Judgment:
1/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH R DATED THIS THE21T DAY OF FEBRUARY2017PRESENT THE HON’BLE DR. JUSTICE VINEET KOTHARI AND THE HON’BLE MR. JUSTICE SREENIVAS HARISH KUMAR W.P. No.109806/2015 (S-KAT) BETWEEN : VEERANNA BASAPPA YALLALI, S/O BASAPPA YELALLI, R/O :
242. RANICHANNAMAM NAGAR, DHARWAD. ... PETITIONER (BY SRI.V M SHEELVANT, SMT.VIJAYALAXMI M.N. ADVS.) AND THE SECRETARY, DEPARTMENT OF CO-OPERATION, M.S.BUILDING, BANGALURU. (BY SRI.M.KUMAR, AGA) ... RESPONDENT THIS WP IS FILED UNDER ARTICLES226AND227OF CONSTIUTION OF INDIA PRAYING TO QUASH THE ORDER
DATED:26.02.2014, PRODUCED AT ANNEXURE- A14, PRODUCED BEFORE KAT BANGALORE IN THE RESPONDENT APPLICATION, GOVERNMENT THE ORDER
THE TO QUASH PASSED AND BY220 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru ON PASSED BY TRIBUNAL THE KARNATAKA DATED:30.07.2015, APPLICATION ADMINISTRATIVE NO.4742/2014 PRODUCED AT ANNEXURE-A IN THE ABOVE WRIT PETITION, GRANT INTERIM ORDER
AND ALSO TO STAY THE ORDER
DATED:26.02.2014, PRODUCED AT ANNEXURE-A14 BEFORE KARNATAKA ADMINISTRATIVE TRIBUNAL, BANGALORE AND DIRECT THE RESPONDENT STATE TO RE-INSTATE THE PETITIONER WITH ALL SERVICE BENEFITS PENDING DISPOSAL OF THE ABOVE WRIT PETITION. THIS PETITION COMING ON FOR ORDER
S THIS DAY, DR. VINEET KOTHARI, J., MADE THE FOLLOWING: ORDER
Mr. V.M.Sheelvant, Advocate for petitioner. Mr. M.Kumar, AGA for respondent 1. The petitioner, Veeranna Basappa Yallali has filed this writ petition challenging the dismissal order, Annexure-A14 dated 26.02.2014 passed by the State Government in the name of Governor of Karnataka, by the Under Secretary to the Co-operative Department dismissing him from the service.
2. The petitioner was working as a Assistant Registrar in the respondent Co-operation Department and at the relevant point of time was given the charge of Liquidator 3/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru of respondent- Hubli Dharwad Urban Co-operative Bank Ltd., Dharwad.
3. On the allegations of misappropriation of bank funds to the extent of Rs.34,43,469.82/-, the present petitioner was charge sheeted and a departmental enquiry was conducted against him by a retired District Judge Mr. K.N.Nagendrakumar, who in his Enquiry Report, Annexure- A5 found him guilty of the said misappropriation.
4. A show-cause notice was served upon the petitioner, by the Disciplinary Authority along with the copy of the Enquiry Report vide Annexure-A6 dated 15.07.2008. The petitioner gave his explanation vide Annexure-A7 dated 29.07.2008. After a lapse of about 6 years, the impugned dismissal order came to be passed against him vide Annexure-A14 on 26.02.2014.
5. Aggrieved by the same, the petitioner preferred his appeal before the Karnataka Appellate Tribunal, which too dismissed his Application by the impugned order Annexure-A dated 30.07.2015 dismissing his Application No.4742/2014. 4/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru 6. Aggrieved by the same, the petitioner filed this writ petition before this Court on 07.09.2015.
7. Learned counsel for the petitioner, Mr.V.M.Sheelvant, vehemently submitted before us that the impugned order of dismissal deserves to be quashed simply on the ground that for the alleged misappropriation of the funds of the Respondent-Bank which the petitioner never committed, the respondent bank also initiated the ‘surcharge proceedings’ against the petitioner and some other persons under Section 69 of the Karnataka Co-operative Societies Act, 1959 (herein after referred to as ‘the Act’ for short), which permits the Registrar of the Co-operative Society to make an order requiring a person responsible for any misappropriation of the funds or causing financial loss to the Co-operative Bank to pay or restore the money or property or any part thereof with interest to the said bank. Section 69 of the Act applies notwithstanding that the Act is one for which person concerned may be criminally liable.
8. The learned counsel for the petitioner submitted that in fact in the proceeding initiated under Section 69 of 5/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru the Act, the concerned Joint Registrar had in fact found that the petitioner was not responsible for any such misappropriation and therefore, he was not even a necessary party in such Section 69 ‘surge proceeding’ and he directed deletion of his name from such proceedings under Section 69 of the Act, vide his order Annexures-A9 and A10 dated 28.04.2008. The relevant portion of the said order of the Joint Registrar is quoted below for ready reference of the Court:- “3. Applicant-respondent No.1 has placed logically strong and appropriate grounds to show that, Smt. Hanumaakshi Gogi who ordered to initiate surcharge proceedings, the DRCS and the Liquidator have created all these cases in a prejudiced manner.
4. It appears that, more important than the charges in the surcharge proceedings, the differences between the applicant-respondent No.1 and the Liquidator is the reason. The Liquidator Smt. Hanumaakshi Gogi, DRCS and the Liquidator illegally entered the bank under liquidation on 21.11.2004 and took the documents and went away and due to vengeance against applicant-respondent No.1, has created these charges, which is proved with appropriate reasons. It is proved with documents that, Smt. Hanumaakshi Gogi had not returned the bank manager and Liquidator charge upto 19.08.2006. 6/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru 5. The Deputy Director of co-operative audit, in violation of the notification No.LePaSha/35/2003 dated 26.10.2002, has released in a hasty manner and the audit report is not subjected to lawful scrutiny and it is suspicious. In this regard, AIR/1970/P&H/2003 Co-operative Societies – Co- operative Societies Act (1912), S.17-Audit Notes prepared under section – There is no provision of law under which there contents could be presumed to be correct – Section 114, Evidence Act cannot be equated with judicial and official acts and secondly because the section does not raise a presumption regarding correctness of contents of documents – (Evidence Act(1872) S.114) is proved.
6. Objections raised to dismiss the surcharge application on the ground that, cause of action arising for filing surcharge application filed under section 69 by the bank is not clearly mentioned, is proved as per the decision of the Hon’ble Supreme Court in AIR/2007/SCW/3456-‘Rejection of plaint – absence of cause of action – Conclusion as to – Held, whether a plaint discloses a cause of action is essentially a question of fact, but whether it does not must be found out, from reading the plaint itself. For the said purpose, the averments made in their entirety must be held to be correct.’ For the aforesaid reasons and on thorough examination of thedocuments and assessment, as applicant-respondent No.1 is not a party and not 7/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru necessary to this surcharge proceeding, enquiry point No.2 is answered in the affirmative.
3. Enquiry point No.3 : As it is decided under enquiry point No.2 that, interlocutory application filed by applicant-respondent No.1 under section 117(3) of KCS Act, 1959, he is entitled for the relief as prayed in this interlocutory application No.1 Hence, the following: ORDER
In exercise of the powers conferred under section 69 of Karnataka Co-operative Societies Act, 1959 and Notification No.CMW/69/CLM/2001 dated 21.01.2001, interlocutory application No.1 filed by the applicant-respondent No.1 is hereby allowed. The name of Sri Veeranna B Yalalli, applicant- respondent No.1 is deleted from the cause title of the surcharge application No.JRD/UBS/3488/2007-08. The petitioner is hereby directed to immediately implement this order and make necessary amendment. The petitioner is hereby warned that, if he fails to initiate further action before next date of hearing, it is not possible to continue the surcharge proceedings.” 9. The relevant portion of Annexure A-10, order dated 28.04.2010 passed by Joint Registrar of Co-operative Societies is also quoted below for ready reference:
8. 20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru “ORDER
“In exercise of the powers conferred under section 69 of Karnataka co-operative societies Act, 1959 and notification No.CMW/CLM/2001 dated 21.01.2001, interlocutory application No.1 filed by the applicant-respondent No.1 is hereby allowed. The name of Sri Veeranna B. Yalalli applicant- respondent No.1 is deleted from the cause title of the surcharge application No.JRD/UBS/3488/2007-08. The petitioner is hereby directed to immediately implement this order and make necessary amendment. The petitioner is hereby warned that, if he fails to initiate further action before next date of hearing, it is not possible to continue the surcharge proceedings. This order is pronounced in the open court this day i.e. on 28.04.2008 and issued under the seal and signature of this office.” Sd/- Joint Registrar of co-operative societies, under Rule 441 (Arbitration), Karnataka State Town Co-operative banks Federation, Bangalore Division, Hubli.” 10. The learned counsel further submitted that the respondent, Hubli-Dharwad Urban Co-operative Bank Ltd., Dharwad also approached the Karnataka Appellate Tribunal against the aforesaid orders on 28.04.2008 by way of 9/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru revision petition, but, their revision petition came to be dismissed by the Karnataka Appellate Tribunal. The relevant portion of the order of Karnataka Appellate Tribunal is also quoted below for ready reference of the Court:- “10. One more aspect which needs to be considered is the petitioner has not at all filed any objection to the application by the Respondent – 2 seeking deletion of his name from the array. The Res.- 2 has given sufficient reasons showing that he is not necessary party to the proceedings. On the contrary the petitioner has not at all filed any objections reflecting the necessity of this Respondent – 2’s presence in the proceedings. It is seen that the Res.-2 after his appointment as Liquidator has held a meeting on 09-05-2003 under rule-33(E) of K.C.S. Rules 1960 and fixed the liabilities on the staff of the Bank. This clearly indicates that the liquidation work done by the staff under the supervision of the Respondent –2. The books of accounts remained in possession of the staff of the Bank as per Section – 29(G)(4) of the Act and the Res.-2 was not directly concerned with the work. Moreover here in this case there is some confusion with the petitioner itself whether it is surcharge proceedings or a proceedings under Section-70 of the Act, at one breath they say Res.-2 caused deficiency of the fund and in another breath it is stated that there is mis-appropriation. As per Section-63 of the Act, audit report has to be 10/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru prepared and thereafter the same has to be finalized and thereafter the Registrar has to pass order under Section-68 of the Act. In this case, the audit report was scrutinized and finalized by the Deputy Director of audit the same say under pressure indicates the ulterior motive of the DRCS/Hanumakshi Googi against whom the Deputy Director audit has made allegations of pressurizing him to release the audit report in hurry. Here in this case Res.-2 being an Officer of the Department while discharging of his duties, he has done his work and any one who is aggrieved by the action of the Liquidator can file appeal under section-106 of the Act and thereafter, the proceedings can be continued. At this stage as per the materials placed before the JRCS, he has passed the impugned order deleting the name of Res.-2 and we find it is proper and correct and does not warrant any interference by this Tribunal. In the result, we proceed to pass the following: ORDER
Revision Petition is dismissed. No costs. Sd/- (S. H. MITTALHOD) District Judge Member.” 11/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru 11. The relevant portion of the order dated 23.08.2010 of Annexure – A12 passed by the Karnataka Appellate Tribunal, Bangalore, is also quoted below of the ready reference:- “25. Coming to the observation regarding cause of action to file the dispute u/s 69 of the KCS Act in para 4 of the petition it is alleged that the DRCS in his order at page has stated that the R-2 to 6 are all jointly and severally liable to pay the amount of deficiency caused to the society. It is also specifically directed to initiate proceedings against all the R2 to 6 and are made liable. In view of the above reasons and other reasons the dispute is raised against the R-2 to 6. Reasons for initiating proceedings has been stated in the petition. Besides though there is no specific allegation as to how much amount of deficiency caused by each of the R-2 to 6 but alleged collusion against all. Such being the case in our opinion it cannot be held that there was no cause of action alleged against the R-2. Therefore we hold that the observation of the R-1 is not correct. In our opinion the judgement of the Hon’ble Supreme Court cannot be made applicable to this case.” 12. After remand by the order dated 23.08.2010 by the Karnataka Appellate Tribunal, vide Annexure-A12, the learned Joint Registrar, vide his order Annexure-A13 dated 21.11.2011, closed the matter by holding that surcharge 12/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru application was unsustainable. The relevant operative portion of the said order is quoted below for ready reference:- “ORDER
From examination of aforesaid factors and in the interest of justice, interlocutory application No.4 filed by the respondent No.3 in the aforesaid surcharge applications is hereby considered and allowed. Consequently, the said surcharge application is held as unsustainable and accordingly set aside this surcharge application. Parties shall bear their respective costs. This order is pronounced in the open court on 21/11/2011. Sd/- Joint Registrar of Co-operative Societies, under Rule 441 (Arbitration), Karnataka State Town co-operative banks Federation, Bangalore division, Hubli.” 13. The learned counsel for the petitioner Mr.Sheelvant urged that all these orders discharging the present petitioner from his responsibility under Section 69 of the Act in surcharge proceedings were produced before the Disciplinary Authority along with the communications dated 18.05.2011 and 22.12.2011 of the petitioner. These communications were addressed to the Secretary of the Co- 13/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru operation Department, who was the Disciplinary Authority for the present petitioner. But, the said documents which had an important bearing on the disciplinary action against the petitioner appears to have been either deliberately ignored or have escaped the notice of the said Disciplinary Authority and therefore, the said dismissal order passed by him after a gap of 6 years on 26.04.2014 cannot be sustained on this ground alone.
14. On the other hand, Mr.Kumar, the learned counsel appearing for the respondent-Bank vehemently supported the impugned dismissal order and submitted that in view of the charges having been proved in a full dress enquiry held against the petitioner by a former District Judge, the said charges were proved with the relevant evidence and therefore, the Disciplinary Authority was justified in passing the impugned dismissal order, so also the learned Karnataka Appellate Tribunal was justified in upholding the same.
15. We have heard the learned counsels at length and perused the records. Without going into the details and 14/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru merits of the rival contention of the learned counsels for both sides, we find even from the reference material noted in the impugned dismissal order that the aforesaid orders passed under Section 69 of the Act by the Joint Registrar and by the Karnataka Appellate Tribunal as quoted above have not been considered at all by the Disciplinary Authority, while passing the dismissal order after a gap of 6 years, after completion of the enquiry in the year 2008 on 26.02.2014.
16. It is not in dispute before us that the respondent-Bank was very much a party to the Section 69 surcharge proceedings not only before the Joint Registrar of the Co-operative Society, but, the respondent-Bank itself had filed revision petition before the learned Karnataka Appellate Tribunal, which came to be dismissed. These orders not only were fully within their knowledge, but, were also separately supplied and placed on record by the petitioner along with its communications dated 18.05.2011 and 22.12.2011. The copies which have been produced before us along with memo dated 18.01.2016. There was no rebuttal to the same from the opposite side. 15/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru 17. Therefore, the question definitely arises in the present matter as to whether these orders passed under Section 69 of the Act, which is quoted below for ready reference will have any effect on the disciplinary proceedings against the petitioner or not and if it does have any effect, whether the impugned dismissal order without considering these facts and documents can be sustained or not?.
18. Section 69 of the Act reads as under:- “69. Surcharge: (1) If in the course of an audit, inquiry, inspection or the winding up of a Co-operative society, it is found that the (Board) of Management (including Government nominees and Ex-officio members) of such society or the President, Vice- President, the Chairman, vice-Chairman or any other member of the Board of Management or any person who is or was entrusted with the organization or management of such co-operative society or who is or has at any time been an officer or an employee of a co- operative society has made any payment contrary to the Act, the rules or the bye-laws or has caused any deficiency in the assets of the co-operative society by breach of trust or negligence or has misappropriated or fraudulently retained any money or other property belonging to such Co-operative society, the Registrar may, of his own motion or on an application of the (Board), Liquidator or any creditor, frame charges 16/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru against such person or persons and after giving such person and in the case of a deceased person, to his representative who inherits his estate, an opportunity of making representation, make an order requiring him to pay 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 co-operative society by way of compensation to such extent as he may consider just and equitable. (2) This section shall apply, notwithstanding that the act is one for which the person concerned may be criminally liable. (3) The order made by the Registrar under sub- section (1) may also provide for recovery of cost of surcharge proceedings from the person against whom the order is made at such rate and in such manner as may be prescribed. (4) The application under sub-section (1) shall be decided within a period of twelve months excluding the period of stay granted by the Court if any. However, the Registrar may for reasons to be recorded in writing extend the said period not exceeding eighteen months: (Provided that the State Government shall, on a report made by the Registrar, may extend the period beyond eighteen months if it is satisfied that, there are genuine/valid grounds for such extension.” 19. From the aforesaid quoted portions from the orders passed by the Joint Registrar as well as Karnataka Appellate Tribunal, it is clear that these authorities did not 17/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru find any merit in the surcharge proceedings initiated against the present petitioner and even deleted his name from the array of respondents in these proceedings under Section 69 of the Act, indirectly finding him as not responsible for the alleged misappropriation of the bank funds, while he was acting as a Liquidator under the duties assigned to him and other bank officials at the relevant point of time. These findings cannot be brushed aside by the Disciplinary Authority, even while he was passing an order under Karnataka Civil Services (Classification, Control and Appeal) Rules 1957.
20. The very basis of the charge framed and proved against the present petitioner was alleged misappropriation of bank funds, by charging lesser interest from the borrowers of the bank when the said bank was ordered to be liquidated under Section 72-A of the Act. Whether the petitioner had the power to do so or not and whether having done that, it amounts to misappropriation of the bank funds or not is a different question on which we are not required to express any opinion at this stage. 18/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru 21. We are however of the definite opinion that the effect of the orders passed under Section 69 of the Act, was required to be considered by the concerned Disciplinary Authority, while passing any order after the conclusion of the enquiry, and serving a show-cause notice upon the petitioner and taking his explanation on record. During the gap of about 6 years, which ensued between the Enquiry Report and passing of the impugned dismissal order, this development of proceedings of Section 69 of the Act had taken place, and therefore, mention thereof in the Enquiry Report of 2008 could not simply be envisaged, but these factual developments in the case of the present petitioner, which had taken place in the year 2009 to 2011 under Section 69 of the Act had a definite bearing on the disciplinary action pending against him during this period, and therefore, the effect of these orders was definitely bound to be considered by the Disciplinary Authority. But, indisputably this has not been done by the concerned Disciplinary Authority while passing impugned dismissal order on 26.02.2014. 19/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru 22. Therefore, we are of the clear opinion that the said impugned dismissal order cannot be sustained and deserves to be set aside.
23. The options available before us was to (i) either quash the impugned dismissal order of the petitioner as well as the order passed by the Karnataka Appellate Tribunal and direct the reinstatement of the petitioner back in service and (ii) the other option is to allow the concerned Disciplinary Authority to re-decide the case after considering the effect of the aforesaid orders passed in favour of the present petitioner under Section 69 of the Act and consider whether despite these orders, he deserves to be dismissed from the service or not?.
24. We adopt the second option advisedly and therefore, while setting aside the impugned dismissal order Annexure-A14, dated 26.02.2014 as well as the impugned order passed by the Karnataka Appellate Tribunal, Annexure-A dated 30.07.2015, we remit the matter back to the concerned Secretary of the Government of Karnataka, the Disciplinary Authority for the present petitioner, with a 20/20 Date of Judgment 21.02.2017 W.P.No.109806/2015 Veeranna Basappa Yallali, Vs. The Secretary, Department Of Co-operation, Bangaluru direction to the said authority to pass fresh orders in accordance with law considering the effect of the orders passed in favour of the petitioner under Section 69 of the Act and as aforesaid and after giving an opportunity of hearing to the petitioner in this regard. A period of two months is allowed for the said purpose to the concerned Disciplinary Authority and we direct the petitioner to appear before the said Authority in the first instance on 07.03.2017.
25. With the aforesaid directions, the present writ petition is allowed. No order as to costs. Sd/- JUDGE Sd/- JUDGE yan/vmb