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Judgment
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.