JUDGMENT : 1. The Managing Committee of the Mala Block Town Co-operative Society Ltd. No. R-1086, has approached this Court seeking to quash Ext.P1 proceedings issued by the 1st respondent by which an inquiry under Section 68(1) of the Kerala Co-operative Societies Act, 1969 (for short, the ‘KCS Act’) has been ordered. 2. The petitioner asserts that by Ext.P2 proceedings, the 1st respondent has initiated an inspection under Section 66 of the KCS Act based on a complaint lodged by an outsider. An inspection report was submitted by the Assistant Registrar before the 1st respondent and on its basis, Ext.P1 proceedings under Section 68(1) of the KCS Act have been initiated. The specific contention of the petitioner is that an action under Section 68 of the KCS Act could be initiated by the authority concerned only if it is found in the course of an audit, inquiry, inspection or winding up of the society that any officer or employee of the society has made any payment contrary to the Act, Rules or the bye-laws and that consequential loss or damage has been caused in the assets of the society by breach of trust, wilful negligence or mismanagement. It is contended that nowhere in Ext.P1 has it been mentioned that the Registrar was subjectively satisfied for invocation of the powers under Section 68(1) of the KCS Act on account of any wrongful act committed by any person responsible for the affairs of the Society. All that is stated in Exhibit P1 is that an inquiry is proposed to be conducted to ascertain the loss caused to the Society, which according to the petitioner is outside the domain of Section 68(1) of the KCS Act. There is no finding in Exhibit P1 that any loss has been occasioned to the Society on account of the act of any individual and the said loss is to be ascertained. It is contended that no amount is quantified in the course of the inspection under Section 66 of the KCS Act and there is no indication of the person responsible and therefore the order is not in tune with the mandate of Section 68(1) of the KCS Act. 3. It is contended that no amount is quantified in the course of the inspection under Section 66 of the KCS Act and there is no indication of the person responsible and therefore the order is not in tune with the mandate of Section 68(1) of the KCS Act. 3. In the statement filed by the 1st respondent, it is stated that the inspection report under Section 66 of the KCS Act was submitted to the 1st respondent on 17.6.2023 and the special report for the year of audit for 2021-2022 was submitted on 7.8.2023. Twelve items were given as ‘terms of reference’ in the proceedings to conduct a detailed inspection under Section 66 of the KCS Act. In the consequent report, it was specifically mentioned that loss occurred in four terms. It is stated that the society had made illegal payments against the Act, Rules, and bye-laws of the society. It is further stated that after considering the report under Section 66 of the KCS Act, it was found that in some items, the loss occurred due to the wilful negligence and mismanagement of the society due to payments that were made contrary to the provisions of the Act, the Rules, and Bye-laws. 4. Sri. George Poonthottam, the learned Senior counsel appearing for the petitioner submitted by referring to the law laid down in A.K. Francis v. Joint Registrar, 1990 (2) KLT 470 that to attract Section 68, the facts giving rise to the charge have to be disclosed in the course of the audit under Section 63, inquiry under Section 65, inspection under Section 66 or winding up of a society. Relying on the law laid down in Mustafa T.H. and Ors. v. State of Kerala and Ors. ILR 2021 (4) Ker. 74, it is submitted that an element of criminal intention in the action of the person mentioned in the provision is necessary to initiate proceedings under Section 68. Relying on the law laid down in Y.R. Vincent v. Joint Registrar, ILR 2024 (1) Kerala 344, it is submitted that the provisions deal with the individual conduct of the member concerned and not the collective conduct of the Committee. According to the learned counsel, the inquiry contemplated under the provision is an investigation and not a mere seeking for information. According to the learned counsel, the inquiry contemplated under the provision is an investigation and not a mere seeking for information. Referring to Exhibit P1 and P2, it is submitted that there is no specific finding as regards the involvement of an individual as responsible for causing loss to the society. All that is stated in the report under Section 68(1) of the KCS Act is that the officer entrusted with the inquiry should ascertain whether any loss has been caused to the society on account of any of the matters specified therein and nothing more. According to the learned Counsel, this is not the purpose for which an inquiry under Section 68(1) of the KCS Act can be initiated. 5. The learned Government Pleader has vehemently opposed the submissions advanced. It is submitted that in view of the judgment rendered by the Full Bench of this Court in Reji K.Koshy, the petitioner would get ample opportunity to respondent as and when they are served a notice under Section 68(2) of the KCS Act. It is submitted that if the petitioner has not been served with any of the documents relied on by the officer concerned, it would be open to them to raise such contention at the appropriate stage. No interference with the notice under Section 68(1) of the KCS Act is warranted at this stage. 6. I have considered the submissions advanced and have perused the entire records. 7. It is based on Exhibit P2 inspection report under Section 66 of the KCS Act that the Registrar has ordered an inquiry under Section 68(1) of the KCS Act. What has been stated in Exhibit P1 is that an inspection under Section 66 has been carried out and a report has been submitted by the Inquiry Officer. It is stated that the report discloses that there are serious deficiencies in the functioning of the Society and it is required to fix the responsibility and to quantify the losses. It is also stated that the deficiencies pointed out in the special audit report are also to be ascertained. 8. In Exhibit P1, the terms of reference and the scope of inquiry has been stated in some detail. It is also stated that the deficiencies pointed out in the special audit report are also to be ascertained. 8. In Exhibit P1, the terms of reference and the scope of inquiry has been stated in some detail. They are (i) whether members outside the area of operation have been enrolled and whether loans have been disbursed causing loss (ii) whether the disbursal of the loans are in order and in terms of the circular and byelaws causing loss (iii) Whether the GCDS transactions have been carried out in accordance with the byelaws and guidelines and whether any loss has been caused (iv) Whether there has occurred depreciation of assets of the society (v) Whether Arbitration proceedings have been initiated to recover the outstanding and whether the failure has led to loss (vi) whether the Bank has exceeded the approved share capital., (vii) Whether construction of a building has been commenced before obtaining approval (viii) the deficiencies pointed out in the audit report etc. 9. On a reading of the order under Section 68(1) of KCS Act, it is clear that the Registrar had no material before him to conclude that in the course of the inspection conducted under Section 66 of the KCS Act, it has been found that any person, who is or was entrusted with the organization or management of such Society or an officer or an employee has made any payment contrary to the Act and the rules or the bye-laws, or has caused to any loss or damage in the assets of the Society by the manner mentioned in the provision. All that is stated is that the Inquiry Officer shall conduct a fresh inquiry to ascertain the losses. No individual has been named and the loss if any caused to the society has not been mentioned in the order passed under Section 68(1) of the KCS Act. The specific contention of the petitioner that the impugned order is not in terms of Section 68 of the KCS Act. 10. To appreciate the contention, it would be relevant to have a glance at Section 68 of the KCS Act and Rule 66(7) of the KCS Rules: 68. The specific contention of the petitioner that the impugned order is not in terms of Section 68 of the KCS Act. 10. To appreciate the contention, it would be relevant to have a glance at Section 68 of the KCS Act and Rule 66(7) of the KCS 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) xxxx xxxx 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. (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 acknowledgment 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 clearly 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 realized. (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. 11. Section 68 of the KCS Act outlines the process and authority for imposing a surcharge on individuals associated with the management or operation of a Society, in situations where their actions result in financial loss to the Society. This can occur through unauthorized payments, loss or damage to the Society's assets due to breach of trust, wilful negligence, mismanagement, misappropriation, fraudulent retention of Society's property, or destruction of records. The essence of this provision is two-fold: The first limb of the provision deals with ascertainment of loss. The provision for the identification and quantification of financial losses or damages incurred by the Society due to the actions or negligence of individuals who have or had roles in the organization, management, or were employees of the Society. This includes any payment made contrary to the governing Act, rules, or bye-laws, and any mismanagement or misconduct leading to loss or damage of the Society's assets. The second limb of the provisions deals with Recovery and Accountability. Once loss or misconduct is established, the provision grants the Registrar the authority to hold the responsible individuals accountable. This includes any payment made contrary to the governing Act, rules, or bye-laws, and any mismanagement or misconduct leading to loss or damage of the Society's assets. The second limb of the provisions deals with Recovery and Accountability. Once loss or misconduct is established, the provision grants the Registrar the authority to hold the responsible individuals accountable. This includes requiring them to repay or restore the lost money or property, possibly with interest, or to pay for the costs or compensation deemed just and equitable. If these amounts are not repaid or restored as required, the Registrar is mandated to take urgent steps to recover the amounts as arrears of public revenue due on the land. 12. The above statutory mechanism serves as a legal safeguard to ensure financial discipline and accountability within Societies, protecting their assets and financial health from the adverse effects of misconduct or negligent management by individuals in positions of trust and responsibility. The process involves an initial inquiry to establish the facts, followed by an opportunity for the individuals concerned to be heard. Based on the findings, the Registrar can make orders for restitution, compensation, or recovery of losses, thus upholding the integrity and financial stability of the Society. 13. In A.K. Francis (supra), this Court has held that 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 organization 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 the 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 as per the statute. 14. In Thrikkadavoor Service Co-operative Society, Thrikkadavoor Service Cooperative Society vs. Sivasankaran Pillai, 1990 (2) KLT 594 a learned Single Judge had occasion to further elucidate on Section 68 of the KCS Act and it was held as under: S.68 applies in special circumstances and requires specific conditions to be satisfied before it could be invoked by the Registrar and an order of surcharge passed. The first of these conditions is that the illegal payment, or deficiency in assets, should have been found in the course of an audit, enquiry, inspection or the winding up of the society. The effect of the decision of the Supreme Court in Pentakota Sriramulu vs. Cooperative Marketing Society Ltd. AIR 1965 SC 621 (a case under the corresponding provisions of the Madras Cooperative Societies Act, 1932) is that the facts giving rise to the charge have to be disclosed in the course of an audit under S.63 or an inquiry under S.65, or an inspection under S.66 or on the winding up of the society. Unless, therefore, there was an audit, inquiry or inspection by virtue of the powers conferred by S.63,65 or 66 and it was found in the course of such audit, inquiry or inspection, that any payment was made contrary to the Act, the rules or the bye laws, by the persons concerned, or any deficiency was caused in the assets of the society, S.68 is not attracted. Another essential pre-requisite for the operation of the section is that the payment or deficiency must have been caused by breach of trust, wilful negligence, misappropriation or fraudulent retention of money or other property. The existence of any of these factors is also obligatory to attract action under the section. 15. In Y.R. Vincent (supra), this Court, while interpreting the provisions had occasion to hold as under: 14. A reading of the Section would show that it refers to “any person” and not to a 'Committee'. The existence of any of these factors is also obligatory to attract action under the section. 15. In Y.R. Vincent (supra), this Court, while interpreting the provisions had occasion to hold as under: 14. A reading of the Section would show that it refers to “any person” and not to a 'Committee'. If the intention was only to take action against the members of the Committee, the Section need not have referred to “any person entrusted with organisation or management of society” or “who is or has at any time been an officer or an employee of the society.” The Section, in its plain meaning, does not permit an interpretation suggested by the Government Pleader. It refers to the conduct of individuals and not the collective conduct of the Committee. In contrast, there are provisions in the Act, which deal with the collective conduct of the Committee. As such, the contention of the Government Pleader that the word “persons” would also include the Committee cannot be sustained. In Shabin Antony vs. Gireesh Kumar M.S & Ors. 2018 (1) KHC 115 , a Division Bench of this Court considered S.32 and S.68 of the KCS Act and held that the area of operation of the two provisions are completely different and independent of each other. It was held that while S.32 relates to the performance of duties by the Committee and action being taken against the Committee, S.68 relates to the action being taken against any person who is entrusted with the organization or management of the Society. In Varghese M.D. vs. The Joint Registrar of Co-operative Societies (General), Kakkanad and others, 2022 (2) KLT 659 , a learned Single Judge of this Court has held that surcharge proceedings can only be against a member who was party to the decision that ultimately led to the supersession and not against a member who had either ceased to be a member at the time the decision was taken or who became a member at a later point of time. What is contemplated is the involvement of an individual in the decision-making or in the action, which resulted in the supersession, for which a specific finding is necessary. In Joint Registrar (General) of Co-operative Societies, Thrissur and another v. Charley Panthallookaran & Ors. What is contemplated is the involvement of an individual in the decision-making or in the action, which resulted in the supersession, for which a specific finding is necessary. In Joint Registrar (General) of Co-operative Societies, Thrissur and another v. Charley Panthallookaran & Ors. 2022 (2) KHC 70 , a Division Bench of this Court while considering the scope of S.66 to 68 of the KCS Act, held that the Act does not confer any authority on the Registrar to straight away require any person to repay or restore any money to the Society based on the materials disclosed in an enquiry and that it is required to order another inquiry to find out if any persons referred to in the provision has caused loss to the Society by any one of the conducts mentioned therein. The Bench held that the inquiry contemplated in the provision is an investigation and not a mere seeking of information. 16. In the case at hand, the issued order notably lacks a determination of individual liability among the members. It merely states that losses have been incurred due to certain actions and inactions of the Committee collectively, without identifying the conduct of any specific individual. The ambiguity extends to whether the Section 66 of the KCS Act inspection report solely investigated the Committee's collective behavior without examining the actions of individual members. It's crucial to recognize that surcharge proceedings carry significant civil implications. Upon establishing an individual's liability for causing financial harm, it is imperative to precisely calculate the extent of such liability, correlating directly to the actual loss experienced by the Society. This calculation must be grounded in the evidence at hand. Consequently, an inquiry under Section 68(1) of the KCS Act must focus on pinpointing the loss attributable to the actions of specific individuals rather than a broad assessment of the Committee's collective conduct. 17. In that view of the matter, I am of the considered opinion that Exhibit P1 cannot be sustained under law. Ext.P1 is set aside as it fails to satisfy the requirements of an order in accordance with Section 68(1) of the KCS Act. Quashing the order in the light of the observations above will not stand in the way of the 1st respondent in passing a fresh order in accordance with law and in the light of the observations above.