S. Subramanian v. Deputy Registrar Of Co-Operative Societies (Housing)

JUDGMENT: E. Padmanabhan, J.

This Writ Appeal has been preferred against the order of the Learned Single Judge dated 31.3.1994

2. Heard Mr. B.M Swami, learned counsel for Mr. R.P Kapilan, appearing for the petitioner, and Mrs. M.G Kalaiselvi, Special Government Pleader appearing for the respondents.

3. The first respondent herein issued a notice under Section 87 of the Cooperative Societies Act, 1983 calling upon the appellant to show cause as to why the order of surcharge for a sum of Rs. 38,332/- with 13% interest should not be passed against the appellant, while enumerating that the petitioner has caused loss to the assets of the second respondent-society. The appellant submitted his objections in detail and contended that he is not liable to be surcharged. The appellant further contended that he has not acted in any manner prejudicial to the interest of the society, much less, willfully, deliberately or intentionally, that he had acted as per the resolution passed by the society as well as the bye laws and that on the very face of the show cause notice surcharge proceedings is not maintainable, nor surcharge could be levied. The appellant had also set out his defense in detail. However, the first respondent ultimately passed orders of surcharge to the tune of Rs. 4230/- in respect of items 3, 5, 6 and 7 alone while accepting the explanation offered in respect of the other items by proceedings dated 14th of February, 1990.

4. Being aggrieved, the appellant preferred an appeal before the third respondent, appellate authority, Special Tribunal for Cooperative Cases and challenged the entire findings as well as raised the question of jurisdiction of the first respondent. The third respondent-Tribunal by judgment and decree dated 19th of October 1993, dismissed the appeal and confirmed the surcharge proceedings. Being aggrieved the petitioner moved this Court by filing Writ Petition No. 4428 of 1994. The learned Single Judge at the stage of admission by order dated 31.3.1994 dismissed the writ petition in limine while holding thus: —

“4. A perusal of the order impugned does not appear to suffer from any infirmity whatever. The third respondent Special Tribunal for Cooperative Cases, took into consideration the relevant materials, in the best of fashion possible, to arrive at the conclusion which is the subject matter of challenge. It is not as if such a conclusion suffers from lack of materials or evidence, calling for interference. The appreciation of the materials available on record cannot also be stated to be perverse and this Court, sitting in the extraordinary jurisdiction under Article 226 of the Constitution of India cannot at all be expected to appreciate the evidence as an appellate court and come to a conclusion, different from the one arrived at by the third respondent Tribunal.

5. In this view of the matter, I feel that the writ petition deserves dismissal even at the admission stage and the same is accordingly dismissed. Consequently, WMP is also dismissed.

5. Being aggrieved, the present appeal has been preferred for various grounds set out in the appeal. The learned counsel for the appellant rightly contended that the proceedings of the first respondent as confirmed by the third respondent is in excess of jurisdiction and runs counter to the pronouncements of this Court as well as the statutory provisions of Section 83 of the Cooperative Societies Act. The learned counsel also contended that even in respect of surcharge sum of Rs. 4230/- no order of surcharge could be passed in respect of items 3, 5, 6 and 7.

6. The learned counsel also contended that nowhere in the show cause notice or in the proceedings the petitioner had been implicated with misappropriation or fraudulent intention or breach of trust or causing deficiency to the assets of the society or acted wilfully or made payments not in accordance with the rules and willfully also. In the absence of such allegations, no action could be taken under section 87 of the Act.

7. In respect of 5th item, travelling allowance, the appellant contended that in the show cause notice given, there is no reference to the items listed in the surcharge proceedings and therefore the appellant cannot be held responsible for Rs. 1795/- towards travelling allowance. In respect of 6th item, telephone calls, the learned counsel contended that the trunk calls had not been made by the petitioner, but by other officials of the society and having found that trunk calls have been made by other staff of the Society the petitioner should not have been surcharged. In respect of the 7th item, the authority below have proceeded as if Rs. 300/- has been paid towards advertisement cost, while the payment of Rs. 300/- is not towards advertisement and records have been misread and misquoted.

8. It is further pointed out that the Deputy Registrar has not even allowed sufficient time to peruse the records and submit or prepare written representation and this had seriously prejudiced the appellant. It is pointed out by the learned counsel for the appellant that without the minimum requirement for surcharge being wilful negligence or causing deficiency wilfully to the assets of the society or breach of trust no surcharge could be ordered and mere negligence alone will not be sufficient to fasten with surcharge. A perusal of the show cause notice and the findings recorded by the respondents 1 and 3 would show that there is no cause at all for the respondents to initiate surcharge proceedings as the basic or minimum requirements as required or contemplated by Section 87 had even been set out to fasten liability and surcharge the petitioner even in respect of any one of the items.

9. The learned counsel for the appellant referred to the judgment of S. Ratnavel Pandian, J. in Sathyamangalam Cooperative Urban Bank Limited v. Deputy Registrar of Cooperative Societies reported in 1980 (11) M.L.J 17, where the learned Judge analysed the scope of Section 71(1) of the Co-operative Societies Act, 1961 (Section 87 of the Tamil Nadu Co-operative Societies Act, 1983), and held thus: —

“The degree of negligence that is contemplated under section 71(1) of the Act is not a mere negligence, but wilful negligence. The word ‘wilful’ has not been defined in the Act. The word ‘wilfulness’ or wantonness imports premeditation or knowledge and consciousness that an injury or loss is likely to result from the act done or from the omission to act. Thus, the term imports a constructive intention as to the consequences which, entering into the wilful act, the law imputes to the offender and in this way a charge, which otherwise would be mere negligence, becomes, by reason of a reckless disregard of probable consequences, a wilful wrong. In other words, the conduct of a person, to amount to wilful negligence, must be something more than ordinary negligence. To constitute wilful negligence, the act done or omitted to be done must be intended or must involve such reckless disregard of security and right as to imply bad faith. The wilful or intentional negligence is something distinct from mere carelessness or inattention however gross, and consists of a wilful and intentional failure or neglect to perform a duty necessary to protect from harm or loss to any person or property of another. In examining whether there is wilful negligence, it has to be seen first whether the person concerned is guilty of negligence and if so, whether that negligence is wilful and secondly, whether the said wilful negligence is the proximate cause of the injury or loss sustained.

Anantanarayanan C.J, in Durairaj v. Rathnabai (1967 (I) MLJ 324), pointed out that there is a sharp distinction between default and willful default quoted with approval the following observation made by Ramamurti, J., in Khivraj Chordia v. Maniklal Bhatted (AIR 1966 Mad. 67).

“The principle that emerges from the several decisions is that for default to be regarded as wilful default, the conduct of the tenant should be such as to lead to the inference that his omission was a conscious violation of his obligation to pay the rents or a reckless indifference.”

Ramaprasada Rao, J., as he then was, in T.S. Rajagopal v. M.N. Saraswathi Ammal (1977 (2) MLJ 8) explained the above words wilful default occurring in the said Act, as follows: —

“Repeatedly the Courts here and elsewhere have taken the view that the expression wilful default is not an expression of art but a meaningful phraseology used by the statute with a definite purpose. The default committed by a tenant should be so telling and conspicuous that any reasonable person apprised of such circumstances and having the occasion to adjudicate upon such facts should come to the conclusion that the tenant was recalcitrant and supremely indifferent and purposely evading the performance of his legitimate obligation of sending the rents to the landlady in time. The wilfulness should be the result of recalcitrancy and deliberateness.

Having regard to the interpretations and discussions in respect of the term wilful appearing in various enactments, as found in the case-law decided by the learned English and Indian Judges, which serve as a guide to the construction of the term wilful used in section 7(1) of the Act, I am of the view that in order to pass a surcharge order under that section against a person entrusted with the organization and management or a cooperative society or an officer or servant thereof, such person should have done an actionable wrong, either by commission or omission, in the deliberate and reprehensible manner, with reckless callousness and with supine indifference (but not by accident or inadvertence), without taking due care and precaution ordinarily expected from a reasonable and prudent man under those existing circumstances, that is to say, not caring what the result of his carelessness would be. To make it explicit, it may be stated that he should have acted in breach of legal obligations or in conscious disregard of duty or with an intentional failure to perform the manifest duty, in the performance of which the public have an interest, and that such commission should be the proximate cause of the loss or deficiency in question.”

10. G. Ramanujan, J., as he then was in Subbammal alias Rajammal and others v. The President, Tenkasi Cooperative Urban Bank Ltd., Tenkasi through its Special Officer, reported in 1976 (II) MLJ 460, had also occasion to examine the scope of Section 71 and the proceedings of surcharge. The learned Judge held that unless wilful negligence is found or such a finding is recorded, there could be no surcharge proceedings, nor any amount could be recovered from the persons in charge of the administration of the society. It has been held that if a normal care has been taken by the persons in charge of the society of day to day administration, they cannot be proceeded or surcharged. The above two decisions have been approved by the Division Bench in Jagannathan v. The Deputy Registrar reported in 1999 (2) LW 333.

11. We respectfully agree with the view taken by the two learned Judges as well as the view of the Division Bench in Jagannathan v. The Deputy Registrar (1999 (2) LW. 333. No other pronouncement of this Court had been brought to our notice taking a contrary view.

12. In the present case it has to be pointed out that no finding has been recorded by the first respondent or by the third respondent to establish that the deficiency had been caused wilfully or deliberately or with a view to cause loss to the assets of the society. Nowhere a finding has been rendered either by the first respondent or by the third respondent in their proceedings that the petitioner is guilty of wilful negligence or wantonness, nor it has been recorded that omission or commission on the part of the petitioner is deliberate, reckless or callous or loss has been caused deliberately to the assets of the society.

13. In the absence of such a finding, as has been consistently held by this Court, that the petitioner is guilty of wilful or deliberate negligence or there is intention to cause loss to the assets of the society, it follows that the impugned surcharge proceedings in so far as the petitioner is concerned are liable to be quashed.

14. In our considered view, the learned single Judge had dismissed the writ petition in limine as set out above without reference to the statutory provisions of the Cooperative Societies Act and the pronouncements and the view of the learned single Judge runs counter to the earlier Division Bench as well as pronouncements of two other learned Single Judges of this Court. It is not mere negligence, it must be wilful negligence. Further it is not a case of misappropriation even according to the respondents. When the requirements of Section 87 had not been satisfied and when the basic requirement of Section 87 which warrants initiation of surcharge proceedings is not satisfied or established on mere assumptions the appellant cannot be fastened with the liability. It has to be pointed out that neither in the show cause notice, nor in the proceedings of the first or third respondent, it has been held that the appellant has acted wilfully or wantonly with premeditation with a view to cause loss to the assets of the society. Mere negligence cannot be a ground of surcharge and it must be a wilful negligence or intentional negligence and not mere carelessness or intention or inadvertence or a single lapse by oversight.

15. In the circumstances, while following the earlier Division Bench Judgement, we set aside the order of the learned single Judge in W.P No. 4428 of 1994, quash the proceedings of the first respondent in R.C 4824/88 sa.pa dated 14.12.1990, as confirmed by the judgment and decree of the 3rd respondent, the Special Tribunal for Cooperative Cases, Madurai made in CMA.NO 38 of 1990, dated 19.10.1993 The Writ Appeal is allowed, but without costs.

Consequently, C.M.P No. 7452 of 1994 is closed.

VCS