Coop. Societies, Srikakulam would indicate that if the Registrar prima-facie satisfied with the irregularities basing on the report of the enquiry officer he may initiate Surcharge proceedings under Section 60 of the Act which 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 of the Act has no opportunity to squarely meet the allegations against him and that he i IS not allowed to cross-examine the Witnesses from whom the statements are recorded implicating his involvement. After the show -cause notice is served an explanation shall be is called for affording

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an opportunity 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

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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. Therefore, it is in the fitness of things that an opportunity like supply of the copy of enquiry report, statement 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.

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Coming to the facts of the present case, though the petitioner was granted several opportunities to submit his explanation,^{hefailedtosubmithis} explanation and he never brought to notice of the Registrar^{thatheintendedto} examine anybody on his behalf in order to file any^{listofwitnesses.}

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In view of the above circumstances, this Court has no hesitation to hold that the petitioner is not denied fair play or sufficient opportunity before the order under Section 60 is passed. As such the contention of the petitionerthat before issuance of impugned surcharge proceedings the petitioner was not given any opportunity, is not acceptable and, therefore, the order passed by the Tribunal dismissing the O.A.No.83 of 2005 is just^{andreasonableandthe} j * same is not called for any interference by this Court. Hence, the writ petition is liable to be dismissed.

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