H.K. Gopalakrishna vs The State of Karnataka

B.S. Patil, J.—This writ petition is filed challenging Annexure-J order dated 07.12.2013 passed by the Additional Registrar of Cooperative Societies according sanction to the Secretary and the President of the 4th respondent-Society to initiate criminal and/or civil proceedings against the petitioner regarding the allegations of misappropriation and other irregularities made against the petitioner.

Petitioner was one of the founder directors of the 4th respondent-Society. Audit of the accounts of the Society for the period during which petitioner was the executive director of the 4th respondent was conducted and certain irregularities of misappropriation of funds of the Society were found. The society intended to initiate action against the petitioner herein both under the provisions of criminal law and also before the Civil Court with regard to the allegations of misappropriation and other irregularities. Accordingly, the 4th respondent-Society sought permission/sanction to prosecute and to proceed against the petitioner. The Additional Registrar of Co-operative Societies-respondent No. 3 herein issued notice to the petitioner, heard him and as also the respondent-Society and thereafter passed the impugned order Annexure-J granting permission to prosecute the petitioner. The sanction has been accorded to prosecute for the offences listed u/s 109 of the Act, apparently exercising the powers conferred u/s 111 of the Act.

Learned Counsel for the petitioner submits that no inquiry has been held in accordance with law into the allegations made against the petitioner and there is no finding recorded holding the petitioner guilty of the allegations. Therefore, the order granting sanction to prosecute the petitioner is without any basis and is illegal. He also points out that the order of disqualification passed against the petitioner in exercise of the powers as per Section 29-C(a) of the Act has been set aside by this Court in W.P. No. 36279/2014 on 09.09.2014 and therefore, petitioner is entitled to succeed in this writ petition as there is no adverse finding so far recorded against the petitioner holding him guilty of the allegations of misappropriation.

It is also contended by Mr. Nataraj, learned Counsel for the petitioner that the order granting sanction is without jurisdiction, in as much as, as per Section 111(2) of the Act, it is the Director of Co-operative Audit who has the power and jurisdiction to grant sanction in respect of matters arising out of audit other than matters relating to credit co-operative and not the Registrar of Co-operative Societies and therefore, the impugned order is bad in law.

Learned Additional Government Advocate and the learned Counsel appearing for the 4th respondent have strongly refuted these contentions and have urged that in terms of Section 111 of the Act indeed no sanction was required for prosecuting the petitioner as such prosecution could be initiated based on the audit report and the available materials found regarding misappropriation of funds of a co-operative society in the normal course of business of a co-operative society apart from detection made during the course of audit.

Having heard the learned Counsel for both parties and on careful perusal of the provisions in Sections 109 & 111 of the act and the contents of the impugned order-Annexure-J, it is clear that for the purpose of initiating proceedings against the Director or an official, it is not necessary that a finding has to be recorded after conducting a detailed inquiry holding him guilty of misappropriation. It is sufficient if it is based on the audit report and other materials wherein it is found that the allegations of misappropriation could be founded against the delinquent which tantamounts to an offence under the penal law. In such circumstance, as is clear from the proviso to Section 111(2) of the Act, even without sanction accorded by the competent authority, prosecution can be initiated. Therefore, I do not find any substance in the contention urged by the petitioner. This Court, therefore, will not in exercise of the power and jurisdiction under Article 226 of the Constitution of India, interfere with the decision taken to prosecute the petitioner. However, I must hasten to add that the observations made in this order will not come in the way of the petitioner taking up proper defense including the grounds that are urged in this writ petition before the appropriate forum. Therefore, this writ petition is dismissed.

It is made clear that in case any criminal prosecution is initiated, the findings recorded in this order will not come in the way of the petitioner challenging the same urging all the grounds available including those urged in this petition.