JUDGMENT : 1. This petition has been filed challenging the impugned judgment and decree dated 25.08.2008 of the first respondent made in C.M.A(CS) No.45 of 2007. 2. The petitioner Society is a Cooperative Society governed by the Tamil Nadu Cooperative Societies Act, 1983 (hereinafter referred to as 'the Act;) and its main object is to grant loan to its members. The third respondent herein was appointed as a Special Officer of the petitioner Society and she was looking after the affairs of the Society. The third respondent was acting as a Special Officer and granted loans for construction of the houses to its members. 3. It is the case of the petitioner that out of the loans disbursed by the third respondent, some were found to be disbursed without following the rules and regulations as per the bylaws of the Society. Therefore, the Registrar of Cooperative Societies, Perambalur was directed to enquire into the matter and submit a report under Section 81 of the Act as per the direction of the 2nd respondent. Accordingly, the Sub Registrar submitted his report dated 20.10.2003 to the 2nd respondent levelling certain allegations against the third respondent, which are as follows: “(a) The third respondent has sanctioned and disbursed loan to S.Duraisamy Member No.603, a sum of Rs. 1 lakh for the purpose of construction of a house. But the said S.Duraisamy after receiving the loan amount has not utilised the same for the purpose of constructing a house. The above said aspect was not supervised by the Special Officer and therefore committed dereliction of duty. (b) The third respondent has sanctioned and disbursed a sum of Rs.88,000/- to P.Duraisamy Member No.634 towards part of the loan and without verifying whether any construction has been made, a further payment of Rs. 55,000/- was paid. But the member has not utilized the earlier loan amount of Rs.88,000/- a further amount of Rs. 55,000/- for the purpose of construction of house has been sanctioned. Without verifying whether the member has utilized the loan amount properly, further installment has been granted is also constitute dereliction of duty. (c) the third respondent has sanctioned and disbursed loan of Rs.55,000/- to P.Ramasamy Member No.637 for construction of house. But the said P.Ramasamy has not utilised the same for the purpose of construction of the house.” 4. Without verifying whether the member has utilized the loan amount properly, further installment has been granted is also constitute dereliction of duty. (c) the third respondent has sanctioned and disbursed loan of Rs.55,000/- to P.Ramasamy Member No.637 for construction of house. But the said P.Ramasamy has not utilised the same for the purpose of construction of the house.” 4. The Enquiry Officer, after going into the above set of allegations and other allegations, found that the third respondent was found guilty of dereliction of duty with respect to the aforementioned allegations and she has not monitored or supervised before or after disbursing the loan amount, which is the duty of the Special Officer and it is also her duty to verify whether the loan amount has been utilised for the purpose of construction of the house. However, the same has not been done and found that surcharge proceedings shall be proceeded against the 3rd respondent and 8th respondent, who are Officers' of the said Society. On the basis of the said report, notice under Section 83 of the Act has been issued calling upon explanation from the 3rd and 8th respondent respectively. 5. On receipt of the explanation, enquiry commenced under Surcharge proceedings and subsequently, it was found that the respondents 3 and 8 have acted against the rules and regulations as per the bylaws of the Society and hence, found that surcharge proceedings initiated under Section 87 of the Act is valid. Aggrieved by the order passed by the 2nd respondent, the third respondent filed CMA No.45 of 2007 before the first respondent. The first respondent allowed the said application on the ground that under Section 83 of the Act, the Society has to prove that there was wilful negligence on the part of the appellant/3rd respondent and in the absence of the said proof, the 3rd respondent cannot be mulcted with liability. Against which, the petitioner is before this Court with this writ petition. 6. Heard the learned counsel for the petitioner Society, the learned Additional Government Pleader for the 2nd respondent and the learned counsel for the 3rd respondent. 7. Against which, the petitioner is before this Court with this writ petition. 6. Heard the learned counsel for the petitioner Society, the learned Additional Government Pleader for the 2nd respondent and the learned counsel for the 3rd respondent. 7. The learned counsel for the third respondent submitted that the third respondent as a Special Officer has disbursed the loan amounts to respondents 4 to 7 for construction of houses as per Clause 58 of the Bylaws of the Society and subsequent installments are to be paid only by the Special Officer, after the installments already drawn by the members, have been properly utilised by them. 8. But, in the instant case, the respondents 4 to 7, after receiving the loan amounts, have not started any construction. Without verifying the same, as per Clause 58, the third respondent disbursed the subsequent installments and thereby caused loss to the Society. Therefore, there is a clear wilful negligence on the part of the third respondent. But, without considering the same, the first respondent has come to the conclusion that the Society can initiate action against the loanees of the Society. So far as the third respondent is concerned, surcharge proceedings cannot be initiated, since other remedies are available for the Society to recover the loan amount from the loanees and if there is any violation of the Rules by the employees, the Society ought to have taken the disciplinary proceedings against them. 9. Attacking the said finding, the learned counsel for the petitioner, by inviting the attention of this Court to Section 87 of the Act, submitted that if there is any wilful negligence on the part of the employee, surcharge proceedings under Section 87 of the Act can be initiated. 10. Inviting the attention of this Court to the surcharge proceedings dated 16.12.2005, the learned counsel for the petitioner submitted that the respondents 4 to 7, who are loanees, had admitted that after availing the first installment, they have not constructed the house. But in spite of the same, the third respondent without verifying the same, has sanctioned second installment. Therefore, there is a clear wilful negligence on the part of the third respondent. But, without considering this aspect, the first respondent set aside the order on an erroneous finding that against the employee only disciplinary proceedings can be initiated and the amount can be recovered from the loanees. 11. Therefore, there is a clear wilful negligence on the part of the third respondent. But, without considering this aspect, the first respondent set aside the order on an erroneous finding that against the employee only disciplinary proceedings can be initiated and the amount can be recovered from the loanees. 11. Countering the submission made by the learned counsel for the petitioner, the learned counsel for the 3rd respondent submitted that absolutely, there is no wilful negligence on the part of the third respondent, in fact, the respondents 6 and 7 have repaid the amount and the proceedings against respondents 4 and 5 to recover the amount disbursed to them is still pending. Therefore, there is no need to set aside the order passed by the first respondent. 12. On a perusal of the records, particularly, the surcharge proceedings, I find that the third respondent has disbursed the 2nd installment, without verifying the utilisation of the amount already disbursed to the loanees, which is in total violation to Clause 58 of the byelaws of the Society. 13. Under such circumstances, in fact, the respondents 4 to 7 have also given a statement that they have not constructed the house and therefore, the third respondent ought not to have disbursed the second installment. Therefore, there is a clear wilful negligence on the part of the third respondent. Therefore, surcharge proceedings can very well be initiated against the third respondent. But, without considering this aspect, probably, the third respondent has passed the impugned order, which is not legally sustainable and the same is liable to be quashed. Accordingly, the same is quashed and the writ petition is allowed. No costs.