Kerala High Court
The President, Managing ... vs The Joint Registrar Of ... on 7 April, 2022
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR
&
THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN
&
THE HONOURABLE MRS. JUSTICE C.S. SUDHA
Thursday, the 7th day of April 2022 / 17th Chaithra, 1944
WA NO. 1751 OF 2020
AGAINST JUDGMENT DATED 03.12.2020 IN WP(C) 2435/2020 OF THIS COURT
---
APPELLANT/PETITIONER:
THE PRESIDENT, MANAGING COMMITTEE, THE KUDAYATHOOR SERVICE CO-
OPERATIVE BANK LIMITED NO.3316, KUDAYATHOOR POST, THODUPUZHA, IDUKKI
DISTRICT, PIN CODE-685590.
BY SENIOR ADVOCATE SRI. GEORGE POONTHOTTAM AND
ADV.SMT.NISHA GEORGE
RESPONDENTS/RESPONDENTS:
1. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), OFFICE OF
THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), PAINAVU,
IDUKKI DISTRICT, PIN CODE-685603.
2. V.S.KURUVILLA, AGED 77 YEARS, S/O.DEVASIA, R/A VERUNKAL HOUSE,
KUDAYATHOOR P.O., IDUKKI DISTRICT-685590.
BY STATE ATTORNEY SRI.N.MANOJ KUMAR FOR R1.
ADV.SRI.LIJI J.VADAKKEDOM FOR R2.
This Writ Appeal having come up for orders along with connected
cases on 07.04.2022, upon perusing the appeal memorandum and this court's
order dated 31.05.2021, the court on the same day passed the following:
P.T.O.
C.R.
P.B.SURESH KUMAR,
P.V.KUNHIKRISHNAN & C.S.SUDHA, JJ.
-----------------------------------------------
Writ Appeal Nos.657, 798 & 1751 of 2020
-----------------------------------------------
Dated this the 7th day of April, 2022.
ORDER
P.B.Suresh Kumar, J. (For himself and on behalf of C.S.Sudha, J.)
These matters have come up before the Full Bench
in the light of the order of reference dated 31.05.2021 in
W.A.No.1751 of 2020, in terms of which a Division Bench of this
Court entertained a doubt as to the correctness of the
proposition of law laid down by another Division Bench in State
of Kerala v. Aravindakshan Nair, 2010 (3) KLT 11 as regards
the interpretation of Rule 66(5) of the Kerala Co-operative
Societies Rules, 1969 (the Rules) framed under the Kerala Co-
operative Societies Act, 1969 (the Act).
W.A. No.657 of 2020 & con. cases 2
2. As we do not propose to deal with individual
cases on their merits, it is unnecessary to refer to the facts of
each case. Suffice it to say that the facts necessary to consider
the correctness of the proposition of law laid down in
Aravindakshan Nair alone need to be stated.
3. Section 65(1) of the Act empowers the
Registrar of Co-operative Societies (the Registrar) to hold an
inquiry by himself or by a person authorised by him by order in
writing, into the constitution, working and financial condition of
any society, if he is satisfied that it is necessary to do so.
Section 65(6) provides that if the Registrar, on completion of
the inquiry, finds that there is any major defect in the
constitution or working or financial condition of the society, he
may initiate action in accordance with the provisions of Section
32 dealing with supersession of committees of societies
registered under the Act. Section 66(2) provides that the
Registrar may, on his own motion or on the application of a
creditor of a society, inspect or direct any person authorised by
him by order in writing in this behalf to inspect the books of the
W.A. No.657 of 2020 & con. cases 3
society. Section 68 provides, among others, that if it is found in
the course of an inquiry or inspection that any person who is, or
was entrusted with any organisation or management of a co-
operative society or who is or has at any time been an officer or
an employee of the society has made any payment contrary to
the Act and the Rules or the bye-laws or has caused to any loss
or damage in the assets of the society by breach of trust or
wilful negligence or mismanagement or has misappropriated or
fraudulently retained any money or other property belonging to
such society or has destroyed or caused the destruction of the
records, the Registrar may, on his own motion, or on the
application of the committee, liquidator or any creditor, inquire
himself or direct any person authorised by him by an order in
writing in this behalf, to inquire into the conduct of such person.
Section 68(2) provides that where an inquiry is made under
sub-section (1), the Registrar may, after giving the person
concerned an opportunity of being heard, by order in writing,
require him to repay or restore the money or other property or
any part thereof, with interest at such rate or to pay
W.A. No.657 of 2020 & con. cases 4
contribution and costs or compensation to such extent, as the
Registrar may consider just and equitable.
4. Rule 66 of the Rules deals with the procedure
for the conduct of inquiry and inspection under Sections 65, 66
and 68 of the Act. Rule 66(5) provides that the person
authorised to conduct the inquiry or inspection shall submit his
report to the Registrar on all points mentioned in the order
authorising the inquiry or inspection. The said sub-rule also
provides that the report shall contain his findings and the
reason therefore; supported by such documentary or other
evidence as recorded by him during the course of the inquiry or
inspection. The sub-rule also provides that the person
authorised to conduct the inquiry or inspection shall 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 costs or a part thereof may be apportioned amongst
the parties specified in Section 67 of the Act. The sub-rule
further provides that 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. Aravindakshan Nair was a case where, on
the basis of a report of inspection under Section 66,
respondents 1 to 4 therein were surcharged under Section
68(2), and the order of surcharge was affirmed in appeal. In a
writ petition instituted challenging the order of surcharge and
the order affirming the same in appeal, a learned Single Judge
set aside those orders on the ground that the parties who were
surcharged were not heard on the report of inspection in terms
of Rule 66(5) of the Rules. In an appeal by the State against the
said decision, the Division Bench held that the hearing provided
for in Rule 66(5) is only with regard to the apportionment of
costs of inspection among the persons referred to in Section 67
of the Act. Paragraphs 5 and 6 of the judgment read thus:
"5. What is clear from the above is that cost of inspection
could be demanded from the society concerned or creditor or
member, as the case may be. Latter part of Rule 66(5) states
that, in the report of inspection it is for the inspecting officer
to recommend whether cost of inspection should be shared
among the persons referred to in Section 67. Obviously, the
Registrar is bound to take a decision on the recommendations
contained in the report of the inspecting officer and in this
regard Rule 66(5) specifically provides that orders to be
passed against a person or society should be only after giving
opportunity to the society or person concerned. The persons
among whom the cost is to be shared contained in Section 67
are incorporated in Rule 66(5) and it is also made very clear
that the adjudication by the Registrar under Rule 66(5) is only
on Section 67. So much so, we are inclined to accept the
argument of the Government Pleader that the principle
contemplated under Rule 66(5) is only on orders imposing
cost on the society and persons concerned referred to in
Section 67 in terms of or in variance with the report of the
inspecting officer contained in the inspection report. The
contention raised by the counsel for the respondents is that
orders to be passed by the Registrar after giving opportunity
to the society or persons concerned referred to in Rule 66(5)
applies to all against whom action is contemplated based on
the report. However, this argument cannot be accepted
because, wherever action is contemplated based on
inspection report, whether it is the supersession of the
management of the society under Section 32 or whether it is
the surcharge on the officers or employees concerned under
Section 68(2), separate opportunity of hearing specifically
contemplated under the relevant sections has to be afforded.
In fact, in this case, the action proposed against the
respondents is based on surcharge under Section 68(2) and
for this the section itself provides that, the Registrar shall
pass order surcharging a person only after giving the person
concerned an opportunity of being heard. This provision
provides effective opportunity to file objections and hearing
and if required, to adduce evidence by the persons
W.A. No.657 of 2020 & con. cases 7
concerned. The fact that action under Section 68(2) is
initiated against any person concerned based on inspection
report does not mean that the Registrar cannot give it up on
being satisfied that there is no case is made out by him in the
notice based on the report. In other words, in the course of
adjudication under Section 68, it is upto the Registrar to
accept the contention of the aggrieved persons and turn
down or reject the findings in the inspection report. It is to be
noted that, the opportunity referred to in Section 68(2) is
specifically mentioned in Rule 66(7)(ii)of the Rules, which is a
repetition of the opportunity referred to in Section 68 (2)of
the Act.
6. In our view, Rule 66(5) does not contemplate any
opportunity to be given to any society or any person, except
with regard to the proposal of the Registrar for ordering cost
of inspection, whether it be in terms of the report or in
variation with the recommendation contained in the Report."
As revealed from the extracted paragraphs, the argument
advanced by the contesting respondents in the case was that
the opportunity of hearing provided for in Rule 66(5) is for
every action to be taken by the Registrar pursuant to the report
and the said argument was repelled holding that wherever
action is contemplated based on report of inspection, whether it
is the supersession of the management of the society under
Section 32 or surcharge on the officers or employees concerned
W.A. No.657 of 2020 & con. cases 8
under Section 68, separate opportunity of hearing is
contemplated under the relevant provisions and therefore the
opportunity of being heard provided for in the Rule can only be
as regards apportionment of costs of inquiry or inspection. As
noted, the correctness of the said view as regards the
interpretation of Rule 66(5) of the Rules, is doubted in terms of
the order of reference referred to in the opening paragraph.
6. Before examining the correctness of the
decision in Aravindakshan Nair, it is worth referring to the
reasons, on the basis of which the dictum in the said case was
doubted. It is stated in the reference order that the difference
that an opportunity of hearing before a tentative decision is
taken on the report as to the further course of action would
make to persons against whom an adverse report is filed, has
not been considered in Aravindakshan Nair and that there is
also no reason as to why the opportunity of hearing to the
parties provided for in the Rule should be confined only as
regards apportionment of costs. It is also stated in the
reference order that the question whether it could be said that
W.A. No.657 of 2020 & con. cases 9
Rule 66(5) of the Rules provides for an opportunity of hearing
only as regards apportionment of costs merely for the reason
that notice is provided for under the relevant provisions before
further action is taken on the report, has not been addressed in
Aravindakshan Nair. The relevant portion of the reference
order reads thus:
"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. These aspects were not gone in detail
and no specific reason is assigned as to why an opportunity
should be confined only in cases where the report in the
W.A. No.657 of 2020 & con. cases 10
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.
Whether the statutory mandate for issuance of notice if
proceedings are initiated based on such a report for
supersession under Section 32 of the Act or for surcharging
under Section 68 of the Act notice would be issued to the
party concerned, be a reason for holding 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. It is true
that the view taken in Aravindakshan Nair case was
followed in the decisions in Registrar of Co-operative
Societies, Thiruvananthapuram v. N.P.Paulose and
others (ILR 2017 (3) Kerala 317) and in Prabhakaran Pillai
v. Asst. Registrar of Cooperative Societies (General)
(2017 (2) KLT 620).
For all these reasons we are of the considered view
that the decision in Aravindakshan Nair case (supra)
requires reconsideration. Hence, place this matter before the
Hon'ble the Chief Justice for appropriate orders."
The correctness of the decision in Aravindakshan Nair needs
to be examined in the above background.
7. Heard the learned Senior Counsel Sri.George
Poonthottam, Adv.Sri.B.S.Swathi Kumar and
W.A. No.657 of 2020 & con. cases 11
Adv.Sri.Liji.J.Vadakedom for the parties and the learned State
Attorney Sri.N.Manoj Kumar.
8. The learned Senior Counsel Sri.George
Poonthottam has made elaborate submissions to bring home
his stand that Aravindakshan Nair did not correctly lay down
the law. According to the learned counsel, if the provisions
contained in Rule 66(5) is read and understood in its entirety, it
could be seen beyond doubt that the hearing provided for in the
last sentence in the Rule is for every action to be taken by the
Registrar on the report of inquiry or inspection. The learned
counsel has brought to our notice the decision rendered by a
learned Single Judge of this Court in Thiruvalla East Co-
operative Bank Ltd. v. Joint Registrar, 2009 (4) KLT 378
taking the aforesaid view, which was not taken note of by the
Division Bench while rendering Aravindakshan Nair. The
learned counsel has also submitted that even otherwise, insofar
as the further action provided for under the Act on the report of
inquiry or inspection, be it under Section 32 or under Section
68, being drastic in nature affecting the rights of parties, the
W.A. No.657 of 2020 & con. cases 12
Court should read into Rule 66(5) an opportunity of hearing to
the affected persons before the report is acted upon. The
learned counsel has relied on the decision of the Apex Court in
Managing Director, ECIL v. B.Karunakar, (1993) 4 SCC
727, in support of the said proposition. Placing reliance on the
various text books on Administrative Law, it was also contended
by the learned counsel that the fair play in action adumbrated
under the scheme of our Constitution also demands a hearing
to the parties concerned on the acceptability of the report of
inquiry or inspection, before it is acted upon.
9. Adv.B.S.Swathi Kumar supported the
arguments advanced by the learned Senior Counsel Sri.George
Poonthottam. In addition, the learned counsel has brought to
our notice the decision of the Division Bench of this Court in
W.A. Nos.2196 and 2198 of 2012, taking the position that the
hearing provided for under Rule 66(5) is mandatory for every
action to be taken by the Registrar pursuant to the report of
inquiry or inspection.
10. Per contra, the learned State Attorney
W.A. No.657 of 2020 & con. cases 13
supported the view taken by the Division Bench in
Aravindakshan Nair pointing out that the said decision is
being followed consistently by this Court in identical and similar
matters. The learned State Attorney has brought to our notice
the various decisions of this Court which followed the dictum in
Aravindakshan Nair. The learned State Attorney has however
conceded that if an action is proposed based on the report of
inquiry under Section 65 or inspection under Section 66, as the
case may be, the parties concerned are entitled to be given a
copy of the report concerned. On being required to State as to
whether there exists any statutory provision obligating the
Registrar to provide copy of the report of inquiry or inspection
to the parties concerned who are facing proceedings under
Section 32 or Section 68 of the Act based on the findings
therein, the learned State Attorney submitted that Rule 24 of
the Rules enables the persons concerned to obtain a copy of
the report, if they choose to do so. The learned State Attorney
has also relied on the decision of this Court in Mukkom
Service Co-operative Bank Ltd. v. Joint Registrar, 1998
W.A. No.657 of 2020 & con. cases 14
(1) KLT 802, to bring home the point that if an application is
preferred under Rule 24 for a copy of the report of inquiry or
inspection with prescribed fee, the same will be given. The
learned State Attorney has also submitted that the parties who
are canvassing for the position that Aravindakshan Nair did
not decide the law correctly, are in fact canvassing for the
position that there shall be opportunity of hearing, not once,
but twice, one at the stage of submission of the report of
inquiry or inspection and the other at the stage of action,
whether it be under Section 32 or Section 68. According to the
learned State Attorney, principles of natural justice and fairness
cannot be stretched to that extent. It was the submission of the
learned State Attorney that when there is only one action, there
cannot be more than one opportunity of hearing. The learned
State Attorney has supported the view in Aravindakshan Nair
placing reliance on the decision of the Apex Court in Ashwin S.
Mehta v. Union of India, (2012) 1 SCC 83, also pointing out
that while the requirement of giving reasonable opportunity of
being heard to the party affected before an order is made by an
W.A. No.657 of 2020 & con. cases 15
administrative, quasi-judicial or judicial authority cannot be
dispensed with, there can be exceptions to the said doctrine
and the extent and its application cannot be put in a straight
jacket formula. According to the learned State Attorney, the
question whether the principle has to be applied, is to be
considered bearing in mind the express language and the basic
scheme of the provision conferring the power, the nature of
power conferred, the purpose for which the power is conferred
and the final effect of the exercise of that power on the rights of
the person affected.
11. In reply to the submissions made by the
learned State Attorney, Sri. George Poonthottam submitted that
although the learned State Attorney has submitted in fairness
that persons affected by the proceedings initiated under
Section 32 or Section 68 based on the report of inquiry or
inspection, are entitled to a copy of the report inasmuch as the
report being one drawn without affording an opportunity of
hearing to them, in reality, the report is never given when
action is proposed under Section 32 or Section 68 based on the
W.A. No.657 of 2020 & con. cases 16
same. The learned counsel has reinforced the said submission
pointing out that large number of writ petitions are being filed
before this Court, for copies of the report after the parties are
served with the notice in the proceedings initiated based on the
same. It was pointed out by the learned counsel that Section
32 provides for action under that provision even without notice
and in that event, the parties concerned will be in absolute
darkness as to the findings against them in the inquiry or
inspection until they are removed from office. In the context of
the proceedings under Section 68, it was pointed out by the
learned counsel that when an inquiry is ordered under Section
68(1), the officer delegated for the said purpose by the
Registrar would never examine the correctness of the report of
inquiry or inspection under Sections 65 or 66, as the case may
be. The report of inquiry under Section 68(1), according to the
learned counsel, is therefore drawn solely based on the findings
in the report of inquiry or inspection, as if the same has become
final. It was pointed out by the learned counsel that at the
stage of Section 68(2), at times, the copy of the report under
W.A. No.657 of 2020 & con. cases 17
Section 68(1) will be served, but the copy of the report of
inquiry or inspection based on which the report of inquiry under
Section 68(1) is drawn, is never served. It was also submitted
by the learned counsel that the submission made by the
learned State Attorney that there was an opportunity of hearing
in terms of Section 68(2) of the Act before an order of
surcharge is passed may not also be correct, for what is
provided for at that stage, going by the provisions contained in
the statute, is only a hearing as regards the apportionment of
the amount sought to be realised. To bring home the said
point, the learned counsel has relied on the expression "require
him to pay or restore the money or other property or any part
thereof" used in Section 68(2). According to the learned
counsel, if the view taken in Aravindakshan Nair is accepted,
there will not be any fairness at all in the proceedings under
Section 32 and Section 68 based on the report of inquiry or
inspection.
12. We have anxiously considered the submissions
made by the learned counsel for the parties on either side.
W.A. No.657 of 2020 & con. cases 18
13. The first and foremost question to be
considered is the question raised as to the interpretation of
Rule 66(5) of the Rules. Rule 66(5) reads thus:
"Rule 66(5).-The person authorised to conduct the inquiry or
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 inquiry 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."
In order to understand the scope of Rule 66(5), it is necessary
to refer to Section 67 of the Act as well, which reads thus:
"Section 67. Cost of inquiry or inspection:-Where an inquiry is
held under Section 65, or an inspection is held under Section
66 on the application of a creditor, the Registrar may, by
order, apportion the cost, or such portion of the cost, as he
may deem fit, between the society to which the society
concerned is affiliated, the society, the member or creditor
W.A. No.657 of 2020 & con. cases 19
demanding an enquiry or inspection, and the officers or
former officers of the society;
Provided that:--
(a) no order of apportionment of the cost shall be made
under this section unless the society or the person
sought to be made liable to pay the costs thereunder
has had a reasonable opportunity of being heard.
(b)The Registrar shall state in writing the grounds on
which the costs are apportioned."
As noted, while the parties who support the view taken in
Aravindakshan Nair assert that the opportunity of being
heard provided for in the last sentence of Rule 66(5) is only on
the aspect of sharing the costs of inquiry or inspection in terms
of Section 67 of the Act, the parties who oppose the said view
assert that the opportunity of being heard provided for in the
Rule is intended to apply for every action to be taken pursuant
to the report of inquiry or inspection. As explicit from the Rule
itself, the person authorised to conduct the inquiry or inspection
shall submit his report to the Registrar on all points mentioned
in the order authorising the inquiry or inspection. The Rule also
mandates that the report shall contain his findings and the
W.A. No.657 of 2020 & con. cases 20
reason therefore, supported by such documentary or other
evidence as recorded by him during the course of the inquiry or
inspection. The Rule further mandates that the officer
conducting the inquiry or inspection shall also specify in the
report the costs of the inquiry or inspection together with
reasons and recommend to the Registrar the manner in which
the said costs or a part thereof may be apportioned amongst
the parties specified in Section 67. As noted, while the Rule
insists only on findings on all points mentioned in the order
authorising inquiry or inspection and the reasons therefore,
supported by documentary or other evidence recorded by him,
as regards the costs of inquiry or inspection, it insists a
recommendation of the officer conducting the inquiry or
inspection to the Registrar as to the manner in which the costs
or part thereof may be apportioned amongst the parties
specified in Section 67. It is in the sentence in the Rule
succeeding the sentence dealing with the recommendation that
it is provided that the Registrar shall pass such orders thereon
as may be considered just after giving a reasonable opportunity
W.A. No.657 of 2020 & con. cases 21
of being heard to the society, person or persons concerned.
According to us, the word "thereon" in the last sentence of the
Rule gives an answer to the question. Oxford Dictionary &
Thesaurus defines the word "thereon" thus:
"on or following from the thing just mentioned"
Collins English Dictionary Online version also defines the word
"thereon" on the same lines. If the word "thereon" in the last
sentence of the provision is understood in the aforesaid fashion,
it could be seen that the opportunity of being heard provided
for in the last sentence of the Rule can only be with reference to
the recommendation mentioned in the previous sentence of the
Rule as regards the costs of the inquiry or inspection. It is all
the more so since, as noted in Aravindakshan Nair, separate
hearing is required to be given in terms of the relevant
provisions of the Act before taking further action based on the
report of inquiry or inspection, whether it be under Section 32
or Section 68, if the Registrar chooses to do so acting upon the
report, except as regards the manner of apportionment of cost.
Again, if the hearing provided for in the last sentence of the
W.A. No.657 of 2020 & con. cases 22
Rule was intended for every action, the expression "shall"
ought not have been used therein, for there is no need for any
hearing at all except on the recommendation made by the
officer as regards the manner in which the cost of the
inquiry/inspection is to be apportioned, if the Registrar does not
propose to take any action based on the report. Again, the
argument of the parties opposing the view taken in
Aravindakshan Nair is that the hearing provided for in terms
of the last sentence in the Rule is on the acceptability of the
report of inspection or enquiry for initiating further action based
on the same. Had that been the intention, we do not find any
reason why that aspect should not have been clarified in the
Rule.
14. The difference that an opportunity of hearing
before a tentative decision is taken on the report as to the
further course of action would make to persons against whom
an adverse report is filed, according to us, may not be of any
relevance in the matter of interpreting Rule 66(5), for if the rule
does not provide for the same, such a hearing cannot be
W.A. No.657 of 2020 & con. cases 23
claimed. Likewise, the question whether there exists any reason
for confining the opportunity of being heard provided for in the
Rule to the aspect of apportionment of costs of inquiry or
inspection also, according to us, loses its relevance in the light
of the finding in the preceding paragraph that the Rule provides
for an opportunity of being heard only on the aspect of
apportionment of costs. Again, in the light of the various
reasons stated in the preceding paragraph, the question
whether an interpretation given therein to Rule 66(5) could be
given to the said Rule for the reason that notice is provided for
under the relevant provisions before further action is taken on
the report, may not also be of any relevance in the context of
examining the correctness of the decision in Aravindakshan
Nair. In short, we do not find any reason to doubt the
correctness of the decision in Aravindakshan Nair for the
reasons stated in the reference order.
15. True, it is seen that a contrary view has been
taken by a learned Single Judge in Thiruvalla East Co-
operative Bank Ltd and the said decision has not been taken
W.A. No.657 of 2020 & con. cases 24
note of in Aravindakshan Nair and the view in the said case
has been followed by the very same learned Judge while sitting
in Division in W.A.Nos.2196 and 2198 of 2012. A reading of
the judgment in W.A.Nos.2196 and 2198 of 2012 would show
that the learned Judges in the Bench were proceeding as if the
opportunity of being heard provided for in Rule 66(5) applies to
every action to be taken by the Registrar pursuant to the report
of inquiry or inspection without considering the scope of the
Rule. But, in Thiruvalla East Co-operative Bank Ltd., the
learned Judge has considered the scope of the Rule. Paragraph
12 of the judgment in the said case reads thus:
"12. Counsel for the 3rd respondent contended that the hearing
contemplated under R.66(5) of the Rules is only on the
recommendation of the Registrar about the manner in which
the cost of the enquiry or a part thereof is to be apportioned. In
my view, there is no warrant for such a restricted reading of
this provision. As is evident from the Rules, apportionment of
costs can only be in respect of an enquiry held at the instance
of a creditor. In such a case, S.67 of the Act contains provision
for apportionment and also for hearing, before anybody is
made liable for costs. In such a situation, there is no necessity
for any further provision of the Rules and this also strengthen
the view that the hearing provided in R.66(5) of the Rules is not
W.A. No.657 of 2020 & con. cases 25
confined to apportionment of costs. For these reasons, I am not
inclined to accept this contention of the counsel for the
respondents."
As evident from the extracted paragraph, the view taken is that
since Section 67 provides for apportionment of costs after
hearing the parties concerned, there is no necessity for a
hearing on the said aspect in terms of Rule 66(5) as well and
the opportunity of being heard provided for in the Rule is,
therefore, only in respect of matters other than the matter
relating to apportionment of costs. We are unable to agree.
Section 67, of course, provides that where an inquiry is held
under Section 65 or inspection is held under Section 66 on the
application of a creditor, the Registrar may, by order, apportion
the costs or such portion of the costs, as he may deem fit,
between the society to which the society concerned is affiliated,
the society, the member or creditor demanding an inquiry or
inspection, and the officers or former officers of the society.
But, what is provided for in Rule 66(5) is a recommendation by
the officer authorised to conduct the inquiry or inspection as
regards the manner in which the costs or part thereof is to be
W.A. No.657 of 2020 & con. cases 26
apportioned among the parties mentioned in Section 67. In
other words, the opportunity of hearing provided for under the
Rule can only be with regard to the recommendation made by
the officer conducting the inquiry or inspection as regards the
manner in which the costs or part thereof of inquiry or
inspection is to be apportioned amongst the parties mentioned
in Section 67. Although it would appear that the manner in
which the costs of inquiry or inspection is to be apportioned
amongst the parties mentioned in Section 67 would fall within
the scope of power of the Registrar under that provision,
since Rule 66(5) provides for a recommendation as regards the
manner of apportionment of costs also and the Rule being
supplementary to the statutory provision, a harmonious
construction of the two provisions would only lead to the
inference that the power under Section 67 is one to be
exercised in the manner provided for in the Rules.
16. Let us now consider the contention of the
learned Senior Counsel Sri.George Poonthottam that insofar as
the further actions provided for under the Act pursuant to the
W.A. No.657 of 2020 & con. cases 27
report of inquiry or inspection is either the supersession of the
committee of the Society in terms of Section 32 or surcharge
against the members of the Managing Committee and others in
terms of Section 68 involving drastic consequences as far as
the parties are concerned, in the absence of any provision in
the Act or Rules for providing to the parties concerned a copy of
the report of inquiry or inspection and for hearing them on the
acceptability of the same, an opportunity of hearing should be
read into the statute before the report is acted upon. There are
two approaches possible to deal with this contention. One is to
hold that the provisions of the Act are themselves
unconstitutional as they do not provide an opportunity of
hearing to the affected parties as to the acceptability of the
report of inquiry or inspection, and the other is to hold that as
there is nothing in the statutory provisions which debar the
application of the principles of natural justice while the
authorities exercise the statutory powers under the Act and as
the principles of natural justice would apply unless the statutory
provisions point to the contrary, it is obligatory for the statutory
W.A. No.657 of 2020 & con. cases 28
authorities to afford an opportunity of being heard to the
parties concerned before an action affecting their rights
adversely is taken. Insofar as the parties who oppose the view
taken in Aravindakshan Nair do not have a case that the
provisions in the Act are unconstitutional inasmuch as they do
not provide an opportunity of hearing for the affected parties on
the acceptability or otherwise of the report of inquiry or
inspection, what was pressed into service by them by raising
the above contention was the second approach mentioned
above. The said approach could be adopted and "audi alteram
partem" rule could be imported into a statute in a situation of
this nature only if the nature of the statutory duty imposed
itself necessarily implies an obligation to hear before deciding
on an issue. The said aspect has been clarified by the Apex
Court in Government of Mysore v. J.V.Bhat, (1975) 1 SCC
110. Paragraph 8 of the judgment in the said case reads thus:
"We think that the Electricity Commissioners' case (supra)
which was followed by this Court in Khushaldas S. Advani's
case (supra), was not really a departure from the general
principle laid down in Cooper v. The Board of Works for the
Wandsworth District (supra), but, it was an attempt to
formulate the conditions under which the general principle laid
down thereby Erle, C.J., who quoted the Biblical story of how
even God Himself had given Adam an opportunity of
answering why he had eaten the forbidden fruit before,
expelling him from Paradises was applicable in the
circumstances of an increasingly complex economic and social
order whose problems compelled the emergence of the
welfare socialistic State with its many organs armed with
extensive powers. Courts attempted, in the interests of justice,
where its imperative demands were not met, to control
administrative action by assimilating it to judicial action over
which Courts could exercise supervision. In later cases,
emphasis was more on the needs of justice and fairness rather
than upon the distinction between the judicial and
administrative action. Administrative action had, however, to
be given free scope within its legitimate sphere without
jeopardizing rights of individuals affected. Policies and
schemes framed under statutory provisions, which affected
rights of individuals could impose the obligations upon the
authorities taking what were essentially administrative
decisions at points at which they begin to impinge on specific
individual rights. It is only where there is nothing in the statute
to actually prohibit the giving of an opportunity to be heard,
but, on the other hand, the nature of the statutory duty
imposed itself necessarily implied an obligation to hear before
deciding that the "audi alteram partem" rule could be
imported. The nature of the hearing would, of course, vary
according to the nature of the function and what its just and
fair exercise required in the context of rights affected."
(underline supplied)
W.A. No.657 of 2020 & con. cases 30
The question therefore is as to whether the nature of the
statutory duty imposed on the Registrar implies necessarily an
obligation to afford to the parties concerned an opportunity of
being heard on the acceptability or otherwise of the report of
inquiry or inspection before a tentative decision is taken as to
the further action pursuant to the report.
17. As noted, Section 66 of the Act empowers the
Registrar, on his own motion or on the application of a creditor
of a society, to inspect or direct any person authorised by him
by order in writing in its behalf to inspect the books of the
society. Similarly, Section 65 empowers the Registrar, on his
own motion or on any of the circumstances mentioned in
clauses (b) to (f) of sub-section (1) of Section 65, to order an
inquiry by himself or by a person authorised by an order in
writing into the constitution, working and financial condition of
the society, if he is satisfied that it is necessary to do so.
Section 65 also empowers the Registrar to supersede the
Managing Committee of a society in accordance with the
provisions contained in Section 32, if any major defect in the
W.A. No.657 of 2020 & con. cases 31
constitution or working or financial condition of the society is
noticed in an inquiry under Section 65(1). Section 68 provides
that if in the course of an inquiry or inspection it is found that
any person who is or was entrusted with any organisation or
management of co-operative societies or who is or has at any
time been an officer or an employee of the society has made
any payment contrary to the Act or the Rules or the bye-laws or
has caused to any loss or damage in the assets of the society
by breach of trust or wilful negligence or mismanagement or
has misappropriated or fraudulently retained any money or
other property belonging to such society or has destroyed or
caused the destruction of the records, the Registrar may, on his
own motion, or on the application of the committee, liquidator
or any creditor, inquire himself or direct any person authorised
by him by an order in writing in this behalf, to inquire into the
conduct of such person. Section 68(2) provides that where an
inquiry is made under sub-section (1), the Registrar may, after
giving the person concerned an opportunity of being heard, by
order in writing, require him to repay or restore the money or
W.A. No.657 of 2020 & con. cases 32
other 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. The aforesaid
provisions would indicate that the Registrar would be
competent to supersede the Managing Committee of the
society under Section 32 of the Act or surcharge the members
of the Managing Committee or others under Section 68 based
on the report of the inquiry under Section 65 or inspection
under Section 66. No doubt, supersession of the Managing
Committee of a society and surcharge of the members of the
Managing Committee and others are drastic measures involving
adverse civil consequence as far as the parties are concerned
which include infraction of property, personal rights and
material deprivation. But it is seen that an opportunity of
hearing is provided for under Section 32 of the Act before the
Managing Committee of a society is superseded under that
provision except in exceptional circumstances referred to
therein. Similarly, a further inquiry under Section 68(1) of the
Act is provided for, based on the report of inquiry under Section
W.A. No.657 of 2020 & con. cases 33
65 or inspection under Section 66 and an opportunity of hearing
is required to be given in terms of Section 68(2) before a
person is called upon to repay or restore the money or other
property as found recoverable from him. Rule 66(7)(ii) also
provides that on getting the report of inquiry or inspection, as
the case may be, the Registrar shall give the person or persons
concerned an opportunity of hearing before issuing an order of
surcharge. In other words, the Act contemplates an opportunity
of hearing to all affected persons before action is taken on the
report of inquiry or inspection, whether it be under Section 32
or under Section 68, except in situations provided for in Section
32 where the Registrar is empowered to dispense with the
opportunity of hearing. Section 32 empowers the Registrar to
dispense with the opportunity of hearing before a committee is
superseded only in cases where the Registrar is of the opinion
that it is not reasonably practical to do so. The relevant
provision contained in sub-section (3) of Section 32 reads thus:
"Notwithstanding anything contained in sub-section (1) or
sub-section (2) it shall not be necessary to give an opportunity
to the committee to state its objections and to consult the
W.A. No.657 of 2020 & con. cases 34
Unions and financing banks, in cases where the Registrar is of
the opinion that it is not reasonably practicable to do so,
subject however to the condition that in such cases the period
of supersession shall generally be for six months and in case a
new committee, cannot be constituted or enter upon office in
accordance with the bye-laws of the society within the period
of supersession the period may be extended for a further
period not exceeding six months-
(a) in the case of a co-operative society only after
consulting the Circle Co-operative Union concerned;
and
(b) in the case of an Apex Society or a Central Society
only after consulting the State Co-operative Union."
The exceptional situation provided for in sub-section (3) of
Section 32 being one of the exceptions to the rule audi alteram
partem, the scheme of the Act can certainly be understood as
one providing for an opportunity of hearing to the persons
concerned before an action is taken on the report of inquiry or
inspection. True, the statute does not expressly provide for an
opportunity of hearing to parties on the acceptability of the
report of inquiry or inspection before the opportunity of hearing
provided for under Sections 32 and 68. As noted, while the
requirement of giving reasonable opportunity of being heard to
W.A. No.657 of 2020 & con. cases 35
the party affected before an order is made by an administrative
or a quasi-judicial or judicial authority cannot be dispensed
with, there can be exceptions to the said requirement and the
extent and its application cannot be put in a straight jacket
formula. In other words, the question whether the principle has
to be applied and if so, to what extent and at what stage it is to
be done etc. are matters to be decided bearing in mind the
express language and the basic scheme of the provision
conferring the power, the nature of power conferred, the
purpose for which the power is conferred, and the final effect of
the exercise of that power on the rights of the person affected.
As noted, insofar as proceedings under Sections 32 and 68 are
contemplated and provided for under the Act based on the
report of inquiry or inspection, it is obligatory on the part of the
Registrar initiating steps under Section 32 or Section 68, to give
copy of the report, on the basis of which the action is proposed,
to the parties concerned. This proposition has not been
disputed by the learned State Attorney, although there was
dispute between the counsel appearing for the parties on either
W.A. No.657 of 2020 & con. cases 36
side as to whether such reports are in reality being served to
the parties concerned. Similarly, the fact that there is no
provision in the Act and Rules obligating the Registrar under
Sections 32 and 68 to provide copy of report of inquiry or
inspection is also not disputed by the learned State Attorney.
The only argument put forward by the State Attorney in this
context is Rule 24 of the Rules which enables the parties
concerned to obtain copies of such reports. Rule 24 of the
Rules reads thus:
"24. Right to obtain documents from Registrar's Office:-(1) Any
person may on payment of fees at the rates as may be prescribed
by the Registrar obtain a certified copy of any public document not
being a document privileged under the Indian Evidence Act, filed in
the office of the Registrar, provided that no such person shall be
entitled to the supply of such copy unless he satisfies the Registrar
that he requires it to seek redress in any matter in which he is
aggrieved or for any other lawful purpose.
(2) The application fee shall be paid in the shape of Court Fee
Stamps.
(3) Along with every application for copies, copying sheets of the
prescribed value for preparing the copies shall be supplied.
Note:- Each statement, account, report, petition, order or
W.A. No.657 of 2020 & con. cases 37
the like shall be treated as a separate document and shall be
written on separate copying stamp paper.
(4) Copies must be transcribed only on the front page of every
copying paper."
A reading of the extracted Rule would only show that any
person may on payment of fees at the rates as may be
prescribed, obtain a certified copy of any public document filed
in the office of the Registrar. Even the said provision clarifies
that no such person shall be entitled to the supply of such
copies unless he satisfies the Registrar that he requires it to
seek redress in any matter in which he is aggrieved or for any
other lawful purpose. In other words, the Rule does not confer
an absolute right on an applicant under the same to claim
copies of the documents filed in the office of the Registrar. The
said Rule, according to us, does not satisfy the statutory
obligation on the part of the Registrar under the Act to provide
a copy of the report of inquiry or inspection before initiating
action under Section 32 or Section 68, as the case may be, on
the basis of the findings in the report of inquiry or inspection.
Needless to say that if the committee of a society is superseded
W.A. No.657 of 2020 & con. cases 38
under Section 32 of the Act based on the factual findings
rendered in a report of inquiry or inspection without providing
to the party concerned a copy of the report of inquiry or
inspection, the order of supersession would be plainly illegal.
Similarly, if any person mentioned in Section 68(1) of the Act is
surcharged based on the finding in an order of inquiry under
Section 65 or inspection under Section 66 without giving to him
a copy of the report of inquiry or inspection as also the report of
inquiry under Section 68(1), the surcharge order would also be
illegal. The argument advanced by the learned State Attorney
that the party concerned, if chooses to obtain copy of the report
of inquiry or inspection, he will have to obtain it under Rule 24
of the Rules cannot be accepted. But that does not mean that
the statute contemplates an implied obligation on the part of
the Registrar to afford an opportunity of hearing as to the
acceptability or otherwise of the report of inspection before
initiating proceedings pursuant to the same whether it be under
Section 32 or under Section 68 of the Act. The scheme of the
Act appears to us to be that the correctness or otherwise of the
W.A. No.657 of 2020 & con. cases 39
report of inquiry or inspection, shall be canvassed by the
parties concerned in the hearing provided to them on the
further action taken pursuant to the report, for the hearing
would not serve any purpose if the Registrar does not propose
any action based on the report. Even if the Registrar proposes
any action, be it under Sections 32 or 68, the said action being
one on the basis of the report of inquiry or inspection, the
essential purpose of the opportunity of hearing in the
proceedings initiated for taking action being to enable the
parties concerned to canvass for the correctness of the findings
in the report of inquiry or inspection, there is no need for a
hearing before a tentative decision is taken on the action based
on the report. Needless to say, it is unnecessary to have two
hearings for the same purpose. In other words, we are of the
view that the nature of the statutory duty imposed on the
authorities under the Act does not imply any obligation to hear
the parties concerned on the acceptability or otherwise of the
report of inquiry or inspection as the case may be, before a
tentative decision is taken on the further action on the report.
W.A. No.657 of 2020 & con. cases 40
18. What remains to be considered is the argument
advanced by Sri.George Poonthottam, the learned Senior
Counsel based on the decision of the Apex Court in
B.Karunakar. The basic question considered by the
Constitution Bench in the said case was whether the report of
the inquiry officer, who is appointed by the disciplinary
authority to hold an inquiry into the charges against a
delinquent employee, is required to be furnished to the
employee to enable him to make proper representation to the
disciplinary authority before such authority arrives at its finding
with regard to the guilt or otherwise of the employee and the
punishment, if any, to be awarded to him. The question was
considered in the context of the provision contained in Article
311(2) of the Constitution that no civil servant or a person
holding a civil post shall be dismissed or removed or reduced in
rank except after an inquiry in which he has been informed of
the charges against him and given a reasonable opportunity of
being heard in respect of those charges. In terms of the
Constitution (Forty-second Amendment) Act, 1976, it was
W.A. No.657 of 2020 & con. cases 41
clarified that it shall not be necessary to give the employee an
opportunity of making representation on the penalty proposed.
The said amendment gave rise to a controversy as to when the
inquiry officer is other than the disciplinary authority, whether
the employee is entitled to a copy of the findings recorded by
him, before the disciplinary authority applies its mind to the
findings and evidence recorded, or whether the employee is
entitled to the copy of the findings of the inquiry officer only at
the second stage namely, when the disciplinary authority had
arrived at its conclusions and proposed the penalty. The Apex
Court has held in the said case that what is dispensed with in
terms of the amendment to the Constitution referred to above,
is the opportunity of making representation on the penalty
proposed and not of opportunity of making representation on
the report of the inquiry officer. The judgment takes note of the
fact that before the Forty-second Amendment to the
Constitution, the point of time at which it was to be exercised
had stood deferred till the second stage namely, the stage of
considering the penalty and all that has happened after the
W.A. No.657 of 2020 & con. cases 42
Forty-second Amendment to the Constitution is to advance the
point of time at which the representation of the employee
against the officer's report would be considered. In other
words, the view expressed by the Apex Court that insofar as it
was not obligatory any more for the competent authority after
the Forty-second Amendment of the Constitution to afford an
opportunity of making representation on the penalty proposed,
the disciplinary authority has to consider the representation of
the employee against the report before it arrives at its
conclusion with regard to the guilt or innocence of the
employee, for in the absence of any provision for the employee
to be heard on the penalty to be imposed on him, if he is not
heard before any decision is taken on the penalty, the provision
would be futile. Consequently, the question was answered
holding that when the inquiry officer is not the disciplinary
authority, the delinquent employee has the right to receive a
copy of the inquiry officer's report before the disciplinary
authority arrives at its conclusions with regard to the guilt or
innocence of the employee as regards the charges levelled
W.A. No.657 of 2020 & con. cases 43
against him and that a denial of the inquiry officer's report
before the disciplinary authority takes its decision on the
charges, is a denial of the reasonable opportunity to the
employee to prove his innocence and thus, is a breach of the
principles of natural justice. The dictum in this case, according
to us, has absolutely no bearing on the facts of the case on
hand. Even if the inquiry and inspection provided for under
Sections 65 and 66 of the Act is equated with the enquiry
provided for under Article 311(2) of the Constitution on the
charges framed against an employee, the position in the cases
on hand would be similar only to the position prior to the
Constitution (Forty-second Amendment) Act, for prior to the
said constitution amendment, the right to raise objections
against the report of inquiry on the charges was deferred till the
stage of considering the penalty and the said procedure was
not found fault with by the Apex Court. In other words, the said
decision also fortifies the view which we are taking in this
matter on the question.
In the light of the discussion aforesaid, we affirm the
W.A. No.657 of 2020 & con. cases 44
dictum laid down in Aravindakshan Nair.
Sd/-
P.B.SURESH KUMAR, JUDGE
Sd/-
C.S.SUDHA, JUDGE
YKB
Kunhikrishnan, J. (Dissenting)
I have gone through the order authored by my
brother Justice P.B. Suresh Kumar. With great respect, I am not
in a position to agree with the finding of my learned brother,
and therefore I am passing a separate order with my own
reasoning. My brother Justice P.B. Suresh Kumar narrated the
W.A. No.657 of 2020 & con. cases 45
facts and the points for the decision in detail in his order. The
contentions raised by the parties were also narrated in detail in
the above order. Therefore, I am not repeating the same in this
order. I will directly go to the point referred to the Full Bench in
this case. As per the reference order dated 31.05.2021, the
Division Bench is of the opinion that the decision in State of
Kerala v. Aravindakshan Nair, 2010 (3) KLT 11 requires
reconsideration.
2. The short point to be decided is whether the
opportunity of being heard provided for in the last sentence of
Rule 66(5) of the Kerala Co-operative Societies Rules, 1969 (the
Rule) is only on the aspect of sharing the cost of inquiry or
inspection in terms of Section 67 of the Kerala Co-operative
Societies Act, 1969 (the Act) or whether the opportunity of
being heard provided for in the Rule is intended to apply every
action to be taken pursuant to the report of inquiry or
inspection. For deciding the same, the interpretation of Rule
66(5) of the Rules is necessary. It is a settled position that, on
a plain reading of a provision in a statute, if there is no
W.A. No.657 of 2020 & con. cases 46
ambiguity, then there is no question of interpreting the
provision of that statute. An interpretation which would negate
the intention of the legislature and would frustrate the statutory
provision can not be accepted by a Court of Law (see Gurpreet
Singh Bhullar v. Union of India, (2006) 3 SCC 758).
3. In Council of Architecture v. Mukesh Goyal
and Others, AIR 2020 SC 1736, the Apex Court observed like
this:
"28. It is well settled that the first and best method of determining
the intention of the legislature is the very words chosen by the
legislature to have the force of law. In other words, the intention of
the legislature is best evidenced by the text of the statute itself.
However, where a plain reading of the text of the statute leads to
an absurd or unreasonable meaning, the text of the statute must
be construed in light of the object and purpose with which the
legislature enacted the statute as a whole. Where it is contended
that a particular interpretation would lead to defeating the very
object of a legislation, such an interpretative outcome would
clearly be absurd or unreasonable."
4. From the above decision, it is clear that the
first and best method of determining the intention of the
legislature is the very words chosen by the legislature to have
the force of law. In other words, the intention of the legislature
W.A. No.657 of 2020 & con. cases 47
is best evidenced by the text of the statute itself. The Apex
Court also observed that, where a plain reading of the text of
the statute leads to an absurd or unreasonable meaning, the
text of the statute must be construed in the light of the object
and purpose with which the legislature enacted the statute as a
whole. Keeping in mind the above principle, this Court has to
consider Rule 66(5) of the Rules.
5. Rule 66 of the Rules says about the procedure
for the conduct of inquiry and inspection. Section 65 of the Act
deals with the inquiry by the Registrar and Section 66 of the Act
deals with the supervision and inspection. As per Section 65,
the inquiry is to be conducted by the Registrar. But a reading of
Section 65(1) of the Act itself will show that the Registrar may
hold an inquiry by himself or by a person authorized by order in
writing. Similarly, Section 66 of the Act deals with supervision
and inspection. As per Section 66, the Registrar shall 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. As
per Section 66(2) of the Act, 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 an order in writing in
this behalf, to inspect the books of the society. Therefore it is
clear from Section 65 and 66 of the Act that the inquiry,
supervision and inspection can be conducted either by the
Registrar or by a person authorised by the Registrar. If the
Registrar is authorising a person for an inquiry under Section 65
or inspection under Section 66 of the Act, certain procedures
are prescribed in Rule 66 of the Rules. Rule 66 of the Rules is
already quoted by my brother Justice P.B.Suresh Kumar in his
separate order. But for convenience, Clauses (1) to (5) of Rule
66 of the Rules is extracted. Clauses (6) and (7) of Rule 66 is
not relevant for deciding this case and therefore, I am not
extracting the same.
"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;
(3) If the inquiry or inspection cannot be
completed within the time specified in the order referred to
in sub-rule (1)(c), the person conducting the inquiry or
inspection shall submit an interim report stating the reasons
for failure to complete the inquiry or inspection, and the
Registrar, if he is satisfied, may grant such extension of time
as he may deem necessary or he may withdraw the inquiry
or inspection from the officer to whom it is entrusted and
hold the inquiry or inspection himself or entrust to such
other person as he deems fit.
(4) On receipt of the orders referred to in sub-rule
(1) the person authorised to conduct the inquiry or
inspection shall proceed to examine the relevant books of
accounts and other documents in the possession of the
society or any of its officers, members, agents or servants
and obtain such information or explanation from any such
W.A. No.657 of 2020 & con. cases 50
officer, members, agents or servants of the society in regard
to the transaction and working of the society as he deems
necessary for the conduct of such inquiry or inspection.
(5) The person authorised to conduct the inquiry
or 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
therefor; supported by such documentary or other evidence
as recorded by him during the course of the inquiry 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."
6. A reading of Rule 66(1) will show about the
details that is necessary in an order, authorising inquiry under
Section 65 or inspection under Section 66. Clauses (a) to (e)
mentioned in Rule 66(1) are the things that are necessary in an
order authorising inquiry under Section 65 or inspection under
Section 66. Rules 66(2) of the Rules says that a copy of every
order authorising inquiry under Section 65 or inspection under
W.A. No.657 of 2020 & con. cases 51
Section 66 shall be issued to the President or the Secretary of
the Society concerned by registered post with acknowledgment
due. Similarly, Rule 66(3) also will show that if the inquiry or
inspection cannot be completed within the time specified in the
order referred to in sub-rule (1)(c), the person conducting the
inquiry or inspection shall submit an interim report stating the
reasons for failure to complete the inquiry or inspection, and
the Registrar, if he is satisfied, may grant such extension of
time as he may deem necessary or he may withdraw the
inquiry or inspection from the officer to whom it is entrusted
and hold the inquiry or inspection himself or entrust to such
other person as he deems fit. Rule 66(4) says about the actions
that are to be taken by the person authorised to conduct the
inquiry or inspection as per sub-rule (1). Therefore, it is clear
that Rule 66 of the Rules is applicable only in a situation where
the Registrar is not conducting the inquiry under Section 65 or
inspection under Section 66. If the Registrar, himself, is doing
the inquiry under Section 65, Rule 66 has no application.
Similarly, if the Registrar, himself, is doing the supervision and
W.A. No.657 of 2020 & con. cases 52
inspection under Section 66, Rule 66 has no application. If the
inquiry under Section 65 or inspection under Section 66 is
conducted by a person authorised by the Registrar, the
procedure for the conduct of inquiry and inspection is narrated
in Rule 66. As mentioned earlier, Clauses (1) to (4) of Rule 66 of
the Rules deals with the preliminary stages and the actions to
be taken by the officer authorised by the Registrar to conduct
the inquiry as per Section 65 or to conduct the inspection under
Section 66. After the preliminary stage mentioned in Clauses 1
to 4 of Rule 66, as per Rule 66(5), the person authorised to
conduct the inquiry or inspection shall submit his report to the
Registrar on all points mentioned in the order referred to in
Clause (c) of sub-rule (1) of Rule 66. The other contents that are
necessary in the report to be submitted to the Registrar by the
person authorised is also narrated in Rule 66(5) and the same
are extracted hereunder.
"(i) 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.
(ii) The report shall also contain his findings and reason
W.A. No.657 of 2020 & con. cases 53
therefore; supported by such documentary or other
evidence as recorded by him during the course of the
inquiry or inspection.
(iii) 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."
7. Therefore, as per Rule 66(5), the person
authorised to conduct the inquiry or inspection shall submit his
report to the Registrar on all points mentioned in the order
referred to in Clause (c) to sub-rule (1) of Rule 66 and the
report shall also contain the above three details as per Rule
66(5). Thereafter, it is mentioned in Rule 66(5) that "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". The point to be
considered in this case is whether this opportunity of being
heard is applicable only to Clause (iii) extracted above or
whether the same is applicable to other actions taken pursuant
to the inquiry or inspection.
W.A. No.657 of 2020 & con. cases 54
8. A plain reading of Rule 66(5) will show that
there is no ambiguity at all for an inference that the opportunity
of being heard to be given by the Registrar is applicable for all
the actions taken pursuant to the report of inquiry or inspection
conducted by the authorised person. First of all, in Rule 66(5),
there is full stop after all the sentences. The first sentence of
Rule 66(5) says that, the person authorised to conduct inquiry
or 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 second sentence says that the said report shall
invariably contain the latest balance sheet of the society and
the last known addresses of the members of the Committee
and of the Secretary. The third sentence in Rule 66(5) says that
the report shall also contain the findings of the person
authorised to conduct the inquiry or inspection and the reason
thereof supported by such documentary or other evidence as
recorded by him during the course of the inquiry or inspection.
The fourth sentence says that the person authorised to conduct
the inquiry shall also specify in his report the costs of the
W.A. No.657 of 2020 & con. cases 55
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 mentioned in
Section 67. After each of these sentence in Rule 66(5), there is
a full stop. If the intention of the legislature was to give an
opportunity of hearing only for the apportionment of cost, a full
stop is unnecessary in that sentence, and the 'opportunity of
hearing' can be used in that sentence itself without much
difficulty. This Court need not guess the intention in a statute
by interpreting the same if, on a plain reading, there is no
ambiguity. When Rule 66(5) says that the report shall contain
the findings of the person authorised to conduct the inquiry and
the reason thereof supported by such documentary or other
evidence as recorded by him during the course of the inquiry or
inspection, the Registrar shall pass an order on it after giving an
opportunity of hearing as per Section 66(5). As per Section 65,
the inquiry is to be conducted by the Registrar. As per Section
66, the supervision and inspection are also to be conducted by
the Registrar. But, the Registrar can authorise a person to
W.A. No.657 of 2020 & con. cases 56
conduct the inquiry as per Section 65 of the Act and also
inspection under Section 66 by a person authorised by him.
Therefore, if the Registrar delegates his power to another
person, Rule 66 of the Rules will come into play, and in such
situation, the person authorised to conduct the inquiry or
inspection should submit a report to the Registrar which should
contain the cost apportionment and thereafter the Registrar
shall pass such orders thereon after giving a reasonable
opportunity of being heard to the society, person or persons
concerned. Therefore, from a reading of the Rule 66(5), there is
absolutely no ambiguity and the only possible conclusion
possible is that, the Registrar should pass such orders on the
report submitted by the person authorised after giving a
reasonable opportunity of being heard to the society, person or
persons concerned.
9. As observed earlier, when the words in the
statute are clear, the Court need not understand the provisions
in any other fashion and the Court has to interpret and accept
the Rule as such. If the intention of the legislature was to give
W.A. No.657 of 2020 & con. cases 57
an opportunity of hearing only for the apportionment of cost as
mentioned in Rule 66(5), the wordings in Rule 66(5) would have
been in another manner. This Court need not interpret the
Rules to the effect that the opportunity of being heard should
be restricted only regarding the cost apportionment.
10. Moreover, what is the problem or difficulty in
giving an opportunity of hearing to the affected parties by the
Registrar, when he himself is not conducting the inquiry?
Section 65 and Section 66 of the Act says that the Registrar
should conduct the inquiry or inspection. But as per the above
sections, the Registrar is given power to authorise another
person to conduct the inquiry. In such situation, Rule 66(5) of
the Rules says that 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. It is an additional duty given to the Registrar in
situations where another person is authorised by the Registrar
to conduct the inquiry or inspection. Therefore, no other
interpretation is possible except the conclusion that the
W.A. No.657 of 2020 & con. cases 58
reasonable opportunity of being heard to the society, person or
persons concerned is applicable not only with respect to the
cost apportionment mentioned in Rule 66(5), but also to the
other actions mentioned in Rule 66(5). The Registrar shall pass
such orders thereon on those actions taken by the authorised
persons is the only meaning that is possible to Rule 66(5). In
Aravindakshan Nair's case (supra), the Division Bench of this
Court held that hearing provided for in Rule 66 is only with
regard to the apportionment of the costs of inspection among
the persons referred to in Section 67 of the Act. Para Nos. 5 and
6 of the judgment in Aravinkakshan Nair's case (supra) is
extracted hereunder :
"5. What is clear from the above is that cost of inspection
could be demanded from the society concerned or creditor or
member, as the case may be. Latter part of R.66(5) states that, in
the report of inspection it is for the inspecting officer to recommend
whether cost of inspection should be shared among the persons
referred to in S.67. Obviously, the Registrar is bound to take a
decision on the recommendations contained in the report of the
inspecting officer and in this regard R.66(5) specifically provides
that orders to be passed against a person or society should be only
after giving opportunity to the society or person concerned. The
persons among whom the cost is to be shared contained in S.67 are
incorporated in R.66(5) and it is also made very clear that the
W.A. No.657 of 2020 & con. cases 59
adjudication by the Registrar under R.66(5) is only on S.67. So much
so, we are inclined to accept the argument of the Government
Pleader that the principle contemplated under R.66(5) is only on
orders imposing cost on the society and persons concerned referred
to in S.67 in terms of or in variance with the report of the inspecting
officer contained in the inspection report. The contention raised by
the counsel for the respondents is that orders to be passed by the
Registrar after giving opportunity to the society or persons
concerned referred to in R.66(5) applies to all against whom action
is contemplated based on the report. However, this argument
cannot be accepted because, wherever action is contemplated
based on inspection report, whether it is the supersession of the
management of the society under S.32 or whether it is the
surcharge on the officers or employees concerned under S.68(2),
separate opportunity of hearing specifically contemplated under the
relevant sections has to be afforded. In fact, in this case, the action
proposed against the respondents is based on surcharge under
S.68(2) and for this the section itself provides that, the Registrar
shall pass order surcharging a person only after giving the person
concerned an opportunity of being heard. This provision provides
effective opportunity to file objections and hearing and if required,
to adduce evidence by the persons concerned. The fact that action
under S.68(2) is initiated against any person concerned based on
inspection report does not mean that the Registrar cannot give it up
on being satisfied that there is no case is made out by him in the
notice based on the report. In other words, in the course of
adjudication under S.68, it is upto the Registrar to accept the
contention of the aggrieved persons and turn down or reject the
findings in the inspection report. It is to be noted that, the
opportunity referred to in S.68(2) is specifically mentioned in
R.66(7)(ii) of the Rules, which is a repetition of the opportunity
referred to in S.68(2) of the Act.
6. In our view, R.66(5) does not contemplate any opportunity
W.A. No.657 of 2020 & con. cases 60
to be given to any society or any person, except with regard to the
proposal of the Registrar for ordering cost of inspection, whether it
be in terms of the report or in variation with the recommendation
contained in the report."
11. I am not in a position to agree with the above
observation in the light of the discussion made in the preceding
paragraphs. Moreover, I also enquired in the High Court Library
to verify, whether there is any official Malayalam version of the
Kerala Co-operative Society Rules 1969. But, it was informed by
the High Court Library that there is no official Malayalam
version of the above Rule. But Adv.K.Narayana Kurup (who was
subsequently elevated as a Judge of this Court) published a
Malayalam version of the Co-operative societies Rules in the
year 1975. The Malayalam version of Rule 66(5) as quoted in
the book published by Adv. K.Narayana Kurup on 15.9.1975 is
extracted hereunder :
"അന ഷണ വ ച രണന പര ന ധ ന
ടത നത ധ ക രപ ട തപ ട ആൾ 1-)o ഉപചട
(സ ) എന ഖണത ൽ പര മർ ക ന ഉതരവ ൽ
പറ ന എല വ ഷ ങള മടങ ത *പറ റ ന ർട*
രജ സ*,ട ർക* സമർ നകണത ണ*. റ ന ർട ൽ
സ ഘത *പറ ഏറവ ഒട വ ലപത ബ ലൻസ* ഷ5റ
കമ റ അ ഗങള പട പസ,കടറ പട ഏറവ
ഒട വ ൽ അറ വ നനമൽവ ല സങള എല *ന ഴ
W.A. No.657 of 2020 & con. cases 61
അടങ ര നകണത ണ*. റ ന ർട ൽ അന ഷണ
വ ച രണന പര ന ധ ന പചയ: സമ തൻ
നരഖപ ട ത നരഖ മ;ലനമ അല തനത ആ
പതള വ കള ൽ പ ന ങ ന ത *പറ ത5ര മ ങള
അവ *ക ള ക രണങള ക;ട
അടങ ര നകണത ണ*. അന>ഹ അന ഷണ
വ ച രണ പടന പര ന ധ പടന പചലവ കൾ
ക രണസഹ ത ത *പറ റ ന ർട ൽ ,പനത@ക
പറന ണത 67-)o വക ൽ ,പനത@ക പറ ന
കക കള പട ട ൽ പമ തപBലനവ അത *പറ
ഭ ഗനമ ഏത ര5ത ൽവ ഭജ കണപമന രജ സ*,ട നറ ട*
പർ പചനDണത മ ണ*. രജ സ*,ട ർ ബനപ ട
സ ഘത ന ആള ന ആള കൾനക പറ ളത*
പറ വ ൻ @ മ അവസര പക ട തത ന ഷ
@ പമന* കര ത വ ന ഉതരവ കൾ
പ സ നകണത ണ*."
12. A reading of the above Malayalam version also
will not give any inference that the opportunity of hearing
mentioned in Rule 66(5) is applicable only for the cost
apportionment. This only confirms the position that the
opportunity of hearing is applicable to all the actions mentioned
in Rule 66(5). Moreover, a learned Single Judge of this Court in
Thiruvalla (East) Co-operative Bank Limited v. Junior
Registrar, 2009 (4) KLT 378 considered the same issue. It will
be beneficial to extract paragraph Nos.12 and 13 of the above
judgment.
"12. Counsel for the 3rd respondent contended that the hearing
contemplated under R.66(5) of the Rules is only on the
recommendation of the Registrar about the manner in which the
cost of the enquiry or a part thereof is to be apportioned. In my
view, there is no warrant for such a restricted reading of this
provision. As is evident from the Rules, apportionment of costs can
only be in respect of an enquiry held at the instance of a creditor.
In such a case, S.67 of the Act contains provision for apportionment
and also for hearing, before anybody is made liable for costs. In
such a situation, there is no necessity for any further provision of
the Rules and this also strengthen the view that the hearing
provided in R.66(5) of the Rules is not confined to apportionment of
costs. For these reasons, I am not inclined to accept this contention
of the counsel for the respondents.
13. In my view, R.66(5) of the Rules is very clear and it has already
been held to be mandatory in nature, and therefore, the Registrar
is bound to comply with the Rules. Therefore, once an enquiry
report is received, the Registrar is bound to hear the society and
the members of the Board of Directors before any action affecting
them is taken."
13. I am in full agreement with the above
observation of the learned Single Judge in Thiruvalla (East)
Co-operative Bank's case (supra). A contrary view was taken
by another learned Single Judge in V. Santhosh v. Asst.
Registrar and others, 2014 (4) KLJ 397 relying
Aravindakshan Nair's case (supra). Since I am not agreeing
with the principle laid down by the Division Bench in
W.A. No.657 of 2020 & con. cases 63
Aravindakshan Nair's case (supra), the principle in V.
Santhosh case (supra) is also not the good law. In the
reference order in this case, it is clearly stated that when
consideration and consequential action on a report can lead to
drastic consequences, strict adherence of principle should be
the rule. I am in agreement with the above observation in the
reference order. An inquiry or inspection under Section 65 and
Section 66 of the Act may lead to drastic consequences
including supersession under Section 32 of the Act or the
proceedings under Sec. 68 of the Act. Therefore, before
accepting the report submitted by the person authorised by the
Registrar, an opportunity of hearing should be given to the
affected parties as per Rule 66(5). Of course, if the Registrar is
conducting the inspection or inquiry, Rule 66 (5) has no
application at all, because Rule 66 is applicable only in a case
where an inquiry or inspection is conducted by a person
authorised by the Registrar. If a person authorised by the
Registrar conducted the inquiry or inspection and if an action is
taken under Section 32 of the Act, that will definitely prejudice
W.A. No.657 of 2020 & con. cases 64
the interest of the affected parties because it is not an
inquiry/inspection report ratified by the Registrar after giving an
opportunity of hearing to the affected parties. In certain
situations mentioned in Section 32(3) of the Act, a supersession
order can be passed even without hearing the affected parties.
In such a situation, if an order is used, which is passed by a
person authorised by the Registrar without the consequential
orders of the Registrar as per Rule 66(5) after giving an
opportunity of hearing to the affected parties, there will be
substantial prejudice to the affected parties. Therefore, in my
opinion, the dictum laid down by the Aravindakshan Nair's
case (supra) is not good law, and the opportunity of hearing
mentioned in Rule 66(5) is applicable to all the actions
mentioned in Rule 66(5).
14. My learned brother Justice P.B.Suresh Kumar
took a different view mainly based on the following reasons and
the same is extracted hereunder :
1. The word "thereon" in the last sentence of Rule 66(5) will
show that the opportunity of being heard provided for in the
last sentence of the Rule can only be with reference to the
W.A. No.657 of 2020 & con. cases 65
recommendation mentioned in the previous sentence of the
Rule as regards the costs of inquiry or inspection.
2. If the hearing provided for in the last sentence of the Rule
was intended for every action, the expression "shall" ought
not have been used therein, for there is no need for any
hearing at all except on the recommendation made by the
officer as regards the manner in which the cost of the
inquiry / inspection is to be apportioned, if the Registrar does
not propose to take any action based on the rule.
3. The difference that an opportunity of hearing before a
tentative decision is taken on the report as to the further
course of action would make to persons against whom an
adverse report is filed, may not be of any relevance in the
matter of interpreting Rule 66(5).
4. A harmonious construction of Rule 66(5) of the Rules and
Section 67 of the Act is only lead to the inference that the
power under Section 67 is one to be exercised in the manner
provided for in the Rules.
15. Now, I will discuss the main points based on
which my brother Justice P.B.Suresh Kumar concluded his order.
The first reason mentioned by my learned brother is that the
word "thereon" in the last sentence of Rule 66(5) gives an
answer to the question. By relying on the meaning of "thereon"
in Oxford Dictionary & Thesaurus and also Collins English
Dictionary online version, it is concluded that the word
"thereon" in the last sentence of Rule 66(5) will show that the
W.A. No.657 of 2020 & con. cases 66
same is applicable only for a thing 'following from the thing just
mentioned'. I am not in a position to accept the above
reasoning for the simple reason that if such an interpretation is
accepted, the same is applicable to Rule 66(5) as such. Why is
such a distinction given to the just previous sentence alone? In
my opinion, Rule 66(5) is a sub-clause and "thereon" means
only to the things mentioned in that sub-clause. That means it
is applicable to all the actions in Rule 66(5). Moreover, in Rule
66(5), it is also stated that "such orders thereon". In some
situation, 'order' and 'orders' are given same meaning. But
'orders' is the plural form of the word 'order'. Since "orders
thereon" is used in the last sentence of Rule 66(5), it is clear
that the same is applicable not only to the cost apportionment,
but it is applicable to all the actions mentioned in Rule 66(5).
Therefore, even if the dictionary meaning of Rule 66(5) is
accepted, this Court need not interpret the same to limit the
application of the opportunity of hearing only to the cost
apportionment. Moreover in Black Dictionary, the meaning of
"thereon" is mentioned as "on that or them". The order and
W.A. No.657 of 2020 & con. cases 67
orders are separately mentioned in different statutes. It is true
that in interpretation of statute by Justice J.P.Gupta (VIIth Edition,
1999) it is mentioned that the words 'order' and 'orders' can be
used interchangeably. But, as I mentioned earlier, in different
statutes, the word 'order' and 'orders' are separately mentioned
in different situations. For example, in Sections 30, 35, 36, 99A
and 104 of the Code of Civil Procedure, 1908, 'order' and
'orders' are used separately. The usage of 'order' and 'orders' is
to be interpreted based on the circumstance in which the
legislature have used the same. A reading of the last sentence
of Rule 66(5) will clearly show that the "orders" mentioned in
that sentence are meant not only for the apportionment of cost,
but it is also applicable to the other actions that are mentioned
in Rule 66(5). Similarly the usage of the word "shall" in the last
sentence of Rule 66(5) also will not change much in the light of
the fact that subsequent words used are "such orders thereon".
As far as the other finding of my brother is concerned, it is
already discussed by me in detail in the earlier paragraphs and
therefore, I am not repeating the same.
W.A. No.657 of 2020 & con. cases 68
16. Therefore, in brief, I am not in a position to
accept the findings of my brother Justice P.B.Suresh Kumar.
According to me, the reference is to be answered affirmatively.
In the light of the above discussion, the dictum laid
down in Aravindakshan Nair's case (supra) is overruled and
the dictum laid down in Thiruvalla East Co-operative Bank
Limited (supra) case is confirmed. Consequently, all decisions
relying the dictum in Aravindakshan Nair's case(supra) are
declared as not good law. It is declared that "the opportunity of
hearing" mentioned in Rule 66(5) is necessary not only before
passing orders by the Registrar on the apportionment of cost,
but it is applicable to the other actions mentioned in Rule 66(5).
Sd/-
P.V.KUNHIKRISHNAN, JUDGE
JV/SKS/DM/das
W.A. No.657 of 2020 & con. cases 69
Order of the Court
1. The dictum in State of Kerala v. Aravindakshan Nair,
2010 (3) KLT 11 is affirmed.
2. Registry to post the writ appeals for hearing as per roster.
Sd/-
P.B.SURESH KUMAR, JUDGE
Sd/-
P.V.KUNHIKRISHNAN, JUDGE
Sd/-
C.S.SUDHA, JUDGE
YKB
07-04-2022 /True Copy/ Assistant Registrar
