IMPORTANT POINTS
The Registrar has to be satisfied with regard to the necessity for conducting an inquiry as contemplated under Section 68 of the Act. Such subjective satisfaction of the Registrar has to be based on material that is brought to his notice in the course of an audit, inquiry, inspection or the winding up of a society. If the Registrar finds that any person, who is or was entrusted with the organisation or management of the society or who is or has at any time been an officer or employee of the society, has made any payment contrary to the Act and Rules, or has caused any loss or damage to the assets of the society by breach of trust, willful negligence, mismanagement or misappropriation or fraudulently retained any money or other property belonging to such society or has destroyed or caused destruction of the records of the society, he can proceed to the next stage.

JUDGMENT :

The petitioners herein are the members of the Kanakkari Service Cooperative Bank Ltd. No.3831 which is a society registered under the provisions of the Kerala Co-operative Societies Act [hereinafter referred to as the 'Act']. It appears that an inquiry was ordered by the 1st respondent under Section 65(1) of the Act into the working and financial condition of the Society and it resulted in the submission of Ext.P5 report. The report disclosed that the then members of the Board of Directors had caused deficiency in the assets of the society and consequent loss. In exercise of his powers conferred under Section 68(1) of the Act, an officer was authorised to conduct an inquiry into the conduct of such persons. On receipt of notice to appear for hearing as part of enquiry under Section 68(1) of the Act, the petitioners have rushed to this Court seeking the following reliefs:

“(i) Call for the records leading to Ext.P5 and P7 and to quash the same by issuing a writ of certiorari.

(ii) Declare that Ext.P5 inquiry report does not satisfy the fundamental requirements of a report as mandated in Rule 66(5) of the Kerala Co-operative Societies Rules and therefore the same is nullity in the eye of law;

(iii) Issue a writ declaring that Ext.P7 order by which Ext.P6 proceedings have been initiated is not a proceedings as contemplated under the Statute and the said order is contrary to what is provided under law.”

2. Sri.George Poonthottam, the learned senior counsel appearing for the petitioners as instructed by Sri.Arun Chandran, the learned counsel, contended that the procedure for the conduct of inquiry and inspection is provided under Rule 66 of the Co-Operative Societies Rules (“Rules'' for short). The Rules mandate that the report shall invariably contain certain details, which details are incidentally lacking in Exhibit P5 report. He points out that the Registrar is bound to pass orders only after giving a reasonable opportunity of being heard to the person concerned particularly in view of Rule 66(5). For failure to comply with the above requirements, the report which is the basis of initiation of proceedings under Section 68(1) cannot be sustained, contends the learned counsel. He would also refer to Exhibit P5 report and it was argued that the report is vague and cryptic and ought not have been the basis of inquiry for ascertaining surcharge.

3. Sri.K.Bimal Nath, the learned Government Pleader has countered the submissions with vehemence. He argued that the notice was issued strictly in tune with the statutory provisions and that being the case, the petitioners have no valid cause of action to challenge the same at this stage as no order prejudicial to the interest of the petitioners has been passed till date. Relying on the report in State of Kerala v. Aravindakshan Nair (2010 (3) KLT 11), it was argued that a hearing under Rule 66 (5) is only for the purpose of determination of the costs of the enquiry and in fixing of the liability and nothing more. He would also profusely rely on the report in Santhosh V v Assistant registrar Co Operative Societies and others (2014 (4) KLJ 397) and it was argued that the petitioners would get sufficient opportunity of being heard under sub section (2) of Section 68 and it is not the law that right of hearing is necessarily to be afforded before any action is contemplated on the basis of a report. Reliance is also placed on an unreported judgment of this Court in W.P.(C) No.888 of 2020 dated 14.1.2020 to bring home his point that only when an adverse order is passed against any of the petitioners under Section 68 (2) of the Act, can they be said to be aggrieved by the order for the purposes of pursuing their remedies.

4. I have carefully considered the submissions advanced by both sides and have gone through the records.

5. It would be relevant to have a glance at Section 68 of the Act and Rule 66(7) of the Rules.

68. Surcharge.-(1) If in the course of an audit, inquiry, inspection or the win