(Prayer: These Petitions are filed under Article 226 of the Constitution of India, with a prayer to quash the Intimation Letter Dated 24.8.2015 issued by the R-2 Vide Ann-A.)
1. The petitioners were initially before this Court assailing the intimation letter dated 24.08.2015 at Annexure-A. In view of the stand taken by the respondents with reference to the other orders and the subsequent order passed, the petitioners have also assailed the orders dated 31.10.2015, 30.12.2014, 02.12.2015 and the notice dated 06.10.2015 which are impugned at Annexures-AH, AL, AN and AK respectively.
2. The respondents No.3 and 4 are the erstwhile President and Secretary of respondent No.5-society. Due to certain internal differences they were removed from that position and the petitioners herein had taken over as the Managing Committee of the respondent No.5. The petitioners were thus at the helm of affairs when the intimation letter dated 24.08.2015 was issued seeking compliance. This Court while directing notice had stayed the same through the order dated 16.10.2015. During the pendency of the petition, the respondent No.1 has relied on the earlier order dated 30.12.2014 and passed the order dated 02.12.2015 invoking the power under Section 27-A of the Karnataka Societies Registration Act, 1960 ('KSR Act' for short) and appointed an Administrator to manage the affairs of respondent No.5-society. The petitioners contending that the entire action is not only mala fide, but also without opportunity to the petitioners are before this Court assailing the action.
3. The respondents No.1 and 2 seeks to sustain the action through the objection statement. The gist of the objection is that a communication was received from the respondent No.1-Government about the misappropriation in the affairs of the respondent No.5 society. Hence a notice dated 09.09.2014 was issued, an Auditor was appointed on 16.10.2014 to audit the books of the society. Since the report submitted indicated that a sum of Rs.2,61,00,000/- was misappropriated, action was initiated under Section 25 of the KSR Act. However, since the Committee of Management themselves came to an arrangement to re-deposit the amount and requested not to send the report to the Government, no steps were taken but despite such undertaking, the amount was not deposited. The respondent No.4 once again made a complaint to the Government and as such the further action through the intimation letter dated 24.08.2015 was initiated, which was followed by the action to appoint the Administrator. It is therefore contended that the action taken is in accordance with law.
4. The respondents No.3 and 4 have filed their objection statement. They refer to the internal disputes between them on the one side and the petitioners on the other, about the meeting notice issued to them being contrary to law and it is contended that the Annual General Body meeting could not have been held on 29.11.2015 when the petition was pending before this Court. These respondents seek to support the order dated 31.12.2014 and contend that though the petitioners in order to avoid legal action had entered into a settlement dated 29.01.2015 to repay the amount, have not honoured the same which was brought to the notice of the respondent No.2, who has initiated the further action in accordance with law. Hence they seek to support the action of the respondent No.2. The suit in O.S.No.553/2011 pending between the petitioners and the respondent No.3 and 4 is admitted. In so far as the appointment of the Administrator, the notice dated 17.11.2015 (Annexure-R 12) to respondent No.5 being received by the respondent No.4 is admitted. The reply submitted by the respondent No.4 on 25.11.2015 (Annexure- R 13) is referred and the appointment of the Administrator is sought to be justified. Hence they contend that the writ petition be dismissed.
5. In the light of the above, I have elaborately heard Sri B.M.Arun, learned counsel for the petitioner. Sri Jayakumar S.Patil, learned senior counsel on behalf of Sri C.M.Patil, learned counsel for respondents No. 3 to 5 and Sri Laxminarayana, learned Government Advocate for respondents No.1 and 2. I have also perused the petition papers and the papers submitted by the learned Government at the time of hearing.
6. The perusal of the rival contentions and the arguments addressed by the learned senior counsel and the learned counsel for the parties will indicate that the impugned action has arisen due to the factional feud between two groups in the Managing Committee of respondent No.5 society. Even in such circumstance, on a complaint received or through suo moto action the respondent No.2 under Section 25 and the respondent No.1 under Section 27-A of the KSR Act will be entitled to initiate appropriate action. Action under Section 26 of the KSR Act can also be initiated, if the need arises. However, the question for consideration herein is as to whether procedure contemplated in law has been followed by the respondents No.1 and 2 before the impugned action is taken. Before adverting to the factual position herein to come to a conclusion as to whether the requirement of law has been complied by respondents No.1 and 2 under the provisions of the KSR Act referred above, the legal position as enunciated in the decisions relied on is necessary to be noticed.
7. The learned counsel for the petitioner in that regard has relied on the following decisions;
i) The case of A.Krishnamurthy and another -vs- State of Karnataka and others (ILR 1979 Karn 1944) wherein it is held that while holding an enquiry under Section 25, Rule 8(5) of the Rules enjoins the Registrar to communicate the findings which can be done by supplying a copy of the enquiry report. If the Registrar takes a decision to inform the Government on the basis of the enquiry report to take further action, the Registrar is bound to communicate that fact also to the society. The intention is to provide an opportunity to the society concerned. Before a final decision is taken by the Government to appoint an Administrator the mandatory provisions are to be complied failing which there will be prejudice to the society.
ii) The case as reported at short notes No.29 (1983 (2) Kar. L.J. 11) wherein it is held that if an enquiry is held under Section 25 and based on such report if the Administrator is appointed as per Section 27-A of KSR Act, the Act has made provision for the communication of the enquiry report to the society so that if it chooses, it may make a representation before the Government with reference to the findings submitted in the enquiry report.
iii) The case of Muniswamy K -vs- State of Karnataka [(2015) 1 Karn LJ 461] wherein while considering the issue relating to appointment of an Administrator based on the report of the Registrar under Section 25, the power to appoint an Administrator under Section 27-A of KSR Act can be done only after holding an enquiry. Since no enquiry was held the action was set aside.
iv) The case of Bharata Ratna Mokshagundam Vishweshwaraiah Education Society -vs- The Registrar, Kolar (AIR 1985 Kar 163) wherein also while considering the same provisions it is held, even if the report is made by the Registrar after affording an opportunity to the society, the Government to satisfy itself that it is a fit case to appoint an Administrator under Section 27-A of KSR Act, an opportunity is to be granted and an enquiry is required to be held.
v) The case of Sree Jain Swetambar Terapanthi Vid (S) -vs- Phundan Singh and others [(1999) 2 SCC 377] wherein the Hon'ble Supreme Court while considering the situation, though under the provision of the Civil Procedure Code in relation to a society it is held that though the rival groups are fighting several litigations, ousting the Managing Committee from the management of the society and the schools run by it on appointing Administrator would neither be legal nor just and proper. Hence the appointment of the Administrator was discontinued.
8. The legal position which can be crystallised cumulatively from the above pronouncements is that; at the first stage when the Registrar proposes to hold an enquiry under Section 25 of the KSR Act, the procedure as contemplated under Rule 8 of the Rules, 1961 will have to be complied by providing opportunity. On such enquiry being conducted, the findings are to be recorded and a copy is to be furnished to the society. On such report being submitted by the Registrar to the Government with its recommendations, if the Government is of the opinion that it will be in public interest to appoint an Administrator to look after the affairs of the society and the power under Section 27-A of KSR Act is sought to be exercised, even in such circumstance relying only on the report of the Registrar will not suffice. The Government on the other hand is not only required to issue notice to the society, but should also hold an enquiry and thereafter take a decision.
9. In the above backdrop, it is clear that in the instant case in view of the contention urged by the respondents, both the aspects with regard to the validity of the enquiry under Section 25 and the appointment of an Administrator in respect of the respondent No.5 society arises for consideration. Since it is the contention of the learned counsel for the petitioner that the procedure contemplated under Section 27-A of KSR Act has not been followed and further from the position of law as enunciated crystallised as above, at the outset what is to be examined is as to whether the very basic procedure required for appointment of an Administrator is at least followed.
10. In that regard, the documents does not indicate that an enquiry as contemplated has been held, even if the collective contentions of the respondents is accepted and the papers are taken on its face value, the only procedure that has been followed is the issue of notice dated 17.11.2015 (Annexure-R 12). The notice does not refer with regard to the findings in the enquiry after following the procedure or the enquiry report being given earlier or along with the notice. Further the said notice also indicates that the recommendation of the District Registrar prima facie indicates that the amount has been misappropriated and as such explanation was sought. But no further proceedings is held. That apart even as per the admitted case of the respondents the notice was received by the respondent No.4 and has conceded to the appointment of an Administrator. When the entire action even as per the case of the respondents No.1 and 2 was that the action was initiated on the complaint made to the Hon'ble Minister by the respondent No.4 himself, his concession ought not to have been acted upon. Further, the notice also indicates that the appointment is due to the factional feud, which cannot be the only basis as indicated in the judgment of the Hon'ble Supreme Court, supra. In any event the consent of the adversary could not have been the basis. Hence I am of the opinion that the appointment of the Administrator based on the present procedure is not justified. The order dated 02.12.2015 (Annexure- AN) is not sustainable.
11. The next point that arises for consideration is with regard to the validity of the order dated 30.12.2014 (Annexure- AL) and the consequent notices including the intimation letter dated 24.08.2015 (Annexure-A). The very subject indicated in the title to the order states regarding the enquiry to be conducted under Section 25 of KSR Act regarding the alleged misappropriation of the amount belonging to the respondent No.5 society which will show that it had not been concluded. Further the order does not refer to the enquiry being held in terms of Rule 8 of the Rules, but it only refers to the visit to the institution and having collected the details. The audit report has been relied on and a conclusion is reached that a sum of Rs.2,61,10,000/- is misappropriated, but such adverse report if any is not put to the petitioners seeking for their explanation. In that regard a reference to the notice dated 09.12.2015 (Annexure- M) will disclose that the enquiry had been commenced, but there is no indication to the conclusion of the same rendering a finding in that regard. The said notice also refers to the parties having mutually settled the matter and a undertaking having been executed on a Rs.200/- stamp paper to repay the amount and the other terms are agreed. The said undertaking which is relied on by the respondents at Annexure- R11 indicates that it is dated 29.01.2015 which evidently is subsequent to the order dated 30.12.2014.
12. If the above aspects are kept in perspective, without even adverting to the contention of the learned counsel for the petitioners about the respondents No. 4 and 5 being removed through the resolution, the fact manifest is that irrespective of the fact as to whether such undertaking has been subsequently executed or not; as on 30.12.2014 when a conclusion was reached an enquiry as contemplated under Section 25 of KSR Act had not been concluded as seen from the face of the order. When that is so, the order sheet of the proceedings sought to be relied on by the learned Government Advocate does not inspire confidence. The learned senior counsel for the respondents No.3 and 4 by relying on the decision of the Hon'ble Supreme Court in the case of Kishore Samrite -vs- State of Uttar Pradesh and others [(2013) 2 SCC 398] would contend that the petitioners have not referred to the undertaking dated 29.01.2015 executed by them and as such, not having approached this Court with clean hands cannot seek for any relief. But, in the instant case, when there are several aspects to the matter including the reference to the Annual General Body meeting subsequent thereto on 14.03.2015 and there being no conclusive proceedings under Section 25 of KSR Act, that by itself cannot be the basis to deny the relief.
13. That apart, what is also to be noticed is that the entire process has commenced at the instance of respondent No.4, through his letter to the Hon'ble Minister and at every stage the proceedings is held only at the behest of respondent No.4 who had certain grievances against the petitioners as he had been ousted. In so far as the rival disputes the suit had been filed in O.S.No.553/2011 and is pending. Notwithstanding the same, if it was a fact that there was a clear finding pursuant to the enquiry with regard to the misappropriation, it is difficult to fathom as to how the respondent No.2, who is the Competent Authority could have so casually accepted the undertaking merely because the parties have settled. This by itself will indicate that the law has not taken its course, but the entire proceedings including the impugned orders and the notices have been issued to the satisfaction of the rival faction and the due course of law has not been followed. On the other hand the respondent No.2 ought to have held the enquiry under Section 25 of KSR Act strictly in accordance in law and ought to have taken it to its logical conclusion. If in the said process a finding was rendered about the alleged misappropriation, the period during which it occurred and the office bearers who were responsible for the same was identified, the further action was required to be taken. As such at this juncture this Court cannot render a finding on that aspect though the learned counsel for the petitioner has sought to rely on Annexure- F2 and N2 to contend that the accounts submitted for the year 2012-13 and 2013- 14 when the petitioner No.4 was the Treasurer has been accepted by the annual general body. These are all aspects which will have to be taken into consideration by the respondent No.2 when a detailed enquiry is held. That apart this Court at this juncture cannot also pronounce on the validity of the action of the petitioners in expelling the respondents No.3 and 4 in the meeting dated 16.08.2015. But, in any event the respondent No.2 could not have nullified the same through the notice dated 24.08.2015 merely on the letter said to have been written by respondent No.4 without examining the matter as per law by providing an opportunity. Hence all aspects of the matter including the allegation of misappropriation will require a de novo consideration by the respondent No.2 after duly complying with the procedure contemplated in law.
14. Having arrived at the above conclusion, the issue for consideration is also, as to whether even in such circumstance, pending enquiry, the Administrator should be allowed to continue. The learned senior counsel for the respondents No.3 and 4 while seeking that such continuation be made has relied on the order of this Court in the case of Sri Prasanna Veeranjanaya Swamy Trust -vs- State of Karnataka and others (W.P.No.14251-53/2012 dated 28.03.2013) and in the case of Sri Vinayaka Seva Samithi -vs- The State of Karnataka and others (W.P.No.1260/ 2014 dated 18.11.2015) wherein such continuation of the Administrator was ordered though a re-consideration was directed. Having perused the same, though in that facts it was so ordered, I am of the opinion that in the instant facts such continuation will not be justified though the respondents No.1 and 2 will have the liberty of reconsidering the matter. In the instant facts, I have already arrived at the conclusion that both under Sections 25 and 27-A of KSR Act the proceedings as contemplated in law has not been held. Further, at the earlier point in time, the respondent No.4 had a say in the proceedings, on exerting influence through the Hon'ble Minister which may not be appropriate if the authorities concerned are to take a decision dispassionately and in accordance with law. Therefore, the position which existed prior to the order dated 02.12.2015 should be restored and allow to continue and the competent authority will have to recommence the process from that stage and if need be do it in an expeditious manner. It will also be open to the Registrar to secure the necessary documents relevant for the enquiry from the Administrator before handing back the affairs so as to avoid the possibility of tampering by the petitioners and ensuring a thorough and proper enquiry.
15. Hence for all the afore stated reasons, the following:
i) The impugned orders/notices dated 24.08.2015, 31.10.2015, 30.12.2014, 06.10.2015 and 02.12.2015 at Annexure- A, AH, AL, AK and AN respectively are quashed.
ii) Liberty is however reserved to the respondents No. 1 and 2 to recommence the proceedings relating to the affairs of the respondent No.5 society from the stage of proceedings under Section 25 of KSR Act on providing opportunity to the concerned parties strictly in accordance with law. All contentions in that regard are left open.
iii) Liberty is also reserved to respondent No.2 to take possession of such documents relating to respondent No.5 which may be considered as relevant and necessary for the purpose of enquiry, before handing back the affairs.
iv) In so far as the inter se disputes between the petitioners and respondents No.3 and 4 the remedy may also be availed in the pending suit.
v) The petition is disposed of in the above terms with no order as to costs.