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2010 DIGILAW 750 (BOM)

Tejas Constructions v. Vandan Kohade

2010-06-08

R.M.BORDE

body2010
JUDGMENT : 1. Heard the respective Counsel appearing for the parties. 2. The petitioners herein are challenging the order passed by Authorised Enquiry Officer dated 25/12/1999 thereby directing to conduct enquiry as contemplated by Section 88 of the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as “the Act”). The Enquiry Officer by rendering the impugned order has turned down the application presented by the petitioners objecting for continuing with an enquiry as contemplated under Section 88 of the Act. The petitioner in writ petition No. 183 of 2000 is a firm entrusted with the contract of erection of the sugar factory whereas the petitioner in writ petition No. 815 of 2000 is a Company dealing with supply of machinery and equipments to respondent No. 2. It is needless to go into the factual aspects of the matter in this case, however, it will be suffice to note that the authorities of the Cooperative Department thought it fit to initiate an enquiry as contemplated under Section 88 of the Act against the office bearers of the sugar factory. The Enquiry Officer was also of the opinion that the petitioners herein who were entrusted with the contract in respect of erection of the factory or supply of necessary plant and equipments to the factory were also responsible for certain misdeeds. The enquiry initiated by the authorities of the Co-operative Department by taking recourse to Section 88 of the Act is on the basis of preliminary enquiry conducted under Section 83 of the Act. The report submitted by the authorities of the Department after holding an enquiry under Section 83 of the Act is stated to be a basis for initiation of the enquiry proceedings under Section 88 of the Act. The petitioners herein have objected for continuation of enquiry against them on the ground that they cannot be proceeded with and also cannot be held responsible for any act or omission alleged against them in an enquiry initiated under Section 88 of the Act. The petitioners contend that they are either the contractors appointed by the office bearers of the factory or the supplier of machinery in pursuance of the order placed on behalf of the society. The petitioners herein have no role to play the management or the conduct of business of the specified society. The petitioners contend that they are either the contractors appointed by the office bearers of the factory or the supplier of machinery in pursuance of the order placed on behalf of the society. The petitioners herein have no role to play the management or the conduct of business of the specified society. It is contended that the scope of enquiry under Section 88 of the Act is totally different and the enquiry can be initiated only as against the past or present office bearers of the society or against the persons who have taken part in the organization or management of the society. It is the contention of the petitioners that they are not the persons who have taken any part in the organization or the management of the society and as such they cannot be held responsible to answer the charges in the enquiry initiated under Section 88 of the Act. 3. It would be appropriate to refer to the provisions of Section 88 of the Maharashtra Cooperative Societies Act, 1960 and the same is quoted as under: “88. Power of Registrar to assess damages against delinquent promoters, etc. 3. It would be appropriate to refer to the provisions of Section 88 of the Maharashtra Cooperative Societies Act, 1960 and the same is quoted as under: “88. Power of Registrar to assess damages against delinquent promoters, etc. (1) Where, in the course of or as a result of an audit under section 81 or an inquiry under section 83 or an inspection under section 84 or the winding up of a society, the Registrar is satisfied on the basis of the report made by the auditor or the person authorised to make inquiry under section 83 or the person authorised to inspect the books under section 84 or the Liquidator under section 105 or otherwise that any person who has taken any part in the organization or management of the society or any deceased, or past or present officer of the society has, within a period of five years prior to the date of commencement of such audit or date of order for inquiry, inspection or winding up, misapplied or retained, or become liable or accountable for, any money or property of the society, or has been guilty of misfeasance or breach of trust in relation to the society, the Registrar or a person authorised by him in that behalf may frame charges against such person or persons, and after giving a reasonable opportunity to the person concerned and in the case of a deceased person to his representative who inherits his estate, to answer the charge, 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 under this section may determine, or to contribute such sum to the assets of the society by way of compensation in regard to the misapplication, retention, misfeasance or breach of trust, as he may determine. (2) The Registrar or the person authorised under subsection (1) in making any order under this section, may provide therein for the payment of the cost or any part thereof, as he thinks just, and he may direct that such costs or any part thereof shall be recovered from the person against whom the order has been issued. (2) The Registrar or the person authorised under subsection (1) in making any order under this section, may provide therein for the payment of the cost or any part thereof, as he thinks just, and he may direct that such costs or any part thereof shall be recovered from the person against whom the order has been issued. (3) This section shall apply, notwithstanding that the act is one for which the person concerned my be criminally responsible.” The enquiry under Section 88 can be initiated on the basis of audit under Section 81 or an enquiry under section 83 or an inspection under section 84 or the winding up of a society. Section 83 of the Act contemplates preliminary enquiry by the Registrar in respect of constitution, working and financial conditions of a society. An enquiry under Section 83 of the Act is essentially directed against the persons who are in-charge of the management of the society. So also, audit under Section 81 of the Act or an inspection of accounts under Section 84 of the Act is essential for determining the legality or otherwise of the transaction of the society or the constitution and functioning of the society. Thus, on perusal of relevant provisions of the Act, it can be said that the powers invested with the Registrar to assess the damages against the delinquents/promoters conferred by Section 88 is essentially required to be invoked as against the persons who have taken part in the organization or management of the society and not against the strangers or the contractors, architects or others who are entrusted certain job work or contract work by the society. On bare perusal of Section 88 of the Act it reveals that the petitioners, who are not concerned with the management or who have not taken any part in the society, cannot be held responsible in an enquiry under Section 88 of the Act. 4. Reliance can be placed on reported judgment in the matter of Shriram Dhonduji Raut Vs. Bahu Uddesiya Sahakari Sanstha, Virsi & others reported in 2003 (4) ALL MR 1121. In the reported matter some financial liability was determined against the petitioner by the Co-operative Appellate Court dealing with the appeal raising exception to the order passed under Section 91 of the Act by the Co-operative Court. Bahu Uddesiya Sahakari Sanstha, Virsi & others reported in 2003 (4) ALL MR 1121. In the reported matter some financial liability was determined against the petitioner by the Co-operative Appellate Court dealing with the appeal raising exception to the order passed under Section 91 of the Act by the Co-operative Court. The petitioner in the reported matter was Manager of the society and in the audit conducted by the officials of the Department some discrepancy in the stock was revealed and the management, therefore, proceeded against the Manager. The Co-operative Court came to the conclusion that the petitioner was not responsible whereas the Appellate Court on consideration of the appeal presented by the Management held that the petitioner was responsible for the shortage and thereby allowed the appeal. The argument was advanced by the petitioner in the reported matter that the provisions of Section 91 of the Act would not have applicability and the dispute could not have been entertained and the proper remedy available to the society was to proceed against the Manager by taking recourse to Section 88 of the Act. While dealing with the challenge raised in the petition this Court has held that the provisions of Section 88 of the Act cannot be invoked against the Manager and the same are required to be invoked essentially against the office bearers who are entrusted with the task of administering the management of the society. This Court has observed in paragraph 8 of the reported Judgment as under: “.......Therefore, applying the above observations to the facts of the present case, I am of view that the petitioner who was placed in charge of one of the cloth shops of the society was not a person who was empowered to give directions in regard to the business of such society. Directions in regard to the business of such society normally emanate from the Managing Committee of the society or an officer empowered to give such direction. The directions contemplated are directions in regard to the business of the “society” and not merely directions, therefore, would be in regard to the manner in which the society should do its business, etcetera and not merely the selling of cloth in one of the shops of the society. The directions contemplated are directions in regard to the business of the “society” and not merely directions, therefore, would be in regard to the manner in which the society should do its business, etcetera and not merely the selling of cloth in one of the shops of the society. In fact, the petitioner in his deposition stated that he was appointed as a salesman and was working as a salesman in the branch at Shenduwafa. That the goods in his shop were purchased by the President and Manager of the head office and salesman of the head office. From the above, it is clear that the petitioner had nothing to do with giving directions regarding the business of the society. The submission on behalf of the petitioner that the subject matter was capable of being inquired into under section 88 is not tenable. Section 88, in my view, is not attracted to the facts of the preset case at all....” 5. In the instant matter also the petitioners were not entrusted with the functions either of the organization or management of the society. The nature of function carried out by the petitioners gives rise to contractual relationship. If at all, there is any breach of the terms of the contract, the petitioners can be proceeded against by the Management and claim in the nature of recovery of damages can be lodged against them. However, the petitioners who have nothing to do with the management of the society, cannot be proceeded in any enquiry by invoking provisions of Section 88 of the Act. 6. For the reasons stated above, I am of the view that the impugned order dated 25/12/1999 passed by the Authorised Enquiry Officer is illegal and liable to be quashed and set aside and the same is accordingly quashed and set aside. It is hereby declared that the petitioners cannot be proceeded against in an enquiry under Section 88 of the Act. Both the petitions are allowed. Rule is accordingly made absolute. However, in the facts and circumstances of the case, there shall be no order as to costs.