Kerala High Court

The President, Managing ... vs The Joint Registrar Of ... on 31 May, 2021

                         C.T.RAVIKUMAR &
                           K.HARIPAL, JJ.

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W.A.No. 1751 of 2020

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Dated 31st May, 2021

ORDER OF REFERENCE Ravikumar, J.

The above appeal is directed against the judgment dated

3.12.2020 in W.P.(C)No.2435 of 2020. In the writ petition the challenge

was against Ext. P6 notice dated 13.1.2020 issued by the Joint

Registrar of Co-operative Societies (General), Idukki District, the first

respondent, under Section 32 of the Kerala Co-operative Societies Act,

1969, for brevity 'the Act' only. As a matter of fact, it is the second

round of litigation for the appellant on the issue involved. Earlier, the

appellant herein filed W.P.(C)No.20699 of 2019 seeking quashment of

proceedings whereby and whereunder an enquiry under Section 65 of

the KCS Act was ordered in Kudayathoor Service Co-operative Bank Ltd.

No.3316 viz., Ext.P1 therein. A declaration to the effect that Ext.P1 did

not satisfy the fundamentals of law governing the field and that it is in

contravention of the settled legal positions, was also sought therein

besides seeking issuance of a writ of Mandamus commanding the

respondents therein to drop the inquiry ordered thereunder. Aggrieved

by the nature of the disposal of the said writ petition W.A.No.2116 of

2019 was filed. During the course of argument in that appeal a

contention was raised that as the enquiry under Section 65 of the KCS

Act, conducted following the procedure under Rule 66 of the Kerala Co-

operative Societies Rules, 1969 (for short 'the KCS Rules'), may lead to

drastic consequences including supersession of the Managing

Committee in power of the Society concerned, before taking any action

based on the report submitted, after such enquiry person/persons likely

to be affected by any such order to be passed based on the said report

should be furnished with copy of the said report and should also be

afforded with an opportunity to be heard, to adhere to the salutary

principles of natural justice, more particularly, the provisions under Rule

66(5) of the KCS Rules. The said contention was resisted by the

respondents therein contending that the same is untenable in view of

the decision of a Division Bench of this Court in State of Kerala v.

Aravindakshan Nair reported in 2010 (3) KLT 11. It was contended

by them that going by the said decision Rule 66 , more particularly Rule

66(5) of the KCS Rules, did not contemplate granting of any

opportunity of being heard to any society or any person except in a

situation where the report carries a recommendation for distribution of

the cost of inspection amongst the parties specified in Section 67 of the

KCS Act. That apart, the learned Government Pleader and the learned

counsel for the 4th respondent therein submitted that such a situation

had not arisen at that stage as the inquiry ordered under Section 65 of

the KCS Act was not yet completed by then. The learned counsel for

the appellant therein contended that the legislative intention could not

be understood as one confining the mandate for affording opportunity

of being heard only in a case where the report in the inquiry under

Section 65 of the KCS Act carries a recommendation for distribution of

cost of inspection amongst the parties specified under Section 67 of the

KCS Act. After considering the said rival contentions on that issue and

taking note of the fact that based on Ext.P1 order, marked as such

therein, no report was submitted after conducting the inquiry, as per

the judgment dated 24.10.2019 the question whether the decision in

Aravindakshan Nair case (supra) requires reconsideration was left

open to be raised at the appropriate time, if such a contingency arises

in future, on the considered view that there was no reason to presume

that outcome of the enquiry under Ext.P1 would be adverse to the

appellant. After considering the other contentions mounted to challenge

the judgment in W.P.(C)No.20699 of 2019 the said appeal was

dismissed. Subsequently, on Ext.P7 report submitted after conducting

inquiry under Section 65 of the KCS Act the Joint Registrar issued

Ext.P6 notice under Section 32 of the KCS Act. It is challenging the

same that W.P.(C) No.2435 of 2020 was filed. The learned Single Judge

held that Ext.P6 reveals allegations / findings regarding violation of the

bye-laws of the Society and the Co-operative Societies Rules and their

correctness is a matter to be considered in the hearing under Section

32 of the KCS Act. Furthermore, it was held:-

"As to whether the irregularities occurred/committed while the present committee was in office and also as to whether the irregularities pointed out are rectifiable irregularities and whether they are sufficient enough to attract supersession, are all matters to be considered in the enquiry under Section 32."

Obviously, the learned Single Judge also referred to the decision in

Aravindakshan Nair case (supra) and noted that the law laid down

thereunder is that opportunity to challenge a report under Rule 66 of

the KCS Rules (be it a report under Section 65 of the KCS Act or under

Rule 66 of the KCS Rules), arises only in a proceeding under Section 32

or Section 68 of the KCS Act while dismissing W.P.(C)No.2435 of 2020

with the observation that it is sure that the authorities would bear in

mind the directions of the Apex Court in State of M.P. and Ors. v.

Sanjay Nagayach and Ors. reported in (2013) 7 SCC 25. It is in

the said circumstances that the learned Senior Counsel appearing for

the appellant raised the question 'whether the decision in

Aravindakshan Nair case (supra) requires reconsideration' availing

the liberty granted under Ext.P5 judgment or in other words, raising the

question that when the enquiry under Section 65 of the KCS Act

conducted following the procedure under Rule 66 of the KCS Rules may

lead to drastic consequences including supersession of the Managing

Committee in power of the Society concerned whether before taking

any action based on the report submitted after such enquiry the

person/persons likely to be affected by any such order to be passed

based on the said report should be furnished with copy of the said

report and should also be afforded with an opportunity to be heard, to

adhere to the salutary principles of natural justice, more particularly,

the provisions under Rule 66(5) of the KCS Rules and whether the right

to be heard on such a report could be confined only in cases where the

report in the inquiry under Section 65 of the KCS Act carries

recommendation for distribution of cost of inspection amongst the

parties specified under Section 67 of the KCS Act ?

2. Normally, when consideration and consequential action

on a report can lead to drastic consequences strict adherence of

principles should be the rule. Whether it is suffice to satisfy its

adherence by issuing a notice after proposing the consequential action

and seeking explanation as to why the proposed action should not be

taken? This question assumes relevance taking note of the fact that a

report in an inquiry conducted under Section 65 of the KCS Act,

following the procedures under Rule 66 of the KCS Rules, may lead to

supersession of the Managing Committee of the Society concerned or to

initiation of surcharge proceedings against the members of the said

committee and such other persons allegedly responsible for the

irregularities, violations and illegalities mentioned in the report.

3. In such circumstances, the question is whether an

opportunity is to be given, after providing the copy of the report, but

before arriving at a tentative decision on the action to be taken based

on the report or after taking a tentative decision and then for explaining

as to why the said decision should not be finalised.

4. For considering the aforesaid questions it is worthy to

refer to Rule 66(5) of the KCS Rules. It reads thus:-

"66. Procedure for the conduct of inquiry and inspection:- (1).........

(5) The person authorised to conduct the inquiry of inspection shall submit his report to the Registrar on all points mentioned in the order referred to in clause

(c) to sub-rule (1). The report shall invariably contain a latest balance sheet of the society and the last known addresses of the members of the Committee and of the Secretary. The report shall also contain his findings and the reason therefore; supported by such documentary or other evidence as recorded by him during the course of the injury or inspection. He shall also specify in his report the costs of the inquiry or inspection together with reasons and recommend to the Registrar the manner in which the entire cost or a part thereof may be apportioned amongst the parties specified in Section 67. 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."

5. It is true that in Aravindakshan Nair case (supra) a

Division Bench of this Court held that Rule 66, more particularly Rule

66(5) of the KCS Rules did not contemplate affording of an opportunity

of being heard to any society or any person, except in a situation where

the report in the inquiry under section 65 of the KCS Act carries a

recommendation for distribution of cost of inspection amongst the

parties specified under Section 67 of the KCS Act. According to us , it

requires a reconsideration. It is to be noted that recommendation for

distribution of cost amongst the parties specified in Section 67 of the

KCS Act cannot strictly be regarded as a drastic consequence arising

from the report and, as the provision suggest, it is only a

recommendation for recovering the cost of inspection from the specified

parties. Is there any real difference in impact when an opportunity is

given to the parties concerned before any tentative decision is taken on

the report received after the inquiry under Section 65 of the Act and

after a tentative decision is taken and then opportunity is provided.