Koliyacode Consumer ... vs The Joint Registrar Of ...
2021 Latest Caselaw 21869 Ker

            IN THE HIGH COURT OF KERALA AT ERNAKULAM
                                PRESENT
           THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR
                                   &
              THE HONOURABLE MRS. JUSTICE C.S. SUDHA
   WEDNESDAY, THE 3RD DAY OF NOVEMBER 2021 / 12TH KARTHIKA, 1943
                          WA NO. 1406 OF 2021
AGAINST THE JUDGMENT DATED 21.10.2021 IN WP(C) 21100/2021 OF HIGH
                    COURT OF KERALA, ERNAKULAM
APPELLANTS/PETITIONERS:

          KOLIYACODE CONSUMER CO-OPERATIVE SOCIETY LTD
          KOLIYACODE P.O, VENJARAMOODU, THIRUVANANTHAPURAM 695607
          REPRESENTED BY ITS SECRETARY
          THE PRESIDENT,
          KOLIYACODE CONSUMER CO-OPERATIVE SOCIETY LTD
          KOLIYACODE P.O, VENJARAMOODU, THIRUVANANTHAPURAM 695607
          BY ADVS.
          K.J.SAJI ISAAC
          ELIZABETH VARKEY
          JITHIN SAJI ISAAC


RESPONDENT/RESPONDENT:

          JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL),
          OFFICE OF THE REGISTRAR OF CO-OPERATIVE SOCIETIES,
          JAWAHAR SAHAKARANA BHAVAN, DPI JUNCTION, THYCAUD P.O,
          THIRUVANANTHAPURAM - 695014
          BY ADV.SUNIL.V.K,GP



     THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 03.11.2021,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 WA NO. 1406 OF 2021

                                   2

                                                               C.R.


            P.B.SURESH KUMAR & C.S.SUDHA, JJ.
             -----------------------------------------------
                 Writ Appeal No.1406 of 2021
             -----------------------------------------------
         Dated this the 3rd day of November, 2021


                             JUDGMENT

P.B.Suresh Kumar, J.

This writ appeal is directed against the judgment

dated 21.10.2021 in W.P.(C)No.21100 of 2021. The petitioners

in the writ petition are the appellants. Parties and documents

are referred to in this judgment for convenience, as they

appear in the writ petition.

2. The first petitioner is a Co-operative Society

(the Society) registered under the Kerala Co-operative Societies

Act, 1969 (the Act) and the second petitioner is the President of

the first petitioner Society. In terms of Ext.P1 order, respondent,

the Joint Registrar of the Co-operative Societies exercising the

powers of the Registrar under the Act over the area where the

Society is located, in exercise of the power under Section 65(1) WA NO. 1406 OF 2021

of the Act, ordered an inquiry into the working of the Society.

Ext.P1 order was issued based on Ext.P2 report of inspection

submitted by the officer authorised to supervise the working of

the Society in terms of Section 66(1) of the Act. Ext.P1 order

was under challenge in the writ petition. The grounds of

challenge were twofold, viz, (i) that the Registrar has not

formed a subjective satisfaction regarding the necessity to

order an inquiry which is a mandatory precondition to exercise

the power under Section 65(1) of the Act in the matter of

issuing Ext.P1 order and (ii) that Ext.P2 report, on the basis of

which Ext.P1 order was issued, is illegal in as much as the

inspection which culminated in Ext.P2 report was one

conducted without compliance of the requirements in Rule

66(2) of the Kerala Co-operative Societies Rules, 1969 (the

Rules) which mandates that a copy of the order of inspection

shall be issued by the Registrar to the President or the

Secretary of the Society, as the case may be, by registered

post with acknowledgement due. The learned Single Judge

rejected the grounds aforesaid holding that Ext.P1 order was

issued after forming a subjective satisfaction as mandated WA NO. 1406 OF 2021

under Section 65(1) of the Act and that Rule 66(2) of the Rules

does not apply to Ext.P2 in so far as it was a report on an

inspection conducted under sub-section (11) of Section 66 of

the Act. The petitioners are aggrieved by the decision of the

learned Single Judge and hence this appeal.

3. Heard the learned counsel for the petitioners

as also the learned Government Pleader.

4. The ground of the petitioners that the Registrar

has not formed a subjective satisfaction regarding the

necessity to order an inquiry into the working of the Society has

been repelled by the learned Single Judge holding that Ext.P1

order has been passed after evaluating the materials disclosed

in Ext.P2 report and thus forming a subjective satisfaction

mandated in terms of Section 65(1) of the Act. A reading of

Ext.P1 order would show that it is after evaluating the various

irregularities reported in Ext.P2 report that the Registrar has

ordered the inquiry into the working of the society under

Section 65(1) and the same cannot be said to be an order

issued without the necessary subjective satisfaction as to the

necessity to order such an inquiry. There is, therefore, no WA NO. 1406 OF 2021

infirmity in the finding rendered by the learned Single Judge on

this point.

5. Now, we shall deal with the ground of the

petitioners that Ext.P2 report is bad in law in as much as the

mandatory pre-condition to be satisfied for conducting an

inspection in a society under Section 66 of the Act as provided

for under Rule 66(2) of the Rules has not been complied with in

the matter of conducting the inspection culminated in Ext.P2

report. In order to deal with the ground aforesaid, it is

necessary to refer to Section 66 of the Act as also Rule 66 of

the Rules. The relevant part of Section 66 of the Act reads thus:

66. Supervision and Inspection.-(1) The Registrar shall supervise or cause to be supervised by a person authorized by him by general or special order in writing in this behalf, the working of every society as frequently as he may consider necessary. The supervision under this sub-section may include an inspection of the books of the society.

(2) The Registrar may, on his own motion, or on the application of a creditor of a society, inspect or direct any person authorized by him by order in writing in this behalf to inspect the books of the society:

Provided that no such inspection shall be made on the application of a creditor unless the applicant--

(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 WA NO. 1406 OF 2021

(b) deposits with the Registrar such sum as security for the costs of the proposed inspection as the Registrar may require.

(3) Where the inspection under sub-section (2) is made on the application of the creditor, the Registrar shall communicate the result of such inspection to such creditor.

(4) The Registrar or any person authorized by him under subsection (1) or sub-section (2) shall at all reasonable time have free access to and have power to inspect the books, records, accounts, documents, securities, cash balance and other properties, belonging to the society and may summon any person in possession of or responsible for the custody of such books, records, accounts, documents, securities, cash balance and other properties, to produce the same for inspection at any place at the Head Quarters of the society or any branch thereof or where there is no working office for the society, at the office of the Registrar or at the office of any of his subordinate officers.

                                  xxx x         xxxx
                  (11)     Notwithstanding anything contained in sub section

(1) and (2) above, the Registrar or his subordinate officers authorized by him under sub section (1) shall have power to hold an enquiry with necessary records of a society, on any petition received, and to inspect the affairs of a society periodically, in such cases, the inspecting officers shall have same powers as specified in sub section (4).

Explanation I- The "affairs of a society" for the purpose of this sub section includes, among other things, matters relating to administration, management and the business of a society.

Explanation II- The duty of the officers and chief executive of a society and the nature of offences and penalties mentioned in sub section (4A) shall be applicable to this sub section also.

Rule 66 of the Rules reads thus:

WA NO. 1406 OF 2021

66. Procedure for the conduct of inquiry and inspection:-(1)(i) An order, authorising inquiry under Section 65 or inspection under Section 66 shall among other things, contain the following:

(a) the name of the society whose affairs are to be inquired into or whose books of accounts are to be inspected:

(b) the name of the person authorised to conduct the inquiry or inspection;

(c) in specific point or points on which the inquiry or inspection is to be made, the period within which the inquiry or inspection is to be completed and report submitted to the Registrar;

(d) costs of inquiry or inspection;

(e) any other matter relating or pertaining to the inquiry or inspection.

(2) A copy of every order authorising inquiry under Section 65 or inspection under Section 66 shall be issued to the President or the Secretary of the Society concerned by registered post with acknowledgment due. A copy of the order shall also be made available to the Central Society or societies, to which the society in respect of which the order is issued, is affiliated; As explicit from the extracted provisions, sub-section (1) of

Section 66 of the Act empowers and authorises the Registrar to

supervise or cause to be supervised by a person authorised by

him by general or special order in writing in this behalf, the

working of every Society as frequently as he may consider

necessary. Similarly, sub-section (2) of Section 66 empowers WA NO. 1406 OF 2021

and authorises the Registrar to inspect on his own motion or on

an application by the creditor of the Society or to direct any

person authorised by him by order in writing in this behalf to

inspect the books of the Society. Likewise, sub-section (11) of

Section 66 provides that notwithstanding anything contained in

sub-sections (1) and (2), the Registrar or his subordinates

authorised by him under sub-section (1) shall have power to

hold an inquiry with necessary records of a Society, on any

petition received, and to inspect the affairs of a Society

periodically.

6. The petitioners do not dispute the fact that the

inspection conducted in the Society which culminated in Ext.P2

report is an inspection in terms of sub-section (11) of Section

66 of the Act. But, they would contend that even for such an

inspection, the requirements of Rule 66(2) of the Rules shall be

complied with. As noted, it is on the ground that the

inspection which culminated in Ext.P2 report was not preceded

by an order authorising the inspection and such inspection was

not conducted after serving the said order either on the

President or the Secretary of the Society, that the petitioners WA NO. 1406 OF 2021

contend that Ext.P2 order is bad in law and that therefore, the

same shall not be the basis for an order under Section 65(1) of

the Act. The short question that falls for consideration

therefore, is whether the requirements in terms of Rule 66(2) of

the Rules need to be complied with for the inspection into the

affairs of a Society in terms of sub-section (11) of Section 66 of

the Act.

7. Going by the plain meaning of the words used in

sub-section (11) of Section 66 of the Act, it can be seen that

the same is a provision independent of sub-section (1) of

Section 66 providing for supervision and sub-section (2) of

Section 66 providing for inspection. In so far as sub-section

(11) of Section 66 starts with a non-obstante clause, it can be

seen that the said provision is intended to enable the Registrar

and his subordinate officers to hold an enquiry with the

necessary records of the Society, on any petition received, and

to inspect the affairs of the Society periodically without

following the procedure prescribed for inspection under sub-

section (2) of Section 66. In other words, while sub-section (2)

of Section 66 provides for inspection in respect of the books of WA NO. 1406 OF 2021

a society by the Registrar on his own motion or on the

application of a creditor by an order issued by the Registrar in

writing in this behalf, sub-section (11) of Section 66 authorises

and empowers the officers subordinate to the Registrar to carry

on periodic inspections into the affairs of every society without

any specific order of the Registrar for the said purpose. No

doubt, the inspection in terms of sub-section (11) of Section 66

is also an inspection under Section 66, but in so far as no order

is required to be passed by the Registrar for an inspection

under sub-section (11) of Section 66, compliance of Rule 66(2)

of the Rules is impossible in the case of such an inspection. If

compliance of Rule 66(2) of the Rules is impossible for

inspection in terms of sub-section (11) of Section 66 of the Act,

the argument that Rule 66(2) of the Rules would apply to such

inspection also can only be rejected. Needless to say,

compliance of Rule 66(2) of the Rules is required only for an

inspection in terms of sub-section (2) of Section 66 of the Act.

We take this view also for the reason that Rule 66 of the Rules

has been in force ever since the introduction of the Rules in the

year 1969, whereas sub-section (11) of Section 66 of the Act WA NO. 1406 OF 2021

was a provision introduced to the Act only with effect from

28.04.2010, in terms of Act 7 of 2010 and when sub-section

(11) of Section 66 was introduced to the Act to provide for

periodic inspection into the affairs of the Society, there was no

corresponding amendment in the Rules. There is, therefore, no

infirmities in Ext.P2 report as well.

8. The petitioners have no case that an order under

Section 65(1) of the Act cannot be passed based on the report

of an inspection conducted under sub-section (11) of Section

66. In other words, there is no illegality in Ext.P1 order.

The writ appeal, in the circumstances, is devoid of

merits and the same is accordingly, dismissed.

Sd/-

P.B.SURESH KUMAR JUDGE

Sd/-

C.S. SUDHA JUDGE Mn