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Case Number

WP No. 25634 of 2003

Attorney(S)

For the Appellant: K. Ramakrishna Reddy Sr. Advocate with B. Mahender Reddy, Advocates.
For the Respondent: R1, The G.P. for Cooperation, R2, M. Bhaskara Lakshmi, Advocate.

Judges

Goda Raghuram, J.

Acts

Section 59 of the A.P. Co-operative Societies Act, 1964 (for short 'the Act')
Rule 72(3)(a) of the A.P. Co-operative Societies Rules, 1964
Section 59 (Sub-section 15). Sub-section (15) of Section 31A
Section 51 or Section 53,
Sub-rule (3)

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The petitioner is the Secretary of the 2nd respondent Co-operative Bank. By a charge memo dated 11.6.2003 the Bank listed about five categories of charges and called on the petitioner to explain why an amount of Rs. 2.30 crores, allegedly invested at the petitioner's instance with certain other banks, could not be recovered and why disciplinary action should not be taken for the alleged lapses. By proceedings dated 1.7.2003 the Bank placed the petitioner under suspension pending a domestic enquiry; that suspension was ordered by a Bank resolution dated 30.6.2003 for a period of three months or until completion of the enquiry, whichever was earlier. The petitioner was declared entitled to subsistence allowance as per rules during the enquiry.

The petitioner instituted a writ petition seeking invalidation of the two Bank proceedings (the charge memo of 11.6.2003 and the suspension order of 1.7.2003).

Legal Issues Presented

Whether the 2nd respondent-Bank was competent to place the petitioner under suspension absent directions from the Registrar under Section 59 of the A.P. Co-operative Societies Act, 1964.
Whether Section 59 and Section 31A(15) of the Act vest exclusive power of suspension in the Registrar to the exclusion of any disciplinary power of the Co-operative Society (the Bank) as employer.
Whether the Bank's exercise of suspension power was arbitrary because the statutory enquiry under Section 51 was still pending and there was no final report attributing responsibility to the petitioner.
Whether the petitioner's grievance concerning violation of the Bye-laws and his service relationship with the Bank is maintainable before the High Court under Article 226 of the Constitution.

Arguments of the Parties

Petitioner's Arguments

The ingredients of Section 59 of the A.P. Co-operative Societies Act, 1964 are not present, and therefore the Bank lacked competence to place the petitioner under suspension; the suspension power is traceable only to Section 59 as reiterated in Section 31-A(15).
The Bank's suspension was arbitrary because the enquiry under Section 51 was still pending and no report had ascertained the petitioner's role; the suspension was effected in haste.
There is no specific bye-law power enabling the Bank to place the petitioner under suspension.

Respondents' Arguments

The 2nd respondent-Bank, as the employer, has inherent power to exercise disciplinary control over its employees, including power to place the petitioner under suspension; such power also derives from the Bank's bye-laws.
The Registrar's powers under Section 59 are supervisory and operate as a check on the employer's failure to act; they do not derogate from or eclipse the Bank's inherent disciplinary powers.
The petitioner is an employee of the Bank, paid by it and subject to its general disciplinary control.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Sri Konaseema Co-operative Central Bank Limited Amalapuram and Anr. v. N. Seetharama Raju, AIR 1990 AP 171	Authority cited to show that the question of the service relationship in relation to bye-laws of a co-operative bank and related grievances is not maintainable as a public law matter under Article 226 (i.e., position is no longer res integra).	The court relied on this Full Bench decision to support its conclusion that the petitioner's grievance about violation of bye-laws and service relationship could not be considered under Article 226; the petitioner must pursue remedies before an appropriate forum such as a Civil Court.
Federal Bank Limited v. Sagar Thomas and Ors., 2003 (7) Supreme 22	Authority of the Supreme Court cited for the same proposition that service disputes of this character are not to be entertained under Article 226 and that the High Court's public law jurisdiction is not the appropriate forum for such private service disputes.	The court treated this Supreme Court decision as further support for declining to entertain the petitioner's bye-law/service relationship grievance under Article 226, directing that remedies lie before appropriate forums (e.g., Civil Court).

Court's Reasoning and Analysis

The Court examined the statutory provisions central to the dispute: Section 31A(11) and (15) and Section 59 of the A.P. Co-operative Societies Act, 1964, together with Rule 72(3)(a) and the sub-rule cited in the A.P. Co-operative Societies Rules, 1964.

The Court's analysis proceeded as follows:

The Registrar's control over co-operative societies under the Act is designed to secure good governance and provide supervisory checks against maladministration; however, this control does not convert societies into mere administrative appendages of the Cooperative Department.
Section 59 permits the Registrar, where in the course of an audit (Section 50), inquiry (Section 51) or inspection (Sections 52 or 53) it is brought to his notice that a paid officer or servant has committed misappropriation, breach of trust or other offence, to direct the committee to place such officer or servant under suspension if there is prima facie evidence and suspension is necessary in the interests of the society. Sub-section (2) obliges the committee to comply notwithstanding any contrary bye-law.
Despite the Registrar's directive power under Section 59, nothing in Section 59 or the statutory structure permits the inference that the Registrar's power wholly eclipses or extinguishes the Co-operative Society's inherent disciplinary powers as an employer. Section 59 operates as a supervisory corrective in specified circumstances but does not negate the society's disciplinary authority.
Section 31A(15) is a reiteration of the committee's obligation under Section 59 to implement a Registrar's directive to suspend; Section 31A more generally confers enabling, day-to-day management powers on the committee (including disciplinary measures under certain circumstances).
Rule 72(3)(a) and the referenced sub-rule of the A.P. Co-operative Societies Rules, 1964, deem a Secretary, on allotment to a society, to be an employee of that society and declare that the society shall exercise disciplinary control over the Secretary. On that statutory/regulatory footing the petitioner (the Secretary) was subject to the Bank's disciplinary control.
Consequently, the Bank's proceedings of 11.6.2003 (charge memo) and 1.7.2003 (suspension) did not contravene Section 59 or Section 31A(15); they do not fall foul of Section 59 of the Act.
On the petitioner's contention of arbitrariness and the absence of bye-law authority for suspension, the Court noted that the Bank's bye-laws are not statutory and that the Bank is not shown to be an agency or instrumentality of the State. Therefore, the service relationship between the petitioner and the Bank does not raise constitutional/public law obligations that would make Article 226 jurisdiction available to the petitioner.
The Court relied on binding decisions (the Full Bench decision in Sri Konaseema Co-operative Central Bank Ltd. and the Supreme Court in Federal Bank Ltd. v. Sagar Thomas) to conclude that the petitioner cannot seek relief under Article 226 for alleged violations of bye-laws or the private service relationship; remedies must be pursued before appropriate forums such as the Civil Court.

Holding and Implications

HOLDING: The writ petition is DISMISSED.

Implications:

Direct effect on the parties: The Bank's proceedings dated 11.6.2003 (charge memo) and 1.7.2003 (suspension) are held not to be in conflict with Section 59 of the Act and thus stand; the petitioner's challenge is rejected.
The petitioner cannot pursue his grievance concerning alleged violations of the Bank's bye-laws and his service relationship under Article 226; he is directed to pursue available remedies before an appropriate forum, including the jurisdictional Civil Court.
The Court noted no basis for costs and ordered no costs.
The opinion does not purport to lay down any novel legal principle displacing earlier authority; it relies on existing Full Bench and Supreme Court decisions and applies statutory construction of Section 59 and Section 31A together with Rule 72 to resolve the dispute.

This summary is confined strictly to the content and reasoning contained in the provided opinion and does not add facts or inferences not present therein.

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V.P. Rama Rao v. District Co-Operative Officer/Registrar, Vizayanagaram

1. Heard Sri K. Ramakrishna Reddy, learned Senior Counsel instructed by Mr. B. Mahender Reddy, learned Counsel for the petitioner; learned Government Pleader for Co-operation for the 1st respondent and Smt. Bhaskara Lakshmi, learned Counsel for the 2nd respondent.

2. The petitioner is a Secretary of the 2nd respondent-Co-operative Bank. By proceedings dated 11.6.2003 the 2nd respondent issued a charge memo listing out about 5 species of charges and called upon the petitioner to explain why an amount of Rs. 2.30 crores invested allegedly at the instance of the petitioner with certain other banks, could not be recovered from him together with interest and also why disciplinary action be not taken against him for the enumerated lapses. By another proceedings dated 1.7.2003, the 2nd respondent placed the petitioner under suspension pending domestic enquiry, which was ordered by a resolution of the Bank dated 30.6.2003, for a period of three months, or the completion of the enquiry, whichever is earlier. The petitioner was declared entitled to subsistence allowance as per rules during the Court of enquiry. The order dated 1.7.2003 records certain allegations of misconduct against the petitioner as the foundation for the action of placing him under suspension pending enquiry. Assailing these two proceedings the writ petition is instituted seeking their invalidation.

3. Sri Ramakrishna Reddy, learned Senior Counsel appearing for the petitioner contends that as the ingredients of Section 59 of the A.P. Co-operative Societies Act, 1964 (for short 'the Act') are not present in the case on hand, the 2nd respondent-Bank was incompetent to have placed the petitioner under suspension. The power of the 2nd respondent, according to the petitioner, is traceable only to Section 59 as reiterated in Section 31-A(15) of the Act.

4. Counter-affidavits have been filed by the respondents. Insofar as the core issue in this writ petition is concerned, Respondents 1 and 2 contend that the 2nd respondent-Bank has the power as the employer to exercise disciplinary control over its employees including the petitioner, including the power to place him under suspension and also qua such powers available under the Byelaws of the Bank and that the grant of power to the Registrar under Section 59 of the Act is not in derogation of the inherent powers of the employer Bank. The powers of the Registrar under Section 59 do not usurp or eclipse the powers of the employer but merely operate as a check on any failure of the employer to act against the misconduct of an employee, is the substratum of the defence of the respondents to the challenge in the writ petition.

5. That the petitioner is an employee of the 2nd respondent-Bank and that his wages and emoluments are paid by the 2nd respondent-Bank and that he is subject to the general disciplinary control of the 2nd respondent, is not in dispute. What is however contended on behalf of the petitioner is that qua the provisions of section 59, it is the Registrar and the Registrar alone who has the power to initiate the process of suspension (including pending enquiry) of an employee of a Cooperative Society, by issuing directions if the circumstances set out in the statutory provision are present in any contextual situation.

6. In view of the limited canvass in which the lis is presented, it is necessary to consider the provisions of Section 31A(11) and (15) and Section 59 of the Act, which are as follows:

"31-A. Powers and functions of the committee :--The committee of a society shall, subject to the provisions of the Act, Rules, Byelaws and Resolutions of the General Body, exercise the following powers and functions, namely :

..............

(11) decide matters connected with the day-to-day management of the society;

..............

(15) suspension of any officer or servant of the society under Section 59;

59. Suspension of officer or servant of society :--(1) Where in the course of an audit under Section 50 or an inquiry under Section 51 or an inspection under Section 51 or Section 53, it is brought to the notice of the Registrar that a paid officer or servant of a society has committed or has been otherwise responsible for misappropriation, breach of trust or other offence, in relation to the society, the Registrar may, if in his opinion there is prima facie evidence against such paid officer or servant and the suspension of such paid officer or servant is necessary in the interests of the society, direct the committee pending the investigation and disposal of the matter, to place or cause to be placed such paid officer or servant under suspension from such date and for such period as may be specified by him, but not retrospectively.

(2) On receipt of such direction, the committee shall, notwithstanding any provision to the contrary in the bye-laws, place or cause to be placed the paid officer or servant under suspension forthwith.

(3) The Registrar may direct the committee to extend, from time to time, the period of suspension and the paid officer or servant suspended shall not be reinstated except with the previous sanction of the Registrar."

7. On a true and fair construction of the provisions of the Act, it is apparent that the control invested in the Registrar, over the affairs of Co-operative Societies, is a control legislatively designed for achieving good governance of Co-operative Societies. By the investure of such control in the Registrar, it is neither the legislative intent nor the expressed or implied statutory mandate that the Co-operative Societies should function as mere administrative arrangements or appendages of the Cooperative Department represented by the Registrar. The co-operative spirit and the autonomy of Co-operative Societies to function according to the majoritarian choices expressed in periodical elections and constitution of the governing bodies of the Societies for such purposes is ensured by the provisions of the Act. To ensure a check on potential maladministration of the Societies or laxity of the elected or nominated Management in the management of the affairs of the Society, certain supervisory powers are conferred on the officers of the Co-operative Department. Section 59, on a true and fair construction of the provisions in the content of the legislation as a whole, is one such provision which inheres in the Registrar the power and in a given context a corollary statutory obligation to direct the committee of the society to place or cause to be placed, a paid officer or servant of the society under suspension, where in course of an audit under Section 50 or an enquiry under Section 51, or an inspection under Section 52 or 53, it is brought to the notice of the Registrar that a paid officer or servant of a society has committed or has otherwise been responsible for misappropriation or breach of trust or other offence in relation to the society. Sub-section (2) of Section 59 of the Act obligates the committee of the society to give effect to the directions of the Registrar under Sub-section (1) notwithstanding any contrary provisions in the Byelaws of the society. Sub-section (2) of Section 59 of the Act is in the nature of a provision ex abendenti cautella since it is well settled that the provisions of Bye-laws are subject to legislative provisions.

8. Even where the power of suspension of a specific paid servant or officer of a society inheres (under the byelaws of the society) in a body other than the Committee of the society, as for instance in the Chairman, President or elected Secretary of the Society, then, notwithstanding the investure of such power of suspension in such officer of the society, the committee is required to itself place an officer or servant of the society under suspension or cause him to be so placed, after receipt of a directive from the Registrar. There is nothing however in the language of Section 59 per se or as part of the statutory architecture which permits the inference that the power conferred on the Registrar under Section 59 totally eclipses any available and inherent power of the Society to exercise disciplinary control over its paid employees.

9. Section 31A is couched in enabling phraseology. Under Section 31A the Committee of a Society shall exercise the powers and functions enumerated in Sub-sections (1) to (23) including decision on matters connected with the day-to-day management of the Society (Sub-section 11) and suspension of any officer or servant of the society under Section 59 (Sub-section 15). Sub-section (15) of Section 31A is apparently a reiterative verbal formula in view of the fact that Section 59 already obligates a committee of the society to comply with the directions of the Registrar. Section 31A(15) reiterates the obligation of the committee of the society under Section 59 in respect of suspension of an officer or servant on the directive of the Registrar.

10. In the considered view of this Court neither the provisions of section 59 taken singly or in conjunction with the provisions of Section 31A(15) of the Act permit the inference that the power of suspension of the employees of the Society vests exclusively in the Registrar of the Cooperative Societies to the total exclusion of any such power in the Co-operative Society. After abolition of centralised service for certain categories of employees and decadarisation, the Paid Secretaries stood allotted to the various societies. Rule 72(3)(a) of the A.P. Co-operative Societies Rules, 1964 enjoins that a Secretary, on allotment to a society, shall be deemed to be an employee of that society and Sub-rule (3) thereof declares, inter alia, that the society shall exercise disciplinary control over the Secretary. The petitioner, who is the Secretary of the 2nd respondent-Bank is therefore subject to the disciplinary control of the 2nd respondent-Bank. This generic disciplinary control that the 2nd respondent-Bank has over the petitioner is not over borne by the provisions of section 59 or Section 31A(15) of the Act.

11. In the circumstances and on the analysis above, the proceedings dated 11.6.2003 and 1.7.2003 issued by the 2nd respondent do not fall foul of Section 59 of the Act.

12. Sri Ramakrishna Ready, learned Senior Counsel urges that the exercise of the power of suspension by the 2nd respondent is arbitrary, as even the enquiry under Section 51 into the affairs of the Society is still pending and even before receipt of a report consequent on such enquiry and an ascertainment of the role and involvement of the petitioner in the allegations of misconduct, the 2nd respondent has, in unbecoming haste, placed the petitioner under suspension pending enquiry. It is also contended that there is no specific power under the Bye-laws of the 2nd respondent-Bank enabling the 2nd respondent-Bank to place the petitioner under suspension.

13. The Bye-laws of the 2nd respondent-Bank are neither statutory nor have a statutory flavour. The 2nd respondent-Bank is neither pleaded, urged or demonstrated to be an Agency or instrumentality of the State. The service relationship between the petitioner and the 2nd respondent-Bank does not fall to be considered by this Court in exercise of its jurisdiction under Article 226 of the Constitution because no constitutional or public law obligations are owed by the 2nd respondent to the petitioner qua the service relationship between them. The grievance of the petitioner as against the 2nd respondent-Bank in respect ,of his service relationship with the said respondent in respect of violation of the Bye-laws of the society, cannot be considered by this Court under Article 226 of the Constitution. The position in this area is no longer res integra in view of the decision of the Full Bench of this Court in Sri Konaseema Co-operative Central Bank Limited Amalapuram and Anr. v. N. Seetharama Raju, AIR 1990 AP 171 and of the Supreme Court in Federal Bank Limited v. Sagar Thomas and Ors., 2003 (7) Supreme 22. In respect of this grievance the petitioner is at liberty to pursue his remedies before an appropriate forum including a jurisdictional Civil Court.

14. On the analysis above I discern no merits in the writ petition. The writ petition is accordingly dismissed. No costs.

V.P. Rama Rao v. District Co-Operative Officer/Registrar, Vizayanagaram

Structured Summary of the Provided Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Respondents' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

V.P. Rama Rao v. District Co-Operative Officer/Registrar, Vizayanagaram

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