Kerala Co-operative Societies Rules| No Opportunity Of Hearing U/R 66(5) Before Registrar Accepts Report: HC Full Bench Upholds Precedent

The Kerala High Court has upheld the position established by its Division Bench in 2010 by agreeing that Rule 66 (5) of the does not contemplate any opportunity being given by the Registrar before accepting any report or initiating any action based on the report.

A Full Bench of Justice P.B Suresh Kumar, Justice P.V. Kunhikrishnan and Justice C.S. Sudha thereby upheld the law as found in State of Kerala v. Aravindakshan Nair [2010 (3) KLT 11] while adjudicating upon a reference made by the Division Bench doubting the correctness of the proposition of law laid down in the impugned decision.  

"...if the hearing provided for in the last sentence of the Rule was intended for every action, the expression "shall" ought not have been used therein, for there is no need for any hearing at all except on the recommendation made by the officer as regards the manner in which the cost of the inquiry/inspection is to be apportioned, if the Registrar does not propose to take any action based on the report."

However, Justice Kunhikrishnan has delivered a dissenting opinion to the effect that from a reading of Rule 66(5), there is absolutely no ambiguity and the only possible conclusion possible is that, the Registrar should pass such orders on the report submitted by the person authorised after giving a reasonable opportunity of being heard to the society, person or persons concerned.

It was opined that the intention of the legislature is best evidenced by the text of the statute itself, while adding that when the words in the statute are clear, the Court need not understand the provisions in any other fashion and the Court has to interpret and accept the Rule as such. 

In the impugned decision, a Division Bench was called to answer if Rule 66(5) contemplates an opportunity of being heard to be given to any society or any person except with regard to the proposal of Registrar for ordering cost of inspection. This was answered in the negative and it was held that the principle contemplated under Rule 66(5) is only on orders imposing a cost on the society and persons concerned in terms of or in variance with the report of the inspecting officer contained in the inspection report.

Wherever action is contemplated based on the inspection report, whether it is the supersession of the management of the society or whether it is the surcharge on the officers or employees concerned, a separate opportunity of hearing specifically contemplated under the relevant sections has to be afforded. Rule 66 (5) does not contemplate any opportunity being given by the Registrar before accepting any report or for initiating any action based on the report, it was established then. 

Therefore, the Division Bench held that the hearing provided for in Rule 66(5) is only with regard to the apportionment of costs of inspection among the persons referred to in Section 67 of the Act. This position has been followed in all similar matters ever since as a precedent. 

In the reference order, it was stated that the impugned decision failed to consider the difference that an opportunity of hearing before a tentative decision is taken on the report as to the further course of action would make to persons against whom an adverse report is filed. It was also asserted that there is also no reason as to why the opportunity of hearing to the parties provided for in the Rule should be confined only as regards apportionment of costs. 

Senior Advocate George Poonthottam and Advocates B.S Swathi Kumar and Liji J Vadakedom appeared for the parties. Their primary contention was that if the provisions contained in Rule 66(5) are read and understood in their entirety, it could be seen beyond doubt that the hearing provided for in the last sentence in the Rule is for every action to be taken by the Registrar on the report of inquiry or inspection.

The Senior Counsel also submitted that even otherwise, insofar as the further action provided for under the Act on the report of inquiry or inspection, being drastic in nature affecting the rights of parties, the Court should read into Rule 66(5) an opportunity of hearing to the affected persons before the report is acted upon.

However, State Attorney N. Manoj Kumar pointed out that the impugned decision has been followed consistently by this Court in identical and similar matters. He submitted that the parties who argue that the impugned decision did not decide the law correctly are canvassing for the position that there shall be an opportunity of hearing, not once, but twice, one at the stage of submission of the report of inquiry or inspection and the other at the stage of action, whether it be under Section 32 or Section 68.

According to the State Attorney, principles of natural justice and fairness cannot be stretched to that extent and when there is only one action, there cannot be more than one opportunity of hearing.

Nevertheless, he conceded that if an action is proposed based on the report of inquiry or inspection, the parties concerned are entitled to be given a copy of the report concerned. On being required if there exists any statutory provision obligating the Registrar to provide a copy of the report of inquiry or inspection to the parties facing proceedings based on the findings therein, the State Attorney submitted that Rule 24 enables the persons concerned to obtain a copy of the report if they choose to do so.

To answer the reference, the full bench initially delved into the interpretation of Rule 66(5). It was found that the Rule insists only on findings on all points mentioned in the order authorising inquiry/inspection and the reasons supported by documentary or other evidence recorded by him. 

But the Bench noted that regarding the costs of inquiry/inspection, Rule 66(5) insists on a recommendation of the officer conducting the inquiry or inspection to the Registrar as to the manner in which the costs or part thereof may be apportioned amongst the parties. The Rule stipulates that the Registrar shall pass such orders thereon as may be considered just, after giving a reasonable opportunity of being heard to the society, person or persons concerned.

It was observed that the word "thereon" in the last sentence of the Rule gives an answer to the question. From the Rules, it could be seen that the opportunity of being heard provided for in the last sentence of the Rule can only be with reference to the recommendation mentioned in the previous sentence of the Rule as regards the costs of the inquiry or inspection.

"It is all the more so since, as noted in Aravindakshan Nair (supra), separate hearing is required to be given in terms of the relevant provisions of the Act before taking further action based on the report of inquiry or inspection, whether it be under Section 32 or Section 68, if the Registrar chooses to do so acting upon the report, except as regards the manner of apportionment of cost."

The Court added that the difference that an opportunity of hearing before a tentative decision is taken on the report as to the further course of action would make to persons against whom an adverse report is filed, may not be of any relevance in the matter of interpreting Rule 66(5), for if the rule does not provide for the same, such a hearing cannot be claimed.

Likewise, the question of whether there exists any reason for confining the opportunity of being heard provided for in the Rule to the aspect of apportionment of costs of inquiry or inspection also loses its relevance in the light of the finding in the preceding paragraph that the Rule provides for an opportunity of being heard only on the aspect of apportionment of costs.

In short, the bench did not find any reason to doubt the correctness of the decision in Aravindakshan Nair. Therefore, the precedent was upheld. 

Case Title: Reji K. Joshy & Ors. v. Joint Registrar of Cooperative Societies & Ors.

Citation: 2022 LiveLaw (Ker) 182

Click Here To Read/Download The Order