H. Rajasekar & Ors. v. The Deputy Registrar of Cooperative Societies

Petitions filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorari to call for the records relating to the impugned proceedings in Thanda Theervai No.3/2008/Sa.Pa. dated 01.08.2008 issued by the first respondent and the enquiry report dated 18.08.2006 submitted by the second respondent herein and quash the same. . . . For petitioner in all W.P.s : Mr. T.Sundaravadanam For respondents in all W.ps : Mrs. Malarvizhi Udhayakumar, Spl. Govt. Pleader(R1) Mr.M.S.Palaniswamy (R4) No appearance for R-2 and R-3 . . . C O M M O N

O R D E R Whether the time limit provided in first proviso to Section 87(1) of the Tamil Nadu Co-operative Societies Act, 1983 is imperative or only directory is the question which needs to be answered in these writ petitions.

An enquiry under Section 81 of the Tamil Nadu Co-operative Societies Act, 1983 (hereinafter referred to as "the Act") was ordered in respect of monetary loss said to have been caused by the petitioners herein, who were the employees of the Fourth Respondent Society. The Enquiry Officer submitted a Report on 18.08.2006 holding that the petitioners are responsible for the loss caused to the Society. Based on the said Report, on an application filed by the fourth respondent, a proceeding under Section 87(1) of the Act was initiated by the first respondent in Penal Assessment No.33/2008/Sa.Pa dated 01.08.2008 against the petitioners. Challenging the said proceeding on the ground that it is barred by limitation as provided in the first proviso to Section 87(1) of the Act, the petitioners are now before this Court. To the contrary, the contention of the respondents is that the time limit provided therein is not mandatory and the same is only directory and therefore, the impugned proceeding is not barred by limitation, warranting interference at the hands of this Court.

In order to appreciate the legal plea taken by either side, it would be, at the outset, useful to refer to Section 87(1) of the Act, which reads as follows:- "87. Surcharge:- (1) Where in the course of an audit under Section 80 or an inquiry under Section 81 or an inspection or investigation under Section 82 or inspection of books under Section 83 or the winding-up of a society, it appears that any person who is or was entrusted with the organisation or management of the society or any past or present officer or servant of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has made any payment which is not in accordance with this Act, the Rules or the bye-laws, the Registrar himself or any person specially authorised by him in this behalf, of his own motion or on the application of the board, liquidatory or any creditor or contributory may frame charges against such person or officer or servant and after giving a reasonable opportunity to the person concerned and in the case of a deceased person, to the representative who inherits his estate, to answer the charges, make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate as the Registrar or the person authorised as aforesaid thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, mis-application of funds, fraudulent retainer, breach of tr5ust or wilful negligence or payments which are not in accordance with this Act, the Rules or the bye-laws as the Registrar or the person authorised as aforesaid thinks just.

While interpreting Section 81(4) of the Act in W.P.No.20310 of 2007, it was contended before me that the period of limitation provided in Section 81(4) of the Act is mandatory. But, after analysing two previous judgments of this Court as well as few Judgments of the Hon'ble Supreme Court, I held that the said period provided in Section 81(4) of the Act is only directory and not mandatory. The affirmative language employed in Section 81(4) of the Act was given due appreciation. Challenging the said order, an appeal was preferred in W.A.No.949 of 2008 in which a Division Bench of this Court approved the view that the period of limitation provided under Section 81(4) of the Act is only directory and not mandatory. (Vide S.V.K.SAHASRAMAM ..VS.. DEPUTY REGISTRAR OF CO- OPERATIVE SOCIETIES (2008 (8) M.L.J. 231)). The Division Bench further held that the period of limitation provided in second proviso to Section 87(1) of the Act is also directory and not mandatory.

It is based on the said view taken by me and the Division Bench, it is contended by the learned counsel for the fourth respondent that the period of limitation provided in the first proviso to Section 87(1) should also be construed to be only directory and not mandatory. In my considered opinion, the said contention of the learned counsel cannot be countenanced for the reasons that follow.

A cursory perusal of the first proviso to Section 87(1) of the Act on one side, Section 81(4) of the Act and second proviso to Section 87(1)of the Act on the other, would go a long way to indicate that in the former, the language employed is affirmative in nature, whereas it is negative in the later two provisions. From this, it could be understood that the Legislature had intended to draw a distinction between the first proviso to Section 87(1) of the Act and the other two provisions stated above. Had it been the intention of the Legislature that the first proviso to Section 87(1) of the Act should also be meant to be only directory, nothing would have prevented the Legislature to use similar affirmative language in the first proviso also. But, the Legislature has deliberately used negative language in the said proviso, which would go to clearly indicate the different intention of the Legislature. Therefore, the interpretation made to Section 81(4) and second proviso to Section 87(1) of the Act cannot be imported to first proviso to Section 87(1) of the Act.

At this juncture, let me analyse the Rule of Interpretation in the context of the language used in a statute. In general, the question as to whether a statute is mandatory or directory, of course, depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other. (Vide State of U.P. ..Vs.. Manbodhan Lal Srivastava (A.I.R. 1957 S.C. 912)).

Thus, it is not only the language employed, but the intent of the Legislature which makes a particular provision in a Statue either imperative or directory. A mode of showing a clear intention that the provision enacted is mandatory, is by clothing the command in a negative form. Prohibitive or negative words can rarely, if ever, be directory. And this is so even though the statute provides no penalty for disobedience. (Vide Haridwar Singh ..Vs.. Bagun Sumbrui and Others (A.I.R. 1972 S.C. 1242)). Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a statute imperative. (Vide SUBBARAO, J. in M. Pentiah ..Vs.. Muddala Veeramallappa (A.I.R. 1961 S.C. 1107)).

Based on the above rules of interpretation, from the negative language employed, the Hon'ble Supreme Court has held that Section 80 of the Code of Civil Procedure, 1908 (Vide Bhagchand ..Vs.. Secretary for State (A.I.R. 1927 PC 176)), Section 87-B of the Code of Civil Procedure, 1908 (Vide Gaekwar Baroda State Railway ..Vs.. Hafiz Habib-ul-Haq (A.I.R. 1938 PC 165)), Section 77 of the Railways Act, 1890 (Vide G.G. in Council ..Vs.. Masaddi Lal (A.I.R. 1961 SC 725)), Section 15 of the Bombay Rent Act, 1947 (Vide Waman Shriniwas ..Vs.. Ratilal Bhagwandas & Co., (A.I.R. 1959 S.C. 689)), Section 213 of the Succession Act, 1925 (Vide Hem Nolini Judah ..Vs. Isolyne Sarojabashini Bose (A.I.R. 1962 S.C. 1471)), Section 5-A of the Prevention of Corruption Act, 1947 (Vide H.N.Rishbud ..Vs.. State of Delhi (A.I.R.1955 S.C. 196)), Section 7 of the Stamp Act, 1899(Vide Suraj Mull Nagoremull ..Vs.. Tritorn Ins. Co., (A.I.R.1925 PC 83)), Section 108 of the Companies Act, 1956 (Vide Mannalal Khetan ..Vs. Kedarnath Khetan (A.I.R. 1977 S.C. 536)), Section 20(1) of the Prevention of Food Adulteration Act, 1954 (Vide A.K.Roy ..Vs.. State of Punjab (A.I.R. 1986 S.C. 2160)) and Section 55 of the Wild Life Protection Act, 1972 (Vide State of Bihar ..Vs.. Murad Ali Khan (A.I.R. 1989 SC 1)) as mandatory. Recently, while analysing the negative language employed to the proviso to Section 33(2)(b) of the Industrial Disputes Act, 1947, the Hon'ble Supreme Court has held that it is mandatory. (Vide Jaipur Zila Sahakari Bhoomi Vikas Bank Ltd., ..Vs.. Ram Gopal Sharma and others (A.I.R. 2002 S.C. 643)).

Applying the above principle laid down by the Hon'ble Supreme Court in various judgments cited supra, if the deliberate negative language employed in the first proviso to Section 87(1) of the Act is analysed in the light of the affirmative language employed in Section 84(1) and second proviso to Section 87(1) of the Act, the intent of the Legislature could be perceived that the Legislature has prescribed the time limit only as mandatory.

In the case on hand, admittedly, the proceeding under Section 87(1) of the Act was initiated after the expiry of seven years period of limitation provided. The learned counsel for the fourth respondent would further submit that the proceeding under Section 87(1) of the Act should be construed to be a continuation of the enquiry held under Section 81 of the Act and therefore, it would be suffice if the enquiry under Section 81 of the Act is commenced within a period of seven years from the date of the commission or omission. I find it very hard to persuade myself to accept the said argument. Section 81 and 87(1) of the Act operate on different spheres in different angles. An enquiry under Section 81 of the Act is held only to find out the truth in respect of certain matters enumerated therein pertaining to the society, where there is no adjudication between the parties in respect of any disputed question. But, a proceeding under Section 87(1) of the Act is quasi Judicial in nature where there is adjudicatory process undertaken; ultimate award binds the parties to the proceeding and the award is executable. Thus, these provisions are totally dissimilar and they operate on different areas. So, a proceeding under Section 87(1) of the Act is only a follow up act and not a continuation of Section 81 of the Act.

Thus, looking at the legal issues from any angle, applying the well settled principles of interpretation as enumerated above, I hold that the first proviso to Section 87(1) of the Act prescribes a period of limitation, which is mandatory. Consequently, the impugned proceedings are liable to be quashed as barred by limitation.

In the result, these writ petitions are allowed and the impugned proceedings of the first respondent dated 01.08.2008 are quashed. Connected miscellaneous petitions are closed. No costs. Index: Yes 17.04.2009 Internet: Yes Pal / Dpn/- Note to Office: Issue copy on 17.07.2009 To

The Deputy Registrar of Cooperative Societies, Krishnagiri Circle, Krishnagiri District.

2. The Special Officer, S.1945, Madagondapalli primary Agricultural Co-operative Bank ltd., Madagondapalli, Hosur Taluk, Krishnagiri District S.NAGAMUTHU, J. PAL / Dpn /- W.P.Nos.22558, 23558 & 23559 of 2008 Dt.17.04.2009 DRAFT ORDER TYPED IN CHENNAI Since a common issue is involved in these writ petitions, they were all heard together and disposed of by means of the common order.

2. Whether the limitation provided in Section 87 (1) of the Tamil Nadu Cooperative Societies Act 1983 is mandatory or directory is the question involved in these writ petitions.

3. In these writ petitions, originally, the Cooperative Bank was not added as a party. Now, the miscellaneous petition No. M.P.1 of 2009 in these writ petitions were filed and they were allowed and the Special Officer of the said Cooperative Bank has been added as fourth respondent in these writ petitions.

The petitioners were employees of the fourth respondent Cooperative Society, which is Governed by the Tamil Nadu Cooperative Societies Act. (herein after called as the "Act") In respect of the loss caused to the said Society by the petitioners, an enquiry was ordered under Section 81 of the said Act. The enquiry officer submitted his report on 18.08.2006 holding the petitioners are responsible for the loss. Thereafter, on an application moved by the fourth respondent, the first respondent has initiated proceedings under Section 87(1) of the Act by his proceedings in Penal Assessment No.33/2008/Sa.Pa. dated 01.08.2008 against the petitioners. Challenging the said order, the petitioners have come forward with these writ petitions.

I have heard the learned counsel for the petitioner and the learned Special Government Pleader for the first respondent and the learned counsel for the fourth respondent. There is no appearance for respondents 2 to 3.

6. Though several grounds have been raised in the writ petitions, the learned counsel for the petitioners would mainly contend that the impugned proceeding is barred by limitation as provided in the first proviso to Section 87(1) of the Act. The said provision 87(1) reads as follows: "87(1) where in the course of an audit under Section 80 or an inquiry under Section 81 or an inspection or investigation under Section 82 or inspection of books under Section 83 or the winding- up of a society, it appears that any person who is or was entrusted with the organisation or management of the society or any past or present officer or servant of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has made any payment which is not in accordance with this Act, the Rules or the bye-laws, the Registrar himself or any person specially authorised by him in this behalf, of his own motion or on the application of the board, liquidatory or any creditor or contributory may frame charges against such person or officer or servant and after giving a reasonable opportunity to the person concerned and in the case of a deceased person, to the representative who inherits his estate, to answer the charges, make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate as the Registrar or the person authorised as aforesaid thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, mis-application of funds, fraudulent retainer, breach of tr5ust or wilful negligence or payments which are not in accordance with this Act, the Rules or the bye-laws as the Registrar or the person authorised as aforesaid thinks just: Provided that no action shall be commenced under this sub-section after the expiry of seven years from the date of any act or omission referred to in this sub-section: Provided further that the action commenced under this sub-Section shall be completed within a period of six months from the date of such commencement or such further period or periods as the next higher authority may permit but such extended period or periods shall not exceed six months in the aggregate.

" 7. The learned counsel for the fourth respondent would contend that seven years period for initiation of the proceeding under Section 87 (1) of the Act, is provided in the first proviso to Section 87 (1) of the Act is only directory and the same is not mandatory and thus, the proceeding is not barred by limitation. He would further submit that the proceedings initiated under Section 87(1) of the Act is in continuation of an enquiry under Section 81 of the Act and therefore, if enquiry under Section 81 had been initiated within seven years from the date of commission or omission, than it shall be construed that the proceedings under Section 87(1) of the Act is in time.

8. To appreciate the said argument, it would be useful to refer to section 81 (4) of the Act . Similarly a reference to the second proviso to Section 87(1) of the Act is also necessary. "81(4)The inquiry shall be completed within a period of three months from the date of ordering the inquiry or such further period or periods not exceeding three months at a time as the next higher authority may permit, provided that such extended periods shall not exceed six months in the aggregate. " Second proviso to Section 87(1):Provided further that the action commenced under this sub-Section shall be completed within a period of six months from the date of such commencement or such further period or periods as the next higher authority may permit but such extended period or periods shall not exceed six months in the aggregate. "

9. While interpreting Section 81 (4) of the Act, in the case of xx in W.P. Xx it was contended before me that the said period of limitation provided is mandatory. But after analysing the positive language used in the said provision by order dated xx x I have stated that the said period of limitation provided under Section 81(4) is only directory and not mandatory. It was challenged on appeal in W.A.949 of 2008 before The Division Bench., which heard the appeal confirmed the view taken by me in the said order and it further gone to the extent of making observation that the limitation provided in the second proviso to Section 87(1) of the Act is also directory and not mandatory. (Vide S.V.K.Sahasraman VS Deputy Registrar of Cooperative Societies (2008(8) ML.J.231) In view of the law affirmed by the Division Bench of this Court, now it cannot be said that the limitations contained in Section 81(4) and the second proviso to Section 87(1) of the Act are mandatory.

10. It is contended by the learned counsel for the petitioner that in view of the above law laid down, it should be construed that the first proviso to Section 87(1) also as directory and not mandatory. In my considered opinion, the said argument cannot be countenanced. While analysing as to whether a particular period of limitation provided in a provision is mandatory or directory, mainly this Court has to look into the language used by the Legislature. It is well settled that if any provision is positive in nature, then the proceedings will be within the limitation provided under the Act and it shall be construed to be mandatory. Insofar as Section 81(4) and the second proviso to Section 87(1) of the Act is concerned, the language employed is positive and that is one of the main reasons, why this Court have to take the view that the period of limitation provided thereunder is only directory and not mandatory. The first proviso to Section 87(1) of the Act go to show that it is negative in nature. It is settled law in xxx page 583) that affirmative statues are sometimes regarded as directory and negative statutes as mandatory. At the same time, affirmative words may be so absolute xx making the statute mandatory. On the other hand, a proviso derived from negative language may be merely directive.

11. In Laxman VS Union of India reported in 1976 SC 714 and in xx 2003, page 577 the Hon'ble Supreme Court has held that negative "words" are clearly prohibitory and ordinarily used as illustrative device to make a statute imperative. Applying the above principles of interpretation to the facts of the case, if Section 87(1) is analysied, it is affirmative nature formed by the first proviso which is negative, which means the proviso is mandatory. Therefore, I hold that the limitation provided in the first proviso to Section 87(1) of the Act is mandatory and not directory.

12. Of course, there is no limitation prescribed for initiation of enquiry under Section 81 of the Act. Relying on this, the learned counsel for the fourth respondent would submit that it would be suffice if proceeding under Section 87(1) of the Act is initiated within 7 years from the date of submission of the report under Section 81 of the Act

13. I am not persuaded by the said argument. It is seen that the report under Section 81 of the Act could be used only for the purpose of initiation of proceedings under Section 87(1) of the Act. Admittedly, such a report could be used for other purposes such as for initiating prosecution for any offence committed or for initiating disciplinary proceedings or for other purposes. Therefore, in a case where either the enquiry under Section 81 of the Act was initiated after seven years or the report is submitted after seven years, though enquiry was initiated within 7 years, such report cannot be used for initiating proceedings under Section 87 (1) of the Act in view of the limitation contained in the first proviso to Section 87(1) of the Act. As I have already stated the said report could be used for some other purposes.

14. The contention of the learned counsel for the fourth respondent that the proceedings under Section 87(1) of the Act is nothing but a continuation of proceedings under Section 81 is only fallacious. On enquiry under Section 81 is held as a fact finding process, where there is no trial conducted. The enquiry officer under Section 87(1) of the Act is not a quasi judicial authority. But a proceeding under Section 87(1) of the Act was initiated at the instance of a party on the basis of a report under Section 81 of the Act, the authority who justifies the same acts as a quasi judicial authority. Thus Section 81 and 87(1) of the Act operate on different areas in different angles. Thus, the proceeding under Section 87(1) of the Act cannot be construed to be a continuation of an enquiry under Section 81 of the Act.

15. In the case on hand, admittedly, the alleged act leading to the loss to the Society were committed between 1998 and 1999. The impugned proceedings under Section 87(1) of the Act was initiated on 01.08.2008. Thus, the proceeding was initiated after 7 years of limitation period provided in the first proviso to Section 87(1) of the Act and therefore, the same is liable to be quashed.