JUDGMENT : 1. The Pala Marketing Co-operative Society Ltd No.4214 is a society registered under the provisions of the Co-operative Societies Act and the Rules framed thereunder. An enquiry under Section 65 of the Act was ordered by the Joint Registrar into the constitution, working and financial condition of the society after being satisfied that it was necessary to do so. The Assistant Registrar (Planning) was appointed as the enquiry officer. The said officer conducted an enquiry and submitted Exhibit P2 report before the Registrar. The Registrar on being satisfied that the incidents for invocation of surcharge proceedings under section 68 of the Act was made out from the report, proceeded to pass an order to enquire into the conduct of the persons mentioned in the report and appointed the 3rd respondent with a further direction to conclude the enquiry and submit a report within a period of two months. Being aggrieved by the above order, the petitioner herein, as the President of the managing committee preferred Exhibit P3 appeal before the Government invoking Section 83 of the Co-operative Societies Act. While so on 28.6.2017, the Joint Registrar issued Exhibit P5 order by which the enquiry officer was ordered to enquire into some additional aspects. On being served with the order, the petitioner approached this Court and filed W.P.(C) No. 23606 of 2017 and by order dated 18.7.2017, this Court directed the State to consider the appeal and take a decision in an expeditious manner. The appeal was considered and by Exhibit P8 order, the same was rejected holding that the petitioner failed to make out any ground to interfere either with the report under Section 65 of the Act or the notice issued under Section 68(1) of the Act. 2. According to the petitioner, the Government has failed to apply its mind to the contentions advanced by the petitioner while assailing the proceedings initiated by the Registrar. It is contended that the valid contentions raised by the petitioner was ignored and the order was passed on irrelevant considerations. The enquiry officer has proceeded to enquire into matters which were not even referred, and this has resulted in grave failure of justice. It is contended that the valid contentions raised by the petitioner was ignored and the order was passed on irrelevant considerations. The enquiry officer has proceeded to enquire into matters which were not even referred, and this has resulted in grave failure of justice. Furthermore, before proceeding to order an enquiry under Section 68(1) of the Act, the enquiry officer ought to have been satisfied that such an action was warranted, and that decision could have been taken only after hearing the petitioner as well as the other managing committee members. It is pointed out that the proceedings are vitiated for noncompliance of Rule 66 of the Rules as the enquiry officer failed to append the latest balance sheet and limited to the points in respect of which enquiry was ordered. However, the enquiry officer has travelled much beyond the scope of the enquiry and delved on matters which were not even referred to him. According to the petitioner, on each and every independent point which was referred to the enquiry officer, the petitioner had furnished proper explanations to bring out that there was no wrongdoing. However, all these relevant aspects were ignored while submitting the report. Though all these aspects were highlighted in the appeal preferred before the Government and interference was sought, the same was dismissed without even a proper consideration of the submissions. It is in the above circumstances that this writ petition is filed seeking to quash the report under Section 65 as well as the notice calling for the appearance issued under section 68 (1) of the Act and for a declaration that there were no circumstances warranting the initiation of proceedings under Section 68 of the Act and for incidental reliefs. 3. A counter affidavit has been filed by the second respondent. It is stated that the report under Section 65 of the Act is complete in all respects and it contains detailed evaluation of all the points referred to the enquiry officer. The report contains the last audited balance sheet and the latest tentative balance sheet of the society and it also contains the summary of the financial position of the society. The report contains the last audited balance sheet and the latest tentative balance sheet of the society and it also contains the summary of the financial position of the society. The enquiry revealed grave irregularities in the functioning of the society, and it was also found that serious loss and damage was caused to the assets of the society by the persons in charge of the organisation and management of the society by breach of trust, wilful negligence, mismanagement, and misappropriation of funds of the society. A copy of the enquiry report was handed over to the society. Since the defects are not minor in nature which can be remedied, there was no reason to direct the officers to initiate appropriate action under Section 65 (4) of the Act. The latest audit report shows that the Society owns fixed assets worth about 21 crores but the same has not been revalued. The society had failed to repay the deposits collected from the general public and many other institutions. Funds were diverted and the society failed to pay the Government dues. The report has revealed that the society is working at a loss of about Rs.66 Crores and about Rs.62 Crores by way of deposit and Rs.10.57 Crores by way of borrowings are liable to be paid by the Society. 4. A counter affidavit has been filed by respondents 4 to 6 contending that the instant Writ Petition filed by the society challenging the initiation of proceedings under Section 68 (1) of the Act is not maintainable as the Board of Directors, which is a collective body is not entitled to challenge the proceedings which have been initiated against the irregular conduct of certain persons who were entrusted with the organisation or management of the society. It is further stated that the enquiry under Section 65 of the Act is merely a fact-finding enquiry and on its conclusion, the Registrar is entitled to decide as to whether he should proceed either under Section 32 of the Act to supersede the managing committee or to initiate surcharge proceedings against the persons who are found responsible for causing the loss to the society or to adopt any other mode. It is further stated that when an enquiry report is submitted before the Joint Registrar, there is no legal obligation to pass an order accepting the report or to issue notice to the society regarding the report. 5. Sri. P.C. Sasidharan, the learned counsel appearing for the petitioner, submitted that Exhibit P10 order issued by the Government cannot be sustained. The learned counsel would refer to the decision of this Court in Cheranallor Service Cooperative Society v Dy Registrar, ( 1976 KLT 353 ) and it was argued that while ordering an enquiry under Section 65 of the Act, the specific point or points on which the enquiry is to be made are to be made known in the proceedings as insisted in Rule 66 of the Rules. The enquiry is vitiated for non-compliance of the above Rule. According to the learned counsel, in the appeal filed by the petitioner before the Government, the petitioner had raised valid contentions to assail the report under Section 65 as well as the consequent order passed under Section 68 (1) of the Act. None of those contentions were adverted to by the Government while rejecting the appeal. After having ordered an enquiry under Section 68(1), the Joint Registrar has widened the scope of enquiry by Exhibit P5 order which is clearly unsustainable under law. With reference to each and every finding in the enquiry report which was adverse to the petitioner society, specific explanation was given by the petitioner. However none of these aspects were taken note of by the Registrar or by the Government while rejecting the appeal preferred by the petitioner 6. Smt.Mable C Kurian, the learned Government Pleader has vehemently opposed the submissions. He would point out that the petitioner could not have apparently challenged the report submitted by the enquiry officer under Section 65 of the Act as it is merely a report and not an order as contemplated under Section 83 of the Act. He would contend that the notice issued under Section 68 (1) was issued strictly in tune with the statutory provisions and that being the case, the petitioner has no valid cause of action to challenge the same at this stage as no order prejudicial to the interest of the petitioner has been passed till date. He would contend that the notice issued under Section 68 (1) was issued strictly in tune with the statutory provisions and that being the case, the petitioner has no valid cause of action to challenge the same at this stage as no order prejudicial to the interest of the petitioner has been passed till date. Relying on the report in State of Kerala v. Aravindakshan Nair ( 2010 (3) KLT 11 ), it was argued that a hearing under Rule 66 (5) is only for the purpose of determination of the costs of the enquiry and in fixing of the liability and nothing more. He would also profusely rely on the report in Santhosh V v Assistant registrar Co Operative Societies and others ( 2014 (4) KLJ 397 ) and it was argued that the petitioner would get sufficient opportunity of being heard under sub section (2) of Section 68 and it is not the law that right of hearing is necessarily to be afforded before any action is contemplated on the basis of a report. Reliance is also placed on an unreported judgment of this Court in W.P.(C) No.888 of 2020 dated 14.1.2020 to bring home his point that only when an adverse order is passed against any of the petitioners under Section 68 (2) of the Act, can they be said to be aggrieved by the order for the purposes of pursuing their remedies. 7. I have carefully considered the submissions advanced by both sides and have gone through the records. 8. It would be relevant to have a glance at Section 68 of the Act and Rule 66(7) of the Rules. 68. 7. I have carefully considered the submissions advanced by both sides and have gone through the records. 8. It would be relevant to have a glance at Section 68 of the Act and Rule 66(7) of the Rules. 68. Surcharge.-(1) If in the course of an audit, inquiry, inspection or the winding up of a society, it is found that any person, who is or was entrusted with the organization 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 the Act and the rules or the bye-laws, or has caused any loss or damage in the assets of the society by breach of trust, or wilful negligence or mismanagement or has misappropriated or fraudulently retained any money or other property belonging to such society or has destroyed or caused the destruction of the records, the Registrar may, of his own motion or on the application of the committee, liquidator of 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. (2) Where an inquiry is made under sub-section (1), the Registrar may, after giving the person concerned, an opportunity of being heard, by order in writing, require him to repay or restore the money or other property or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such extent, as the Registrar may consider just and equitable. Rule 66. Procedure for the conduct of inquiry and inspection: (1) xxxxx xxx xxxx (7) (i) The order in writing for an inquiry under sub section (1) of Section 68 of the Act shall among other things contain the following:- (a) Name of the society whose affairs are to be inquired into or whose books of accounts are to be inspected; (b) name of the person authorised to conduct the inquiry: (c) the specific point or points on which the inquiry is to be made; (d) the period within which the Inquiry is to be completed and report submitted to the Registrar; (e) costs of inquiry or inspection; (f) any other matter relating or pertaining to the inquiry. (ii) On gelling the inquiry report, the Registrar shall give the person or persons concerned an opportunity of being heard before issuing an order of surcharge. The order for surcharge shall be in writing and shall be sent under registered post with acknowledgement due. The order shall among things contain the following: (a) name of society; (b) name/names of person/persons responsible to repay or restore the money or any property or part thereof, by mentioning cleary the total amount involved due from each; (c) the rate of interest, if any, to be clearly specified; (d) the amount of cost or compensation to be specified; (e) the period within which the amount is to be realised; (f) in case the person responsible is not remitting the amount within the time limit so fixed, the Society shall report the matter to the Registrar forthwith and the Registrar shall realize the amount as per the Revenue Recovery Act. 9. The statutory scheme under the Act envisages that the Registrar has to be satisfied with regard to the necessity for conducting an inquiry as contemplated under Section 68 of the Act. Such subjective satisfaction of the Registrar has to be based on material that is brought to his notice in the course of an audit, inquiry, inspection or the winding up of a society. If the Registrar finds that any person, who is or was entrusted with the organisation or management of the society or who is or has at any time been an officer or employee of the society, has made any payment contrary to the Act and Rules, or has caused any loss or damage to the assets of the society by breach of trust, willful negligence, mismanagement or misappropriation or fraudulently retained any money or other property belonging to such society or has destroyed or caused destruction of the records of the society, he can proceed to the next stage. All that is required at this stage is that fact giving rise to the charge has been disclosed in the course of audit under Section 63, inquiry under Section 65, inspection under section 66 or winding up of society and the Registrar is satisfied that he needs to proceed further as per the statute (See A.K. Francis v Joint Registrar [ 1990 (2) KLT 470 ]). 10. 10. The Registrar may thereafter on his own motion or on the application of the committee, liquidator or any creditor inquire into the matter himself or may authorise a person by an order in writing to conduct an inquiry into the conduct of such persons. This is the next stage of the proceeding. No opportunity for hearing is contemplated before passing an order for enquiry (See Santhosh V v Assistant registrar Co Operative Societies and others [ 2014 (4) KLJ 397 ]). 11. The provisions however contemplate a further opportunity of being heard before any action could be initiated under the said provision. As held in Aravindakshan (supra), whenever action is contemplated based on inspection report, whether it is the supersession of the management of the society under S.32 or whether it is a surcharge on the officers or employees concerned under S.68(2), separate opportunity of hearing specifically contemplated under the relevant sections has to be necessarily afforded. In the instant case, since the action proposed against the respondents is based on surcharge under S.68(2), the Registrar will be competent to pass an order surcharging a person only after giving the person concerned an opportunity of being heard. This provision provides effective opportunity to file objections and hearing, and if required, to adduce evidence by the persons concerned. The fact that action under S.68(2) is initiated against the petitioner based on the inspection report does not mean that the Registrar cannot give it up on being satisfied that no case is made out by him in the notice based on the report. In other words, in the course of adjudication under S.68, it is upto the Registrar to accept the contention of the aggrieved persons and turn down or reject the findings in the inspection report. It is to be noted that the opportunity referred to in S.68(2) is specifically mentioned in R.66(7)(ii) of the Rules, which is a repetition of the opportunity referred to in S.68(2) of the Act. 12. Now the question is whether any interference is warranted. It is by now settled that when notice is issued under a statutory provision, the Courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued without jurisdiction or palpably without any authority of law. No such circumstances are brought out in this case. It is by now settled that when notice is issued under a statutory provision, the Courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued without jurisdiction or palpably without any authority of law. No such circumstances are brought out in this case. Furthermore, when the provisions of the statute entitles the party with an opportunity to put forth his contentions before the authorities, this Court would not be justified in interfering with the same under writ jurisdiction. (See Union of India v. Vicco Laboratories [ (2007) 13 SCC 270 ]; Siemens Ltd. v. State of Maharashtra [ (2006) 12 SCC 33 ]. In that view of the matter, I am of the considered opinion that the petitioner has not made out a case for interference in exercise of the extraordinary jurisdiction under Article 226 of the Constitution of India. 13. However, I find that the petitioner has a contention that the initiation of proceedings by the Registrar is actuated by mala fides and that the valid contentions raised by the petitioner will not be considered during the section 68 (2) proceedings. It would be felicitous for the Registrar to remember that the special statutory remedy of surcharge is invoked only if the conditions prescribed by S.68 are strictly complied with. A person can be proceeded against, and vested with liability, only if an objective assessment of the evidence and the materials available on record leads to the irresistible inference that the person concerned is guilty of one or other of the acts specified in the section. A mere routine, mechanical chanting of the section or of the acts mentioned, without anything more, is not sufficient in law to sustain an order of surcharge. It should be based on relevant and adequate materials on which a court could satisfy itself that the person concerned was guilty of breach of trust, wilful negligence, misappropriation or fraud. This has been held so in A.K. Francis (supra). The Registrar shall also do well to remember that should he decide to proceed with the inquiry on the strength of the report, then he shall follow the procedure contemplated under Section 68(2), hear the objections of the petitioner on the merits of the inquiry and thereafter pass orders as contemplated under Section 68(2) of the Act. The Registrar shall also do well to remember that should he decide to proceed with the inquiry on the strength of the report, then he shall follow the procedure contemplated under Section 68(2), hear the objections of the petitioner on the merits of the inquiry and thereafter pass orders as contemplated under Section 68(2) of the Act. The petitioner may at that stage raise all their objections including the objections that they have raised with respect to non-compliance of Rules. While dismissing the writ petition, I direct the respondents to conclude the proceedings within a period of two months from the date of receipt of a copy of this judgment.