Manohar Lal Jain vs The Registrar Cooperative ...
2009 Latest Caselaw 2711 Del

        THE HIGH COURT OF DELHI AT NEW DELHI
%                               Judgment delivered on: 20.07.2009

+             W.P(C) 5003/1993

MANOHAR LAL JAIN                                       ..... Petitioner

                                  - Versus -


THE REGISTRAR COOPERATIVE
SOCIETIES & ORS                                        ..... Respondent

Advocates who appeared in this case:-

For the Petitioner               : Mr Anand Yadav
For the Respondents              : Mr V. K. Tandon

CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MS JUSTICE VEENA BIRBAL

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in Digest?

BADAR DURREZ AHMED, J (ORAL)

1. We have heard the counsel for the parties. The petitioner is

aggrieved by the order dated 27.05.1993 passed by the Delhi

Cooperative Tribunal in an appeal under Section 76 of the Delhi

Cooperative Societies Act, 1972 (hereinafter referred to as the „said

Act‟) which arose out of the order dated 20.04.1993 passed by the Joint

Registrar, Cooperative Societies, Delhi. The said order dated

20.04.1993 was purportedly passed under Section 59(2) of the said Act,

the operative portion of which reads as under:-

"17. On the basis of above, I fix the responsibility in loss of assets of the society on Sh. M. L. Jain, the then President, and Sh. P. C. Jain, the then Secretary. Both of them are equally responsible for the acts of misappropriation and loss to the society. Thus, both should bear equal share of liability as well. It is, therefore, ordered that Sh. M. L. Jain and Sh. P. C. Jain shall pay Rs 50,000/- each with interest @ 18% from the date the unauthorized payments were made to Architects till the full payment is realized.

I order accordingly.

Given under my hand and seal on 20th day of April 1993."

2. Aggrieved by the said order dated 20.04.1993 the petitioner

herein preferred an appeal under Section 76 of the said Act being case

No. 51/93-C.A before the Delhi Cooperative Tribunal, Delhi. One of

the grounds on which the order dated 20.04.1993 was assailed was that

a proper opportunity had not been granted to the petitioner by the Joint

Registrar prior to the making of the said order. It was also contended

that the procedure under Rule 87 of the Delhi Cooperative Societies

Rules, 1973 (hereinafter referred to as the „said Rules‟) read with

Section 59 of the said Act had not been followed. Other submissions

were made with regard to the merits of the matter with which we are

not concerned in this writ petition. The Delhi Cooperative Tribunal,

however, did not find any force in the grounds taken by the petitioner

before it. Consequently, the Tribunal dismissed the appeal summarily

by the impugned order dated 27.05.1993.

3. As noted above, we have heard the counsel for the parties on the

question of whether the proper procedure as laid down under the said

Act and under the said Rules had been followed and whether the

petitioner had been given the requisite opportunity for putting forward

his case. This issue arises in the backdrop of the controversy with

regard to the payments made to the architects appointed by the society

(Samant Bhadra Cooperative Group Housing Society Limited).

According to the petitioner on 05.07.1987 the General Body of the said

society resolved to appoint Pasricha & Associates as architects. On

30.07.1987 a sum of Rs 25,000/- was paid by the society to the said

architects as the signing amount at the time of entering into the

agreement with the said architects. The Managing Committee of the

society approved the drawings submitted by the said architects on

08.11.1987 and on the next date, that is, on 09.11.1987, a further sum

of Rs 25,000/- was paid to the architects by the society. This was

followed by a further payment of Rs 25,000/- to the same architects on

submission of plans by them to the Delhi Development Authority.

Consequently, a sum of Rs 50,000/- was again paid to the architects for

the processing work undertaken by them insofar as the DDA was

concerned. Apparently, on 03.01.1988 all the accounts of the society

were approved by the General Body. However, there arose some

controversy with regard to an audit objection and, therefore, an Enquiry

Officer was appointed under Section 55 of the said Act. The said

Enquiry Officer submitted his report on 18.01.1993. A photocopy of

the said Enquiry Report has been filed as Annexure-8 to this writ

petition. The heading of the said report is -- "Enquiry Report U/S 55

of the Delhi Cooperative Societies Act, 1972.........". In the said

heading between the expressions "U/S 55" and "of the Delhi

Cooperative Societies Act, 1972" there is an interpolation in ink which

reads "& 59". However, in the body of the report at page 4 of the said

report (page 103 of the paper book), it is clearly indicated that the said

Enquiry Officer was appointed under Section 55 of the said Act. At the

place where the Enquiry Officer had signed at the end of the report it is

also clearly indicated that he was an "Enquiry Officer U/S 55 of the

Delhi Coop. Societies Act 1972". Therefore, although there has been

an attempt to pass off this Enquiry Report under Section 55 of the said

Act as one also under Section 59, it is abundantly clear that it is an

Enquiry Report only under Section 55 of the said Act and not one under

Section 59.

4. That settled, we move on with the further facts. Pursuant to the

said Enquiry Report, a show cause notice was issued by the Joint

Registrar (II) under Section 59 (2) of the said Act. The said show cause

notice was issued on 18.03.1993. Consequent to the said show cause

notice, the petitioner submitted his reply. Thereafter, the said Joint

Registrar (II) fixed the date of hearing as 15.04.1993 at 10:30 am. The

petitioner sent a letter dated 15.04.1993 itself requesting for an

adjournment. In the same letter, there was also a request made for

supply of documents. However, the request for adjournment was not

acceded to and the matter was taken up and heard on 15.04.1993 itself

whereupon the impugned order dated 20.04.1993 was passed.

Thereafter, the petitioner filed the appeal before the Delhi Cooperative

Tribunal which passed the impugned order dated 27.05.1993.

5. We have examined the relevant provisions of the said Act and

find that there is a difference between an enquiry under Section 55 and

an enquiry under Section 59 of the said Act. We have already indicated

that the Enquiry Report dated 18.01.1993 is one under Section 55 and

not under Section 59. The enquiry that is to be conducted under

Section 59 has to be done so in the manner prescribed in Rule 87 of the

said Rules. The said Section 59 and the said Rule 87 read as under:-

"59. Surcharge. -- (1) If in the course of an audit, inquiry, inspection or the winding up of a co-operative society, it is found that any person, who is or was entrusted with the organization 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 this Act, the rules or the bye-laws or has caused any deficiency in the assets of the society by breach of trust or willful negligence or has misappropriated or fraudulently retained any money or other property belonging to such society, the Registrar may, of his own motion or on the application of the committee, liquidator or any creditor, inquire himself or direct any person authorized by him, by an order in writing in this behalf, to inquire into the conduct of such person:

Provided that no such inquiry shall be held after the expiry of six years from the date of any act or omission referred to in this sub-section.

(2) Where an inquiry is made under sub-section (1), the Registrar may, after giving the person concerned an opportunity of being heard, make an order, requiring him to repay or restore the money or 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."

"87. Procedure for assessing damages against delinquent promoters etc. under section 59

1. On receipt of the report made by the auditor, or person authorised to make inspection under section 54 or enquiry under section 55 or inspection under section 56, or by the liquidator or otherwise, the Registrar or any other person authorised by him may make such further inquiries as he may deem necessary regarding the extent to which the person who has taken any part in the organisation or management of a society or any deceased, past or present, officer of the society has misapplied or retained, or become liable or accountable, for any money, property of the society, or has committed misfeasance or breach of trust in relation to the society.

2. On the completion of the further enquiries under sub- rule (1), where necessary, the Registrar or the person authorised by him shall issue a notice to the person or persons concerned furnishing him or them with particulars of the acts of misapplication, retention, misfeasance or breach of trust and the extent of his or their liability involved therein and calling upon him or them to put in statements in his or their defence within fifteen days of the date of issue of the notice.

3. On receipt of the statements referred to in sub-rule (2), the Registrar or the person authorised by him, if he is satisfied that there are reasonable grounds for holding the person or persons liable, shall frame charges.

4. The person or persons concerned shall, after the charges are framed, be asked to put in his statement in defence and to indicate the documentary or oral evidence which he would like to produce. The Registrar or the person authorised by him may permit production of other documentary or oral evidence, if considered necessary, subsequently.

5. The Registrar or the person authorised by him, shall thereafter record the evidence led by the society or the liquidator or the person or persons concerned and take on record the documents proved by them, and shall thereafter fix a date for hearing arguments of the parties.

6. On the day fixed for hearing under sub-rule (5), the Registrar or the person authorised by him, shall hear the arguments and may pass his final orders on the same day or on any day fixed by him within twenty days from the date on which the hearing was completed. On the day so fixed, the Registrar or the person authorised by him, as the case may be, shall make his final order either ordering repayment of the money or return of the property to the society together with interest at such rate as may be specified by him or to contribute such amount to the assets, of the society by way of compensation in regard to misapplication, retention, misfeasance or breach of trust as may be determined or may reject the claim submitted on behalf of the society.

7. The Registrar or the person authorised by him, may also provide in his order for the payment of the cost of the proceeding under this rule or any part of such cost as he thinks just.

8. The Registrar or the person authorised by him, shall furnish a copy of his order, under sub-rule (6) to the party concerned within ten days of the date on which he makes his final order."

6. A plain reading of Rule 87 indicates that on the receipt of an

enquiry report, inter alia, under Section 55 of the said Act, the Registrar

or any other person authorized by him "may make such further

inquiries as he may deem necessary............". Thus, after an enquiry

report under Section 55 is received by the Registrar, two options are

available to him. One option being that further proceedings need not be

taken and the other option being that further enquiries would be

necessary. If the second option is adopted and the Registrar decides to

make further enquiries, then for the conducting of such further

enquiries, as is indicated by Rule 87(2), it would be necessary that

notices be issued to the persons concerned furnishing them with

particulars of the acts of misapplication, retention, misfeasance or

breach of trust and the extent of their liability involved therein and

calling upon them to put in statements in their defence within 15 days

of the issuance of the notices. Once the statements are received under

rule 87(2), the Registrar or the person authorized by him, if he is

satisfied that there are reasonable grounds for holding the said persons

liable, is required to frame charges. In the present case what has

happened is that a show cause notice was issued under Rule 87(2) read

with Section 59 of the said Act and the petitioner filed his reply within

stipulated period. Immediately thereafter the Joint Registrar (II) fixed a

date of hearing and passed the impugned order dated 20.04.1993. The

said Joint Registrar did not frame any charges and, therefore, did not

comply with the stipulation of Rule 87(3). As a result, the petitioner

was denied his right of being heard in the sense that he was not made to

face any charges nor was he given an opportunity to produce any

documentary or oral evidence as is prescribed under Rule 87(4). The

said sub-rule specifically provides that the person or persons concerned

shall, after the charges are framed, be asked to put in his statement in

defence and to indicate the documentary or oral evidence which he

would like to produce. It further provides that the Registrar or the

person authorized by him may permit production of other documentary

or oral evidence if considered necessary subsequently. Then, the further

proceedings are prescribed under Rule 87(5) whereby the Registrar or

the person authorized by him is required to record the evidence led by

the society or the liquidator or the person and/ or persons concerned

and take on record the documents proved by them and to thereafter fix

a date for hearing the arguments of the parties. It is apparent from the

narration of facts given above that these opportunities were not

afforded to the petitioner and in fact, no opportunity of producing any

evidence or recording any evidence was given to the petitioner. As a

result, we find that the procedure prescribed under Rule 87 has not been

followed and, therefore, on this ground alone, the impugned order is

liable to be set aside.

7. We set aside the impugned order dated 27.05.1993 in which the

order dated 20.04.1993 has merged. The learned counsel for the

petitioner makes a statement at the Bar that he does not press for return

of the sum of Rs 50,000/- which was deposited by him with the society,

namely, Samant Bhadra Cooperative Group Housing Society Limited

by virtue of the order dated 05.11.1993 passed by this Court.

This writ petition stands disposed of. The parties shall bear their

own costs.

BADAR DURREZ AHMED, J

VEENA BIRBAL, J JULY 20, 2009 SR