Tamil Nadu Cooperative Marketing Federation Limited vs M. Krishnasamy, The Deputy Registrar of Cooperative Societies (Non Credit) Second Floor, Kuralagam, Chennai 600108 and Special Tribunal for Cooperative Society Cases, Chennai. (in the Court of Small Causes, Chennai)

Honourable Mr. Justice K.N. Basha

The challenge in this writ petition is to the order passed by the third respondent, namely, Special Tribunal for Cooperative Society Cases,

Chennai dated 04.04.2007 made in C.A.No. 22/2004, with a prayer to quash the same.

The case of the petitioner is that the first respondent herein was employed as Special Officer in Tamil Nadu Cooperative Marketing Federation

Limited [hereinafter referred to as ''TANFED''] between 07.08.1992 and 30.09.1994. During his tenure, the first respondent alleged to have

caused loss to the TANFED along with other Special Officers and as a result, an enquiry was conducted u/s 81 of the Tamil Nadu Cooperative

Societies Act, 1983 [hereinafter referred to as ''Act'']. Based on the findings of the Enquiry Officer''s report, surcharge proceedings have been

initiated u/s 87 of the Act by the second respondent herein. The said surcharge proceeding was challenged by the first respondent by preferring an

appeal in Cooperative Appeal No. 22/2004 before the Special Tribunal for Cooperative Society Cases, Chennai and the Tribunal allowed the said

appeal by the order dated 04.04.2007 and set aside the surcharge order on the ground of violation of statutory provisions and also on the ground

of violation of the principles of natural justice. Being aggrieved against the said order, the present writ petition is filed with the above said prayer.

Mr. J. Rajakalifulla, learned counsel appearing for the petitioner contended that the Tribunal passed the impugned order mainly on three

grounds, namely,

(1) The surcharge proceedings is barred by limitation as it is not completed within the stipulated period of six months from the date of its

commencement as per Second Proviso to Section 87(1) of the Act;

(2) The Enquriry Officer, while submitting his report after completion of the enquiry u/s 81 of the Act, not recommended for any disciplinary action

or to initiate surcharge proceedings against the first respondent herein; and

(3) The explanation submitted by the first respondent dated 20.06.2003 was not considered and as such, there is a violation of the principles of

natural justice.

The learned counsel for the petitioner vehemently contended that all the above three grounds are unsustainable. It is contended that in respect of

the provision stipulating time limit to complete surcharge proceedings within a period of six months from the date of commencement, namely,

Second Provision to section 87(1) of the Act, the First Bench of this Court has held that the said proviso is only directory and not mandatory, as

per the decision in S.V.K.Sahasramam v. Deputy Registrar of Coop. Societies, Tiruvannamalai and Others reported in (2008) 8 MLJ 231 and as

such, the first ground is unsustainable and on that ground, the impugned order is liable to be quashed. It is further contended that in respect of the

second ground, namely, that the Enquiry Officer has not recommended for initiating surcharge proceedings, as per Rule 104(6) of the Tamil Nadu

Cooperative Societies Rules, 1988, there is no necessity for the Enquiry Officer to recommend for initiation of surcharge proceedings and as such,

even the said ground is unsustainable. The learned counsel for the petitioner submitted that in respect of the third ground on which the impugned

order was passed, namely, non-consideration of the explanation submitted by the first respondent dated 20.06.2003, the Tribunal itself could have

considered the same as the Tribunal is vested with the powers u/s 152 of the Act to appreciate the entire materials available on record, both on

facts and on law and as such, there is no question of rendering a finding on the ground of violation of the principles of natural justice. It is pointed

out by the learned counsel for the petitioner that even assuming there is a violation of the principles of natural justice, the Tribunal ought to have

considered the explanation submitted by the first respondent coupled with the other materials available on record and as such, the matter may be

remitted back to the Tribunal to reconsider the same in accordance with law and to dispose of the appeal on merits.

Per contra, Mr.K.Durairaj, learned counsel appearing for the first respondent contended that there is no infirmity or illegality in the impugned

order passed by the Tribunal. It is contended that the Tribunal has considered the points raised by the first respondent elaborately by placing

reliance on the decision of the Hon''ble Supreme Court. It is submitted that the Tribunal has pointed out that the surcharge proceedings was

initiated and commenced on 25.04.2000 and the said proceedings ought to have been completed within a period of six months as contemplated

under Second Proviso to Section 87(1) of the Act i.e., on or before 24.10.2000, but in the instant case, the surcharge order was passed only on

19.01.2004 and as such, the Tribunal has rightly held that there is a violation of statutory provisions as contemplated under the Act and the

impugned surcharge order was ultimately set aside. It is further submitted that in respect of the bar of limitation, the decision relied by the learned

counsel for the petitioner was rendered only subsequent to the passing of the order by the Tribunal. It is contended that the surcharge order not

only suffers from violation of statutory provisions, but also suffers from violation of the principles of natural justice, as rightly pointed out by the

Tribunal to the effect that the explanation submitted by the first respondent dated 20.06.2003 was not considered.

This court carefully considered the rival contentions put forward by either side and perused the entire materials available on record, namely, the

affidavit filed by the petitioner, counter filed by the first respondent and also the impugned order passed by the Tribunal.

The undisputed fact remains that the Tribunal passed the impugned order dated 04.04.2007, not on the ground of merits but only on the ground

of alleged violation of statutory provisions and the principles of natural justice. It is relevant to refer the ultimate decision of the Tribunal as

hereunder:

12.... I do not propose to go into the merits of the case as the surcharge order stands vitiated in view of the violation of statutory provisions and

also principles of natural justice. Hence, hold that the surcharge order passed against the appellant does not stand to legal scrutiny and the same is

liable to be set aside.

The above said conclusion arrived by the Tribunal makes it crystal clear that the Tribunal has not considered the matter on merits, but only on the

alleged violation of statutory provisions and the principles of natural justice. As far as the violation of statutory provision is concerned, it is pointed

out by the Tribunal that the surcharge proceedings commenced from 25.04.2000 and the surcharge order was passed only on 19.01.2004 and as

such, the said proceedings were not completed within the stipulated period of six months as contemplated under Second Proviso to Section 87(1)

of the Act.

It is pertinent to note that the First Bench of this Court in the case of S.V.K.Sahasramam v. Deputy Registrar of Coop. Societies,

Tiruvannamalai and Others reported in (2008) 8 MLJ 231, held that Second Proviso to Section 87(1) of the Act is only directory and not

mandatory. A learned Single Judge of this Court has also elaborately dealt with the said question of limitation in respect of the Second Proviso to

Section 87(1) of the Act in H.Rajasekar & Others v. The Deputy Registrar of Cooperative Societies, Krishnagiri & Others reported in 2009 4

L.W.427. Therefore, it is now well settled that the provisions relied by the Tribunal, namely, Second Proviso to Section 87(1) of the Act is only

directory and not mandatory and as such, it cannot be contended that the surcharge proceedings have been barred by limitation. In view of the fact

that the said point is in respect of question of law, there is no bar for considering the decision rendered by the First Bench of this Court in respect

of the surcharge proceedings initiated earlier. Therefore, merely because the proceedings have not been completed within the period of six months

from the date of commencement, the proceedings cannot be held to have been vitiated.

Now coming to the second point raised, on the ground on which the Tribunal has passed the impugned order, it is held by the Tribunal that the

Enquiry Officer who has conducted the enquiry u/s 81 of the Act has not recommended for initiating surcharge proceedings and as such, the first

respondent cannot be proceeded on surcharge proceedings. At this juncture, it is worthwhile to refer Rule 104(6) of the Tamil Nadu Cooperative

Societies Rules, 1988, as relied by the learned counsel for the petitioner as hereunder:

Procedure Regarding inquiry, inspection or investigation.

.......

(6)(a) The Enquiry Officer, or Inspecting Officer or Investigating Officer shall submit his report on the matters on which inquiry is ordered to be

held or inspection or investigation is ordered to be made to the Registrar within such time as may be specified by the Registrar but not exceeding

ten days from the date of completion of the inquiry or inspection or investigation.

(b) The report shall contain the findings of the Enquiry Officer or Inspecting Officer or Investigating Officer and the reasons therefor supported by

documentary or other evidence as recorded or gathered by him during the course of his inquiry or inspection or investigation as the case may be.

Where the inquiry held or inspection or investigation was made into any specific allegation, he shall state the procedure followed by him, the

documentary, oral and other evidence gathered by him and his specific findings.

(c) The Enquiry Officer or Inspecting Officer or Investigating Officer as the case may be, shall, as far as practicable, not include any matter of

confidential nature in the main report of the inquiry, inspection or investigation but shall submit such matter or matters in a separate confidential

report. Where any matter of confidential nature has to be discussed in the main report, the report may be drafted in such a manner that the matter

of confidential nature can either be segregated or be not communicated except to the party concerned.

.....

A reading of the above said Rules makes is crystal clear that there is absolutely no obligation cast upon the Enquiry Officer to recommend for

initiation of surcharge proceedings. On the other hand, it is also relevant to refer Rule 104(9)(a) of the Tamil Nadu Cooperative Societies Rules,

1988 which reads as hereunder:

104(9)(a). The Registrar may ask the society or the Government department or the organisation concerned communicating necessary details,

available in the report of inquiry or inspection or investigation required for taking action against the officer or servant specified in sub-rule (8) to

take such action within such time not exceeding two months from the date of receipt of communication as may be specified by him.

...

A reading of the above said Rule makes it abundantly clear that only the Registrar of Society is having power to recommend any action to be

initiated or taken against the first respondent herein. Therefore, this Court is of the considered view that the impugned order passed by the Tribunal

is liable to be set aside on this ground also.

Last but not the least ground on which the impugned order was passed by the Tribunal is the violation of the principles of natural justice on the

ground that the explanation given by the first respondent dated 20.06.2003 was not considered while passing the surcharge order. In respect of

this ground, it is to be stated that the Tribunal is vested with the power of entertaining appeal u/s 152 of the Act and the Tribunal having considered

the said appeal, ought to have gone into the merits of the case by going through the entire materials available on record including the explanation

submitted by the first respondent dated 20.06.2003. The learned counsel for the petitioner rightly placed reliance on the decision of this Court in R.

Nanjundan v. District Judge-cum-Tribunal for Cooperative Cases of the Nilgiris District, Udhagamandalam and Others reported in (2010) 4 MLJ

1027. This Court in the said decision has held as hereunder:

In any event, in an appeal u/s 152 (which is in the nature of an appeal suit) the Tribunal has power to go into both questions of fact and law.

Therefore, nothing prevented the petitioners from filing appropriate application before the Co-operative Tribunal summoning those documents for

the purpose of making their contention more explicit. The Tribunal has power to decide all such questions. The petitioner cannot complaint before

this Court that the surcharge order must be set aside solely on the ground of non-furnishing of the enquiry report. The petitioners have failed to

make such an exercise before the Tribunal.

....

Though Mr. P. Sivashanmugasundaram, learned counsel for the society attempted to justify the impugned order by stating that no such

contentions were raised, a perusal of the impugned order shows that the Tribunal did not deal with any of the individual contentions or the defects

pointed by the petitioners. Since the liability fastened on the petitioners runs into more than half a Crore rupees, it is necessary that the attention of

the Tribunal should have been focussed on the issues raised and appropriate findings should have been given. Therefore, on that short ground, the

writ petitions are liable to be allowed. The impugned orders passed by the Tribunal will stand set aside and the Tribunal is directed to dispose of

the said matter afresh and after due notice to the parties. Since the appeals were of the year 2001 and more than nine years have elapsed, the

Tribunal shall give preference to hearing of this matter and in any event dispose of the cases within a period of six months from the dat of receipt of

the copy of this order.

A reading of the above said decision rendered by this Court makes it abundantly clear that in an appeal preferred u/s 152 of the Act, the Tribunal

has power to go both into the question of fact or on law and as such, the Tribunal could have very well considered and appreciated the materials

available on record on merits and on the other hand, the Tribunal passed its findings not on merits and only on the basis of the violation of statutory

provisions and the principles of natural justice.

In view of the aforesaid reasons, this Court is constrained to set aside the order passed by the third respondent, namely, Special Tribunal for

Cooperative Society Cases, Chennai dated 04.04.2007 made in C.A.No. 22/2004. Consequently, the third respondent/Tribunal is hereby

directed to re-consider the appeal afresh by affording reasonable opportunity to the petitioner only in respect of the merits of the case and not in

respect of the alleged violation of statutory provision, namely, Second Proviso to Section 87(1) of the Act or on the ground of the Enquiry Officer

not recommending for initiation of surcharge proceedings. It is seen that the surcharge proceedings were initiated in the year 2000 and as such, it is

made clear that the appeal shall be expedited as expeditiously as possible and shall be disposed of by the third respondent/Tribunal within a period

of six (6) months from the date of receipt of a copy of this order.

With the above direction, this writ petition is disposed of. No costs. Consequently, connected miscellaneous petition is closed.