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

The Kerala High Court recently held that an inquiry under Section 68(1) of the Kerala Co-operative Societies Act includes the inquiry conducted by the Vigilance Officer appointed under Section 68A of the Act, and that it does not have to be necessarily be done by the Joint Registrar (General) of Cooperative Societies himself. 

A Division Bench comprising Justice P.B. Suresh Kumar and Justice C.S. Sudha added that merely for the reason that an inquiry under Section 65 can be conducted by the Registrar directly, such a report under Section 65 cannot be placed in a better pedestal than an inquiry conducted by the Vigilance Officer.

"It cannot be contended that the term "inquiry" in Section 68(1) does not take within its fold the inquiry of the Vigilance Officer appointed under Section 68A merely for the reason that Section 68A is a provision introduced when Section 68(1) was already there in the statute."

The petitioner is a member of a Co-operative Society registered under the Act and was the President of the Society for some time. He along with others were surcharged by the Joint Registrar of Co-operative Societies under Section 68(2) of the Act for allegedly causing a loss of Rs.3,15,269/- to the Society by unnecessarily taking out a building on lease without the approval from the competent authority.

This order of surcharge was issued based on the inquiry conducted by the Joint Registrar under Section 68(1) after the Vigilance Officer submitted a report on the same.

Challenging the impugned order, the petitioner moved the Court arguing that there cannot be an inquiry under Section 68(1) based on the report of the Vigilance Officer appointed under Section 68A.

Accepting this argument, the Single Judge quashed the order and held that an inquiry under Section 65 is to be conducted by the Registrar himself, whereas an inquiry under Section 68A is one to be conducted by the Vigilance Officer.

Aggrieved by the same, the appellants moved the Division Bench with an appeal.

The Court heard Senior Government Pleader T.K. Vipindas for the appellants and Senior Advocate George Poonthottam assisted by Advocate Nisha George for the respondents

It was observed that Section 68(1) only empowers the Registrar to order a further inquiry if the materials in an inquiry reveal that anyone has caused loss to the society by any conduct mentioned therein. Therefore, there cannot be any doubt that the term "inquiry" is used in the provision to mean investigation and not mere enquiry.

Further, the Bench emphasised that while Section 65 empowers the Registrar to conduct an inquiry into the constitution, working and financial condition of a society by himself or a person authorised by him, Section 68A empowers the Registrar to obtain a report from the Vigilance Officer, after conducting an inquiry concerning misappropriation, corruption and other major irregularities in the society.

Notably, the Judges found that the first part of Section 68(1) only uses the word "inquiry"; it does not refer specifically either to the inquiry under Section 65 or to the inquiry under Section 68A. Therefore, they disagreed with the view taken by the Single Judge that the term "inquiry" used in Section 68(1) refers only to the inquiry under Section 65.

The Court added that merely for the reason that an inquiry under Section 65 can be conducted by the Registrar directly, such a report under Section 65 cannot be placed in a better pedestal than an inquiry conducted by the Vigilance Officer.

This was all the more so since the scope of an inquiry under Section 65 and an inquiry by the Vigilance Officer under Section 68A is entirely different. While Section 65 provides for an inquiry only into the constitution, working and financial condition of the society, Section 68A provides for an inquiry into the cases of misappropriation, corruption and other major irregularities in the society.

"If the materials disclosed in an inquiry under Section 65 could be made use of for the purpose of surcharging a person after an inquiry under Section 68(1), there is no reason why the materials disclosed in an inquiry conducted by the Vigilance Officer cannot be made use of for the said purpose after conducting an identical inquiry. True, an inquiry report of the Vigilance Officer can be the basis of an order for inquiry under Section 65, but that by itself is not sufficient to hold that the materials disclosed in an inquiry report of the Vigilance Officer cannot be made use of for surcharging a person after an inquiry in terms of Section 68(1)."

On a scrutiny of the provisions contained in Chapter VIII of the Act, the Court concluded that the Registrar is empowered to order an inquiry under Section 65 based on the report of the Vigilance Officer appointed under Section 68A.

They justified this view on the ground that such a stance was necessary to ensure that if the materials disclosed in the report of the Vigilance Officer make out circumstances warranting an inquiry into the constitution, working and financial condition of the society, the Registrar shall not be powerless to order an inquiry based on the same.

As such, holding that the materials disclosed in an inquiry report of the Vigilance Officer can be used for the purpose of surcharging a person after due inquiry as provided for under Section 68(1), the appeal was allowed. The Single Judge's decision was accordingly set aside. 

Case Title: Joint Registrar (General) of Cooperative Societies & Anr. v. Charley Panthallookaran & Anr. 

Citation: 2022 LiveLaw (Ker) 83

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