Orissa High Court
Pradeep Kumar Behera & vs State Of Odisha & Ors. ..... Opposite ... on 7 March, 2025
Author: Aditya Kumar Mohapatra
Bench: Aditya Kumar Mohapatra
IN THE HIGH COURT OF ORISSA AT CUTTACK
WP(C) No.4472 of 2025
Pradeep Kumar Behera & ..... Petitioners
Ors.
Represented By Adv. -
Shri Upendra Kumar
Samal, Sr. Adv.
-versus-
State of Odisha & Ors. ..... Opposite Parties
Represented By Adv. -
Shri Pitambar Acharya,
Advocate General being
assisted by Mr.S.K.Parhi,
A.S.C. (For O.P. Nos.1 to
4)
Tapan Kumar Biswal,
Adv. for Caveator
WP(C) No.5252 of 2025
Surya Narayan Sahoo ..... Petitioner
Represented By Adv. -
Shri Jana Kalyan Das, Sr.
Adv.
-versus-
State of Odisha & Ors. ..... Opposite Parties
Represented By Adv. -
Shri Pitambar Acharya,
Advocate General being
assisted by Smt.Sasmita
Nayak, A.S.C. (For State-
O.Ps.)
Page 1 of 17.
CORAM:
THE HON'BLE MR. JUSTICE ADITYA KUMAR
MOHAPATRA
ORDER
07.03.2025
W.P.(C) No.4472 of 2025 with I.A. No.2562 of 2025
&
W.P.(C) No.5252 of 2025 with I.A. No.3007 of 2025
Order No.
03. 1. Both the above noted writ applications which are taken up on
board today involves similar set of facts and identical questions of
law. Therefore, both the writ applications were taken up together for
admission hearing.
2. Heard Shri U.K. Samal, learned Senior counsel appearing for
the Petitioners in W.P.(C) No.4472 of 2025 and Shri J.K. Das,
learned Senior Counsel appearing for the Petitioner in W.P.(C)
No.5252 of 2025 and Shri Pitambar Acharya, learned Advocate
General along with Shri S.K. Parhi & Smt. Sasmita Nayak, learned
Additional Standing Counsels appearing for the State-Opposite
Parties. Perused the writ applications as well as the documents
annexed thereto.
3. W.P.(C) No.4472 of 2025 has been filed by the elected
members of the managing committee of Nayagarh District Central
Cooperative Bank, Ltd. challenging Order No.2491 dated 07.02.2025
passed by the learned Registrar, Cooperative Societies, Odisha
thereby suspending the elected Committee of Management of the
Opposite Party-Bank. The Petitioners have further prayed for
quashing the impugned suspension order dated Order No.2491 dated
07.02.2025 to the writ application and a further prayer for issuance
of a writ of mandamus directing the Opposite Party No.2 to conduct
the enquiry as per the OCS Act, 1962.
4. Similarly, W.P.(C) No.5252 of 2025 has also been filed by
another set of elected members of the Committee of Management of
Naygarh District Central Cooperative Bank, Ltd., being aggrieved by
the very same order dated Order No.2491 dated 07.02.2025 passed
by the learned Registrar Cooperative Societies, Odisha. The
Petitioner has further prayed for quashing the impugned suspension
order dated Order No.2491 dated 07.02.2025 and further for issuance
of a writ of mandamus directing the Opposite Party No.2 to conduct
the inquiry as per the OCS Act, 1962.
5. The factual matrix involved in both the writ applications, in
short, is that the Nayagarh District Central Cooperative Bank, Ltd. is
a cooperative society registered under the Odisha Cooperative
Societies Act, 1962 with a prime objective to provide banking
facilities to its members and other farmers. The said Cooperative
Bank has also received licenses from the Reserve Bank of India for
such banking activities. On 22.09.2022, the Election Officer of the
NDCCB Ltd. issued a notification with regard to holding of election
of members of the committee of management of the above noted
bank. As per the election schedule notified, 30.10.2022 was the date
for declaration of the result and the managing committee to take over
the charge of the bank. Thereafter, the new elected members of the
Committee of Management of the bank took over charge and they
were discharging their duties.
6. While the matter stood thus, a complaint petition was received
from one Nasir Ahmed on 25.06.2024. The very same person lodged
another complaint on 30.07.2024 before the MLA, Ranpur with a
copy to the RCS, Odisha alleging commission of illegal activities by
the Committee of Management of the NDCCB, Ltd. with a prayer to
initiate an inquiry under Section 65 of the OCS Act. The RCS,
Odisha vide his letter no.13051 dated 05.08.2024 directed the DRCS,
Nayagarh Division to conduct an inquiry on the complaint lodged by
the above named complaint under Section 65 of the OCS Act and to
furnish a report in that regard. Another letter was also issued on
15.10.2024 by the RCS, Odisha to conduct an inquiry into the
allegation under Section 65 of the OCS Act with regard to the
allegation made in the complaint petition dated 25.06.2024.
7. While the inquiry under Section 65 of the OCS Act was going
on, another complaint was lodged by the CEO of the NDCCB, Ltd.
vide his letter no.1764 dated 02.11.2024 before the RCS, Odisha. It
is alleged by the Petitioners that the nature of allegations involved in
the complaint petition dated 30.07.2024 under Annexure-3 and the
complaint petition dated 05.08.2024 under Annexure-4 are almost
identical to the complaints involved in the complaint petition dated
02.11.2024 made by the CEO of the NDCCB, Ltd. under Annexure-
6 to the writ application. On the basis of the aforesaid allegation, the
Special Secretary to the Govt. Cooperation Dept. suo moto issued
letter dated 27.12.2024 to the Joint Secretary Cooperation Dept.,
Joint RCS and Joint AGCS to make a joint inquiry into the allegation
of financial irregularities by the Committee of Management of the
NDCCB, Ltd. Another letter dated 06.01.2025 was also issued by the
Joint Secretary to the Govt. to the President of the Committee of
Management of the NDCCB, Ltd. for formation of a joint inquiry
team. While this was the position, the Committee of Management of
NDCCB, Ltd. on 06.01.2025 resolved to approach the RCS, Odisha
to conduct an inquiry under Section 65 of the OCS Act with regard
to the allegation of financial irregularities, particularly, with regard
to the huge income tax demand that was levied on the bank and the
loss sustained by the bank in the previous years. Such resolution also
contains similar set of allegations as has been made by one Nasir
Ahmed, the complainant, referred to hereinabove. Further, a request
was also made to the RCS, Odisha to conduct a special audit under
section 62 of the OCS Act, 1962. At this juncture, it is relevant to
mention here that the Petitioners had also approached the Opposite
Party No.1 with a request to conduct an inquiry under Section 65 and
the special audit under Section 62 of the OCS Act, 1962.
8. It may not be out of place to mention here that challenging the
decision dated 06.01.2025 of the Joint Secretary Cooperation Dept.,
Govt. of Odisha, the President of the NDCCB Ltd. had earlier
approached this Court by filing a writ petition bearing W.P.(C)
No.916 of 2025 which is still pending for final adjudication. It has
also been alleged in the writ petition that the CEO of the NDCCB,
Ltd. has kept the Registers/ Registers of the Minutes of the Meeting
and other important documents under his custody and the copies
thereof were not provided to the members of the Committee of
Management. As a result, an F.I.R. has been lodged before the
Nayagarh Police Station. In the absence of such important
documents, the Committee of Management of the Bank was not in a
position to file its reply in course of the pending inquiry. As such, it
is alleged by the Petitioners, who are none other than the elected
members of the Committee of Management, that the complainant-
CEO has successfully prevented the Petitioners from filing their
reply in the pending inquiry. The RCS, Odisha, vide his letter dated
20.01.2025, again directed the Deputy Registrar Cooperative Society
Nayagarh Division to conduct an inquiry and present the inquiry
report on the allegation made by the CEO of the bank vide his letter
dated 02.11.2024.
9. Finally, when the above discussed inquiries were pending and
while the previous writ application bearing W.P.(C) No.916 of 2025
was sub-juiced before this Court, the RCS Odisha, vide Order
No.2491 dated 07.02.2025, suspended the Committee of
Management of NDCCB, Ltd. in exercise of the power conferred by
Section 32(7) of the OCS Act, 1962 and thereafter appointed the
Collector, Naygarh as the Administrator to manage the affairs of
NDCCB, Ltd.
10. Learned Senior Counsels representing the Petitioner in both the
writ applications at the outset contended that the suspension of the
Committee of Management vide Order No.2491 dated 07.02.2025 is
an illegal, arbitrary, motivated and high-handed exercise of the power
under Section 32(7) of the OCS Act by the RCS, Odisha.
Furthermore, the RCS, Odisha is required to record his satisfaction in
forming an opinion with regard to the suspension of the Committee
of Management while invoking the power under Section 32(7) of the
OCS Act, 1962. However, despite the aforesaid requirement, no such
satisfaction has been recorded which would support the decision to
suspend the otherwise elected Committee of Management of the
Bank. It was also argued that the grounds on which the Committee of
Management was suspended were existing prior to the Order
No.2491 dated 07.02.2025 and on the basis of such grounds an
inquiry has been ordered to be conducted in terms of the provisions
contained under Section 65 of the OCS Act. Moreover, the basis of
giving a direction to conduct an inquiry under Section 65, which is
on-going, is similar to the grounds of suspension of the Committee of
Management vide Order No.2491 dated 07.02.2025. Therefore,
learned Senior Counsels representing the Petitioners emphatically
argued that the RCS, Odisha, without waiting for the inquiry report
of the inquiry which is going on under Section 65 of the OCS Act,
1962, has illegally and arbitrarily dissolved a democratically elected
Committee of Management. They further asserted that the allegation
made in the complaint as well as the satisfaction recorded in the
Order No.2491 dated 07.02.2025 are all based on vague and baseless
allegations. It was further submitted that the motive behind
suspending a duly elected Committee of Management is malafide
intention of the local politicians who are hostile towards the members
of the Committee of Management. In fact, the learned Senior
Counsels for the Petitioners have also contended that an attempt was
being made to somehow suspend the Committee of Management for
last several months.
11. Additionally, the learned Senior Counsels for the Petitioners
further contended that after detecting the financial irregularities, the
Committee of Management of the NDCCB Ltd. resolved to approach
the RCS, Odisha to conduct an inquiry under Section 65 of the OCS
Act, 1962 for fixation of liability against the erring officials.
Furthermore, the main liability, i.e. the income tax demand, is a result
of accumulation of tax liabilities over the past decade. Therefore, the
present Committee of Management which took over charge in the
year 2022 had no role in such huge accumulation of tax liability. On
the contrary, it was argued that earlier the bank was incurring huge
operational loss. However, after the new Committee of Management
took over charge, they have shown profit in the balance-sheets of the
bank for the last couple of years. Such turn around in the banking
operation is due to the sincere and committed effort made by the
newly elected Committee of Management. With regard to the
payment of professional fee to the Financial Advisor/ Chartered
Accountant, learned Senior Counsels appearing for the Petitioners
contended that the same was done with the due approval of the AGM
of the Bank. Moreover, while deciding such professional fee, the
Committee of Management has not violated any rules or regulations.
Learned Senior Counsels appearing for the Petitioners further
contended that the allegations made are unspecific and no detailed
particulars have been provided to substantiate the allegations made
against the Committee of Management of the Bank. Therefore, such
allegations are highly motivated and baseless.
12. With regard to the suspension of Committee of Management,
learned Senior Counsels appearing for the Petitioners argued that the
impugned Order No.2491 dated 07.02.2025 does not disclose the
necessary satisfaction for formation of such opinion by the RCS,
Odisha, which is a mandatory requirement under Section 32(7) of the
OCS Act, 1962. Moreover, the opinion so formed by the RCS,
Odisha is not only based on the old materials for which an inquiry is
on, but also without waiting for the outcome of such inquiry and
without forming a definite opinion with regard to the fact that the
further continuance of the Committee of Management would be
detrimental to the interest of the Bank, the RCS, Odisha has taken a
undemocratic decision to suspend a democratically elected
Committee of Management which is contrary to the settled principles
of law.
13. Mr. Pitambar Acharya, learned Advocate General representing
the State-Opposite Parties on the other hand contended that serious
allegations have been made against the Committee of Management of
the Bank. He further contended that due to the inefficiency of the
members of the Committee of Management, the Income Tax Dept.
has demanded and levied a penalty to the tune of Rs.362.56 Crores.
Moreover, the allegations made by the complainant are of a very
serious nature and the same clearly speaks of the financial
irregularities that had taken place in the bank. He further contended
that since the bank is handling public money, the allegations of
financial irregularities are serious in nature. As such, the RCS,
Odisha, realising the gravity of the issue, had directed for an inquiry
under Section 65 of the OCS Act, 1962. Since, the inquiry was taking
some time and further keeping in view the interest of the depositors,
a decision has been taken in the shape of the impugned order to
suspend the Committee of Management pending inquiry. In such
view of the matter, learned Advocate General contended that no
illegalities can be found in the conduct of the RCS, Odisha in
suspending the Committee of Management in exercise of his power
under Section 32(7) of the OCS Act, 1962. He further submitted that
while suspending the Committee of Management the RCS, Odisha
has scrupulously followed the relevant provision i.e. the Section
32(7) of the OCS Act, 1962 and the relevant rules. He further
submitted that it would be in the larger public interest that the
Committee of Management should cooperate with the inquiry and
appear before the RCS, Odisha and till such inquiry is concluded, the
members of the Committee of Management be kept away from the
Management of the Bank. Learned Advocate General appearing for
the State-Opposite Parties also supported the decision of the RCS,
Odisha in appointing an Administrator to look after the Management
of the Bank during the aforesaid interregnum period.
14. In course of his argument, Mr. Acharya, learned Advocate
General, laid emphasis on the outstanding income tax dues. In the
said context, he further argued that due to mismanagement of the
Committee of Management of the Bank, the Income Tax Dept. has
levied a total demand of Rs.362.56 Crores. He further contended that
a huge sum of money has been given to the Chartered Accountant
towards consultancy fee by the Committee of Management without
having any such authority to do so. Furthermore, it was also
contended that the decision taken in the Annual General Body
Meeting held on 21.02.2024 is completely illegal and that the same is
not supported by the provisions of the Acts as well as the Rules. He
further argued that the Committee of Management which had taken a
decision to pay the consultancy fee has managed to get it done
indirectly through the AGM in an absolutely illegal manner. On such
ground, learned Advocate General submitted that the impugned
Order No.2491 dated 07.02.2025 suspending the Committee of
Management does not call for any interference by this Court at this
stage and accordingly, no interim order should be passed thereby
interfering with a statutory procedure that has been followed by the
RCS, Odisha while conducting the inquiry.
15. In reply to the contentions raised by the learned Advocate
General, learned Senior Counsels appearing for the Petitioners
contended that the chief allegation against the present Committee of
Management is with regard to payment of the consultancy fee to the
tune of Rs.2 Crores. They further contended that such consultancy
fee was paid on the basis of the decision taken at the AGM of the
Bank. They further clarified that the members of the Committee of
Management are not parties to such AGM of the Bank. Moreover, the
decision with regard to the payment of consultancy fee was taken in
presence of the Govt. nominee to the AGM of the Bank. They further
argued that as per the Bye-laws of the Bank, the Committee of
Management is competent to take a decision with regard to the
expenditure which is likely to be incurred by the Bank. As such, it
was argued that the Committee of Management has not committed
any illegality which would call for any interference by the RCS,
Odisha in the affairs of the bank, particularly, suspension of the
Committee of Management in exercise of the power conferred under
Section 32(7) of the OCS Act, 1962.
16. Having heard the learned Senior counsels appearing from both
sides, on a careful analysis of their submission, further taking into
consideration the materials placed on record, this Court finds that the
issue that is involved in both the writ applications and which requires
adjudication by this Court, is the conduct of the RCS, Odisha in
suspending the duly elected Committee of Management vide his
Order No.2491 dated 07.02.2025 in exercise of his power under
Section 32(7) of the OCS Act, 1962. On a careful examination of the
provisions contained under Section 32(7) of the Act, this Court
observes that the said provision starts with a non-obstante clause.
Further, such provision confers power on the RCS, Odisha to the
extent that if in the opinion of the Registrar, the Committee of
Management of any society is acting in a manner that is prejudicial to
the interest of the society or its members, or has committed such
serious irregularities or illegalities that further continuance of the
committee would be detrimental to the interest of the society, then in
such eventuality the Registrar may at any time suspend the
committee for a period of time not exceeding one year and make such
arrangement as he thinks proper for the management of the affairs of
the society.
17. On a plain reading of the provisions contained in Section
32(7), this Court is of the prima facie view that the same confers
power on the RCS, Odisha to suspend the Committee of Management
pending an inquiry with regard to the irregularities or illegalities,
provided, the Registrar is of the view that further continuance of the
committee would be detrimental to the interest of the society.
Therefore, the formation of an opinion by the Registrar with regard to
the fact that further continuance of the committee would be
detrimental to the interest of the society is an essential pre-condition
to exercise the power under Section 32(7) of the OCS Act, 1962. At
this stage, while considering the interim application of the
Petitioners, this Court is required to examine as to whether on the
basis of the opinion formed by the Registrar, as is evident from the
Order No.2491 dated 07.02.2025, his subsequent conduct in
suspending the Committee of Management under Section 32(7) of
the OCS Act, 1962 is justified or not. Coming back to the formation
of opinion in Order No.2491 dated 07.02.2025, this Court observes
that the grounds taken therein are almost identical to the allegations
made earlier in the complaint by one, Nasir Ahmed. Moreover, an
inquiry has been ordered on the basis of such complaint petition of
the above named Nasir Ahmed. Such inquiry is required to be carried
out under Section 65 by the Registrar. On a perusal of Section 65, it
is further observed that the same confers a very wide power on the
Registrar to conduct an inquiry into the constitution, working and
financial condition of the society. Furthermore, such inquiry can be
initiated by the Registrar either of his own motion or upon receipt of
a complaint by the society itself or by the majority members of the
Committee. In the present case, it appears that the Registrar had
earlier directed to conduct an inquiry under Section 65 on his own
motion. The striking feature between two inquiries ordered i.e. the
one under Section 65 and the other one under Section 32(7) of the
Act is that the allegation in both the cases are almost identical. Thus,
the same raises a doubt with regard to the exercise of the power
under Section 32(7) by the RCS, Odisha, in suspending a duly
elected Committee of Management.
18. While considering the grant of interim relief in the
Interlocutory Applications, this Court is conscious of the fact that no
such interim order could be passed by this Court which would be
tantamount to issuance of a mandamus at the interim stage granting
an interim relief which is akin to the final relief sought for in both the
writ applications. In such eventuality, there is every likelihood that
both the writ applications might become infructuous. Moreover, there
are a catena of judgments of the Hon'ble Supreme Court as well as
this Court that such type of interim order granting final relief by way
of an interim order should not be ordinarily passed in both the writ
applications. However, there are exceptions to the aforesaid general
principle. This Court, while exercising the writ jurisdiction under
Article 226 and 227, is of the view that there exists a strong prima
facie case in favour of the Petitioners and the balance of convenience
heavily leans in favour of the Petitioners and unless the interim order
is passed there is every likelihood that the impugned conduct would
cause irreparable loss and in rarest of the rare cases, this Court can
grant the interim relief which would be tantamount to issuance of a
writ of mandamus akin to the one prayed for by the Petitioners as a
final relief. Normally, in these types of cases, this Court would not
have interfered. However, considering the factual background in
which a coercive power under Section 32(7) of the OCS, Act has
been exercised by the RCS, Odisha, this Court is of the considered
view that the prayer for interim relief needs a careful consideration
by this Court.
19. With regard to the prima facie case in favour of the present
Petitioners, this Court would like to refer to the judgment of the
Hon'ble Supreme Court in E.S. Bose and Ors. vs. The Managing
Committee, The Vellathooval Service Co-operative Bank Ltd. and
Ors. decided by the Hon'ble Kerala High Court in W.A. No.1021 of
2020 and a connected batch of matters on 31.05.2021, the Hon'ble
Justice C.T. Ravikumar, as his lordship then was, while presiding
over the Division Bench had an occasion to discuss the provisions of
the Kerala Co-operative Societies Act, 1969, the provisions of Kerala
Act are somewhat similar to the Odisha Act. In an identical factual
scenario, the Hon'ble Division Bench of Kerala High Court has held
that the Co-operative Society is expected to function in a democratic
manner through one elected Committee of Management and hence
the same should be the normal rule. The Administration by an
Administrator or an Administrative Committee can be effected in a
co-operative society only rarely and in exceptional circumstances.
Furthermore, the Hon'ble Division Bench has held that the impact of
suspension of a society is that it would deprive the democratically
elected committee of the society concerned from holding the elected
office, to discharge the power & duties, and as such, the power to
suspend a committee of a society should be exercised only in rare and
exceptional circumstances. It has also been held that the suspension
or supersession of a committee of a society is a very drastic stage and
therefore, it could be resorted to only in very exceptional
circumstances by scrupulously following the procedure. While
discussing the legal position, the Hon'ble Division Bench of Kerala
High Court has categorically held that while an inquiry under Section
65 of the Act was pending, the Registrar could not have taken resort
to Section 32 to suspend the Committee of Management.
20. Reverting back to the facts of the present case, this Court
observes that in the Order No.2491 dated 07.02.2025 purported to be
one under Section 32 (1) of the OCS Act, 1962, this Court finds that
the grounds taken therein by the Registrar to form an opinion to
suspend the Committee are almost identical to the allegations which
were made earlier and for which an inquiry under Section 65 has
already been ordered. Although, such inquiry under Section 65 of the
Act is going on, however, the RCS, Odisha without waiting for the
report to be submitted by the Authorised Officer who was conducting
the inquiry, an order has been passed by invoking the provisions of
Section 32 of the OCS Act, 1962 thereby suspending the Managing
Committee. At this juncture, this Court would like to observe that the
harshest remedy in the form of suspension/ supersession of the
Committee of Management could only be taken by the Registrar
provided a preliminary inquiry is conducted with regard to the
allegation made against the Committee of Management and it is
found in such inquiry there are verifiable materials on record with
regard to the allegations made. In the present case, it prima facie
appears that although an inquiry was ordered earlier, however, before
the report could be received a drastic major in the shape of
suspension of a democratically elected body has been taken. As such,
this Court is unable to convince itself with regard to the action taken
by the RCS, Odisha in suspending a democratically elected
Committee of Management.
21. In such view of the matter, in view of the aforesaid analysis of
fact, this Court is of the considered view that these matters require
further consideration by this Court particularly since adjudication is
required of an important issue involved in the present writ
application.
22. Since, the learned State Counsels accept notice on behalf of all
the Opposite Parties. No notice is required to be sent by the Regd.
Post to the Opposite Parties. Extra copies of both the writ
applications as well as the I.A. applications be served on learned
counsels for the State.
23. Learned counsels for the State shall file their counter affidavit
within four weeks after serving a copy thereof on learned Senior
Counsels for the Petitioners.
24. Rejoinder affidavit, if any, be filed within a week thereafter.
25. In view of the aforesaid analysis and the prima facie view of
this Court on the issue involved in the present writ application, this
Court, in the larger interests of justice, is of the view that the
suspension of the Committee of Management in exercise of power
under Section 32(7) of the OCS Act, 1962, which is one of the
harshest remedy, requires examination by this Court.
26. Accordingly, the impugned Order No.2491 dated 07.02.2025
passed by the RCS, Odisha i.e. Opposite Party No.2 with regard to
the suspension of Committee of Management shall remain stayed till
the next date. However, it is open to the Opposite Parties to proceed
with the inquiry under Section 65 of the OCS Act and make every
endeavour to conclude the same as expeditiously as possible,
preferably within a period of two months from today, and if possible
a report of such inquiry be placed before this Court by the next date.
Further, as an interim order, this Court directs that the Committee of
Management shall not exercise any financial power and the interim
arrangement made vide Order No.2491 dated 07.02.2025 thereby
appointing the Collector & District Magistrate, Nayagarh as an
Administrator shall continue with regard to the financial powers of
the Bank till the next date.
27. List this matter in the week commencing from 5th of May,
2025.
( A.K. Mohapatra )
Judge
Anil
Signed by: ANIL KUMAR SAHOO Page 17 of 17.
Location: High Court of Orissa, Cuttack
Date: 07-Mar-2025 19:13:51
