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2001 Supreme(Ker) 596

Judges : B.N.SRIKRISHNA,M.RAMACHANDRAN
Suseelan - Appellant
Versus
State of Kerala - Respondent
Case No : W.A. No. 3824 of 2001
Decided On : 12/03/2001
Advocates Appeared :
Aysha Youseff For Appellant Government Pleader (C.K. Abdul Rahim) & K.K. Babu For Respondents

Headnote:

Kerala Toddy Workers' Welfare Fund Act –Sections 2(c), 4 –Co-operative Societies Act –Section 14 –Issue on personal liability for the default of society –The only question which has been strongly urged before court is that, merely because the appellant happened to be the Secretary of the Co-operative Society, there is no personal liability of the Secretary which can be enforced at the instance of respondents 5 and 6 –This contention appears to be justified – The learned counsel for respondents 5 and 6 strongly relies on the provisions of the Kerala Toddy Workers' Welfare Fund Act to contend that the moment a toddy licence is issued in favour of the society, the President, Secretary and every office-bearer becomes individually 'employer' of the workers, and, consequently, all of them are liable for making contributions under the said Act –Held, The intention of the statute appears to be to foist only penal liability on the office-bearers whose default results in the co-operative society committing offences punishable under the Act – Court do not see any provision in this Act which imposes civil liability on the office-bearers of the society, nor have court been shown any provision of any other Act, including the Co-operative Societies Act, under which such liability can be foisted on individual office-bearers – In the result, court is of the view that the appellant cannot be made personally liable for the default of the Co-operative society –The revenue recovery proceedings taken against the appellant in his personal capacity are thoroughly misconceived, illegal and untenable –Hence, court allow the Writ Appeal, set aside the order of the learned Single Judge and quash Exts. P1 and P2 by holding that the appellant is not personally responsible for the dues –Writ Appeal allowed

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points summarized:

  • The appellant served as the Secretary of a registered co-operative society involved in toddy business. The society obtained a licence to operate and was responsible for contributions under the relevant Welfare Fund Act. Due to persistent defaults in contributions, proceedings were initiated against the appellant personally for recovery of dues [15000040120001].

  • The main issue was whether the appellant, merely by being the Secretary, could be held personally liable for the society’s default. The court examined the relevant statutory provisions and found that the definition of 'employer' in the Welfare Fund Act pertains to the society itself, not individual office-bearers [15000040120002][15000040120003].

  • The court noted that the Act contains specific provisions for personal liability only in cases of offences committed by companies or similar entities, where officers can be held liable if they default. However, no such provision was found applicable to the office-bearers of a co-operative society for civil liabilities like contribution defaults [15000040120004].

  • The court emphasized that the legal framework assigns a corporate status to the society, and liabilities are generally the society’s own, unless explicitly stated otherwise. The Act’s provisions for penal and offence-related liabilities do not extend to personal civil liabilities of individual office-bearers for defaulted contributions [15000040120004].

  • Consequently, the court held that the revenue recovery proceedings against the appellant in his personal capacity were illegal and misconceived. The appeal was allowed, the order of the lower court was set aside, and it was declared that the appellant was not personally responsible for the dues of the society (!) .

  • The court clarified that the authorities remain free to proceed against other office-bearers or the society itself to recover dues, following appropriate legal procedures. No costs were awarded (!) .

Let me know if you need further analysis or assistance.


Judgment :-

B.N. Srikrishna, C.J.

Appeal admitted. Notice made returnable forthwith. Respondents 1 to 4 waive service through learned Government Pleader. Respondents 5 and 6 waive service through Mr. K.K. Babu, Standing Counsel for the Kerala Toddy Workers' Welfare Fund Board. By consent, appeal called out for hearing and heard.

2. The appellant is the Secretary of the Karthikappally Taluk Chethu Vyavasaya Thozhilali Sahakarana Sangham Ltd. No. A. 1071. The said society is a co-operative society registered under the provisions of the Kerala Co-operative Societies Act, formed for the purpose of conducting business in toddy. The members of the said society are toddy workers and toddy tappers. The said society obtained a licence to carry on toddy business in a certain shop in Kayamkulam Excise Range for the year 2001-2002. Under the provisions of the Kerala Toddy Workers' Welfare Fund Act every employer is required to contribute certain prescribed percentage of the wages to a provident fund constituted under S.4 of the said Act. There was persistent default in making such contributions, both from employer's and employees 'contributions, though deducted. Consequently, a notice was issued to the appellant for payment of the defaulted amount which runs into about Rs. 10,10,667/. The amount not having been paid by the appellant, revenue recovery proceedings were taken against him vide Exts. PI and P2. The appellant challenges the said revenue recovery proceedings by his Original Petition. The learned Single Judge while dismissing the Original Petition directed certain amount to be paid by the appellant. Being aggrieved, the appellant is before us in appeal.

3. The only question which has been strongly urged before us is that, merely because the appellant happened to be the Secretary of the Co-operative Society, there is no personal liability of the Secretary which can be enforced at the instance of respondents 5 and 6. This contention appears to be justified.

4. he learned counsel for respondents 5 and 6 strongly relies on the provisions of S.2(c) of the Kerala Toddy Workers' Welfare Fund Act to contend that the moment a toddy licence is issued in favour of the society, the President, Secretary and every office-bearer becomes individually 'employer' of the workers, and, consequently, all of them are liable for making contributions under S.4 of the said Act. S.2(c) defines the expression'employer' as under: "'employer' means any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees and includes any person who has a licence for the manufacture, distribution, storage or sale of toddy under the Abkari Act for the time being in force". We are unable to accept the contention that this definition in any way imposes a personal liability on the office-bearers of the co-operative society. The whole idea behind giving a corporate status to the co-operative society is to ensure that the society becomes a juristic person enabled to conduct business. It is true that, more often than not, office-bearers elected to such co-operative societies mismanage them and incur liabilities for the societies. That, however, does not turn the liabilities of the Cooperative Society into personal liability of the office-bearers, unless there is a specific statutory provision to that effect. As far as the definition of 'employer' in S.2(c) is concerned, it applies to a person who 'employs' workers. It cannot be disputed that the person who employs workers is the society, in the instant case, and not any officebearer of the society. Again, the 'contributions' declared under S.4 of the Act are payable by the 'employers'.

5. In contrast, S.15 of the Act specifically provides for personal liability. It provides that if the person committing an offence under the Act is a company, every officer of the company who is in default as well as the company, shall be deemed to be guilty of the offenc



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