T.R. RAMANATHAN AND ORS. AND S.M.A. HABEEB Vs. THE STATE OF MADRAS BY THE DEPUTY REGISTRAR OF CO-OPERATIVE SOCIETIES AND ANR.

JUDGEMENT

(1.) The Directors, the Secretary, the Jewel Appraiser, the Cashier and some of the Clerks of the Bodinaicknur Cardamom and Coffee Planters Co -operative Bank Limited were surcharged under Sec. 71 of the Tamil Nadu Co -operative Societies Act, 1961, for having mismanaged the affairs of the Bank and for having committed wilful negligence as also breach of trust in relation to the property of the Bank and thereby caused a deficit to the assets of the Bank to the extent of Rs. 1,63,179. The Bank gives loans from and out of its liquid assets to members for certain recognised purposes on the pledge of gold jewels amongst other articles. The by -laws of the Bank, which have been noticed by this Court, vest several responsibilities and obligations on the officers of 'he Bank. We are here concerned with by -law No. 44 which deals with loans on the security of gold jewels and bullion. The usual process by which an application for the grant of a loan on the pledge of a gold jewel is admittedly as follow. An application form is made out to the Secretary. The Secretary passes on the jewel to the Appraiser of the Bank who is obliged Under the by -laws to correctly evaluate the gold content of the jewel and look after the interests of the Bank. Thereafter the member is obliged to go to the jewel loan clerk to find out whether his application has been successfully processed through. The Secretary in turn, after being satisfied personally about the merits of the loan as well as the value of the jewel to be pledged, recommends the loan. It is also common ground that the Appraiser when he values the jewel brings the jewel to the Secretary, weighs the same in the presence of the Secretary and on the strength of the recommendation of the Secretary to sanction the loan the jewel is kept in the custody and control of the Secretary and thereafter customarily in the custody of the Bank. On such a recommendation made by the Secretary, the member approaches the Cashier, receives the cash and thus completes the loan application.... In or about July, 1966 it came to. light that several jewels which were pledged with Bank and on which loans were granted were spurious and an enquiry therefore was set afoot. It was found during the preliminary stages by the Auditor of the Bank that there was misappropriation to the tune of over a lakh under the jewel loan account in the Bank. On a further enquiry under Sec. 65 of the Act by the Co -operative Sub -Registrar, Periyakulam, it was found that jewels to the face value of Rs. 1,63,179 pledged in respect of 668 loans to the value of Rs. 1,25,522 were not of gold, but were either gold -patted or gold -covered. The deficiency having thus been discovered in the course of an enquiry under Sec. 65, the enquiry officer was of the view that such a loss was due to the mismanagement and wilful negligence on the part of those normally responsible for the conduct of the affairs of the Bank. This finding prompted the appropriate authority to take action under Sec. 71 of the Act. A notice under Sec. 71 was therefore issued to the petitioners in these writ petitions who are occupying one or the other of the posts already mentioned in the service of the Bank and all of them were jointly and severally called upon to make good the loss to the Bank and they were directed to pay interest on such loss. In the enquiry that ensued the Deputy Registrar of Co -operative Societies, in his Older dated 29th March, 1967, found the petitioners jointly and severally responsible and after a full enquiry and mainly basing his assessment of the material and records scrutinised by him apportioned the loss amongst the petitioners. It is not in dispute that all the petitioners were given a full opportunity to state their objections. The Deputy Registrar was of the view that on account of the conjoint mismanagement of the Directors, Secretary, Appraiser, Cashier and the Clerks, the loss has occurred and he therefore directed the petitioners to bear jointly and severally the loss to the tune of Rs. 1,63,179, On appeal by the aggrieved persons, the learned District Judge of Madurai agreed with the man findings of the Deputy Registrar and re -apportioned the liability amongst the alleged delinquent officials of the Bank.

(2.) I may at this stage state certain important but necessary facts which have a bearing upon the instant case. As soon as the fraud was discovered, the Appraiser who was the primary official to prompt the other officers to accept the security and part with the assets of the Banks was tackled. On 31 st July, 1966 the Appraiser admitted his guilt and undertook to be responsible for making good the loss to the Bank. With this object in view and in order to sustain the fair name of the Appraiser, the Appraiser together with the members of his family, such as his brothers and minor members of the coparcenary, executed sale deeds of properties, one on 1st August, 1966, covering the properties in Kerala State, and the other on 2nd August, 1966, comprising of properties in the State of Tamil Nadu. The Appraiser in the first instance desired that the deeds of sale should be accepted as a sale with a counter obligation on the part of the Bank to reconvey the properties after six years if the loan is otherwise made good. The Board in the first instance agreed to this peculiar request of the Appraiser, but the general body would not agree with the resolution of the Board which was inclined to treat the sale deeds as a conditional sale with a contemporaneous obligation attached thereto to reconvey the properties after six years when once the loan to the Bank has been paid off. I have already referred to the sale deeds which ex facie were not conditional in any sense, but were absolute. The share -holders of the Bank met on 14th August, 1966, accepted the sale deeds and ratified the action of the Board in having taken the sale deeds from the Appraiser and the other members of his family and thus having wiped out completely the monetary liability of the Appraiser towards the Bank in respect of his open mismanagement in the affairs of the Bank. After the general body thus ratified the sale deeds, the Bank, as owners thereto, leased out the properties in favour of third parti's. Whilst this was the position, the Appraiser and the other members of his family, for reasons better known to themselves, sent a notice on 18th April, 1967, challenging the alienations made by him and the members of his family. Whilst this was the position, the Registrar of Co -operative Societies, by his order dated 9th September, 1967, ratified the action of the Bank in having accepted the conveyance of the properties of the Appraiser and the members of his family, situate both in the State of Tamil Nadu and in the State of Kerala. The Bank obviously felt apprehensive of the action of the Appraiser and the members of his family who by then began to go back on the solemn sale deeds executed by them in 1966. The Bank therefore took the precaution of filing regular suit's for possession in the civil Courts both in the State of Tamil Nadu and in the State of Kerala. It is reported that the Bank has taken possession of the properties which are the subject -matter of the sale situate in the State of Tamil Nadu on 28th March, 1972 and the properties in Kerala State also on 19th July, 1972. One noticeable feature in this case is that the Bank, ever since the sale deeds referred to above have been executed, was collecting rents from both the properties in Bodinaicknur in the State of Tamil Nadu and from the properties in the State of Kerala and has been appropriating the same for itself as owners thereof.

(3.) In the light of the above facts the petitioners have come up to this Court challenging the order of the Co -operative Tribunal. In W.P. Nos. 1740 and 1741 of 1970 the Directors of the Bank are the petitioners. In W.P. No. 2170 of 1970 the Secretary of the Bank, who was for a considerable length of time during 1957 and July 1966 its Secretary, is the petitioner. In W.P. No. 2171 of 1970 the Cashier who was functioning between July, 1961 and July, 1966, during which period the loans were advanced or renewed, is the petitioner. In W.P. No. 2172 of 1970 there are two petitioners ; the 1st petitioner acted as Secretary on different dates during the absence of the permanent Secretary and the 2nd petitioner acted for one day. In W.P. No. 2173 0f 1970 the senior clerk who acted on several dates as the Secretary during the relevant period is the petitioner. And lastly the Appraiser is the petitioner in W.P. No. 3152 of 1970.