Kerala Co-operative Societies Act | Inquiry U/S 65(1) Can Be Based On Complaints Received By Competent Authority: High Court

The Kerala High Court on Thursday ruled that what is expected from the competent authority while ordering an inquiry under Section 65(1) of the Kerala Co-operative Societies Act, 1969 on the basis of information gathered either on his own or received from other sources is that there shall be an independent and active application of mind as to whether there shall be an inquiry or not. 

A Division Bench of Justice P.B. Suresh Kumar and Justice C.S. Sudha reiterated that the only requirement of law in the matter of ordering an inquiry under Section 65(1) is that the competent authority has to come to a conclusion on an active application of mind, whether to order the inquiry or not and that he shall not act mechanically at the behest of others without independent application of mind. It added,

"if it is held that a competent authority exercising the power under Section 65(1) could order an inquiry under that provision only based on independent materials sourced by him and shall not act based on materials provided in the complaints received, or the reports called for on complaints, or on reports submitted by subordinate officers, having regard to the large numbers of societies placed under the administrative control of the Registrar, Section 65(1) would be a dead letter, incapable of enforcement and the object of the same would be defeated."

The appellant is the President of a Primary Cooperative Agricultural Credit Society registered under the Act. The Joint Registrar of Co-operative Societies exercising powers of the Registrar of Co-operative Societies ordered an inquiry under Section 65(1) into the loan transactions of the appellant's Society from 01.01.2020 and into the financial structure and stability of the Society.

This inquiry was ordered based on the reports of the concerned Unit Inspector disclosing certain irregularities he noticed in the course of his inspections at the Society.

Challenging this inquiry order, the appellant instituted a writ petition before the High Court. To his disappointment, the Single Judge dismissed the plea finding that the satisfaction arrived at by the Joint Registrar for ordering an inquiry under Section 65(1) of the Act cannot be said to be baseless or unfounded. Aggrieved by this, the appellant approached the Division bench with an appeal.

Senior Advocate George Poonthottam, Advocates Arun Chandran and Nisha George submitted that in the absence of any applications in clauses Section 65(1)(b) to (f), an inquiry could be ordered by the Joint Registrar only "on his own motion" under Section 65(1)(a) on his subjective satisfaction that it is essential to order an inquiry into the constitution, working and financial condition of the society.

It was elaborated that when an inquiry is ordered by the Joint Registrar Section 65(1)(a), the order should reflect the materials on the basis of which he arrived at the subjective satisfaction and the same shall be based on materials independently collected by him. 

The appellant argued that the impugned order did not disclose the materials independently sourced by the Joint Registrar but was issued solely based on the reports of the Unit Inspector, which is per se illegal and unsustainable.

On the other hand, Senior Government Pleader V.K. Sunil resisted the appeal. 

Upon going through Section 65(1) of the Act, the Bench noted that the Registrar is empowered to order an inquiry under any one of the six circumstances enumerated in clauses (a) to (f) of Section 65(1). The appellants argued that to invoke the power under clause (a), such a decision shall not be based on materials provided by others, but on materials independently sourced by him. 

As such, the Court examined the scope of the expression "on his own motion" used in the provision.

In Bangalore Grain Merchants Association v. District Registrar for Societies & Ors [2001 (1) KCCR 292], the Karnataka High Court held that the expression 'on his own motion' is synonymous with 'suo-motu' and that the only legal requirement was that on the basis of information gathered either independently or received from other sources, the competent authority has to come to a conclusion on an active application of mind and not act mechanically at the behest of others.

Further, the Court noted that since the object of the inquiry under Section 65(1) was to protect the interests of the society and its members, it would be beneficial to concede with the view of the Karnataka High Court.

A similar view was taken by this Court in Melukkara Service Co-operative Bank Ltd. v. Joint Registrar (General) [2018 (2) KHC 143], but here it was clarified that the Registrar is obliged to personally satisfy himself by evaluation and assessment of all the relevant records which should have guided him to a valid conclusion to the requirement of an inquiry. 

However, the Division Bench opined that this clarification cannot be understood to hold that the competent authority ordering an inquiry under Section 65(1) should satisfy himself that there are defects in the constitution, working or financial condition of the society before ordering the inquiry since the purpose of an inquiry is to ascertain these facts. 

Moreover, a reading of the impugned order also indicated beyond doubt that it is not a case where the Joint Registrar acted mechanically on the reports filed by the Unit Inspector, but a case where on an active and independent application of mind on the reports, the Joint Registrar found that it is expedient in the interests of the Society to order an inquiry under Section 65(1) and accordingly issued the order impugned in the writ petition. 

As such, the appeal was dismissed.

Also Read: Kerala Co-operative Societies Act | Section 68(1) Includes Inquiry Conducted By Vigilance Officer : High Court

Case Title: K. Sivasankaran v. Joint Registrar of Co-operative Societies & Ors.

Citation: 2022 LiveLaw (Ker) 99

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