M.Krishnasamy vs The Deputy Registrar Of ...
2021 Latest Caselaw 11831 Mad

                                                    CRP (NPD) No.1222 of 2018
       IN THE HIGH COURT OF JUDICATURE AT MADRAS

                          DATED: 17.06.2021

                               CORAM:

        THE HON'BLE MR.JUSTICE G.K.ILANTHIRAIYAN

                     C.R.P (NPD) No.1222 of 2018
                                and
                        CMP.No.6247 of 2018

M.Krishnasamy                                          ... Petitioner

                                   Vs.

1. The Deputy Registrar of Co-operative Societies (No Credit),
  Chennai – 108.

2. Tamil Nadu Co-operative Marketing Federation,
   Chennai.                                           ... Respondents

Prayer : Civil Revision Petition is filed under Article 227 of the
                                                     rd
Constitution of India, to set aside the order of the 3 respondent dated
                                                                           st

04.08.2017 made in C.M.A.No.22 of 2004 confirming the order of the 1
respondent dated 19.01.2004 made in Na.Ka.2735/01/Sa.Pa.1.


                  For Petitioner     : Mr.K.Premkumar

                  For Respondents : Mr.L.P.Shanmugasundaram




1/22
                                                     CRP (NPD) No.1222 of 2018
                                              ORDER

This Civil Revision Petition is directed against Judgment passed in

C.M.A.No.22 of 2004 dated 04.08.2017 on the file of the learned Chief

Judge, Small Causes Court, Chennai, confirming the order passed in

Na.Ka.2735/01/Sa.Pa.1 dated 19.01.2004 on the file of the first

respondent, thereby ordering surcharge proceedings to the tune of

Rs.24,56,370/-.

2. The learned counsel for the petitioner submitted that the

petitioner was working as Special Officer in the Tamil Nadu

Co-operative Marketing Federation Limited from 07.08.1992 to

nd 30.09.1994. During the petitioner's tenure as Special Officer of the 2

nd respondent, the 2 respondent procured fertilizers to the tune of 305.500

metric tonnes and 810 litres for sale to the farmers to the tune of

Rs.1,95,08,452/-. Thereafter, from the date of his superannuation, there

were other Special Officers and they also procured fertilizers for the

purpose of selling the same to the farmers. Out of the said tune of

fertilizers, till the superannuation of the petitioner herein as Special

CRP (NPD) No.1222 of 2018 Officer, 111 metric tonnes of fertilizers were sold out and subsequently,

115 metric tonnes of fertilizers were sold within a period of four months.

When the other person was holding additional charge till 31.01.1995, 79

metric tonnes of fertilizers were available, which was alleged to have

been purchased by the petitioner without sale. On account of the same,

the Registrar of Co-operative Societies ordered enquiry under Section 81

of the Tamil Nadu Co-operative Societies Act (hereinafter referred to as

'the Act' for short). In the enquiry conducted, several Officials were found

responsible for causing loss of goods/fertilizers to the value of

Rs.73,50,204/-. Therefore, the petitioner was served with show cause

notice for which the petitioner submitted his explanation. However,

without considering the same, the first respondent passed surcharge order

under Section 87 of the Act.

3. The learned counsel for the petitioner further submitted that as

per the charges, the petitioner has not obtained any prior permission of

the Government for purchase over Rs.1 Crore as per the G.O.Ms.No.436

dated 15.04.1997 and also based on the Circular in Na.Ka.43310/95 dated

17.03.1995. Therefore, the petitioner challenged the surcharge order in

C.M.A.No.22 of 2004 on the file of the Special Tribunal for Co-operative

CRP (NPD) No.1222 of 2018 Cases, Chennai (In the Court of Small Causes, Chennai). The surcharge

order was set aside on the ground that the surcharge proceeding itself was

barred by limitation, since it was initiated after six months from the date

of its commencement. The enquiry officer, who conducted enquiry under

Section 81 of the Act, had not recommended for any disciplinary action

or to initiate any surcharge proceedings against the petitioner. Further, the

Tribunal held that the explanation submitted by the petitioner dated

26.03.2003 was not considered properly. Aggrieved by the same, the

second respondent herein challenged that order before this Court by way

of Writ Petition in W.P.No.20207 of 2008. It was allowed by this Court by

an order dated 21.02.2012 and remanded back the matter to the Tribunal

for fresh disposal. By an order dated 04.08.2017, the Tribunal dismissed

the appeal filed by the petitioner and confirmed the surcharge order

passed by the first respondent.

4. He further submitted that the Tribunal failed to see that the

petitioner was working only till 30.09.1994 and the fertilizers purchased

by him is not against the Government order or Circular as stated by the

Tribunal, since no Government Order and Circular was passed by the

Government at that juncture. The subsequent Government Order in

CRP (NPD) No.1222 of 2018 G.O.Ms.No.436 dated 15.04.1997 and the Circular in Na.Ka.43310/95

dated 17.03.1995 could not have retrospective effect. Therefore, the

petitioner is not all liable for any violation as stated by the second

respondent. Admittedly, on the part of the petitioner, no wilful negligence

in the procurement, no misappropriation, no fraudulent retention of any

money or other property and no breach of trust in relation to the society

are caused by the petitioner. When that being so, no surcharge proceeding

is sustainable as against the petitioner. Even assuming that the petitioner

committed any negligence, the mere negligence is not sufficient to pass

any surcharge order under Section 87 of the Act. During the relevant

period, as alleged by the second respondent, there was no Government

Order or the Circular privileged and only after his retirement, the

aforesaid Government Order and the Circular were issued. Therefore,

nothing is proved and even then, the second respondent passed surcharge

order as against the petitioner. In support of his contentions, the learned

counsel for the petitioner relied upon the judgment reported in (2016) 6

MLJ 485 (S.Ramadevi -vs- Special Officer) and 2014 (1) CWC-835

(P.Elango -vs- The Administrator, M.R.K. Co-operative Sugar Mills).

CRP (NPD) No.1222 of 2018

5. Per contra, the learned counsel appearing for the respondents

submitted that the second respondent filed a counter stating that based on

the findings of the enquiry under Section 81 of the Act into the affairs of

the Tamil Nadu Co-operative Marketing Federation Limited relating to

the loss to the assets of the Federation by the indiscriminate purchase and

sales of micro nutrients/fertilizers by the Special Officers of the

Federation as received by the Special Investigation Squad in the office of

the Registrar of Co-operative Societies, notice was issued under Section

87(1) of the Act to the Special Officer of the Federation and other

Officers and staff of the Federation who are found responsible for the

indiscriminate purchase of various micro nutrients/fertilizers to the extent

of 723.500 metric tonnes and 810 litres to the value of Rs.4,66,95,452

during the period from the year 1994 to 1996. The value of unsold

damaged micro nutrients/fertilizers upto 31.12.1999 was to the value of

Rs.73,50,204/- and to that extent, loss was caused to the assets of the

Federation. These micro nutrients/fertilizers were initially purchased on

consignment basis and stocked in the various regional godowns situated

throughout the state. Since the Special Officers purchased the micro

nutrients/fertilizers from the cash credit availed from the Central Co-

CRP (NPD) No.1222 of 2018 operative Bank, there was unnecessary locking of funds increasing the

loss incurred by the Federation. He further stated that though as per

Government Order 325 Co-operative Food & Consumer Protection

Department dated 15.04.1995, prior permission has to be obtained from

the Government for the purchase over and above Rs.1 Crore, no such

Government permission was obtained. Further, as per the Registrar

Circular Rc.43310/95 IP3 dated 17.03.1995, the purchase of goods above

Rs.10 lakhs have to be purchased by the purchase committee constituted

by the Registrar. Though the value of micro nutrients/fertilizers purchase

exceeded Rs.4.67 Crores, Government Orders have not been obtained and

purchase of the micro nutrients/fertilizers have not been made by the

purchase committee.

6. The learned counsel for the respondents further submitted that

the purchase of the nutrients/fertilizers were made during the tenure of

the following Special Officers on their orders issued from the head office:

K.Krishnasamy (SO) From 305.500 MT Rs.1,95,08.452/-

07.08.1992 to 30.09.1995         810 litre
G.Gandhidoss (AR/SO) From       10.000 MT       Rs.5,10,000/-
01.10.1995 to 31.01.1995
S.Damodaran (AR/SO) From        398.00 MT      Rs.2,61,28,000/-
01.02.1995 to 04.03.1996
M.M.B.Sivaprakasam (SO)         10.000 MT       Rs.5,49,000/-

                                                     CRP (NPD) No.1222 of 2018
From 05.03.1996 to 31.12.1996
            Total               723.500 MT    Rs.4,66,95,452/-
                                 810 Litre

7. The learned counsel for the respondents also submitted that all

the above purchases were made from the Head Office without obtaining

indents from the regional offices as well as from Primary Co-operative

Credit Societies and though there was adequate stock in the godown, the

purchases were made. By such indiscriminate purchases, stocks were

piled in the godown exceeding the expiry date and stocks were damaged.

The Federation incurred loss to the tune of Rs.73,50,204/- and for the said

loss only the former special officers are liable and surcharge notice was

issued to them by the Deputy Registrar (Non Credit) Ms in

Rc.3879/200/Nu Ku2 dated 25.04.2000. The petitioner and others gave

reply and considering their reply, the Deputy Registration (Non Credit)

Ms has passed surcharge order in Re.2737/01SF dated 19.01.2004

holding the petitioner M.Krishnasamy liable for Rs.24,56,370/- and

Lakshmikanda wife and other heirs of S.Damodaran were made liable for

Rs.48,93,630/- on behalf of S.Damodaran, Additional Registrar.

CRP (NPD) No.1222 of 2018

8. Heard the learned counsel for the petitioner as well as the

learned counsel appearing for the respondents.

9. The petitioner was appointed as Additional Registrar/Special

Officer of the second respondent Federation on 07.08.1992. The second

respondent was engaged for procuring and selling fertilizers to the

Primary Agricultural Property Societies through its District level units.

The purchase of the fertilizers is done through the committee constituted

by the Registrar of Co-operative Societies, consisting of the Additional

Registrar (consumer activities), the first respondent herein and the

Special Officer. The committee was headed by the Additional Registrar

and functioned under the control of the Registrar and his directions. As

per the decision taken in the committee, the purchase was made on

special intends of the district level region of the second respondent.

While being so, the product viz., micro nutrients/fertilizers was

introduced by the Agricultural Department. The rate and terms of supply

of micro nutrients/fertilizers were approved by the purchase committee

constituted by the Registrar and on receipt of the specific intends from

the district level regional officers, the petitioner purchased 305.500

metric tonnes during his tenure from the month of May 1994 to

CRP (NPD) No.1222 of 2018 September 1994. Out of which, 111 metric tonnes of the micro

nutrients/fertilizers were sold out till his superannuation and

subsequently, 115 metric tonnes of the micro nutrients/fertilizers were

sold out by the subsequent officer till 31.01.1995. The remaining 79

metric tonnes micro nutrients/fertilizers were available to the second

respondent.

10. In fact, subsequent to the procurement, the petitioner's

successors in the office procured so many tonnes on the intends placed

before them. Now, the charge against the petitioner is that the petitioner

failed to obtain prior permission from the Government in respect of

purchase over Rs.1 Crore as per G.O.Ms.436 dated 15.04.1997. The

purchase of nutritious fertilizers is in violation of Circular in

Na.Ka.43310/95/EPA3 dated 17.03.1995. The stock of nutritious

fertilizers procured by the petitioner is very much available without sale.

Therefore, the petitioner and others are held responsible for the total loss

of Rs.73,50,000/- and the same is apportioned at the rate of 33.42% and

66.58% viz., as against the petitioner shall pay a sum of Rs.24,56,370/-.

Though initially the surcharge proceeding was set aside by the

Co-operative Tribunal, the same was set aside by this Court and

CRP (NPD) No.1222 of 2018 remanded back for fresh disposal. Thereafter, the Tribunal confirmed the

order passed by the second respondent and dismissed the appeal.

11. Now, the point for consideration is that whether the act of the

petitioner would amount to wilful negligence in procurement,

misappropriation, fraudulent retention of any money or other property,

any breach of trust in relation to the society and caused any deficiency in

the assets of the society by breach of trust or wilful negligence. As stated

supra, the entire charges against the petitioner are that he procured micro

nutrients/fertilizers over the tune of Rs.1 Crore without getting

permission as contemplated under the Government order and it is in

violation of the Circular dated 17.03.1995. Further, charged that the

stocks of nutritious fertilizers procured by the petitioner are available

with the second respondent, without any sale. Therefore, no charges is

made out as against the petitioner to pass surcharge order as contemplated

under Section 87 of the Act.

12. In this regard, the learned counsel for the petitioner relied upon

the judgment reported in (2016) 6 MLJ 485 (S.Ramadevi -vs- Special

Officer), it is held as follows:-

“25. The third and the last plea is actually the most

CRP (NPD) No.1222 of 2018 crucial as to whether the appellant could be said to have acted with willful negligence. In this behalf, the learned counsel for the appellant has relied upon two judgments of this Court in S.Subramanian v. Deputy Registrar of Co- operative Societies (Housing), Cuddalore and Others 2002- 3-L.W.185 : LNIND 2002 MAD 1671 and K.Ajay Kumar Gosh and Others v. Tribunal for Co-operative Cases, LNIND 2009 MAD 986 : (2009) 4 MLJ 992, to contend that when requirements of Section 87 had not been satisfied, which warrants initiation of surcharge proceedings, the liability cannot be fastened. There has to be willful and wanton premeditation with a view to cause loss to the assets of the Society and “mere negligence cannot be a ground for surcharge and it must be willful negligence or intentional negligence and not mere carelessness or intention or inadvertence or a single lapse by oversight”. We extract the observations in the case of K.Ajay Kumar Gosh and Others v. Tribunal for Co-operative Cases (supra), as hereunder:

“19. A detailed discussion has been made by making reference to various judgments on this aspect in another judgment reported in Sathyamangalam Co- operative Urban Bank Ltd. v. Deputy Registrar of Co- operative Society and Another, (1980) 2 MLJ 17, it is held thus:

The degree of negligence that is contemplated under Section 71 (1) of the Tamil Nadu Co-operative Societies Act is not mere negligence, but wilful

CRP (NPD) No.1222 of 2018 negligence. The word 'wilful' has not been defined in the Act. 'Wilfulness' or 'wantonness' imports pre- meditation or knowledge and consciousness that an injury or loss is likely to result from the act done or from the omission to act. It imports a constructive intention as to the consequences which, entering into the wilful act, the law imputes to the offender and in this way a charge, which otherwise would be mere negligence, becomes by reason of a reckless disregard of probable consequences, a wilful wrong. The act done or omitted to be done must be intended or must involve such reckless disregard of security and right as to imply bad faith. In examining whether there is wilful negligence, it has to be seen first whether the person concerned is guilty of negligence and if so, whether the said wilful negligence is the proximate cause of the injury or loss sustained.”

20. In the light of the decisions referred to above, it is clear that to pass surcharge order under Section 87 of the Act, appellants should have done an actionable wrong either by commission or omission in a deliberate and reprehensible manner with reckless callousness and with a supine indifference, without taking due care and caution ordinarily expected from a reasonable and prudent man under those existing circumstances. In the absence of such categorical finding by the respondents, it is not possible to mulct

CRP (NPD) No.1222 of 2018 the appellants with the loss caused to the society.”

13. Further the learned counsel for the petitioner relied upon the

judgment reported in 2014 (1) CWC-835 (P.Elango -vs- The

Administrator, M.R.K. Co-operative Sugar Mills), it is held as follows:-

"12. Similar issue arose for consideration in the

decision rendered by a learned single Judge of this Court

(N.Paul Vasanthakumar, J.) reported in (2009) 6 MLJ

1051 [A.Janakiraman and another -vs- Deputy Registrar

of Cooperative Societies and another), wherein the

learned single Judge has referred to all the earlier

decisions on that point and held as follows:-

"In surcharge proceedings, the first

respondent is duty bound to prove that there was

wilful dereliction of duty like criminal case. The

criminal Court having found that the petitioners are

not guilty, the said findings are definitely in favour

of the petitioners. The words used under Section

87(1) are "wilful negligence". The said issue was

considered in series of decisions of this Court

CRP (NPD) No.1222 of 2018

(a)In Sathyamangalam Co-operative Urban

Bank Limited v. Deputy Registrar of Co-operative

Society and Another (1980) 2 MLJ 17, this Court

considered the scope of earlier Section viz., Section

71 of the Tamil Nadu Co-operative Societies Act,

1961, which is analogous to Section 87 of the Act,

1983 and held that mere negligence is not sufficient

to initiate surcharge proceedings.

(b)A Division Bench of this Court in

P.Karuppiah v. Deputy Registrar of Co-operative

Societies (1989) WLR 272 considered the very same

aspect and in paragraph 3 held as follows:

"3.The second aspect canvassed by the learned

counsel for the appellant is that, assuming that

the petitioner was cast with specific

responsibility or obligation or duty with

reference to the remittances and withdrawals

yet, the alleged acts and omissions with which

the appellant was charged could not be said to

have been tainted with 'wilful negligence'

CRP (NPD) No.1222 of 2018 which has been construed by pronouncements

of the Court as meaning something done either

by commission or omission, in a deliberate and

reprehensible manner, with reckless

callousness and with a supine indifference, and

not by accident or inadvertence without taking

due care and precaution ordinarily expected

form a reasonable and prudent man under the

existing circumstances. Learned counsel for

the appellant took the trouble of citing before

us pronouncements of a number of single

Judges of this Court. Learned counsel for the

appellant would submit that even in the field of

inference, there is no possibility of

characterising the alleged acts and omissions

on the part of the appellant as tainted with

'wilful negligence'. We would have gone into

this question, but we find that the answer given

by us with regard to the first contention in

favour of the appellant has served his purpose

CRP (NPD) No.1222 of 2018 and we are of the view that for the present case

we need not trouble ourselves with regard to

this aspect. The learned single Judge, we find,

has omitted to take note of the crucial aspect

with regard to the casting of specific

responsibility or duty or obligation on the

appellant with regard to remittances and

withdrawals. As we have already pointed out,

there is no material evidence exposed in this

case, showing that position. In the absence of

the said position being made out against the

appellant it is not possible to sustain the

proceedings which culminated in the mulcting

of the liability on the appellant. Taking note of

this feature, we are obliged to interfere in writ

appeal and accordingly, the writ appeal is

allowed, the order of the learned single Judge

is set aside and the writ petition W.P.No.1955

of 1978 is allowed. We make no order as to

costs both in the writ petition and in the writ

CRP (NPD) No.1222 of 2018 appeal."

              (c)The above decision was followed in the

        decisions   Chockappan      v.    Special    Tribunal     for

        Co-operative   Cases    (1999)       1   MLJ     587     and

        M.Sambandam      v.     Deputy       Registrar       (Credit)

Co-opeartive Societies, Mylapore, Madras.

(d)In M.Chella Nadar v. Deputy Registrar of

Cooperative Societies, Thuckalai and post,

K.K.District (2002) WLR 198, the very same issue of

scope of Section 87 (1) was considered and similar

surcharge proceedings was quashed.

(e)The above decisions are followed in the

decision in S.Marimuthu v. Deputy Registrar of Co-

operative Societies (Housing), Madurai Circle (2006)

4 MLJ 86.

(f)Recently, a Division Bench of this Court in

the decision in K.Ajay Kumar Gosh v. Tribunal for

Cooperative Cases, Nagercoil (2009) 4 MLJ 992, set

aside the order of surcharge and in paragraph 20 held

thus at p.996 of MLJ:

CRP (NPD) No.1222 of 2018 "20.In the light of the decisions referred to

above, it is clear that, to pass surcharge order

under Section 87 of the Act, appellants should

have done an actionable wrong either by

commission or omission in a deliberate and

reprehensible manner with reckless callousness

and with a supine indifference, without taking

due care and caution ordinarily expected from a

reasonable and prudent man under those existing

circumstances. In the absence of such categorical

finding by the respondents, it is not possible to

mulct the appellants with the loss caused to the

society".

14. The Hon'ble Division Bench of this Court repeatedly held that

to pass surcharge order, the first respondent is duty bound to prove that

there was wilful dereliction of duty like criminal case and mere

negligence is not sufficient to initiate surcharge proceedings. It is further

held that the wilful negligence which has been construed by

pronouncements of the Court as meaning something done either by

CRP (NPD) No.1222 of 2018 commission or omission in a deliberate and reprehensible manner with

reckless callousness and with a supine indifference and not by accident or

inadvertence without taking due care and precaution ordinarily expected

form a reasonable and prudent man under the existing circumstances.

15. In the light of the decisions referred to above, it is clear that, to

pass surcharge order under Section 87 of the Act, the petitioner should

have done an actionable wrong either by commission or omission in a

deliberate and reprehensible manner with reckless callousness and with a

supine indifference, without taking due care and caution ordinarily

expected from a reasonable and prudent man under those existing

circumstances. In the absence of such categorical finding by the

respondents, it is not possible to mulct the petitioner with the loss caused

to the society. That apart, there is no findings in respect of wilful

dereliction of duty on the part of the petitioner and mere alleged violation

of Government Order and Circular are not sufficient to issue surcharge

order under Section 87 of the Act.

16. In view of the above discussion, this Civil Revision Petition is

allowed and the judgment passed in C.M.A.No.22 of 2004 dated

CRP (NPD) No.1222 of 2018 04.08.2017 is hereby set aside. Consequently, the connected

Miscellaneous Petition is closed. No costs.

17.06.2021 kv

Index :Yes/No Internet : Yes/No

To

1. The Chief Judge, Small Causes Court, Chennai.

2. The Deputy Registrar of Co-operative Societies, (No Credit), Chennai – 108.

3. Tamil Nadu Co-operative Marketing Federation, Chennai.

4. The Section Officer, V.R. Section, High Court of Madras.

G.K.ILANTHIRAIYAN.J., kv

CRP (NPD) No.1222 of 2018

C.R.P (NPD) No.1222 of 2018

17.06.2021