JUDGMENT : Heard Sri Srinivas Polavarapu, learned counsel for the petitioner and Sri N. Jayasurya, learned Government Pleader for Cooperation for respondents. 2. The petitioner was the President of the 2nd respondent society from 1996 to 2001. The Pay Scales of the State Government employees were revised in 1999 and the employees of the 2nd respondent society requested the Board to extend the same to them and they also requested for payment of ex-gratia to an extent of the salary for two months as per the practice since 20 years earlier. The General Body, which is the ultimate authority, passed resolutions revising the Pay Scales and to grant two months salary as ex-gratia, which was also approved by the Board. The arrears of revised Pay Scales amounting to Rs.91,733/- were released to the employees on 28-02-2000 and the employees executed an undertaking on 03-10-2000 to return the amount, if the payments were to be found irregular. The ex-gratia amount was also paid to the employees on 30-06-1999, which was later ratified by the Board. The Cooperative Sub-Registrar, after audit for 1999-2000, submitted a special report regarding the society to the 1st respondent, which submission of a special report is not provided by the statute. In pursuance of the special report alleging some irregularities, Surcharge proceedings were initiated by the 1st respondent under Section 60 of the A.P. Cooperative Societies Act 1964 by issuing a notice to the petitioner. The petitioner submitted a detailed explanation about the absence of any illegality or irregularity in enhancing the salaries of the staff as well as paying ex-gratia, but the 1st respondent held the enhancement of the salary to be against Section 116-C of the Act and the payment of ex-gratia to be opposed to Section 45 (2) (d). When the petitioner preferred an appeal to the 3rd respondent against the said order, the Tribunal dismissed the appeal on 26-09-2003, challenging which the present writ petition has been filed. The petitioner contended that the initiation of surcharge proceedings on the special audit report was without jurisdiction and the 1st respondent, without conducting any independent enquiry, simply relied on the findings of the Auditor in the special audit. The 3rd respondent did not give any independent findings regarding the validity of the surcharge orders and the payments made do not come within the purview of various situations contemplated by Section 60. The 3rd respondent did not give any independent findings regarding the validity of the surcharge orders and the payments made do not come within the purview of various situations contemplated by Section 60. The respondents 1 and 3 ought to have given credence to the letters submitted by the employees on 03-10-2000 and 08-05-2001 stating that they will take the responsibility for the actions of the Managing Committee having received the benefit of the payment. The proceedings without adding the employees, who are necessary parties, are also vitiated. Any irregular payments made to the employees can be recovered from the salaries of the employees, but no surcharge proceedings can be initiated against the members of the Managing Committee in that regard. The periodical enhancement of the salaries is permissible and there was no misappropriation of any amounts. There is no requirement of obtaining permission from the Registrar whenever there is a revision of Pay Scales, which is automatic and which does not require any administrative sanction provided the society is not in loss. The society is earning profits and mere non-allocation to different headings could not invalidate the payment of ex-gratia, which is being paid since 20 years earlier without any objection. The petitioner, therefore, desired the orders of the 1st respondent and the confirmation by the 3rd respondent to be declared illegal. 3. The 1st respondent in his counter affidavit stated that at the time of appointment of the petitioner as Chairman of the Person-in-charge Committee under Section 32 (7)(a) of the A.P. Cooperative Societies Act, it was clearly specified that the management appointed shall not take any policy decisions. The average margin of profit of the society was less than 2% and while the salaries should be in accordance with the Minimum Wages Act, they cannot be more than the income of the society. In any view, the petitioner has to place the matter before the Registrar for taking any such decision and the request of the employees for revised Pay Scales was placed before the General Body on 05-09-1999 without including in the agenda and without placing the subject earlier before the Board of Directors. In any view, the petitioner has to place the matter before the Registrar for taking any such decision and the request of the employees for revised Pay Scales was placed before the General Body on 05-09-1999 without including in the agenda and without placing the subject earlier before the Board of Directors. The 1st respondent further claimed that in the absence of approval by the Registrar under Section 116-C in spite of availability of ample time between the decision of the General Body and the actual date of payment i.e. 28-02-2000, the payment cannot be justified and the Board ratifying the payment on 18-04-2001 was of no avail. The undertaking said to have been given by the employees on 03-10-2000 was not enforced even at the stage of initiating the action under Section 60 (1) of the A.P. Cooperative Societies Act and the A.P. Cooperative Tribunal rightly confirmed the order of the 1st respondent, more so, as the Board resolution was passed after receiving the surcharge notice of the 1st respondent. The provision under Section 45 (4) about payment of bonus/ex-gratia is only if there is a balance in the profit after allocating for the items specified under the other sub-sections in the provision. But, in the present case, the amount was paid from the general funds of the Bank, but not by allocating from the profits, which was irregular and illegal. The oral permission from the Deputy Registrar claimed by the petitioner is not true and the 1st respondent further stated that the Audit for 1999-2000 resulted in the special report disclosing several irregularities based on which the surcharge proceedings and enquiry had taken place and the orders of the respondents 1 and 3 are not illegal, within their jurisdiction and are not unsustainable. 4. Section 116-C of the A.P. Cooperative Societies Act, 1964 as it stood with effect from 25-04-2001 mandates that the power of the society to fix the staffing pattern, qualifications, pay scales and other allowances for its employees is only with the prior approval of the Registrar of Cooperative Societies. It is also subject to further condition that expenditure towards pay and allowances of the employees shall not exceed two percent of the working capital or thirty percent of the Gross profit, in terms of actuals in a year whichever is less. It is also subject to further condition that expenditure towards pay and allowances of the employees shall not exceed two percent of the working capital or thirty percent of the Gross profit, in terms of actuals in a year whichever is less. Whether the revision of Pay scales, the benefit of which was given to the employees by the petitioner was answering the condition that the expenditure towards pay and allowances of the employees was not more than two percent of the working capital or thirty percent of the gross profit in terms of actuals in a year is not clear from the material on record, while admittedly there was no prior approval of the Registrar of Cooperative Societies for revising the earlier existing pay scales of the employees of the society. The fixation of the pay scales and other allowances of the employees by the society being with the prior approval of the Registrar of Cooperative Societies has to be interpreted as applicable not only to the original fixation of the pay scales and allowances, but also for the revision of such pay scales and allowances as the fixation referred to Section 116-C, in the ordinary and natural grammatical sense, has to be understood as original fixation or any revised fixation from time to time. The accepted principles of interpretation of statutes cannot give rise to any other interpretation as otherwise the object and purpose of Section 116-C will be defeated and the provision will become redundant. 5. As the fixation and payment of revised pay scales to the employees under the resolution of the General Body or the resolution of the Board of Directors were obviously thus not in compliance with Section 116-C of the Act, therefore, the payment patently falls within the scope of a payment made contrary to the provisions of the A.P. Cooperative Societies Act, 1964 or the Rules or the Bye-laws thereunder. The payment thus falls within the ambit of Section 60 of the Act. The fact that the employees have offered subsequently to reimburse the society of any irregular payments made to them will not detract from the rigour of the conclusion that the payment was made against the provisions of the Act. 6. The payment thus falls within the ambit of Section 60 of the Act. The fact that the employees have offered subsequently to reimburse the society of any irregular payments made to them will not detract from the rigour of the conclusion that the payment was made against the provisions of the Act. 6. Similarly, the payment of any ex-gratia or bonus to the employees of the society with reference to Section 45 of the Act is with reference to the net profits derived by the society in any financial year and the utilisation of any portion of such net profits for payment of bonus to the employees under sub-section (4) is only after getting the amounts as prescribed by sub-section (2) and after satisfying the contents of sub-section (3) in respect of the total net profits, the payment of bonus to the employees is only to the extent and in the manner specified in the bye-laws of the society under the provision. The payment of ex-gratia herein to the employees was stated to be without distribution of the profits as prescribed by Section 45 and the amount was stated to have been paid from out of the general funds of the society. The bye-laws were also stated to limit the bonus to one month salary out of the net profits, while the payment here was to the extent of the amount equal to two months of salary. The payment of ex-gratia also is, thus, not in terms of the permissible manner in which such payment can be made under the statute. 7. Though the petitioner claimed that the conduct of a special audit and the submission of a special audit report are not contemplated under the statute and are not permissible, no provision or principle has been brought to notice, which debarred the submission of a special audit report, if any irregularities are found. The Audit for the year 1999-2000, which resulted in the audit report, is the result of a regular audit of the accounts of that financial year and the same does not appear to be prohibited or vitiated by violation of any rule. The Audit for the year 1999-2000, which resulted in the audit report, is the result of a regular audit of the accounts of that financial year and the same does not appear to be prohibited or vitiated by violation of any rule. The 1st respondent proceeded in S.C.No.10 of 2001 and pronounced his orders on 30-08-2001 in pursuance of the special report submitted by the Auditor after a regular audit and the order of the 1st respondent specifically referred to the Board and the General Body authorising the payments to pass the surcharge order on the ground of the revision of the Pay scales and payments made on that ground being opposed to Section 116-C of the statute, which, as a matter of fact, is not in dispute. Similarly, notwithstanding the Board of Directors or General Body approving any payment of ex-gratia, it was found to be a payment not sanctioned by Section 45 of the statute or the bye-laws, more particularly to the extent to which the payment was made in respect of a period of two months. The 1st respondent, therefore, consequently fixed the responsibility for the payment of the revised pay scales and allowances on the Secretary and President of the society and the responsibility for the payment of ex gratia on the Board of Directors. The Person-in-charge committee has, therefore, been made solely responsible to recoup the amount of excess salaries paid by the society and the President and all the Board of Directors were made liable for recovery of the payments made towards the bonus or ex gratia. 8. When the matter was being taken in appeal to the A.P. Cooperative Tribunal, the Cooperative Tribunal could not have come to any other conclusion in the face of the patent violation of Section 116-C of the Act in payment of excess salaries and Section 45 in payment of bonus or ex gratia. The petitioner herein was noted to be not denying the allegations that led to the surcharge proceedings and the Tribunal also noted adversely the fact that the arrears were paid without Board resolution and it was only subsequently the Board resolution was passed after receipt of the surcharge notice and consequently, the Cooperative Tribunal confirmed the order of the 1st respondent, which also cannot be considered to be illegal or irregular under the circumstances. 9. 9. Sri Srinivas Polavarapu, learned counsel further submitted that subsequent to the undertaking given by the employees to reimburse the amounts to the society, some amounts were stated to have been recovered, to the credit of the society. If any such amounts have been recovered to that extent, the amounts recoverable from the petitioner by virtue of surcharge order of the Deputy Registrar/the 1st respondent as confirmed by the Cooperative Tribunal have to be reduced. The learned counsel also referred to the decision in Suryanarayana and others v. District Cooperative Officer, Visakhapatnam and others ( 1998 (5) ALD 495 ), wherein the payment of ex gratia was upheld by the learned Single Judge. But that was a case where the bye-laws of that society approved by the Registrar of Cooperative Societies provided for payment of a minimum one month salary to the employees whether it is called bonus or remuneration and the society was admittedly making profits from out of which such payments were made. In the present case, neither any bye-law, which enables the payment of ex gratia for two months, has been placed before the Court nor had it been shown that the Society was making profits nor was it proved that the payment was made from out of such profits and not the general funds as concluded by the 1st respondent. The learned counsel further laid emphasis on the fact that in fact no amount was the subject of any misappropriation by the petitioner, who was the then President of the society, who acted bonafide in responding to the genuine representation made by the employees, which actions were ratified by the General Body and the Board of Directors, but the question is not one of the motives of the petitioner in making the payments, but whether the payments made were contrary to the Act and the Rules and the Byelaws. When the payment is so contrary to the Act or the rules or Bye-laws, the liability under Section 60 of the Act cannot be nullified. When the payment is so contrary to the Act or the rules or Bye-laws, the liability under Section 60 of the Act cannot be nullified. The learned counsel also requested that the payment made to the employees in excess of their eligibility or in violation of the prescribed procedure can be recovered from the employees themselves, but it is not for this Court in this writ petition for determination of the liability of the petitioner to determine any such liability, more so, without notice to or an opportunity of defending themselves for the employees on such a course of action. If such action is permissible for the 2nd respondent, it may be open to it to take recourse to such recovery in accordance with the prescribed procedure as per law about which no expression of opinion is being made herein. 10. Under the above circumstances, the writ petition should fail, but only with the observation about any amounts already recovered from the employees being given credit to towards the amounts directed to be recovered from the petitioner by the impugned orders making the petitioner liable for the balance of amount only. 11. Accordingly, the writ petition is dismissed without costs. But, if any amounts out of the amounts directed to be recovered from the petitioner alone or from the petitioner and the Board of Directors by the order in S.C.No.10 of 2001, dated 30-08-2001 of the 1st respondent were already recovered from the employees of the society, to that extent the liability of the petitioner to pay such sums may be reduced.