Allowed

Mg.Committee of Kandalloor Farmers Servi v. Jt.Registrar of Co-Op.Societies(G) Alp.

Kerala HC17 Oct 2008WP(C)/4661/2008

Case brief

AI extract

What is this about?

The High Court held that proceedings under Section 32 for supersession were invalid because the Registrar failed to determine whether the inquiry under Section 65 revealed major defects before initiating action. The court quashed the notice and order as arbitrary and lacking jurisdictional support.

What did the court decide?

Exhibits P4 and P11 in WP(C).7339/2008 are quashed; WP(C).4661/2008 is allowed in the same terms.

Mg.Committee of Kandalloor Farmers Servi Vs… — Company and Corporate | Kerala HC (2008)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT :

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THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN FRIDAY, THE 17TH OCTOBER 2008 / 25TH ASWINA 1930

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WP(C).No. 4661 of 2008(E) -------------------------------------

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PETITIONER:

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-------------------

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THE MANAGING COMMITTEE OF KANDALLOOR FARMERS SERVICE CO-OPERATIVE BANK LTD. NO.1410, KANDALLOOR P.O., ALAPPUZHA DISTRICT, REPRESENTED BY ITS PRESIDENT S.ANANDAN.

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BY ADV. SRI.GEORGE POONTHOTTAM.

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RESPONDENTS:

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-----------------------

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1. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (G), ALAPPUZHA.

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*ADDL.R2. K.P.JANARAJAN, AGED 67 YEARS, S/O. KUNJU PILLAI, RESIDING AT SHIJU BHAVAN, KANDALLOOR SOUTH, KANDALLOOR.P.O., KAYAMKULAM.

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*ADDL.R2. IS IMPLEADED AS PER ORDER DTD. 08/02/08 IN I.A. NO. 2053/08.

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R1 BY GOVERNMENT PLEADER SMT. A.G. ANEETHA, R2 BY ADV. SRI.K.RAMAKUMAR (SR.), ADV. SRI.T.RAMPRASAD UNNI, ADV. SMT.SMITHA GEORGE.

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11/08/2008, ALONG WITH W.P.(C).NO.7339/2008,THE COURT ON 17/10/2008 DELIVERED THE FOLLOWING:

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W.P.(C). NO.4661/2008-E:

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APPENDIX

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PETITIONERS' EXHIBITS:

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EXT.P.1: COPY OF THE NOTICE NO. C.R.B. NO. 3461/06 DTD. 22/10/07.

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EXT.P.2: COPY OF THE REPLY DTD. 30/11/2007 GIVEN BY THE PETITIONER.

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EXT.P.3: COPY OF THE NOTICE NO. C.R.B. 3461/06 DTD. 29/01/2008.

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EXT.P.4: COPY OF THE ORDER NO. C.R.B. NO. 1871/05 DTD. 10/02/2006.

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EXT.P.5: COPY OF THE NOTICE NO. C.R.B. NO. 2098/2005/K. DIS. DTD. 27/06/2005.

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EXT.P.6: COPY OF THE FEEDER CATEGORY RULES.

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EXT.P.7: COPY OF THE INTERIM ORDER IN C.M.P. NO. 42678/2000 IN O.P. NO. 25278/2000 DTD. 31/08/2000.

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RESPONDENTS' EXHIBITS & ANNEXURE:

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EXT.R2.A: COPY OF THE JUDGMENT DTD. 14/06/2007 IN W.A. NO.181/2007.

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ANNEXURE R1.A: COPY OF THE ORDER DTD. 20/02/2008.

//TRUE COPY//

P.S. TO JUDGE.

prv.

THOTTATHIL B. RADHAKRISHNAN, J.

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= = = = = = = = = = = = = = = = = = = = = = = =

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W.P.(C).Nos.4661/2008-E & 7339/2008-W

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= = = = = = = = = = = = = = = = = = = = = = = =

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Dated this the 17^th day of October, 2008.

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JUDGMENT

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“CR”

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1.These writ petitions are by the managing committee of a Co-operative Bank. That committee was superseded as per order dated 20-2-2008 which is marked Ext.P11 in WP(C).7339/2008. WP(C). 4661/2008 was filed challenging the notice dated 29-1-2008 issued under Section 32(1) of the Kerala Co-operative Societies Act, 1969, hereinafter referred to as the “Act”. That document is Ext.P4 in WP(C).7339/2008. Noticing the different contentions in WP(C).4661/2008, an interim order was issued on 8-2-2008 in that case. It was thereafter that the order impugned in WP(C).7339/2008, Ext.P11 therein, was issued by the Joint Registrar exercising the powers of the Registrar. The implementation and all further proceedings pursuant to that order stand stayed

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WP(C)4661 & 7339/08 -: 2 :-

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as per interim order dated 3-3-2008 granted at the stage of admission of WP(C).7339/2008.

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2.Having regard to the pleadings, materials and the issues arising for decision, these writ petitions are heard jointly and are being decided as per this common judgment by making reference to the documents as are placed in WP(C).7339/2008.

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3.In the gist, the contentions of the petitioner are that the issuance of Ext.P4 notice and Ext.P11 order under Section 32 lacks jurisdictional foundation and is arbitrary and mala fide. It is contended that in answer to Ext.P2 notice under Section 65(5) of the Act, the petitioner submitted Ext.P3 reply and no decision was rendered thereon; but what ultimately followed was Ext.P4 notice under Section 32 and that the same cannot be the outcome of a proceedings under Section 65(5). It is further contended that the specific objections placed as per Ext.P10, with reference to the ten enumerated

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WP(C)4661 & 7339/08 -: 3 :-

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grounds in Ext.P4, have not been considered, while issuing Ext.P11 as is expected of an administrative authority, bestowed with statutory power. It is submitted that the impugned decision has been made without adverting to and considering relevant materials.

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4.The official respondents have placed counter affidavits. The additional respondent, impleaded at his instance, also contests.

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5.Heard.

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6.It is argued that Ext.P4 notice under Section 32 has been issued without jurisdiction in so far as the proceedings were not concluded after the enquiry in terms of Section 65(5) on the basis of Ext.P3 objections to Ext.P2 notice under Section 65 and still further, that the impugned order has been passed even when the Circle Co-operative Union, a consultant in terms of Section 32, has recommended against supersession, while the other

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WP(C)4661 & 7339/08 -: 4 :-

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consultant, the District Co-operative Bank, going by Ext.P11, did not provide any opinion. It is argued on behalf of the petitioner that the committee superseded as per Ext.P11 had come into office only in November, 2003 and though none of the members of that committee was member of the previous committee, Ext.P4 notice has been issued levelling seven allegations therein as regards conducts attributable exclusively to the previous committee.

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7.On behalf of the respondents, in particular, on behalf of the impleaded respondent, it is argued that having regard to the scope of the jurisdiction under Article 226, this Court is not to sit in appeal on the findings contained in Ext.P11 which have been rendered on the basis of the materials and in the absence of any situation of lack of jurisdiction or absence of materials, the visitorial jurisdiction of this Court would not extend to erase the impugned order passed under Section 32.

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WP(C)4661 & 7339/08

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-: 5 :-

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8.In considering the rival contentions, it needs to be noticed at the outset that Ext.P2 notice was issued for an enquiry under Section 65(5) of the Act. This is beyond dispute in view of the statements in the opening paragraph of Ext.P4. Ext.P3 is the reply given by the petitioner to that notice. Going by Ext.P4, it appears that after Ext.P3 reply dated 30-11-2007, the Joint Registrar had obtained report dated 22-1-2008 from the Assistant Registrar (General) Karthikappally which, on a reading of the first paragraph of Ext.P4 will show, is a report submitted by the Assistant Registrar on a detailed examination of the contentions of the petitioner in Ext.P3 objections to Ext.P2 notice.

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9.Section 65 deals with Inquiry by Registrar. The Joint Registrar, exercising the powers of the Registrar, is empowered to initiate proceedings in terms of sub-section (1) of Section 65. This includes an inquiry on his own motion but does

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WP(C)4661 & 7339/08 -: 6 :-

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not include an exercise based on instructions issued by the Minister. I say so because, the petitioner has attempted to state through the reply affidavit that the exercise is one that was triggered by a representation made to the Minister for Co-operation. Be that as it may, the Registrar can have the enquiry conducted through a person as authorized by him under sub-section (1) of Section 65. Sub-section (2) enumerates the powers for the purpose of the said enquiry. While the Registrar may communicate the result of that enquiry to the financing bank and the Circle Cooperative Union in terms of sub-section (3), subsection (5) provides that the enquiry shall be completed within a period of six months. Subsection (4) states that when the inquiry under Section 65 reveals only minor defects, which in the opinion of the Registrar can be remedied by the society, he shall communicate the result of the inquiry to the society and the society, if any, to which the said society is affiliated. The Registrar is statutorily obliged by sub-section

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WP(C)4661 & 7339/08

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-: 7 :-

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(4) of Section 65, in such a situation, to direct the society or its officers to take such action within the time specified therein to rectify the defects disclosed in such inquiry. He “shall”. Therefore, whenever minor defects are disclosed, the Registrar is duty bound to ensure that directions are issued by him for rectification of such defects. Sub-section (6) of Section 65 provides that if the Registrar, on completion of the enquiry, finds that there is major defect in the constitution or working or financial condition of the society, he may initiate action in accordance with the provisions of Section 32. When the statute law thus contemplates two types of actions, depending upon the nature of the defects noticed; and when the legislature has given its mandate regarding the proceedings that shall or may be adopted, the distinction conceived by the legislature has to be borne in mind. To arrive at the procedure to be followed, the officer exercising the powers of the Registrar under Section 65 has necessarily to

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WP(C)4661 & 7339/08

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-: 8 :-

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conclude whether the enquiry reveals only minor defects or whether there is major defect in the constitution or working or financial condition of the society. The consequences of the views that the Registrar may have, following the enquiry under Section 65(5), could be drastic; having regard to Section 68 and other provisions. The legislative authorization in sub-section (6) of Section 65 that the Registrar may initiate action in accordance with the provisions of Section 32 is regulated by the jurisdictional fact that the said officer reaches a finding that there is major defect in either among the three aspects; namely, constitution, working and financial condition, of the society. On completion of enquiry under sub-section (5) of Section 65, the Registrar will get the authority to initiate action in accordance with the provisions of Section 32 on the basis of that enquiry, only when the Registrar, on completion of the enquiry, finds that there is such major defect. That provision in Section 65(6), in contradistinction

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WP(C)4661 & 7339/08 -: 9 :-

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to sub-section (1) of Section 32, would show that the grounds available for action under Section 65 (6) would be beyond even those in clauses (a) to (d) of sub-section (1) of Section 32. All that the last limb of sub-section (6) of Section 65 provides is that the action under that subsection shall be in accordance with the provisions of Section 32. Therefore, to initiate action for supersession on the basis of findings in an enquiry under Section 65(5), the Registrar has to definitely reach at a finding that there are major defects in the constitution or working or financial condition of the society. Having commenced proceedings under Section 65, the Registrar cannot abdicate, or defer, the function of arriving at a conclusion for himself following the enquiry under Section 65 and then, with the materials gathered in the inquiry under Section 65, move on to Section 32(1) of the Act. If that was permissible in terms of the legislative intention, there was no necessity for sub-section (6) to use the words “major defect” when such

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WP(C)4661 & 7339/08 -: 10 :-

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terms are not available in Section 32(1).

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10.Adverting to the facts of the case in hand, Ext.P2 notice was issued specifically invoking the jurisdiction and authority under Section 65 of the Act. The fact that the Registrar was proceeding under Section 65 by the issuance of Ext.P2, is clear from the opening sentence of Ext.P4. After receiving Ext.P3 objections dated 30-11-2007, the Joint Registrar states in Ext.P4 that the petitioners were heard on 30-11-2007. However, it appears from Ext.P4 that a further report from the Assistant Registrar was obtained on 22-1-2008 regarding the contentions of the petitioners in Ext.P3 objections. Section 65(5) provides for an enquiry and Rule 66(5) provides that the Registrar shall pass such orders thereon as may be considered just, after giving a reasonable opportunity of being heard to the society, person or persons concerned. The Assistant Registrar's report dated 22-1-2008 at Sl.No.5 is not put to the petitioners before the

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WP(C)4661 & 7339/08 -: 11 :-

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issuance of Ext.P4 under Section 32. Ext.P4 notice is issued by only stating that Ext.P3 objections and the report at Sl.No.5 in Ext.P4 have been examined in detail and it is found that the committee has been found to have failed in the matters enumerated in Ext.P4. There is no statement in Ext.P4 of any major defect, having been found by the officer exercising the powers of the Registrar.

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11.With that view of the Registrar, there was no finding of any major defect on the basis of which proceedings could have followed under Section 65 (6) of the Act, meaning thereby that, there could not have been proceedings initiated for supersession and for further action in accordance with the provisions of Section 32.

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12.It could be conceived that when materials come out during supervisory inspection in terms of Section 66, disclosing that the committee of the society becomes liable for supersession in terms

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WP(C)4661 & 7339/08 -: 12 :-

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of Section 32, an action could be initiated thereby under Section 32 without reference to section 65(6). But when proceedings are initiated specifically under Section 65 and enumerated grounds are raised and objections called for from the committee, it does not stand to reason that the Registrar, after hearing the parties and after even calling for further report from the Assistant Registrar, as has been done in the case in hand, could confine himself to silence as regards the proceedings under Section 65, without expressing himself on the views generated following the enquiry under Section 65(5) and then initiate action under Section 32(1) as if it is a fresh proceedings. This is not the content of law when Sections 32 and 65 are read harmoniously. Section 32 occurs in the statute much earlier than Section 65. It is not the provision in the Act and the intention of the legislature that the Registrar could have the proceedings under Section 65 at the stage of Section 65(5) without concluding as to whether

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WP(C)4661 & 7339/08 -: 13 :-

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there are any defects and if there are any, whether those defects are minor or major and then go off to proceedings under Section 32. If such a situation is to be conceived, it would only be a tottering drapery, swinging to the fancied tunes of repositories of administrative and statutory powers. Any such concept would only give room for arbitrary exercise of power in an unbridled manner. When Section 65 conceives a scheme for itself, the proceedings initiated under that provision has to be allowed to its logical end. That would be the only sure test of fairness and to decide whether the statutory authority has acted in terms of law.

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13.In the case in hand, it is not so. This conclusion is fortified in view of the fact that the allegations in Ext.P4 are nothing but the repetition of the allegations in Ext.P2 and if the Joint Registrar could not have concluded as to the quality of the defence of the petitioner to the allegations in Ext.P2 after considering

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WP(C)4661 & 7339/08 -: 14 :-

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Ext.P3 and hearing them thereon, there is no reason to assume that he had legitimately concluded that there is material to act under Section 65(6) or, even under Section 32(1). This is because, an administrative authority vested with statutory power, has to show that a process of reasoning has been undertaken in the decisionmaking process; because the initiation of proceedings under Section 32(1) also calls for arriving at a decision as to whether such power has to be invoked or not. This is just not there in the impugned proceedings.

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14.With the word of caution sounded by the learned senior counsel appearing for the impleaded additional respondent regarding the quality of jurisdiction under Article 226; particularly that it is not an appellate jurisdiction on findings of facts, if I were to examine the ten grounds and findings in Ext.P11, it may tend only to show that the objections as contained in Ext.P10 have not been considered, appreciated and acted upon

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WP(C)4661 & 7339/08 -: 15 :-

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in accordance with law. I say so because, every head under which finding is entered in Ext.P11 is a mere statement that the answer is not acceptable. Further, even if I go deeper into the considerations made by the Joint Registrar, things would not improve in favour of Ext.P11 order. For example, Ground No.1 relates to allegations of lack of supervision referable to certain misappropriations on the basis of gold loans. The ultimate accusation in relation thereto is that the petitioner committee had allowed an intra-institutional appeal against the punishment imposed on the officers concerned and that no action for prosecution of those officers was initiated. Firstly, that is a matter governed by the statutory rules. The employer society, going by the scheme of the Act and Rules, is empowered to decide on appeals in exercise of statutory power. This is done through the committee after the sub-committee decides on the punishment. If there is failure in exercising a statutory power, it would well be within the

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WP(C)4661 & 7339/08 -: 16 :-

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Registrar's authority to interfere with that. Merely because the punishment that was ultimately given is unsustainable in the views of the Joint Registrar, that cannot, by itself, lead to a situation of supervisory lapse. Not only that, without the delinquent being put to notice, there is no conceivable ground on which there could be a review by any statutory authority on that issue. Similar is the case of promotion given to certain staff. The said issue also essentially calls for a decision only with the junction of the concerned employee. Still further, that is a matter which the Registrar could have rectified in exercise of statutory power. Similarly, there is no answer in Ext.P11 to the objections in Ext.P10 that amendments to Feeder Category Rules still continue to lie on the table of the first respondent without being attended to. The specific objections given on the question of procurement of coconut and other matters, including the question of computerization, have also not been, obviously, considered. These

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WP(C)4661 & 7339/08 -: 17 :-

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materials are noticed from among those in Ext.P11, only to notice that no major defect as contemplated in sub-section (6) of Section 65 was noticed by the Joint Registrar at any point of time before, or at least while, issuing Ext.P4.

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15.For the aforesaid reasons, the issuance of the impugned Ext.P4 and the resultant Ext.P11 order lacks jurisdictional support and is vitiated in law and is hence, arbitrary.

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For the foregoing reasons, Exts.P4 and P11 in WP (C).7339/2008 are quashed and the said writ petition is allowed accordingly. WP(C).4661/2008 will also stand allowed in the aforesaid terms. No costs.

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Sd/-

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THOTTATHIL B. RADHAKRISHNAN, JUDGE.

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Sha/171008

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-true copy-

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P.S.to Judge.

Mg.Committee of Kandalloor Farmers Servi v. Jt.Registrar of Co-Op.Societies(G) Alp.

Case brief

What is this about?

What did the court decide?

Mg.Committee of Kandalloor Farmers Servi v. Jt.Registrar of Co-Op.Societies(G) Alp.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

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