SANJAY KISHAN KAUL, J.

The appellant was employed as a Chief Accountant with the Ambur Co-operative Sugar Mills/first respondent from November 1992 to March 1997. The controversy to be examined in the present appeal commences from an enquiry under Section 81 of the Tamil Nadu Co-operative Societies Act, 1983 (hereinafter referred to as 'the said Act') ordered by the Commissioner for Sugar on 10.04.2000 for the loss caused to the Mill in respect of the period from July 1993 to December 1995. At the relevant point of time, the enquiry was not only against the appellant, but also against the third respondent, who was the Selection Grade Assistant and the fourth respondent, who was working as an Accountant in the Mill.

2. In the aforesaid proceedings, there was allegation of fabrication of documents relating to remittances made to different institutions and the three incumbents were held for having acted negligently to cause loss to the Mill. The remittances which were made from the salary of the employees was deducted in excess of their actual dues and after remitting the actuals to the concerned credit account, the excess was diverted to the personal account of the Selection Grade Assistant/the third respondent. Thus, he was the direct financial beneficiary.

3. The allegation against the appellant was that as the Chief Accounts Officer and as part of duties and responsibilities, she failed to verify and supervise the work of the staff attached to the accounts department and if she had carried out the task of due verification, the occasion for excess deductions, then remittances could not have occurred resulting in the loss to the employees. In pursuance to the enquiry conducted, a report was filed by the Enquiry Officer dated 09.01.2001 recommending for initiation of criminal actions and surcharge proceedings.

4. As a consequence of the aforesaid enquiry report and the loss having been caused, the surcharge proceedings under Section 87 of the said Act were initiated. Suffice to say that in so far as fixation of liability for surcharge from the appellant is concerned, the same could have been based only on ''willful negligence'' as per the said provisions. The relevant provision reads as under:

''87. Surcharge. - (1) Where in the course of an audit under Section 80 or an inquiry under Section 81 or an inspection or investigation under Section 82 or inspection of books under Section 83 or the winding-up of a Society, it appears that any person who is or was entrusted with the organisation or management of the Society or any past or present officer or servant 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 or has caused any deficiency in the assets of the Society by breach of trust or wilful negligence or has made any payment which is not in accordance with this Act, the Rules or the Bylaws, the Registrar himself or any person specially authorised by him in this behalf, of his own motion or on the application of the Board, Liquidator or any creditor or contributor may frame charges against such person or officer or servant and after giving a reasonable opportunity to the person concerned and in the case of a deceased person, to the representative who inherits his estate, to answer the charges, make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate as the Registrar or the person authorised as aforesaid thinks just or to contribute such sum to the assets of the Society by way of compensation in respect of the misappropriation, mis-application of funds, fraudulent retainer, breach of trust or wilful negligence or payments which are not in accordance with this Act, the Rules or the Bylaws as the Registrar or the person authorised as aforesaid thinks just:

Provided that no action shall be commenced under this sub-section after the expiry of seven years from the date of any