Surcharge proceedings can only be initiated if willful negligence or omission is proved and must be initiated within seven years from the date of the alleged act or omission.

The prayer in this writ petition is to quash the judgment made in C.M.A. (CS) No. 77 of 1999 dated 20.2.2001 on the file of the second respondent.

2. The case of the petitioner is that he served as Special Officer-cum-Sub Registrar of the Samuelpuram Employees Co-Operative Housing Society and he retired from service on 30.6.1993. While the petitioner served as Special Officer of the said Society from 20.12.1989 to 30.6.1993, the Housing and Urban Development Corporation (HUDCO) sanctioned a loan of Rs.30 lakhs to the Society for giving loans for construction of 67 houses by its members. Petitioner was-in-charge of the construction work and the said houses were constructed during the petitioner’s tenure, by utilizing the said sanctioned loan amount.

3. In the year 1993, inspection was ordered under Section 82 of the Tamil Nadu Co-Operative Societies Act, 1983, and during the said inspection, alleged omissions and commissions were found out. Petitioner was allowed to retire on 30.6.1993 on attaining the age of superannuation, without any adverse remarks. According to the petitioner, the said inspection was made behind the back of the petitioner, i.e., after his retirement. Based on the said inspection, surcharge notice under Section 87 of the Tamil nadu Co-Operative Societies Act, 1983, was issued to the petitioner on 3. 1998 for the alleged loss of Rs. 1,89,309/-. The said amount was arrived at seven times more than the actual loss. The petitioner sent reply on 30.3.1998 and stated that after five years of retirement the said notice was issued and therefore one month time was sought, for perusal of the records and to submit his reply. On 6. 1998 petitioner submitted his reply to the notice dated 3. 1998. According to the petitioner, the first respondent without considering the explanation submitted by him, ordered to pay a sum of Rs. 1,69,259.22 insofar as item Nos. 1, 6 and 7 are concerned and exonerated as to the items 2 to 5 are concerned. The Board of Directors were directed to initiate action for recovery of the said amount.

4. Being aggrieved, the petitioner preferred C.M.A. (CS) No. 77 of 1999 before the second respondent under Section 152 of the Act and contended that there was procedural irregularities in the surcharge proceedings and the said appeal was also dismissed on 20.2.2001, thereby the order of surcharge passed by the first respondent was confirmed. The said order is challenged in this writ petition on three grounds viz., copy of the report of inspection made under Section 82 was not furnished to the petitioner and the last sanction of loan having been made on 212. 1990, the period of seven years to initiate any surcharge proceedings expired on 212. 1997 and therefore, the initiation of surcharge proceedings on 3. 1998 is time barred. Further, no willful negligence/omission was proved for ordering recovery under Section 87 of the Act.

5. The first respondent filed counter affidavit by stating that inspection report made under Section 82 was enclosed along with surcharge notice and the petitioner never complained that he was not served with copy of the enquiry report. The petitioner being In-charge of the administration of the affairs of the Society, when commissions and omissions have happened, he is bound to pay the financial loss sustained by the Society. When HUDCO fixed interest at 12.5% p.a., the petitioner fixed Interest at 11.5% and thereby the, Society sustained loss. Similarly, the petitioner paid Rs. 1,00,000/- to the Contractor engaged for the electrical work and the said amount was excessive than estimated amount. Therefore, it is contended that the order of surcharge is just and proper.

6. The learned counsel for the petitioner argued that the surcharge proceedings having been Initiated after the statutory period mentioned under Section 87(1) of the Act, the entire proceedings is illegal and further no willful negligence or omission was proved to initiate surcharge proceedings under Sec