G. CHANDRAIAH WRIT PEITITON No. 25908 of 2001 · Andhra Pradesh High Court

Since the subject matter of these three writ petitions is one and the same, they are heard together and being disposed of by this common order.

The Deputy Registrar of Co-operative Societies, Machilipatnam, Krishna District, issued surcharge order, under Section 60(1) of the Andhra Pradesh Co-operative Societies Act 7 of 1964 by proceedings in Rc.No.1485/96-A, dated 14.07.1999, directing to recover an amount of Rs.1,97,000/- from Sri V.K. Sundara Rao, Ex-Secretary of Lankapalli Primary Agricultural Co-operative Society, Lankapalli (for short “the Society”) and Sri B.S.R.K. Prasad, Ex-Cashier of the Society, jointly and severally, as they are held responsible for the fraud and misappropriation of the amount and caused loss to the Society; with a further direction to recover an amount of Rs.10,000/- relating to loan No.1943, dated 27.06.1994 from Sri V.K. Sundara Rao, as he is held responsible for misappropriation of the said amount. The Deputy Registrar of Co-operative Societies, Machilipatnam, Krishna District, also issued surcharge order dated 12.07.1999 directing to recover an amount of Rs.85,000/- from the afore-stated persons, as they are jointly and severally held responsible for misappropriation of funds and caused loss to the Society. Challenging the surcharge orders dated

12.07.1999 and 14.07.1999, Sri V.K. Sundara Rao preferred appeals in O.A.Nos.159 and 160 of 1999, respectively, while Sri B.S.R.K. Prasad preferred appeal in O.A.No.169 of 1999 before the A.P. Co- operative Tribunal, Vijayawada, against the surcharge order dated

14.07.1999. The Tribunal, by common order dated 22.12.2006, dismissed the appeals preferred by Sri V.K. Sundara Rao and; by order dated 18.09.2001 dismissed the appeal preferred by Sri B.S.R.K. Prasad. Aggrieved by the same, Sri B.S.R.K. Prasad W.P.No.25908 of 2001 against the order dated 18.09.2001 in

O.A.No.169 of 1999 and Sri V.K. Sundara Rao preferred W.P.Nos.23734 and 23739 of 2007 against the orders dated

22.12.2006 in O.A.Nos.160 and 159 of 1999, respectively.

Learned counsel appearing for the petitioners contended that while the petitioner in W.P.No.25908 of 2001 was originally appointed as a Clerk in the Society and thereafter, he was appointed as Cashier and that as a Cashier he has acted only as per the instructions of the Secretary of the Society; that the petitioners are no way concerned with the alleged misappropriation levelled against them; that the petitioners were not given any opportunity during the course of proceedings under Section 60(1) of the Andhra Pradesh Co-operative Societies Act, 1964 (for short , ‘the Act’); that neither the original authority nor the appellate authority has considered the contention of the petitioners they are not responsible the alleged misappropriation; that the allegations made against the petitioners are not correct; that the procedure contemplated under Section 51 of the Act has not been followed, which amounts to violation of Principles of natural justice; and hence, the impugned orders are liable to be set aside. In support of his contention, the learned counsel placed reliance on a decision of this Court reported in P.Yeram Naidu V. Deputy Co- operative Registrar, Srikakulam, Gujarathipeta, Srikakulam and another [1] .

On the other hand, learned Government Pleader appearing for the Deputy Registrar of Co-operative Societies, Machilipatnam, Krishna District, submits that the petitioners were given ample opportunity; that the Society also issued show cause notice to the petitioners and they submitted the explanation; that the procedure contemplated under the Act has been followed; that there is no violation of principles of natural justice; that since the primary authority found that the petitioners have misappropriated the funds of society, ordered for recovery of amount from them; that on appeals the appellate authority also confirmed the orders passed by the primary authority and, therefore, the impugned Surcharge Orders were passed after giving ample opportunity to the petitioners to defend their case; that the petitioners failed to prove their innocence; and there are no grounds to interfere with the impugned Surcharge Orders and hence, he prays to dismiss the Writ Petitions.

In support of his contention, the learned Government Pleader placed reliance on a decision of this Court reported in Kolluri Bhaskara Rao V. Dy.Registrar of Co-operative Societies, Gudivada, Krishna District & another , wherein it was held thus: [2]

The grounds on which the petitioners have disowned their liability are that there was no entrustment of work; no deficiency of the funds of the society caused at their instance and for the loss caused by others, the petitioners should not have been made responsible. The management did not supply the material to the petitioners which was the basis for the management to initiate the proceedings in question. They also contended that during enquiry no opportunity of either adducing evidence of hearing has been given to them. The same contentions were raised before tribunal. The tribunal found that the orders passed by the Co-operative Authorities fixing the liability on the petitioners based on proper appreciation of evidence. The tribunal being an appellate authority again went through the entire material and found that there is no illegality or irregularity in the orders passed by the authorities fixing the liability on the petitioners. The findings given by re- appreciation of evidence and consideration the Tribunal are on of all the contentions which were raised by the petitioners. The tribunal and the Co- operative authorities scrutinised material properly and reached correct conclusion liability on fixing petitioners. The petitioners have not shown how the orders under challenge resulted in depriving of fundamental rights or violation of any legal or statutory right nor they are result of non- compliance of principles of natural justice. Thus, the liability part on the petitioners is concerned. We see no reason to interfere with the impugned orders. So far as interest ordered by the tribunal and the authority is concerned, we think that justice will be met if the same is reduced to 10% instead of 18%. Thus, we direct the petitioners in both the writ petitions to pay the amount ordered to be due from them with 10% interest in instalments with a single eight equal default clause. First instalment commencing from First July, 1998.

Learned counsel appearing for Lankapalli P.A.C.S. submits that the petitioners in these three writ petitions were charged for misappropriation of the funds relating to the society and Surcharge proceedings were initiated under Section 60 (1) of the Act; that the petitioners were given ample opportunity to defend their case; that the primary authority issued proceedings and found that the petitioners are responsible for misappropriation of funds and ordered for recovery of the amounts from them; that aggrieved by the said orders, the petitioners filed appeals before A.P.Cooperative Tribunal, Vijayawada and the appellate authority also dismissed the appeals filed by them while confirming the orders passed by the primary authority; that the grounds urged in the writ petitions that the petitioners were not furnished the documents, therefore, the orders passed by the primary authority and as confirmed by the appellate authority are in violation of the principles of natural justice is not correct; that the documents sought for by the petitioners are not relevant for the purpose of considering their case; that both the authorities gave concurrent findings that the petitioners have misappropriated the funds of the Society and, therefore, the Society is entitled to recover the said amount from the petitioners.

Heard learned counsel for the respective parties.

Now, the point that arises for consideration is whether the petitioners are entitled for the relief sought in the writ petitions. The undisputed facts are that while the petitioner in W.P.No.25908 of 2001 worked as a Cashier, the petitioner in W.P.Nos.23734 and 23739 of 2007 worked as Secretary of the Society, at the relevant point of time. Basing on the proceedings dated

05.11.1996 issued by the District Cooperative Society, Machilipatnam, Krishna District, an enquiry was conducted under Section 51 of the Act into the affairs of the Lankapally Primary Agricultural Cooperative Society, Lankapally, Krishna District and the Enquiry Officer submitted his report dated 6.6.1997. The District Cooperative Officer, Krishna, issued proceedings 19.6.1997 to review the said enquiry. As per the findings of the Enquiry Officer, the General Body of Lankapally Society resolved for initiation of both the Civil and Criminal cases against the petitioners vide resolution dated 25.09.1997. The enquiry report revealed that an amount of Rs.2,73,200/- was misappropriated from the funds of the society by V. Kanaka Sundar Rao, Ex-Secretary and Sri B.S.R.K. Prasad, Ex-Cashier by making fictitious entries in the books of the society. The Deputy Registrar issued surcharge notice to the petitioners on 18.09.2001. The delinquent employees engaged the counsel and filed Vakalat on behalf of the petitioners and also filed explanation to the notice, dated 21.03.1999. Notices were also issued to the member loanees, whose loans were misappropriated by the delinquents by making fictitious entries in the records of the Society. Statements were recorded from the loanee members who attended to the notice issued and the advocates of the delinquents were permitted to cross-examine them.

The contention of the petitioner in W.P.Nos.23734 and 23739 of 2007 is that loans were sanctioned by the Branch Manager, Krishna District Cooperative Central Bank and the entries were recorded by the Accountant and the Accountant simply obtained his signatures without his knowledge and he is innocent. This contention cannot be countenanced. It is the responsibility of the Secretary to receive loan applications from the members, scrutinize them and arrange for disbursement of loans. On receipt of loan applications, he has to prepare the withdrawal application, get it approved by the Financing Bank, for sanction. After sanction, as a Secretary, he has to sign voucher and bond with District Cooperative Central Bank along with President and one Director and arrange for disbursement to the members. As a Secretary, he has to get the vouchers and other papers prepared with the help of staff, and as Passing Officer, has to pass the voucher and sent it to Cashier. Afterwards, the Cashier by affixing the paid stamp and after duly affixing his initial, he has to pay the amount and enter in the scroll. Then only, the role of the Accountant to write the registers like Cash Book and General Ledger etc., as per challans and vouchers of the days’ transaction will arise. But Sri V.K.Sundara Rao, the Ex-Secretary, the petitioner W.P.Nos.23734 and 23739 of 2007 states that the loans were sanctioned by the Branch Manager, Krishna District Cooperative Central Bank, Challapalli and entries were recorded by the Accountant without his knowledge. It is further to be noticed that as a Chief Executive, he has over all control on the staff and by exercising his powers he has to get the things done. As a Chief Executive he has to distribute the duties and responsibilities among the staff. He got experience of 15 years as a Secretary. His statement that he is not expected to do police job over his sub-ordinates shows his highhanded attitude. No one expects him to do police job. As a Chief Executive, he has to supervise the staff, discharge his duties as per Bye-laws, which he failed to do and it shows his dereliction of duties.

The contention of the petitioner in W.P.No.25908 of 2001 is that Surcharge Order was issued to him on 14.07.1999. He worked in the Society from 1987 onwards. He worked under the control of the Secretary Sri V.K.Sundara Rao, the petitioner in W.P.Nos.23734 and 23739 of 2007, and he is no way concerned with misappropriation of the funds. After Pay Order by the Secretary on the vouchers, he made the payments to the members. He further stated that he never rounded off the entries in the ledgers. He stated that as he got suspicion against the Secretary, he questioned the Secretary to that effect, and on

21.06.1993 the Secretary gave him a letter stating that he is not responsible for any misappropriation that has taken place in the society. The letter in original is produced along with his statement. Further he stated that he disbursed the loans relating to this surcharge as per letter given by the Secretary on 25.06.1995. He produced that letter also along with his statement.

During the course of Surcharge enquiry a statement was recorded from him in person. He stated that he worked under the control of the Secretary. No duties and responsibilities were fixed to him. The vouchers and bonds were prepared by the remaining staff of the society and as per Pay Orders of the Secretary, he paid the amount to loanees. He further stated that he handed over the loan amount of the loanees in question to the Secretary, after taking letter from him, which was produced during surcharge enquiry. Share capital was not collected proportionately from these loanees. Further eight loans were remitted by V.K.Bhaskara Rao on 05.03.1997 on behalf of V.K.Sundara Rao’s father. He stated that as a Secretary, V.K. Sundara Rao misappropriated the amount and remitted the same through Sri V.K.Bhaskara Rao.

Learned counsel for the petitioners pointed out that from the enquiry report dated 06.06.1997, the primary authority i.e., the Deputy Registrar of Cooperative Societies gave a finding basing on the presumptions, but not based on the evidence on record. Therefore, the impugned order is liable to be set aside.

The order passed by the primary authority as well as appellate authority reveal that the primary authority has considered all the aspects in detail and after giving opportunity to the petitioners passed orders. The petitioners admit that they engaged an advocate to defend their case. Witnesses were examined and their statements were recorded, who deposed that the petitioners obtained the signatures. Therefore, the allegation that was made against the petitioners about misappropriation of funds was proved.

The petitioner’s contention, relying on the judgment in P.Yeram Naidu’s case (1 supra), is that the procedure under Section 51 of the Act has not been followed.

The further contention of the petitioner in W.P.No.25908 of 2001 is that, both the primary authority as well as appellate authority have not considered the fact that the paternal uncle of the Secretary was paid an amount of Rs.65,200/- which clearly reveals that the Secretary is behind the misappropriation. The primary authority simply said that the 1st respondent has come to the conclusion after thorough enquiry and therefore, it is correct. It has not considered the documents, pleadings and oral evidence on record and came to the wrong conclusion that the petitioner is close associate of the Secretary. He further contended that in spite of repeated requests by the petitioner and his counsel to hear the matters jointly because the issue involved in both the matters is one and same, but the Tribunal disposed of his matter keeping the appeals filed by the Secretary still pending, which caused great injustice to the petitioner. The plea of the petitioners is that respondent No.1 failed to take into consideration the relevant clauses and arrived at a wrong conclusion that they misappropriated the funds of the Society. He also contends that respondent No.1 failed to consider that the petitioner is not supporting the Secretary of the society and he has to discharge his duties as per the direction of the Secretary. He further contended that the Secretary gave letters dated

21.06.1993 and 25.06.1995 informing that he is responsible for misappropriation of the funds of the society.

The above contentions cannot be countenanced. Initially surcharge notice was issued to B.S.R.K Prasad, the petitioner in W.P.No.25908 of 2001. The contention of the petitioners is that he has not been afforded sufficient opportunity to defend his case is not correct since the authority followed the procedure under the Act and has given sufficient opportunity to the petitioner. But the petitioner failed to submit the written statement. Respondent No.1 recorded the statements of the petitioner. Having regard to the same, it was found that the petitioner is liable for misappropriation of the amount. The primary authority as well as appellate authority discussed the whole issue in detail. The contention raised by the petitioner that the procedure contemplated under Section 51 of the Act has not been followed, cannot be said to be correct. The decision relied upon by the petitioner has no application to the facts of the present case. The procedure contemplated under Section 51 of the Act is very much followed. The petitioner was given ample opportunity to defend the case by engaging an advocate who has taken all steps to defend case of the petitioner and ultimately the appellate authority on an elaborate consideration of the material on record and after giving due opportunity to the petitioner came to the right conclusion that the petitioner is liable for misappropriation of the funds of the Society. Both the authorities also found that mere shifting of the burden by the petitioner against the Ex-Secretary and the Ex-Secretary inturn against the petitioner is only to escape from the liability by throwing the burden against each other. Both the authorities also found that since the loan amounts are disbursed by the petitioner, which are sanctioned by Sri V.K. Sundara Rao, Ex-Secretary and one cannot do without the assistance of the other. Therefore, there are no merits in W.P.No.25908 of 2001 and accordingly the same is liable to be dismissed.

Accordingly, W.P.No.25908 of 2001 is dismissed.

As far as W.P.No.23734 and 23739 of 2007 are concerned, the contention of the learned counsel for the petitioner is that the documents relied upon by the Society are not related to this case and hence, the findings cannot be sustained. In support of his contention he relied on a decision reported in Bugatha Prasada Rao V. Commissioner and Registrar of Cooperative Societies, Hyderabad and another . [3]

As per the procedure prescribed under Section 51 and 60 (1) of the Act, the enquiry is conducted against the petitioner. As far as consideration of the appeal by the appellate authority is concerned, it has considered the same in different angles. A plea that was taken by the petitioner in response to the Telegram issued by the Tribunal, dated 05.09.2001 the 2nd respondent sent part of the record referred in the letter dated 16.10.2001 stating that except the documents mentioned in Sl.Nos.1 to 5, remaining documents could not be submitted as they are not available. Therefore, the contention of the learned counsel for the petitioner that no documents were furnished to the petitioner and it amounts to violation of Principles of natural justice is incorrect. According to his own arguments and reply, the respondent No.2 itself produced all the available documents and expressed his inability for not-producing the other documents which are not available. The document at Sl.No.5 is the notice dated

25.09.1997 that was issued by the society to the staff and the document at Sl.No.6 is the representation of the staff and the document at Sl.No.10 is with regard to quarterly inspection report of the 1st respondent society. When the evidence recorded is consistent and corroborative and required material evidence is available on record, by not-supply of the other unimportant documents, no prejudice is caused to the petitioner. The allegation against the petitioner is that there is misappropriation of funds of the society, for which the loanee members are the relevant persons who made the entries in the ledgers, accounts and connected persons are the proper witnesses and the documents which are brought in the oral evidence, consistently proved the misappropriation. Therefore, the decision relied by the petitioner wherein the very documents, which are the basis for initiation of enquiry were not supplied, is distinguishable and not applicable to the facts on hand. In the case on hand, all the copies of relevant documents were supplied and the petitioner was given an opportunity to cross examine those witnesses and had completely availed the opportunity and cross examined the witnesses.

With regard to document No.6 filed along with the arguments it is in respect of foreclosure of account against the staff concerned. The securing of the matter in the resolution, dated 28.10.1997 is in no way connected to the surcharge enquiry. Therefore, it has no affect on the enquiry. The non-production of the documents preferred in item Nos.5 and 6 in respect of the departmental enquiry against the staff, has no bearing on the surcharge enquiry as per his own written arguments. The decision relied upon by the learned counsel for petitioner in Bugatha Prasada Rao’s case (3 supra) is not of much assistance to the case of the petitioner.

Having regard to these findings, the appellate authority has very well considered the contention of the petitioner that the documents relied upon by the petitioner were not relevant for considering the issue. Therefore, this Court is of the view that it is not a case where the petitioner was not given the opportunity and no documents were furnished to him. It is also not a case where the principles of natural justice have been violated. The primary authority as well as appellate authority have well considered the entire material on record and after following due process of law passed orders. The primary authority had provided ample opportunity to the petitioner by giving a show cause notice to which the petitioner submitted his explanation. During the enquiry under Section 60(1) of the Act statements of loanees were recorded. They have given ample opportunity to make their statements and there upon the primary authority came to the conclusion that the petitioner is liable for misappropriation of the funds of the society and accordingly ordered for recovery of the same. In appeal, the appellate authority also considered the entire material on record and after giving ample opportunity to the petitioner and also after calling for necessary records from the Department, respondent No.1 came to the conclusion that the plea that was taken by the petitioner that the principles of natural justice was not followed, was found to be unsustainable.

For the foregoing reasons, the impugned orders do not suffer from any illegality or irregularity warranting interference by this Court. The writ petitions are devoid of merits and they are liable to be dismissed.

Accordingly, W.P.Nos.23734 and 23739 of 2009 are dismissed. There shall be no order as to costs.

Miscellaneous petitions, if any, pending in these Writ Petitions shall stand closed. __________________________ JUSTICE G.CHANDRAIAH OCTOBER 10, 2012 YVL THE HON'BLE SRI JUSTICE G. CHANDRAIAH WRIT PEITITON Nos.25908 of 2001 AND 23734 AND 23739 OF 2007 YVL

10.10.2012 [1] [2] [3] 2005 (2) ALD 194 1998 (3) ALD 154 (DB) 2004 (1) ALT (DB) 359