Madras High Court
The Managing Director /Joint ... vs M.Premalatha ...1St on 9 September, 2025
Author: R.Vijayakumar
Bench: R.Vijayakumar
CRP(MD).No.620 of 2025
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on : 29.08.2025
Pronounced on : 09.09.2025
CORAM
THE HON'BLE MR.JUSTICE R.VIJAYAKUMAR
CRP(MD).No.620 of 2025
and CMP(MD).No.3368 of 2025
1.The Managing Director /Joint Registrar/
Special Officer, No.178
Tiruchirappalli District Central
Co-operative Bank Ltd.,
Tiruchirappalli – 2
2.The General Manager
Tiruchirappalli District Central Co-operative Bank Ltd.,
Rockfort Branch
Tiruchirappalli District ....Petitioners 1 & 2/Respondents 4 & 5
Vs
1.M.Premalatha ...1st Respondent/Appellant
2.The Registrar of Co-operative Societies
Poonamallee High Road
Kilpauk, Chennai
1/16
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CRP(MD).No.620 of 2025
3.The Deputy Registrar of Co-operative Societies,
Tiruchirappalli Range
Tiruchirappalli – 20
4.The Co-operative Sub-Registrar
Varaganeri Town
Co-operative Bank
Tiruchirappalli District ....Respondents 2 to 4/
Respondents 1 to 3
PRAYER: The Civil Revision Petition filed under Article 227 of Constitution
of India to set aside the judgment and decree passed in CMA(CS).No.12 of
2019 dated 18.04.2024 passed by the Principal District Judge, Tiruchirappalli.
For Petitioners : Mr.D.Shanmugaraja Sethupathi
For Respondents : Mr.T.Gowthaman
Senior Counsel
For Mr.R.S.Sivaram for R1
:M/s.D.Farjana Ghoushia
Special Government Pleader for R2 to R4
*****
ORDER
This revision petition has been filed by the management of a Co-operative
Bank challenging the order passed by the Principal District Judge/Co-operative
Tribunal, Trichy in CMA(CS).No.12 of 2019 dated 18.04.2024.
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(A).Factual Matrix:
2.The first respondent herein was working as a Manager in Central
Co-operative Bank, Rockfort Branch, Trichy between 2011 to 2016. On
08.02.2016, a surprise inspection was conducted by the Branch Inspection
Officer. It was found that the jewels pledged under 17 loans are of substandard
quality. The Inspection Officer had orally informed the same to the Head Office
and instructed the first respondent herein (Branch Manager) to make
arrangement to inform the customers for redeeming the jewels.
3.The first respondent herein had lodged a police complaint on
25.02.2016. However, the same was not taken on file by the police authorities
and she was directed to route the said complaint through the Head Office. The
first respondent has addressed a letter to the Head Office on 29.02.2016. A
preliminary enquiry was conducted and based upon the said report dated
03.03.2016, an enquiry under Section 81 was ordered as against the first
respondent herein, the jewel appraiser and the other officials of the concerned
Bank.
4.In the 81 enquiry report submitted on 15.06.2016, it was found that the
first respondent was responsible for pledging of all substandard jewels for
disbursement of loan. It was further found that the first respondent has not
brought those pledged jewels for auction even though the loan amount has
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become overdue. It was further found that despite coming to know about the
pledging of substandard jewels, the first respondent has not sent any report to
the Head Office. Hence, there was dereliction of duty. It was further found that
the first respondent has permitted transfer of jewel loan account from one name
to another name without the jewels being redeemed. The 81 enquiry report
recommended for initiating proceedings under Section 87 of the Co-operative
Societies Act as against the first respondent and others.
5.Pursuant to the findings of the 81 enquiry, a statutory notice was issued
to the first respondent on 15.07.2016 under Section 87 of Tamil Nadu
Co-operative Societies Act. The said notice was challenged by the delinquent in
WP(MD).No.13797 of 2016 and the same was dismissed on 30.01.2018. A
perusal of the show cause notice issued under Section 87 reveals that the first
respondent herein was alleged to have committed misconduct by disbursing the
jewel loan based upon the substandard jewels and she had caused financial loss
to the Bank.
6.The first respondent herein has submitted her counter objection to the
said statutory notice on 11.02.2019. As per the said counter, the first respondent
has contended that she was not technically qualified to verify the quality of the
jewels. It was assessed by the jewel appraiser, namely Mr.Subramanian and
based upon his certificate, the jewel loans were disbursed by her. There was no
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collusion on her part in the misconduct of the jewel appraiser. In the counter,
she had further contended that she has no knowledge about the spurious jewels.
It was further contended that as soon as it came to her knowledge, she has
approached three customers who had pledged those substandard jewels and
asked them to redeem the same. Two of them had redeemed it and only one of
them has not redeemed.
7.In the counter submitted to Section 87 notice, the first respondent herein
had further contended that, on 25.02.2016, she has preferred a police complaint
about misappropriation before the Commissioner of Police, Trichy. However, it
was not taken on file, but she was directed to send the complaint through Head
Office. In the said counter, the first respondent had further contended that the
jewel appraiser has colluded with the customer and has accepted the spurious
jewels and disbursed loan without the involvement of the Branch Manager. She
had further submitted that she had never indulged any misappropriation and she
had no knowledge about the substandard jewels.
8.The following findings were rendered in the Section 87 award.
a)In the 87 enquiry report, it was found that there was a gross
negligence on the part of the Branch Manager and she had colluded with
the jewel appraiser which has resulted in pledging of substandard jewels
and disbursement of Bank loan.
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b)On 09.02.2016 a circular was issued by the Head Office to bring
all the jewels for auction where the loan amount was overdue. However,
the Branch Manager has suppressed 8 jewel loans which have become
overdue. These 8 jewel loans have been disbursed based upon the
pledging of substandard jewels.
c)This award under Section 87 proceedings was put to challenge
before the Principal District Court, Trichy/Co-operative Tribunal in
CMA(CS).No.12 of 2019.
9.The Co-operative Tribunal has proceeded to set aside the order passed
in the surcharge proceedings primarily on the ground that when the appraiser
has certified the articles as a genuine one and fit for pledging, there is no option
available for the Manager except to grant loan. Therefore, the Branch Manager
cannot be considered to have colluded with the jewel appraiser. The
Co-operative Tribunal has further found that there was no willful negligence on
the part of the Branch Manager in accepting the certificate issued by the jewel
appraiser. Based upon these findings, the surcharge order as against the first
respondent was set aside. Challenging the same, the present revision petition
has been filed by the management of the Co-operative Bank.
(B).Submissions of the Counsels:
10.The learned counsel for the revision petitioners submitted that when
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the surprise inspection was conducted on 08.02.2016, the dispersal of jewel loan
on the basis of substandard jewel had come to the knowledge of the first
respondent. However, the Branch Manager has not chosen to inform the same in
writing to the Head Office or lodged a police complaint. A police complaint was
lodged only on 25.02.2016. This will clearly establish the collusion of the
Branch Manager with jewel appraiser.
11.The learned counsel for the petitioners further submitted that the Head
Office issued a circular to all the Branch Managers to report overdue jewel
loans to the Head Office for conducting public auction. Though the Branch
Manager had reported other loan transactions, she had deliberately suppressed
those loan accounts wherein fake jewels were pledged. This would expose the
involvement of the Bank Manager.
12.The learned counsel for the petitioners further submitted that the
customers who have pledged fake jewels while opening their bank account,
have not given their correct address. Therefore, the proof of identity and address
were not verified by the Bank Manager. In fact, these account holders were
introduced by the jewel appraiser himself. He had further submitted that three
borrowers had repeatedly pledged the same jewels and borrowed huge loan
amount from the very same branch. If the Bank Manager had verified the
genuineness of these transactions, during the normal course of business, it
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would have come to light. Therefore, there was gross negligence on the part of
the Branch Manager.
13.The learned counsel for the petitioners further submitted that one
A.M.Jawahar had borrowed jewel loan by pledging substandard jewels on
28.12.2013 in respect of three loan transactions on the same date. These three
loan transactions have been renewed in the name of one Mr.Abdul Hameed on
02.07.2015. This is clearly in violation of the Bank norms by changing the name
of the borrower under the guise of renewal.
14.The learned counsel for the petitioners further submitted that during 81
enquiry, it has been specifically found that the jewel appraiser has committed
serious financial irregularities and misappropriation of funds. In fact, the Branch
Manager in connivance of the said jewel appraiser had sanctioned the said loan
by obtaining fake jewels. The Bank had sustained huge loss. The learned
counsel had further submitted that as per circular issued by the Head Office, the
Branch Manager has to sanction loan only after verifying the quality of the
jewel and the quantum of the loan amount has to be decided taking into account
the weight of the jewels. The Branch Manager is responsible for the day to day
administration and over all control of the concerned branch. Therefore, there
was a breach of trust and negligence on the part of the Branch Manager.
15.The learned counsel for the petitioners further submitted the
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Co-operative Tribunal has erred in exonerating the Branch Manager merely on
the ground that she did not have any personal knowledge about the pledging of
the fake jewels. It is the duty of the Branch Manager to verify whether the loan
amount is being disbursed by pledging of 22 carrot gold jewels. The dispersal of
loan based on the fake jewels had taken place only with the connivance of the
first respondent. Hence, he prayed for setting the order of the Co-operative
Tribunal and to restore the award passed under Section 87 of the Co-operative
Societies Act.
16.Per contra, the learned Senior Counsel appearing for the first
respondent herein had contended that the officer who conducted surprise
inspection has recorded a categorical finding that the jewels are of substandard.
Therefore, the allegation that the Branch Manager has sanctioned jewel loan
based on fake jewellery is factually incorrect. He further submitted that the
jewel appraiser alone is a technically qualified person to assess the standard of
gold. He was appointed by the Head Office. Only based upon his certificate,
jewel loan has been sanctioned by the Manager. Therefore, the allegation of
collusion or connivance on the part of the Branch Manager is not correct.
17.The learned Senior Counsel appearing for the first respondent further
contended that in fact the first respondent herein is a whistle-blower. She was
the first to inform about the misappropriation to the police authority on
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25.02.2016. However, the complaint was not taken on file by the Commissioner
of Police, Trichy. She was directed to send the same through the Head Office.
Accordingly, she was forced to send a letter to the Head Office on 29.02.2016.
In such circumstances, the allegation as against the Branch Manager is not
sustainable in the eye of law.
18.The learned Senior Counsel appearing for the respondent further
contended that CBCID enquiry was initiated as against the first respondent and
later, the name of the first respondent was dropped in the final report after
analysing the material on record and the sequences of events. On the similar set
of facts, the authorities cannot proceed under Section 87 of the Co-operative
Societies Act. The learned Senior Counsel had further contended that
immediately after it came to the knowledge of the Branch Manager, she had
instructed the customers to redeem the jewel loans. All the jewel loans have
been redeemed, except only one. In such circumstances, there is no financial
loss to the Co-operative Bank.
19.The learned Senior Counsel appearing for the first respondent had
further submitted that no document or material have been produced to show that
she had colluded by the appraiser thereby willfully negligent in discharging her
duties. There is no allegation of any monetary benefits as against the Branch
Manager in dispersal of the jewel loan for bogus gold. The first respondent
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further submitted that in the judgment reported in (2009) 4 MLJ 992 (K.Ajay
Kumar Gosh and others Vs. Tribunal for Co-operative Cases (District Judge
of Kanyakumari District, Nagercoil and another), it has been held that no
liability can be fixed under Section 87 of the Co-operative Societies Act in the
absence of proof that dereliction or willful negligence in discharging her duties
and she was getting monetary benefits by allowing the loan by bogus gold.
20.The learned Senior Counsel appearing for the first respondent had
further submitted that the jewel appraiser alone is a technically qualified person.
He had assessed the jewels and issued a certificate that they are of good quality
and only based upon the said certificate, the loan amount has been disbursed by
her. In such circumstances, the Branch Manager cannot be alleged to have
colluded with the jewel appraiser in disbursement of loan amount. Hence, he
prayed for sustaining the order passed by the Co-operative Tribunal.
21.Heard both sides and perused the material records.
(C).Analysis:
22.The primary ground on which the Co-operative Tribunal had
exonerated the first respondent from the surcharge is that the Branch Manager
was not a technically qualified person to assess the standard of the gold
jewellery. The Branch Manager had relied upon the certificate issued by the
jewel appraiser and has disbursed the loan amount. There was no collusion or
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connivance on the part of the Branch Manager.
23.The findings of the Co-operative Tribunal is not sustainable in the eye
of law for the following reasons:
a)On 08.02.2016 a surprise inspection was conducted in the Bank by the
Branch Inspection Officer. On the same day, the Inspection Officer found that
the jewel loans have been disbursed on the basis of the substandard jewelleries.
The Branch Manager has neither reported the same to the Head Office nor to the
police officials. For the first time, she lodged a police complaint on 25.02.2016
and when the said complaint was not accepted, she has sent a report to the Head
Office only on 29.02.2016. In the meantime, the Branch Manager had taken
pains to contact the customers and requested them to redeem the jewels. The
Branch Manager was successful in persuading all of them except one borrower.
b)The act of the Branch Manager in contacting the customers
for requesting them to redeem the jewels which are found to be of substandard,
instead of reporting the same to the Head Office, would clearly indicate that
there was an attempt on the part of the Branch Manager to suppress the facts. In
case, if she was not aware of the this misappropriation, she would have
immediately reported to the police or the Head Office. This conduct will clearly
reveal the collusion on the part of the Branch Manager with the jewel appraiser.
c)One of the customers who had pledged substandard jewellery namely
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Zakir Hussain has opened Savings Bank account by getting introduction from
the jewel appraiser. This has been endorsed by the Bank Manager. As a Bank
Manager, she should be aware of the norms that an employee of the Bank cannot
introduce or identify a customer as known to him for opening a Savings Bank
Account.
d)One Mr.Jawahar had availed jewel loan by pledging his jewels. Under
the guise of renewal of the jewel loan, the name of the mortgagor has been
changed from Jawahar to Abdul Hameed. This has also been permitted by the
Bank Manager.
e)Though the Bank Manager may not be a technically qualified person to
assess the substandard of gold jewel, if she had verified the introduction given
to the customer who had pledged gold jewel, it could have been prevented. The
three customers have permitted to borrow jewel loan based upon the same set of
jewellery.
f)The three persons who belong to the same family have been permitted to
repeatedly pledge the same set of jewellery again and again for borrowing jewel
loan. Therefore, it is clear that the Branch Manager has been guilty of breach of
trust in relation to the Society. Had she properly verified, the dispersal of
jewellery loan, based on substandard jewellery could have been prevented. The
dispersal of the jewel loan based on substandard jewellery has resulted in
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deficiency in the assets of the society. The Branch Manager had willfully
neglected in not verifying the Savings Bank, opening norms or repeated jewel
loan borrowals by three persons of the same family.
g)The Branch Manager has also willfully neglected to take immediate
action to inform the Head Office about the dispersal of jewellery loan based on
substandard jewellery. In such circumstances, the judgements relied upon by the
learned Senior Counsel appearing for the first respondent are not applicable to
the facts and circumstances of the present case.
24.The Co-operative Tribunal has not properly appreciated these facts and
arrived at an erroneous findings that, merely because the Branch Manager was
not a technically qualified person, she was obliged to sanction the jewel loan
based upon the certificate issued by the jewel appraiser. The conduct of the first
respondent in the context of the circumstances narrated above will clearly
indicate that there was breach of duty and gross negligence on the part of the
first respondent.
(D).Conclusion:
25.In view of the above said deliberations, the order impugned in the
revision petition is set aside and the civil revision petition stands allowed. No
costs. Consequently, connected miscellaneous petition is closed.
09.09.2025
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NCC : Yes/No
Index : Yes/No
Internet: Yes/No
msa
To
1.The Registrar of Co-operative Societies
Poonamallee High Road
Kilpauk, Chennai
2.The Deputy Registrar of Co-operative Societies,
Tiruchirappalli Range
Tiruchirappalli – 20
3.The Co-operative Sub-Registrar
Varaganeri Town
Co-operative Bank
Tiruchirappalli 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
09.09.2025
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