Isabella Mariam

The High Court of Andhra Pradesh Single Bench of Justice Gannamaneni Ramakrishna Prasad has held that surcharge proceedings initiated under Section 60 of the Andhra Pradesh Co-operative Societies Act, 1964, are legally sustainable even during the liquidation process of a co-operative society. The Court dismissed the writ petition challenging the notice issued under Section 60(1), observing that the proceedings were initiated pursuant to a remand direction by the Tribunal. The Court directed the petitioners to pay costs of ₹10,000 each to the Andhra Pradesh High Court Advocates' Association.

The writ petition arose from proceedings initiated under Section 60(1) of the Andhra Pradesh Co-operative Societies Act, 1964 (“the Act”) against the petitioners by the Deputy Registrar of Co-operative Societies, Vizianagaram. The initial surcharge proceedings dated 29.03.2004 were challenged before the A.P. Co-operative Tribunal in O.A. No. 2 of 2005. By an order dated 18.05.2006, the Tribunal remanded the matter to the Deputy Registrar with directions for a fresh enquiry, emphasizing procedural fairness, including supply of the enquiry report and witness statements, and an opportunity to cross-examine and adduce evidence.

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While the O.A. was pending, the society was placed under liquidation under Section 65 of the Act. Subsequently, on 16.10.2006, the Deputy Registrar issued a fresh notice under Section 60(1), initiating surcharge proceedings in accordance with the Tribunal’s order. This notice directed the petitioners to file their written counter and sworn statement.

Challenging the said notice, the petitioners approached the High Court on 24.11.2006, seeking a writ of mandamus to declare the notice as illegal and without jurisdiction, and to quash all further proceedings. The Court, through an interim order dated 01.12.2006, suspended the impugned notice.

The petitioners raised two principal contentions: first, that they were not provided with any material relating to the surcharge proceedings initiated on 16.10.2006; and second, that initiation of surcharge proceedings was not maintainable after the appointment of a liquidator under Section 65 of the Act.

In support, the petitioners relied on Section 66, which empowers the liquidator to initiate or defend legal proceedings on behalf of the society. They also referred to a judgment in W.P. No. 23337 of 2006 involving similar issues, though the Court noted that the impugned proceedings in the present case arose under Section 60, unlike the cited case which involved Section 50.

The respondent argued that the impugned proceedings were in compliance with Section 60 and were initiated following the Tribunal’s remand order. Section 60 authorizes the competent authority to initiate such proceedings, including during winding up, either suo motu or on application by the liquidator, committee, creditor, or contributor.

The Court recorded that the petitioners had not submitted any application to the Deputy Registrar requesting the disputed material after receiving the impugned notice, thereby weakening their contention of non-supply.

The Court recorded: “Section 60 of the Act, extracted hereinabove, specifically refers to the power of the competent authority to initiate Surcharge Proceeding during the winding up of a society.”

It further observed: “The said provision clearly stipulates that the Registrar himself, or any person specially authorised by him in this behalf, of his own motion or on the application of the Committee, Liquidator or any Creditor or Contributor, may inquire into the conduct of such person or officer or servant and make an order requiring him to repay or restore the money etc.”

On the applicability of the provision during liquidation, the Court stated: “The above provision clearly indicates that the Surcharge Proceeding can be initiated even by the Liquidator. The said provision would also clearly indicate that the Surcharge Proceeding would go on even during the process of winding up of the Society.”

On the petitioners’ contention, the Court recorded: “In view of the very clear wording indicated in Section 60 of the Act, the submission of the learned Counsel for the Writ Petitioners pales-away, inasmuch as the said submission is directly in conflict with the Section 60 of the Act.”

Further, the Court noted the prolonged pendency of the matter: “Unfortunately, the impugned proceeding that was challenged way back in the month of November, 2006, stood suspended by an Interim Order on 01.12.2006 (almost 19 years ago).”

The Court concluded: “This Court is of the considered view that the Surcharge Proceeding under Section 60 of the Act can be initiated by the competent authority and to be proceeded with even during the course of the liquidation process.”

It found the challenge devoid of merit, stating: “The present Writ Petition is not only devoid of any merit but also an abuse of process, inasmuch as the Writ Petitioners have approached this Court challenging the very impugned notice dated 16.10.2006, which notice is in fact issued as per the direction of the Tribunal in O.A.No.2 of 2005 on 18.05.2006.”

On the issue of non-supply of documents, the Court recorded: “The contention of the Writ Petitioners is that the material has not been supplied to the Writ Petitioners. The same is also frivolous in nature, inasmuch as the Writ Petitioners have never made any application to the competent authority namely the Deputy Registrar of Co-operative Societies seeking any material documents after the impugned notice came to be issued.”

The High Court dismissed the writ petition, holding it to be devoid of merit and an abuse of process. It directed both the writ petitioners to pay costs of ₹10,000 each within three weeks.

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The Court ordered that the costs be deposited in favour of the Andhra Pradesh High Court Advocates’ Association, High Court Buildings, Amaravati.

 It further directed the President of the Advocates’ Association to utilize the said amount for the purchase of law books and to add them to the Association’s Library.

The Registry was instructed to transmit a copy of the order to the President of the Advocates’ Association for effective compliance. All interlocutory applications were declared closed in terms of the order.

Advocates Representing the Parties

For the Petitioners: Sri P. Ravi Kanth, appearing on behalf of Sri Venkat Challa

For the Respondents: Sri A. Krishna Kishore, Assistant Government Pleader for Co-operation

Case Title: S.S. Karri & Another v. Deputy Registrar & Others

Neutral Citation: APHC010450672006

Case Number: Writ Petition No. 25007 of 2006

Bench: Justice Gannamaneni Ramakrishna Prasad

[Read/Download order]