JUDGMENT : 1. Heard Shri Anurag Kumar Singh, learned Counsel for the petitioner and Shri P.C. Rai, learned Counsel for the State/respondent as well as perused the record. 2. The petitioner has assailed the impugned order dated 14.10.2009 passed by U.P. Cooperative Tribunal, Lucknow by which surcharge, in exercise of power under Section 68(2) of the U.P. Cooperative Societies Act, 1965 (in short hereinafter referred to as 'Act') has been imposed upon the petitioner and he has been directed to pay a sum of Rs.33,56,479/- along with interest. The appeal filed by the petitioner has also been dismissed vide order dated 17.4.2022 which is also impugned in this petition. 3. Learned counsel for the petitioner submits that vide order dated 19.6.1986 the Registrar, Cooperative Societies U.P. directed for payment of ex-gratia to employees of Cooperative Societies. This direction of the Registrar was only for Financial year 1984-85 however the same continued to be paid to the employees thereafter. On 27.4.1995 while the petitioner was posted as Secretary/General Manager, District Cooperative Bank Limited, Lakhimpur Kheri when Committee of Management of the Bank passed a resolution for payment of ex-gratia for financial year 1994-95 to its employees. Thereafter it appears that on 10.05.1995 Registrar, Cooperative Societies U.P. issued an order directing to Secretary General Manager, U.P. Cooperative Bank not to provide facility of bonus or ex-gratia to the employees. This order dated 10.5.1995 was received in the office of District Cooperative Bank Limited. Lakhimpur Kheri on 02.06.1995. The petitioner has not taken any action for implementation of resolution dated 27.04.1995 and no payment of ex-gratia was made to the employees for financial year 1994-95 or till the time the petitioner was posted at the Society concerned. In the meantime on 04.08.1995 the petitioner was transferred to Moradabad. The petitioner proceeded on leave on 09.08.1995. Thereafter vide order dated 19.8.1995, order dated 04.08.1995 was amended and the petitioner stood transferred to Hardoi as Secretary/ General Manager, District Cooperative Bank Limited, Hardoi. On 24.08.1995 the petitioner was relieved from District Cooperative Bank Limited, Lakhimpur Kheri and one Surendra Singh Sengar took charge of Secretary/General Manager on 14.10.1995. The petitioner proceeded on leave on 09.08.1995. Thereafter vide order dated 19.8.1995, order dated 04.08.1995 was amended and the petitioner stood transferred to Hardoi as Secretary/ General Manager, District Cooperative Bank Limited, Hardoi. On 24.08.1995 the petitioner was relieved from District Cooperative Bank Limited, Lakhimpur Kheri and one Surendra Singh Sengar took charge of Secretary/General Manager on 14.10.1995. The Committee of Management of the Bank, while Surendra Singh Sengar, Secretary/General Manager was posted as Secretary of the Society, passed a resolution while considering the circular of the Registrar dated 10.05.1995 and proceeded to pay ex-gratia to the employees citing the reason that it was being paid in previous years and the Bank was in profit ignoring the fact that there is clear prohibition in the resolution of the Registrar dated 10.5.1995. The audit objection was raised in the special audit of the Bank pertaining to financial year 1995-96 and 1996-97 and Surendra Singh Sengar was held responsible for the payment of ex-gratia in 1995-96 and 1996-97 pertaining to the corresponding two previous years (Annexure-10). Thereafter an enquiry under Section under Section 68(1) of the Act was conducted and the report submitted by the Enquiry Officer which holds Surendra Singh Sengar responsible for making payment of ex-gratia and causing the entire loss to the Bank of an amount of Rs. 78,42,167/-. Although the petitioner was not held responsible for causing loss to the Bank in the body of the enquiry report. However the name has been inserted by making overwriting/interpolation by hand in the typed enquiry report (Annexure 11). It is worthwhile to mention that the then Committee of Management of the Bank was also held responsible in the enquiry under Section 68(1) of the Act. On 23.01.2006 a show cause notice was issued to the petitioner however, incorrect figures were mentioned against the name of the petitioner and the petitioner was given show cause notice for payment of bonus in 1996-97 and payment of ex-gratia in 1996-97 when he was not even posted in the Bank. A reply was submitted by the petitioner on 07.11.2006 (Annexure SCA-1 to the Supp. Counter Affidiavt) to the show cause notice wherein he has asserted that he has not made any payment after the order dated 10.05.1995 and has followed the order passed by the Registrar. A reply was submitted by the petitioner on 07.11.2006 (Annexure SCA-1 to the Supp. Counter Affidiavt) to the show cause notice wherein he has asserted that he has not made any payment after the order dated 10.05.1995 and has followed the order passed by the Registrar. Admittedly there is no direction of the Registrar for annulment of any resolution of Committee of Management during the tenure of the petitioner, direction is only not to make payment (Annexure 12). 4. Learned counsel for the petitioner further submits that order under Section 68 (2) of the U.P. Cooperative Societies Act, 1965 has been passed imposing surcharge and directing the petitioner to make payment of Rs. 35,56,479/- along with interest. 5. He submits that although in the inquiry report Committee of Management, which had passed the resolution dated 27.04.1995, has been held responsible, however, while passing order under Section 68 (2) of the U.P. Cooperative Societies Act, 1965 it has been exonerated without recording any finding for this. 6. It has also been submitted by learned counsel for the petitioner that no show cause notice for making payment of Rs. 35,56,479/- has been given to the petitioner rather a show cause notice given to the petitioner is for different figure. Thus, show cause notice also has been issued without application of mind. The appeal filed by the petitioner i.e. Appeal No. 81/2007 before the U.P. Cooperative Tribunal has been dismissed without considering the relevant facts and merely on the fact that the appeal filed by Surendra Singh Sengar was dismissed. 7. Per contra, learned Standing Counsel has opposed the petition and submitted that the petitioner was under obligation to annul the resolution dated 27.4.1995 and by passing the resolution and being part of the resolution dated 27.4.1995 he has caused loss to the society. 8. I have considered the submissions of learned counsel for the parties. 9. The provision of Surcharge defined under Section 68 of the U.P. Cooperative Societies Act, 1965 is extracted below:- "68. Surcharge. 8. I have considered the submissions of learned counsel for the parties. 9. The provision of Surcharge defined under Section 68 of the U.P. Cooperative Societies Act, 1965 is extracted below:- "68. Surcharge. - (1) If in the course of an audit inspection or the winding up a co-operative society it is found that any person, who is or was entrusted with the organisation or management of such society or who is or has at any time been an officer or an employee of the society, has made or caused to be made any payment contrary to this Act, the rules or the bye-laws or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has misappropriated or fraudulently retained any money or other property belonging to such Society, the Registrar may of his own motion or on the application of the committee, liquidator or 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: Provided that no such inquiry shall be commenced after the expiry of twelve years from the date of any act or omission referred to in this sub-section. (2) Where an inquiry is made under sub-section (1) the Registrar may after affording the person concerned a reasonable opportunity of being heard, made an order of surcharge requiring him to restore the property or repay the money or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such an extent, as the Registrar may consider just and equitable. (3) Where an order of surcharge has been passed against a person under sub-section (2) for having caused any deficiency in the assets of the society by breach of trust or willful negligence, or for having misappropriated or fraudulently retained any money or other property belonging to such society, such person shall, subject to the result of appeal, if any field against such order, be disqualified from continuing in or being elected or appointed to an office in any co-operative society for a period of five years from the date of the order of surcharge." 10. A perusal of sub-section 1 of Section 68 of the Act shows that in the course of audit inspection or the winding up a co-operative 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 or caused to be made any payment contrary to this Act, the rules or the bye-laws of the society or caused any deficiency in the assets of the society the Registrar may of his own motion or on the application of the committee, liquidator or any creditor, inquire himself or direct any person authorized by him by an order in writing in this behalf to inquire into the conduct of such person. 11. It is lastly submitted by learned counsel for the petitioner that mere existence of willful negligence cannot be inferred on the mere footing that the society suffered loss. There has to be some basis for the authority or the tribunal to arrive at the finding that the petitioner had either caused or caused to be made financial loss to the society. In support of his submission he has relied on the judgement of this Court in the case of Raghunandan Prasad Pandey and Others Vs. The Co-Operative Tribunal Lucknow and Others reported in 1982 SCC OnLine All 913. Emphasis is on paragraphs 8 and 9 of the judgement. 12. Relevant paragraphs 8 and 9 of the Raghunandan Prasad Pandey (supra) are extracted below:- 8. In the instant case there is no averment by the respondents to the effect that the petitioners made or caused to be made any payment contrary to the Act, Rules or Bye-laws. It is also not alleged that the petitioners or any of them misappropriated or fraudulently retained any money or other property belonging to the society. Reliance placed by the learned Standing counsel would seem to be exclusively on the provision relating to the person concerned having caused deficiency in the assets of the society by wilful negligence. There is no element of breach of trust attributed to any of the petitioners. In relation to wilful negligence, the words "Wilful" and "Wilfully" have been frequently used in many statutes and have come up for judicial consideration in the courts time and again. There is no element of breach of trust attributed to any of the petitioners. In relation to wilful negligence, the words "Wilful" and "Wilfully" have been frequently used in many statutes and have come up for judicial consideration in the courts time and again. In Ramchandra v. State of Mysore ( AIR 1964 SC 1701 ) : (1964 All LJ 822), in the context of S. 53 of the Indian Post Office Act, 1898, after a review, of the authorities the Supreme Court observed that not infrequently the word "wilful" or "wilfully" has been used to mean that the act had been done with a bad purpose or without justifiable excuse or stubbornly, obstinately or perversely. 9. In the show cause notice issued on Sept. 25, 1974 in the instant case, there appears no charge made to wilful negligence against the petitioners. The order made by the District Assistant Registrar, Co-operative Societies, Banda, dated Dec. 30, 1974 is also silent in relation to any act of the wilful negligence. The District Assistant Registrar seems indeed to have had in view R. 115 of the U.P. Co-operative Societies Rules, 1965, according to which in the conduct of the affairs of the Co-operative Society, every member of the committee of management shall exercise prudence and diligence of an ordinary man of business, shall not perform any act contrary to the provisions of the Act, Rules and Bye-laws of the Society and shall not default in the performance of the duties entrusted under the Act, Rules or Bye-laws of the society. Assuming that there was lack of exercise of due prudence and diligence on the part of the petitioners in this case, there is no liability for surcharge imposed under S. 68 merely on that account. The existence on wilful negligence may not be inferred on the mere footing that the Society suffered loss to the tune of Rs. 5166.52 as the Tribunal seems to have thought in this case. The order made by the Tribunal does not indicate the basis for arriving at this finding except that there is a reference made to the balance sheet of the Society of the relevant year. The relevant content of the balance sheet are explained in the affidavit accompanying the petition which are not countered specifically on the other side. The order made by the Tribunal does not indicate the basis for arriving at this finding except that there is a reference made to the balance sheet of the Society of the relevant year. The relevant content of the balance sheet are explained in the affidavit accompanying the petition which are not countered specifically on the other side. The decision taken to enter into an agreement for proceeding with Lakhan Singh Narbada Prasad was under a resolution passed by the Committee of Management and there is no finding recorded to the effect that the petitioners individually or collectively were guilty of wilful negligence in the matter of this agreement being entered into or the same being operated upon. It was also submitted for the petitioners that there is no case of any deficiency caused in the assets of the society. The question is whether the order of surcharge could be passed under S. 68 against the members of the Committee of Management for the loss suffered by the society in carrying out the trade or business concerned. Assuming that upon the facts and circumstances of a case, it is possible to do so, for which we need express no opinion herein, the existence of wilful negligence or breach of trust or misappropriation etc., as the case may be, in accordance with sub-s. (1) of S. 68 remains indispensable. 13. In the case in hand, the petitioner was posted as Secretary/General Manager of the Society on 27.4.1995 wherein the resolution for payment of ex-gratia for financial year 1994-95 to its employee was passed. The restraining order by the Registrar dated 10.5.1995 was passed wherein all the District Cooperative banks of the State were directed not to provide facility of bonus or ex-gratia to the employees. The petitioner was admittedly transferred and relieved from the District Cooperative Bank Lakhimpur Kheri on 24.8.1995. After the transfer of the petitioner taking note of the order of the Registrar the resolution dated 14.10.1995 appears to have been passed by which decision was taken to pay ex-gratia to the employees of the society/bank on the ground that it was being paid in the previous years and the bank was in profit. 14. After the transfer of the petitioner taking note of the order of the Registrar the resolution dated 14.10.1995 appears to have been passed by which decision was taken to pay ex-gratia to the employees of the society/bank on the ground that it was being paid in the previous years and the bank was in profit. 14. The submission of learned Standing Counsel that by the resolution dated 27.4.1995 the petitioner has made or caused to be made any payment contrary to the Act appears to be incorrect as after the resolution dated 27.4.1995 the petitioner was transferred from the society and was relieved on 24.8.1995. Thereafter on 14.10.1995 the resolution was passed, when Surendra Singh Sengar was the Secretary/General Manager taking note of the restraining order of the Registrar dated 10.5.1995, had decided to pay ex-gratia to the employees stating the reason that it was being paid in previous years and the bank was in profit. Thus, ex-facie it is clear from the resolution dated 14.10.1995 that the payment of ex-gratia was made to the employees as a consequence to the resolution dated 14.10.1995 which while passing said resolution has taken note of the order of the Registrar dated 10.5.1995, therefore, submission to the extent that the petitioner has caused to be made any payment contrary to the Act is not correct. It appears from the show cause notice that show cause notice was given to the petitioner for causing loss to the tune of Rs.42,85,608/-, however, as per the admitted case no show cause notice for the penalty imposed to the petitioner i.e. Rs.35,56,479/- has been given. 15. So far as second submission of learned Standing counsel that the petitioner, while posted as Secretary of the Society, has failed to get the resolution dated 27.4.1995 annulled also appears to be incorrect as Section 128 of the U.P. Cooperative Societies Act does not impose any obligation on the secretary of the Society. Only the Registrar can exercise power under Section 128 of the U.P. Cooperative Societies Act for annulling the resolution passed by the society. It is thus clear that payment has not been made pursuant to the resolution dated 27.10.1995. The payment has also not been made during the tenure of the petitioner in the district Lakhimpur Kheri. Only the Registrar can exercise power under Section 128 of the U.P. Cooperative Societies Act for annulling the resolution passed by the society. It is thus clear that payment has not been made pursuant to the resolution dated 27.10.1995. The payment has also not been made during the tenure of the petitioner in the district Lakhimpur Kheri. On the contrary the payment has been made in pursuance to the resolution dated 14.10.1995 even the circular letter dated 10.5.1995 does not direct any Secretary/General Manager to refer the resolutions passed by the Board of the Bank for payment of ex-gratia to the Registrar under Section 128 of the Act for annulment. The Board in its resolution has considered the order of the Registrar dated 10.5.1995 and despite the bar has decided to pay the ex-gratia to the employees. It is also evident that payment of ex-gratia for the financial year 1995-96 and 1996-97 has been made during the tenure of Surendra Singh Sengar thus from the discussion made hereinabove it is clear that non-referral of the resolution of the committee of management dated 27.4.1995 to the Registrar under Section 128 of the Act cannot be construed that the petitioner has caused financial loss or caused to be made the financial loss to the society. Further, no surcharge has been imposed on the committee of management or its members. The petitioner admittedly has not been held responsible in the enquiry report. Only order for recovery has been passed. In the enquiry report the name of the petitioner has been inserted by interpolation/overwriting. The committee of management has been exonerated in the final order dated 17.4.2007 without recording any finding. The surcharge has been imposed for payment of Rs.35,56,479/- for which no show-cause notice, admittedly, have been given to the petitioner. 16. There is also no finding in the enquiry report or in the show cause notice dated 23.1.2006 that the petitioner is liable for causing the payment of ex-gratia of 1995-96, hence, for this reason surcharge cannot be imposed. 17. Considering the above, the petition is allowed. The impugned orders dated 14.10.2009 passed by respondent no.3 and 17.4.2007 passed by the respondent no.2 are hereby quashed.