1. A. S. No. 263 of 1966 and C.R.P. No. 1408 of 1966, have been preferred by one and the same person against the judgment of the learned District Judge of Ramanathapuram at Madurai in O.P. No. 19 of 1964, on his file preferred Under Section 49 (2) of the Madras Co-operative Societies Act, 1932, hereinafter referred to as the Act. C.R.Ps. Nos. 543 and 1491 of 1966, have been preferred by the petitioners in O.P. Nos. 1.7 and 21 of 1964, on the file of the same Court, preferred Under Section 49 (2) of the Act. The Special Officer, Karaikudi. Cooperative Town Bank, Karaikudi, is the common respondent in all these proceedings. The said Original petitions were preferred to the District Court, Ramanathapuram at Madurai Under Section 49 (2) of the Act to set aside the order of the Deputy Registrar of Co-operative Societies, Sivaganga, in A.R.C. No. 1321 of 1961-62, dated 31st August, 1963. The petitioners in these civil revision petitions were the office bearers of the Cooperative Bank and they were the defendants in A.R.C. No. 1321 of 1961-62 before the Deputy Registrar of Cooperative Societies, Sivaganga. That was a claim preferred Under Section 49 (1) of the Act praying for a decree against defendants 1 to 8 therein for a sum of Rs. 3,415.59. The appellant was the ex-President of -the Co-operative Bank, while the petitioner in C.R.P. No. 543 of 1966, was the ex-Secretary of the Bank and the petitioners in C.R.P. No. 1491 of 1966, were the ex-Directors of that Bank. The plaint preferred before the Deputy Registrar of Co-operative Societies stated that, according to the by-laws of the Bank, loans shall be given only to members whose share values have been fully paid up and that on 25th February, 1948 defendents 1 to 7 sanctioned a long term loan of Rs. 3,000 to one Sri C. Subramaniavathiar on the mortgage of his house on the recommendation of the eighth defendant and that in sanctioning the said loan proper care was not taken to safeguard the insterests of the Bank. The factual allegation was that the loan was sanctioned on 25th February, 1948 in a hurry without taking into consideration the title deeds and that, in the absence of legal opinion, surveyor report etc., the applicant Subramaniavathiar was sanctioned admission as a member and allotted 60 shares in the same meeting Consequently the gravamen of the charge was that the ex-President, the ex-Secretary and the ex-Directors acted in violation of the by-laws of the Bank in so far as they sanctioned loan on 25th February, 1948 when the person concerned got enrolled himself as a member by paying the share capital only on 27th February, 1948. The Special Officer alleged that by infringing the by-laws-of the Bank and other rules and regulations and by their illegal and high-handed, act, they had committed a breach of trust in relation to the Bank and consequently they Were liable to be surcharged under the provisions of Section 49 of the Act. The petitioners herein denied their liability Under Section 49. Overruling their defence, the Deputy Registrar of Cooperative Societies passed an order on 31st August, 1963 directing defendants 1 to 8 to pay a sum of Rs. 3,415.59 with interest at 61/4 per cent; from 1st June, 1963 till the date of realisation. It is to set aside this order, they preferred the original petitions referred to above before the District Court, Ramanathapuram at Madurai, Under Section 49 (2) of the Act. The learned District Judge on 21st July, 1965 dismissed the said petitions. It is the correctness of the conclusion of the learned District Judge that is challenged before us in the appeal and the civil revision petitions referred to above.
2. The respondent in A.S. No. 263 of 1966, is the Special Officer of the Co-operative Bank. A preliminary objection has been taken as regards the maintainability of this appeal. From one point of view, it may not be necessary to decide this question, since the appellant has preferred, as we have already pointed out, C.R.P. No. 1408 of 1966 also Nonetheless, since the point was argued before us, and both the sides requested us to decide the question, We would like to express our opinion with regard to the maintainability of the appeal itself. The learned Counsel for the respondent contended, relying on a judgment of the Kerala High Court in Appu v. Executive Officer, P. C. C. Society Thazhecode (1962) Ker. L.T. 393, that no appeal lies against an order of the District Judge Under Section 49 (2) of the Act. The reasoning of the Kerala High Court can be found in the following observation :
The proceeding before the District Judge was not a suit and the order does not fall within the definition of a decree in the Code of Civil Procedure. The question of appealability of an order of the District Judge Under Section 49 of Act VI of 1932 (Madras) did not arise in the latter case. Their Lordships were only disposing of a writ petition to prohibit the Deputy Registrar of Co-operative Societies from proceeding with certain plaints filed Under Section 51 of Act VI of 1932 (Madras). My attention was also drawn to a decision of this Court reported in (1919) K.L.T. 334 : (1959) K.L.R. 233. That was an appeal from an order dismissing a petition by a debtor for relief under Act XXXI of 1958 (Kerala). The petition was dismissed on the ground that the petitioner was not an agriculturist and that that Court had no jurisdiction to entertain the petition. Reliance was placed on the decision of the Privy Council referred to earlier and it was held that the order was appealable. An order under Act XXXI of 1958 (Kerala), for scaling down a debt covered by a decree effects a partial or complete discharge or satisfaction of the decree and hence falls within the definition of a decree in the Code of Civil Procedure, and is appealable. The position here is different and the decision cited cannot apply to the facts of this case. It cannot be said that the order of the District Judge is a decree as defined by the Code of Civil Procedure. The preliminary objection must therefore be sustained.
The two decisions referred to in the above extract are the decision of the Privy Council in Adaikappa v. Chandrasekhara I.L.R. (1948) Mad. 505 : 74 I.A. 264 : (1948) 1 M.L.J. 41 : A.I.R. 1948 P.O. 12 and that of this Court in Sundaram Iyer v. Deputy Registrar, Cooperative Societies . In the Privy Council case, the Privy Council stated thus:
The true rule is that where a legal right is in dispute and the ordinary Courts of the country are seized of such dispute the Courts are governed by the ordinary rules of procedure applicable thereto and an appeal lies, if authorised by such rules, notwithstanding that the legal right claimed arises under a special statute which does not in terms confer a right of appeal.
The learned Counsel for the respondent relied upon the above decision of the Kerala High Court in support of her contention that the decision is directly in point and holds that no appeal lies against the decision of the District Judge. Mr. K. Parasaran, learned Counsel for the appellant, on the other hand, relies upon the statement of law as contained in the judgment of the Privy Council referred to above and contends that once a matter has been taken to a regularly constituted Court, the procedure applicable to the other proceedings of that Court will also apply to the particular proceedings also unless the statute restricts the applicability of that procedure and prescribes a special procedure and that in this case the Act having provided for the matter being considered by the District Court and not having provided for a special procedure, the ordinary procedure applicable to the proceedings before the District Court will apply to this case also and consequently the appeal will lie against the decision of the District Court. Apart from this, he also relied on a decision of a Full Bench of this Court in Chikkanna Chettiar alias V. S. Nanjappa Chettiar v. V. S. Perumal Chettiar and Anr (1940) 1 M.L.J. 732 : I.L.R. (1940) Mad. 791 : A.I.R. 1940 Mad. 474. in which the decision of an earlier Full Bench decision of this Court in Rajagopala Chettiar v. The Hindu Religious Endowments Board, Madras (1934) 66 M.L.J. 43 : I.L.R. 57 Mad. 271 : A.I.R. 1934 Mad. 103 (2) was held to be not authoritative. The decision in Rajagopala Chettiar v. The Hindu Religious Endowments Board, Madras, dealt with the question whether an order passed by the District Judge Under Section 84 (2) of the Hindu Religious Endowments Act, Act II of 1927, on an application made to the District Court to set aside the decision of the Hindu Religious Endowments Board passed Under Section 84 (1) of that Act was appealable to the High Court. The Full Bench held that the said decision was not appealable to the High Court. For coming to this conclusion, the Court relied on the definition of the term decree in Section 2, clause (2) of the Code of Civil Procedure, and pointed out that though the decision of the District Judge would fulfil all the other requirements of the definition of a decree as contained in Section 2, clause (2) of the Code of Civil Procedure, yet it would not be a decree because the order was not passed by the District Judge in a suit, but only in an application. It is this judgment of the Full Bench that was declared to be not authoritative by the later Full Bench which considered the question of the appeal-ability of an order passed by a Subordinate Judge appointed by the Provincial Government Under Section 3 (d) of the Land Acquisition Act of 1894 to decide a dispute referred by the Collector Under section 30 of that act. This Full Bench after an elaborate consideration of the question and after referring to the earlier Full Bench decision to which we have drawn attention held that the said order was appealable and the decision of the earlier Full Bench was not authoritative. This conclusion was come to on the interpretation of the decisions of the Privy Council in Ramachandra Rao v. Ramachandra Rao (1922) 49 I.A. 129 : I.L.R. 45 Mad. 3201 : 43 M.L.J. 78 : A.I.R. 1922 P.C. 80 and in Bhagwati v. Ram Kali ( 1939) 661, A. 145 : (1939) 2 M.L.J. 98, As we pointed out already, the only reason given by the Full Bench in Rajagopala Chettiar v. The Hindu Religious Endowments Board, Madras (1934) 66 M.L.J. 43 : I.L.R. 57 Mad. 271 : A.I.R. 1934 Mad. 103 (2) for coming to the conclusion that the order passed by the District Judge Under Section 84 (2) of Madras Act II of 1927 was not a decree was the consideration that Section 2 (2) of the Code of Civil Procedure referred to a decree only when the order was passed in a suit and not in an application. It is that conclusion which Was held to be not authoritative by the later Full Bench. In view of this and having regard to the statement of law laid down by the Privy Council in Adaikappa v. Chandrasekhara 74 I.A. 264 : I.L.R. (1948) Mad. 505 : (1948) 1 M.L.J. 41 : A.I.R. 1948 P.C. 12 we hold that the present appeal is maintainable.
3. We may also refer to one other consideration in this behalf. Section 49 (a) of the Act does not state that the application should be preferred to a District Judge but states that the application should be preferred to the District Court having jurisdiction. As a matter of fact, with regard to the City of Madras, the section proceeds to state that the application should be preferred to the City Civil Court as such. If the section had provided for an application to the District Judge or to any particular Judge in the City Civil Court, an argument may be available that such a Judicial Officer functions under Sub-section (2) of Section 49 as persona designata and that consequently all the procedural law applicable to the Court in question will not apply to the particular proceedings of the Judge concerned. On the other hand, Section 49 (2) provides for an application being preferred to the Court as such and therefore the general principle that all the laws governing the procedure before this Court will apply to the particular proceedings also, will prevail. After examining the authorities in this behalf, the Supreme Court in South Asia Industries (P.) Ltd. v. S. B. Sarup Singh and Ors. stated:
A statute may give a right of appeal from an order of a tribunal or a Court to the High Court without any limitation thereon. The appeal to the High Court will be regulated by the practice and procedure obtaining in the High Court. Under the rules made by the High Court in exercise of the powers conferred on it Under Section 108 of the Government of India Act, 1915, an appeal Under Section 39 of the Act will be heard by a single Judge. Any judgment made by the single Judge in the said appeal will, Under Clause 10 of the Letters Patent, be subject to an appeal to that Court. If the order made by a single Judge is a judgment and if the appropriate Legislature Under Clause 3 of Letters Patent has, expressly or by necessary implication, not taken away the right of appeal, an appeal shall lie from the judgment of a single Judge Under Clause 10 of the Letters Patent to the High Court.
It is pertinent to point out that one of the earlier decisions examined by the Supreme Court for coming to this conclusion was the decision of the Privy Council in Adaikappa v. Chandrasekhara (1948) 1 M.L.J. 41 : I.L.R. 1948 Mad. 505 : 74 I.A. 264 : A.I.R. 1948 P.C. 12.
4. One other significant feature is, there is absolutely no provision whatever in the Act to regulate the procedure before the District Court in proceedings Under Section 49 (2) of the Act. If the argument of the Counsel for the respondent is to be accepted, it will follow that there is no special procedure prescribed by the statute for dealing with an application preferred Under Section 49 (2), and at the same time the provision contained in the Code of Civil Procedure also will not apply. Certainly an argument which will lead to such an absurd conclusion cannot be countenanced by any Court and there being nothing in the statute making special provision for the procedure to be followed by the District Court in disposing of an application Under Section 49- (2) of the Act, the only conclusion is that the proceedings before the District Court will be governed by the rules and practice applicable to the other proceedings before that Court and on that basis an appeal will lie against the decision of the District Court.
5. On the merits, Mr. K. Parasaran, the learned Counsel for the appellant in the appeal as well as the petitioner in C.R.P. No. 1408 of 1966, contended that in the present case the requirements of Section 49 (1) have not been complied with and therefore the order passed by the Deputy Registrar, confirmed as it is by the learned District Judge, cannot be sustained. Section 49 (1) of the Act is as follows:
Where in the course of an audit under Section 37, or an inquiry Under Section 38 or an inspection Under Section 39, or the winding up of a society, it appears that any person who has taken part in the organisation or management of the society or any past or present officer 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, the Registrar may, of his own motion or on the application of the committee or liquidator or any creditor or contributory, examine into the conduct of such person or officer and 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 thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, fraudulent retainer or breach of trust as the Registrar thinks just.
Thus it will be seen that to bring a case within the scope of this section the following conditions must be satisfied: (1) It should appear that any person who has taken part in the organisation or management of the society or any past or present officer 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. (a) It must so appear in the course of an audit Under Section 37, or an enquiry Under Section 38 or an inspection Under Section 39, or the winding up of a society. Only when both these conditions are cumulatively satisfied, the Registrar may of his own motion or on the application of the committee or liquidator or of any creditor or contributory, examine into the conduct of the person concerned and make an order requiring him to repay or restore the money or property or any part thereof. In this particular case, Mr. Parasaran's contention is that there has been no audit Under Section 37, or an enquiry Under Section 38, or an inspection Under Section 39 and there had been no winding up of the Bank and consequently the section is not attracted and that therefore the Deputy Registrar had no jurisdiction to proceed under that section. In support of this contention the learned Counsel relied on the decision of the Supreme Court in Pentakota Sriramulu v. Co-operative Marketing Society Ltd. Anakapalli and Anr. . There the Supreme Court pointed out thus:
The facts giving rise to the charge have to be disclosed in the course of an audit Under Section 37 or an enquiry Under Section 38 or an inspection under, Section 39 or on the winding up of the Society. Mr. Ram Reddy while not disputing that unless this condition is also satisfied Section 49 would not be attracted, however submitted that there was an enquiry Under Section 38 preceding the supersession and that in consequence the condition was fulfilled. It is true that there was an enquiry conducted into the affairs of the Society Under Section 38, but that by itself is not sufficient. It has further to be proved that the facts alleged in the claim, and on which it is based, were disclosed at that enquiry.
Thus the decision of the Supreme Court in that case fully supports the contention of the learned Counsel. Consequently we have to examine whether in this particular case this requirement namely, that the facts which gave rise to the charge were disclosed in the course of an audit Under Section 37, or an enquiry Under Section 38 or an inspection Under Section 39, or the winding up of the society, is satisfied or not. No material whatever is placed before us to show that the facts were disclosed under any one of those conditions. All that the Deputy Registrar has stated in his order is this:
An enquiry Under Section 38 of the Madras Co-operative Societies Act VI of 1932 was said to have been ordered into the working, constitution and financial condition of the bank before filing the claim. The cause of action to file the claim is considered to have arisen out of the findings in the enquiry and so the claim is sustainable Under Section 49 of the Madras Cooperative Societies Act.
The learned District Judge who disposed of the said contention raised before him merely reproduced what the Deputy Registrar has stated without satisfying himself as to whether there was actually an enquiry Under Section 38, and during the course of that enquiry, the facts which gave rise to the charge were disclosed. Even before us, the learned Counsel for the respondent was not able to draw our attention to any material available before the Court to show that the requirement of the section in this behalf was satisfied, namely, that the facts which gave rise to the charge in question were disclosed in the course of an enquiry Under Section 38. In view of this alone the learned Counsel for the respondent, prayed for a remand, so that the respondent may have an opportunity to place the necessary materials, if any, before the Court. We are unable to accede to this request in view of the fact that the matter had been pending for a long time and that there is absolutely no explanation whatever as to why the said materials, if they were available could not be placed either before the Deputy Registrar or before the lower Court. Under these circumstances, we see no justification for making an order for remand.
6. In view of our conclusion that the requirements of Section 49 (1) have not been complied with, we are not going into the merits of the charge levelled against the appellant and the petitioners herein as to whether they have committed any breach of trust in relation to the Bank which alone was the charge mentioned in the plaint preferred before the Deputy Registrar of Co-operative Societies, Sivaganga.
7. On the ground that the requirements of Section 49 (1) of the Act have not been satisfied and consequently the Deputy Registrar in the first instance, and the District Court Under Section 49 (2) of the Act had no jurisdiction to pass the orders in question against the appellant and the petitioners herein, we allow the appeal and the civil revision petitions and set aside the order of the learned District Judge, dated 21st July, 1965, confirming the order of the Deputy Registrar, dated 31st August, 1963. The appellant in A.S. No. 263 of 1966 will be entitled to his costs and the petitioners in C.R. Ps. Nos. 543 and 1491 of 1966 also are entitled to their costs from the respondent. There will be no order as to costs in C.R.P. No. 1468 of 1966.
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