Rule 198 Kerala Co-operative Societies Rules | Managing Committee Not Exclusive Authority To Issue Memo Of Charge: Kerala HC Full Bench

The Kerala High Court last week overruled the decision of the division bench in Kodanchery Service Co-operative Bank Ltd. v. Joshy Varghese (2020), which dealt with the interpretation of Rule 198 of the Kerala Co-operative Societies (KCS) Rules.

A Full Bench comprising Justice Alexander Thomas, Justice C Jayachandran and Justice Shoba Annamma Eapen thus revised the interpretation of Rule 198 and held that appointing authority is not the sole and exclusive authority for framing and issuing memo of charges to the delinquent employees. 

“...it is to be held that the view taken by the Division Bench in Kodanchery's case supra [2020 (4) KLT 129], as if the appointing authority (Managing Committee) is the sole and exclusive authority for framing and issuing memo of charges to the delinquent employees, covered by Rule 198 of the KCS Rules, does not reflect the correct legal position.”

The key takeaways from the Kondachery (supra) were as follows:

1. Only the appointing authority/managing committee has the power to issue chargesheet to employees of cooperative societies. It refers to Rule 198 (2B) of the KCS Rules to state that the disciplinary sub-committee is not empowered to frame memo of charges and that the power to frame memo of charges was exclusively vested with the appointing authority/managing committee of the cooperative society.

2. The terms charge and memo of charges/charge sheet have different meanings. In this regard, the division bench held that a charge memo can only be issued by the appointing authority which is the Managing Committee.

3. The disciplinary sub-committee under Rule 198 (2A) and (2B) were not standing committees and can only be constituted on a case-to-case basis to inquire into allegations.

The division bench of the High Court was hearing a writ appeal when it referred the above questions of law to the full bench.

Rule 198 (Before Amendment)

Rule 198 deals with disciplinary action against the employees of cooperative societies.

Rule 198 (3) gives powers to certain authorities to issue penalties and Rule 198(4) gives powers to certain authorities to consider appeals against the imposition of penalties. The Managing Committee has the power to issue certain major penalties under Rule 198(3). Going by Rule 198(4), the Managing Committee happens to be the appellate authority as well. Thus, the problem was that if the Managing Committee itself was issuing penalties under Rule 198(3), then the employees cannot prefer an appeal under Rule 198(4) to the same Managing Committee.

The afore-mentioned confusion was cleared by the Court in President, Pudupariyaram Service Co-operative Society v. Rukmini Amma & Ors. (1996). The Court held that as per Rule 198(3) penalties should be imposed by the subcommittee. This decision of the sub-committee could be challenged by filing an appeal under Rule 198(4) before the managing committee. The court also held that failure to constitute a sub-committee as the disciplinary authority to issue penalties was against the KCS Rules.

Rule 198 (After Amendment)

Rule 198 was amended and sub-rules (2A) and (2B) were inserted after the amendment was made effective from November 02, 2010. Rule 198 (2A) provides for the creation of a disciplinary sub-committee. Rule 198 (2B) provides that the disciplinary sub-committee shall inquire into the charges against the employees either by themselves or by engaging an external agency.

Findings of the Court

The full bench found that the clarification brought in by the Pudupariyaram case (supra) was to ensure that employees were not denied the opportunity to prefer an appeal before the Managing Committee under Rule 198(4). If the authority imposing the penalty was the same as that of the appellate authority, then that would render the appeal provision useless. The Court held thus:

“It is in this context that the Division Bench of this Court in Pudupariyaram's case supra [1996 (1) KLT 100 (DB)], has held, inter alia, in paras 9 & 10 thereof, that the said practice is illegal and ultra vires, inasmuch as a statutorily vested and accrued right of appeal will be obliterated and nullified, inasmuch as the appeal will have to be dealt with by the same authority (Managing Committee), which has imposed the penalty. Hence, the Division Bench ordered that, failure to constitute a sub-committee, as envisaged in Rule 198(3), to take the decision regarding penalties, is contrary to the provisions of the Rules, etc.”

The full bench stated that a comparative reading of Rule 198 before and amendment would show that sub-rules (2A) and (2B) have been inserted only for clarity and focus. It was to ensure that penalties were imposed by designated authority only to ensure that the right to appeal under Rule 198 (4) was made meaningful.

Agreeing with the Pudupariyaram case (supra) and legislative amendments, the full bench held that the disciplinary sub-committee under Rule 198 (2A) and (2B) is the same as the sub-committee under Rule 198 (3). The Court held that the disciplinary sub-committee has the power to inquire under Rule 198 (2B) as well as the power to issue penalties under Rule 198(3), it is both the inquiry authority and the penal authority.

Thus, the Court found that the Managing Committee was prohibited from acting as the penal authority for the reason that it is also the appellate authority under Rule 198(4). The Managing Committee being the appellate authority cannot issue penalties, the Court stated thus:

“Whereas, going by the statutory scheme and structure of Rule 198 and its various sub-rules, the Managing Committee, which is the appointing authority, cannot impose the penalties and it can only adorn the role of the appellate body and the power to impose the penalties is to be exercised only by the designated penalty authorities mentioned in sub-rule (3).”

The full bench agreed to the finding in Kodanchery (supra) that the terms charge and charge sheet have different meanings. Charge means any specific act/acts, omission/omissions alleged to have been committed by an employee. On the other hand, charge sheet is a memorandum of charges which carries the allegations of acts or omissions. The full bench held that charge is the genus and charge sheet/memo of charges is the species.

However, the full bench noted that in Kodanchery (supra), the division bench proceeded on the wrong premise that appointing authority alone can issue and frame memo of charges. It was in that regard, the division bench in Kodanchery (supra) stated that memo of charges are to be issued by the appointing authority which is the Managing Committee.

The full bench found that Rule (2B) uses the term ‘charge’ and not ‘charge sheet/charge memo’. As per Rule 198 (2B), the disciplinary sub-committee can inquire into the charges. The full bench refers to various decisions to state that the penal authority can also issue the charge memo. Thus, the disciplinary sub-committee has the power to inquire into the charges as well as the power to frame and issue charge memo. The full bench held that this was for the reason that the Managing Committee being the appellate authority cannot also act as a penal authority.

The full bench found that there were no provisions, either in the KCS Act or in the KCS Rules that prescribe with specific clarity as to who can frame and issue the memo of charges to employees of co-operative societies. The full bench refers to various provisions to state that there was no general mandate that the appointing authority alone has the competence to issue a memo of charges. Thus, the full bench held that the finding in Kodanchery (supra) that the appointing authority (Managing Committee) of the co-operative society was the sole and exclusive authority to frame and issue memo of charges does not reflect the correct legal position.

The full bench also found that the finding in Kodanchery (supra) that the disciplinary sub-committee under Rule 198 (2A) and (2B) was to be constituted only on a case-to-case basis and that it can never be a standing body was incorrect. It held that a sub-committee could be conceived as a standing body functioning co-terminus with the elected managing committee. The full bench further held that disciplinary sub-committee under the sub rules can also be constituted on a case-to-case basis, but the finding that it can never be a standing body was incorrect.

Based on the above discussions, the full bench summed up the findings as follows:

1. Overruled the finding in Kodanchery (supra) that appointing Authority (Managing Committee) was the sole and exclusive authority to issue memo of charges to the employees under Rule 198 of the KCS Rules.
2. Disciplinary sub-committee under Rule 198 (2A), (2B) was the same as the sub-committee referred to in Rule 198 (3). The disciplinary sub-committee can inquire into charges and also issue memo of charges.
3. In cases where the Managing Committee was not the appellate authority under Rule 198, it can also issue memo of charges.
4. It is incorrect legal position to state that disciplinary sub-committee can only be constituted on a case to case basis.
5. The decision in full bench will affect only pending and new cases. It will not affect cases already settled and finalized.
6. Co-operative societies can issue circulars regarding forming disciplinary sub committees so they can function co-terminus with the managing committee. Such disciplinary sub committees can also be reconstituted by the managing committee during their term.

Case title: Mattanur Co-operative Rural Bank Ltd. v The Co-operative Arbitration Court

Citation: 2023 LiveLaw (Ker) 399

Case number: WA NO. 934 OF 2022

Counsel for the appellant- Senior Advocate George Poonthotham, Advocates Nisha George and Navneeth Krishnan.

Counsel for the respondents- Additional Advocate General Ashok M Cherian, Government Pleader Advocate Sabeena P Ismail, Special Government Pleader (Co-operation) P P Thajudeen, Senior Government Pleader Saigi Jacob Palatty, and Advocate P N Mohanan

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