Madras High Court
Poomalai vs The Deputy District Registrar Of ... on 3 September, 2025
Author: R.Vijayakumar
Bench: R.Vijayakumar
CRP(MD).No.1572 of 2024
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on : 26.08.2024
Pronounced on : 03.09.2025
CORAM
THE HON'BLE MR.JUSTICE R.VIJAYAKUMAR
CRP(MD).N.1572 of 2024
and CMP(MD).No.9309 of 2024
Poomalai
Secretary (Removed from service)
Sp.Spl.118, Sathirapatti Thiruvengadasamy Primary
Agricultural Co-operative Credit Society
Sathirapatti
Srivilliputhur Taluk,
Virudhunagar District ...Petitioner/Appellant/Respondent
Vs.
1.The Deputy District Registrar of Co-operatives
Srivilliputhur Taluk
Virudhunagar District
2.The President
Sp.Spl.118, Sathirapatti Thiruvengadasami Primary
Agricultural Co-operative Credit Society
Sathirapatti
Srivilliputhur Taluk,
Viruthunagar District ....Respondents/Respondents/Petitioners
1/11
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CRP(MD).No.1572 of 2024
PRAYER: The Civil Revision Petition filed under Article 227 of Constitution
of India to set aside the judgment made in C.M.A(CS).No.16 of 2022 dated
06.04.2024 on the file of the learned Principal District and Sessions Judge (Co-
operative Tribunal) Viruthunagar confirming the surcharge proceedings No.5 of
2019-20 dated 01.09.2020 on the file of the first respondent and to allow the
above revision petition.
For Petitioner : Mr.C.Jeganathan
For Respondents : M/s.D.Farjana Ghoushia
Special Government Pleader
*****
ORDER
The present revision petition has been filed challenging the order passed
by the Co-operative Tribunal, Virudhunagar in C.M.A.(C.S).No.16 of 2022
wherein the order passed by the first respondent in the surcharge proceedings
under Section 87 of the Co-operative Societies Act on 01.09.2020 has been
confirmed.
2.The petitioner herein who was working as a Secretary of the second
respondent Co-operative Society was issued with a notice under Section 87 of
the Co-operative Societies Act for initiating surcharge proceedings.
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3.The sum and substance of the charge as against the petitioner are as
follows:
a)The petitioner has received additional share capital from
four members of the Society. Returned the said share capital over
and above at 10% permissible per year. In view of release of
dividend for the above said amount, the Society has incurred huge
loss. Since excess was available to the Society, the receipt of
additional share capital from the members of the Society could not
be used by the Society and it resulted in huge loss. This has been
done by the petitioner without the approval of the Board.
b)While auctioning the pledged jewels, the jewels have to be
auctioned as per the loan account. However, the jewels pledged by
different members have been grouped together and they have been
auctioned. The amount received through auction has been credited
to the extent of the loan to each one of the loan account. This
auction has been conducted without considering the value of the
jewels on the date of pledge and on the date when the auction were
conducted. The jewels have been auctioned for a lesser amount.
This has caused loss to the members who had pledged more
sovereign of jewels. After adjusting the loan amount, the balance
amount was not returned to the concerned members. The petitioner
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has caused loss to a tune of about Rs.75% by crediting lesser
amount.
c)The petitioner has caused a loss of Rs.19,047/- by not
crediting the excess amount to the account of the individual
member which was received by the Society by auctioning of the
jewels.
4.After a detailed enquiry, the first respondent herein has found that the
charges as against the petitioner have been proved. The petitioner had filed
CMA(C.S).No.16 of 2022 before the Principal District and Sessions Court,
Virudhunagar/ Co-operative Tribunal.
5.The learned District Judge after considering the submissions made on
either side, has proceeded to confirm the award passed by the first respondent.
Challenging the same, the present revision petition has been filed.
6.The learned counsel for the petitioner had submitted that the additional
share capital was paid by the members voluntarily. For the additional share
capital, the dividend was paid by the Society after getting approval from the
Board. Because of receipt of additional share capital, the Society has not
incurred any loss.
7.The learned counsel for the petitioner further submitted that the jewels
were auctioned as per rules. The auction amount was credited to each one of the
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loan accounts and the balance amount is retained in the Society. As and when
the members approach the Society, the excess amount could be paid by the
Society. Therefore, there is no irregular or illegality in the conduct of the
auction of the jewels.
8.The learned counsel for the petitioner further submitted that none of the
charges shows an allegation that the petitioner is a beneficiary of the alleged
misconduct. None of the members have made any complaint to the Society that
they have incurred loss due to the auctioning of the jewels by way of grouping.
9.The learned counsel for the petitioner further submitted that there was
no wilful negligence on his part. He relied upon a Division Bench judgment of
our High Court reported in 2016-4-L.W 452( S.Ramadevi Vs. The Special
Officer, Ambur Co-operative Sugar Mills and others) and contended that
unless the wilful negligence is attributed, proceedings under Section 87 of the
Co-operative Societies Act cannot stand. The learned counsel has also relied
upon a decision of this Court in CRP(MD).No.4618 of 2024 (J.Jayakumar Vs.
The Surcharge Officer, Vellore Zone and others) dated 02.12.2024 and
contended that when the wilful act in a deliberate manner has not been
established, a case under Section 87 of the Co-operative Societies Act would not
be made out. He had further contended that already Rs.70,000/- has been paid
by the petitioner to the Society. The first respondent has erroneously imposed an
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interest at the rate of 15% which is on the higher side.
10.Per contra, the learned Special Government Pleader appearing for the
respondents submitted that additional share capital can be collected from the
members only if it is approved by the Board. When the Society was not in need
of money, unnecessarily this amount has been collected by the petitioner.
Therefore, it could not be invested for reaping benefit. The additional share
capital collected by the petitioner remained idle and the society was forced to
pay dividend to the members. All these activities have been done by the
petitioner without the approval of the Board. This has resulted in huge loss to
the society.
11.The learned Special Government Pleader had further submitted that
whenever the pledged jewels are auctioned, due to default, the value of the
jewels on the date of auctioning have to be mentioned. However, the jewels
have been auctioned as per their value on the date of their pledge. The jewels
without being sold per loan, all the jewels have been grouped together and they
have been auctioned. This has resulted in huge loss to the concerned members.
This is clearly in violation of the provisions of the Co-operative Societies Act
and the Rules thereunder. Merely because the members have not approached the
Society seeking excess amount, the misconduct of the petitioner would not get
erased.
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12.The learned Special Government Pleader further submitted that only if
the jewels are auctioned separately, as per the loan account, whether any excess
amount was received in auction or not could be found out. Only then the excess
amount could be credited to the account of the members. In case of any deficit,
the same has to be collected from the members. In view of auctioning in groups,
huge loss has been incurred to the Society as well as to the members.
13.The learned Special Government Pleader had further submitted that
the first respondent herein after going through the records has found that the
excess amount has neither been credited to the account of the members nor been
credited in the miscellaneous account. In such circumstances, there is a huge
loss to the society as well as the members. She had further pointed out that the
rate of interest has been correctly fixed by the authority and hence, she prayed
for dismissal of the revision petition.
14.Heard both sides and perused the material records.
15.The petitioner, as Secretary of the Co-operative Society has collected
additional share capital from four members. As per bylaws, the Board alone can
permit the members to remit the additional share capital. Admittedly, the
petitioner is not in a position to show any authorization from the Board for
collecting additional share capital. As per contention of the Society, the
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additional share capital was a dead investment and the amount was kept idle and
it has not generated any revenue. However, dividend was released to the
concerned members. There is no answer for this allegation from the petitioner.
That apart, the petitioner without approval of the Board, had released more than
10% of the share capital on the next year of investment in violation of the
bylaws. Therefore, this Court is of the considered opinion that the said
allegation as against the petitioner stood proved.
16.As far as the allegation relating to the auctioning of pledged jewels are
concerned, even as per the admitted case of the petitioner, he had auctioned the
jewels in groups instead of auctioning them as per loan account. Thereunder, the
auction money has been credited to each one of the loan account to the extent of
satisfying the said loan amount. Therefore, it could not be found out whether
any one of the jewels pledged for particular loan account had fetched more
money or there were any deficit for the loan amount. Hence, the contention of
the petitioner that there was no complaint from the members or there was any
loss to the Society is not acceptable. The manner in which the petitioner has
acted would clearly indicate that the pledged jewels have been auctioned in
groups and adjusted to the loan account of the members, so that it cannot be
verified how much was the value of the jewels for each loan account. Therefore,
it is clear that it is a clear case of wilful negligence.
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17.Though the petitioner contends that the excess amount has been
credited to the account of the members, the authority has found that the amount
has neither been credited to the account of the individual member nor to the
miscellaneous account. Therefore, it is clear that by way of auctioning the
pledged jewels in groups, the petitioner has permitted the person who had
participated in the auction to benefit illegally to the detriment of the society as
well as its members. When negligence and breach of trust on the part of the
petitioner have been proved, the judgments cited by the learned counsel for the
petitioner are not applicable to the facts of the case.
18.As far as the rate of interest is concerned, the same is reduced from
15% to 12%.
19.In view of the above said deliberations, this Court is inclined to pass
the following orders:
a) The liability and quantum of the award passed by the first
respondent and confirmed by the Principal District and Sessions
Judge, (Co-operative Tribunal) Virudhunagar in CMA.(CS).
No.16 of 2022 dated 06.04.2024 are hereby confirmed.
b)The rate of interest is reduced from 15% to 12%.
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c)This civil revision petition is partly allowed to the extent as
stated above. No costs. Consequently, connected miscellaneous
petition is closed.
03.09.2025
NCC : Yes/No
Index : Yes/No
Internet: Yes/No
msa
To
1. The Principal District and Sessions Judge
(Co-operative Tribunal) Viruthunagar
2.The Deputy District Registrar of Co-operatives
Srivilliputhur Taluk
Virudhunagar District
3.The President
Sp.Spl.118, Sathirapatti Thiruvengadasami Primary
Agricultural Co-operative Credit Society
Sathirapatti
Srivilliputhur Taluk
Viruthunagar District
4.The Record Keeper,
Vernacular Section,
Madurai Bench of Madras High Court,
Madurai.
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R.VIJAYAKUMAR, J.
msa
Pre-delivery order made
in
CRP(MD).N.1572 of 2024
03.09.2025
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