Dharam Pal Koundal Vs the State of Hp and Others

2026:HHC:27554

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

CWP No.6156 of 2024 Decided on: 8^th July, 2026

------------------------------------------------------------------------------------- Dharam Pal Koundal …..Petitioner

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Versus

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State of H.P. and others .....Respondents

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Coram

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Ms. Justice Jyotsna Rewal Dua

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Whether approved for reporting?¹

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For the Petitioner: Mr. Onkar Jairath and Mr. Piyush Mehta, Advocates. For the Respondents: Ms. Seema Sharma, Deputy Advocate General, for respondents No.1 to 4. Mr. K.S. Dhaulta, Advocate, for respondents No.5 and 6.

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Jyotsna Rewal Dua, Judge

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Vide office order dated 29.01.2024 (Annexure P-11), respondent No.4 appointed an arbitrator in a matter concerning the rate of interest at which loans were advanced to the petitioner and his late father-Sh. Bhagat Ram. Petitioner filed appeal against the aforesaid office order appointing the arbitrator. The appeal was dismissed by respondent No.3 on 14.06.2024 (Annexure P-12) holding

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that there were sufficient reasons for the matter to be

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1 Whether reporters of print and electronic media may be allowed to see the order? Yes.

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delved upon by the arbitrator. Feeling aggrieved against the aforesaid two orders, petitioner has taken recourse to the

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writ jurisdiction of this Court.

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Pursuant to the interim order dated 03.07.2024

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passed in this writ petition, operation of the aforesaid two orders was stayed.

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2. The case:-

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2(i). Petitioner remained President of the Thathal

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Co-operative Agriculture Service Society Limited, Thathal, District Una from 1985 to 2019. Petitioner’s father-Sh. Bhagat Ram was granted loan of Rs.1,70,000/- at 9% interest per annum during the year 2004. Second loan in the same sum at same rate of interest was granted to him in the year 2006. Normal rate of interest at which loans were advanced by the Society at that time was 12%. Petitioner also obtained loan of Rs.15 Lakhs from the society in the year 2017 at 10% interest per annum. Loan amounts at the sanctioned rate of interest were repaid by the petitioner as also by his father within the prescribed time. Petitioner’s father died on 19.02.2009.

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2(ii). Respondents conducted an inquiry under Section 67 of the Himachal Pradesh Co-operative Societies Act, 1968 (in short ‘the Act’) regarding the rate of interest at

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which the aforementioned loans were sanctioned in favour of the petitioner and his father. Separate inquiry reports were furnished on 27.05.2022. In terms of the inquiry reports, loans were advanced to the petitioner and his father at lower rates than the normal chargeable rate. In terms of the inquiry report, the amount proportionate to the less rate of interest charged from the petitioner and his late father was liable to be recovered.

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2(iii). The above reports were followed by notice dated 15.09.2023 (Annexure P-9) issued to the petitioner for recovery of an amount of Rs.81,319/- as equivalent of less rate of interest charged. Failure to deposit the amount was to entail initiation of proceedings under Section 72 of the Act. Petitioner did not deposit the amount. Resultantly, respondent No.4 issued office order on 29.01.2024, appointing an arbitrator in the matter. Petitioner’s appeal against the appointment of arbitrator was dismissed on 14.06.2024, giving occasion to the petitioner to institute this writ petition.

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3. Learned counsel for the petitioner contended that petitioner’s father had passed away on 19.02.2009, therefore, in view of Section 29(1)(b) of the Act, the respondents could not have ordered to recover the amount

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in question as the recovery could have been effected only

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for a period of two years from the date of death. The

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provision pressed into service reads as under:-

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“29. Liability of past member and estate of deceased member-

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(1) Subject to the provisions of sub-section (2), the liability of a past member or of the estate of a deceased member of a co-operative society for the debts of the society as they existed-

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(a) in case of a past member, on the date on which he ceased to be a member;

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(b) in the case of a deceased member on the date of his death;

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shall continue for a period of two years from such date.”

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It was also urged that in the inquiry report, petitioner was not held responsible, rather, the Secretary/ Managing Committee was held liable for the lapses, if any. Therefore, no action can be taken against the petitioner. Reliance in this regard was, inter alia, placed upon Section 69 of the Act, which reads as under:-

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“69. Surcharge –

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(1) If in the course of an audit, inquiry, inspection or the winding up of a co-operative society, it is found that any person who is or was entrusted with the organisation or management of such society, or who is or has at any time been an officer or an employee of the society, has made any payment contrary to the provisions of this Act, the rules or the bye-laws or has caused any deficiency in the assets of the society by breach of trust, or wilful negligence or has misappropriated or fraudulently retained any money or other property belonging to the society, the Registrar may, of his own motion or on the application of the committee, liquidator, or any creditor, inquire himself or direct any person

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2026:HHC:27554

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authorised by him, by an order in writing in this behalf, to inquire into the conduct of such person :

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Provided that no such inquiry shall be held after the expiry of six years from the date on which any act of commission or omission referred to in this sub-section comes to knowledge.

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(2) Where an inquiry is made under sub-section (1), the Registrar may, after giving the person concerned an opportunity of being heard, make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate, or to pay contribution and cost or compensation to such extent, as the Registrar may consider just and equitable.

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(3) This section shall apply notwithstanding that the act is one for which the offender may be criminally responsible.”

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Learned counsel for the petitioner also

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submitted that in view of the provisions of Section 72(2) of the Act, the dispute in question was beyond the purview of arbitration. The said provision is as under:-

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“72. Disputes which may be referred to arbitration –

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(1) Notwithstanding anything contained in any law for the time being in force, if any dispute touching the constitution, management, or the business of a cooperative society arises-

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(a) among members, past members and persons claiming through members, past members and deceased members; or

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(b) between a member, past member or person calming through a member, past member, or deceased member and the society, its committee or any officer, agent or employee of the society or liquidator, past or present; or

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(c) between the society or its committee and any past committee, any officer, agent or employee, or any past officer, past agent or past employee or the nominee, heirs or legal representatives of any deceased officer, deceased agent, or deceased employee of the society; or

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(d) between the society and any other co-operative society, between a society and liquidator of another society or between the liquidator of one society and the liquidator of another society; or

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(e) a surety of a member, past member or a deceased member or a person other than a member who has been granted a loan by the society under section 58 whether such surety is or is not a member of the society;

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such disputes shall be referred to the

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Registrar for decision and no court shall have jurisdiction to entertain any suit or other proceeding in respect of such dispute.

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(2) For the purposes of sub-section (1), the following shall be deemed to be disputes touching the constitution, management, or the business of a cooperative society, namely:-

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(a) a claim by the society for any debt or demand due to it from a member or an employee, or the nominee, heir or legal representative of a deceased member or an employee, whether such debt or demand be admitted or not;

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(b) a claim by a surety against the principal debtor where the society has recovered from a surety any amount in respect of any debt or demand due to it from the principal debtor as a result of default of the principal debtor, whether such debt or demand is admitted or not;

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(c) any dispute arising in connection with the election of any officer of the society.

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(3) If any question arises whether a dispute referred to the Registrar under this section is or is not a dispute touching the constitution, management or the business of a co-operative society, decision, thereon, of the Registrar shall be final and shall not be called in question in any court.”

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Learned counsel also highlighted issuance of No

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Dues Certificate to the petitioner by the Society after repayment of the loan, to canvass that the arbitrator could

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not have been appointed by the respondents under Section 72 of the Act.

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Though the Thathal Co-operative Agriculture Service Society Limited has not been impleaded in the writ petition as such, however, its President and Secretary have been impleaded as respondents No.5 and 6, respectively. Learned counsel appearing for these respondents has defended the impugned orders by reiterating the reasoning assigned in the order dated 14.06.2024 passed by respondent No.3, dismissing petitioner’s appeal against the appointment of Arbitrator.

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Learned Deputy Advocate General also

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supported the impugned orders.

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4. Heard learned counsel for the parties and considered the case file.

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Respondents had appointed the Arbitrator vide impugned office order dated 29.01.2024 in exercise of powers under Section 72 of the Act. As per Sub-section (2) of Section 72 of the Act, the dispute touching the constitution, management or the business of a co-operative society, namely a claim by the society for any debt or demand due to it from a member or an employee or the nominee, heir or legal representative of a deceased member,

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also falls within the purview of arbitration. In the instant case, as is evident from the notice issued to the petitioner on 15.09.2023, the Society has raised demand allegedly due to it from the petitioner in his own capacity and also as heir/legal representative of his late father. In the inquiry conducted into the matter under Section 67 of the Act, the finding recorded is that the petitioner had indeed advanced loan amounts to himself and his late father during the period of his Presidentship of the society at less rate of interest than normally chargeable. The inquiry report also is to the effect that shortfall in the amount on account of less rate of interest charged is liable to be recovered. The inquiry officer though has mentioned in the report that it was the responsibility of the Secretary/Managing Committee of the society to have ensured compliance of the applicable Bye-Laws while sanctioning the loan amount and applicable interest, nonetheless, that factor alone would not take away the right of the society to proceed in the matter in accordance with law. While dismissing petitioner’s appeal against the appointment of Arbitrator, respondent No.3 has observed that prima facie, there is irrefutable evidence of bias in levying the interest on the loan amounts sanctioned in favour of the petitioner and his father. That it is a matter

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2026:HHC:27554

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of inquiry & adjudication as to whether the loans so obtained were legally and ethically right or not. The grounds being urged by the petitioner in law as also on the factual matrix, therefore, are required to be raised by him before the learned Arbitrator. Petitioner’s right to defend himself has not been taken away merely because of appointment of Arbitrator. However, it cannot be said that the respondents could not have appointed the Arbitrator to examine and adjudicate the question involved.

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5. For the foregoing reasons, I do not find any infirmity in the impugned orders. Accordingly, this writ petition fails and is dismissed. Pending miscellaneous application(s), if any, also stand disposed of.

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By way of an abundant caution, it is clarified that the observations made hereinabove shall remain confined only to the adjudication of the present writ petition and shall not be construed as an opinion on the merits of the matter. It shall be open for the petitioner to raise all contentions on facts and law before the learned Arbitrator, who shall decide the matter expeditiously in accordance with law.

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Jyotsna Rewal Dua Judge

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July 08, 2026 Mukesh

Dharam Pal Koundal v. the State of Hp and Others

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What is this about?

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Dharam Pal Koundal v. the State of Hp and Others

Case brief

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