BY AD vs V.SETHUNATH

2. Brief facts of the case are that ten criminal cases were registered against the 7th respondent, the Managing Committee and other staff of the respondent Co-operative Society for misappropriation of large amount of funds of the depositors to an extent of Rs.2.5 Crores. The president of the Managing Committee and the Secretary are the prime accused in the ten criminal cases registered against them and other staff of the Society. The details of the cases registered against them are given in Paragraph 2 of the writ petition which are being summarized hereunder:- Co-operative Society Ltd no. 3864 is the prime accused and Secretary „The president of the Managing committee of the Chethakkal Service , Managing Committee and other staffs of the Chethakkal Service Co- operative Society Ltd no. 3864 are accused in crime no. 20/2021 , WP(C) NO. 5241 OF 2024 4 crime no. 38/2022, crime no. 40/2022, crime no. 41/2022, crime no. 514/2022, crime no. 656/2022, crime no. 658/2022, crime no. , Crime no. 686 / 2022 of 659/2022, crime no. 661/2022 Vechoochira Police Station.“

3.The Secretary, Managing Committee and other staff of the Society had moved before this court seeking anticipatory bail. However, this court dismissed the anticipatory bail applications of all the accused except for the Vice President, considering his advanced age of 83 years. The Order dated

23.03.2023 passed in B.A No. 1600/2021 and connected cases have been placed on record as Exts.P2(a) and 2(b).

4. After the dismissal of the anticipatory bail, the 7th respondent, Secretary and other staff were arrested by the Police. The learned counsel for the petitioners submits that the complaints were given regarding the misappropriation and manipulation of the record by the Secretary and the Managing Committee, however, only on 25.11.2020, the enquiry was ordered by the Assistant Registrar, though the offences were committed as early as on 25.05.2020. The Joint Registrar and the Assistant Registrar sat over the complaints by the victims for over 6 months, and thereafter, only on 25.11.2020, the enquiry was ordered. During these six crucial months, the Secretary, Managing Committee and other staff of the Co-operative WP(C) NO. 5241 OF 2024 5 Society tried to manipulate the record; originals were removed and in that place, duplicate signed vouchers and papers of the victims, including the petitioners, were inserted to make it appear that the victims had taken money from the Society. After conducting the enquiry under Section 65 of the Act, an enquiry report was filed on 15.03.2021(Ext.P6) which would reveal that misappropriation was done by the President and other staff of the Chethakkal Service Cooperative Society and an amount to the tune of Rs.1,76,97,127/- (Rupees One Crore Seventy Six Lakhs Ninety Seven Thousand One hundred and twenty seven) has been misappropriated and a tune of Rs.1,76,97,127/- (Rupees One Crore Seventy Six Lakhs Ninety Seven Thousand One hundred and twenty seven) was lost and thus a total sum of Rs.2,50,83,338/- (Rupees Two Crore Fifty Lakhs, Eighty Three Thousand Three Hundred and Thirty Eight) was lost to the petitioners and other similarly situated depositors.

5. Despite, a finding was recorded for misappropriation of more than Rs.2.50 Crore by the President, Secretary, and Other staff of the Cooperative Society, no action was taken against the staff and the Managing Committee. The allegation is that the Managing Committee and other staff manipulated and destroyed all records by allowing them to continue for two more years WP(C) NO. 5241 OF 2024 6 after the offence was registered against them as early as on 25.05.2020.

6.The Managing Committee of the said Society has filed two writ petitions before this court, W.P' No. 21371/2021 and W.P(C) No.15091/ 2021 challenging Ext.P6 enquiry report dated 15.03.2021, under Section 65 of the Act, which were dismissed by this court. Against the judgment of the learned single judge, writ appeals were filed; W.A Nos. 1206,1204, 1340 of 2021 and W.A Nos. 798, 657,1751,1766 of 2020.

7.The learned Division Bench categorised the seven writ appeals broadly into three categories; a)W.A Nos.1340 & 1204 of 2021 and W.A No.798/2020 were the cases which are under Section 68(1) stage. b)W.A Nos. 657/2020 was belonged to the second category of the stage, wherein Section 68(1) enquiry process has been completed and the Section 68(1) enquiry report has been drawn up and on the basis of Section 65 report and Section 68(1) enquiry report, the notices were issued to the affected persons concerned for show causes why the adverse orders for surcharges has envisaged under Section 68(2) should not be rendered against them. WP(C) NO. 5241 OF 2024 7 c)W.A Nos.1206 of 2021, 1751/2020 and 1766 of 2020 would come into the 3rd category of cases, which are at the Sec.32(1) stage), proposing supersession measures whether notices have been issued in pursuance to Section 65 enquiry reports conducted in those cases.

8.The Division Bench in W.A Nos. 1340/2021, 1204/2021, 798/2020 directed the enquiry officer concerned to complete Section 68(1) enquiry process in accordance with law and draw up the enquiry report. Thereafter, if the Joint Registrar intended to proceed under Section 68 (2) he would supply the copies of Section 65/66 reports, as the case may be, and Section 68(1) enquiry report to the affected persons concerned before proceeding further in relation to the steps contemplated under Section 68(2). It was also observed that findings recorded as per Sections 65/66 and 68(1) enquiry reports, were to be treated as provisional fact findings and the Joint Registrar would be obliged to independently apply his mind to the issue as to whether the alleged irregularities found out in those adverse reports were correct or not. The Joint Registrar was also directed to give a hearing to the affected persons either in person or through their authorised representatives or authorised counsels if any, and thereafter, he should WP(C) NO. 5241 OF 2024 8 render a decision for surcharge against the affected persons concerned.

9.The learned counsel for the petitioners submits that despite aforesaid directions issued by the Division Bench, the petitioners and victims were not permitted to participate in the enquiry conducted under Section 68(1).

10.Under public pressure, the Joint Registrar, vide the order dated

03.03.2023, ousted the Managing Committee of the respondent Society. The Managing Committee filed W.P' No. 8357/2023, impugning the order dated 03.03.2023 superseding the Managing Committee. This court vide the order dated 11.04.2023 stayed the order dated 03.03.2023 passed by the Joint Registrar.

11.The second petitioner and other victims filed writ appeal against the interim order dated 11.04.2023 passed by the learned Single Judge in W.P(C) No. 8357/2023 before the Division Bench of this Court. However, the learned Division Bench, directed them to approach the learned Single Judge, and thereafter, the second petitioner and another filed an impleading petition in pending W.P(C) No. 8357/2023.

12.The said writ petition was disposed of by the learned Single Judge on 29.05.2023. The order passed by the Joint Registrar was set aside on the WP(C) NO. 5241 OF 2024 9 ground that the Central Co-operative Union was consulted before issuing the order of supersession. However, the authorities were permitted to continue the proceedings after consultation with financing Bank/ Central Co-operative Union or after recording satisfaction that situation demands for the action to be taken without involving the financing bank and Central Co-operative Union. It was also directed that the status quo should be maintained on the date of the judgment i,e., 29.05.2023, until fresh orders were passed by the Joint Registrar and the Managing Committee was directed not to take any decision on policy matters till a fresh decision was taken by the Joint Registrar.

13.The operative part (paragraph 7) of the said judgment is extracted hereunder:- Senior Government Pleader appearing for the official respondents, Sri. C.P. “7. Having heard the learned counsel for the petitioners and the learned Sabari appearing for the 3rd respondent and Sri. V. Sethunath appearing for the additional respondents 4 and 5, this writ petition will stand disposed of in the following manner:- (i) Exhibit P10 order issued by the 1st respondent is set aside as the order does not reflect that the orders are issued after consultation with the financing banks and Central Co-operative union. (ii) The competent among the respondents shall be permitted to continue the proceedings after consultation with financing bank/Central Co- operative Union or after recording satisfaction that the situation demands that action to be taken without involving the financing bank and the Central Cooperative Union. While deciding the matter afresh, the 1st respondent shall also afforded an opportunity of hearing to the additional respondents 4 and 5. The needful shall be done within a period of 2 months from the date of receipt of a certified copy of this judgment. (iii) Status-quo as on today shall be maintained until fresh orders are WP(C) NO. 5241 OF 2024 10 passed by the Joint Registrar as directed above. (iv) The petitioners/managing committee of the Chethakkal Service Co- operative Bank Ltd. No.3864 shall not take any decisions on policy matters till a fresh decision is taken by the Joint Registrar.“

14.The learned counsel for the petitioner submits that when the administrator had suspended the 7th respondent, the Secretary from service on 14.04.2023, the Managing Committee had not challenged the said order, therefore, reinstatement of the 7th respondent without permission from the court was wholly unjustified. This fact was never brought to the notice of the learned Single Judge or before the Division Bench in appeal regarding reinstatment of the 7th respondent as Secretary. As per the judgment dated 29.05.2023 passed in W.P(C) No. 8357/2023, the Managing Committee was restrained from taking any new policy decision, reinstating the 7th respondent as Secretary was wholly unjustified, illegal and in violation of the direction issued by this court.

15.The Managing Committee had preferred an appeal against the judgment dated 29.05.2023 passed in W.P(C) No.8357/2023 by filing W.A No. 1148/2023 dated 19.06.2023. The learned Division Bench did not find any illegality in the judgment of the learned Single Judge whereby the Managing Committee was restrained from taking any policy decision, till the WP(C) NO. 5241 OF 2024 11 decision was taken by the Registrar. It was also said that the Managing Committee was only an ad-hoc arrangement, and therefore, the learned Single Judge was fully right in directing that they should not take any policy decision.

16.Paragraph 12 of the said judgment passed by the learned Division Bench in W.A No.1148/2023 is extracted hereunder:- that the appellants shall not render any policy decision till a decision is taken “12. Further, we do not find any illegality in the learned Single Judge directing by the Notified Registrar. We are of the firm view that the learned Single Judge is fully justified in ordering so, as the Society appears to be already involved in various controversies and the effect of the status quo order to allow the appellants to continue as members of the Managing Committee is only an ad hoc arrangement and, therefore, it goes without saying that the learned Single Judge was fully right in directing that they shall not take any policy decision till the Notified Registrar takes a final call on the issue of supersession. Hence, the said plea of the appellants will stand repelled. No other orders and directions are called for. The other directions issued by the learned Single Judge regarding the issue of consultation with the said Co- operative Union and the Financing Bank, etc. are not in any manner interdicted with by us. This is all the more so as those directions appear to be in favour of the appellants and they have not challenged those directions. The impugned directions of the learned Single Judge will stand modified to the limited extent as above.“

17.The submission of the learned counsel for the petitioner is that the 7th respondent is the Kingpin of the entire financial fraud committed in the Society whereby more than Rs.2.5 Crores of the depositor’s money was misappropriated by him. Therefore, the decision to reinstate the 7th respondent to the post of Secretary when there are ten criminal cases for WP(C) NO. 5241 OF 2024 12 misappropriation of Society funds are pending against him is wholly illegal, arbitrary, and unjustified, and the same is required to be set aside.

18.The Senior Government Pleader appearing for the official respondents submitted that the Chethakkal Service Co-operative Society Limited is a primary agriculture-related Cooperative society registered under the provisions of the Kerala Cooperative Society Act, 1969 and the rules made thereunder. The inquiry regarding misappropriation of the funds in the said society was conducted under section 65 of the Act and the report was submitted on 15.03.2021 by the unit inspector appointed by the Assistant Registrar, the 4th respondent. The report disclosed the misappropriation loan distribution, deposit transactions, MMBF transactions and computer entries. Besides, the secretary and managing committee also failed to do their duties and responsibilities. Also, Smt. Divya Vijayan, Attendant of the Bank had utilized this opportunity for misappropriating funds of the Society.

19.After submission of the said inquiry report, the managing committee of the bank was dissolved vide the order dated 03.03.2023 by the Joint Registrar (General) of Co-operative Societies, Pathanamthitta. A Part Time Administrator of the Bank was appointed, who took charge on WP(C) NO. 5241 OF 2024

04.03.2023. 13

20.After the case was registered at Vechoochira Police Station regarding the misappropriation of the bank’s funds, its secretary, Mr. Abraham Jacob (7th Respondent), and Senior Clerk, Sri. Sanoj P. Kuttappan were arrested on 11.04.2023, and remanded. They were also suspended from service on 11.04.2023 based on the decision of the part-time administrator of the bank vide resolution No. 39 dated 12.04.2023.

21.The W.P(C) No.8357/2023 filed by the Managing Committee before this Court was disposed of vide the order dated 29.05.2023, and the decision of the Joint Registrar to supersede the Managing Committee/Board of Directors was set aside, and the order issued by the part-time administrator was nullified. As a result of the said judgment dated

29.05.2023 passed in W.P(C) No. 8357 of 2023, the Secretary, Mr. Abraham Jacob, the 7th respondent and senior clerk Mr. Sanoj P Kuttappan were reinstated in service vide the resolution No. 11 dated 09.05.2023 of the Managing Committee.

22.Thereafter, the Joint Registrar (General) Co-operative Societies took the decision on 24.08.2023, and Assistant Registrar (General) Co- operative Societies, Ranni, was appointed again as a part-time administrator WP(C) NO. 5241 OF 2024 14 of the bank, took charge on 23.08.2023. This order was issued in compliance with the directions of the Learned Single Judge in WPC No.8357/23 dated

29.05.2023.

23.The Enquiry report under Section 68(1) was submitted on

30.09.2023 to the Joint Registrar (General) of Co-operative Societies, Pathanamthitta and Section 68(2) proceedings are under progress in the office of the Joint Registrar (General) of Co-operative Societies, Pathanamthitta. Based on the resolution No. 10, dated 09.05.2023, of the Managing Committee, a show cause notice was served on 12.05.2023 to Secretary Sri. Abraham Jacob and Senior clerk, Sri. Sanoj P Kuttappan. During the resolution, the explanation given by them was examined by the Managing Committee of the Bank, which was not found satisfactory and a Sub Committee was formed for Enquiry into the charges against the Said employees. The Sub Committee, then decided to conduct a domestic enquiry. After the conduct of the domestic enquiry, the Part-Time Administrator imposed a major penalty as stipulated in Rule 198(C) of KCS, barring three increments of the 7th respondent Secretary with cumulative effect as per Order No 01/2023 dated on 07/08/2024 and two increments of the Clerk as per Order No 02/2023 dated on 07/08/2024. WP(C) NO. 5241 OF 2024 15

24.The learned counsel appearing for the 7th respondent now submits that the writ petition is not maintainable, and if the petitioners are aggrieved, they may take recourse to the proceedings under Section 69 of the Co-operative Societies Act. The Secretary performs duties towards its members and not towards the public in general. There is no public duty that is being performed by the Secretary affecting the public at large, and therefore, the writ petition is not maintainable. He further submits that the 7th respondent has already been punished with the major penalty of withholding three increments with cumulative effect after the domestic enquiry was conducted, and therefore, the writ petition is liable to be dismissed.

25.It is again stated that the writ petition against the Co-operative Society is not maintainable before this court as the Co-operative Society is not the State or an instrumentality of the State under Article 12 of the Constitution of India.

26.I have considered the submission advanced.

27.In sum and substance, the petitioners‘ grievance is that they are the stakeholders in the Society. They have deposited their hard-earned money in the respondent Society. The Secretary is the main functionary of WP(C) NO. 5241 OF 2024 16 the Society and funds of the Society are placed under his control. The Secretary has been found to be guilty of misappropriation of the funds of the Society. Such a person should not be reinstated in service, giving him the charge of the society’s funds again. The said decision of the part-time administrator is basically under challenge before this court in the present writ petition.

28.The questions which fall for consideration in this writ petition are; a) Whether the writ petition against the Co-operative Society and the 7th respondent is maintainable? b) When the allegation of misappropriation of Society funds has been proved against the 7th respondent in domestic enquiry, can he be given the charge of the Secretary again for managing the funds of the Society?

29.A five-judge bench of this court in Association of Milma Officers‘ Ksheera Bhavan, Tvm and Another v. State of Kerala an others [2015 (1) KHC 779] held that the words ‘any person or authority‘ used in Article 226 of the Constitution of India, are not confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much WP(C) NO. 5241 OF 2024 17 relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of the positive obligation owed by the person or authority to the affected party. No matter by what means, if the duty is imposed and a positive obligation exists, mandamus cannot be denied. This Court, in paragraph 19, concluded that any action of the Co- operative Society, if it is in breach of any of the constitutional provisions, the Society can be made the subject matter of the writ petition.

30. The five bench judge, while answering the questions referred to it, held that a writ petition against the Co-operative Society in the absence of breach of any statutory duty or public duty cannot be entertained.

31.Paragraph 19 of the said judgment is extracted hereunder:- amendment, it contains several constitutional provisions which regulate “19. Coming to Part IXB of the Constitution which has been inserted by the 97th incorporation, number and term of members, election of the members of the Board and superannuation. Obviously, any action of any Co-operative Society if it is in breach of any of the constitutional provisions, that can be made subject matter of the writ petition. Present is not a case where there is any issue pertaining to any violation of Part IXB. In view of the foregoing discussion, our answer to the above questions are as follows: i) The writ petitions against Co-operative Societies are maintainable in certain circumstances. When the action complained in the writ petition is of any statutory violation on the part of the Co-operative Society, a writ petition will lie. The action of the Cooperative Society, if falls in a public domain or breach of the public duty is complained of, writ may also lie. However, in the absence of breach of any statutory duty or public duty, a writ petition cannot be entertained against a Co-operative Society. ii) The judgment of the Full Bench in Bhaskaran (supra) confines to only consideration of a Co-operative Society under Article 12. In regard to Cooperative Society which does not fall under Article 12, writ cannot be maintainable against the Co-operative Society on that basis. However, as we have already observed by considering issue No.(i), writ petition may be maintainable against Co-operative Society in the circumstances mentioned therein. Thus the ratio of the judgment WP(C) NO. 5241 OF 2024 18 in Bhaskaran (supra) is approved only to above extent. iii) The Full Bench judgment in John (supra) lays down the correct law and we approve the said judgment. iv) The present writ petition is not maintainable under Article 226 of the Constitution of India. The reference is answered accordingly and the writ pe

32.I do not find any substance in the submission of the learned tition is dismissed.“ counsel for the 7th respondent, that the 7th respondent does not perform the statutory duty or duty towards the public in taking deposits, and therefore, the present petition is not maintainable. Neither the submission of the learned counsel for the respondent that the 7th respondent does not have any duty to the public but only to the members of the Society can be accepted.

33.The banking services are the backbone of the economy of the country. The bankers perform their functions and duties as trustees of their customers, they owe a public duty to discharge this trust in good faith and to protect the interest of their customers. If the bankers or its employees misappropriate the funds of the depositors, it amounts to dereliction of the statutory duty and the public duty and therefore, I am of the considered view that the present writ petition is maintainable.

34.A person who has been found guilty of misappropriation of funds while performing the important function of the Secretary, who is the person who controls the funds of the Society ought not to have been reinstated on WP(C) NO. 5241 OF 2024 19 the same job. His reinstatement is against the interest of the depositors, the larger public interest and the banking system. The 7th respondent was behind bars for quite some time before he was granted bail by the High Court for allegations of misappropriation of funds for which he is facing trial. Therefore, the order passed by the part-time administrator to reinstate the 7th respondent in the service cannot be countenanced. He cannot be again put in charge of the funds of the society for which he has faced domestic inquiry where the allegations of misappropriation have been found true and proved. He is facing trial for misappropriation of the funds. Thus, the impugned order passed by the part-time administrator reinstating the 7th respondent to the post of secretary is set aside. In view thereof, the writ petition stands allowed in terms of the aforesaid decision. The 7th respondent is restrained from performing the function of the Secretary of the Society, forthwith. All the pending interlocutory applications in this writ petition stand closed. SJ Sd/- D. K. SINGH JUDGE WP(C) NO. 5241 OF 2024 PETITIONER EXHIBITS Exhibit P1(a) Exhibit P1(b) Exhibit P1(c) Exhibit P1(d) Exhibit P1(e) Exhibit P1(f) Exhibit P1(g) Exhibit P1(h) Exhibit P1(i) Exhibit P1(j) Exhibit P2(a) Exhibit P2(b) Exhibit P3 Exhibit P4 Exhibit P5 Exhibit P6 Exhibit P7 Exhibit P8 Exhibit P9 20 APPENDIX OF WP(C) 5241/2024 THE TRUE COPY OF THE FIR IN CRIME NO. 20/2021 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 38/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 40/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 41/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 514/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 658/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 659/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 661/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 664/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE FIR IN CRIME NO. 686/2022 OF VECHOOCHIRA POLICE STATION THE TRUE COPY OF THE COMMON ORDER DATED 23-03-2023 IN B.A NO. 1600/2021 AND CONNECTED CASES THE TRUE COPY OF THE COMMON ORDER DATED 14-09-2023 IN B.A NO. 4954 /2022 AND CONNECTED CASES TRUE COPY OF THE ARREST INTIMATION GIVEN BY THE STATION HOUSE OFFICER TO THE 4TH RESPONDENT ASST. REGISTRAR DATED 12-04-2023 TRUE COPY OF THE STATEMENT FILED BY THE STATION HOUSE OFFICER, VECHOOCHIRA DATED 5-8-2022 IN W.P(CRI) 39/2022 THE TRUE COPY OF THE CIRCULAR NO. 50/2021 ISSUED BY THE 2ND RESPONDENT DATED 4-12-2021 THE TRUE COPY OF THE SEC. 65 ENQUIRY REPORT DATED 15-3-2021 THE TRUE COPY OF THE COMMON JUDGMENT IN W.A NO. 1206/ 2021 DATED 31-08-2022 TRUE COPY OF THE ORDER ISSUED BY THE 3RD RESPONDENT DATED 3-3- 2023 OUSTING THE MANAGING COMMITTEE OF THE CHETHAKKAL SERVICE CO-OPERATIVE SOCIETY LTD NO. 3864 TRUE COPY OF THE WRIT PETITION (WITHOUT EXHIBITS) IN W.P.(C) NO. 8357/ 2023 WP(C) NO. 5241 OF 2024 21 Exhibit P10 Exhibit P11 Exhibit P12 Exhibit P13 Exhibit P14 THE TRUE COPY OF THE INTERIM ORDER OF THIS COURT IN W.P.(C) NO. 8357/ 2023 DATED 11-04-2023 THE TRUE COPY OF THE ORDER OF THE DIVISION BENCH OF THIS COURT IN I.A NO. 1/ 2023 IN UNNUMBERED WRIT APPEAL(FILING NO. 776/2023) DATED 2-5-2023 TRUE COPY OF THE INTERIM ORDER PASSED IN I.A NO. 1/ 2023 IN W.P.(C) NO. 8357/ 2023 DATED 9-5-2023 THE TRUE COPY OF THE PROCEEDINGS OF THE PRESIDENT OF THE MANAGING COMMITTEE DATED 15-05-2023 ’OBTAINED BY THE PETITIONER THROUGH RTI APPLICATION THE TRUE COPY OF THE JUDGMENT IN W.P(C) NO. 8357/ 2023 DATED 29-05-2023 Exhibit P15 THE TRUE COPY OF THE CASE STATUS IN W.P(C) NO. 8357/ 2023 Exhibit P16 Exhibit P17 Exhibit P18 THE TRUE COPY OF THE JUDGMENT PASSED BY THE DIVISION BENCH OF THIS COURT IN W.A NO. 1148 OF 2023 DATED 19-06-2023 THE TRUE COPY OF THE REPLY ISSUED BY THE 4TH RESPONDENT DATED 29-12-2023 TRUE COPY OF THE PETITION GIVEN BY 2ND PETITIONER ANOTHER VICTIM ON 20-06-2023 BEFORE THE 3RD RESPONDENT