Laiq Singh vs State of Punjab

G.S. Singhvi, J.—This is a writ petition for quashing of arbitration proceedings initiated by the Assistant Registrar, Cooperative Societies, Dasuya under Section 55 of the Punjab Cooperative Societies Act, 1961. At the time of filing of the writ petition, award had not been passed by the Arbitrator. However, during the pendency of the writ petition, award dated 21.3.1994 (Annexure P7) has been passed and by way of Civil Miscellaneous Application No. 5909 of 1994, the petitioner has challenged the legality of the award as well. Other prayers made by the petitioner include a prayer for issue of a direction for his reinstatement and for issue of a writ of prohibition restraining the respondents from taking any action against him.

Petitioner was appointed as Secretary of Rajwal Cooperative Agricultural Service Society Limited (in short the Society) on 18.2.1978. Vide notice dated 19.7.1993 (Annexure P4), the petitioner was called upon by Inspector, Cooperative Societies, Datarpur to appear for hearing before the Assistant Registrar, Cooperative Societies, Dasuya regarding the case of embezzlement of Rs. 62,344/. The petitioner was directed to produce his evidence. The petitioner appeared before the Assistant Registrar and submitted a representation dated 11.10.1993 (Annexure P6) stating therein that the allegation of embezzlement levelled against him is baseless because in the earlier audit reports, no embezzlement had been detected.

The petitioner has challenged the action of respondent No. 3 in holding arbitration proceedings as also the award (Annexure P7) on the ground that respondent No. 3 does not have any jurisdiction to take action against him under Section 55 of 1961 Act solely on the basis of audit reports. Case of petitioner is that when some allegation is required to be investigated on the basis of audit reports, proceedings can be taken only under Section 54 of 1961 Act and not under Section 55 of the said Act. Another ground of challenge is that in the audit reports (Annexures P1 to P3) no irregularity was detected by the Auditor and the subsequent reports have been manipulated by the respondentSociety in connivance with the authorities of the department for harassing the petitioner.

Case of respondent No. 6 is that when two remedies were available to it under Sections 54 and 55 of the Act, it was perfectly legitimate for the Society to elect one of them. Respondents Nos. 1 to 3 have pleaded that in terms of Section 48 of 1961 Act, a statutory duty is imposed on them to conduct audit of every Cooperative Society. In furtherance of that statutory duty, audit was conducted by Shri Pawan Kumar, Inspector Cooperative Societies, Talwara who found embezzlement of the funds of the Society and shortages. He reported the matter to the Assistant Registrar who called upon the petitioner to submit his explanation and after giving full opportunity to the petitioner, arbitration award Annexure P7 has been passed.

Main argument of learned counsel for the petitioner is that power to make an inquiry on the basis of audit, inquiry or inspection vests with the Registrar under Section 54 of 1961 Act and the Registrar or any person authorised by him to make an inquiry in the matter can do so by giving an opportunity of being heard and the only action which can be taken under Section 54(2) is to direct a person to repay or restore the money or property or any part thereof, with interest and compensation. The learned counsel argued that in matters which are covered by Section 54, provisions of Section 55 cannot be applied to and therefore, initiation of proceedings under Section 55 as well as the award passed by respondent No. 3 are without jurisdiction. Learned counsel relied on the decision of a Division Bench in Dharam Pal Chhachhiya v. Joint Secretary (Cooperative) Haryana and others, 1993 Punjab Law Journal 5 : 1993(1) RRR 607(P&H). Learned counsel for respondent No. 5 as well as learned Assistant Advocate General argued that when two remedies were available to the Society for recovery of the loss caused to it by actions and omissions of the petitioner, it was perfectly legitimate for the Society to elect one of the remedies; and no illegality has been committed by it in the initiation of proceedings under Section 55 of the Act. Learned counsel argued that the dispute in question touches the management and business of the Society and, it is fully covered by Section 55(1)(c) of 1961 Act. Learned counsel relied on decisions of Supreme Court in Prem Jeet Kumar v. Surender Gandotra and others, JT 1991(3) SC 570 : 1992(1) RRR 301(SC) and The Bihar State Cooperative Marketing Union Ltd. v. Uma Shankar Sharan and another, JT 1992(4) SC 1590.

In order to resolve and decide the controversy raised in the present petition, we may refer to Sections 54 and 55 of 1961 Act. These provisions are :

"54 (1) If in the course of an audit, inquiry, inspection or the winding up of a cooperative society it is found that any person, who is or was entrusted with the organization or management of such society or who is or has at any time been an officer or an employee of the society has made any payment contrary to this Act, the rules or the byelaws or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has misappropriated or fraudulently retained any money or other property belonging to such society, the Registrar may, of his own motion or on the application of the committee, liquidator or any creditor, enquire himself or direct any person authorised by him by an order in writing in this behalf, to inquire into the conduct of such person :

Provided that no such inquiry shall be held after the expiry of six years from the date of any act or omission referred to in this subsection.

(2) Where an inquiry is made under subsection (1), the Registrar may, after giving the person concerned an opportunity of being heard, make an order requiring him to repay or restore the money or property or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such extent, as the Registrar may consider just and equitable.

(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 cooperative arises

(a) among members, past members or persons claiming through members, past members and deceased members; or

(b) between a member, past member or persons claiming through a member, past member or deceased member and the society, its committee or any officer, agent or employee of the society, or liquidator, past or present; or

(c) between the society or its committee and any past committee, any officer, agent or employee, or any past officer, past agent or past employee or the nominee, heirs or legal representatives of any deceased officer, deceased agent, or deceased employee of the society; or

(d) between the society and any other cooperative society, between a society and liquidator of another society or between the liquidator of one society and the liquidator of another society;

such dispute shall be referred to the Registrar for decision and no Court shall have jurisdiction to entertain any suit or other proceeding in respect of such dispute.

(2) for the purposes of subsection (1), the following shall be deemed to be disputes touching the constitution, management or the business of a cooperative 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 surety 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.

(3) If any question arises whether a dispute referred to the Registrar under this section is or is not a dispute touching the constitution, management or the business of a cooperative society, the decision thereon of the Registrar shall be final and shall not be called in question in any Court."

While Section 54 finds place in Chapter Vll and relates to audit, inquiry, inspection and surcharge, Section 55 falls within Chapter VIII which relates to the settlement of disputes. Section 54 speaks of an inquiry by the Registrar or a person authorised by him in cases where it is discovered during the course of an audit, inquiry, inspection or the winding up of a Co operative Society that a person entrusted with the organization or management of such Society has made any payment contrary to the provisions of 1961 Act or the Rules or the Byelaws framed thereunder or who has caused any deficiency in the assets of the Society by breach of trust or wilful negligence or has misappropriated or fraudulently retained any money or other property belonging to such Society. Section 55, on the other hand, begins with non obstante clause and provides for reference of a dispute touching the constitution, management or the business of a Cooperative Society to the Registrar for decision. A cursory and superficial reading of Sections 54 and 55 together may suggest that Section 54 is in the nature of a special provision dealing with cases of wrongful payments, deficiency in the assets of the Society by breach of trust or wilful negligence or misappropriation or fraud by officers or employees entrusted with the organization and management of the Society as against general provisions contained in Section 55 for adjudication of disputes touching the constitution, management or the business of a Cooperative Society. However, a minute examination of the two provisions shows that in reality two options are available to a Society and the departmental authorities to initiate action against a person who is connected with the management or the organization of the Society. Ambit and scope of Section 55 is wider than of Section 54. In our opinion, when two options/remedies are available to the Society and the departmental authorities, they are entitled to elect any one of them and mere fact that action initiated under Section 55 by way of reference of dispute relates to allegation of embezzlement or fraud by officers or employees discovered in the course of audit, inquiry, inspection or winding up of the Society will not render the proceedings as without jurisdiction on the ground that actions could have been initiated under Section 54.

In Pentakota Sriramulu v. Cooperative Marketing Society Ltd., Anakapalli and another, AIR 1965 SC 621, provisions of Madras Cooperative Societies Act, 1932 came up for interpretation before the Supreme Court. Section 49 of that Act authorised the Registrar to make an inquiry by himself or through a person duly authorised by him with regard to matter involving mis appropriation or breach of money or other property belonging to the Society and it was discovered during the course of audit under Section 37 or inquiry under Section 38 or inspection under Section 39 or winding up of Society. Section 51 of that Act related to reference of dispute touching the business of the registered Society except a dispute regarding disciplinary action taken by the Society. An argument was advanced on behalf of the appellant that provisions of Section 51 could not have been invoked by the Society because it pertained to the recovery of the amount. While repelling the argument, the Supreme Court referred to an earlier decision of the Madras High Court in Sundaram Iyer v. Deputy Registrar of Cooperative Societies, AIR 1957 Madras 634 and, thus, observed :

"This argument, however, proceeds on ignoring one further essential requisite for the application of S. 49(1). Besides the two factors to which learned counsel referred and which we have just set out, there is also another condition which has to be satisfied before S. 49(1) could be attracted. The facts giving rise to the charge have to be disclosed in the course of an audit under S. 37 or an enquiry under S. 38 or an inspection under S. 39 or on the winding up of the Society. Mr. Ram Reddy while not disputing that unless this condition is also satisfied S. 49 would not be attracted, however, submitted that there was an enquiry under S. 38 preceding the supersession and that in consequence the condition was fulfilled. It is true that there was an enquiry conducted into the affairs of the Society under S. 39, but that by itself is not sufficient. It has further to be proved that the facts alleged in the claim, and on which it is based, were disclosed at that enquiry. This can be proved or established only if the enquiry report which was submitted to the Registrar was placed before the Court and the facts disclosed therein corresponded with the facts alleged in the statement of claim. Mr. Ram Reddy admitted that the enquiry report was not before the Court and is not in the record of these proceedings. It is not, therefore, possible to say that there is correspondence between the facts disclosed in that report as a result of the enquiry under S. 38 and those found in the statement of claim which was referred by the Registrar to the Deputy Registrar for arbitration under S. 51. The case must, therefore, be held not to fall under S. 49 of the Act. There can be no doubt that if S. 49 does not apply, subject to the other argument about illegality to which we shall advert, the order of the Registrar proceeding under Section 51 is not open to objection."

A similar question was raised in Prem Jeet Kumar v. Surender Gandotra and others (supra) in relation to the interpretation of Delhi Cooperative Societies Act, 1972. Section 59 of that Act relates to surcharge while Section 60 relates to disputes which may be referred to arbitration. Proceedings were initiated against the appellant on the allegation that several irregularities have been committed by the previous Managing Committee of which the appellant was the President. The arbitrator held the appellant responsible for irregularities and directed him to pay that amount. The appellant questioned the validity of the proceedings on the ground that proceedings could not have been taken under Section 60 of 1972 Act. After making reference to the two sections of 1972 Act and the judgment in Pentakota Sriramulu v. The Cooperative Marketing Society Ltd. (supra), the Supreme Court held that the provisions of Section 60 have been rightly applied by the Registrar, Co operative Societies.

In Bihar State Cooperative Marketing Union Limited v. Uma Shankar Sharan and another (supra), Sections 40 and 48 of the Bihar and Orissa Cooperative Societies Act, 1935 became a subject matter of interpretation before the Supreme Court. Respondent No. 1 Uma Shankar Sharan was a Depot Manager under the appellantSociety. During his tenure, a shortage of coal was detected. When the Society made a claim in relation to the loss suffered by it, a reference was made to the Assistant Registrar, Cooperative Societies under Section 48 of the Bihar and Orissa Cooperative Societies Act. The Arbitrator absolved the respondent from any liability. However, on appeal by the society, the Joint Registrar passed the award. The respondents successfully challenged the award before the High Court on the ground that Section 40 of 1935 Act and not Section 48 could be availed of by the Society. While reversing the Judgment of the High Court, the Apex Court held :

"Validity of plural remedies, if available under the law, cannot be doubted. If any standard book on the subject is examined, it will be found that the debate is directed to the application of the principle of election, where two or more remedies are available to a person. Even if the two remedies happen to be inconsistent, they continue for the person concerned to choose from, until he elects one of them, commencing an action accordingly. In the present case, there is no such problem as no steps under Section 40 were ever taken by the appellant. The provisions of Section 48 must, therefore, be held to be available to the appellant for recovery of the loss."

From these pronouncements of the Supreme Court, it is clear that when a person who is entrusted with organization or management of Cooperative Society is charged with the allegation of embezzlement or misappropriation of money or the property of the Society, it is open to the Society to initiate action for the recovery of the amount by the process of inquiry through the Registrar of Cooperative Societies or to resort to the procedure of arbitration. The principle which clearly emerges from the decision of the Supreme Court in Bihar State Cooperative Marketing Union Limited v. Uma Shankar Sharan and another (supra), is that option is available to the Co operative Society to elect either of the two remedies.

Apart from the various decisions of the Supreme Court, referred to above, we may take note of one more decision of the Apex Court in National Engineering Industries Ltd. v. Shri Kishan Bhageria and others, AIR 1988 Supreme Court 329. That was a case in which the respondent workman had invoked the provisions of Rajasthan Shops and Commercial Establishments Act, 1958 by filing an application under Section 28A of the said Act against the termination of his service. This application was dismissed as time barred. Thereafter the respondent resorted to the provisions of the Industrial Disputes Act, 1947. Rajasthan High Court rejected the objection of the employer that there was a conflict between the provisions of the Industrial Disputes Act, 1947 and the Rajasthan Shops and Commercial Establishments Act, 1958. While upholding the decision of Rajasthan High Court, the Supreme Court held that rejection of application filed under the Shops and Commercial Establishments Act on the ground of limitation did not debar the employee from availing the remedy under the Industrial Disputes Act. The Court further held that the Rajasthan Act could not be construed to curtail the rights of the workman to seek relief against the termination of their services under the Industrial Disputes Act, 1947. The ratio of this judgment is that when two remedies are available to a party, it is open to that party to choose either of the two remedies and even if one of the remedies cannot be availed of on account of bar of limitation or otherwise, the second remedy can still be availed of.

We may also notice a special feature in Section 55 of 1961 Act. Language of Section 55 of 1961 Act is parimateria with the language of Section 60 of Delhi Cooperative Societies Act, 1962 which was subject matter of interpretation in Prem Jeet Kumar v. Surender Gandotra and others (supra). It is slightly different than the language of Section 51 of the Madras Co operative Societies Act, 1932 and Section 48 of the Bihar and Orissa Co operative Societies Act. The special feature of Section 55 is that it begins with a non obstante clause. The expression "notwithstanding anything contained in any law for the time being in force", is indicative of the intention of the Legislature to give overriding effect to the provisions of Section 55 over the provisions of Section 54. Non obstante clause is appended to a provision of law with a view to give it overriding effect over the other provisions of the Act mentioned in the non obstante clause. In Union of India and another v. G. M. Kokil and others, AIR 1984 SC 1022, the Supreme Court explained the scope of non obstante clause in the following words :

"It is well known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions."

In view of the above discussion, we hold that by initiating action against the petitioner under Section 55 of 1961 Act, the respondents have not committed any illegality. Neither the initiation of proceedings nor award, Annexure P7, suffers from lack of jurisdiction. This conclusion of ours is fortified by an earlier decision of this Court in Angoori Lal Sharma v. The State of Haryana and others, 1980 Punjab Law Journal 86. The judgment of this Court in Dharam Pal Chhachhiya v. Joint Secretary (Cooperative) Haryana and others (supra) on which reliance has been placed by the learned counsel is of no help to the case of the petitioner. A close reading of that judgment shows that the petitioner before the Court had not raised any objection regarding the nonapplicability of Section 55 of 1961 Act in the proceedings before the competent authorities and the High Court held that failure of the petitioner to raise this objection was sufficient to decline relief to him in the writ petition. Although some observations have been made in para 14 which may, in the first blush suggest that they support the case of the petitioner, in our considered opinion, these observations cannot be read as laying down a proposition of law contrary to the various judgments of the Supreme Court to which reference has been made hereinabove.

Although the learned counsel advanced arguments on the validity of the award, we refrain ourselves from expressing any opinion because the petitioner will have a right to avail other remedies available to him against the award, Annexure P7. We do not want to make any observation prejudicially affecting the case of either of the parties.

In the result, the writ petition fails and is hereby dismissed. The petitioner shall pay costs of Rs. 2,000/ to respondent No. 6. .