Padmalochan Panda and Others vs State of Orissa and Others

Pradipta Ray, J.—The President and four other Directors of Balasore Central Co-operative Bank Ltd. (under suspension) have filed this writ application challenging the legality and propriety of the order dated April 10, 2000 passed by the Registrar, Cooperative Societies, Orissa in exercise of its power u/s 32(7) of the Orissa Cooperative Societies Act, 1962 (hereinafter referred to as to the ''Act'') suspending the Committee of Management of the District Central Co-operative Bank Ltd., Balasore (hereinafter called as the ''Bank'') and appointing the Deputy Registrar of Co-operative Societies, Balasore Division to manage the affairs of the said Bank in its place.

Mr. Acharya, learned Advocate appearing for the petitioners has mainly urged the following grounds assailing the impugned order of suspension :

(i) The impugned order does not disclose the necessary satisfaction or formation of opinion as is required for the purpose of invoking the extraordinary power given u/s 32(7) of the Act.

(ii) On the basis of the allegations as contained in the impugned order, there cannot be any bona fide opinion or satisfaction that further continuance of the Committee of Management during the proceeding for supersession would be detrimental to the interest of the Society.

(iii) The impugned order is wholly mala fide and actuated by extraneous considerations and political motive,

In response to the notice of this writ application the opposite party No. 2 has filed a counter affidavit by Sri Janaki Prasad Choudhary, Deputy Registrar, Co-operative Societies (Credit). In the said counter affidavit several allegations which have not been mentioned in the impugned order as issued, have been made against the management of the Bank in support of exercise of the power of suspension u/s 32(7) of the Act. The relevant file relating to passing of the impugned order has also been placed before us.

From the records the following sequence of events emerges :

By letter dated April 1, 2000 the local M.L.A. made certain allegations of corrupt practice and mismanagement against the Committee of Management of the Bank and requesting the Registrar to take stock of the situation and offer his recommendation to the Government to supersede the Board. On the basis of the said complaint the Registrar made an endorsement on April 3, 2000 directing the Deputy Registrar (Marketing) to make enquiry within 15 days. On April 7, 2000 the Deputy Registrar of the Co-operative Societies, Balasore Division at Balasore who was the Government nominee in the said Committee of Management transmitted draft charges to the Registrar at Bhubaneswar. On April 10, 2000 a note containing various allegations was made in the file and the same was placed before the Registrar on the same date. On the basis of the said note the Registrar recorded the following order in the file -

"Apparently the management of the Bank is bent upon committing serious irregularities like wild appointment, reckless expenditures and lending to the detriment of the interests of the Bank and the share-holder public reposing their faith in it. Pending enquiries into the allegation petitions by a responsible officer the management be placed under suspension u/s 32(7)from committing further such irregularities."

On the same day the necessary order u/s 32(7) of the Act was signed and issued and the Deputy Registrar of Cooperative Societies, Balasore Division is said to have taken the charge of the management of the Bank.

Section 32(7) of the Act has conferred an extra ordinary power on the Registrar of Co-operative Societies whereby he may suspend the Committee of Management even before or after issuing a notice u/s 32(1) of the Act and without seeking any explanation or comments from the Committee. The Committee of Management is an elected body and is to continue till expiry of its term under normal circumstances. The functioning of an elected body is to be interfered with only when the Registrar is satisfied upon application of his independent mind that further continuance of the Committee even for a short period required for submitting comments or explanation or a decision u/s 32(1) of the Act is detrimental to the interest of the Society. The Committee of Management can be suspended without seeking any explanation or comments. This suspension is in fact and in effect a kind of temporary supersession without giving any opportunity to show cause and the elected body is restrained from functioning on the basis of a prima facie view taken ex parte. This kind of extreme power cannot be and should not be lightly used merely on receipt of allegation from any person. In this connection reference may be made to the observation by a Division Bench of this Court in (1991) 2 Ori 32 (Sri Rama Chandra Khera v, State of Orissa. After the allegations are received the Registrar should ordinarily cause some enquiry or call for the regards and upon consideration of such report of fact finding enquiry, if any, and/or the records, is to form his independent opinion whether further continuance of the committee will be so detrimental to the interest of the society that it should not be allowed to continue even for a single day or till the submission of any comment or explanation. Further the order passed by the Registrar should briefly indicate the allegations and/or materials on the basis of which the Registrar has arrived at the required satisfaction. It is well settled that more reproduction of words of the Section or a generalised omnibus allegation is not sufficient.

The order recorded in the file has already been quoted hereinbefore. It appears that the Registrar in the said order has made sweeping remarks and used strong expressions like wild appointments, reckless expenditure and lendings. All the alleged irregularities as mentioned in the complaint filed by the local M.L.A. in the draft charge sheet prepared by the Deputy Registrar referred to completed acts of commission or omission for which the proceeding for supersession has been initiated. Excepting reproducing the language of Section 32(7) of the Act and making generalised observation no particular or specific instance has been mentioned in the order recorded by the Registrar in the file for invoking his extraordinary power of suspending an elected body.

In the impugned order ultimately issued only two allegations have been specifically mentioned, one is irregular appointment of a large number of staff without prior approval of the competent authority and without following the recruitment procedure disregarding ban on recruitment of staff and the other is incurring abnormal expenditure causing loss to the Bank etc. The relevant portion of the order as issued is reproduced below :

"Whether it has come to the notice of the undersigned that the Committee of the Management of the District Central Co-operative Bank Ltd. Balasore has failed to perform its duties and responsibilities and is alleged of various commissions and omissions like large number of irregular appointments of staff without prior approval of the competent authority as required u/s 33A of the aforesaid Act and without following recruitment procedure overlooking the circular of the Registrar imposing ban on all recruitments of staff and incurs abnormal expenditure causing loss of the Bank etc. so that its further continuance shall be detrimental to the interest of the Bank, its members, and the public at large."

The allegations of irregular appointments like other allegations mentioned in the note in the file referred to completed acts. There is no allegation that the Committee is taking steps to appoint more persons even after legality of the appointments made by them has been questioned and process of initiation of a proceeding u/s 32(1) of the Act has commenced. After the process of initiating a proceeding u/s 32(1) of the Act has been initiated if the Committee of Management still takes steps or continues to give appointment in an illegal or unauthorised manner or to indulge in similar kind of activities for which proceeding u/s 32(1) of the Act is being intitiated the power of suspension can be exercised at that stage. It appears that after the allegations were received from the local M.L.A. no enquiry or inspection was held nor any single record or file was called for even for the purpose of prima facie verification of the said allegation. The Deputy Registrar of the Co-operative Societies, Balasore Division at Balasore did not even think it fit to verify any of the facts alleged and merely sent a draft of charges to the Registrar on April 7, 2000. The draft charge-sheet so far does not contain any allegation of misappropriation or defalcation. The allegations are mostly about unauthorised expenditure already incurred or loans already given during the period 1998-2000.

u/s 33(2) of the Act the Registrar has the power to seize any record or document which, according to him, are likely to be tampered with or suppressed. He can also authorise any person to enter in and search any place or seize any records or property. The State Government has also power to issue directives to the Societies and to inspect the records or to enquire into the affairs of the Soeieties and even to remove a committee for non-compliance with its orders or directives issued under the relevant provisions of the Act (vide Section 123A of the Act). Nothing has been disclosed before us to show that at any point of time before April 10, 2000 any enquiry or inspection was held, or any irregularity or illegality was pointed out by the office of the Registrar. The Deputy Registrar of the Co-operative Societies, Balasore was himself a member of the Committee of Management and there is nothing on record to show that at any point of time he has recorded his objection to any act of commission or omission on the part of the Committee of Management. Even after receipt of the allegations the Deputy Registrar neither made any verification nor called for any record, but merely sent draft charge sheet to the Registrar. The petitioners have annexed the audit reports submitted by the Director of Accounts to prima facie show that performance of the Committee of Management is at least better than the previous Committees and the expenditure incurred has not exceeded the permissible limit. In such circumstances, we feel that even a limited kind of verification should have been made before formation of the purported opinion that continuance of the Committee of Management during the proceeding u/s 32(1) of the Act is detrimental to the Interest of the Society.

In the matter of formation of opinion for the purpose of Section 32(7) of the Act, the Registrar cannot act mechanically without any verification of the allegations unless the allegations are so grave that immediate action is called for. In the present case the Registrar did not at all apply his independent mind and mechanically acted upon the allegations received without any verification whatsoever.

In the counter affidavit an allegation has been made that the Committee of Management might tamper with the records and destroy evidence. Such allegation is not there in the basic order recorded by the Registrar in the file or in the impugned order as issued or even in the draft charge-sheet submitted by the Deputy Registrar, Balasore. It is well settled that the authorities cannot add new grounds which have not been mentioned in the basic order recorded in the file or in the order finally Issued, through affidavits. Even the decisions of the Supreme Court relied on by the learned Advocate General, namely; The Swadeshi Cotton Mills Co. Limited Vs. The State of U.P. and Others, and State of Haryana Vs. Hari Ram Yadav and others, do not lay down that an allegation which is absent in the basic order recorded in the file or in the ultimate order issued, can be added by way of affidavit. The said decisions layd down that absence of recital in the order issued is not decisive and authorities can show fulfilment of condition precedent on the basis of the basic order recorded in the file. It has been held in Mohinder Singh Gill and Another Vs. The Chief Election Commissioner, New Delhi and Others, that when a statutory functionary makes an order based on certain grounds its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise.

Upon consideration of the materials on record including the file produced by the opposite parties, the order of the Registrar as noted in the file and the final order as issued, we find that Registrar has not acted independently with required application of mind and there is no formation of opinion as required for the purpose of Section 32(7) of the Act and the impugned order of suspension cannot be sustained.

For the reasons aforesaid the impugned order of suspension u/s 32(7) of the Act passed by the Registrar is set aside. However, this order will not prevent the Registrar from examining and verifying the relevant materials and/or any other or further act of commission or omission by the Committee of Management and from passing any fresh order u/s 32(7) of the Act in accordance with law. As the process for initiating a proceeding for supersession u/s 32( 1) of the Act has commenced the Committee of Management is directed not to take any policy decision or to incur any expenditure excepting those necessary for normal management of the Bank and other essential matters till completion of the proceeding for supersession. It is also directed that if the Registrar or its authorised officer requires any records or files in connection with the proceeding for supersession the Committee of Management will immediately handover those records and files.

The writ petition is disposed of accordingly.

P.K. Patra, J.

I agree.