Podapati Nageswara Rao v. 1. The Commissioner for Cooperation and Registrar of Cop Societies'

Petition under Section 1s1 cpc praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be oreased to stay all further proceedings in pursuance of the biased and perfunctory Section 51 Enquiry Report dt: 30.6.2003 of the 4th respondent herein i.e. ch. china Ankaiah including proceedings Rc. No. 64l2oo3-F, Dt: 27.10.2003 of the 3rd respondent herein i.e. Deputy Registrar of cooperative societies, Khammam, Khammam District. Counsel for the Petitioner : SRI G.RAVI MOHAN Counsel forthe Respondent Nos.1 & 3 : Gp FOR COOPERATION Counsel for the Respondent No.2 : SRt SRIN|VAS POLAVARAPU Counsel forthe Respondent No.4 : - Counsel for the Respondent No.S : SRI p.M.GOpAL RAO The Court made the following ORDER -t C,, HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA WRIT PETITI ON No.25913 oF 2003 o RDER: Petitioner, serving as the Secretary of Wyra Large Size Cooperative Society Ltd' (for short' 'the Society')' the 5tn respondent since 28'04'1971, has brought this writ petition' He has been under suspension effective from 1'5'2003 FN' The Society operates across seven villages in Wyra 2. Mandal, Khammam District, providing loans to its members and supplying fertilizers' lt is stated that Society developed significantly under petitioner's tenure' with its own buildings' two godowns and a shopping complex' The last-elected managing committee of 13 members' including the President' completed its term of hve years on 31 07'2OO0' after which no elections have been conducted Presently' a four-member committeeappointedunderSection32(7|(a|oftheAndhra Pradesh Cooperative Societies Act' 1964 (hereinafter referred to as 'the Act') is managing Society's affairs ' On 18'02'2O03' the 2'd respondent ordered an enquiry into the affairs of the Society under Section 51 of the Act authorizing the 4th respondent to conduct it' pursuant to the Memo dated 03.02' 1999 issued by the 1"t respondent' J 2 Claiming the 4fr respondent to be inimical and prejudiced against him, petitioner requested the 2nd respondent on 04.03.2003 and again on 18.03.2O03 to appoint a different Enquiry Officer, reiterating these concerns in his subsequent representation dated 28.03.2003 through the president of Ap State Agricultural Cooperative Societies Employees Association, Khammam District Unit. However, no orders were issued to change the trnquiry Ofhcer. The 3.d respondent, relying on a preliminaty report by the 4th respondent, issued proceedings dated 31.O3.2003, authorizing attachment of certain immovable properties of petitioner under Section 73 of the Act. Aggrieved thereby, petitioner hled Writ petition No. 5994 of 2003 challenging the orders dated 18.O2.2OO3 and 31.03.2003 as being arbitrary and based on bias. In the said Writ petition, this Court passed the order dated 08.04.2003, directing that attachment ordered in the impugned proceedings shall remain, but petrtioner was allowed to use the properties. Subsequently, on 30.O6.20O3, the 4fr respondent submit[ed a report under Section 5 l. of the Act, implicating petitioner in the alleged misappropriations amounting to Rs. 45.24 lakhs. Based on this report, the 3rd respondent issued a surcharge notice under Section 60(1) of the 3 Act dated 30.07.2003, directing petitioner to remit Rs' 38'2O lakhs. Petitioner contends that this notice was cryptic, vague' and issued in contravention of law. In his explalation dated 09.09.2003 and subsequent suppiemental explanations dated 23.O}.2OO3 and 06. 10.2OO3, petitioner highlighted the biased and prejudicial nature of the 4tr' respondent's enquiry report' emphasizing its perfunctory nature' In Writ Petition No' 5994 of 2OO3, this Court, through order dated 04'11'2003' directed Respondents 2 arrd' 3 to appoint a different Enquiry Offrcer in place of the 4ff respondent. Despite this, the 3'd respondent proceeded to issue a surcharge order under Section 60(2) of the Act dated 27 .!O.2OO3 holding peLitioner liable for Rs' 22'96 lakhs. This order was based on the 4ft respondent's enquiry report dated 30.06.2003, which petitioner asserts is void due to the evident bias and lack of compliance with the Court's directions. This Court by order dated 17 '12'2003' granted 3. interim stay of all further proceedings pursuant to the Section 51 Enquiry report dated 30'06'2003 of the 4h respondent including proceedings dated 27 'LO'2OO3 of the 3'd respondent' karned counsel for petitioner Sri G' Ravi Mohan 4. submits that the 3'd respondent issued attachment orders dated 4

31.03.2003 targeting the immovable properties of petitioner, his wife, and his son, based on the preiiminary report by the 4tr, respondent. He highlighted several inconsistencies in the Enquiry Report. For instance, the total aileged misappropriation amount was stated as Rs.49,13,757 at page 6 of the report, with Rs.3,89,688 attributed to the Accountant and Rs.4 j,24,O69 against the petitioner. However, the show-cause noti,:e dated 3O.7.2OO3 issued by the 3rd respondent cited Rs.38,,19,633, and the final surcharge order dated 2T.10.2003 mentioned Rs.22,96,398. This discrepancy of Rs. 15,23,235 was cited as evidence of manipulation and mala fide intentions b), the 4rh respondent, aimed at damaging petitioner,s reputation. It is argued that the 46 respondent published damaging information in local newspapers to tarnish his image further. The affidavit also provided detailed all:gations regarding the methodologr of the 4th respondent. It was claimed that the Enquiry Officer inflated the figures of allegecl fraud, such as including salary enhancements, arrears, adjustment entries, and other legitimate transactions under the category of misappropriations. The petitioner noted that many of these items, such as excess payments to IFFCO and KRIBHCO, advances made to shops, and share capital collections from 1 ) : 5 members, could not be classihed as misappropriation under Section 60(1) of the Act' The petitioner asserted that these figures were adopted without proper verihcation or relevance and were part of a calculated effort to implicate him' Specific examples included allegations regarding pay frxation and arrears for employees, which the 4e respondent attributed solely to petitioner, ignoring the role of Society's Managing Committee and President'

5. The 2'a respondent District Cooperative Offtcer' Cooperative Offrcer. Khammamsubmitsthattheprerogativetoappointaninquiry offrcer lies with the Registrar' in this case' the District The reasons provided by petitioner rn 18.O2.2OO3 and 18.03'2003, seeking a Applications dated change of the Inquiry Officer, were baseless and reflected an apprehension on his part and were not valid and were not considered sufhcient to warrant changing the inquiry oflicer' It is stated, the 4e respondent seized the records of the 5e respondent Society and submitted a preliminary report which indicated large-scale misappropriation of society funds by the petitioner and recommended invoking Section 73 of the APCS Act, 1964, due to the likelihood of petitioner alienating properties held by his wife' son' and himself' The preliminary i,; 6 reporl ied the Deput5r Registrar of Cooperatrve Societies, Khammam, to authorize the 4fr respondent under Section 73 to attach the immovable properties of the petitioner. The ilction of the inquiry officer was in accordance with the provisions of the APCS Act, 7964, and was intended to safeguard the Society,s interests. Summons were issued seven times under Section 55 to attend the inquiry and produce books of accounts, provide deposition, and offer explanations for the irregularities on dates including 20.O2.2OO3, 26.03.2003, t2.O4.2OO3, 29.Ct4.2OO3,

10.05.2003. and 02.06.2003, however, he failed to produce complete records and intentionaliy, avoided provrding a deposition, obstructing the inquiry. The inquiry officer proceeded with the available records and submitted thr: report on 30.06.2003. Petitioner failed to cooperate with the inquiry and was absent from the inquiry ofhcer,s hearings on more than srx occasions. It.is clarihed that inquiry report was only a foundation for the 3.d respondent - Surcharge Authority to rnitiate proceedings under Section 6O who conducted an independent inquiry and passed orders judiciouslv. The petitioner had every opportunity to rebut the inquiry report by providing evidence during Section 60 proceedings. The Hon,ble Cooperative Tribunal, ir Hgd.erabad DCCB us. Cooperatiae I ) 7 ,! Tribunal, held that reports under Sections 51 or 52 serve as thebasisforinitiatingsurchargeproceedingsbutcannotbethe sole basis for passing a surcharge order' The petitioner's right to challenge the inquiry report during the surcharge proceedings is emphasized. It is stated, petitioner in Writ Petition No' 5994 of 2OO3 challenged appointment of the 4ft respondent as the Inquiry Ofhcer and conditional attachment of his properties under Section 73 of the APCS Act wherein this Court issued interim direction on 08'04'20O3' aliowing petitioner to Lrse attached properties but maintaining the attachment orders' inquiry officer' Since there was no direction for changing .the therewasnoneedtoreplacethe4frrespondent.Basedonthe report dated 30'06'2003' the 3'd respondent conducted independent inquiry under Section 6o' duly giving petitioner an opportunitSr to Present his case and Passed orders dated 27.1O.2OO3, for recovery of Rs' 22'96 lakhs' a reduced amount compared to the Rs' 45'24 lal<hs initialiy reported by the Inquiry officer.Thisdemonstratedanindependentevaluationbythe3,d respondent, taking into account evidence and circumstances' It is further stated that Writ Petition No' 5994 of 2O03 was frnally disposed of on 04'11'20O3'with a direction to -/ I i l 8 Respondents 2 and 3 to appoint another person in place of the 5th respondenL (4ff respondent in the present Writ pctition) to conduct an inquiry, however, by the time the or.der was delivered, inquiry was already completed. Therefore, the direction could not be complied with. The respondents further submitted that the inquiry officer issued seven summonses to the petitioner, who repeatedly sought extensions of rime and failed to provide a deposition over a period of three mo.ths and thirteen days. The petitioner first appeared before the inquiry officer on 2O.O2.2OO3 and last on 02.06.2003, yet continued to delay the proceedings. It was emphasized that despite ample time being given, he failed to cooperate, compelling the inquiry ofhcer to complete the inquiry based on available records. The responsibilitl' for misappropriation was fixed against the petitioner accordingly. The 3.a respondent,s reductior of the amount was attributed to arbitration proceedings pending before the Arbitrator, MARK_FED, Hyderabad, ancl proof provided by petitioner for certain recoveries. It was argued that if petitioner had cooperated and submitted the necessarv proots during the inquiry, the initial report might have reflected those adjustmenls. : 1 ; I 1 I 9 It is highlighted that Inquiry Officer's role is fact- hnding in nature and the inquiry report serves as a basis for surcharge authority under Section 6O which independently examinesthefindingsandisnotboundbytheinquiryofficer,s conclusions.Thus,thecontentionthatliabilitywasfrxedwitha prejudiced mind is unfounded' Itisstatedthatpetitioner,sfailuretoprovideall relevant records to the inquiry ofhcer' citing unavaiiability due totheirage,hinderedtheinquiryprocess.AstheChief Executive of the society' it was the petitioner's responsibiliry to maintain these records' In the absence of subsidiary ledgers' the inquiry officer relied on the audit report' cash book' and conf,rrmations from firms with whom the socieff conducted business to determine the extent of misappropriation and hx responsibility against petitioner' The respondents emphasized that there were no interim directions in W'P M'P' No' 7854 of 2OO3 in W.P. No' 5994 of20o3 requiring a change of the inquiry ofhcer, hence, the 4fr respondent conducted the inquiry' Regarding petitioner's salary frxation' respondents pointed out that as per Section 116-C of the Act' prior approval of the Registrar is mandatory for fxing staffing patterns' qualifications, pay scales' and other aliowancis' In petitioner's R i r :. (. l0 case, salar1 was fixed by the managing committee wittLout such approval, rendering it invalid under the Act. The pay scale cited by petitioner corresponded to state government employees, which does not apply to Society staff. They supported the inquiry officer's objection to petitioner,s salary fixation as proper and in compliance with the Act. Respondents reiterated that the order passed by ths 3'a respondent on 22.7o.2oo3 rvas valid and based on an independent inquiry conducted under Section 6O of the Ac1., hence, prays to dismiss the Writ petition. 6. Respondents 4 and S categorically contend that petitioner has a statutory remedy under Section 76 of the Act by way of an Appeal before the cooperative Tribunal. pel.itioner,s claims of bias in the conduct of enquiry under Section 51 are baseless, [abricated, and aimed solely at delaying the proceedings. The 4e respondent asserts that he was duly appointed as enquiry ofhcer by the 2.d respondent through proceedings dated 18-O2-2003 to investigate allegations of misappropriation of societ5i funds based on the special report dated 3 i -03-2OO2 submitted by the Cooperative Sub_ Registrar/Auditor. petitioner, with mala fide int(:ntions, submitted representations dated 1g_02_2OO3 and lg_03_.20O3 to the Respondents 1 and 2 seeking a change of Enquiry Officer. 11 These rePresentations were considered and rejected' It is stated, the 4ft respondent issued summons to petitioner on 20-02-2003, 26-03-2003, several occasions, sPecificallY 12-04-2C,03, 29-04-2003, 10-05-2003' and 02-06-2OO3, to produce books of accounts and provide deposition' however' he deliberately failed to produce the required records and avoided giving his deposiLion' Despite this non-cooperation' the fourth respondent conducted a thorough examination of the availabie record,s and witnesses and submitted the Enquiry Report dated 30-06-2003 to the 2'd respondent The respondents clarify that Section 51 enquiry is an administrative enquiry that serves as a basis for initiating surcharge proceedings but is not the sole criterion for passing surcharge orders which were issued following an independent enquiry' during which petitioner was afforded ample opportunity to present evidence and arguments' trven if the enquiry ofhcer's report under Section 51 contains errors or incorrect conclusions' these do not vitiate the report or subsequent proceedings' Therefore' the petitioner's repeated claims of bias and procedural flaws lack merit and do not withstand legal scrutiny Notably' the petitioner has not specihed any particular instances of bias in his representations or afhdavit. t I I t t2 While it is true that the 4th respondent sought extension of time to complete enquiry, the 2"d respondent granted only a 12-day extension and the said direr:tive was complied rvith. The respondents also address the attachment of petitioner's properties under Section 73 contending that this action was taken to safeguard Societ5r,s interests, as ltetitioner has a history of aiienating properties. The fourth respondent requested the third respondent to issue the necessary attachment ordcrs, which were duly authorized and executed. The respondents maintain that there is no illegality or irregularit5r rn the conduct of the enquiry under Section 51 of the A.P.C.S. Act or in the issuance of the surcharge orders.

7. Petitioner hled rejoinder to the counter of the 2,a respondent denying the averments of the counter. It is stated that while the counter alhdavit refers to orders dated 08.04.2003 jn WpMp No. 7854/2003 in Wp No. S994I2OO3, petitioner refers order dated 04.ll.2OO3 which directed replacement of the 4ff respondent as trnquiry Ofhcer. The order dated O4 . 1 1 .2OO3 explicitly directed appointment of a new ofhcer. The 4th respondent,s biased approach is evident from the inflated misappropriation amount of Rs. 45.24 lakhs, later reduced to R.s. 22.96 lakhs. He emphasizes that the biased ) ) 13 report stemmed from an enquiry conducted without adequate records or fair procedures' Representations dated 04 03'2003'

18.o3.2oo3,and28.03.2003bypetitionerandtheemployees' association were ignored' necessitating legal intervention; the hurried completion of enquiry by 30'O6'2003' despite pending litigation (WP No' 5gg4l2lo3)' underscores bias and undue haste. There was no intention on his part to delay the enquiry and reasons for seeking time were provided in earlier submissions. The petitioner had requested a 1S-day extension to give his deposition through a letter daled 2'6 2OO3 ' but his requestwasdenied.Furthermore,theEnquiryoflrcerdidnot communicate furtrer dates for the enquiry' and the enquiry report was hurriedly submitted on 30'6'2003' denying the petitioner a fair opportunity to present his case' The petitioner alsodisputesthefrndingsoftheenquiryreport,arguingthatit was unfair and incomplete' as the enquiry ofhcer oniy considered the avaiiable records rather than reviewing the fu1l setofconnectedrecords.Thepetitionerclaimsthatsucha procedure was contrary to natural justice and resulted in biased findings. Additionally; the reduction of the surcharge anount in the surcharge from Rs.45'24 lakhs to Rs'22 96 lakhs proceedings indicates the inflated and biased figures in the . I i i : i* ( 14 ( original enquiry report. The petitioner emphasizes that the enquiry o1ficer's actions were arbitrary and lacked due process, with no reasonable opportunity given for a proper defense. In the 18th paragraph, the petitioner repeats his previous arguments regarding the biased nature of the enquirv ofhcer,s actions, including the incorrect and incomplete sa1ary figures that were used against him. The petitioner points out that the salary hgurcs were lixed by the president of the Society, not by him, and that these were wrongly treated as misappropriations.

8. Petitioner filed rejoinder to the counter hled on behalf of Respondents 4 and 5 denying the averments. It is contended that the 4ft respondent cannot represent the Society in this capacity, and his involvement raises con<;erns of propriety.

9. I{eard Sri G. Ravi Mohan, learned counsel for petitioner and Sri Srinivas polavarapu, learned counsel for the 2nd respondent and learned Government pleader for Cooperation.

10. Having heard learned counsel on either srde and having perused the material on record, it is to be seen that main contention of petitioner revolves around the alleged bias of the ) ) *a.,-_*\ . .,. ..:-- .t:. :-1. ,r. ,r.. .!ttl -gt. .,.:t;i i ;"_ :&e 15 4h respondent, who was appointed as Enquiry Ofhcer under Section 51 of the Act' Petitioner made representations dated O4.O3.2OO3, 18 03'2OO3 and 28'03'2OO3 to the 2'd respondent to change the said Enquiry Ofhcer' but in vain' Further' after receiving preliminary enquiry report from him' the 3'd respondent through proceedings dated 31 03'2OO3 authorised the very same 4e respondent to attach his immovable properties as also that of his son and wife' Questioning the same' Writ Petition No. 5994 of 2OO3 was frled wherein this Court uide order dated 08'04'2003 directed that attachment order dated 3l.o3.2oo3shouldremainbutpetitionershouldbeentitledto of Petitioner is that use the ProPerties' The comPlaint an order and to avoid Respondents 2 arrd 3 anticipating such change of the 4th respondent' got Section 51 enquiry completed with god-speed by the same Enquiry Ofhcer' Thereafter' Writ Petitionwasdisposedofon04.ll.2oo3directingRespondents2 and 3 to appoint any other person in the place of the Enquiry Offrcer to conduct enquiry into the matter' In this regard' the case of the 4th respondent is that he had issued summons to several occasions to attend enquiry and for of books of accounts and for giving dePositions; to Produce the records and production though attended, he failed petitloner I t r l6 intentionally avoided to give depositions. The Enquiry Ofhcer submitted report on 3O.06.2003, based on which. the 3.a respondent initiated surcharge proceedings and issi.ted show cause notice dated 30.07.2003 indicating the amount of misappropriation /fraud as Rs.39,19,633/_ and passed orders on 27.1O.2OO3 for Rs.22.96 lacs. Here, petitioner points out that in the Enquiry Report, the 4tr, respondent mentioned the amount as Rs.49,13,757 /-, whereas in the show cause notice dated 3O.O7.2003, it was shown as Rs.38, 19,633/_ and in the surcharge proceedings dated, 27.7O.2003, as Rs.22,96,39g/- and this itself shows the 46 respondent acted in a biased manner. According to the 4m respondent, enquiry under Section 51 is only an administrative enquiry and a basis for lnitiating surcharge proceedings which would be passed after conducting independent enquiry and that since petitioner did not produce books of accounts, based on the material available, he arrived at such a hgure. The 3.d respondent, acting as the sr-rrcharge authority under Section 6O, has power to independentlv assess the findings of the inquiry and issue orders accordingly. Reduction of surcharge amount from Rs.49.24 to Rs. 22.96 lacs demonstrates that the 3'd respondent acted judiciously and considered the petitioner's submissions. In view of the same, it I { I II ' 4F, I j ,; l I I 11 cannot be said that variatton rn hgures dePicts the biased towards Petitioner' The nature of the 4th resPondent discrepancies in the alleged misappropriation amounts cited in different documents can be attributed to the complexities involvedinsuchinvestigationsanddonotnecessarilyindicate mata fide intentlons Further, the contention of petitioner that inquiry 11. report shouid be invalidated because the 4ft respondent was not replaced despite the Court's directive is concerned' it is to be noted that in the interim order passed in Writ Petition No' 5994 of2003,thereisnodirectiontochangetheEnquiryofficerand in the final order dated O4'11'2OO3' it was directed to change t I the4mrespondentltnquiryOfficer'bywhichtime'enquiry report was submitted by the 4th respondent Enquiry Offrcer' Furthermore, petitioner had ample opportunity to 12. present his case during the surcharge proceedings and he has the opportunity even to challenge the said order' but however' he did not avail the said remedy under Section 76 of the Act' The attachment of petitioner's properties under Section 73 was alawfulmeasuretoprotectthesociety'sassets,especiallyinthe light of petitioner's history of alienating properties' This Court I I -I 18 therefore, is of the view that pe[itioner failed to substantiate his claims of bias and prejudice in the inquiry proc:ess. The respondents have acted within the provisions of thc Andhra Pradesh Cooperative Societies Act, 7964, and have due process in conducting the inquiry, issuing surcharge orders, and attaching properties. The Writ petition is therefore, liable to be dismissed.

14. The Writ Petition is accordingly, dismissed. No Consequently, the misceilaneous Applications, if any shall stand closed. //TRUE COPY// SD/-A.V.S. PRASAD ASSISTANT REGISTRAR 0' SECTION OFFICER To Two CCs to GP FOR COOPERATION' High Court for the State of Telangana at Hyderabad [OUT] o;;'ac 6 sRic.RAVI MoHAN, Advocate [oPUC] One cc to SRI P.M'GOPAL RAO, Advocate [oPUc] o;; aa io SRI SRINIVAS POLAVARAPU' Advocate [oPUc] Two CD CoPies 1 2 J 4 q \ SA BS %-r , ) HIGH COURT DATED:0210112025 ORDER WP.No.25913 of 2003 .'---\-\ ; L{ 4 .S' h \'v I /.- I \ ,,9 *llI DISMISSING THE W.P WITHOUT COSTS. ,