Point of Law: Surcharge - There is no sale of rubber on a credit basis, and sale of rubber, after accepting a cheque cannot be treated as 'sale on credit'. - There is no loss to society because society initiated criminal and arbitration proceedings in accordance to law

JUDGMENT :

These two writ petitions are connected and therefore, I am disposing of these two writ petitions by a common judgment.

2. The petitioners herein are the members of Alwaye- Kunnathunad Co-operative Rubber Marketing Society Limited No.E- 221, Perumbavoor of Ernakulam district (for short 'society'). The main business of the society is procurement and sale of latex and rubber produces such as rubber sheets. The bye-law of the society is produced as Ext P16 in WP(C)No.13951 of 2018. Clause 27 of the bye-law of the society deals with the sale of rubber. The Board of directors can frame a subsidiary bye-law for the business as per this clause. As per clause 21 of the bye-law, the decisions in connection with the purchasing and marketing duty of the society are done by a purchasing and marketing committee which consists, four members of the Managing Committee. Following clause 27 in the bye-law, the Managing Committee by way of resolution bearing No.95 dated 18.12.1995 framed a subsidiary bye-law, regarding the manner in which the purchasing and marketing committee should function. Ext P2 in WP(C)No.10982 of 2020 is Resolution No.95 dated 18.12.1995. The entire purchase and marketing of the rubber and latex during the period of 2008-2013 is conducted by the purchasing and marketing committee of the society in which petitioners 2, 3, and 5 in WP(C) No.13951 of 2018 were members.

3. The Joint Registrar of Co-operative Societies (General), Ernakulam ordered an inspection u/s.66 of the Kerala Co-operative Society Act (for short KCS Act) in the society alleging that latex had been sold to a dealer by the purchase and marketing committee without approval of the Managing Committee so also without securing sufficient and adequate security. The report says that there was a credit sale, which is not in accordance with the bye-law. Ext P4 in WP(C) No.10982 of 2020 is the report of the Assistant Registrar(General) Aluva under Section 66 of the KCS Act. In the above report, the officer found that the committee members, as well as the secretary, are liable for causing a loss of Rs.50,40,028/- to the society in the rubber trading transaction with M/s.Kallada Rubber Traders. Accordingly, liability was fixed on the petitioners in these writ petitions. Meanwhile, the Joint Registrar concerned issued a notice under Section 32(1) of the KCS Act seeking an explanation as to why the Managing Committee of the respondent society shall not be superseded. A reply was given to the notice under Section 32(1) of the KCS Act. After accepting the explanation from the Managing Committee, the proceedings under Section 32 of the KCS Act were dropped.

4. Even though the proceedings under Section 32 of the KCS Act were dropped, an inquiry u/s.68 (1) KCS Act was ordered and proceedings were issued to that effect by the Joint Registrar. Ext P5(a) in WP(C) No.10982 of 2020 is the proceedings by which the inquiry u/s.68(1) KCS Act was ordered. The petitioners submitted an explanation to Section 68(1) KCS Act notice. But the same was rejected and an order u/s.68(2) of the KCS Act was passed by the Joint Registrar (General) Ernakulam on 23.4.2015. Ext P6 in WP(C) No.10982 of 2020 is the order passed u/s.68(2) of the KCS Act. As per Ext P6 order, liability was fixed on the petitioners in these writ petitions. The petitioner in WP(C) No.10982 of 2020 is serial No.5 in the table shown in the last portion of Ext P6 order. The petitioners in WP(C) No.13951 of 2018 are serial Nos. 10, 2, 3, 6, 4, 7, 8 and 9 respectively in the table shown in the concluding portion in Ext P6 order produced in WP(C) No.10982 of 2020. Aggrieved by the order u/s.68(2) of the KCS Act, the petitioners filed an appeal before the Government u/s.83 of the KCS Act. The Government rejected the appeal filed by the petitioners as evident by Ext P8 in WP(C) No.10982 of 2020. Aggrieved by the order under Section 66(2) and the order of the Government rejecting the appeal filed u/s.83 of the KCS Act, these t