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Rajasthan High Court · body

1994 DIGILAW 939 (RAJ)

Damodar Dusad v. State of Rajasthan

1994-11-24

ARUN MADAN

body1994
Honble MADAN, J. — The facts giving rise to the filing of this writ petition, briefly stated are that the petitioner had opened a Bank-account with the Rajasthan State Industrial Co- operative Bank Ltd., Jaipur (respondent No.2 herein) and the petitioner was given over-draft facilities by the Bank upto Rs.40,000/-. It has been contended in the writ petition that some employees of the Bank had committed forgery and the petitioners account was also fabricated though the said allegations have been denied by the petitioner. A report was also lodged with the police by the Bank and on that basis a criminal case vide FIR No.273/83 was instituted with P.S. Ashok Nagar, Jaipur in respect of offences under Sections 420/467/468/120-B and 471 IPC. Since some of the Bank employees were also involved in the embezzlement, proceedings under Section 74 of the Rajasthan Co-operative Societies Act, 1965 (hereinafter to be referred as the Act) were also initiated against the bank employees as well as against the petitioner. It has been further contended in the writ petition that before initiating proceedings under section 74 of the Act Investigating Audit was done by the Department and Audit Report was submitted to the Bank by the 3 auditors, who were so appointed to conduct the audit. It was on the basis of the Audit Report that proceedings under section 74 of the Act were initiated and that the petitioner was also notified to participate in the said proceedings. In pursuance of the audit proceedings the shop and house of the petitioner were attached by respondent No.3 and the goods confiscated from the shop were sold at a very low price than the estimated cost of the goods which was worth Rs.50.000/-. The petitioner filed an application for release of the attachment and for handing over the possession of the shop and house in question belonging to the petitioner under Section 74 of the Act before the respondent No.4. It was contended by the learned counsel for the petitioner that respondent No.3 had no jurisdiction either to attach the shop as well as the house belonging to the petitioner or to have sold the goods lying therein, as he was not authorised to do so in terms of the provisions of Section 74 of the Act. It was contended by the learned counsel for the petitioner that respondent No.3 had no jurisdiction either to attach the shop as well as the house belonging to the petitioner or to have sold the goods lying therein, as he was not authorised to do so in terms of the provisions of Section 74 of the Act. It will be pertinent to refer the provisions of section 74 (1) of the Act, which provides as under: — "74. Surcharge.—(1) If in the course of an audit, inquiry, inspection or the winding up of a co-operative society, it is found that any person, who has taken any part in the organisation or management of such society or who is or has at any time been an officer or an employee of the society, has made any payment contrary to this Act, the rules or the bye-laws or has caused any deficiency in the assets of the society by breach of trust or willful negligence or has misappropriated or fraudulently retained any money or other property belonging to such society, the Registrar may, of his own motion or on the application of the committee, liquidator or any creditor, inquire himself or direct any person authorised by him by an order in writing in this behalf, to inquire into the conduct of such person : Provided that no such inquiry shall be held after the expiry of six years from the date of any act or omission referred to in this sub-section." (2). It is submitted by the learned counsel for the petitioner that keeping in view the aforesaid statutory provisions and the safeguard available under the said provisions to the petitioner, it was not open to the Registrar to effect the attachment of the property in question as he was having limited scope of powers under the said provision in as much as the Registrar on the basis of the Audit Report or Inquiry or Inspection Report, in respect of the remissions in question, could, at the most, on his own motion or. on the application of the committee, liquidator or any creditor, could inquire either himself or direct any person authorised by him, by an order in writing in this behalf, regarding conduct of such person. on the application of the committee, liquidator or any creditor, could inquire either himself or direct any person authorised by him, by an order in writing in this behalf, regarding conduct of such person. It is further contended by the learned counsel for the petitioner that since the petitioner was neither a Member of the Organisation or Managing Body of the Society nor he was an officer or employee of the society, the Registrar was not competent to initiate proceedings against the petitioner by attachment of his assets, as referred to above. He has further contended that as such the entire process adopted by respondent No.3 was without jurisdiction and the action taken in pursuance thereof was not in accordance with law and hence void- ab-initio. (3). The aforesaid contentions advanced at the bar on behalf of the petitioner have not been specifically controverted by the respondents in as much as merely by opening an account with the respondent - Bank , the petitioner automatically does not become the member of the organisation as he is merely an account-holder. In Para 6 of the reply, the Co-operative Bank, respondent No.2 has admitted the attachment of the shop as well as the house of the petitioner and also the sale of goods and has further admitted that the goods were sold through public auction and that the Bank was authorised to proceed against the petitioner under Section 74 of the Act since as a member of the Bank, the petitioner took part in the management and business of the respondent Bank. (4). It has been further contended in the reply by the respondents that the petitioner though not an employee of the Bank but was a member of the organisation and hence the proceedings under Section 74 of the Act could very well be initiated against him. It has been further contended in the reply that respondent No.3 was also authorised to proceed with the case by virtue of delegation of powers by proper orders of the State Government. (5). It has been further contended in the reply that respondent No.3 was also authorised to proceed with the case by virtue of delegation of powers by proper orders of the State Government. (5). The above contention of the respondents was specifically controverted by the learned counsel for the petitioner on the ground that since the petitioner was merely an account-holder and not a member of the executive committee of the Bank nor he took any active part in the management of the Bank, the provisions of Section 74 of the Act are not applicable to the petitioner. The respondents have not placed any document on the record in support of their contentions. (6). It is further contended by the learned counsel for the petitioner that soon after the attachment of the property belonging to the petitioner by respondent No.3, the petitioner had moved an application before respondent No.3 on 19-2-86 not only challenging the attachment being contrary to the provisions of Section 74 of the Act, but had also prayed for the consequential relief of the release of the attachment and for compensation for the loss which he has been subjected to on account of auction sale. It was subsequent to that, that on 2.05.1986, the impugned orders (Annex-2) dated 2-5-86 was passed by respondent No.3 whereby the objections of the petitioner were rejected. (7). Keeping in view the facts and circumstances of the case and after examining the contentions advanced at the bar, by the learned counsel for the petitioner as well as the reply by respondent No.2, I am of the considered opinion that the proceedings initiated against the petitioner by respondent No.3 in terms of the impugned order (Annex.2) dated 2.5.86 were contrary to the provisions of Section 74 of the Act and illegal and hence the same are quashed and set aside. (8). The writ petition is, therefore, allowed with costs which are quantified at Rs. 2,500/-. The attachment of the shop and the house in question stands vacated and the respondents are directed to handover the peaceful and vacant possession of the shop as well as the house in question to the petitioner within a period of 2 weeks from the date of submission of a certified copy of this order by the petitioner to the respondent. The petitioner is at liberty to move for compensation and damages against the respondents before the appropriate forum, if so advised, in accordance with law.