JUDGMENT :- Ramachandran Nair, J. 1. Investment in land and building is the common channel for diversion of funds of cooperative societies and when the same is done detrimental to the interest of the society, society goes bankrupt, though individuals in management, mainly elected managing committee members and officers of the society may turn to be big beneficiaries. In order to check and prevent misappropriation of funds of co-operative societies in acquisition of land and building, the Legislature in their wisdom thought of making specific regulations requiring previous sanction in writing from the Registrar of Co-operative Societies before the society makes investment of it's funds in land and building. This provision is contained in Rule 54 of the Kerala Co-operative Societies Rules made under the Kerala Co-operative Societies Act, 1969. The first respondent-society entered into agreement with the appellant for purchase of 4 cents of land on the road side at the rate of Rs.27.5 lakhs per cent through a written agreement under which appellant was given an advance of Rs.10 lakhs. Though advance sanction from Registrar was not obtained before executing the purchase agreement as required under Rule 54, the managing committee before executing the sale deed pursuant to the agreement with the appellant applied to the Joint Registrar for permission in terms of the said Rule 54. However, on a detailed consideration of the deal between the appellant and the first respondent-society, the Joint Registrar held that the proposed purchase of property, in the first place, is at exorbitant price i.e much above the prevalent market price and that the deal will adversely affect the interest of the society in as much as it has it's own land for construction of office and the diversion of public deposit will lead to heavy interest burden to the society. Through a detailed order the Joint Registrar declined permission for purchase of appellant's land by the society. The society turned wise through the findings of the Joint Registrar who rejected their application for permission and they, therefore, accepted his orders thereby backing out of the agreement executed between them and the appellant for purchase of latter's property. This led to the appellant filing writ petition before the learned Single Judge challenging the Joint Registrar's order issued under Rule 54 which is produced as Ext.P4 in the W.P.(C). This led to the appellant filing writ petition before the learned Single Judge challenging the Joint Registrar's order issued under Rule 54 which is produced as Ext.P4 in the W.P.(C). The learned Single Judge, however, upheld the findings of the Joint Registrar against which the Writ Appeal is filed challenging the judgment and Ext.P4. 2. We have heard Adv. Sri. P.V. Baby appearing for the appellant, Adv. Sri. K.G. Anil Babu appearing for the first respondent-society and Special Government Pleader Sri. D. Somasundaram appearing for the remaining respondents. We are told that the society accepted Ext.P4 order issued by the Joint Registrar and has filed suit before the Sub Court for recovery of advance of Rs.10 lakhs paid to the appellant. Even though writ petition is not maintainable for specific relief, that is for direction to the society to purchase appellant's property in terms of the sale agreement, challenge against Ext.P4 order is rightly entertained by the Single Judge in writ proceedings. We, therefore, proceed to consider all the contentions raised in the Writ Appeal on merit. Besides, we feel obliged to explain the scope of Rule 54 because investment in land and building is one unique device adopted by many elected managing committees of co-operative societies to swindle the funds of societies for personal benefits leading to absolute ruin of societies handling public funds sourced both by way of share capital from members and mostly raised through public deposits. 3. Before proceeding to consider the facts of the case and the legality and propriety of the order issued by the Joint Registrar declining permission under Rule 54, we feel the object and scope of the Rule has to be considered first and for easy reference we extract hereunder Rule 54 of the Kerala Co-operative Societies Rules: "R.54. Manner of investment of funds:-(1) A Society may, with the previous sanction in writing of the Registrar, invest the whole or any portion of it's funds in the purchase or lease of land on the acquisition, construction or renewal of any building that may be necessary to conduct its business. The amount of the funds so invested shall be recouped on such terms as may be determined in each case by the Registrar." What is clear from sub-section (1) is that no society shall make investment of it's funds in land or building without previous written sanction from the Registrar. The amount of the funds so invested shall be recouped on such terms as may be determined in each case by the Registrar." What is clear from sub-section (1) is that no society shall make investment of it's funds in land or building without previous written sanction from the Registrar. The Legislature is well aware of chances of societies making unwise investments in land and building adversely affecting their financial position leading to erosion in capital and failure to repay public deposits which is the main source of funds for the societies. In the first place, Ext.P3 sale agreement executed between appellant and the first respondent-society on 30.1.2012 is illegal and unenforceable for want of previous sanction in writing from the Registrar. Even though counsel for the appellant submitted that appellant has no role in regard to the approval to be taken by the first respondent from the statutory authorities and, therefore, he is entitled to enforce the agreement against the society, we are not able to accept the contention because when the appellant enters into a transaction with the society which is governed by the provisions of the Co-operative Societies Act and Rules, the appellant should have been prudent enough to ensure that the society executed the agreement in accordance with their powers under the statute and by following the procedure prescribed. If only appellant took little care to find out whether first respondent-society is free to execute the agreement for purchase of land for Rs.1.2 crores without approval from the statutory authorities, he would have realised that the society could enter into agreement with him only after getting prior written approval from the Joint Registrar. Assuming sanction could be granted by the Joint Registrar even after execution of sale agreement, the agreement gets validity only if sanction is granted by the Joint Registrar in writing under Rule 54 which is declined by him vide Ext.P4 order. At the maximum the agreement for sale executed between appellant and first respondent-society can be treated as a conditional sale agreement, the enforcement of which will depend on approval from the Joint Registrar under Rule 54. Since the Joint Registrar declined approval, Ext.P3 agreement continues to be invalid and unenforceable against the society. We, therefore, reject the contention raised by the appellant that Ext.P3 sale agreement is enforceable between the parties. 4. Since the Joint Registrar declined approval, Ext.P3 agreement continues to be invalid and unenforceable against the society. We, therefore, reject the contention raised by the appellant that Ext.P3 sale agreement is enforceable between the parties. 4. We appreciate the approach of the Joint Registrar in the exercise of the discretionary jurisdiction conferred on him under Rule 54 in this case. In our view, he has correctly understood the scope and object of Rule 54 because he has analysed the impact of this unwise investment in land by the society and has rightly drawn the conclusion that the same will lead to loss and probably eventual financial ruin of the society. We completely agree with the suggestion that there is no need for the society to construct office building on the road side and on the other hand, it can utilise it's own land located little inside for construction of it's office. Further, the Joint Registrar rightly estimated the interest burden the society will suffer if deposits are diverted for non-productive investment in land and the saving in interest if amounts are applied in business. On the whole, we place on record our appreciation on the quality of order issued by the Joint Registrar. 5. Several cases are reaching this court wherein several co-operative societies have gone bankrupt on account of diversion of funds for non-productive and unwise investment in land and building. In fact, many sad cases of poor depositors losing their deposits in societies compelled us to pass orders directing Vigilance enquiry against the managing committee members and their predecessors. We, therefore, feel that the Registrar of Co-operative Societies should exercise effective control on deployment of funds by societies, because Rule 54 permits investment of "own funds" in land and building which means that public deposits taken should not be permitted to be applied for investment in land and building. In our view, societies should not go for massive investment in acquisition of land for construction of office on road side. Societies are visited by members, depositors, borrowers and lenders and whoever wants to go to the society will trace the office wherever it is and reach there. Therefore, there is absolutely no necessity for location of a society on important road side and huge investment in land and building on road side for construction of office space for the society is unwise investment. Therefore, there is absolutely no necessity for location of a society on important road side and huge investment in land and building on road side for construction of office space for the society is unwise investment. All what is required is to have a proper location with road facility. Land and building on road side is required only for societies which are engaged in trading of goods to the public and unless there is turnover and profit justifying investment, no society should be allowed to make investment in land and building anywhere. We have seen from some cases pending and decided by this court that many societies have become bankrupt on account of construction of Auditoriums, shopping complex etc. Atleast in one of the cases decided by one of us (C.N. Ramachandran Nair, J.) this court had to direct the District Collector to intervene and conduct sale of a commercial building constructed and retained by the society without any returns to save the society. There is nothing wrong in society making capital outlay in the form of construction of building by acquiring land, but the same should be done only after making proper study about market conditions, availability of tenants and business in the area so that the investment brings reasonable return to the society. The basis condition should be that the capital employed should be productive and should bring reasonable return to the society. Unless the Registrar is satisfied on these matters, no approval should be granted under Rule 54, no matter the managing committee of the society has passed resolution approving it and that the Memorandum and Articles of Association of the society may authorise it. Even though Co-operative Societies function like companies wherein the ultimate authority is with the annual general body, it is common knowledge that most of the members are borrowers who have no interest in the management of the society and only for the purpose of taking a loan they take membership. Therefore, much reliance cannot be placed on decisions in the general body meeting of the societies and so much so, there is a necessity for strict control on societies by the statutory authorities, mainly to protect the interest of depositors who are members of the public. 6. Therefore, much reliance cannot be placed on decisions in the general body meeting of the societies and so much so, there is a necessity for strict control on societies by the statutory authorities, mainly to protect the interest of depositors who are members of the public. 6. Every investment by the society in land and building can be only from profits retained in the form of reserve and no investment should be made in land and building or for any other capital outlay from public deposits retained by the society which have to be used only for business purpose i.e. as working capital for making advances on interest. Public deposits are debts due to the depositors and societies should not be allowed to borrow for non-productive investments. The funds of the society referred to in Rule 54 is own funds and not borrowed funds which includes public deposits also. We are of the view that the important responsibility under Rule 54 should be conferred on a more competent and responsible body like a committee properly constituted because a low level functionary like the Joint Registrar may not be able to withstand the political pressure that many managing committees of societies elected on political lines are able to exert. In our view, in every District, the District Collector can be authorised to constitute a committee with the General Manager, District Industries Centre or such other responsible officers and the President and representative of the society concerned to conduct study about the need and justification for capital investment and the investment should be permitted only if the committee is satisfied that the investment is going to bring reasonable returns to the society. Since purchase of land and construction of buildings create opportunities for corruption and mismanagement, we feel violation of Rule 54 that is, for execution of agreement for purchase or investment in land or building without prior approval from Registrar, should lead to disqualification of the committee, supercession under Section 32 and statutory liability for surcharge under Section 68. We, therefore, feel amendment is called for, to ensure stability of societies and to retain public faith in these institutions which to a large extent supports the economy of the rural areas in the State. We, therefore, feel amendment is called for, to ensure stability of societies and to retain public faith in these institutions which to a large extent supports the economy of the rural areas in the State. In our view, instead of permitting construction of office building for societies in busy and expensive areas at heavy cost, societies should be located in convenient but less expensive areas. Pending consideration by Government for amendment of the Act and Rules for strict control on non-productive investments by societies, we feel the Registrar should issue binding circular under Section 66A on the above lines for guidance while issuing orders under Rule 54. The Special Government Pleader will forward one copy each of this judgment to the Secretary, Department of Co-operation and also to the Registrar of Co-operative Societies for compliance. Writ Appeal is dismissed but with the above observations and findings.