AI Structured Summary
Not yet generated for this judgment
Judgment
The challenge in this writ petition is to the order passed by the second respondent dated 17.08.2006 in proceedings Tha.Thee.3/2006-07, with
a prayer to quash the same. The petitioner was working in the Cooperative Department as Attender and he was promoted as Secretary (In-
charge) of Ambur Co-op. Land Development Bank Ltd. He reached the age of superannuation on 31.3.1997 and he was allowed to retire from
service on the same day. He has also been disbursed with all retirement benefits.
An enquiry was conducted u/s 81 of the Tamil Nadu Co-operative Societies Act, 1983 [hereinafter referred to as ''Act''] in respect of the affairs
of Ambur Cooperative Primary Agricultural and Rural Development Bank and a report was also furnished by the Enquiry Officer on 13.04.2006.
The first respondent ordered for initiation of surcharge proceedings against the employees of the Cooperative Society. As far as the petitioner is
concerned, he was working as Secretary in the said Society and he was also directed to be included in the enquiry proceedings in respect of the
loan disbursed in the year 1995-96. The petitioner has been served with a notice of the second respondent dated 17.08.2006 for initiating
surcharge proceedings u/s 87 of the Act. Being aggrieved against the same, the present writ petition is filed with the above said prayer.
Mr. G. Sankaran, learned counsel appearing for the petitioner put forward twofold contentions, namely,
(1) Surcharge proceedings have been initiated after a lapse of seven years as the alleged transaction said to have been taken place during 1995-
1996 and the enquiry u/s 81 of the Act was conducted and a report was submitted only on 13.04.2006 and even the petitioner was allowed to
retire on reaching the age of superannuation on 31.03.1997 and as per First Proviso to Section 87(1) of the Act, the Department is entitled to
initiate surcharge proceedings within a period of 7 years and the said time limit provided in the said proviso is a mandatory one and therefore, the
proposed surcharge proceedings sought to be initiated against the petitioner is liable to be quashed.
(2) The petitioner was not served with the enquiry report and as such, the impugned show cause notice was issued against the petitioner in violation
of the principles of natural justice and on this ground also, the impugned notice is liable to be quashed.
The learned counsel for the petitioner, in support of such contentions, would place reliance on the following decisions:
(1) H.Rajasekar & Others v. The Deputy Registrar of Cooperative Societies, Krishnagiri & Others reported in 2009-4-L.W.427, referring the
earlier decisions including the decision of the Division Bench of this Court in S.V.K.Sahasramam v. Deputy Registrar of Coop. Societies,
Thiruvannamalai and Others reported in (2008) 8 MLJ 231.
(2) K. Murugan Vs. The Deputy Registrar of Co-operative Societies and Others,
(3) R.Ganapathy v. Deputy Registrar of Coop. Societies (Housing) reported in (2009) 6 MLJ 1066
Per contra, Mrs.P.Rajalakshmi, learned Government Advocate appearing for the respondents 1 and 2 contended that Section 87(1) First
Proviso is only directory and not mandatory and as such, the proposal to initiate surcharge proceedings u/s 87 of the Act on the basis of the
impugned show cause notice is not liable to be quashed. It is further contended that the contents of the enquiry report was also stated in the notice
itself and as such, the petitioner would not have suffered any prejudice.
This Court carefully considered the rival contentions put forward by either side and scrutinized the entire materials available on record including
the affidavit filed by the petitioner, counter filed by the respondents 1 and 2 and the impugned show cause notice dated 17.08.2006.
The core question involved in this matter is to the effect that whether initiation of surcharge proceedings as per the provision u/s 87 of the Act is
barred by limitation and whether the time limit fixed as per First Proviso to Section 87 (1) of the Act is mandatory or only directory.
Before proceeding to consider the said question, it is relevant to incorporate and refer the provision u/s 87(1) of the Act, which reads as follows:
Surcharge:-(1) Where in the course of an audit u/s 80 or an inquiry u/s 81 or an inspection or investigation u/s 82 or inspection of books u/s 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 bye-laws, the Registrar himself or any person specially authorised by him in this
behalf, of his own motion or on the application of the board, liquidatory or any creditor or contributory 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, misapplication of funds, fraudulent retainer, breach of trust or wilful negligence or payments
which are not in accordance with this Act, the Rules or the bye-laws as the Registrar or the person authorised as aforesaid thinks just.
First Proviso to Section 87(1) of the Act reads as follows:-
Provided that no action shall be commenced under this sub-section after the expiry of seven years from the date of any act or omission referred to
in this sub-section.
A bare reading of the above First Proviso to Section 87(1) of the Act would make it abundantly clear that the time limit provided therein is
mandatory.
As far as the case on hand is concerned, the alleged transaction in respect of the allegations levelled against the petitioner said to have taken
place during the year 1995-1996 and the petitioner was also allowed to retire as early as in the year 1997 on reaching the age of superannuation
on 31.03.1997 but the present impugned notice was issued against the petitioner for initiating surcharge proceedings came to be issued only on
17.08.2006 and as such, the impugned notice is clearly barred by limitation as per Section 87(1) First Proviso. However, the learned counsel
appearing for the respondents contended that the said First Proviso to Section 87(1) is not mandatory and the same is only directory and sought to
place reliance on the Division Bench decision of this Court in S.V.K.Sahasramam v. Deputy Registrar of Coop. Societies, Thiruvannamalai and
Others reported in (2008) 8 MLJ 231. It is to be stated that the Division Bench has dealt with only the provision u/s 81 and 81(4) of the Act and
not the provision u/s 87 of the Act.
The above said Division Bench decision (S.V.Sahasramam''s case) was also considered by the learned Single Judge of this Court in
H.Rajasekar & Others v. The Deputy Registrar of Cooperative Societies, Krishnagiri & Others reported in 2009-4-L.W.427. In the said
decision, the learned Single Judge also elaborately considered the nature and scope of First Proviso to Section 87(1) of the Act on the basis of
interpretation of statutes and rules. The learned Single Judge after referring the very provision u/s 87(1) First Proviso, further held as hereunder:
A plain reading of the above proviso to Section 87(1) of the Act, at the first glimpse, would give an ambiguous impression that the time limit
provided therein is mandatory. But, the learned counsel for the respondents would submit that similar time limits provided in second proviso to
Section 87(1) and Section 81(4) of the Act have been held to be only directory by this Court and so, applying the same yardstick, the first proviso
to Section 87(1) of the Act should also be construed to be only directory and not mandatory.
To appreciate the said argument, it is necessary to refer to second proviso to Section 87(1) and Section 81(4) of the Act, which read as
follows:
Second Proviso to Section 87(1) of the Act:-
Provided further that the action commenced under this sub-Section shall be completed within a period of six months from the date of such
commencement or such further period or periods as the next higher authority may permit but such extended period or periods shall not exceed six
months in the aggregate.
81.Inquiry:-(4).The inquiry shall be completed within a period of three months from the date of ordering the inquiry or such further period or
periods not exceeding three months at a time as the next higher authority may permit, provided that such extended periods shall not exceed six
months in the aggregate.
While interpreting Section 81(4) of the Act in W.P.No.20310 of 2007, it was contended before me that the period of limitation provided in
Section 81(4) of the Act is mandatory. But, after analysing two previous judgments of this Court as well as few judgments of the Hon''ble Supreme
Court, I held that the said period provided in Section 81(4) of the Act is only directory and not mandatory. The affirmative language employed in
Section 81(4) of the Act was given due appreciation. Challenging the said order, an appeal was preferred in W.A.No.949 of 2008 in which a
Division Bench of this Court approved the view that the period of limitation provided u/s 81(4) of the Act is only directory and not mandatory.
(Vide S.V.K.Sahasramam vs. Deputy Registrar of Co-operative Societies 2008 (8) M.L.J. 231 . The Division Bench further held that the period
of limitation provided in second proviso to Section 87(1) of the Act is also directory and not mandatory.
It is based on the said view taken by me and the Division Bench, it is contended by the learned counsel for the fourth respondent that the period of
limitation provided in the first proviso to Section 87(1) should also be construed to be only directory and not mandatory. In my considered
opinion, the said contention of the learned counsel cannot be countenanced for the reasons that follow.
A cursory perusal of the first proviso to Section 87(1) of the Act on one side, Section 81(4) of the Act and second proviso to Section 87(1) of
the Act on the other, would go a long way to indicate that in the former, the language employed is affirmative in nature, whereas it is negative in the
later two provisions. From this, it could be understood that the Legislature had intended to draw a distinction between the first proviso to Section
87(1) of the Act and the other two provisions stated above. Had it been the intention of the Legislature that the first proviso to Section 87(1) of the
Act should also be meant to be only directory, nothing would have prevented the Legislature to use similar affirmative language in the first proviso
also. But, the Legislature has deliberately used negative language in the said proviso, which would go to clearly indicate the different intention of the
Legislature. Therefore, the interpretation made to Section 81(4) and second proviso to Section 87(1) of the Act cannot be imported to first
proviso to Section 87(1) of the Act.
At this juncture, let me analyse the Rule of Interpretation in the context of the language used in a statute. In general, the question as to whether a
statute is mandatory or directory, of course, depends upon the intent of the legislature and not upon the language in which the intent is clothed. The
meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by
considering its nature, its design, and the consequences which would follow from construing it the one way or the other. (Vid State of U.P. Vs.
Manbodhan Lal Srivastava, .
Thus, it is not only the language employed, but the intent of the Legislature which makes a particular provision in a Statue either imperative or
directory. A mode of showing a clear intention that the provision enacted is mandatory, is by clothing the command in a negative form. Prohibitive
or negative words can rarely, if ever, be directory. And this is so even though the statute provides no penalty for disobedience. (Vide Haridwar
Singh Vs. Bagun Sumbrui and Others, S.N.. Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a
statute imperative. (Vide M. Pentiah and Others Vs. Muddala Veeramallappa and Others, .
Based on the above rules of interpretation, from the negative language employed, the Hon''ble Supreme Court has held that Section 80 of the
Code of Civil Procedure, 1908 (Vide AIR 1927 176 (Privy Council) Section 87-B of the Code of Civil Procedure, 1908 (Vide AIR 1938 165
(Privy Council) , Section 77 of the Railways, Act, 1890 (Vide Governor General in Council Vs. Musaddi Lal, , Section 15 of the Bombay Rent
Act, 1947 (Vide Waman Shriniwas Kini Vs. Ratilal Bhagwandas and Co., , Section 213 of the Succession Act, 1925 (Vide Mrs. Hem Nolini
Judah (since deceased) and after her Legal Representative Mr. Marlean Wilkinson Vs. Isolyne Sarojbashini Bose and Others, , Section 5-A of the
Prevention of Corruption Act, 1947 (Vide H.N. Rishbud and Inder Singh Vs. The State of Delhi, , Section 7 of the Stamp Act, 1899 (Vide AIR
1925 83 (Privy Council) , Section 108 of the Companies Act, 1956 (Vide Mannalal Khetan and Others Vs. Kedar Nath Khetan and Others, ,
Section 20(1) of the Prevention of Food Adulteration Act, 1954 (Vide A.K. Roy and Another Vs. State of Punjab and Others, and Section 55 of
the Wild Life Protection Act, 1972 (Vide State of Bihar Vs. Murad Ali Khan and Others, as mandatory. Recently, while analysing the negative
language employed to the proviso to Section 33(2)(b) of the Industrial Disputes Act, 1947, the Hon''ble Supreme Court has held that it is
mandatory (Vide Jaipur Zila Sahakari Bhoomi Vikas Bank Ltd. Vs. Ram Gopal Sharma and Others, .
Applying the above principle laid down by the Hon''ble Supreme Court in various judgments cited supra, if the deliberate negative language
employed in the first proviso to Section 87(1) of the Act is analysed in the light of the affirmative language employed in Section 84(1) and second
proviso to Section 87(1) of the Act, the intent of the legislature could be perceived that the Legislature has prescribed the time limit only as
mandatory.
I respectfully agree with the above said view taken by the learned Single Judge of this Court by elaborately considering the provisos 1 and 2 to
Section 87(1) of the Act coupled with the principles of interpretation of statutes and also referring the decisions rendered by the Division Bench of
this Court in S.V.Sahasramam''s case and other decisions of the Hon''ble Apex Court and ultimately arriving at the conclusion to the effect that the
First Proviso to Section 87(1) of the Act as mandatory.
A similar view was taken by another learned Single Judge of this Court in R.Ganapathy v. Deputy Registrar of Cooperative Societies
(Housing), Tirunelveli and Another reported in (2009) 6 MLJ 1066, holding that First Proviso to Section 87(1) is mandatory and any surcharge
proceeding initiated beyond the period of 7 years from the date of the transaction is liable to be quashed.
In yet another decision in K. Murugan Vs. The Deputy Registrar of Co-operative Societies and Others, a question was raised to the effect that
whether First Proviso to Section 87(1) of the Act is mandatory or directory and the learned Single Judge of this Court referred the decision
rendered in R.Ganapathy v. Deputy Registrar of Cooperative Societies (Housing), Tirunelveli and Another reported in (2009) 6 MLJ 1066, and
held as hereunder:
The second contention is as to whether the Surcharge proceedings itself was barred by limitation. This Court in R.Ganapathy v. Deputy
Registrar of Co-operative Societies (Housing) (supra) held that in terms of the First Proviso to Section 87 of the said Act, no surcharge action shall
be commenced under sub-section (1) and Section 87, after the expiry of 7 years, from the date of any act or omission referred to, in the said
subsection.
However, to apply the said decision to the facts of the present case on hand, it has to be seen as to whether the Surcharge proceedings have
been initiated, after the time prescribed by the Statutory Authority. The petitioner has not produced the copies of the notices issued by the First
Respondent, prior to the issuance of the notice dated 1.12.1995. Yet from the preamble of the order passed by the First Respondent, it is clear
that though the proceedings were initiated well within time and it is the Petitioner, who has been prolonging the matter by seeking time to submit his
explanation......
18... Therefore, unless and until the Petitioner is able to factually establish that the proceedings are beyond time, the question of applying the
decision of this Court rendered in R.Ganapathy v. Deputy Registrar of Co-operative Societies (Housing) (supra) does not arise. In the case of
R.Ganapathy, referred supra, the petitioner therein was a Special Officer of a Co-operative Society and he retired from service on 30.6.1993 and
during his service, he has sanctioned loans for construction of houses by its members. During 1993, inspection was ordered u/s 82 of the Act and
certain omissions and commissions were found. However, the Petitioner therein was allowed to retire on 30.6.1993 on attaining the age of
superannuation. After his retirement, based on the inspection, surcharge notice u/s 87 of the Act was issued. Though, reply was submitted to the
said notice, authority confirmed the demand and the Appeal filed by the Petitioner therein before the Special Tribunal was also dismissed.
Thereafter, the Petitioner therein approached this Court. Considering the facts of the said case, this Court held that the Petitioner retired from
service on 30.6.1993 and prior to his retirement, the last loan sanctioned by the Petitioner was on 29.12.1990 and though, the inspection u/s 82 of
the Act was conducted in the year 1993, proceedings u/s 87(1) of the Act was initiated only on 6.3.1998. Therefore, this Court held that the
Proviso to Section 87 is attracted and proceedings initiated after the expiry of seven years is without jurisdiction. However, the facts of the present
case are couched differently.
It is pertinent to note that the learned Judge in K.Murugan''s case (cited supra) has not disagreed with the view taken by the another learned
Single Judge of this Court in R.Ganapathy''s case (cited supra) and in the said case, as the proceedings were initiated well within time limit, the said
question was not raised.
Considering the above decisions of this Court coupled with the admitted fact that the surcharge proceedings proposed to be initiated by issuing
the impugned notice was issued only in the year 2006 in respect of the transactions said to have taken place in the year 1995-96 and the petitioner
had retired as early as in the year 1997 and thereby, the impugned notice proposing to initiated surcharge proceedings is liable to be quashed, as
barred by limitation.
This Court is of the considered view that having accepted the first contention put forward by the learned counsel for the petitioner, it is not
necessary to consider the second contention as pointed out earlier.
K.N.BASHA, J
jvm
In the result, this writ petition is allowed and the impugned order passed by the second respondent dated 17.08.2006 in proceedings
Tha.Thee.3/2006-07 is hereby set aside. No costs.