2000(3) ALL MR 748
IN THE HIGH COURT OF JUDICATURE AT BOMBAY (NAGPUR BENCH)

D.D. SINHA, J.

Director Of Handlooms, Powerlooms & Co-Operative Textiles Vs. G.S. Rambhad, Chairman, Vidarbha Weavers Central Co-Operative Society Ltd.& Ors.

Writ Petition No. 260 of 1987

25th November, 1999

Petitioner Counsel: Shri U. V. MESHRAMKAR
Respondent Counsel: Shri P. C. MADKHOLKAR, Shri VIVEK GAOLI, Shri P. M. GUNDAWAR & V. G. DESHMUKH

Maharashtra Co-operative Societies Act (1960), Ss.83, 84, 88 - Misfeasance and breach of trust committed by society - Action against society - Satisfaction of authority - Specific irregularities not mentioned - Matter remanded.

The action contemplated under S.88 of the Act is required to be instituted by the Registrar only after being satisfied on the basis of the contingencies mentioned in S.88 and not otherwise. [Para 8]

The order must reflect what is the basis on which the required satisfaction is reached by the Registrar for the purposes of proceeding against the person concerned in accordance with the provisions of this Section. However the Registrar need not give detailed description about the irregularities brought to his notice either by the Auditor or in inquiry under Section 83 or 84 of the said Act. However, the general nature of material particulars, on the basis of which the satisfaction is reached by the Auditor, must find place in the order, in absence of which, the said order would not be sustainable in law. [Para 10]

In the instant case, except the word "satisfaction" incorporated in the order, there is nothing in the order to show that, what were the specific irregularities which were noticed by the Registrar in the audit report which can be termed as an act of misfeasance or misapplication, etc. There is nothing in the order, on the basis of which, it can be presumed that the Registrar had applied his mind in regard to the irregularities, etc. mentioned in the Special Auditor's report vis-a-vis the respondents and it is only thereafter, he was satisfied that the necessary action contemplated under Section 88 of the Act is required to be instituted against the respondents. [Para 8]

The irregularities brought on record committed by the respondents are of serious nature and, therefore, due consideration in this regard and proper application of mind by the petitioner/Registrar is necessary before giving clean chit to the respondents. In the interest of justice, therefore, it will be appropriate to remand the matter back to the Registrar to consider afresh the special audit report and pass appropriate orders under Section 88 of the Act. [Para 12]

JUDGMENT

JUDGMENT :- Heard Shri Meshramkar, A.G.P. for the petitioner and Shri Madkholkar, learned Counsel for the respondent.

2. The Writ Petition is directed against the order dated 22.08.1986 passed by the Member, Maharashtra State Co-operative Appellate Court, Bombay, Bench at Nagpur whereby the order dated 25.10.1985 passed by the petitioner is set aside.

3. The learned Counsel for the petitioner submitted that the petitioner, after careful consideration of the audit report of Vidarbha Weavers' Central Co-operative Society Ltd., Nagpur for the years 1981-82 and 1982-83 recorded by the Special Auditor Class-I, Co-operative Societies, Nagpur was satisfied that the persons mentioned in clause no.5 in the Schedule at Annexure-A including the respondents had taken part in the management of the Society and were guilty of misfeasance and breach of trust in relation to the society and they have misapplied, retained and they have become liable and accountable for the money and property of the society as mentioned in the Schedule and have acted improperly, inefficiently and in a manner which is highly uneconomic and detrimental to the interests of the society and that they have acted contrary to the provisions of the Maharashtra Co-operative Societies Act, 1960 and the rules made thereunder. The learned Counsel further submitted that the petitioner, in accordance with the provisions of Section 88 of the Act, exercised powers conferred upon him by virtue of this Section, being satisfied about the conduct of the respondent in respect of the above referred situation, authorised Shri K.R. Pandey, retired Additional Registrar, Co-operative Societies to frame charges against the respondents and after giving them reasonable opportunity to answer the charges to make an order requiring them to repay or restore the money or property or any part thereof with interest at such rate as he may determine or to contribute such sum to the assets of the society by way of compensation in regard to the misapplication, retention, misfeasance or breach of trust as he may determine.

4. The learned Counsel further submitted that the respondent being aggrieved by this order dated 25th October 1985, approached the Maharashtra State Co-operative Appellate Court and the Co-operative appellate court vide order dated 22.08.1986 allowed the appeal and set aside the order passed by the petitioner dated 25.10.1985 in view of the provisions of Section 88. Hence this Writ Petition.

5. The learned Counsel submitted that the petitioner, after careful perusal of the special audit report, was satisfied that the respondents are guilty of above referred acts and, therefore, appointed the above referred officer to proceed against them in view of Section 88 of the Act. The learned Counsel submitted that the petitioner in view of the provisions of Section 88 of the Act was justified in passing the order dated 25th October 1985 which is sustainable in law. It is further contended that the necessary inquiry in regard to the misfeasance and breach of trust, etc. against the respondents was to be conducted by the authorised officer as per the provisions of Section 88 of the Act and, therefore, it was not necessary for the petitioner to mention in the order the circumstances on the basis of which the satisfaction is reached by the petitioner/Registrar at this stage.

6. It is further contended that the Co-operative appellate court did not consider this objection and, therefore, the impugned order is not sustainable in law.

7. Shri Madkholkar, the learned Counsel for the respondents no.1, 3, 6, 7, 9, 10, 11 and 18 supported the impugned order and further contended that the order dated 25th October 1985 is in fact a mechanical order without application of mind and also does not demonstrate the necessary satisfaction required to be reached under the provisions of law. The learned Counsel further contended that the entire approach adopted by the appellate court is just and proper and the order is sustainable in law.

8. I have considered the contentions raised by the learned Counsel for the parties and perused the order dated 25.10.1985 passed by the petitioner as well as the order dated 22.10.1986 passed by the Maharashtra Co-operative Appellate Court. It is no doubt true that the order dated 25th October 1985 does make a mention that the Registrar, after going through the Auditor's report, was satisfied that the respondents were guilty of misfeasance, etc. However, except the word "satisfaction" incorporated in the order, there is nothing in the order to show that, what were the specific irregularities which were noticed by the Registrar in the audit report which can be termed as an act of misfeasance or misapplication, etc. There is nothing in the order, on the basis of which, it can be presumed that the Registrar had applied his mind in regard to the irregularities, etc. mentioned in the Special Auditor's report vis-a-vis the respondents and it is only thereafter, he was satisfied that the necessary action contemplated under Section 88 of the Cooperative Societies Act is required to be instituted against the respondents. It is absolutely clear that the action contemplated under Section 88 of the Act is required to be instituted by the Registrar only after being satisfied on the basis of the contingencies mentioned in this Section and not otherwise. If that is so, then it must factually reflect in the order as to what is the basis on which such satisfaction is reached which warrants initiation of action as per the provisions of Section 88 of the Act. In the instant case, though reference is made to the audit report in the order dated 25.10.1985, the same is completely silent in respect of the specific act of irregularities mentioned in the audit report which does not show that the necessary satisfaction required to be reached was not reached after due application of mind in regard to the irregularities pointed out by the Special Auditor in the audit report.

9. A perusal of Section 88 would show that it contemplates that where, in the course of or as a result of an audit under Section 81 or an inquiry under Section 83 or an inspection under Section 84 or the winding up of a society, the Registrar is satisfied on the basis of the report made by the auditor or the person authorised to make inquiry under Section 83 or the person authorised to inspect the books under Section 84 or the Liquidator under Section 105 or otherwise that any person who has taken any part in the organisation or management of the society or any deceased, or past or present officer of the society has, within a period of five years prior to (the date of commencement of such audit or date of order for inquiry, inspection or) winding up, misapplied or retained, or become liable or accountable for, any money or property of the society, or has been guilty of misfeasance or breach of trust in relation to the society, the Registrar or a person authorised by him in that behalf may frame charges against such person or persons. The controversy in question is limited to the above referred provisions of the Section and, therefore, the remaining portion thereof is not concerned with the issue in hand.

10. The intention of Legislature is evident that the Registrar is required to take into consideration the recitals in the audit report submitted under Section 81 or inquiry report under Section 83 or inspection report contemplated under Section 84, etc. and he has to apply his mind in this regard and after such application of mind, if he is satisfied then only the Registrar can proceed against the person concerned, himself or somebody on his behalf to do so. The word "satisfaction" inserted in this Section has a positive object and specific meaning. The object is that the Registrar, before proceeding against the concerned person, must apply his mind and must be prima facie satisfied that the situation exists for initiating further proceedings against the person or persons concerned in accordance with the provisions of Section 88 of the Act. The order, therefore, must reflect what is the basis on which the required satisfaction is reached by the Registrar for the purposes of proceeding against the person concerned in accordance with the provisions of this Section. It is, however, true that the Registrar need not give detailed description about the irregularities brought to his notice either by the Auditor or in inquiry under Section 83 or 84 of the said Act. However, the general nature of material particulars, on the basis of which the satisfaction is reached by the Auditor, must find place in the order, in absence of which, I am afraid that the said order would not be sustainable in law.

11. In the instant case, therefore, after taking into consideration the above referred facts and circumstances, the order dated 25.10.1985 passed by the Registrar is not sustainable in law. Similarly, in view of the above facts and circumstances, the contention raised by the learned Counsel for the petitioner suffers from lack of merit and has to be rejected. The impugned order dated 22.08.1986, in my opinion, is sustainable in law and the appellate authority has rightly set aside the order dated 25.10.1985 passed by the Registrar under Section 88 of the Maharashtra Co-operative Societies Act, 1960.

12. Though the impugned order dated 22.08.1986 is proper, the respondents cannot be allowed to go scot free only on the basis of non application of mind by the petitioner at the time of proceeding against the respondents in view of Section 88 of the Act. The irregularities brought on record committed by the respondents are of serious nature and, therefore, due consideration in this regard and proper application of mind by the petitioner/Registrar is necessary before giving clean chit to the respondents. In the interest of justice, therefore, it will be appropriate to remand the matter back to the Registrar to consider afresh the special audit report in the light of the above referred observations in the judgment and pass appropriate orders under Section 88 of the Maharashtra Cooperative Societies Act, 1960. Since the matter is old, the petitioner/Registrar is hereby directed to pass appropriate orders under Section 88 of the Maharashtra Cooperative Societies Act, 1960 in view of the abovementioned observations within a period of one month from the date of receipt of this order.

13. In the result, petition is dismissed with no order as to costs.

Petition dismissed.