Back
2013 Supreme(Mad) 2634
High Court of Judicature at Madras
S. NAGAMUTHU, J.
P. Elias
Versus
The Special Officer, Kumari District Tailoring Women Development Cottage Co-operative Society Ltd.
W.P. Nos. 23530 & 33127 of 2003
Decided on : 26-07-2013
For the Petitioner:U.M. Ravichandran, Advocate.
For the Respondent:A.S. Vijayaraghavan, Advocate, M.S. Krishnan, Senior Advocate.
Section 87 and Section 90 of the Tamil Nadu Co-operative Societies Act, 1983 are overlapping provisions, but Section 87 is a special provision and Section 90 is a general provision. A claim arising out of a transaction may fall both within the ambit of Section 87 and Section 90, but if the claim is based on an audit report, enquiry report, inspection, or investigation under the Act or winding-up of the society, the claim shall be made only under Section 87 and not under Section 90.
Headnote:
CO-OPERATIVE SOCIETIES - SURCHARGE PROCEEDINGS - DISPUTE - DISTINCTION - SCOPE AND AMBIT - SECTION 87 AND SECTION 90 OF THE TAMIL NADU CO-OPERATIVE SOCIETIES ACT, 1983 - INTERPRETATION - OVERLAPPING - MUTUALLY EXCLUSIVE - LOSS CAUSED TO THE SOCIETY BY AN OFFICER BY THE ACT OF MISAPPROPRIATION - WHETHER A DISPUTE TOUCHING THE BUSINESS OF THE SOCIETY IN TERMS OF SECTION 90 OF THE ACT - HELD, YES.
Fact of the Case:
The petitioner, a Special Officer of a Co-operative Society, was subjected to surcharge proceedings under Section 87 of the Tamil Nadu Co-operative Societies Act, 1983, for alleged misappropriation of funds and causing loss to the society. He challenged the proceedings, arguing that the dispute should have been resolved under Section 90 of the Act, which deals with disputes touching the business of the society. The issue before the court was to determine whether Section 87 and Section 90 are mutually exclusive or overlap, and under what circumstances a dispute can be initiated under each section.
Finding of the Court:
The court held that Section 87 and Section 90 of the Tamil Nadu Co-operative Societies Act, 1983 are overlapping provisions, but Section 87 is a special provision and Section 90 is a general provision. To initiate a proceeding under Section 87, it is necessary that it should be preceded by an audit, enquiry, inspection, or investigation under the Act or winding-up of the society. However, no such condition precedent is required for initiating a proceeding under Section 90. The court further held that a claim arising out of a transaction may fall both within the ambit of Section 87 and Section 90, but if the claim is based on an audit report, enquiry report, inspection, or investigation under the Act or winding-up of the society, the claim shall be made only under Section 87 and not under Section 90.
Issues: 1. Whether Section 87 and Section 90 of the Tamil Nadu Co-operative Societies Act, 1983 are mutually exclusive or overlap? 2. Under what circumstances a dispute can be initiated under Section 87 of the Act? 3. Under what circumstances a dispute can be initiated under Section 90 of the Act? 4. Whether the loss caused to the society by an officer by the act of misappropriation is a dispute touching the business of the society in terms of Section 90 of the Act?
Ratio Decidendi: The court interpreted Sections 87 and 90 of the Tamil Nadu Co-operative Societies Act, 1983, and held that they are overlapping provisions, but Section 87 is a special provision and Section 90 is a general provision. The court further held that a claim arising out of a transaction may fall both within the ambit of Section 87 and Section 90, but if the claim is based on an audit report, enquiry report, inspection, or investigation under the Act or winding-up of the society, the claim shall be made only under Section 87 and not under Section 90. The court also held that depending upon the nature of the business of the society, the misappropriation or fraudulent retention of money or other property, or breach of trust, or loss caused to the society, may also constitute a dispute touching the business of the society in terms of Section 90 of the Act provided there is nexus between the business of the society and the act of the individual which resulted in loss.
Final Decision: The court allowed the writ petition in part. It set aside the surcharge award under Section 87 of the Act except for one charge and directed the petitioner to pay the amount awarded under that charge with interest. The court also confirmed the award under Section 90 of the Act and directed the petitioner to pay the amount awarded with interest.
1. Certain important legal issues, such as, ‘whether Section 87 and Section 90 of the Tamil Nadu Co-operative Societies Act’ are mutually exclusive and ‘whether the loss caused to the society by an officer by the act of misappropriation will be a dispute touching the business of the society in terms of Section 90 of the ‘Tamil Nadu Co-operative Societies Act’ etc., have come up for consideration in these writ petitions.
2. The Petitioner in both the writ petitions was the Special Officer of the ‘Kumari District Tailoring Women Development Cottage Co-operative Society Limited’, Nagercoil, (hereinafter referred to as Society ) during the period between November 1988 and August 1994. The said Society is governed by the ‘Tamil Nadu Co-operative Societies Act, 1983’. The Special Officer, who succeeded him, representing the Society, raised a dispute in A.R.C.No.1/94-95 dated 11.12.1995, under Section 90 of the ‘Tamil Nadu Co-operative Societies Act, 1983’ before the Industrial Co-operative Officer / Arbitrator, Valliyur, making the following claims under seven heads:-
(1) On 03.05.1993, the petitioner had received a cheque from TADCO Bank for a sum of Rs.7,000/-and again on 21.08.1993, he received a cheque for Rs.3,000/- from the very same bank. But the petitioner had not accounted the said amount and thus misappropriated the said sum of Rs.10,000/-(1a) In the daily ledger, on two different dates, the petitioner had omitted to account for Rs.100/-and Rs.1000/- respectively for which he was responsible.
(2) He had entered into the account of the Society as though a sum of Rs.900/- was paid to the members on three different occasions. But in fact, he did not pay the same.
(3) For stitching uniforms for the Adi Dravida Children, he had not made payment; but he had entered in the account books as though such payment of Rs.1,60,576.20 was made.
(4) He had purchased materials for a total cost of Rs.1,60,560.20/- in injurious manner thereby causing loss to the Society.
(5) He has entered in the account books as though he had spent Rs.1,32,306.25/-towards various expenses but there were no vouchers available for the same.
(6) He had failed to pay Rs.7,765/- as stitching charges to the Unemployed Women Society though he had entered in the accounts as though the same was paid.
(7) There was difference in the savings bank account until 31.03.1993 to the tune of Rs.12,842/- for which he did not account for.
3. During enquiry, on the side of the Society, as many as three witnesses were examined and eight documents were exhibited. On the side of the petitioner, he was examined as R.W.1 and as many as four documents were exhibited. Having considered all the above, the Arbitrator passed an award on 03.10.1996, wherein, he has held as follows:
(i) For claim under Head No.(1), the petitioner was held liable to pay a sum of Rs.6,930/- and Rs.3,000/-.
(ii) For claim under Head No.(1a), he was held liable to pay a sum of Rs.100/- and Rs.1000/-.
(iii) For claim under Head No.(2) he was held liable to pay a sum of Rs.900/-.
(iv) For claim under Head Nos.(3) and (4) the claim was rejected as the claim was not proved by the Society, however with liberty to hold enquiry under Section 81 of the Act and then to initiate proceeding afresh.
(v) For claim under Head No.(5), he was held liable to pay a sum of Rs.1,21,524.60/-
(vi) For the claim under Head No.(6), the claim was rejected as the claim was not proved by the Society, however with liberty to hold enquiry under Section 81 of the Act and to initiate proceedings afresh.
(vii) The claim under Head No.(7), was dismissed.
4. Thus, the amounts mentioned under the heads (1), (1a), (2) and (5) were directed to be recovered from the petitioner with interest. Challenging the same, the petitioner filed an appeal before the Co-operative Tribunal, Kanyakumari at Nagercoil in C.M.A.(C.S.) No.19 of 1999.
5. In the meanwhile, the Director of Social Welfare ordered an enquiry under Section 81 of the Tamil Nadu
