A. Kadan (died) and Others vs Co-operative Tribunal (Co-Operative cases Special Tribunal) , Deputy Registrar of Cooperative Societies and Special Officer Co-Operative Union Bank Ltd.

Y. Venkatachalam, J.—Invoking Art 226 of the Constitution of India, the Petitioner herein has filed the present writ petition seeking for a writ of certiorari to call for the records relating to CMA No. 298 of 1980 on the file of the Court of the Co-operative Tribunal (Special Tribunal for Co-operative Cases) at Madras, modifying the order of the 2nd Respondent in the proceedings in R.C. No. 2057/69/G dated 30.7.1970 and to quash the same.

In support of the writ petition, the 1st Petitioner herein has filed an affidavit wherein he has narrated all the facts and circumstances that forced him to file the present writ petition and requested this Court to allow the writ petitions prayed for. Per contra, on behalf of the third Respondent a counter affidavit has been filed rebutting all the material allegations levelled against them one after the other and ultimately they have requested this Court to dismiss the writ petition for want of merits.

During the pendency of the writ, the first Petitioner died and the Petitioners 2 to 7 herein who are the legal heirs of the first Petitioner have been impleaded.

Heard the arguments advanced by the learned Counsel appearing for the parties. I have perused the contents of the affidavit and the counter affidavit together with all other relevant material documents available on record in the form of typed set of papers. I have also taken into consideration the various points raised by the learned Counsel appearing for the respective parties during the course of their arguments.

In the above facts and circumstances of the case the only point that arises for consideration in this writ petition, is as to whether there are any valid grounds to allow this writ petition or not.

The brief facts of the case of the Petitioner as seen from the affidavit are as follows: Kotagiri Co-operative Urban Bank Ltd., K..679 Kotagiri, registered under the Tamilnadu Co-operative Societies Act 53 of 1961 was started in or about 1944. The first Petitioner herein became one of the seven directors the President, Vice President and Treasurer were elected. Besides, there were also a paid secretary, an Accountant, a shroff, two clerks and an attendant. All Banking transactions were carried on by the Bank, the same being limited to the members in matter like issue of loans or discounting of bills and cheques. Departmental audit was conduct at the end of every financial year. Under by-law No. 23 of the Bank the president had the general control over all affairs of the Bank. The secretary was responsible for the day-today executive administration of the bank subject to the control of the president. The treasurer had all the custody of the properties including the cash and jewels of the bank and the other paid staff as aforesaid were in charge of the daily banking affairs. The Board of Directors of which he was one used to meet once: in a month or whenever called upon, for considering the General policies of the bank. He was at no time in charge of the day-today administration of the Bank or the maintenance of accounts. While so, during January, 1967, on a report by the Kotagiri Co-op. Stores about certain irregularities in the Bank on 8.5.1967, enquiry u/s 65 of the Tamil Nadu Co-operative Societies Act was ordered by the 2nd Respondent and the Co-operative Sub Registrar (Arbitration), Ootacamund conducted the said enquiry. The first Petitioner was examined on 11.9.1967. In his statement he has set out in clear terms as to how the affairs of the Bank were being conducted, the nature of the business handled and the various duties performed by the employees, the other officers of the Bank and a Director like himself. The secretary of the Bank K. Lingaraj has given a statement, admitting among other facts that deficiency in the assets was only due to the commissions and omissions of the staff members. He has not involved the first Petitioner herein with respect to any of the transaction resulting in loss to the assets of the bank. On the enquiry report dated 9.10.1967 submitted by the Enquiry Officer, a show cause notice u/s 72(1) of the Act was issued by the Joint Registrar, calling upon the first Petitioner herein and other Directors to submit their explanation as to why the Board should not be superseded. Among other things it stated that upto 17.6.1966 the were amount involved in cheques discounted not realised till then He sent his detailed reply on 9.1.1968, specifically denying the outstandings noted against him. The Board was subsequently superseded and the Special Officer was appointed Subsequently the first Petitioner was served with an order dated 17.6.1968 issued by the 2nd Respondent to the effect that his properties referred to in the schedule have been conditionally attached u/s 108 of the Act with respect and to a sum of Rs. 29,787-05p. with further interest and costs regarding a decree to be passed against him in a claim by the 3rd Respondent. The order described the 3rd Respondent as Plaintiff and the Petitioner herein was described as Defendant. But then no case had been filed against him by the 3rd Respondent u/s 73 of the Act, warranting the issue of a conditional attachment order. No notice was given to him earlier by the 3rd Respondent with respect to the claim of an alleged sum of Rs. 29,787.05 P. mentioned in the attachment order. It is contended by the first Petitioner that the said order of attachment issued arbitrarily and without any basis of necessity whatever, has not been subsequently revoked or cancelled by the 2nd Respondent herein. The said properties in his possession and enjoyment are tea garden as located within Kotagiri Town Panchayat and are worth over Rs. 4.5 lakhs at the market value prevailed at the time of filing this writ petition. While so, the 2nd Respondent issued a notice dated 31.12.69 u/s 71 of the Act setting out various charge in the matter of discounting of cheques and bills alleging a total deficit of Rs. l,53,582.71p. to the assets of the bank and claimed that he along with other members of the Board and officers of the bank referred to in the said, notice, were jointly and severally liable to compensate the bank regarding the said deficit amount. He submitted his representation dated 21.1.1970 to the 2nd Respondent. He specifically denied any liability to the bank since he was a mere Director, having nothing to do with the day-to-day administration or the affairs of the bank managed by its paid officers, the secretary and the president. Later the 2nd Respondent passed an order dated 30.7.70 holding him individually liable for payment of Rs. 15,436.71 and jointly and severally liable with the other Directors and officers of the bank for the repayment of a sum of Rs. 89,942.05p. It is his grievance that neither himself nor anyone representing the 3rd Respondent were examined by the 2nd Respondent before passing the order, no proof was adduced relating to his liability and he was not given any opportunity to disprove the same. The well laid principles regarding the conduct of enquiry u/s 71 of the Act were ignored. Principles of natural justice in the matter of fixing his liability were brushed aside. Aggrieved by the said order, the first Petitioner herein filed an appeal in C.M.A. No. 246 of 1970 before the 1st Respondent. By its judgment dated 27.10.1973 the 1st Respondent upheld his contentions that he was not jointly and severally liable to pay the sum of Rs. 89,942.05 pas given in the order. But relating to his individual liability the 1st Respondent held that he was liable to pay a sum of Rs. 14,535.05 as against the sum of Rs. 15,436.15 mentioned in the order of the 2nd Respondent. It is contended by Petitioners herein that the 1st Respondent except for considering the question of limitation as provided in the first proviso to Section 71 of the Act did not consider his other contentions on merits and give its findings thereon. Aggrieved the first Petitioner herein filed a CRP before this Court and this Court remanded the matter for fresh disposal en merits. That time also as his contentions put forward in his grounds of appeal were not considered by the 1st Respondent, the first Petitioner filed another W.P. and by order dated 5.8.1980 in W.P. No. 4370/77, this Court allowed the writ petition and remanded the matter again to the 1st Respondent for fresh disposal in accordance with law and in the light of the evidence in the case. The appeal was thereafter renumbered as C.M.A. No. 298/80 on the file of the Respondent-1. The appeal was finally heard on 20.9.91. It is contended by the Petitioners that on a wholly erroneous appreciation of law and facts, by judgment dated 30.9.1991 the 1st Respondent after rejecting the order of the 2nd Respondent making him liable jointly and severally to pay a sum of Rs. 89,942.0.5p. along with other Directors and officers of the Bank and in modification of the order relating to his personal liability, has decreed that he is liable to pay a sum of Rs. l4,586.05p. with interest at the rate of 12 1/2 per annum from 30.7.1970 till the date of payment. Challenging the said order it is contended by the Petitioners that the 1st Respondent has arrived at its findings without reference to the evidence on record and has arbitrarily fixed the liability on him failing to exercise properly the jurisdiction vested in its and that the conclusions of the 1st Respondent are based on presumptions unsupported by evidence oral and documentary and that therefore this writ petition.

Per contra, it is contended by the third Respondent that it is true that the staff, do attend to the day to day affairs of the bank but the directors have full responsibilities to ensure that the staff discharge their duties properly and that the properties of the bank were safe in the hands of these employees. It is their case that all the ex-officers viz., the committee members have full powers of giving directions and control over the affairs of the bank and hence there is an attempt in the present case to disown the responsibilities, and that as the Petitioner herein is an officer of the bank under Sections 2 (s) of the Tamil Nadu Co-op. Societies Act 53 of 1961 it is in order to call the Petitioner to make good the deficiency to the assets of the bank, caused on account of his omission, fraudulent in action to take proper and prompt action to realise such deficiency. According to them the Petitioner was examined on 11.9.1967 by the enquiry officer and all the facts have been considered and orders passed accordingly.

They contend that the Tribunal has passed the order on 27.10.1973 only after having gone into the merits of the case. It is also their case that due to the misappropriation of the huge amounts and properties belonging to the bank, the Board was superseded and a Special Officer was appointed and that the Petitioner and the staff had colluded in misappropriating huge funds of the bank in the guise of bills purchases A/c. which is really an overdraft facility for the directors to take the funds of the bank and that only with the available records, the Respondent has to recover the amounts from the officers and staff. Thus it is the case of the 3rd Respondent that the Tribunal has passed the order only after having gone into the merits of the case and confirmed the order of the Deputy Registrar of the Co-op Societies, Udagamandalam and that as the first Petitioner herein is an officer of the Bank as defined u/s 2(B) of the Tamilnadu Co-op. Societies Act it is in order to call the Petitioner to make good the deficiency of the assets of the Bank which was caused on account of the Petitioner's omission.

Having seen the entire material available on record and in the facts and circumstance of this case and also from the claims and counter claims made by the rival parties the only grievance of the Petitioners herein is that they are aggrieved by the order of the first Respondent made in C.M.A.

No. 298 of 1980 in and by which the Petitioners 1 herein was made liable to pay a sum of Rs. 14,586.05.p with interest. When the impugned order is challenged by the Petitioners herein on the grounds that the conclusions of the 1st Respondent are based on presumptions unsupported by evidence oral and documentary it is specifically contended on behalf of the Petitioners herein that the court below has failed to appreciate that the show cause notice dated 31.12.1969 issued by the 2nd Respondent is bereft of any details relating to his personal liability and that in the absence of any specific charges against him relating to particular items and his liability therefore the subsequent proceedings fastening personal liability on him with respect to specified items are wholly illegal and unsustainable. His main grievance is that he was not called upon to answer his specific charges fixing liability on him and that even without affording him any opportunity to explain specific items of transaction he has been made liable personally for payment of Rs. 14,586-05.p. in violation of the provision of the act and the principles of natural justice. Whereas it is not the case of the Respondents that such sufficient opportunity was afforded to the first Petitioner before making him personally liable to pay the said amount. But it is only their case that the directors have full responsibilities to ensure that the staff discharge their duties properly and that the properties of the bank were safe in the hands of these employees. It is their case that the Petitioner was examined on 11.9.1967 by the enquiry officer and all the facts have been considered and orders passed accordingly. In this context it is significant to note that after that this matter was remanded to the Respondents two times for fresh disposals. Thereafter only in the appellate stage the Petitioner was able to produce documents in I.A. No. 358/77. Further the Respondents are not able to show on what dates he was further examined. Further when it is the specific case of the first Petitioner herein that the show cause notice dated 31.12.1969 issued by the 2nd Respondent is bereft of any details relating to his personal liability, there is no explanation in this regard from the Respondents and they have simply stated that everything was done in accordance with rules. Further when it is the strong case of the first Petitioner that he was not called upon to answer the specific charges fixing liability on him, it is not the case of the Respondent that the first Petitioner was given sufficient opportunity to explain the specific items of transactions. Therefore it is rightly contended on behalf of the first Petitioner herein that in the absence of any specific charges against him relating to particular items and his liability therefor, the subsequent proceedings fastening personal liability on him with respect to specified items are wholly illegal and unsustainable. It is also significant to note that even after more than one remand the first Petitioner herein has been made liable personally for payment of Rs. 14,586.05 p. contrary to the provisions of the Act and the principles of natural justice. That apart at present the first Petitioner is no more and that therefore there is no chance for proving his case or affording any opportunity to him to put forward his case against the personal liability. Now only his L.Rs. are on record. It is also significant to note that the show cause notice was issued in this regard viz., personal liability on 31.12.1969 and since then the matter is pending before one forum or the other and ultimately during the pendency of the present writ petition, the first Petitioner herein died and now only his legal representatives are on file. Therefore, I see every force in the contention of the Petitioners herein that even without affording the first Petitioner any opportunity to explain specific items of transactions, he has been made liable personally for payment of Rs. l4,586.05.p. in violation of the provisions of the Act and also the principles of natural justice.

Therefore for all the aforesaid reasons and in the facts and circumstances of this case and also in view of my above discussions with regard to the various aspects of this case, I am of the clear view that the Petitioners herein have clearly made out a case in their favour and that therefore the orders impugned in this case have to be quashed as prayed for by them. Thus the writ petition succeeds and the same has to be allowed.

In the result, the writ petition is allowed as prayed for. No costs. Consequently W.M.P. No. 27502/91 is dismissed.