Judgment:
D.V. Shylendra Kumar, J.
1. Writ petition by a person who was an elected Director of Krishnarajanagar Taluk Co-operative Agricultural and Rural Development Bank Limited, Krishnarajanagar Taluk, Mysore District, who is aggrieved by the adverse order that he has suffered at the hands of the second respondent - Deputy Registrar of Co-operative Societies, Mysore Division, Mysore who had in exercise of his powers under Section 29-C of the Karnataka Cooperative Societies Act, 1959 [for short the Act'] disqualified him from holding the Directorship of the society in terms of his order dated 6.7.2006 (copy at Annexure-D) and which the petitioner was unable to get over in his appeal before the first respondent - Joint Registrar of Co-operative Societies in an appeal under Section 106 of the Act as the appeal came to be dismissed affirming the order passed by the Deputy Registrar as per order dated 19.12.2006 passed in Appeal No. 5/2006-07 [copy at Annexure-K].
2. It is to get over these orders, the present writ petition seeking for quashing of these orders.
3. The respondents had been put on notice. Statutory functionaries - respondents 1 & 2 are represented by Smt. Sarojini Muthanna, learned Additional Government Advocate, the society and the secretary of the society -respondents 3 & 4 respectively are represented by Sri. Ashok Kumar, learned Counsel.
4. Writ petition is mainly on the premise that the orders passed by the Deputy Registrar and affirmed by the Joint Registrar are not tenable in law; that it is without any proper foundation; that it is also in violation of the principles of natural justice; that no proper or adequate opportunity had been given to the petitioner before passing such orders; that the orders visit the petitioner with serious consequences and can act as a stigma even in future; that the orders are required to be quashed etc.,.
5. On behalf of the respondents, the respondents 3 & 4 have filed statement of objections. These respondents have supported the impugned orders and have contended that the writ petition is wholly false, vexatious; that the petitioner being one of the Directors of the Bank had availed the loan for purchase of sheep, bullocks and bullock carts; that an inspection of the premises of the petitioner on 8.3.2006 as a routine or surprise visit revealed that the petitioner in fact had sold away the bullock carts, bullocks and sheep; that nothing was found at his house; that the petitioner having misused the loan by selling away the bullock carts, bullocks and sheep purchased from out of the money advanced by the bank, the bank had in terms of the agreement recalled the entire loan, had called upon the petitioner to make payment of the full loan amount with interest within fifteen days; that the petitioner instead of repaying the loan amount had given an untenable reply and had become a defaulter, that the Bank and its officials visited the house of the petitioner again on 16.6.2006 and even then bullocks, bullock carts or sheep were not found, a mahazar was drawn in the presence of the villagers; that the petitioner had misused the loan amount and also had become a defaulter and it is for such reason, the bank had requested the Deputy Registrar to take suitable action against the petitioner; that the continuation of the petitioner as a Director of the Bank was detrimental to the interest of the bank and the Deputy Registrar on enquiry having found the petitioner guilty was disqualified in terms of the provisions of Section 29-C of the Act; that the appeal being without merit had been rightly dismissed by the first respondent - Joint Registrar of Co-operative Societies; that the petitioner has made false and untenable allegations even against the fourth respondent; that certain allegations are leveled against the fourth respondent only as a counter blast to the action initiated by the fourth respondent against the petitioner; that the fourth respondent was a very honest, upright person who was working with dignity and the action initiated by him was only in the interest of the Bank; that the action was not of the fourth respondent but by the committee of the management headed by the President; that the writ petition is without merit and is to be dismissed.
6. It is also indicated in the statement of objections filed on behalf of these respondents that the petitioner had not only become a defaulter incurring disqualification under Section 29-C[1][a] of the Act but also a person who had committed a fraud, acted in gross negligence, in contravention of the provisions of the Act, Rules and Bye-laws of the society and therefore had incurred a disqualification even in terms of the provisions of Section 29-C[8][b] of the Act; that the action taken is fully warranted and justified and therefore the writ petition should be dismissed.
7. Writ petition had been admitted by issue of rule and respondents had been directed to place the record before the court.
8. The matter is taken up for hearing. I have heard Sri M S Padmarajaiah, learned senior counsel appearing for the petitioner, Smt. Sarojini Muthanna, learned Additional Government Advocate appearing for respondents 1 & 2 and Sri. Ashok Kumar, learned Counsel appearing for respondents 3 & 4.
9. Sri. M S Padmarajaiah, learned senior counsel appearing for the petitioner has mainly put forth the contention that the orders are vitiated for not affording a proper opportunity; that there was no proposition put forth to the petitioner proposing disqualification under any specific provision of the Act; that no authority had determined that the petitioner has either become a defaulter or that he has committed an act of 'fraud' within the meaning of this expression under Section 29-C[8] of the Act; that the petitioner's response before the Deputy Registrar has not been taken note of; that the Bank and the Secretary - respondents 3 & 4 respectively had deliberately foisted such disqualification on the petitioner to see that the petitioner is removed from his elected post; that the orders are even otherwise not sustainable and are liable to be quashed.
10. Sri. Ashok Kumar, learned Counsel for the respondents 3 & 4 has very vehemently urged that the petitioner is a person who has not even placed any material either before the Deputy Registrar or before the Joint Registrar to show that he had not committed any act of fraud; that at no point of time the petitioner had asserted that he had not committed an act of misuse of the loan amount; that while two inspections revealed nonavailability of the goods and livestock which the petitioner had purported to have purchased from the loan availed from the Bank, the petitioner had never come forward to show their availability either to the Bank or before the authorities under the Act and that in itself proves the fraudulent act of the petitioner; that the Bank having recalled the entire loan in terms of the very agreement and the petitioner having not paid the amount within fifteen days from the date of the recall, had become a defaulter and therefore action taken is justified both in terms of Section 29-C[1][a] as well as Section 29-C[8](b] of the Act.
11. Further submission is that the petitioner had been given sufficient opportunity; that it is the petitioner who has not availed of the opportunity; that no material was ever placed by the petitioner before the authorities to disprove the version of the Bank and the allegation that he had committed an act of fraud and therefore the orders do not warrant interference and is to be dismissed.
12. Learned Counsel for the respondents 3 & 4 would also submit that even the record of the Bank have been submitted to the Deputy Registrar which would show that the Bank had called upon the petitioner to show cause as to why he should not be treated as a defaulter for nonpayment etc.,; that those records can be summoned from the respondents 1 & 2 etc.,.
13. Appearing on behalf of respondents 1 & 2, Smt Sarojini Muthanna, learned Additional Government Advocate would support the orders and would point out to the provisions of Section 29-C of the Act and submits that the action is justified; that the petitioner if had not paid the entire loan amount which had been recalled, obviously becomes a defaulter, putting forth untenable or raising merit-less grounds will not in any way absolve the petitioner from the operation of the provisions of the Act; that it is very conduct of the petitioner which resulted in disqualification of the petitioner and there is no merit in the writ petition and is to be dismissed.
14. So far as placing of the records before the court is concerned, while the record of the Joint Registrar of the Co-operative Societies is placed, it is submitted that what has been furnished by way of record of the Deputy Registrar is only the copy of the order sheet of the proceedings before the Deputy Registrar, true copy of the notice dated 20.3.2006 issued by the Bank to the petitioner, true copy of the communication dated 3.5.2006 issued from the Bank to the Deputy Registrar for taking action against the petitioner in terms of Section 29-C of the Act for having incurred the disqualification, true copy of the mahazar dated 16.6.2006 etc.,.
15. On pointing out that this does not constitute the original record of the Deputy Registrar, it is only xerox copy of the order sheet and true copies of the notice, communication & mahazar which does not constitute the original record, learned Additional Government Advocate would submit that the learned Additional Government Advocate was under the impression that in itself was the original record and given time would secure the original record and place it before the court.
16. The matter is being heard for the past more than two weeks and had been adjourned to 8.9.2008 only to enable learned Additional Government Advocate to secure records in terms of the order dated 21.8.2008. Even on 8.9.2008, it had been submitted by counsel appearing for respondents 3 & 4 that the record was with the respondents 1 & 2 and the learned Government Pleader was specifically directed to secure records from respondents 1 & 2 by 15.9.2008.
17. I do not find any need or necessity to adjourn the matter further to enable the learned Additional Government Advocate to secure the records as the respondents 1 & 2 have not acted with any sense of responsibility in placing the proper record before the court though time had been given for the very purpose and an act of irresponsible conduct on the part of the respondents 1 & 2 cannot be a good ground to keep adjourning the matter time and again.
18. While the record of the Joint Registrar is only that of the appellate authority which may not throw much light, the record of the original authority - the Deputy Registrar which could have thrown some light on the pertinent question as to whether the petitioner was given proper opportunity or not is not placed before the Court.
19. Be that as it may, the present matter requires examination on the touchstone of the provisions of Section 29-C of the Act and therefore non-production of the record at the best can lead to drawing of adverse inference with regard to the availability on the basis of which a factual position is asserted on the part of the respondents 1 & 2 and nothing beyond.
20. Disqualification from the membership of the committee in terms of Section 29-C of the Act is a very serious matter. An elected Member of the Managing Committee of the society is disqualified from holding his elected post Such disqualification is in the nature of a penalty and should be visited upon an erring member of the Managing committee only after complying with the procedure contemplated in this regard. It is not an order that can be passed in a casual manner or without following the proper procedure or without the supporting material and the finding which attracts disqualification.
21. It has been noticed that the provision has been time and again used by rival political factions to visit the adversary with disqualification, misusing the office of the Deputy Registrar or the other Registrars functioning under the Act to the detriment of the adversaries. It is for this reason, an order under Section 29-C of the Act merits serious scrutiny by this Court even in writ jurisdiction.
22. In a democratic set up, allowing persons who have assumed office through an electoral process is the norm and throwing them out of the office is exception. That exception is to be resorted to only on situations justifying and warranting such action which is penal in nature and on satisfactory proof of the disqualification.
23. In the present proceedings, I find that the order passed by the Deputy Registrar woefully lacks all requirements that are to be fulfilled to justify an order of disqualification under Section 29-C of the Act. Section 29-C of the Act has several sub-clauses indicating disqualification under different heads and grounds. This court had an occasion to examine such matters and had indicated that the procedure should be strictly followed and duly complied. Unfortunately, the orders that are being passed by the authorities functioning under the Act and even the appellate authorities do not show sufficient awareness to such requirements.
24. In the present case, on alleged facts the petitioner could have been disqualified on the ground of being a defaulter and also on the ground of being a person who had committed an act of fraud or who had acted with gross negligence or who had contravened the provisions of the Act, Rules and Bye-laws etc.,. In either event, it should be made known to the petitioner that he is being disqualified under what heading and for what reason. This is the statutory requirement even in terms of Sub-section (7) of Section 29-C of the Act which is as under
29C. Disqualification for membership of the committee:(7} Any question as to whether a member of the committee was or has become subject to any of the disqualifications mentioned in this section shall be decided by the Registrar after giving the person concerned a reasonable opportunity of being heard.
25. In the present case, except that the Bank had indicated that the petitioner had become a defaulter and that it is possible that he had misused the loan amount by selling away the goods and livestock purchased by using the loan amount, even before the repayment of the loan amount is a serious aspect and which should have been found as a matter of fact either by the Deputy Registrar or if he is so relying upon an earlier finding by the Bank if it had been so proved. I find neither has happened in the present case. The Bank contends that the petitioner incurs disqualification as a defaulter for the reason that the loan amount had been recalled and the petitioner had been asked to repay the entire loan amount in one installment which he had not done and therefore had become a defaulter. Here again recalling of the loan is on the premise that the petitioner had sold away the goods and livestock which he had purported to have purchased by utilizing the loan amount borrowed from the Bank. There is no finding anywhere on record whether by the Bank or by the Deputy Registrar that the petitioner has in fact sold the goods and livestock which he had purchased using the loan amount. On the other hand, the stand of the petitioner is that he had not done so and that it is still available with him.
26. Whether it is available with him or not, it was incumbent on the part of the Deputy Registrar to have recorded a finding of this nature without which the Deputy Registrar could not have passed an order disqualifying the petitioner either under Section 29-C[1][a] or under Section 29-C[8][b] of the Act In fact, the show cause notice does not even indicate that there is a proposition to disqualify under specific head. In a matter of this nature, the show cause notice proposing disqualification should be explicit enough to indicate as to what reason the petitioner is incurring disqualification so that the petitioner gets an opportunity to defend himself. Otherwise, opportunity contemplated in terms of the requirement of Section 29C(7) of the Act or adherence to the principles of natural justice is not met
27. While Sri Ashok Kumar, learned Counsel for the respondents 3 & 4 would draw attention to the notice dated 22.5.2006 issued by the Deputy Registrar to submit that the relevant requirements of putting the petitioner on notice has been met by this notice, a perusal of this notice only indicates that the Bank had petitioned the Deputy Registrar to take action under Section 29-C of the Act for the reason that the loan availed from the petitioner for the purpose of purchasing bullock carts, bullocks and sheep etc., has not been properly used and therefore action under Section 29-C of the Act is warranted and for such purpose there will be an enquiry which the petitioner is required to attend on 8.6.2006 at 10.30 am.
28. A notice of this nature while does not necessarily propose action for disqualification, but being a general notice for an enquiry is neither here nor there. If as a result of the enquiry the Deputy Registrar is of the definite view that the petitioner has incurred disqualification, it is for the Deputy Registrar to propose such action in terms of the specific sub-clauses or sub-sections of Section 29-C of the Act. The action sought for by the Bank appears to be only on the ground of misutilization and not on the ground of the petitioner being a defaulter which is a separate head for incurring disqualification under Section 29-C[1](a) of the Act A notice for action under Section 29-C[1](a) of the Act should be precise and should communicate to the person against whom the notice is issued, as to what requirements are to be met by him, as to what action is proposed, for which violation of particular provision. Otherwise, the notice becomes nebulous, ambiguous and not one, which can be properly defended by the person.
29. Though considerable reliance is placed by Sri. Ashok Kumar, learned Counsel for the respondents 3 & 4 on the so called mahazar said to have been conducted by the Bank and its officials on 16.6.2006 at the house of the petitioner and at which time also there was neither the bullock carts & bullocks nor sheep was available as per the mahazar, Sri. M S Padmarajaiah, learned senior counsel appearing for the petitioner submitted that the mahazar itself is a farce; that the thumb impression of the petitioner's mother who is aged 85 years had been obtained on the mahazar without explaining as to what it contained; that in fact the petitioner had sought for examination of the witness before the Deputy Registrar but when the petitioner had appeared for hearing on 3.7.2006, the matter was adjourned to 6.7.2006 without permitting the petitioner to examine the witness.
30. The order sheet also indicates that the Deputy Registrar had not directed for any inspection of the premises of the petitioner. The mahazar is one drawn up during the pendency of the proceedings before the Deputy Registrar and it could have been only as per the direction of the Deputy Registrar and after putting the parties on notice. A material of this nature cannot be used for proving the case before the Deputy Registrar in an enquiry pending before him without awareness or knowledge of the authority before whom the proceedings are pending. Though it is submitted by Sri Ashok Kumar, learned Counsel for the respondents 3 & 4 that it was because the petitioner made such a request before the Deputy Registrar, the mahazar was drawn on 16.06.2006. No record is placed before the court to substantiate this position and on the other hand as the entire original record is not placed before the court inference can only be to the contrary. On the other hand, a xerox copy of the order sheet produced before the court also indicates that the hearing which was to take place on 3.7.2006 was adjourned to 6.7.2006 as the Presiding Officer was busy elsewhere. The first date of hearing before the Deputy Registrar as indicated in the notice for enquiry is on 8.6.2006 and on that day the inquiry had been adjourned to 24.6.2006. There is no mention of the proposed mahazar to be conducted on 16.6.2006. Be that as it may, on a perusal of the entire record placed before the court, pleadings and on examination of the statutory provisions, I find that in the instant case, neither the petitioner had been specifically apprised of the kind of action proposed against him in terms of Section 29-C of the Act nor in that context the petitioner was heard. The stand of the petitioner in terms of the representation before the authority and also in terms of the pleadings in this writ petition are to urge that the orders are bad indicating that the petitioner had disputed the allegation of parting with the goods and livestock he had purchased and having also indicated that he had made payment of the installment and that he was not a defaulter and in the absence of any record being placed before the court either by the Bank or by the authorities to indicate that the petitioner had been given an opportunity before recalling the loan that he had been apprised that he had become a defaulter etc., neither the factum of the petitioner being a defaulter had been made good nor the factum of the petitioner having acted in a fraudulent matter had been made good by the authorities below which alone could have invited action for disqualification.
31. In the absence of such a clear finding, the impugned orders cannot be sustained.
32. The order dated 6.7.2006 passed in No. DRM.Dispute.Col.29-C: 1/06-07 passed by the second respondent - Deputy Registrar of Co-operative Societies [copy at Annexure-D] and the order dated 19.12.2006 passed in Appeal No. 5/2006-07 passed by the first respondent - Joint Registrar of Co-operative Societies [copy at Annexure-K] are hereby quashed by issue of a writ of certiorari.
33. Writ petition is allowed. Rule made absolute.
34. The manner of response by the respondents - authorities even for production of the record being rather lukewarm, tardy and the respondents - authorities acting in a very casual manner only elicits adverse remarks and invites commensurate cost which is valued at Rs. 2,000/- on each of the respondents payable to the petitioner.
35. However, it is made clear that it is open to the Bank or the authorities to take such action against the petitioner as is permitted and warranted in law even at this point of time.