Judgment :- 1. This appeal has been filed by the State of Kerala along with the Deputy Registrar of Co-operative Societies (General), Ernakulam and the Tahsildar, Mattancherry, against the decision of our learned brother Justice Chandrasekhara Menon allowing O. P. 2978/ 77 and quashing the proceedings taken against the writ petitioner under Exts. P1 to P3 for recovery from them by way of surcharge an amount of Rs. 9070.64, which is said to have been the loss sustained by the Co-operative Society by reason of unauthorised payments made by the petitioners who are the members of the Committee in charge of the administration and management of the said society. The parties will, hereinafter be referred to on the basis of the ranking in the writ petition. 2. The writ petitioners - 6 in number - were members of the Committee of of the Cochin Port Staff Employees Consumer Store Ltd., which is a society registered under the Kerala Co-operative Societies Act (hereinafter referred to as the Act) during the year 1972-73. On the occasion of the General Body meeting of the Society held on 15-8-1973 the Committee distributed to the Members of the Society stainless steel utensils worth Rs. 9070.64 exgratia, notwithstanding the fact that objections had been taken by the department to the similar expenditure incurred during the previous years for such exgratia distribution of gift articles to the members. A notice under S.68 of the Act was issued to the petitioners by the Deputy Registrar of Co-operative Societies-2nd respondent - on 19-7-73 calling upon the petitioners to show cause why they should not be subjected to surcharge for recouping the loss caused to the society by the unauthorised expenditure incurred in connection with the distribution of the steel utensils. Written objections were filed by most of the writ petitioners in response to the said notice. After consideration of those objections the 2nd respondent passed the order Ext. P1 directing the petitioners to restore to the society a sum of Rs. 9070.64 with interest at 71/2% from 13-8-1973 (the date of purchase of the steel utensils) failing which the amount would be recovered from them and their properties under S.76 of the Act by resort to Revenue Recovery proceedings. One of the writ petitioners thereupon filed an appeal before the State Government under S.83 (1) (c) of the Act. 9070.64 with interest at 71/2% from 13-8-1973 (the date of purchase of the steel utensils) failing which the amount would be recovered from them and their properties under S.76 of the Act by resort to Revenue Recovery proceedings. One of the writ petitioners thereupon filed an appeal before the State Government under S.83 (1) (c) of the Act. That appeal was dismissed by the State Government as per a detailed order, copy of which is Ext. P2. Thereafter the petitioners were called upon by the demand notice, Ext. P3, to remit the aforesaid sum of Rs. 9070.64 with interest within a week of service of the said notice. The O. P. was then instituted by the petitioners seeking to quash Exts. P1 to P3. 3. The ground on which the learned Single Judge has allowed the original petition is that the amount of Rs. 9070.64 expended by the Committee for the purchase of the stainless steel utensils was less than the net profit of the Society for the concerned year, and since S.55 did not apply to the net profits of the Society the General Body of the Society had the freedom to utilise the net profits or part of it for distribution amongst its members by way of bonus, dividend or otherwise. 4. We find force in the contention urged on behalf of the appellants that the aforesaid view taken by the learned Single Judge is not correct. It is no doubt true that S.55 of the Act prohibits only payment or distribution of any part of the funds of the Society other than the net profits by way of bonus for dividend amongst its members. But the very next section - S.56 - prescribes the only permissible modes in which the Society shall deal with its net profits. Under clauses (a) and (b) of sub-S. (1) of S.56 the Society is enjoined to transfer an amount not being less than 15%. of the net profits to the reserve fund, and to credit such portion of the net profits, not exceeding 5%, as may be prescribed, to the Co-operative Education Fund. Under clauses (a) and (b) of sub-S. (1) of S.56 the Society is enjoined to transfer an amount not being less than 15%. of the net profits to the reserve fund, and to credit such portion of the net profits, not exceeding 5%, as may be prescribed, to the Co-operative Education Fund. Sub-S. (2) lays down that the balance of the net profits may be utilised for all or any of the purposes enumerated in clauses (a) to (e) thereof, ft is manifest that no portion of the balance of the net profits remaining after complying with the provisions of sub-sec. (I) can be utilised for the Society for any purpose falling outside the scope of clauses (a) to (e). Clause (a) permits payment of dividends to the members on their paid-up share capital at such rate not exceeding 10% as may be prescribed. Under clause (b) the Society is empowered to make payment of bonus to members on the amount or volume of business done by them with the society, to the extent and in the manner specified in the bye-laws. Clause (c) permits the constitution of, or contributions to, such special funds as may be specified in the bye-laws. Under clause (d) the society can make donations of amounts not exceeding ten per cent of the net profits for any charitable purpose as defined in S.2 of the Charitable Endowments Act, 1890. And clause (e) empowers the society to make payment of bonus to employees of the society to the extent and in the manner specified in the bye-laws or in the Payment of Bonus Act, 1965 as the case may be. 5. The ex gratia distribution of stainless steel utensils to members of the Society on the occasion of the General Body meeting will not fall within any of the clauses (a) to (e) and it was not, therefore, competent for the Committee of the Society to incur any expenditure out of the net profits of the Society for making such ex gratia gift of articles to the members of the Society. With respect, we hold that the contrary view taken by the learned Single Judge cannot be accepted as correct. Exts. P1 to P3 did not, therefore, call for any interference by this Court. 6. We accordingly set aside the judgment under appeal and dismiss O.P. 2978/ 77. The parties will bear their respective costs throughout. With respect, we hold that the contrary view taken by the learned Single Judge cannot be accepted as correct. Exts. P1 to P3 did not, therefore, call for any interference by this Court. 6. We accordingly set aside the judgment under appeal and dismiss O.P. 2978/ 77. The parties will bear their respective costs throughout. Allowed.