Andhra Pradesh High Court - Amravati

Perarapu Satyanarayana vs State Of Andhra Pradesh on 20 April, 2022

Bench: K Sreenivasa Reddy

THE HONOURABLE SRI JUSTICE K.SREENIVASA REDDY

                WRIT PETITION No.24614 OF 2021

ORDER:

Heard Sri O.Manohar Reddy, learned counsel,

appearing for Sri V.V. Satish, learned counsel for the

petitioner, the learned Government Pleader for Co-

operation for respondents 1 to 4 and Sri Srinivas Basava,

learned counsel for respondent No.5.

2. The present Writ Petition is filed challenging the

order in Rc.No.2636/2020-A, dated 18.03.2021 passed by

2nd respondent-District Collector and the notice in

Rc.No.2636/2020-H/ST SA01, dated 16.04.2021 issued by

3rd respondent.

3. It is stated in the affidavit filed in support of the

Writ Petition that the petitioner is the Chief Executive

Officer of Primary Agricultural Co-operative Society,

Gandepalli, East Godavari District (for short, 'PACS'). The

District Co-operative Central Bank, Gandepalli branch,

East Godavari District (for short, 'DCCB') is the creditor

bank of the PACS. It is stated that 2nd respondent-District

Collector, vide order in Rc.No.2636/2020-A, dated

23.12.2020, appointed 4th respondent as Enquiry Officer to

conduct an enquiry into the affairs of the DCCB under

Section 51 of the Andhra Pradesh Co-operative Societies

Act, 1964 (for short, 'the Act, 1964'). It is stated that no

enquiry is ordered into the affairs of PACS.

It is further stated that while so, 3rd respondent

issued the impugned notice dated 16.04.2021 which states

that the Enquiry Officer conducted enquiry and submitted

report on 17.03.2021 and that 2nd respondent-District

Collector issued the proceedings dated 18.03.2021 for

initiating civil, criminal and disciplinary action against the

persons responsible for misappropriation of funds and

financial irregularity and authorized 3rd respondent to take

action under Section 60 (1) of the Act, 1964 for recovery of

the amount quantified. It is further stated that the notice

dated 16.4.2021 states that the Enquiry Officer

recommended for recovery of the amounts and that the

petitioner and the employee of DCCB and the Ex-President

of the PACS are jointly liable to pay an amount of

Rs.4,59,80,902/- towards sanction of irregular loan and

called for appearance of the petitioner. Challenging the

same, the present Writ Petition has been filed.

4. A counter affidavit has been filed by respondents

1 to 4 resisting the Writ Petition and justifying the

impugned action, stating inter alia that on the report

submitted by the Chief Executive Officer (FAC) of DCCB

suspecting misappropriation of amounts in the Bank, 4th

respondent conducted enquiry on the request of 3rd

respondent and submitted a report stating that Rs.22.83

crores was misappropriated by way of irregular loans

sanctioned to the members of PACS without proper

documentation, scrutiny and verification by the branch and

requested to order enquiry under Section 51 of the Act,

1964 into the affairs of DCCB with reference to loans

sanctioned and disbursed to the members of the PACS. It

is further stated that 2nd respondent-District Collector, vide

proceedings dated 23.12.2020, ordered an enquiry under

Section 51 of the Act, 1964 and 4th respondent herein

conducted enquiry and submitted report dated 16.3.2021

finding that Rs.22,07,40,067/- was misappropriated by

way of issue of various types of irregular loans to the

members of PACS on fake documents without proper

documentation, scrutiny and verification and recommenced

for recovery of the same from the persons responsible by

invoking action under Section 60 (1) of the Act, 1964 and

suggested initiation of civil, criminal, disciplinary and other

actions against the said persons. It is further stated that

2nd respondent-District Collector, vide proceedings dated

18.03.2021, issued directions to take action against the

persons responsible as recommended by the Enquiry

Officer. It is further stated that pursuant to the orders of

2nd respondent-District Collector, 3rd respondent initiated

surcharge enquiry and the same is pending.

It is further stated that there are serious allegations

against the petitioner, in the capacity of CEO of PACS, viz.

preparing loan applications with fake documents in the

name of bogus members and submitting the same to DCCB

for sanction, etc., and that he admitted in his deposition to

the Enquiry Officer that he committed all the irregularities/

offences with the instructions of Ex-President, and thus, he

misused his official position as CEO and committed

misappropriate of funds. It is further stated that the

petitioner filed Criminal Petition No.2227 of 2021 before

this Court against the prosecution orders and crime in FIR

No.68 of 2021 of Gandepalli police station registered for the

offences punishable under Sections 409, 419, 420, 471,

468, 477-A read with 109 and 34 IPC and this Court

granted interim order dated 08.04.2021 not to take any

coercive steps against him. It is further stated that the

petitioner is at liberty to produce material, if any, in

support of his case in the surcharge enquiry.

5. 5th respondent-PACS, who came on record as

per order dated 02.12.2021 in I.A.No.2 of 2021, also filed

counter affidavit in the same lines and praying dismissal of

the Writ Petition.

6. Learned counsel for the petitioner mainly

contended that appointment of Enquiry Officer under

Section 51 of the Act, 1964 by 2nd respondent to conduct

enquiry into the affairs of the PACS is without jurisdiction.

The learned counsel has taken this Court to various

provisions of the Act, 1964 and the Rules made thereunder,

and submitted that in case of any dispute that arises

within the Society, it is only the Registrar, who is

empowered to appoint an Officer, but 2nd respondent-

District Collector is not empowered and has acted without

jurisdiction.

The contention raised by the learned counsel for the

petitioner, though has not been mentioned in the affidavit

filed in support of the Writ Petition, the same is permitted

to be urged, being question of law.

7. On the other hand, learned counsel for the

respondents relied on G.O.Ms.No.34, Food and Agriculture

(Coop.IV) Department, dated 16.01.1989 and contended

that 2nd respondent-District Collector is authorized to

appoint an Officer in respect of any dispute pertaining to

the District Co-operative Central Banks. It is further

submitted that money flows from NABARD and from there,

it would be sent to the Co-operative Banks and from Co-

operative Banks, money will be flown to the societies. The

learned counsel also submitted that 2nd respondent-

District Collector has equal powers with that of the

Registrar and conducting enquiry under Section 51 of the

Act, 1964 would not be any hurdle to the petitioner herein.

The learned counsel also submitted that no prejudice has

been caused to the petitioner if enquiry under Section 51 of

the Act, 1964 is allowed to take place in view of the fact

that enquiry under Section 51 of the Act, 1964 is only to

ascertain prima facie misappropriation of amounts, and

that the petitioner came at a belated stage, and hence, the

Writ Petition is liable to be dismissed.

8. Now, the point that arises for consideration of

this Court in the present Writ Petition is, 'whether, in the

facts and circumstances of the case, the action of 2nd

respondent in appointing enquiry officer to conduct enquiry

into the affairs of the PACS is without jurisdiction ? '

9. This Court perused the material placed before it.

Section 2(n) of the Act, 1964 defines 'Registrar' as the

Central Registrar appointed by the Central Government in

relation to the multi-State co-operative societies, the

Registrar of Co-operative societies appointed under section

3 [1] in relation to this Act as the case may be and includes

any other person on whom all or any of the powers of the

Registrar under this Act are conferred.

Section 2 (p) of the Act, 1964 defines 'Society' as a co-

operative society registered / deemed to have been

registered under this Act / Societies registered under

14Telangana Mutually Aided Cooperative Societies Act and

received land from Government either free of cost or at

subsidized price or at market rate and thus deemed to have

been registered under this Act.

Section 3 of the Act, 1964 reads :

3. (1) There shall be appointed a Registrar of Co- operative Societies for the State and as many other persons as the Government think fit for the purposes of this Act.

(2) Every other person appointed under sub- section (1) shall exercise under the general superintendence of the Registrar, such powers of the Registrar under this Act as the Government may, from time to time, confer on him.

10. 2nd respondent-District Collector, vide

proceedings No.2636/2020-A, dated 23.12.2020, ordered

enquiry under Section 51 of the Act, 1964 into the affairs of

the D.C.C.B. with reference to the loans sanctioned and

disbursed to the members of the Gandepalli PACS, and

authorized the Divisional Co-operative Officer, Peddapuram

to conduct the said enquiry. During the course of

preliminary enquiry, a notice has been issued to the

petitioner. This Court also perused the entire enquiry

report wherein it is found that the petitioner prepared 389

loan files of 155 legally admitted members of the society

under various purposes like SAO, LT Land Development, LT

Banana, ST (others), etc. for a total loan amount of

Rs.22.83 crores. The CEO of the society submitted the loan

files seeking sanction to Smt. Rakurti Syamala, Branch

Manager, for sanction for herself and recommend for

sanction by the higher officers of DCCB, Kakinada. All

these activities happened in between 20.11.2017 and

25.07.2019.

11. This Court also perused the deposition of the

petitioner wherein he stated that the President gave him

with a direction to prepare loan files, fake title deeds,

mortgage/declaration bonds, Aadhar cards and photos of

the newly admitted members of the society, and that as per

the minute to minute direction of the President, he

prepared the loan files with fake documents and sent them

for sanction to the Branch and Head Office. He further

deposed that the President assisted him in getting new SB

accounts opened in the DCCB branch, Gandepalli, and the

President managed all the sanctioning authorities and got

the loans sanctioned. Further, he admitted that in the

loaning process, he followed the instructions of the

President and got the loan amounts deposited in the

personal SB accounts of the loanees in the DCCB,

Gandepalli, and that the loaning funds are diverted to

various deposit accounts of the President, his wife, his son,

his daughter, his nephew and other friends and kith and

kin. He further deposed that he acted as per oral

instructions of the President of the society and Managers of

the DCCB in getting loan sanctioned and for submission of

necessary address evidences of newly admitted 155

members of the society.

12. After perusal of the enquiry report, this Court

comes to the conclusion that the modus operandi that has

taken place prima facie goes to show that all the

transactions are inter-linked and composite, and the

employees of the DCCB and the management committee of

the society were hand in glove in siphoning of the funds.

13. Learned counsel for the petitioner relied on the

following judgments with regard to delegation of powers.

(a) In State of U.P. & others v. Daulat Ram Gupta1,

wherein it is held thus: (para 15 (d))

"It must be remembered that the power to issue directions is derived from sub-clause (6) of clause 16 of the Statutory Order and a delegate on whom such a power is conferred is required to act within the framework of the authority conferred by the Statutory Order. Since the direction issued by the Licensing Authority that the licence of the respondent shall not be renewed on the premise that his place of business falls within a radius of 5 km of a retail outlet of a government-run oil company, being not in conformity

(2002) 4 SCC 98

with the provisions of the Statutory Order, it must be held to be inconsistent to the provisions of the Statutory Order."

(b) In Union of India and others v. Alok Kumar2,

wherein it is held thus: (para 38)

".. It is possible that where the authority is vested in a person or a body as a result of delegation, then delegate of such authority has to work strictly within the field delegated. If it works beyond the scope of delegation, in that event it will be beyond the authority and may even, in given circumstances, vitiate the action."

Limited and others v. Ananta Saha and others3, wherein it is

held thus: (paras 32 and 33).

"If initial action is not in consonance with law, subsequent proceedings would not sanctify the same. In such a fact situation, the legal maxim sublato fundamento cadit opus is applicable, meaning thereby, in case a foundation is removed, the superstructure falls. This principle of consequential order which is applicable to judicial and quasi-judicial proceedings is equally applicable to administrative orders."

A perusal of the said judgments makes it clear that

the said judgments are in respect of delegation of powers.

14. In Punjab State Power Corporation Limited and

another v. Bal Krishan Sharma and others4, it is held thus:

(paras 15 to 17)

(2010) 5 SCC 349

(2011) 5 SCC 142

"15. At this juncture, it is pertinent to note that the PSEB has already framed the 1965 Regulations in exercise of the powers conferred by clause (c) of Section 79 of the said Act, and the said Regulations have been notified in the Official Gazette. Regulation 17 of the said Regulations states that the members of the service will be entitled to such scale of pay as may be authorised by the Board from time-to-time. Thus, in view of Regulation 17 of the said Regulations, the PSEB was authorised to fix the scales of pay of the posts specified therein including that of the Junior Engineers, from time-to-time. Even otherwise it is well-settled proposition of law that in absence of any Rules or Regulations governing the service conditions of the employees, the Electricity Board has power to issue administrative orders. In Sohan Singh Sodhi v. Punjab SEB [Sohan Singh Sodhi v. Punjab SEB, (2007) 5 SCC 528 : (2007) 2 SCC (L&S) 198] , this Court has held in the context of Section 79(c) of the Electricity (Supply) Act, 1948 that when the State Electricity Board can frame Regulations under Section 79(c) of the said Act, in the absence of any Regulation, issuance of executive order is permissible in law.

16. In yet another decision in Punjab SEB v. Gurmail Singh [Punjab SEB v. Gurmail Singh, (2008) 7 SCC 245 : (2008) 2 SCC (L&S) 539] , this Court held as under : (SCC pp. 251-52, paras 19-20) "19. The validity of the provisions of the said Regulations is not in question. The power of the Board to issue circulars from time-to-time in support of the matters which are not governed by the statute or statutory regulations is also not in dispute. The Board, as noticed hereinbefore, had been issuing such regulations from time-to-time. It is now well settled that

(2022) 1 SCC 322

the Board, even in the absence of any express provision of statute, may issue such circular.

20. In Meghalaya SEB v. Jagadindra Arjun [Meghalaya SEB v. Jagadindra Arjun, (2001) 6 SCC 446 : 2001 SCC (L&S) 976] it was held : (SCC p. 453, para

11) '11. As per Section 79(c), Meghalaya SEB may frame regulations not inconsistent with the provisions of the Act and the Rules providing for the duties of officers and other employees of the Board and their salary, allowances and other conditions of service. It is to be stated that this is an enabling provision. Meghalaya SEB may frame regulations as provided in Section 79(c) of the Act, but in the absence of any regulations, Meghalaya SEB can lay down service conditions by administrative order/instructions. Section 15 of the Act empowers the Board to appoint its employees as may be required to enable Meghalaya SEB to carry out its functions under the Act except the Secretary who is to be appointed with previous approval of the State Government. The power to lay down service conditions by regulations is expressly conferred upon Meghalaya SEB, so it has power to prescribe service conditions. Section 78-A also provides that except on question of policy for which the State Government has issued directions, the Board is entitled to discharge its functions prescribed under the Act which would include appointment of staff to enable it to carry out its functions and also lay down service conditions. Hence, if there are no rules or regulations pertaining to service conditions of its employees, the same could be prescribed by administrative order and such power of the employer which is a statutory corporation would be implied.'

21. Yet again in Sohan Singh Sodhi v. Punjab SEB [Sohan Singh Sodhi v. Punjab SEB, (2007) 5 SCC 528 : (2007) 2 SCC (L&S) 198] , Meghalaya SEB [Meghalaya SEB v. Jagadindra Arjun, (2001) 6 SCC 446 : 2001 SCC (L&S) 976] was noticed. It was stated : (SCC p. 532, para 10) '10. The power of the State Electricity Board to issue circulars in exercise of its powers under Section 79(c) of the Electricity (Supply) Act, 1948 is not in dispute. It has the power to frame regulations. If it can frame regulations, in absence of any regulations, issuance of executive orders is permissible in law. The power of framing regulations prescribing conditions of service of its employees appointed by the Board in terms of Section 15 of the Act cannot be disputed. Thus, in absence of any rules or regulations governing the service conditions of its employees, issuance of administrative order is permissible in law vide Meghalaya SEB v. Jagadindra Arjun [Meghalaya SEB v. Jagadindra Arjun, (2001) 6 SCC 446 : 2001 SCC (L&S) 976] .'

Power of the Board to issue circulars, therefore, was not in dispute. The validity of the said circular letters was not in question."

17. In the instant case, apart from the fact that the respondents had not challenged the validity of the said office order dated 29-3-1990 in the writ petition on the ground that it was not notified as per Section 79 of the said Act, the PSEB having already framed the Regulations of 1965 in exercise of powers conferred under Section 79(c) of the said Act, and the said Regulations having also been published in the Official Gazette, there was no need for the PSEB to notify the office order dated 29-3-1990 which pertained to the upgradation of 20% of the posts of Junior

Engineer II (Civil), as was permissible under Regulation 17 of the said Regulations."

15. Admittedly, G.O.Ms.No.34, Food and Agriculture

(Coop.IV) Department, dated 16.01.1989 is not in question

before this Court. If the petitioner is aggrieved, he ought to

have challenged the said G.O. on the ground that 2nd

respondent has acted without jurisdiction. The petitioner

chose not to challenge the proceedings initiated under

Section 51 of the Act, 1964, as he himself participated in

the said proceedings.

16. The Commissioner for Co-operation and

Registrar of Co-operative Societies, Andhra Pradesh,

Guntur, vide Memo File No.AGC06-17026/10/2020-

APCOBDCCB-CCRCS, dated 18.12.2020, delegated certain

powers of the Registrar to the D.C.Os. and the District

Registrars in respect of DCCB's including certain powers

under Section 51 and 52 of the Act, 1964. The District Co-

operative Officer, East Godavari District -3rd respondent

herein, vide letter Rc.No.2636/2020-A, dated 31.12.2020

addressed to the Commissioner for Co-operation and

Registrar of Co-operative Societies, Andhra Pradesh,

Guntur, clearly stated inter alia as under:

"I submit that the CC&RCS, A.P., Guntur vide ref. 4th cited, has instructed to examine and take suitable decision as per the powers delegated to the DCOs and District Collectors in respect of DCCBs including the powers under

section 51 and 52 of APCS Act, 1964 under G.O.Ms. No.34, Food and Agriculture (Coop.IV) Dept, Dt: 16.01.1989. Accordingly, the District Collector has ordered an inquiry U/s 51 of the APCS Act, 1964 in to the affairs of D.C.C. Bank, Gandepalli Branch with reference to the loans sanctioned and disbursed to Gandepalli PACS and Sri A.Radhakrishna Rao, Divisional Cooperative Officer, Peddapuram was authorized to conduct the said inquiry vide ref. 6th cited. Accordingly, he has commenced the inquiry on 28.12.2020."

By virtue of the said proceedings, it is clear that 2nd

respondent is empowered to appoint an Enquiry Officer in

view of the fact that the transactions which had taken place

between the co-operative society and the DCCB are inter-

linked and they cannot be separated and also in view of the

fact that employees of both the institutions had acted hand

in glove and misappropriated huge amounts to a tune of

about Rs.23.00 crores as per the enquiry report under

Section 51 of the Act, 1964. The enquiry under Section

51 of the Act, 1964 has not been challenged by the

petitioner, but the consequential notice under Section 60 of

the Act, 1964 is under challenge in the present Writ