Willful negligence must be established to impose surcharge; mere inaction is insufficient.

ORDER

When the matter came up for hearing, it is submitted by the learned counsel appearing for the petitioner that arising out of the same proceedings, in respect of one J.Jayakumar, the connected Civil Revision petition in C.R.P.No.4618 or 2024 has been allowed.

2. When the charge pertains to the recovery of loan amount and there is no allegation with reference to misappropriation, this Court, after considering the very same charge in respect of the manager, concluded that there was no willful negligence or deliberate act. Therefore, the loss cannot be recovered through surcharge proceedings. The relevant portions of the said order from paragraph No. 6 to 10 are extracted here under:-

“6. As against the petitioner, enquiry was conducted under Section 81 of the Co-operative Societies Act on the ground that, after sanctioning of loan to the small traders, he has not taken any steps to recover the amount in time from the borrowers. It is not disputed that the revision petitioner was working as Branch Manager from 01.12.2011 to 31.08.2016 and during his tenure, he had sanctioned Small Traders loans to the tune of Rs.4,80,575/- to six persons and thereafter, he was transferred to the fourth respondent bank on 01.09.2016. Though he has not taken any steps immediately to recover the loan amount either by arbitration proceedings or some other proceedings, the facts remains that the revision petitioner was transferred on 01.09.2016 itself. As far as the recovery of the loan amount is concerned, though limitation is applicable, the proviso to Section 90(9) (b) of the Act clearly says that notwithstanding anything contained in the Act for limitation, the Registrar may admit the claim, if the applicant satisfies the Registrar that he had sufficient cause for not referring the dispute within such period and the dispute so admitted shall be a dispute which shall not be barred on the ground that the period of limitation has expired. In such circumstances, to fasten the liability on the person, the requirements for initiation of surcharge proceedings under Section 87 of the Act must be established; and the person must be acted in a manner of willful negligence to cause loss to the assets of the society. Therefore, mere inaction on the part of the employee would not suffice to proceed surcharge proceedings against that person.

7. At this juncture, it is worthwhile to note that, in the case of S.Ramadevi Vs. The Special Officer, Ambur Cooperative Sugar Mills, Vadapudupet, Vellore District and others reported in 2016 - 4 - L.W. 452 (W.A.No.1213 of 2008, dated 05.08.2016, arising out of the dispute with regard to the loss caused to the Society, inview of willful negligence on the part of the appellant, a Division Bench of this Court held as follows.

Issue No.3 : Willful negligence

25.The third and the last plea is actually the most crucial as to whether the appellant could be said to have acted with willful negligence. In this behalf, the learned counsel for the appellant has relied upon two judgments of this Court in S.Subramanian vs. The Deputy Registrar of Co-operative Societies (Housing), Cuddalore & others, 2002-3-L.W. 185, and K.Ajay Kumar Gosh and Others vs. Tribunal for Co-operative Cases , (2009) 4 MLJ 992, to contend that when requirements of Section 87 had not been satisfied, which warrants initiation of surcharge proceedings, the liability cannot be fastened. There has to be willful and wanton premeditation with a view to cause loss to the assets of the Society and ''mere negligence cannot be a ground for surcharge and it must be willful negligence or intentional negligence and not mere carelessness or intention or inadvertence or a single lapse by oversight''. We extract the observations in the case of K.Ajay Kumar Gosh, supra, as hereunder:

''19.A detailed discussion has been made by making reference to various judgments on this aspect in another judgment reported in