Pitta Chalapati Rao vs The State Of Andhra Pradesh
2023 Latest Caselaw 4370 AP

         THE HON'BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA

                    WRIT PETITION No.17767 OF 2023

ORDER:-

      The present Writ Petition is filed under Article 226 of the Constitution

of India, seeking the following relief:

              "...to issue a Writ, Order or Direction, more particularly one
     in the nature of Writ of Mandamus declaring the action of the 2nd
     respondent in ordering enquiry U/Sec.51 of APCS Act, 1964 into

the affairs of 5th respondent society through proceedings Rc.No. 707/2023-C (Coop), Dated 28.06.2023 at the instance of the 3rd respondent is highly illegal, arbitrary, and contrary to the provisions of APCS Act, 1964 and also in violation of Article 14 of the Constitution of India and liable to be set aside and to pass such other order or orders. .."

2. The case of the petitioner is as follows:

3. The petitioner herein was initially appointed as Clerk at Respondent

No.5 Society in the year 1984. Later, he was promoted as Secretary in the

year 1999 and he had been continued as Secretary till his retirement dated

31.05.2023.

4. While so, on 19.06.2023, Respondent No.3 bank addressed a letter to

Respondent No.4 to conduct an enquiry regarding the allegations on the

employees of Respondent No.5 Society including the petitioner who were

involved in the misappropriation of funds of Respondent No.5 Society,

specifically in drawal of salaries, arrears, PF loans etc. Apart from this, NV,J

Respondent No.2 also issued proceedings dated 20.06.2023, directing the

Respondent No.4 for conducting an enquiry regarding misappropriation of

funds of Respondent No.5 Society. Pursuant to the same, the Respondent

No.4 conducted a preliminary enquiry and submitted a detailed report with

specific remarks.

5. On perusal of the preliminary report as well as specific remarks

submitted by the Respondent No.4, apart from the report submitted by

Respondent No.3 bank, the Respondent No.2 issued proceedings dated

28.06.2023 directing the statutory enquiry as contemplated under Section

„51‟ of the Andhra Pradesh Co-operative Societies Act, 1964 (for short "the

Act, 1964") by appointing / authorizing Sri S. Satyanarayana, Assistant

Registrar, Narsipatnam Sub-Division, as an inquiry officer and also directed

to submit the report. Hence, the order of the said statutory enquiry was

assailed in the present writ petition.

6. Learned counsel for the petitioner submits that the present impugned

proceedings under which the enquiry was ordered is not in accordance with

the Section 51 of the Act, 1964. In the given facts and circumstances,

utmost an enquiry can be ordered by Respondent No.2 is only under Section

52 of the Act, 1964 but cannot be under Section 51 of the Act. As such, the

impugned proceedings directing enquiry under Section 51 of the Act, 1964

is liable to be quashed.

7. Learned counsel for the petitioner further submits that Section 51 of

the Act envisages that the Respondent No.2 should apply his mind NV,J

independently and he was empowered to order suo moto enquiry but not

upon the material or letter of request submitted by Respondent No.3, who is

the creditor of the Respondent No.5 Society. He further submits that the

entire impugned proceedings dated 28.06.2023 were issued on the basis of

the enquiry report submitted by Respondent No.3 bank on 19.06.2023. At

best, Respondent No.3 can order an enquiry under Section 52 of the Act,

1964 but not under Section 51 of the Act, 1964 for which the learned

counsel for the petitioner relied upon a judgment of this Court in

B. Sreenivasulu Vs. Government of Andhra Pradesh1. As such the

present impugned orders are liable to be set aside.

8. On the other hand, the learned Government Pleader for Cooperation

submitted written instructions as well as the proceedings issued by

Respondent No.2 vide office Memo dated 20.06.2023 under which

Respondent No.4 was directed for conducting enquiry and for submission of

Report. Then, the Divisional Cooperative Officer, Yelamanchili proceedings

also issued vide Memo dated 24.06.2023 forwarding the proceedings of

Respondent No.2 to Respondent No.4 for conducting enquiry. Accordingly,

the enquiry report dated 27.06.2023 was submitted by the Respondent No.4

to the Respondent No.2.

9. Learned Government Pleader for Cooperation submits that the

Respondent No.2 delegated the powers of the Registrar under Sections 51

and 52 of the Act, 1964 as per the procedure contemplated under the Act by

1987 Law Suit(AP) 224 NV,J

way of G.O.Ms.No.34, Food & Agriculture (Coop-IV) Department dated

18.01.1989 in favour of the District Cooperative Officer. As such,

Respondent No.2 would be the Registrar for the purpose to initiate any

action and for order an enquiry either under Section 51 or 52 of the Act,

1964 against any Primary Agriculture Cooperative Societies / Respondent

No.5 herein. Therefore, Respondent No.2 is the competent authority to

cause a preliminary enquiry, once the Respondent No.2 came to known

about the misappropriation of funds or irregular transactions / affairs in

respect of Respondent No.5 Society out of the Preliminary Report he is

empowered to order an enquiry as contemplated under Section 51 of the

Act,1964, after receipt of the preliminary information about the

misappropriation of funds in respect of Respondent No.5 Society. In view of

the letter addressed by Respondent No.3 to Respondent No.4, directing the

Respondent No.4 for causing preliminary enquiry regarding

misappropriation of funds as alleged by the petitioner in respect of

Respondent No.5 Society and for submission of Report. He further submits

that the report submitted by Respondent No.4 on 27.06.2023 indicates that

there is a misappropriation of funds at Respondent No.5 Society by the

petitioner and others to the tune of Rs.96,01,762.71/- which is a huge

amount, by which the financial position of the Respondent No.5 Society

going to be affected severely.

10. Learned Government Pleader for Cooperation further submits that

pursuant to the said preliminary enquiry report submitted by Respondent

No.4 and also based upon the information forwarded / furnished by NV,J

Respondent No.3. The Respondent No.4 issued the present impugned

proceedings for conducting enquiry under Section 51 of the Act, 1964. He

further submits that the present impugned proceedings are only at

preliminary stage for conducting a statutory preliminary enquiry, unless the

petitioner does not have committed any misappropriation, nothing will

happen to the petitioner. At this stage of statutory enquiry on the basis of

said preliminary enquiry was ordered purely basing upon report of the

Respondent No.3 bank. Therefore, it cannot be proceeded an enquiry under

Section 51 of the Act, 1964 is against the object and a scheme of the Act. As

such the impugned order does not warrants any interference of this Court,

for which the learned Government Pleader for Cooperation relied upon a

ratio laid down by this Court in Mandava Laxmana Rao Vs. Primary

Agricultural Co-operative Society, Warangal District and others2 and

Akkayapalli Co-operative House Building Society Limited, Kadapa Vs.

Joint Registrar / District Co-operative Officer, Y.S.R. District, Kadapa

and others3. Therefore, the present writ petition is liable to be dismissed.

11. Heard learned counsel for the petitioner and learned Government

Pleader for Cooperation and perused the material placed on record.

12. On perusal of the impugned proceedings dated 28.06.2023 issued by

Respondent No.2 is only an order for causing a preliminary enquiry as

required under Section 51 of the Act, 1964. Moreover, for any penal action

the respondents should comply other provisions and should comply

1996 (4) ALD 141

2011 (1) ALD 662 NV,J

principles of natural justice and fair and reasonable opportunity for rebuttal

of allegations or accusations of the Respondents.

13. The contention of the learned counsel for the petitioner that the

Respondent No.2 is neither competent authority nor empowered to conduct

an enquiry under Section 51 of the Act, 1964. In given facts and

circumstances the very limitation of enquiry under Section 51 is contrary to

the ingredients of Section 51 of the Act, 1964. But, Respondent No.2 is

competent enough to order an enquiry under Section 52 of the Act, since he

relied upon a report submitted by Respondent No.3 who is a creditor of

Respondent No.5 Society, is unjust and unsustainable, for the reason that

the impugned enquiry under Section 51 of the Act, 1964 was initiated

pursuant to the preliminary report submitted by Respondent No.4 but not

as per the letter addressed by Respondent No.3 dated 19.06.2023, therefore

both the Sections 51 and 52 of the Act, 1964 are extracted as under:

51. Inquiry:- The Registrar, may of his own motion and shall, on

the application of a society to which the society concerned is

affiliated, or of not less than one third of the members of the

Committee, or of not less than one fifth of the total 'number of

members of the society, hold an inquiry or direct some person

authorised by him by an order in this behalf to hold an inquiry into

the constitution, working and financial condition of a society. Such

inquiry shall be completed within a period of four months and the

report of inquiry along with the findings of the Registrar thereon NV,J

shall be communicated to the managing committee of the society. It

shall be the responsibility of the managing committee to place the

inquiry report before the General Body or Special General Body

convened for the purpose for its information, within a period of one

month from the communication of the inquiry report by the Registrar.

The Registrar shall be competent to initiate action under the

provisions of this Act, if the committee fails to take action as

aforesaid:

52. Inspection. -[(1)] The Registrar may, of his own motion or on

the application of a creditor of a society, inspect or direct any person

authorised by him by a general or special order in this behalf to

inspect the books of the society.

[Such inspection shall be completed within a period of three months

from the date of order of inspection]

Provided that no such inspection shall be made or directed on the

application of a creditor unless the creditor:-

(a) satisfies the Registrar that the debt is a sum then due and that he

has demanded payment thereof and has not received satisfaction

within a reasonable time ; and

(b) deposits with the Registrar such sum as security, for the costs of

the proposed inspection as the Registrar may require.

14. By cumulative reading of Sections 51 and 52 of the Act, 1964

envisages that Registrar of the Societies is empowered on his own motion or NV,J

shall on the application of the Society by passing resolution with minimum

strength of not less than 1/3rd members of the committee or not less than

1/5th members out of the total members of the Society can hold an enquiry

under Section 51 of the Act, 1964. The Registrar may on his own motion or

on the application of the creditor of the Society can ordered an enquiry in

respect of books of the Society under Section 52 of the Act.

15. It appears that in a case on hand there is a report of the creditor by

Respondent No.3 dated 19.06.2023 to the Respondent No.4 but not to the

Registrar as alleged by the petitioner. Similarly, a special report also

submitted by Respondent No.3 to Respondent No.5 bank on 17.06.2023.

16. Be that as it may, Respondent No.2 delegated powers as Registrar and

issued proceedings dated 20.06.2023 directing Respondent No.4 to conduct

an enquiry basing upon the special report in reference to the report

submitted by Respondent No.3 into the affairs of Respondent no.5 Society.

17. It is a fact that Respondent No.4 submitted his detailed reported as

instructed by Respondent No.2 on 27.06.2023, which seems to be the basis

for ordering suo moto enquiry under Section 51 of the Act, 1964 by way of

impugned proceedings against Respondent No.5 Society. Therefore, the

contention of the learned counsel for the petitioner that Respondent No.2

not exercised his power of suo moto enquiry but exercised at the behest of

the enquiry Report of Respondent No.3 who is a creditor of the Respondent

No.5, as such the enquiry under Section 51 of the Act, 1964 cannot be

initiated and which is contrary to the Section 51, of the Act, 1964 is NV,J

untenable and unjustified for the reason that admittedly the Respondent

No.2 acted upon on suo moto after ordering enquiry only. At best, an

enquiry under Section 52 of the Act, 1964 can be ordered and for which he

relied the ratio laid down by this Court in B. Sreenivasulu Vs. Government

of Andhra Pradesh (1 Supra) wherein it is held as follows:

Examining the matter from that angle, we must consider the

question as to what is the purpose for which the enquiry is

authorised to be instituted by the Registrar. The purpose is spelt out

by the language of the section. The scope of the enquiry is to enquire

into the constitution, working and financial condition of the society.

the society is managed by a managing committee under the

provisions of the Act. It is that small body which holds the reins of

administration in its hands. The enquiry contemplated under section

51 is to see how that body is functioning or has functioned. the

enquiry is intended by the Act to aid and help the general body to

effectively supervise the functioning of the managing committee. That

is why the section directs that the report should be submitted to the

general body together with the remarks of the Registrar so that the

general body, on consideration of this report, may take appropriate

disciplinary and suitable action in the affairs of th society. The

enquiry report contains findings of facts which are kept away from

the knowledge of the general body. It is not by itself capable of

imposing any punishment on the committee. By considering the NV,J

whole exercise as mandatory with the result of invalidating the

enquiry report on the ground that it has not been submitted within

the stipulated period and thus defeating and crippling the

supervisory authority of the general body the promotion of which is

the object of section 51, the whole purpose would be subverted. The

interpretation sought to be placed by learned counsel, Sri V.T.M.

Prasad, for the Committee, on section 51 of the Act does not help the

purpose of the law. It only helps to suppress the truth from the

general body and to shield the management form the glare of

exposure which it is purpose of enquiry report to shed. Such

interpretation cannot be accepted. Crawford, in his book On the

Construction of Statutes, at page 516, has stated thus:

"The question as to whether a statute is mandatory or directory

depends upon the intention of the legislature and not upon the

language in which the intention is clothed. The meaning and

intention of the legislature must govern and these are to be

ascertained not only from the phraseology of the provision but also

by considering its nature, its design and the consequences which

would follow from construing it one way or the other....."

18. If the contention of the petitioner is accepted, the intention of the

legislature which is a paramount consideration to make applicable a

particular provisions of the Act, more particularly in the present case the

enquiry under Section 51 of the Act, 1964 will be defeated.

NV,J

19. Coming to the submission of learned Government Pleader for

Cooperation that Respondent No.2 is empowered to cause a preliminary

enquiry, basing upon report of such enquiry, he can invoke suo moto

enquiry as permitted under Section 51 of the Act, 1964. Even in the case in

hand also the same is in accordance with the Section 51 of the Act, 1964

and also liable to be upheld, in view of the admitted fact that the

Respondent No.2 ordered preliminary enquiry on 20.06.2023 and received a

report dated 27.06.2023 from Respondent No.4 and after his satisfaction he

finally ordered an enquiry under Section 51 of the Act is in accordance with

Section 51 of the Act, 1964. He further contended that in this context, this

Court in Mandava Laxmana Rao vs. Primary Agricultural Co-operative

Society, Warangal District and others (2 supra) in para Nos.2 and 5,

wherein it is held as follows:

The first and fore-most important contention raised by Sri Movva

Chandrasekhara Rao, learned counsel for the petitioner is that the

initiation of the proceedings under Section 51 of the Andhra Pradesh

Co-operative Societies Act VII of 1964 (the Act) itself is bad, illegal

and void in law as the said order was passed without satisfying

any one of the ingredients of that Section. To appreciate this

contention it is necessary to read Section 51 of the Act, which is to

the following effect.

In the present case admittedly the Inquiry proceedings were

initiated basing on the application of one of the members of the first NV,J

respondent society dated 23.06.1985 submitted to the Hon. Minister

for Co-operation requesting into the affairs of the first respondent

Society with special reference to the misappropriation of the funds of

the said society by the petitioner herein, on which the Hon. Minister

ordered enquiry, and the Special Grade Deputy Registrar / District

Co-operative Officer on Special Duty, District Co-operative Central

Bank Ltd., Warangal to conduct the enquiry in the said

misappropriation of funds of the first respondent society. So

admittedly the inquiry proceedings were not initiated suo moto by

the Registrar as it was done under the directions of the Hon.

Minister on the application. Neither one-third of the members of the

committee nor of not less than one-fifth of the total number of

members of the society made an application to the Registrar making

allegations against the petitioner about the allegations against the

petitioner about the alleged misappropriation of the funds of the first

respondent-society. So none of the grounds mentioned in Section 51

of the Act were satisfied making a ground to initiate the enquiry

proceedings in question. I see some force in the contention of Sri

Movva Chandrasekhara Rao, learned counsel for the petitioner that

the initiation of the proceedings is ab initio void as no just or

reasonable grounds are made out attracting the provisions of Section

51 of the Act.

Hence I allow the writ petition setting aside the impugned

proceedings without costs and direct the third respondent herein to NV,J

conduct a regular enquiry into the matter afresh after giving

reasonable opportunity to the petitioner and take necessary action

against the concerned, completing all the process necessary within

six months from the date of receipt of a copy of this order.

20. Learned Government Pleader for Cooperation also relied upon a ratio

laid down by this Court in Akkayapalli Co-operative House Building

Society Limited, Kadapa vs. Joint Registrar / District Co-operative

Officer, Y.S.R. District, Kadapa and others (3 supra) wherein in para

Nos.2,3,5,6,7,8,9, it is held as follows:

2. The petitioner is a House Building Society. The Divisional

Cooperative Officer, Kadapa, respondent No.2, has submitted his

report, dated 06.10.2010, to respondent No.1, wherein he has

pointed out that a sum of Rs.89,32,539/- was found as imbalance in

between loan outstanding of loans at Housefed level and member

level of the petitioner-Society. While submitting the said report,

respondent No.2 has requested for instituting an inquiry under

Section 51 of the Act. Placing reliance on the said report, respondent

No.1 has ordered for inquiry into the affairs of the petitioner-Society

by appointing respondent No.3 as Inquiry Officer.

3. At the hearing, Sri L.J.Veera Reddy, learned counsel for the

petitioner, strenuously contended that the impugned order is in

violation of the provisions of Section 51 of the Act, inasmuch as NV,J

respondent No.1 has not exercised his suo motu power or that no

requisite quorum for holding an inquiry was made either by 1/3rd of

the Managing Committee Members or 1/5th of the total number of

members of the Society.

A perusal of the impugned proceedings shows that respondent No.1

has exercised his power under Section 51 of the Act on the basis of

the report of respondent No.2, who has also incidentally made a

request for instituting an inquiry. Though respondent No.1 has not

used the phrase ?on his own motion?, the purport of the impugned

order clearly reveals that he has exercised the powers inhered in

him to order for an inquiry on the basis of the report received by him.

The mere absence of words that he was exercising power of his own

motion or his placing reliance on the report of a subordinate officer

would not detract the nature of the power from the one of suo motu

exercise.

6. I am also unable to accept the contention of the learned

counsel for the petitioner that there is no application of mind on the

part of respondent No.1. The very fact that respondent No.1 has

referred to the report shows that he was aware of its contents and

satisfied that it was a deserving case for holding an inquiry under

Section 51 of the Act.

8. I have carefully perused the said Judgment, which dealt

with a case, wherein an inquiry was ordered on the direction given NV,J

by the Minister for Cooperation. I am of the opinion that a direction

given by a superior authority is different from a request coming from

the subordinate officer while sending his report. While in the former

case, the competent authority had no discretion, in the latter case,

he is always vested with the power either to exercise his suo motu

power or not to exercise such power. Therefore, this Judgment is not

of any assistance to the petitioner.

9. One other reason for my disinclination to interfere with the

matter is that by the impugned order, respondent No.1 has merely

directed holding of an inquiry into the affairs of the Society. The

petitioner is unable to plead, much less substantiate, that by such

inquiry, the interest of the society or its members would in any way

be jeopardized. In the interests of cooperative movement, it is

always desirable that whenever the alleged lapses are pointed out,

inquiries are lied so that the cooperative movement is sustained and

corruption in the societies is curbed.

21. After analysis of the judgments relied upon by the learned counsel for

the petitioner cautiously and consciously that the facts mentioned therein is

not applicable to the facts mentioned in the case in hand, wherein the

Registrar ordered an enquiry pursuant to the directions, without there being

any preliminary enquiry or without any basis for ordering such an enquiry.

But in the present case the Registrar / Respondent No.2 after having

preliminary enquiry and after his satisfaction regarding the report only he

ordered for suo moto enquiry under Section 51 of the Act, 1964 as NV,J

envisaged. Coming to the another submission of learned counsel for the

petitioner that the present enquiry under Section 51 of the Act 1964 is not

suo moto enquiry, it is only basing upon the enquiry of the Respondent No.3

is not acceptable and liable to be rejected for the reason that there is an

preliminary enquiry conducted by Respondent No.4, pursuant to the suo

moto initiation of Respondent No.2, the said submission was also upheld by

this Court in Akkayapalli Co-operative House Building Society Limited,

Kadapa vs. Joint Registrar / District Co-operative Officer, Y.S.R.

District, Kadapa and others.

22. In view of the foregoing reasons and upon the analysis as stated above

and the ratio laid down by this Court in Akkayapalli Co-operative House

Building Society Limited, Kadapa vs. Joint Registrar / District Co-

operative Officer, Y.S.R. District, Kadapa and others wherein this Court

negatived the similar contention of the petitioner herein.

23. On the above analysis of submissions of both the counsel and having

regard to the material placed before this court as referred supra, the subject

enquiry was ordered in accordance with Section 51 of the Act, 1964 and the

Respondent No.2 is empowered and issued proceedings of enquiry in

consonance with the provisions of the Act, much less as per Section 51 of

the Act, 1964.

24. Accordingly, the impugned proceedings does not warrants interference

of this Court at preliminary stage and more over it is only an enquiry to find

out whether any misappropriation has been taking place in respect of NV,J

Respondent No.5 Society. As per the report of Respondent No.4, the alleged

misappropriation of funds is in high value which may affects the financial

position of Respondent No.5 Society, unless a statutory enquiry is not

conducted the Respondent No.5 Society will suffer with huge loss and

hardship.

25. Therefore, the Writ Petition is dismissed. There shall be no order as to

costs.

26. As a sequel thereto, interlocutory applications pending, if any in the

writ petition, shall also stand closed.

_____________________________________________ JUSTICE VENKATESWARLU NIMMAGADDA

20th September, 2023 KNR NV,J

HON'BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA

WRIT PETITION.No.17767 of 2023

20th September, 2023

KNR