Mahalingam vs The Deputy Registrar Of ...
2021 Latest Caselaw 23267 Mad

                                                                C.R.P.(NPD).Nos.428 & 429 of 2021




                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS
                                                DATED: 29.11.2021
                                                     CORAM:
                             THE HONOURABLE MR.JUSTICE R.SUBRAMANIAN
                                         C.R.P.(NPD).Nos.428 & 429 of 2021
                                                       and
                                           C.M.P.Nos.3713 & 3717 of 2021



                     C.R.P.(NPD).No.428 of 2021:

                     Mahalingam                                            .. Petitioner

                                                        Vs.

                     1.The Deputy Registrar of Co-operative
                     Societies (Housing),
                     O/o The Deputy Registrar of Co-operative
                     Societies (Housing), Salem Region,
                     Salem District.

                     2.K.K.128, Mettur Industrial Employees
                     Co-operative Industrial Housing Society Ltd.,
                     Rep by its Special Officer/President
                     Metturdam, Salem District

                     3.G.Viswanathan                                       .. Respondents

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

Prayer: Civil Revision Petition filed under Article 227 of the Constitution of India against the Judgement and Decreetal Order dated 23.09.2019 made in C.M.A.(CS).No.2 of 2014 on the file of the Principal District Judge, Salem confirming the Surcharge Order passed by the 1st respondent in Na.Ka.No.913/2012/E dated 01.11.2013.

C.R.P.(NPD).No.429 of 2021:

S.Munusamy .. Petitioner

Vs.

1.The Deputy Registrar of Co-operative Societies (Housing), O/o The Deputy Registrar of Co-operative Societies (Housing), Salem Region, Salem District.

2.K.K.128, Mettur Industrial Employees Co-operative Industrial Housing Society Ltd., Rep by its Special Officer/President Metturdam, Salem District

3.G.Viswanathan

4.M.Sivasami

5.Tmt.V.Krishnaveni .. Respondents

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

Prayer: Civil Revision Petition filed under Article 227 of the Constitution of India against the Judgement and Decreetal Order dated 23.09.2019 made in C.M.A.(CS).No.1 of 2014 on the file of the Principal District Judge, Salem confirming the Surcharge Order passed by the 1st respondent in Na.Ka.No.913/2012/E dated 01.11.2013.

                                       For Petitioner       :    Mr.K.Raja
                                       (In both CRPs)            for Mr.N.Kolandaivelu

                                       For Respondent 1     :    Mr.Edwin Prabakar
                                       (In both CRPs)            Government Advocate

                                       For Respondent 2     :    Mr.L.P.Shanmugasundaram
                                       (In both CRPs)


                                                COMMON ORDER

These two revisions arise out of the surcharge proceedings

initiated under Section 87 of the Tamil Nadu Cooperative Societies

Act, herein after referred to as the Act. The petitioners were Special

Officers of the Mettur Industrial Employees Co-operative Housing

Society Ltd., hereinafter referred to as the Society, during various

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

periods. While the petitioner in C.R.P.No.428 of 2021 was in service

between the years 2003 and 2004, the petitioner in C.R.P.No.429 of

2021 was in service during the year 2007.

2. Claiming that they had caused loss to the Society because of

dereliction of duty and certain omissions committed by them while they

were working as the Special Officers, surcharge proceedings were

initiated against them in the year 2013. The first show cause notice of

surcharge under Section 87(1) of the Act was issued on 10.01.2013.

3. The petitioner in C.R.P.No.428 of 2021 was charged with

causing loss of income in four different transactions. All the

transactions had taken place during the year 2003. The first transaction

was on 31.03.2003, the second transaction was on 12.03.2003, the third

transaction on 31.07.2003 and the fourth transaction was on

16.05.2003.

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

4. All these instance of loss of revenue to the Society in so far as

C.R.P.No.428 of 2021 is concerned arise out of non-recovery of

housing loans advanced to various members of the Society during the

tenure of office of the petitioner. The main contention of the learned

counsel for the petitioner is that the claim under Section 87 of the Act,

itself is barred by limitation. Though, such contention was raised

before the learned Principal District Judge, Salem, in Civil

Miscellaneous Appeals, the learned Principal District Judge has

rejected the same on the premise that the limitation prescribed under

the proviso to Section 87 (1) is only directory and not mandatory.

5. Mr.K.Raja, learned counsel appearing for the petitioners would

invite my attention to two decisions of this Court, one by the Hon'ble

Mr.Justice N.Kirubakaran in W.P.No.32116 of 2015 dated

28.06.2016 and the other by the Hon'ble Ms.Justice P.T.Asha in

C.R.P. No. 1214 of 2013 dated 18.11.2019.

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

6. In W.P.No.32116 of 2015, this Court had held that the seven

years period prescribed, under the proviso, as limitation for

commencement of actions under Section 87 is mandatory and the same

cannot be held to be directory.

7. In C.R.P.No.1214 of 2013, the Hon'ble Ms.Justice P.T.Asha

after referring to the various Judgments on the issue had concluded as

follows:

“17. The proviso to Section 87 of the Act mandates

that no action shall be commenced under the Sub Section

namely, 87 (1) of the Act, after the expiry of 7 years from

the date of any act of omission. The surcharge notice and

the surcharge order would clearly indicate that the

revision petitioner was charged with reference to the

alleged misappropriation which had taken place for the

period 2001 and 2002. The surcharge notice has been

issued only on 03.07.2009, which was beyond the period of

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

7 years. Therefore, the proceedings that have been

initiated are clearly beyond the time specified under the

proviso to Section 87 (1) of the Act.”

8. As I had already pointed out, the transactions, the subject

matter of the surcharge order dated 01.11.2013, in respect of the

petitioner in C.R.P.No.428 of 2021 have happened in the year 2003.

Therefore, the time available for the respondents to proceed under

Section 87 was seven years from the date of the transaction i.e., at the

best till, 2010.

9. Admittedly, the first surcharge notice itself was issued only in

the year 2013. Therefore, the claim as against the petitioner in

C.R.P.No.428 of 2021 is clearly barred by limitation. The learned

Principal District Judge, Salem, was therefore not right in concluding

that the limitation prescribed under the proviso was only directory and

not mandatory. Such a conclusion is not in tune with the Judicial

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

pronouncements of this Court noted above. Hence, the surcharge

proceedings against the petitioner in C.R.P.No.428 of 2021 cannot be

sustained. The Revision succeeds.

10. As regards C.R.P.No.429 of 2021, the petitioner therein has

been accused of causing loss to the Society on six different occasions.

As far as the Item No.6, which transaction had happened on

30.03.2007, it is claimed that the petitioner had granted the loan

without proper documents. It is also pointed out that there is a mistake

in the membership number assigned to the loanee, V.Radhika. It is

claimed that a sum of Rs.1,02,230/- is the loss that has occurred to the

Society due to the omission on the part of the petitioner in obtaining

proper documents. As regards Item Nos.11, 12, 13 and 14, it is claimed

that the loans were advanced without proper inspection and the loanees

have not put up construction as required, resulting in financial loss to

the Society.

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

11. It is not stated that as to how the petitioner is responsible for

the loss. The surcharge order passed by the Deputy Registrar of

Cooperative Society, does not reflect that there was any negligence or

callous indifference on the part of the petitioner in discharging his

duties, so as to make him liable for surcharge under Section 87 of the

Act.

12. This Court had on various occasions examined the scope of

Section 87 of the Act. A Hon'ble Division Bench of this Court in Ajay

Kumar Gosh and others Vs. Tribunal for Cooperative Cases – 2009

(4) MLJ 992, has held that in order to surcharge a person under Section

87, an employee of the Cooperative Society should have done an

actionable wrong either by commission or omission in a deliberate

and reprehensible manner with reckless callousness and with supine

indifference without taking due care and caution ordinarily expected

from a reasonable and prudent man. However, if we examine the

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

order of the Deputy Registrar surcharging the petitioner for the loss

caused to the Society, the above ingredients are totally absent.

13. The order proceeds in a mechanical fashion saying that the

petitioner had issued the cheques without ensuring that construction

was put up by the loanees. In one of the instances, namely, Item No.12,

the loanee had deposed that she has not received the loan but the then

Secretary V.Vishwanathan has taken the loan amount. There is no

answer to such a charge raised by the loanee in the surcharge order.

The surcharging officer cannot mechanically reproduce the contents of

the surcharge notice and mulct the liability on the employees of the

Society. He is bound to examine the evidence positively and

independently and record his findings to the effect that the officer

concerned or the employee concerned had committed an act of

omission or commission with supine indifference and without taking

due care and caution.

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

14. Every case of non-repayment of the loan cannot provide a

cause of action for surcharge under Section 87 of the Act. Section 87

of the Act is an enabling provision, where there is a financial loss to the

Society because of commission and omission of the employees, to

recover the same by way of surcharge. The way in which the

surcharging officer, namely, the Deputy Registrar of Cooperative

Society has proceeded shows that he has mechanically initiated

surcharge proceedings against the petitioner. He has not adverted to

the requirements of Section 87 of the Act before passing the surcharge

orders.

15. A reading of Section 87 of the Act would show that, in order

to invoke the said Section, it must be shown that, “an officer or servant

of the Society has mis-appropriated or fraudulently retained any

money or other property or been guilty of breach of trust in relation to

the Society or has caused any deficiency in the assets of the Society by

breach of trust or willful negligence or has made any payment which

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

is not in accordance with the Act, Rules or by-laws”.

16. Therefore, apart from the fact showing that there has been a

loss to the Society, the Surcharge Officer must go one step further and

record a finding that such loss has been caused due to willful

negligence or callous indifference on the part of the officer concerned.

In the absence of such finding, as rightly contended by the learned

counsel for the petitioner, surcharge proceedings cannot be sustained.

17. Unfortunately, the learned Principal District Judge, Salem

who heard the appeal as against the order surcharging the petitioner

has not considered this aspect. It will be useful to refer to the

Judgement of the Hon'ble Mr.Justice N.Sathish Kumar, in

C.R.P.Nos.19 to 22 of 2010, wherein, also in similar proceedings it was

held that unless willful negligence or callous indifference is

established, proceedings under Section 87 cannot be sustained. In view

of the above, the order of surcharging the petitioner is set aside.

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

18. In the result, the Civil Revision Petitions are allowed. The

surcharge orders are set aside. Consequently, connected Civil

Miscellaneous Petitions are also closed. No costs.

19. The setting aside of surcharge orders will be confined to the

petitioners in these revisions alone.

29.11.2021

kan/shr Index :No Internet: Yes Speaking order

To:-

The Principal District Judge, Salem.

https://www.mhc.tn.gov.in/judis C.R.P.(NPD).Nos.428 & 429 of 2021

R.SUBRAMANIAN, J.

kan/shr

C.R.P.(NPD).Nos.428 & 429 of 2021 and C.M.P.Nos.3713 & 3717 of 2021

29.11.2021

https://www.mhc.tn.gov.in/judis