Scope of the provisions of Sections 49 and 51 of the Act.

These two writ petitions are filed against the order of the Deputy Registrar of Co-operative Societies, Tirunelveli, holding that the two references A.R.C. Nos. 198 and 199 of 1962-63 fall within the ambit of section 51 of the Madras Co-operative Societies Act (VI of 1932).

The petitioner was the President of the Palamcottah-Tirunelveli Co-operative Stores, Ltd., in 1959-60. On 1st September, 1960 the petitioner found on receipt of the profit and loss account that there was a stock deficit of Rs. 8,000 and a gross loss of Rs. 6,957. The usual annual profit of Rs. 8,700 was not found. The petitioner became suspicious about the conduct of the business of the society and asked the Secretary for particulars regarding the working of the society. On 12th September, 1960 the petitioner placed the matter before the Board of Directors. On 19th September, 1960 he reported the matter to the Deputy Registrar of Cooperative Societies. On 21st September, 1960 the Deputy Registrar directed an enquiry under section 38. An Enquiry officer was appointed and he conducted an enquiry. The officer submitted an interim report. In the meantime on 17th November, 1960 the petitioner submitted his resignation which was accepted on 9th January, 1961. On 23rd March, 1961 the Registrar superseded the Board of Directors as and from 30th March, 1961 under section 43 (1) of the Act. The suits A.R.C. Nos. 198 and 199 of 1962-63 were filed before the Deputy Registrar of Co-operative Societies under rule 15 (2) of the Rules framed under section 65 of the Act. A.R.C. No. 198 of 1962-63 relates to defalcation of a sum of Rs. 4,278-07 which consists of eight excess payments and four bogus payments. It is common ground that the payment was made by the 3rd defendant and the petitioner was impleaded as first defendant as he facilitated the misappropriation by his negligence. A.R.C. No. 199 of 1962-63 relates to a sum of Rs. 3,556-72 which was due to shortage in the remittances of the sale-proceeds in nine fair price shops. In this matter also the petitioner is sought to be made liable as he failed to perform his duties and facilitated the commission of the offence by the third defendant and others.

Before the Deputy Registrar the petitioner took a preliminary objection as to the jurisdiction. He did not file a statement regarding the merits, but contended that on the allegations the enquiry should be under section 49 of Act VI of 1932 and not under section 51.

Section 49 of the Act provides that where in the course of an audit under section 37 or an inquiry under section 38 or an inspection under section 39 or the winding-up of a society it appears that any person who has taken part in the organisation or management of the society or any past or present officer of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society, the Registrar may proceed under this section. Before proceedings under section 49 can be taken, it is necessary that the misappropriation or fraudulent retention or breach of trust in relation to the society should appear in the course of an audit under section 37 or an inquiry under section 38 or an inspection under section 39 or the winding-up of the society. So far as the requirement that the misappropriation should appear in the course of an audit under section 37 or an inspection under section 38 is concerned, there cannot be much dispute that A.R.C. No. 198 of 1962-63 was as a result of only an audit and A.R.C. No. 199 of 1962-63 was as a result of an inquiry under section 38. The position is made clear in A.R.C. No. 198 of 1962-63 where in the plaint it is alleged that the cause of action arose in the year 1961 during the audit when the fraudulent acts were detected. So far as A.R.C. No. 199 of 1963 is concerned, in his affidavit the petitioner has stated that an inquiry under section 38 was ordered on 29th January, 1960, that in pursuance of the order