Malkiat Singh vs State of Punjab and ors.

S.S. Sodhi, J.

"When during the course of audit of a Cooperative Society, shortages of funds and/or stocks is detected and liability for the same is sought to be fastened on the member of a management, or an officer, or an employee of the Society what proceedings are to be taken ?" This was the question posed by the admitting Bench issuing notice in this petition and directing it to be placed before a Division Bench. Reference was also there made to an apparent conflict between the judgments of this Court on the point in issue. These being Jai Pal v. State of Haryana, 1984 R.R.R. 203 : 1984 P.L.J. 8, and Angoori Lal Sharma v. State of Haryana, 1980 P.L.J. 86.

The matter in controversy here really being whether the provisions of Section 54 or Section 55 of the Punjab Cooperative Societies Act, 1981 (hereinafter referred to as `the Act'') were applicable to such a situation, namely when audit of a Cooperative Society reveals actionable irregularities.

Tagged to this petition are three others, they being writ petitions 597, 2627 and 2841 of 1986, where a similar point of law arises. This will consequently dispose of these petitions too. To consider and decide the point in issue, it would, however, suffice to setforth the relevant facts of only the present petition.

Sometime in 1977, there was an audit of the accounts of the Ayal Kalan Cooperative Agricultural Services Society Ltd. (hereinafter referred to as `the Cooperative Society'') for the period July 1, 1971 to June 30, 1977. On the basis of this adult report, for having caused loss to the funds of the Cooperative Society, a claim for Rs. 67, 732.26 paise along with interest was made against the petition Malkiat Singh, who had been its Secretary till October, 1972. The matter was referred to the Assistant Registrar, Cooperative Societies, for arbitration, who by this Award of April 24, 1981, held the petitioner liable to pay Rs. 17, 853.91 paise along with interest and costs thereon. The appeal, as also the revision filed against this Award by the Petitioner, were dismissed by the competent authorities. It was thereafter that the petitioner moved this Court under Article 226 of the Constitution of India seeking the setting aside of the reference of the dispute to arbitration as also the subsequent award of the Arbitrator and the orders upholding it in appeal and revision.

It was the contention of Mr. B.S. Khoji, counsel for the petitioner, that as the liability fastened upon the petitioner was in respect of loss detected during audit, action could be taken against the petitioner only in terms of Section 54 of the Act and consequently the reference of the dispute to arbitration, under Section 55 thereof was not competent. Cited in support being the Supreme Court judgement in Pentakota Sriramulu v. Cooperative Marketing Society Ltd. Anakapalli and another, A.I.R. 1965 S.C. 621, where similar provisions, namely Sections 49 and 51 of the Madras Cooperative Societies Act, 1932 (analogous to Sections 54 and 55 of the Act here) were noticed as also the construction placed upon them by the High Court of Madras in Sundaram Iyer v. Deputy Registrar of Cooperative Societies, A.I.R. 1957 Madras 634. The relevant observations being as under :

"There it was held that it was only in case where the provisions of S. 49 were in applicable that recourse could be had to S. 51. In cases where a matter fell both within Ss. 49 and 51, two provisions were not intended to operate on parallel lines. As S. 51 excluded the jurisdiction of Civil Courts, it must be strictly construed and for that reason, in cases where S. 49 were applicable. S. 51 would be excluded. Further, it was held S. 51 was of a general nature providing for a variety of matters and was almost exhaustive of the parties between whom as well as the disputes that could arise in cooperative societies. Section 49 on the other hand dealt with special types of disputes which arise in exceptional circumstances, segregated out of the larger group dealt with number S. 51. When there was thus an overlapping of the terms of both the sections the provisions of S. 49 alone it was held would be applicable."

Applying the ratio of Pantakota Sriramulu''s case (supra), J.M. Tandon, J. in Jai Pal v. State of Haryana, 1984 R.R.R. 203 : 1984 P.L.J. 8, held that Section 55 of the Act would not apply to a case covered by Section 54 thereof.

There can obviously be no doubt now with regard to the proposition that where a matter is covered by Section 54 of the Act, recourse cannot be had to Section 55 thereof. No dent is created in this statement of law by the judgment of Division Bench in Angoori Lal Sharma v. State of Haryana, 1980 P.L.J. 86 as no contrary view was expressed therein. In this sense, there is really no conflict between Jai Pal and Angoori Lal Sharma''s cases, (supra).

The question, however, arises does the present case come within the ambit of Section 54 of the Act ? A reading of this provision of law would show that it provides action thereunder only if in the course of audit, inquiry, Inspection or winding up of a Cooperative Society, an offending act or omission is discovered. It is ChapterVII of the Act that provides for audit, inquiry, inspection and surcharge. Section 48 deals with audit, Section 49 with inspection and Section 50 with inquiry. A reading of these sections would show that in each case, it is the Registrar or a person authorised by him, who was has been empowered to order the audit, inspection or inquiry in respect of any cooperative society. It follows, therefore, that an essential prerequisite for the applicability of the provisions of Section 45 is that audit, inquiry or inspection must have been ordered by the Registrar or by someone authorised by him. In other words, unless it is in the course of an audit, inquiry or inspection ordered by the Registrar or by someone one authorised by him that the offending act or omission committed by the person concerned is detected, it would not be a case covered by Section 54 of the Act. Admittedly, in the present case, there is no material on record to show that the audit, whereby loss was found to have been caused to the funds of the Society by the petitioner, was conducted under the orders of either the Registrar or some one authorised by him. This being so, there can be no escape from the conclusion that the provisions of Section 54 of the Act are not attracted to the present case. It follows, therefore, that action taken against the petitioners under Section 55 of the Act cannot be held to be invalid or without jurisdiction. A similar finding must also be returned against the petitioners in other writ petitions, as there too, it could not be shown that the audit or inspection, which led to the discovery of the offending act, was under the orders of the Registrar or someone authorised by him.

Further, it would not apparent from a plain reading of Section 54 of the Act that it would not come into play, where in dealing with a complaint or allegations against a particular official or person, the accounts of the Cooperative Society concerned are examed with a view to verify the correctness or otherwise of the allegations made against the person concerned or the manner in which he had been carrying out his duties and functions in the Cooperative Society. It is to be noted in this behalf that the audit, inquiry or inspection referred to in Section 48, 49 and 50 are with regard to the Cooperatives Society itself and not in respect of the acts or omissions of any particular individual. On this ground too, Section 54 of the Act cannot be held to be applicable in the present case.

Faced with this situation, Mr. B.S. Khoji sought to raise the point of limitation by taking the plea that the claim against the petitioner could not be entertained after more than three years from the date the loss was caused. It will be seen that no such plea had been raised before the arbitrator or in appeal or revision. In the circumstances, it would clearly not be appropriate to permit this plea to be raised for the first time here in writ proceedings.

There is thus no merit in any of these writ petitions and they are consequently hereby dismissed with costs. Counsel fee Rs. 500/ in each case.

Petitions dismissed.