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IN THE HIGH COURT OF KERALA AT ERNAKULAM
N. NAGARESH, J.
Punnoose P.P. S/o P.J. Punnoose - Petitioner
Versus
The Joint Registrar of Co-Operative Societies - Respondent
WP (C) No. 34973 of 2023
Decided On : 10-03-2025
(A) Kerala Co-operative Societies Act - Sections 66(1) and 68(2) - Writ petition challenging surcharge proceedings and revenue recovery notice - Petitioner contended that he was not provided necessary materials for defense during surcharge proceedings, violating principles of natural justice - Court held that the Joint Registrar must provide all relevant materials before proceeding with surcharge under Section 68(2). (Paras 9 , 16 )
(B) Natural Justice - Right to be heard - The court emphasized that affected persons must be given copies of inquiry reports and materials leading to adverse findings before any surcharge proceedings can be initiated. (Paras 9 , 16 )
Facts of the case:
The petitioner, former Secretary of a Co-operative Society, faced surcharge proceedings for discrepancies in fixed deposit collections, leading to a demand for Rs.1,10,66,351/- without being provided necessary materials for defense.
Findings of Court:
The court found that the surcharge proceedings were unsustainable due to the lack of provision of relevant materials to the petitioner, thus setting aside the surcharge and revenue recovery orders.
Issues: The main issues were whether the petitioner was provided necessary materials for defense in surcharge proceedings and the legality of the surcharge order.
Ratio Decidendi: The court ruled that the Joint Registrar must ensure that all relevant materials are provided to the affected person before proceeding with surcharge under Section 68(2), reaffirming the principles of natural justice.
Result: Surcharge and revenue recovery proceedings set aside.
JUDGMENT :
The petitioner is the former Secretary of the Ranni Employees Co-operative Society Limited. He has filed this writ petition seeking to set aside Exts.P1 to P5, P7 and P8.
2. The petitioner states that the Managing Committee of the Society increased collection of Fixed Deposits. The Committee appointed a Collection Agent for daily collection. Thereafter, discrepancies in collection were noted. Though the petitioner complained about the discrepancies, no action was taken. However, the Auditor issued proceedings against the petitioner demanding Rs.4,00,000/- from the petitioner.
3. CC No.375/2013 was filed against the petitioner in the Chief Judicial Magistrate's Court, Ranni. Two other criminal complaints were lodged in the Ranni Police Station. The petitioner was arrested and later released on bail. The Committee suspended him on 04.01.2018 initiating disciplinary proceedings. Ultimately, the services of the petitioner were terminated with effect from 04.01.2018, as per order dated 16.07.2019.
4. In the meanwhile, the Joint Registrar of Co-operative Societies ordered inspection under Section 66(1) of the Kerala Co-operative Societies Act, as per Ext.P1. Ext.P2 report dated 22.03.2018 was submitted by the Unit Inspector. The Joint Registrar, as per Ext.P3 order dated 26.03.2018, ordered a Section 68(1) inquiry. The Assistant Registrar General submitted Ext.P4 report dated 20.05.2018 fastening a liability of Rs.1,10,66,351/- upon the petitioner alone. The petitioner was served with Ext.P5 notice dated 17.07.2018 requiring to submit explanation.
5. The petitioner states that he was under detention in connection with the criminal case during the relevant time and hence did not receive the notice. Later, the petitioner attended a hearing conducted by the Joint Register under Section 68(2), on 14.08.2019.
6. The petitioner states that Ext.P4 report under Section 68(1) is dated 20.05.2018. However, reference No.5 in Ext.P5 show-cause notice refers to another report dated 22.06.2018. Two inquiry reports under Section 68(1) raise suspicion. The petitioner cannot be surcharged on the basis of two reports. The Joint Registrar, however, passed Ext.P7 surcharge order under Section 68(2) dated 18.02.2020 surcharging the petitioner for an amount of Rs.1,10,66,351/-.
7. Now, the Deputy Tahsildar (RR) has issued Ext.P8 demand notice dated 30.03.2023 seeking to recover Rs.1,70,31,266/-. The petitioner submitted Ext.P9 objection.
The Tahsildar (RR), however, issued Ext.P11 reply dated 03.10.2023 stating that revenue recovery proceedings cannot be stalled. The petitioner is challenging the orders passed under Sections 66 and 68 and Ext.P8 notice issued the Revenue Recovery Act.
8. The petitioner states that none of the materials leading to Ext.P2 Section 66(1) report was served on the petitioner. Ext.P5 refers to a report dated 22.06.2018 under Section 68(1). The said report was not served on the petitioner. The petitioner submitted reply requesting the Joint Registrar to furnish materials leading to Section 68 inquiry report to defend the same. However, Ext.P7 surcharge order was passed without providing any materials to the petitioner.
9. The petitioner states that in the judgment in Managing Committee, Chethakkal Service Co-operative Bank Ltd. No.3864 represented by its President v. The Joint Registrar of Co-operative Societies (W.A. No.1340/2021), this Court has held that if the Joint Registrar intends to proceed to the Section 68(2) stage, then he will be under a legal obligation to ensure that copies of Section 65/66 reports and Section 68(1) inquiry report should necessarily be given to the affected person. The surcharge proceedings against the petitioner without providing necessary documents are illegal and unsustainable.
10. The petitioner further states that he has not indulged in any irregular transactions in the Society. He has not caused any misappropriation or loss to the Society. The petitioner can prove the same if relevant materia
The Joint Registrar must provide all relevant materials to the affected person before proceeding with surcharge under Section 68(2) to uphold principles of natural justice.
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The court upheld the finding of willful negligence against the petitioner under the U.P. Cooperative Societies Act, yet remitted the surcharge quantum for reconsideration due to lack of justification....
Surcharge proceedings under Section 68(2) of the KCS Act require specific findings on individual liability and compliance with statutory requirements. Liability cannot be fixed on deceased persons wi....
Liability under Section 68(1) of the Kerala Co-operative Societies Act must be fixed individually, not jointly, ensuring compliance with statutory provisions.
The court upheld the validity of inquiry proceedings under the Kerala Co-operative Societies Act, confirming that affected parties are entitled to a hearing before any adverse action is taken.
The main legal point established in the judgment is that the enquiry under Section 68(1) of the Kerala Cooperative Societies Act can only be against individuals and not a committee, in line with the ....
Point of law: it is clear that, to pass surcharge order under Section 87 of the Act, appellants should have done an actionable wrong either by commission or omission in a deliberate and reprehensible....
Section 68 of the Kerala Co-operative Societies Act allows imposing surcharges on management members for mismanagement, without requiring proof of willfulness, based on statutory obligations.
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