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Judgment
P. Jyothimani, J.—The writ petition is directed against the circular issued by the first respondent, the Registrar of Co-operative Societies
along with the consequential memo issued by the third respondent, Co-operative Bank dated 31.7.2008, by which the petitioner was allowed to
retire on superannuation on 31.7.2008, but relieved on the said date without prejudice to the surcharge proceedings initiated u/s 87(1) of the Tamil
Nadu Co-operative Societies Act. The writ petition is also for direction against the respondents to permit the petitioner to retire from service on
superannuation on 31.7.2008 with all retirement benefits.
Earlier, the petitioner filed W.P. No. 19165 of 2008 against the impugned notice of the third respondent dated 31.7.2008. Since he had no
other particulars and during the pendency of the said writ petition, in the counter affidavit it was informed that the third respondent passed the order
only based on the circular issued by the first respondent wherein it is stated that the District Level Committee has to screen the retirement of
persons employed in the Societies in all cadres, the said writ petition was withdrawn with liberty to file a fresh writ petition and thereafter, the
present writ petition has been filed.
The petitioner was working as a Manager in the third respondent Society, against which an inquiry u/s 81 of the Tamil Nadu Co-operative
Societies Act, 1983 (in short, ""the Act"") was ordered. Subsequent to the inquiry, surcharge proceedings were initiated against the petitioner u/s 87
of the Act on 1.8.2005. The main charge was that the Society granted mortgage loans contrary to the bye-laws to the extent of Rs. 1 crore. The
explanation submitted by the petitioner was rejected and surcharge order came to be passed holding that the petitioner and 24 other persons are
responsible for irregularities.
3(a). Aggrieved by the said surcharge order, the petitioner filed an appeal u/s 152 of the Act, which is pending. The petitioner was due to retire on
attaining the age of 58 years on 31.7.2008. However, the third respondent did not allow the petitioner to retire based on the instructions of the first
respondent dated 29.7.2008, but relieved him from service. In the said order of the first respondent, the surcharge order dated 5.10.2007 passed
u/s 87 of the Act was taken note of and therefore, the entire monetary service benefits due to the petitioner were withheld.
3(b). The said order relieving the petitioner, but at the same time, retaining him in service for disciplinary proceedings is challenged on the ground
that there are no powers available u/s 87 of the Act. The circular of the first respondent dated 5.6.2008, is also challenged as contrary to law and
affecting the fundamental rights of citizens, apart from the grounds that the first respondent has no jurisdiction to issue such circular and such
circular has not been issued in public interest and that as per the bye-laws, the petitioner is entitled to retire and such right cannot be taken away by
the circular issued by the first respondent.
3(c). It is stated that for recovery of amount, the Tamil Nadu Co-operative Societies Act provides a mechanism and the constitution of any such
Committee is illegal and that the payment of gratuity and provident fund amount is a basic right which cannot be detained under any circumstances.
It is stated that the charge memo issued by the third respondent on 27.2.2006 against the petitioner was deliberately kept pending till the date of
retirement in spite of the fact that the circumstance that the enquiry officer has given a finding to drop the charges.
In the counter affidavit filed by the first respondent, it is stated that the circular has been issued as per the powers conferred u/s 181 of the Act in
public interest and it was only based on the said circular, the second respondent, the District Level Committee which was constituted in respect of
officers of the Co-operative Societies, convened a meeting and took a decision not to permit the petitioner to retire on 31.7.2008 pending the
disciplinary proceedings.
In the counter affidavit of the second respondent it is also reiterated that the circular was issued by virtue of powers u/s 181 of the Act, since
crores of rupees were involved in the malpractice committed in the functioning of the third respondent Bank concerning public interest. The Co-
operative Banks, especially the third respondent was established and is functioning with the funds contributed by the public and therefore, under
the statutory provisions of Section 181 of the Act, to control the gross irregularities, the impugned circular was issued. It is stated that the petitioner
by granting loans in an illegal manner, violated the bye-laws and the provisions of law.
In the counter affidavit filed by the third respondent, it is stated that in the inquiry conducted u/s 81 of the Act in respect of functioning of the
third respondent, a gross irregularity in sanctioning of loans to the extent of Rs. 1.05 crores was unearthed and that resulted in the consequential
proceedings u/s 87 of the Act and an award was passed by the Deputy Registrar of Co-operatives for an amount of Rs. 61,68,648/-. It is stated
that the disciplinary proceedings u/s 81 of the Act was initiated and the General Manager of the Bank was dismissed from service and in respect of
the petitioner, the inquiry proceeding was pending and the enquiry officer submitted his report on 23.7.2008 and final order has to be passed.
6(a). It is further reiterated that public interest is involved in this case and therefore, u/s 181 of the Act, the first respondent issued the circular
dated 5.6.2008 constituting the District Level Committee. The third respondent being the appointing authority of the petitioner, issued the
consequential order dated 31.7.2008 which is well within its powers. It is stated that as per the surcharge proceedings, the petitioner and other
officials are jointly and severally responsible for the repayment.
6(b). It is stated that the enquiry officer completed the enquiry against the petitioner and submitted his report on 23.7.2008 and in the meantime,
since the petitioner was to retire on superannuation, the order dated 31.7.2008 was passed.
6(c). In respect of the point raised on behalf of the petitioner that the similarly situated two persons viz., Mr. C. Mani and Mr. N.T. Raviraj were
treated leniently, but the petitioner was targeted and therefore, a discrimination was shown, an additional counter affidavit is filed by the third
respondent stating that the said persons were Special Officers working as Government servants and the Government initiated disciplinary
proceedings against them and not by the third respondent and that the petitioner cannot compare himself with the above said individuals.
Mr. S. Venkataraman, learned Counsel appearing for the petitioner would submit that as far as service condition of the petitioner is concerned,
the same is governed by the bye-laws and if that is so, the powers conferred under the bye-laws cannot be usurped by the first respondent by
issuing the impugned circular, by relying upon the judgment of the Supreme Court in Jaswant Singh Gill v. Bharat Coking Coal Ltd. and Ors.
(2007) 1 SCC (L&S) 584. He would also submit that there is no public interest involved u/s 181 of the Act, in respect of persons who are retiring
on superannuation, by relying upon the judgment of the Apex Court in Co-operative Central Bank Ltd. and Others Vs. Additional Industrial
Tribunal and Others, and also the latest judgment of this Court in Nirvagam, Dharmapuri Mavatta Madhya Kooturavu Vangi, Dharmapuri and
Anr. v. The Presiding Officer, Industrial Tribunal Chennai and Ors. W.P. Nos. 29973 of 2004 and 31944 of 2006 dated 20.11.2009.
On the other hand, it is the contention of the learned Additional Government Pleader that the impugned circular/instructions are in accordance
with Section 181 of the Act. He would rely upon the judgment in Forest Department and Ors. v. Abdur Rasul Chowdhury 2009 (3) LLN 8 (SC).
In the impugned circular issued by the first respondent dated 5.6.2008, the first respondent provided certain guidelines in respect of retirement
of employees of the Co-operative Societies and by forming a District Level Committee. As per the said circular, the District Level Committee was
constituted consisting of the Regional Joint Registrar/Additional Registrars of Co. operative Societies of the concerned Region as the Chairman and
the Managing Director/Special Officer of the District Central Co-operative Bank, Circle Deputy Registrar concerned, The Assistant General
Manager of the District Central Co-operative Bank (Administration) and the Personal Officer to the Regional Joint Registrar of Co-operative
Societies/Additional Registrars of Co-operative Societies of the concerned Region as Members, out of whom the Personal Officer to the Regional
Joint Registrar is made as the Convenor-Member.
The guidelines are in the form of Annexure II to the said Circular, which prescribe that the service particulars of the employees to be retired are
to be obtained six months in advance from the date of retirement and the Committee should scrutinize and find out whether there are any specific
irregularity relating to the affairs of the Society. The annexure also prescribes about the periodical meetings of the Committee to be convened, etc.
The annexure which contains the guidelines is as follows:
Annexure II
1) The Circle Deputy Registrars concerned shall obtain the service particulars of the employee/Officer concerned atleast 6 months in advance from
the date of retirement on superannuation from the society where the employee/officer is working and employer shall also furnish the particulars of
deputation of the employee/officer who are due to retire within next 6 months to the circle deputy registrars concerned.
2) In the Circle deputy Registrars shall scrutinise the particulars and also verify whether any petitions/allegations is pending against such person/any
specific irregularity relating to the affairs of the society and incorporate the same in the list received from the society and send the details to the
member convenor.
3) The member convenor shall place the list of persons who are due to retire on superannuation in the next 6 months before the said committee and
the committee shall take decisions as regards to the course of action to be followed in respect of persons against whom criminal/Surcharge
disciplinary DV & AC/Food Cell Complaints etc. are pending are being contemplated by any such agency on a complaint from members of the
society or from public authority of similar nature.
4) The Committee shall convene the meeting by 3rd week of every month to clear the proposal or otherwise of the person due to retire in the
month, duly recording the reasons therefore.
5) The Committee shall communicate the minutes of the meeting to Registrar within 3 days from the date of such meeting.
6) The decisions taken in the meeting shall also be communicated to the employer concerned within 3 days for taking appropriate action at the
societies end.
7) Any decisions of the Committee which would likely to affect the interest of the person who is due for retirement shall also be communicated to
such person by the employer concerned.
That apart, Annexure-I prescribes a form for furnishing the service particulars of the employees/officers of Co.operative Societies, who are
due to retire within next 6 months, for the purpose of scrutiny by the Committee. The domestic enquiry stated to have been ordered against the
petitioner on 27.2.2006 was pending at the time of superannuation of the petitioner. In addition to that, it is not in dispute that an award in
surcharge proceedings was passed on 5.10.2007 and the same was pending for recovery at the time of superannuation. It was, in those
circumstances, the third respondent employer, by referring to the surcharge proceedings and the award passed u/s 87(1) of the Act dated
5.10.2007 and on the basis that the said amount had to be recovered from the petitioner and by relying upon the District Level Committee''s
resolution dated 29.7.2008, passed the order not allowing the petitioner to retire, however, relieving him without prejudice to the recovery
proceedings under the Act.
On the whole, it is clear that the impugned order of the third respondent by relying upon the Circular of the first respondent has restrained the
petitioner from retiring to face the surcharge proceedings u/s 87 of the Act. The surcharge proceedings u/s 87 must be initiated on the basis of audit
conducted u/s 80, or inquiry conducted u/s 81 or inspection or investigation conducted u/s 82 or inspection of books u/s 83 of the Act. In the
present case, it is not in dispute that the surcharge proceedings against the petitioner as well as other employees were initiated after the inquiry that
was conducted u/s 81 of the Act. Section 81 of the Act which is as follows:
Section 81. Inquiry.- (1) The Registrar may, of his own motion and shall, on the application of a majority of the board or of not less than one-third
of the members or on the request of the financing bank or of the District Collector, hold an inquiry or direct some person authorised by him by
order in writing in this behalf to hold an inquiry into the constitution, working and financial conditions of a registered society or any alleged
misappropriation, fraudulent retention of any money or property, breach of trust, corrupt practice, or mis-management in relation to that society or
into any particular aspect of the working of that society.
(2) The Registrar or the person authorised by him under Sub-section (1) shall have the following powers, namely:
(a) He shall, at all reasonable times, have free access to the books, accounts, documents, securities, cash and other properties belonging to, or in
the custody of, the society and may summon any person in possession of, or responsible for the custody of, any such books, accounts, documents,
securities, cash or other properties to produce the same at any place at the headquarters of the society or any branch thereof.
(b) Where any person summoned under Clause (a) fails or refuses to produce any record or property of the registered society as specified in the
summons, any Metropolitan Magistrate or any Judicial Magistrate of the first class in whose jurisdiction the office of such society or the records
and properties of such society is or are situated, shall, on application by the Registrar, or the person authorised by him under Sub-section (1),
direct the delivery to the Registrar or such person of the possession of the records and properties of such society:
Provided that no such application shall be made by the person authorised under Sub-section (1) without the previous sanction of the Registrar.
(c) He may seize the books, accounts or documents of the society, if he considers that such seizure is necessary to ensure the safety of such
books, accounts or documents or to facilitate his inquiry, and shall give the person from whose custody the books, accounts or documents have
been seized a receipt for the same:
Provided that the books, accounts or documents seized shall be retained by him only for so long as may be necessary for their examination and for
the purpose of inquiry:
Provided further that the books, accounts or documents shall not be retained for more than three months at a time except with the permission of
the next higher authority.
(d) He may summon any person who, he has reason to believe, has knowledge of any of the affairs of the society and may examine such person on
oath and may summon any person to produce any books, accounts or documents belonging to him or in his custody if the Registrar, or the person
authorised as aforesaid has reason to believe that such books, accounts or documents contain any entry relating to transactions of the society.
(e)(i) He may, notwithstanding any Rule or bye-law specifying the period of notice for a general meeting of the society or for a meeting of the
board require any officer or officers of the society to call a general meeting or a meeting of the board at such time and place at the headquarters of
the society or any branch thereof to consider such matters as may be specified by him and the provisions of Sub-clauses (i) and (ii) of Clause (b)
of Sub-section (4) of Section 32 shall apply to any meeting called under this Sub-clause as if it were a meeting called in pursuance of a requisition
under Clause (a) of Sub-section (3) of that section.
(ii) If the officer or officers of the society refuses or refuse or fails or fail to call such meeting or if in the opinion of the Registrar there is no board or
officer or officers competent under this Act, the rules or the bye-laws to call such meeting, or if there be an order of the Registrar or of the Civil
court restraining the board to function, the Registrar or the person authorised by him under Sub-section (1) shall have power to call the meeting
himself and the provisions of Clause (b) of Sub-section (4) of Section 32 and Sub-section (5) of that Section shall apply to such meeting as if it
were a meeting called under Clause (a) of the said Sub-section (4).
(3) When an inquiry is held under this Section the Registrar shall, within such time as may be prescribed, communicate the result of the inquiry-
(i) in case the Government have subscribed directly to the share capital of the registered society or in case any moneys are due from the registered
society either to the Principal State Partnership Fund or to the subsidiary State Partnership Fund referred to in Chapter VI, to the Government or
to any officer appointed by the Government in this behalf;
(ii) to the financing bank, if any, to which the society is affiliated; and
(iii) to the society concerned.
(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.
(5) It shall be competent for the Registrar to withdraw any inquiry from the person authorised by him under Sub-section (1) and to hold the inquiry
himself or entrust it to any other person as he deems fit.
(6) The Registrar may, by order in writing, direct the registered society or any officer of the society or its financing bank to take such action as may
be specified in the order to remedy, within such time as may be specified therein, the defects, if any, disclosed as a result of the inquiry.
The above said Section 81 of the Act enables an inquiry regarding constitution, working and financial condition of the Society including
misappropriation, fraudulent retention of money, breach of trust, corrupt practice, etc. After the inquiry u/s 81 was conducted, admittedly,
surcharge proceedings were initiated u/s 87 of the Act, which also contemplates the mode of recovery including the powers of the Collector under
the Revenue Recovery Act, 1864. While conducting proceedings u/s 87 of the Act, the powers of the Registrar are that of a civil Court. The said
Section 87 is as follows:
Section 87. 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 will-full 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, mis-application of funds, fraudulent retainer, breach of trust or will-full
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:
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:
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.
(2) Without prejudice to any other mode of recovery which is being taken or may be taken under this Act or any other law for the time being in
force, any sum ordered under this Section to be repaid to a registered society or recovered as a contribution to its assets may be recovered as if it
were an arrear of land revenue and for the purpose of such recovery the Registrar shall have the powers of a Collector under the Tamil Nadu
Revenue Recovery Act, 1864 (Tamil Nadu Act II of 1864).
(3) This Section shall apply not withstanding that such person or officer or servant may have incurred criminal liability by his act.
(4) The Registrar or the persons authorised by him shall, when acting under this Section have all the powers of a Civil Court while trying a suit
under the Code of Civil Procedure, 1908 (Central Act V of 1908) in respect of the following matters, namely:
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of any documents;
(c) reception of evidence on affidavits;
(d) requisitioning any public record from any Court or office;
(e) issuing Commission for examining of witnesses.
The question to be considered in this case is, as to whether the inquiry conducted u/s 81 of the Tamil Nadu Co-operative Societies Act by the
Registrar relating to the working and financial conditions of the registered Society would include the dispute regarding service conditions of
employees of the Co-operative Society. Almost in a similar circumstance, in the Andhra Pradesh Co-operative Societies Act, 1964, Section 61
enables the Registrar to decide when a dispute arises regarding constitution, management or business of a society other than the dispute regarding
the disciplinary action taken by the society against its employees. The said Section 61 is as follows:
61.Disputes which may be referred to the Registrar:
(1) Notwithstanding anything in any law for the time being in force, if any dispute touching the constitution, management or the business of a
society, other than a dispute regarding disciplinary action taken by the society or its committee against a paid employee of the society, arises-
(a)....
In that context, a question arose as to whether the Registrar with the powers exercisable u/s 61(1) can decide about the alteration of service
conditions of the employees of the Society and if so, such decision would come within the meaning of the word, ''business'' of the society. The said
question was considered by the Hon''ble Apex Court in Co-operative Central Bank Ltd. and Others Vs. Additional Industrial Tribunal and Others,
, wherein a similar contention was raised on behalf of the society that the Registrar''s power to conduct inquiry regarding the business of the
Society would include a dispute in respect of alteration of service conditions of the employees. By referring to various judgments of the High
Courts including the judgment of a Full Bench of Bombay High Court in Farkhundali Nannhay Vs. V.B. Potdar and Another, , and by applying the
test laid down by the Full Bench of the Bombay High Court, the Apex Court held that the reference of a dispute can be made to the Registrar only
if the dispute is capable of being resolved by the Registrar. The relevant portion of the judgment is as follows:
Applying these tests, we have no doubt at all that the dispute covered by the first issue referred to the Industrial Tribunal in the present cases
could not possibly be referred for decision to the Registrar u/s 61 of the Act. The dispute related to alteration of a number of conditions of service
of the workmen which relief could only be granted by an Industrial Tribunal dealing with an industrial dispute. The Registrar, it is clear from the
provisions of the Act, could not possibly have granted the reliefs claimed under this issue because of the limitations placed on his powers in the Act
itself. It is true that Section 61 by itself does not contain any clear indication that the Registrar cannot entertain a dispute relating to alteration of
conditions of service of the employees of a registered society; but the meaning given to the expression ""touching the business of the society"", in our
opinion, makes it very doubtful whether a dispute in respect of alteration of conditions of service can be held to be covered by this expression.
Since the word ""business"" is equated with the actual trading or commercial or other similar business activity of the society, and since it has been
held that it would be difficult to subscribe to the proposition that whatever the society does or is necessarily required to do for the purpose of
carrying out its objects, such as laying down the conditions of service of its employees, can be said to be a part of its business, it would appear that
a dispute relating to conditions of service of the workmen employed by the society cannot be held to be a dispute touching the business of the
society. Further, the position is clarified by the provisions of Sub-section (4) of Section 62 of the Act which limit the power to be exercised by the
Registrar, when dealing with a dispute referred to him u/s 61, by a mandate that he shall decide the dispute in accordance with the provisions of the
Act and the Rules and bye-laws. On the face of it, the provisions of the Act, the rules and the by-laws could not possibly permit the Registrar to
change conditions of service of the workmen employed by the society. For the purpose of bringing facts to our notice in the present appeals, the
Rules framed by the Andhra Pradesh Government under the Act, and the bye-laws of one of the appellant Banks have been placed on the Paper-
books of the appeals before us. It appears from them that the conditions of service of the employees of the Bank have all been laid down by
framing special bye-laws. Most of the conditions of service, which the workmen want to be altered to their benefit, have thus been laid down by
the bye-laws, so that any alteration in those conditions of service will necessarily require a change in the bye-laws. Such a change could not
possibly be directed by the Registrar when, u/s 62(4) of the Act, he is specifically required to decide the dispute referred to him in accordance with
the provisions of the bye-laws. It may also be noticed that a dispute referred to the Registrar u/s 61 of the Act can even be transferred for disposal
to a person who may have been invested by the Government with powers in that behalf, or may be referred for disposal to an arbitrator by the
Registrar. Such person or arbitrator, when deciding the dispute, will also be governed by the mandate in Section 62(4) of the Act, so that he will
also be bound to reject the claim of the workmen which is nothing else than a request for alteration of conditions of service contained in the bye-
laws. It is thus clear that, in respect of the dispute relating to alteration of various conditions of service, the Registrar or other person dealing with it
u/s 62 of the Act is not competent to grant the relief claimed by the workmen at all. On the principle laid down by this Court in the case of Decan
Merchants Co-operative Bank Ltd. Civil appeal No. 358 of 1967, D/-29-8-1968 = (AIR 1969 SC 1320) (Supra) therefore, it must be held that
this dispute is not a dispute covered by the provisions of Section 61 of the Act. Such a dispute is not contemplated to be dealt with u/s 62 of the
Act and must, therefore, be held to be outside the scope of Section 61.
The provisions relating to the Paid Officers and servants of the Co-operative Societies are dealt with in Chapter VIII of the Tamil Nadu Co-
operative Societies Act, 1983 between Sections 73 and 78. The provisions also deal with the appointment of Paid Officers and Servants of a
registered Society and their conditions of service, as it is seen in Section 73 which is as follows:
Section 73. Appointment of Paid Officers and Servants of a registered Society and their conditions of service.- Subject to the provisions of
Sections 74, 75, 76 and 77 and subject to the Rules made in this behalf, a registered society may appoint such paid officers and servants as are
necessary for the efficient performance of its functions:
Provided that the qualifications for the appointment of paid officers and servants, the conditions of service including disciplinary control and the
cadre strength of such officers and servants of a registered society or class or category of registered societies shall be such as may be prescribed.
Explanation I. For the purposes of this Chapter ""paid officers"" does not include the President, Vice-President and the members of the board.
Explanation II. For the purposes of this Chapter and other provisions of this Act, ""competent authority"" means the competent authority constituted
under Sub-section (3) of Section 75 and includes the single officer referred to in the proviso to the said Sub-section (3) of Section 75.
Section 74 contemplates the powers on the part of the Government to notify and constitute Recruitment Bureaus at the State and District
Levels and Section 75 deals with the constitution of common cadre of service in the co-operative employment which, of course, includes the
power under Sub-section (5) to file appeal to the Registrar and thereafter to the Government, if he is aggrieved by the order of the competent
authority. Section 76 deals with the suspension of paid officers and servants of the Society, while Section 77 relates to the removal of paid officer
or servant of society, who is found guilty or convicted by a competent Court for an offence involving moral turpitude, etc. Section 78 relates to the
provident fund and Section 79 relates to the gratuity, in which it is stated that in cases where for a Society, the Payment of Gratuity Act, 1972 is
not applicable, the bye-laws may provide for gratuity to the employees.
Rule 149 of the Tamil Nadu Co-operative Societies Rules, 1988 relating to conditions of service of paid officers and servants of Societies,
which enables the Society to adopt a special bye-law with the approval of the Government to cover the service conditions of the employees is as
follows:
Rule 149. Conditions of service of paid officers and servants of Societies.- (1) Every society shall, taking into account its nature of business,
volume of transaction and financial position, adopt, [with the prior approval of the Government], a Special bye-law covering the service conditions
of its employees. The special bye-law shall, inter alia, prescribe the following:
(i) Cadre strength and classification of various categories of posts and the qualifications required thereof for each such post.
(ii) The method of recruitment for each such post.
(iii) The scale of pay and allowances for each such post.
(iv) Conditions of probation for each such post.
(v) Duties and responsibilities for each such post.
(vi) Leave of various kinds admissible and the conditions thereto for each such post.
[(vii) The penalties that may be imposed upon, the procedure for taking disciplinary action and inflicting various kinds of punishments on an
employee holding each such post and the authority competent to entertain and dispose of appeals made against an order of punishment imposed by
the competent authority on a disciplinary proceedings.]
(viii) Conditions relating to acquisition and disposal of moveable and immovable property:
Provided that a minimum period of three years of satisfactory service shall be prescribed for eligibility for promotion from one category to the
immediate next higher category of post:
Provided further that the co-operative training at the appropriate level may be prescribed as a necessary qualification for specific categories of
non-technical posts.
(2) No appointment by direct recruitment to any post shall be made except by calling for a list of eligible candidates from the Employment
Exchange and also giving due publicity by means of announcement in the notice board of the society and also of the affiliated societies, inviting
application from the eligible employees of such societies. Where the employment exchange issues a non-availability certificate, the society shall
invite applications by giving advertisement in more than one daily newspaper in which one should be in regional language having wide circulation
throughout the State:
Provided that the above stipulation shall not apply-
(i) to the appointment made on compassionate grounds;
(ii) for the absorption of surplus employees of other cooperative societies;
(iii) to the posts for which a Recruitment Bureau has been constituted u/s 74 of the Act or in respect of which a common cadre of service has been
constituted u/s 75 of the Act.
(3) In matters of reservation for appointments and age for appointment and retirement, the rule applicable to the Government servants shall be
followed.
(4) No person shall be appointed to the service of any society, if he has been found guilty of any offence involving moral turpitude. An employee
shall cease to be as such in a society, if he is found guilty of any such offence.
(5) No person who is a near relative as specified in Rule 63, of a member of the Board or of an officer of a society shall be appointed to any post
in the service of such society. If a doubt arises as to whether a person is or is not a near relative of a member of the board or of an officer of a
society, the board shall refer it to the Registrar for decision.
(6) No employee of a society shall contest or canvass or otherwise interfere or use his influence in connection with or take part in any election to
any Legislature, Parliament or local authority or any institution constituted under any State or Central Act except with the previous permission of
the Board.
(7) (a) No employee shall accept any employment or work elsewhere, whether honorary or otherwise except with the previous permission of the
Board.
(b) No employee shall engage himself in any trade or business outside the scope of his duties either in his name or in the name of any member of his
family or relative except with the previous permission of the Board.
(8) Nothing contained in this Rule, except the items (i), (v) and (viii) of Sub-rule (1) and the provision contained in Sub-rules (5) to (7) shall apply
to a Government servant deputed or a person deputed from any other institution, to the services of any society.
It is stated that the special bye-law so framed shall cover the procedure for disciplinary action, imposing of punishment, etc. Therefore, it is
clear that the service conditions of the employees of the Societies under the Tamil Nadu Co-operative Societies Act are distinct and governed by
the bye-laws apart from the above said Chapter VIII of the Tamil Nadu Co-operative Societies Act.
Now, coming to the powers of the Registrar of Co-operative Societies u/s 181 of the Co-operative Societies Act, it is relevant to extract the
said provision for a better appreciation of the rival contentions. Section 181 is as follows:
Section 181. Power of Registrar to give directions in the public interest, etc.- (1) Where the Registrar is satisfied that in the public interest or for
the purpose of securing proper implementation of co.operative production and other development programs approved or undertaken by the
Government or to secure the proper management of the business of any class of registered societies generally, or for preventing the affairs of any
registered society being conducted in a manner detrimental to the interests of the members, or of the depositors or the creditors thereof, it is
necessary to issue directions to any class of registered societies generally or to any registered society or registered societies in particular, he may,
by order issue directions to them from time to time, and all registered societies or the registered society concerned, as the case may be, shall be
bound to comply with such directions.
(2) The Registrar may, by order, modify or cancel any directions issued under Sub-section (1) and in modifying or cancelling such directions may
impose such conditions as he may deem fit.
A reading of the said Section shows that it no doubt contemplates a power on the Registrar, in public interest, but the issue must be one
relating to the implementation of the co-operative production or proper management of the business of the registered Society. The power can also
be exercised to prevent the affairs of the registered society conducted in a detrimental manner, against the interest of the members or depositors or
creditors. A reading of the said Section makes it clear that the power of the Registrar is general in nature in respect of the functioning of the co-
operative society.
Taking into consideration of the intent behind the co-operative concept as a whole, the said Section is not relating to the procedures for
appointment or disciplinary proceedings in respect of a specific conduct against the employees of the co-operative society, etc., which are specific
in nature for which specific provisions are available under the Co-operative Societies Act and Rules made thereunder, as indicated above. That
was also the view of this Court in T. Mutheeswaran Vs. The Registrar of Co-operative Societies (Housing) Gandhi Nagar, Adayar, Chennai - 20
and three others, , wherein S.S. Subramani, J. held that the power of Registrar u/s 181 of the Co-operative Societies Act are not applicable to the
appointments to the Co-operative Societies which are to be effected within the four corners of Section 73 of the Co-operative Societies Act and
Rule 149 of the Rules framed thereunder. The relevant portion is as follows:
Every appointment will have to be within the four corners of Section 73 and Rule 149. Merely because there is urgency and pressure of work,
respondents 1 to 3 cannot be permitted to do an illegal act. Respondents 1 to 3 are also claiming the right only under the Act and their source of
power is also only under the Tamil Nadu Co-operative Societies Act and Rules.
Learned Counsel for respondents at that juncture submitted, even though there may not be any provision for appointment of such persons,
Section 181 of Tamil Nadu Co-operative Societies Act empowers the Registrar to give necessary instructions in public interest and the
appointment of 4th respondent could be justified under that Section I fail to understand such an agreement. Section 181 of Tamil Nadu Co-
operative Societies Act reads thus:
Section 181. Power of Registrar to give directions in the public interest, etc.- (1) Where the Registrar is satisfied that in the public interest or for
the purpose of securing proper implementation of Co-operative production and other development programs approved or undertaken by the
Government or to secure the proper management of the business of any class of registered societies generally, or for preventing the affairs of any
registered society being conducted in a manner detrimental to the interests of the members, or of the depositors or the creditors thereof, it is
necessary to issue directions to any class of registered societies generally or to any registered society or registered societies in particular, he may,
by order issue directions to them from time to time, and all registered societies or the registered society concerned, as the case may be, shall be
bound to comply with such directions.
(2) The Registrar may, by order, modify or cancel any directions issued under Sub-section (1) and in modifying or cancelling such directions may
impose such conditions as he may deem fit.
These are general powers given to the Registrar to give directions in public interest. When there is specific provision Section 73 and Rule 149,
general provision u/s 181 cannot be applied.
I do not think that u/s 181 of the Act any appointment could be made when directions are for the purpose of proper implementation of
Co.operative program or to issue directions to prevent the affairs of registered society from being conducted detrimental to the interest of the
society. It has nothing to do with the appointment of Secretary or a paid servant to the Society. The impugned order is therefore bad.
Therefore, the general powers given to the Registrar in public interest u/s 181 of the Tamil Nadu Co-operative Societies Act would not certainly
cover the appointment and service conditions of the servants of the Co-operative Societies.
The intention of the first respondent in the constitution of District Level Committee as per the impugned circular for the purpose of settlement of
pensionary benefits at the earliest point of time immediately after the retirement of co-operative servants may be laudable, but such powers are not
certainly available to the first respondent, the Registrar of Co-operative Societies in respect of service conditions of the employees of the Co-
operative Societies, by applying Section 181 of the Tamil Nadu Co-operative Societies Act. Therefore, the contention on behalf of the
respondents made by the learned Additional Government Pleader that Section 181 of the Act is the source of powers for the first respondent to
issue the impugned circular cannot be accepted.
It is relevant to point out at this stage that in a situation like the present case wherein enormous amounts of co-operative society have been
either misused or misappropriated, for which surcharge proceedings have been initiated, it is not as if the respondents are left in lurch and there are
adequate powers available u/s 87 of the Act for the recovery of surcharges which may be imposed on the persons concerned whether such person
is in employment or otherwise. In addition to that, if the bye-law framed in accordance with Rule 149 of the Co-operative Societies Rules
governing the third respondent, contemplates such powers on the part of the authorities to proceed with disciplinary proceedings, the same can
always be enforceable in accordance with the said bye-law, subject to the law relating to the maintainability of such disciplinary proceedings after
the person is allowed to be relieved. But, certainly, the impugned circular cannot be used for the purpose of preventing the petitioner from retiring
from service on attaining superannuation till the finalization of disciplinary proceedings, unless the bye-laws framed in respect of third respondent
society covers the appointment of the petitioner or the provisions of Chapter VIII of the Co-operative Societies Act enables such an act.
In the absence of any such power on the part of the first respondent and the third respondent to pass the impugned orders, certainly the
valuable rights of the petitioner have been taken away at least in respect of payment of gratuity, as it was held by the Supreme Court in Jaswant
Singh Gill v. Bharat Coking Coal Ltd. (2007) 1 SCC L & S 584 wherein it was held by referring to Coal India Executives'' Conduct Discipline
and Appeal Rules, 1978, that if an employee is allowed to retire on attaining the age of superannuation, even after initiation of disciplinary
proceedings, major punishment cannot be imposed on him because, in respect of gratuity a statutory right accrues on the employee which should
prevail over the Rules. The relevant portion of the judgment is as follows:
The Rules framed by the Coal India Limited are not statutory rules. They have been made by the holding company of respondent 1. The Payment
of Gratuity Act was enacted with a view to provide for a scheme for payment of gratuity to the employees engaged inter alia in mines. The Act
provides for a close knit scheme providing for payment of gratuity. It is a complete code containing detailed provisions covering the essential
provisions of a scheme for a gratuity. It not only creates a right to payment of gratuity but also lays down the principles for qualification thereof as
also the conditions on which he may be denied therefrom. A statutory right accrued, thus, cannot be impaired by reason of a rule which does not
have the force of a statute. The provisions of the Act, therefore, must prevail over the Rules.
It is certainly true that under such circumstances, if the bye-law framed by the third respondent Society does not contain any provision to meet
the above situation which can only be said to be an unfortunate situation, that cannot be a ground to bypass the procedure. In such view of the
matter, I am not able to accept any of the contentions raised on behalf of the respondents and looking at any angle, there is no justification on the
part of the respondents to interfere with the rights of the petitioner to retire, subject to the bye-law framed under the Tamil Nadu Co-operative
Societies Act and various provisions of the said Act enabling the respondents to recover the amount of surcharge.
Accordingly, the writ petition stands allowed and the impugned circular of the first respondent and the consequential order of the third
respondent are set aside, however, with liberty to the respondents to proceed in accordance with the Tamil Nadu Co-operative Societies Act,
1983 with the surcharge proceedings either under the bye-law framed for the third respondent or as per Rule 149 of the Co-operative Societies
Rules and the third respondent is directed to allow the petitioner to retire from service with all eligible consequential monetary benefits, if there are
no other legal impediments as stated above, within a period of 12 weeks from the date of receipt of copy of this order. No costs. Connected
miscellaneous petition is closed.