Gurbux Singh vs The State of Punjab

K. Kannan, J.

CM No. 14206 of 2013

Notice.

Learned counsel for the non-applicants accepts notice. For the reasons stated in the application, Punjab State Cooperative Supply & Marketing Federation Limited is substituted as respondent No. 2 in place of the Dehati Cooperative Marketing-cum-Processing Society Ltd.

CWP No. 17760 of 1991

The writ petition challenges the award passed by the Deputy Registrar as Arbitrator u/s 55 of the Punjab Cooperative Societies Act 1961 (for short ''the Act''). The award was challenged in appeal u/s 68 of the Act before the Joint Registrar and in revision before the Commissioner all of which failed and, therefore, the person against whom the award was'' passed is before this court challenging the award and the subsequent orders passed respectively in appeal and revision. The petitioner was the Manager of Dehati Cooperative Marketing-cum-Processing at the relevant time when a sales person in whose custody fertilizers stock had been entrusted were said to have been mis-appropriated resulting in loss of over Rs. 3 lakh. A resolution had been, passed by the Society on 25.3.1975 for recovery of the amount towards value of shortage of fertilizers from salesman Gurbachan Singh. Subsequent to the resolution, an application for appointment of an Arbitrator was made by the Manager of the Society and entrusted the work with the Assistant Registrar for taking action and securing the recoveries against the legal representatives, of the then deceased salesman. An application for impleading the petitioner appears to have been filed on 24.2.1981 on an averment that at the relevant time the petitioner was the Manager and stocks to the worth of Rs. 3.5 lakhs odd was embezzled by the store keeper with the connivance of the petitioner and that the amount was liable for recovery against both of them. The petitioner had filed a petition for deletion of his name contending that there had been at no point of time any charge or inquiry against him and he cannot be made liable for the alleged loss. The argument was that when the Deputy Registrar passed the award on 31.1.1983, he had not actually taken the decision regarding the impleadment of the petitioner and the entire text of the award only finds the sales person as responsible for the loss and oh a sweeping observation that the petitioner was the Manager at the relevant time and that he had held the supervising authority and, therefore, he shall also be made liable. In the appeal as well as in the revision, the liability has been confirmed on the petitioner on the only ground that he had been the Manager and, therefore, he will also be made liable.

Learned counsel appearing on behalf of the petitioner argues that no surcharge proceedings or any notice was issued at any time for the loss that was said to have been detected even in the year 1975. It was for the first time during the pendency of the proceedings before the Arbitrator that he had been impleaded beyond a period of six years from time of initial detection and such impleadment had been made even without any resolution by the Society. The counsel would urge that any action taken without sanction from the Society cannot be valid and no liability could be fastened on him. The counsel would also refer me to a decision of this Court in Bahadur Singh v. State of Punjab 1983 PLJ 366 that held that a reference for arbitration has to be specific as also to the parties involved therein. The court was rejecting in that case a liability sought to be fastened on the petitioner as President of the Cooperative Society as being associated in a loss caused by a subordinate official. The counsel would also make a reference to a Division Bench ruling of this Court in Brij Kishore Arora Vs. The Administrator, U.T. Chandigarh and Others, that considered an objection that the proceedings without a due resolution for pursuing a dispute before the Arbitrator would be incompetent. The counsel would also place reliance on Shri Yash Raj Goyal v. State of Punjab 1996 (1) SLR 571 that held that in a case of misappropriation where there had been no charge against a particular person as having caused the loss but only that he was responsible as a supervisory authority, it was liable to be interfered with as decision rendered without justification.

Learned counsel for the respondents would join issues on the contentions raised to point out that neither in the appeal nor in the revision has the petitioner taken any objection that there was no order passed by the Arbitrator directing the impleadment, or that the impleadment could not be done beyond the period of six years from the time when the Arbitrator was appointed or when the shortage was noticed. The counsel would also urge that the loss caused was enormous namely of several tonnes of fertilizers having been lost over the period of two years and the petitioner as a person under whose direct supervision Gurbachan Singh was working as a sales person must be taken as acting in connivance with the sales person to cause the loss and, therefore, the authorities were justified in finding the petitioner as liable for the award.

It is an admitted case that the loss which is ascertained as recoverable from the petitioner related to an incident of verification carried out in April 1974 and the loss was said to have been detected during inspection. When a resolution was passed, it was only for proceeding against the sales person. The arbitrator''s appointment was also for adjudication of a liability sought to be fastened on the sales person. All this is only to show that it is through the arbitral reference the liability was sought to be assessed and a course of action was taken for its recovery only against the sales person. There was no surcharge against the petitioner nor there was anything brought before the arbitrator that the inquiry or inspection revealed the petitioner''s connivance for the loss caused by the sales person. Section 55 of the Act which could be an adjudicated body for resolving the dispute must come within the three distinct items of consideration possible u/s 55(2)(a) to (c) of the Act. Section 55(2) sub-clause (a) to (c) are re-produced as follows:-

Disputes which may be referred to arbitration:- (1) Notwithstanding anything contained in any law for the time being in force, if any dispute touching the constitution, management or the business of a co-operative society arises:-

xx xx xx

(2) For the purpose of sub-section (1), the following be deemed to the disputes touching the constitution, management or the business of co-operative society, namely:-

(a) a claim by the society for any debt or demand due to it from a member or the nominee, heirs or legal representatives of a deceased member, whether such debt or demand be admitted or not;

(b) a claim by a society against the principal debtor where the society has recovered from the surety any amount in respect of any debt or demand due to it from the principal debtor as a result of the default of the principal debtor, whether such debt or demand is admitted or not;

(c) any dispute arising in connection with the election of any Officer of the society;

The claim that is possible shall be in relation to a debt or a demand due to it from a member. The ''debt'' is not defined under the Act but I would understand this to be used in a generic sense, that it must relate to a liability which is assessed as payable. An amount which is determined as payable must relate to a loss having been directly caused by such a person. Assuming that such assessment relating to the loss would be possible, it should be against a recoverable loss by law at the time when the dispute is sought to be adjudicated upon by the arbitrator. The arbitrator was appointed through a reference brought in the year 1975 as Ex. P. 2 would show and the initial reference was only for recoveries sought to be initiated against Gurbachan Singh, the salesman as per the resolution. There was no reference in the resolution to the petitioner as a person responsible for the loss or as a person acting in connivance with the sales person. If there was a liquidated sum which was required to be adjudicated, then again reference must be for ascertainment of the sum. The impleadment made of the petitioner on a wide observation that he was the Manager and hence he must be taken as acting in connivance, if it is tenable at all, it should have been done within a period of three years when the inspection revealed that there had been a loss. If the recovery is by way of damages by loss caused, then it must be again from the time when the loss was detected and when action was sought to be taken. The Cooperative Society Act which provides for a forum for adjudication must obtain an enforceable award only in respect of the claim which is legally enforceable and enforceable claim cannot be brought against the petitioner at a whimsical time nearly six years after proceedings were initiated before the arbitrator. I will not take a contention that the petitioner had not raised the objection regarding the limitation or the impleadment is any way relevant, for, the duty of the court to ensure that only enforceable claims are brought before the adjudication authority must be seen as something which is fundamental, irrespective of absence of objection regarding limitation. If Section 3 of the Limitation Act is any guidance, it sets out that the plea shall be examined whether the objection was taken specifically or not.

I do not see anything specifically u/s 55 of the Act that a resolution must have been passed by the Society before arbitral reference but the reference on subject in Brij Kishore Arora''s case (supra) was only a re-production of an argument made by the counsel that the proceedings could not go without resolution. The issue of whether an arbitral reference could be made without a resolution of the Society was not directly in issue in the said case, for, it was with reference to a suspension of a committee and an, action sought to be taken in terms of Section 27 of the Act. Any observation with reference to the absence of the resolution must be taken as obiter and I leave it to some future case for proper consideration. To me the case must be rest on the facts that no recovery for the alleged debt was possible beyond a period of six years from the time when loss was detected and that too, when the arbitral reference itself had been made only for ascertainment and for recovery against the salesman pursuant to the inspection made in the year 1975. The claim against the petitioner was stale and the arbitrator could not have passed the award against the petitioner.

Even as regards the connivance of the petitioner for the loss caused, it is more in the nature of a possible inference that a Manager ought to have known the misappropriation made by the sales person and, therefore, such a huge loss of the value of fertilizers of a few tonnes could not have been possible without the connivance. This shall be on appropriate proof brought on specific evidence tendered before the arbitrator. The judgment in Yash Raj Goyal (supra) was actually considering the extent of interference under Article 226 of the Constitution in a case where an employee was sought to be dismissed from service for causing loss of bitumen. The court was observing that even though no direct evidence of connivance would be possible, there has to be specific evidence and proof regarding the same. Though the matter related to the proceedings for discharge of an employee, the case was being considered in the light of an alleged misappropriation which the court said cannot be inferred by the only fact that particular official was a supervisor or Manager at that time and, therefore, misappropriation must be taken as in connivance with subordinate officials. The law that can be, extracted from this decision is that the misappropriation cannot be merely a passive inference against a particular person without that particular person being charged with such misappropriation or specific instances had been brought against him to infer a case of connivance. I have gone through the entire text of the award passed by the Deputy Registrar and there is not a reference in one word except in the final paragraphs that there was connivance of the petitioner with the sales person causing the disappearance of huge stock. On the other hand, the consideration has been that all the bills and the stocks had been held by the sales person and he had not accounted for the value of all the stocks in his custody. The bills and registers bear the signatures of the salesman and they do not appear to have been entered under the signatures of the petitioner on any of the bills or account books. The best can be said against the petitioner was that he had not exercised proper supervisory control against the sales person but that could only be a matter of an independent charge of a dereliction of duty and cannot be a finding of a debt or liability as was sought to be fastened through an arbitral award. The impugned award is untenable in law and bound to be set aside. During the pendency of the case, the Society in which the petitioner was the Manager has been wound up and the assets have been taken by the MARKFED. There could be no enforceable award against the petitioner at the instance of the MARKFED. The award is quashed and the writ petition is allowed with costs. Counsel fee is assessed at Rs. 10,000/-.