Partly allowed

Gadigeppagowda v. State of Karnataka

Karnataka HC12 Jul 2022WP/44581/2018

Case brief

AI extract

What is this about?

The Karnataka High Court allowed a writ petition to quash the Karnataka Appellate Tribunal's order reinstating surcharge proceedings against cooperative society directors. The Court found that with most loans recovered and no evidence of intent to cause loss, the proceedings could not be sustained.

What did the court decide?

The Appellate Tribunal's impugned order dated 26.7.2018 in Appeal No.638/2011 is quashed.

Gadigeppagowda Vs State of Karnataka — Cooperative Societies | Karnataka HC (2022)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 12^TH DAY OF JULY 2022

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BEFORE

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THE HON’BLE MR. JUSTICE B. M. SHYAM PRASAD

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WRIT PETITION NO.44581/2018 (CS-RES)

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BETWEEN :

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GADIGEPPAGOWDA S/O PARVATHGOWDA PATIL, AGED ABOUT 64 YEARS,

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R/AT AMARGOL,NAVANABGAR POST, HUBLI TALUK, DHARWAD DISTRICT, AT PRESENT THE PETTIONER NO.1 IS PRESIDENT, KARNATAKA STATE CO-OPERATIVE CONSUMERS FEDERATION,

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CHAMARAJPETE, BANGALORE - 560 018.

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SHIVAKUMARGOWDA

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S/O SHIDDALINGANGOWDA PATIL, AGED ABOUT 48 YEARS, KALAKERI, MUNDARHI TALUK, GADAG DISTRICT,

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AT PRESENT THE PETITIONER NO.2 IS DIRECTOR, KARNATAKA STATE CO-OPERATIVE CONSUMERS FEDERATION, CHAMARAJPETE,

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BANGALORE - 560 018.

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... PETITIONERS

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(BY SRI. PRUTHVI WODEYAR, ADVOCATE)

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AND :

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STATE OF KARNATAKA DEPARTMENT OF COOPERATION M.S.BUILDING,

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BANGALORE - 560 001. BY ITS SECRETARY.

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THE REGISTRAR OF CO-OPERATIVE SOCIETIES ALI ASKER ROAD, BANGALORE - 560 052.

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THE JOINT REGISTRAR OF COOPERATIVE SOCIETIES BELGAUM, NEAR PRAKASH TALKIES, SHAPUR, BELGAUM - 590 001.

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THE MANAGING DIRECTOR KARNATAKA CENTRAL CO-OPERATIVE BANK LTD, SUBASH ROAD, DHARWAD - 580 001.

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... RESPONDENTS

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(BY SRI. BASAVARAJ.N. PATIL, ADVOCATE FOR R4; SMT. KAVITHA H.C., HCGP FOR R1 TO R3)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 26.7.2018 IN NO.APPEAL NO.638/2011 PASSED BY THE KARNATAKA APPELLATE TRIBUNAL (BELGAUM BRANCH CCH-6) VIDE ANNEXUREG; STRIKE DOWN CLAUSE-(e) & (f) OF SECTION 98 N OF THE KARNATAKA CO-OPERATIVE SOCIETIES ACT 1959, AS AMENDED ACT NO.6 OF 2010 AS UNCONSTITUTIONAL.

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THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioners, who were the Directors of the fourth respondents, have called in question the Karnataka Appellate Tribunal's order dated 26.07.2018 in Appeal No.638/2011. The Tribunal, by this impugned order, has set aside the interim order dated 19.07.2011 in the proceedings in JRL/B/LS/02/200203 and has directed the concerned to reinstate the proceedings under Section 69 of the Karnataka Cooperative Societies Act, 1959 (for short, ' the Cooperative Societies Act' ). The proceedings against the petitioners and others under Section 69 of the Cooperative Societies Act are commenced after enquiry under Section 64 of the Cooperative Societies Act.

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It is undisputed that the surcharge proceedings are commenced against the petitioners and others for disbursement of twenty-two different loans such as Credit Card Loans, Bridge Loans, Working Capital Loans, Long Term Loans and Loans under

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certain schemes alleging that these loans are sanctioned and disbursed contrary to the Rules and norms. The petitioners and others have filed application before the concerned Joint Registrar of the Co-operative Societies for disposal of the proceedings relying upon the information furnished by the Managing Director of the Society informing them that out of twenty-two loans, eleven loans were closed; execution proceedings were pending in respect of five land and other proceedings as against recovery of other loans were pending at different stages in different Courts.

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The Managing Director, who has appeared before the Joint Registrar, has also confirmed the information and the Joint Registrar has dropped Surcharge proceedings because of this information. The Tribunal has interfered with the Joint Registrar's order opining that even if some loans are discharged, the proceedings under Section 69 of the Cooperative

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Societies Act could not be dropped entirely because there was default in respect of other loans.

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It is now stated in unison that out of twentytwo loans, twenty loans have been closed recovering all the amounts due; one account is pending on the execution side and the dispute as regards other loan account is pending in W.P.No.107086/2018. Sri.Pruthvi Wodeyar, the learned counsel for the petitioners, submits that with these subsequent events, there cannot be any dispute that the petitioners are not responsible for any financial loss and in fact, he submits that the pending execution proceedings pertain to the loan that is sanctioned during the period when the Administrator was looking after the affairs of the Society.

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With these unanimous submissions and the

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other submission that the loan, which is yet to be settled, was sanctioned during the time when the

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Administrator was overseeing the affairs of the Society, it cannot be opined that if the surcharge proceedings are dropped, that would be irregular. One of the salient requirements of the provisions under Section 69 of the Cooperative Societies Act is a deliberate intent to cause financial loss to the society, and this requirement has obviously not been established in the present facts and circumstances of the case.

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Therefore, this Court is of the considered view that the Tribunal's order insofar as the petitioners cannot be sustained and must be accordingly quashed. As such, the petition is allowed in part and the Appellate Tribunal's impugned order dated 26.7.2018 in Appeal No.638/2011 is quashed.

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SA/Ct:sr

Gadigeppagowda v. State of Karnataka

Case brief

What is this about?

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Gadigeppagowda v. State of Karnataka

Case brief

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