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2024 DIGILAW 380 (KER)

Tomy Joseph S/o Joseph v. Joint Registrar of Cooperative Societies [General], Idukki

2024-03-20

A.MUHAMED MUSTAQUE, SATHISH NINAN, SHOBA ANNAMMA EAPEN

body2024
ORDER : 1. This matter has been placed before the Full Bench on a reference from a Division Bench formulating two questions for answers by the Full Bench: “(i) Whether Reji K. Joshi, the Full Bench decision requires a reconsideration insofar as the finding that before a notice is issued under Section 67, there should be a notice and hearing under Rule 66(5)? (ii) Whether the declaration in Bose E.S. as to a suspension or a temporary supersession under Sub-Section (3) of Section 32 can be made only after completion of an inquiry under Section 65 is correct?” ON REFERENCE NO.(i): 2. A Division Bench of this Court in State of Kerala v. M. Aravindakshan Nair, 2010 KHC 545 took the view that Rule 66(5) of the Kerala Co-operative Societies Rules, 1969 does not contemplate any opportunity of hearing to be given to any Society or any person, except with regard to the proposal of the Registrar for ordering cost of inspection, whether it be in terms of the report or in variation with recommendation contained in the report. 3. The correctness of the proposition of law laid down by the Division Bench in Aravindakshan Nair (supra) was doubted by a co-ordinate Division Bench and referred to the Full Bench. The Full Bench in Reji K. Joshi v. Joint Registrar of Co-operative Societies, 2022 (3) KHC 317 (FB) affirmed the judgment in case. A Division Bench of Aravindakshan Nair’s this Court in its reference affirmed and followed the proposition of law laid down by the Full Bench on questions relating to the non requirement of hearing on acceptance of the report by the Registrar before leading to any proceedings contemplated under Section 32 or Section 68 of the Co- operative Societies Act, 1969. An attempt was made by the learned Senior Counsel, Shri George Poonthottam appearing for the party to canvass a proposition that the report referred to under Rule 66(5) would result in dire consequences and therefore, before initiating any action based on the report, referable under Rule 66(5), an opportunity should be given to the Society, or the person concerned to discredit the report. We are afraid that this argument does not arrive for answer as the reference order does not cover this aspect. We are afraid that this argument does not arrive for answer as the reference order does not cover this aspect. On the other hand, the order passed by the Division Bench in the reference clearly indicates that the Division Bench accepted the order of the Full Bench negativing this argument raised. In the absence of specific reference to us, we cannot enlarge the scope of reference. Therefore, based on reference we only have to answer whether there should be a separate notice of hearing under Rule 66(5) or not for the purpose of Section 67, since Section 67 proviso itself contemplates for providing reasonable opportunity of being heard before passing an order. In other words, for a matter for inquiry under Section 67, for which the report is relied, the further hearing contemplated under Rule 66(5) is superfluous or not, as Division bench was of the view that two hearings for the same purpose were not envisaged under law. 4. Rule 66 generally lays down only the procedure for inquiry, inspection, suspension, investigation and surcharge. Rule 66(5) states that the report by the authorized person shall be placed before the Registrar with reasons and recommendation, in regard to the manner in which the entire cost or a part thereof may be apportioned among the parties specified in Section 67. It is further stated that an order shall be passed after affording them an opportunity. The proviso to Section 67 states that no order of apportionment of cost shall be made under this Section unless the Society or person liable to pay costs was given a reasonable opportunity of being heard. This opportunity is the same as that of Rule 66(5). The Division Bench was of the view that such stipulation in Rule 66(5) is therefore superfluous. We note that the Full bench had no occasion to consider the point highlighted by the Division Bench. The full bench had only considered whether the notice of hearing prescribed under Rule 66(5) is for acceptance of the report or not, before initiating any action under Section 67. It is in that context that the Full bench interpreted the opportunity of being heard referred to in Rule 66(5) as intended to be applied pursuant to an action taken under Section 67. We are not holding it as superfluous. It is in that context that the Full bench interpreted the opportunity of being heard referred to in Rule 66(5) as intended to be applied pursuant to an action taken under Section 67. We are not holding it as superfluous. Rule 66(5) only reiterates the procedure referred under Section 67 as the substantial right to proceed to recover the costs is only referable under the parent enactment and not under the Rule. Therefore, on a reading of Rule 66(5) it can be said that it only reiterates procedural aspects to be followed for the action under Section 67 and not any independent proceedings de hors Section 67. Therefore, we answer that the proposition of law reiterated by the Full Bench is a correct interpretation of law and mandate under Rule 66(5) cannot be over emphasized as a separate procedure to hold it as superfluous. We may have to state here that when a statutory rule prescribes a procedure, the Court cannot hold that it is superfluous, and the Court should make every attempt to read such Rule harmoniously to subserve objectives of the parent Act and Rules. Thus, we hold that the procedure as prescribed in Rule 66(5) only states about the procedure to be followed under Section 67 and not a separate proceedings independent of Section 67. Reference on this point is answered as above. ON POINT NO.(ii) IN REFERENCE: 5. A Division Bench of this Court in Bose E.S. and Another v. Managing Committee, Vellathooval Service Co- operative Bank Ltd. and Others, 2021 KHC 345 held that action under Section 32 shall only be based on an inquiry under Section 65. The Division Bench noted that Section 32 only provides for supersession of committee and, procedure for exercising suspension having not been provided in the statute, such exercise is permissible only based on an inquiry under Section 65. The above proposition of law in Bose case (supra) was doubted by the Division Bench in reference and noted that Sub Section 6 of Section 65 enabling the registrar to invoke the power under Section 32 does not prohibit Registrar from invoking that power while the inquiry is pending, especially when interim reports are submitted wherein major defects are noticed. The above proposition of law in Bose case (supra) was doubted by the Division Bench in reference and noted that Sub Section 6 of Section 65 enabling the registrar to invoke the power under Section 32 does not prohibit Registrar from invoking that power while the inquiry is pending, especially when interim reports are submitted wherein major defects are noticed. The learned Division Bench agreed that supersession can only occur after the inquiry, however disagreeing with the Bose judgment (supra), opined that suspension of the Committee under proviso 3 to Section 32 could be based on interim report bringing to the notice of Registrar. The Division bench in reference order also noted observation of the learned Single Judge that an order of suspension under Section 32 of the Co-operative Societies Act is not dependent on completion of inquiry under Section 65. 6. We perused the powers under Section 32. It does not speaks about suspension. On the other hand, third proviso states that the Board of Co-operative Society shall not be superseded or cannot be kept under suspension when there is no government shareholding or loan or financial assistance or any guarantee by the Government or any other board or institution constituted by the Government. This is in tune with constitutional provision under Article 243. 7. The Division Bench in Bose case (supra) judgment and in reference, is unanimous that power of suspension can be exercised under proviso 3 to Section 32. The question is therefore, whether such power is exercisable only based on a report under Section 65. In other words, as pointed out by the learned Single Judge, as referred in the reference order, whether exercise of power under Section 32 for supersession depends upon the completion of inquiry under Section 65 or not. It is to be noted that Part B of Co-operative Societies Act confers Registrar the power to conduct inquiry, exercise power of suspension, investigation and surcharge. Section 65 only delineates the procedure of inquiry by the Registrar. Section 65(6) states that if the Registrar on completion of inquiry finds that there is a major defect in the constitution or working of the financial condition of the Society, he may initiate action in accordance with the provisions of Section 32. Here we need to note that a proceeding for supersession under Section 32 can be initiated even without an inquiry under Section 65. Here we need to note that a proceeding for supersession under Section 32 can be initiated even without an inquiry under Section 65. Section 65(1) says that a proceeding under Section 32 can be initiated on the satisfaction of the Registrar on an inquiry by himself or through his subordinates, or on a report of the financing Bank, or the Vigilance and Anti-corruption Bureau of the Government, or the Vigilance Officer, or otherwise. The temporary supersession is not dependent on the final report under Section 65. This makes the position clear. To order final supersession of the committee, there must be concrete material to act upon by the Registrar and satisfaction of such material must be related to numerous circumstances referred to under Section 32. The point of dispute in this matter is related to ordering temporary suspension pending proceedings under Section 32. The statutory provision as such referable under the Act or rules do not state in what manner power of temporary suspension can be exercised. 8. Webster’s Third New International Dictionary defines ‘Supersession’ to mean "the state of being superseded, removal and replacement”. In Black's law dictionary ‘suspension’ means, “the act of temporarily delaying, interrupting, or terminating something”. 9. Suspension therefore has to be understood as an incidental power, as part of the power to order supersession of the Committee. It would be unrealistic to say that for exercise of power of suspension, a final report has to be obtained under inquiry referable to Section 65. Suspension and supersession are not the same. Suspension is pending a proceeding for supersession. There will be grave situations where immediate action is required pending an inquiry under Section 65. If the Registrar has to wait till the completion of inquiry under Section 65, sometimes even the very purpose of supersession will be lost due to lapse of time. The purpose of suspension is to keep affairs of the society intact by keeping away the Board of Co-operative Society till such a period as deems fit or till the conclusion of the proceedings under Section 32. Suspension being an incidental power, it cannot be said that the same procedure for exercising power for supersession should be followed. What is required for consideration is whether the continuation of the Board of Co-operative Society is a threat to the existence of the Society or would stand prejudicial to inquiry contemplated under Section 65. Suspension being an incidental power, it cannot be said that the same procedure for exercising power for supersession should be followed. What is required for consideration is whether the continuation of the Board of Co-operative Society is a threat to the existence of the Society or would stand prejudicial to inquiry contemplated under Section 65. Therefore, on being satisfied from the materials collected, with regard to the imminent necessity, the power of suspension can be exercised. Thus, we hold that, to order suspension of the Committee, completion of inquiry under Section 65 is not necessary. We further hold that proposition to the contrary as laid in Bose case (supra) is not good law. Thus, we answer the reference as above.