Allowed

8.S.JOSEPHKUTTY v. Managing Director,Kerala Co-Oeperative

Kerala HC26 Oct 2016WP(C)/10775/2006

Case brief

AI extract

What is this about?

The High Court of Kerala held that recovery proceedings against employees of MILMA under Section 68 of the Kerala Co-operative Societies Act were illegal due to failure to afford a personal hearing. The court quashed the orders as the statutory duty to hear the officers was circumvented.

What did the court decide?

The writ petitions were allowed and the impugned orders directing recovery of the sum of Rs.41,850/- were quashed.

8.S.JOSEPHKUTTY Vs Managing Director,Kerala Co-Oeperative — Company and Corporate | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE SMT. JUSTICE P.V.ASHA

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WEDNESDAY, THE 26TH DAY OF OCTOBER 2016/4TH KARTHIKA, 1938

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WP(C).No. 10775 of 2006 (G)

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PETITIONER(S):

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T.S. JOSEPHKUTTY, ASSISTANT MANAGER, QUALITY CONTROLLER, CATTLE FEED PLANT, PATTANAKKADU, ALAPPUZHA DISTRICT.

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BY ADV. SRI.JOMY GEORGE.

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RESPONDENT(S):

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1. KERALA CO-OPERATIVE MILK MARKETING FEDERATION LTD., MILMA BHAVAN, PATTOM, THIRUVANANTHAPURAM, REP. BY ITS MANAGING DIRECTOR.

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2. REGISTRAR OF DAIRY CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM.

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3. DIRECTOR, DAIRY DEVELOPMENT DEPARTMENT, THIRUVANANTHAPURAM.

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4. SECRETARY TO GOVERNMENT, AGRICULTURE (DAIRY DEPARTMENT), THIRUVANANTHAPURAM.

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R1 BY SRI.B.S.KRISHNAN, SENIOR SC, ADV. SRI.K.ANAND, ADV. SMT.LATHA KRISHNAN. R2 TO R4 BY SR. GOVT. PLEADER SRI.SANTHOSH PETER.

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26-10-2016, ALONG WITH WP(C).NO. 17906 OF 2006, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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rs.

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WP(C).No. 10775 of 2006 (G)

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APPENDIX

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PETITIONER'S EXHIBITS:-

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EXT.P1 COPY OF THE ORDER ISSUED BY THE 1ST RESPONDENT ON 19TH SEPTEMBER 2001.

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EXT.P2 COPY OF THE LETTER DATED 06/12/2004 ISSUED BY THE 3RD RESPONDENT TO THE 1ST RESPONDENT.

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EXT.P3 COPY OF THE ENQUIRY REPORT SUBMITTED BY THE ENQUIRY OFFICER TO THE 3RD RESPONDENT DATED NIL.

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EXT.P4 COPY OF THE PROCEEDINGS OF THE 1ST RESPONDENT DATED 10/03/2006.

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RESPONDENT'S EXHIBITS:-

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EXT.R1A COPY OF THE ORDER DATED 09/12/2005 ISSUED BY THE 4TH RESPONDENT.

//TRUE COPY//

P.S. TO JUDGE

rs.

P.V.ASHA, J.

W.P(C) Nos.10775 of 2006-G and 17906 of 2006-F

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Dated this the 26^th day of November, 2016

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JUDGMENT

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The petitioners in both these cases are challenging the surcharge proceedings against them on the basis of an inquiry report of the Joint Director of the Diary Development Department under Section 68 of the Kerala Co-operative Societies Act conducted on the basis of the orders of the 3^rd respondent - the Director of Diary Development Department. Petitioners in both these writ petitions were employed under the 1^st respondent- Kerala Co-operative Milk Marketing Federation Ltd. (hereinafter referred to as `MILMA” for short). The impugned proceedings were initiated against them in respect of the very same incident. As common questions are involved both the writ petitions were heard together and are being disposed of by this common judgment. Parties and documents referred to in this common judgment are as described in W.P(c).No.10775 of 2006 unless specified otherwise.

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 2

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The petitioner in W.P(c).No.10775 of 2006 was working as Assistant Manager, Quality Control, Central Products Dairy, Punnapra, under the 1^st respondent. The petitioner in Writ Petition No.17906 of 2006 was working as Senior Manager of the same office. While they were working as Assistant Manager, Quality Control and Senior Manager(Marketing) respectively, they were placed under suspension, disciplinary proceedings were initiated against both the petitioners on allegations relating to purchase of mango pulp, which had crossed expiry date.

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A domestic enquiry was conducted against both of them. By separate orders passed on 19.9.2001, produced as Ext.P1 in the respective writ petitions of the petitioners, the Managing Director awarded them a punishment of barring of one increment for one year without cumulative effect. In the case of Sri.Unnikrishna Pillai, the Senior Manager (Marketing), it was further ordered that the loss caused to the 1^st respondent i.e a sum of Rs.1,25,550/- would be recovered from him and in the event of the date expired pulp being disposed of in future, it would be reimbursed to him. But in the appeal filed by him, the

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 3

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Board withdrew the penalty of recovery, as per its decision on 8.3.2002.

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According to the petitioners, the 3^rd respondent thereafter caused an enquiry to be conducted under Section 68 of the Co-operative Societies Act, through the Joint Director, without issuing any notice to the petitioners and without following any procedure and directed the 1^st respondent, as per Ext.P2 letter dated 6.12.2004, to call for objection on Ext.P3 enquiry report from the officers concerned, after furnishing a copy of the enquiry report. On receipt of the inquiry report through the 1^st respondent, they submitted detailed objections as against the enquiry report and requested for personal hearing. But without hearing them and without considering their objections, recovery of a sum of Rs.41850/- each was ordered from the petitioners, as per Ext.P4 letter dated 10.3.2006 of the 1^st respondent, allegedly based on an order dated 9.12.2005 passed by the Government.

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The petitioners filed these writ petitions at that stage challenging the proceedings for recovery alleging that they were not given any notice or opportunity of hearing either by the

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 4

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inquiry officer before Ext.P3 report was submitted or by the 3^rd respondent or Government before the recovery was ordered and hence there was total violation of the procedure contemplated in Section 68 of the Co-operative Societies Act, 1969 ('the Act' for short) as well as the principles of natural justice.

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In the counter affidavit of the 3^rd respondent it was stated that the special audit report for the year 1999-2000 revealed that the 1^st respondent sustained a loss of Rs.1,39,500. As per Section 68 of the Act, when loss is seen incurred to a society in the audit, the Registrar shall inquire or cause any inquiry into it and the loss can be recovered from the officers responsible. The Director of Dairy Development Department, the 3^rd respondent, is the functional Registrar in respect of the 1^st respondent. It is stated that the 3^rd respondent took every steps under Section 68 and the last sentence of Ext.P2, gave opportunity to petitioners also. According to him, the petitioners were given ample opportunity in the domestic enquiry conducted against them to present their case before they were found negligent. Ext P3 report was sent to the 1^st respondent with direction to communicate the same to the 4

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 5

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persons who were responsible for the loss. It is stated that in the domestic enquiry conducted against the petitioners they were found guilty as they were responsible for purchase of inferior quality pulp. According to the 3^rd respondent the enquiry conducted under Section 68 as well as the domestic enquiry and the audit revealed that the officers were responsible for the loss and hence recovery of proportionate loss was ordered from each of the officers found responsible.

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The 1^st respondent has filed counter affidavit stating that the petitioners were proceeded against on the basis of allegations with respect to the purchase of 9MT's of mango pulp used for production of `refresh', a drink produced by the 1^st respondent for human consumption. Sri P.Unnikrishna Pillai, who was the Senior Manger, Sri Joseph Kutty, who was the Assistant Manager (Quality Control) and 2 others were proceeded against, seeing that the mango pulp purchased had crossed the expiry date and the officers who were responsible to check and ensure the quality of the raw materials were seen negligent in performing their duties. In the separate domestic enquiries conducted, they were awarded punishment. In the

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 6

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case of Sri Unnikrishna Pillai, the Senior Manager, even though the Managing Director took a decision to recover the loss caused to the 1^st respondent, on appeal before the Board of Directors, the said punishment for recovery was revised and reduced to that of barring of increment for one year without cumulative effect as in the case of the other petitioners. In respect of the enquiry report Ext.P3, it is stated that the 3^rd respondent, as per Ext.P2 letter directed the 1^st respondent to serve a copy of the same to the officers responsible and to call for and forward their objections to reach the 3^rd respondent before 31.12.2004. Accordingly, the 1^st respondent forwarded the objections received from the delinquent employees. Since the 3^rd respondent did not find the same satisfactory, recommendations were made for recovery of the respective amounts for which they were found responsible from the petitioners and others. The Board had filed an appeal before the Government as against the findings in Ext.P3 report. But the same was rejected as per Ext.R1(a) order of the Government on 09.01.2005 directing recovery of the loss from the respective officers. The 1^st respondent stated that Ext.P4 order was passed accordingly.

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 7

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Government accordingly directed to effect recovery from the officers as recommended by the 3^rd respondent and to furnish the action taken report within a month. Thereupon the 1^st respondent issued Ext.P4 order on 10.3.2006, informing Sri. Unnikrishna Pillai the decision of the Board, on the basis of the direction of Government in order dated 9.12.2005, to recover a sum of Rs.41850/- from the financial benefits due from him. Sri. Josephkutty was informed that a sum of Rs.41850/- would be recovered from his monthly salary in equal instalments of Rs.3500/-.

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I heard the learned Counsel appearing for all the parties and considered the contentions.

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The main ground raised in these writ petitions is that the recovery from them is ordered without issuing any notice of opportunity of hearing either during the course of enquiry under Section 68 or thereafter and that the 3^rd respondent or the Government did not afford them an opportunity of hearing.

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In Ext.R1(a) order, the Government stated that after a preliminary hearing of the appeal, the Government requested the Director of Dairy Development to re-examine the responsibility

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 8

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of the officers after giving them a copy of the audit report and after affording an opportunity of being heard. It is further stated: “As directed the Director of Dairy Development has submitted a report after hearing the parties.” On a reading of Ext.R1(a) order it would appear that on direction from the Government, the 3^rd respondent had heard the officers who were found responsible.

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In view of the contentions raised by the petitioners and the counter affidavit filed by the 3^rd respondent, this court found it necessary to call for the records leading to the impugned orders as well as Ext.R1(a). The learned Government Pleader made available the files.

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But there is nothing to find that the 3^rd respondent had given an opportunity of hearing to the officers or that he has gone through the representations of the officers. On the other hand, the 3^rd respondent had offered a hearing to the 1^st respondent alone, while requesting it to forward the inquiry report and to obtain and forward the objections from the concerned officers.

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From the records it is seen that the Government had been calling for reports from the Director and pursuant to that

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 9

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the Director had been calling for reports from the 1^st respondent. Even though the officers including the petitioners requested for an opportunity of personal hearing, the 3^rd respondent found that the opportunity given by 1^st respondent during the course of disciplinary proceedings was sufficient in proceedings under Section 68, that too, even after the direction issued by the Government after the preliminary hearing of the appeal filed by the MILMA. On perusal of the files leading to Ext.R1(a), it is clear that the Government acted upon the report of the Director of Dairy Development without looking into the records and without verifying whether the officers were heard, as directed by them in the preliminary hearing. Since the Government directed to afford opportunity of hearing to the petitioner, while considering the appeal of the 1^st respondent, the 3^rd respondent adopted a short cut and offered opportunity of hearing to MILMA and not to the officers. Neither the Government nor the 3^rd respondent found it necessary even to communicate the final orders to the officers who are held responsible, before the recovery is sought to be effected.

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Thus the inaction of the 3^rd respondent in observing

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 10

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the formalities and that of the Government in not ensuring compliance of its directions in accordance with rules, while issuing the impugned action, has in effect nullified the entire proceedings, disabling them to recover the loss in accordance with law.

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16. Section 68 provides as follows:

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“68. (1) If in the course of an audit, inquiry, inspection or the winding up of a 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 Act and the rules or the bye-laws, or has caused any loss or damage in the assets of the society by breach of trust or wilful negligence or mismanagement or has misappropriated or fraudulently retained any money or other property belonging to such society or has destroyed or caused the destruction of the records, the Registrar may, of his own motion or on the application of the committee, liquidator or any creditor, inquire himself or direct any person authorised by him by an order in writing in this behalf, to inquire into the conduct of such person.

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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, by order in writing, require him to repay or restore the money or other property or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such extent, as the Registrar may consider just and equitable.

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(3) Where the money, property, interest, cost or compensation is not repaid or restored as per sub-section (2), the Registrar shall take urgent steps to recover such amounts from the concerned persons as arrears of public revenue due on land as specified in section 79 of the Act. ”

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Thus under sub section 2 of section 68, the Registrar is bound to give the person concerned an opportunity of being heard, before he passes an order. In this case the officers were not given any opportunity of hearing either in the inquiry or

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W.P(C) Nos.10775 of 2006-G 17906 of 2006-F 11

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before order was passed. When the statute requires a thing to be done in a particular manner that has to be done only in that manner. The 3^rd respondent was not right in circumventing the procedure while passing orders under Section 68. Even the order passed by the 3^rd respondent or the Government was also not communicated to them. Therefore, the orders for recovery Ext.P4 and the orders based on which the recovery was ordered including Ext.R1(a), contrary to the procedure prescribed in Section 68 are illegal and liable to be set aside.

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In the above circumstances, the writ petitions are allowed. The order Ext.P4 is quashed. This will not stand in the way of respondents in initiating any proceedings permissible in accordance with rules.

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Sd/-

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(P.V.ASHA, JUDGE)

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rtr/

8.S.JOSEPHKUTTY v. Managing Director,Kerala Co-Oeperative

Case brief

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8.S.JOSEPHKUTTY v. Managing Director,Kerala Co-Oeperative

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