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P. Narayan Rao and ors. Vs. State of Orissa and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtOrissa High Court
Decided On
Case NumberO.J.C. Nos. 512, 513, 696 and 769 of 1978
Judge
Reported inAIR1984Ori32; 1984(I)OLR85
ActsOrissa Co-operative Societies Act, 1952 - Sections 4(2); Madras Co-operative Societies Act, 1932 - Sections 49 and 49(1); Constitution of India - Article 227; Code of Criminal Procedure (CrPC)
AppellantP. Narayan Rao and ors.
RespondentState of Orissa and ors.
Appellant AdvocateR. Mohanty, ;N. Patra and ;P.V. Ramdas, Advs.
Respondent AdvocateR.K. Patra, Adv. and ;Additional Govt. Adv.
DispositionApplication allowed
Cases ReferredState of Punjab v. Mohar Singh Pratap Singh
Excerpt:
.....under the madras act would be deemed to be one under the orissa act, in order to sustain the proceedings the conditions precedent prescribed under clauses (a) to (d) of section 17 of the orissa act must be satisfied. since there was no charge with respect to these clauses and since there has been no finding with respect to the same, the orders passed by the original authority as well as the appellate authority are without jurisdiction. he also contended that the appellate authority as well as the original authority have found that the directors have committed breach of trust and, therefore, the charge against them has been substantiated. in our view, the appellate authority has failed to do the same and as such, the appellate order is liable to be interfered with by this court. but the..........ex-cashier of central co-operative marketing & textile syndicate, limited against the order of the appellate authority--minister of state, co-operation, orissa--in a surcharge proceeding have been heard together and are being disposed of by this common judgment. petitioners in ' o. j. cs. 512, 696 and 769 of 1978 are the ex-directors or their substituted legal representatives while petitioner in o. j. c. no. 513 of 1978 is the former cashier of the society.2. a society in the name and style of ganjam district co-operative cloth and yarn society had been registered under the madras co-operative societies act, 1932, on 3-7-1945. the name of the society was changed to central co-operative marketing & textile syndicate, limited on 10-7-1949. the accounts of the society were audited on.....
Judgment:

G.B. Patnaik, J.

1. These tour writ petitions filed by the ex-directors and the ex-cashier of Central Co-operative Marketing & Textile Syndicate, Limited against the order of the appellate authority--Minister of State, Co-operation, Orissa--in a surcharge proceeding have been heard together and are being disposed of by this common judgment. Petitioners in ' O. J. Cs. 512, 696 and 769 of 1978 are the ex-directors or their substituted legal representatives while petitioner in O. J. C. No. 513 of 1978 is the former cashier of the society.

2. A society in the name and style of Ganjam District Co-operative Cloth and Yarn Society had been registered under the Madras Co-operative Societies Act, 1932, on 3-7-1945. The name of the society was changed to Central Co-operative Marketing & Textile Syndicate, Limited on 10-7-1949. The accounts of the society were audited on different dates in 1953 and 1954 and audit reports were submitted. The said audit reports revealed acts of omission and commission as also mismanagement of the society's lunds. On the basis of the said audit report, surcharge proceedings were initiated by issuing notice under Section 49 of the Madras Co-operative Societies Act against the directors, Secretary, .Branch Managers, General Manager, Distribution Manager, Godown Keeper, Typist and other employees. Notice against the directors was issued on 2-12-1954 alleging breach of trust to the tune of Rupees 2,17,712.57 and notice against the cashier was issued on 7-12-1954 on the allegation of misappropriation and breach of trust to the tune of Rs. 76,768-14-0. On 1-1-1955, the Orissa Co-operative Societies Act, 1951 came Into force and the Orissa Act repealed the Madras Act, but under sub-sec. (2) of Section 4 of the Orissa Act, the notices issued or proceedings instituted under any of the repealed Acts were deemed to have been issued or instituted under the corresponding provisions of the Orissa Act. Though the notice under the Madras Act had been issued on 2-12-1954, yet, the proceedings continued for a pretty long period and ultimately the Registrar of the Co-operative Societies passed final orders on 4-9-1963 holding the directors as well as the cashier liable to the extent indicated in the said order. The delay in disposal of the original proceedings appears to be mainly on account of long adjournments given by successive Registrars. On other feature with respect to the society which deserves attention is that on 29-7-1955. the Registrar of the Co-operative Societies dissolved the Managing Committee of the society and appointed an agent and on 10-6-1957, the society was ordered to be wound up. Those orders have been passed on account of unsatisfactory financial position due to mismanagement by the Board and lack of control over the activities of the society. In the winding-up proceeding, the Assistant Registrar, Co-operative Societies, Ganjam Circle, Berhampur, was appointed as the Liquidator.

3. Being aggrieved by the order of the Registrar, appeals were carried to the appellate authority--the Minister of State, Co-operation, who by his order dt. 4-2-1978 allowed the appeals in part by reducing the liability of the different appellants. The order of the Registrar as well as that of the Minister are being impugned in these writ petitions.

4. Mr. R. Mohanty, learned counsel appearing for the petitioners in O. J. C. No. 512 of 1978 raises the following contentions :--

(i) Though the charge against the directors is one of breach of trust, there has been no finding either of the appellate authority or of the original authority that the directors committed breach of trust and, therefore, the orders are liable to be interfered with;

(ii) In view of the peculiar position the directors of the society occupy, the finding of breach of trust can be arrived at only when it is established that they wilfully violated the rules and regulations and on account of such wilful violation, the society sustained financial loss. Since there has been no discussion in this regard nor any finding; the charge has not been sustained and consequently the orders are illegal;

(iii) In view of the Orissa Act coming into force with effect from 1-1-1955 repealing the Madras Act and in view of Sub-section (2) of Section 4 of the Orissa Act, the proceedings initiated against the directors under the Madras Act would be deemed to be one under the Orissa Act, in order to sustain the proceedings the conditions precedent prescribed under Clauses (a) to (d) of Section 17 of the Orissa Act must be satisfied. Since there was no charge with respect to these clauses and since there has been no finding with respect to the same, the orders passed by the original authority as well as the appellate authority are without jurisdiction.

(iv) In view of the language used in Sub-section (2) of Section 4 of the Orissa Act, provisions of Section 5 of the Orissa General Clauses Act or Section 6 of the General Clauses Act will have no application.

5. Mr. R. K. Patra, learned Additional Government Advocate, on the other hand, contended that notwithstanding the repeal of the Madras Act by the Orissa Act, the liability accrued under the Madras Act cannot be wiped out particularly when any different intention does not appear in the Orissa Act. According to him, the provisions of the General Clauses Act would apply. He also contended that the appellate authority as well as the original authority have found that the directors have committed breach of trust and, therefore, the charge against them has been substantiated. Consequently, the orders of the tribunals cannot be interfered with by this Court in exercise of the extraordinary jurisdiction under Article 227 of the Constitution.

6. The rival contentions require careful examination. We would examine the third and fourth contentions raised by Mr. Mohanty first. In order to arrive at the proper conclusion, it is necessary to trace the legal history in brief. Under the law of England as it stood prior to the Interpretation Act, 1889, the effect of repealing a statute without any express savings was to obliterate it completely from the records of parliament as if it had never been passed. Tindal, C. J., in Kay v. Goodwin, (1830) 6 Bing 576, stated thus,

'I take the effect of repealing a statute to be to obliterate it as completely from the records of the parliament as if it had never been passed; and it must be considered as a law that never existed except for the purpose of these actions which were commenced, prosecuted and concluded whilst it was an existing law.'

Lord Tenterdon in Surtees v. Ellison, (1829) 9 B and C 750, expressed thus :--

'It has long been established that, when an Act of Parliament is repealed, it must be considered (except as to transactions past and closed) as if it had never existed.'

To obviate this difficulty, a practicedeveloped in England to insert a savingclause in the repealing statute with aview to preserve the rights and liabilities already accrued or incurredunder the repealed enactment.The necessity of having to insert a saving clause in the repealingstatutes on each occasion was dispensedwith by introducing Section 38(2) in theInterpretation Act of 1889 whichprovided that a repeal, unless the contrary intention appears, doesnot effect the previous operation of therepealed enactment or anything dulydone or suffered under it and any investigation legal proceeding or remedymay be instituted, continued or enforcedin respect of any right liability andpenalty under the repealed Act as if therepealing Act had not been passed. Section 6of the General Clauses Act is on thesame lines as Section 38 (2) of the Interpretation Act of England. The language of Section 5 of the Orissa General Clauses Act isidentically worded as that of Section 6 ofGeneral Clauses Act.

7. The effect of the repeal of an enactment has been considered by several Courts. The Federal Court in the case of Piare Dusadh v. Emperor. AIR 1944 FC 1, stated thus :--

'......On the principle embodied in Section 6(e), General Clauses Act, the result of the repeal of an enactment on cases pending at the time of repeal would be that they would continue as if the enactment had not been repealed. But this is subject to the qualification that the repealing enactment contains no provision or indication to the contrary. ......'

The Supreme Court while considering the effect of repealing a statute and the absence of a saving clause in the repealing statute in the case of Mishilal Beni-ram Jain Glass Works, Firozabad, Uttar Pradesh v. S. P. Singh, Assistant Labour Commr. and Adjudicator, Uttar Pradesh, Kanpur, (1971) 2 SCJ 307: (1971 Lab IC (NOC) 6, observed that the absence of a saving clause in the particular enactment is immaterial. The provisions of General Clauses Act more particularly Section 6 thereof could be applicable even in such cases, unless the new legislation manifests an intention incompatible with or contrary to the application of the section. Such incompatibility would have to be ascertained from a consideration of all relevant provisions of the new law and the mere absence of the saving clause is not, by itself, material. From the aforesaid propositions of law, it is clear that in case of repealing of a statute, one has to enquire to find out how far the rights and obligations under the repealed statute have been destroyed by the repealing statute. The line of enquiry has to be how far are the rights destroyed and how far they are saved. If the repealing statute manifests and intention to destroy the rights and obligations under the repealed statute, then the provisions of Section 6 of the General Clauses Act will have no application and the general principle which was being followed in England prior to the Interpretation Act of 1889 would govern. The leading case on the point is that of State of Punjab v. Mohar Singh Pratap Singh, AIR 1955 SC 84. In this case an Ordinance had been promulgated by the Governor of East Punjab on 3rd March, 1948. making provisions for the registration of land claims of the East Punjab Refugees. Mohar Singh purporting to be a refugee from West Pakistan and filed a claim under the provisions of this Ordinance on 17th Mar., 1948. The Ordinance was repealed on 1st April, 1948 and Act 12 of 1948 was passed by the East Punjab Legislature re-enacting all the provisions of the repealed Ordinance. The claim filed by Mohar Singh was investigated into and it was found that the statement made by him was false and a prosecution was, therefore, started against him on 13th May, 1950 under Section 7 of the Act. Mohar Singh was convicted under Section 7 of the Act. The District Magistrate, Jullundur referred the matter to the High Court being of the view that the sentence awarded was inadequate. A Bench of the High Court at Simla set aside the conviction of the respondent (Mohar Singh) accepting the respondent's contention that the Magistrate had no jurisdiction under the provisions of the Act to convict him as the offence was committed under the Ordinance before the Act had come into force and the prosecution was started long after the Ordinance had come to an end. The Supreme Court negatived the aforesaid view and after laying down the law on the point and examining the provisions of the repealing Act held :--

'......We think that the provisions of Sections 4, 7 and 8 make it apparent that it was not the intention of the legislature that the rights and liabilities in respect of claims filed under the Ordinance shall be extinguished on the passing of the Act, and this is sufficient for holding that the present case would attract the operation of Section 6 of the General Clauses Act.'

8. If we examine the provisions of the Orissa Act from the aforesaid standpoint, we do not find any provision in the Act whereby an intention of the Legislature to obliterate the liabilities incurred under the Madras Act can be spelt. On the other hand, Sub-section (2) of Section 4 of the Orissa Act indicates the legislative intention that the notification and notices issued under the repealed statute would survive. In this view of the matter, we negative the third and fourth contentions raised by Mr. Mohanty and hold that the surcharge proceedings which had been initiated against the directors of the society under the provisions of the Madras Act would continue notwithstanding the Madras Act being repealed by the Orissa Act.

9. This takes us to consider the first and second contentions of Mr. Mohanty which are inter-linked. To appreciate the contentions raised, it would be necessary to find out the responsibility and liability of the directors under the Act, the Rules and the Bye-laws and the role which they are expected to play with respect to the affairs of a society. The directors of a society are responsible for the smooth management of the society and act as trustees of the society. Under the Act, they have a responsibility to see that the society does not suffer any loss on account of inaction or negligence of the officers on whom the power vests to act in accordance with the provisions of law. They are to determine the policy, frame the guidelines and are required also to see that the policies and guidelines are duly implemented. The power is no doubt very extensive and the responsibility is also heavy, but to fasten the liability of 'breach of trust' something more has to be positively found out. Directors en masse cannot be made liable for all acts of misfeasance without any specific finding against the individuals who were actually responsible for the acts of misfeasance. But if the directors wilfully shut their eyes to the acts of misfeasance it can be held that thereby they are aiding misfeasance and when this state of affairs continues for a long period, then the directors can be held liable for the acts of misfeasance of other officers responsible for the same.

10. The charge of 'breach of trust' in the surcharge proceeding under Section 49 of the Madras Co-operative Societies Act cannot be equated with 'criminal breach of trust' under the provisions of Criminal P. C. Continuous wilful negligence on the part of the directors' inaction in enforcing the provisions of Bylaws or Rules, lack of proper supervision and control over the affairs of the society which they are obliged to perform under the provisions of the Act, Rules or Bylaws resulting in consequential financial loss to the society would tantamount to breach of trust within the meaning of Section 49 (1) of the Madras Co-operative Societies Act. But it has to be found that by the tribunals with reference to the materials on record and also with reference to the specific obligation of the directors under the provisions of the Art, Rules or By-laws. If we examine the order of the appellate authority from the aforesaid standpoint, we find that the appellate authority has not come to a finding in the eye of law. The charges against the directors are in respect of Items 2 (2), 3 (3), 3 (6), 3 (22), 4 (5), 4 (6), 9 and 7. In all these items, the appellate authority without discussing the materials on record and without giving any reasons has reached the conclusion that the directors displayed callous attitude and negligence in dealing with members and, therefore, committed breach of trust. Even in some of these items, there has been no finding whether the alleged act of misfeasance amounted to breach of trust or not.

11. We are aware of our limitations in exercise of power under Article 227 of the Constitution in respect of the findings arrived at by the lower tribunals in a quasi-judicial proceeding. Where the tribunal exercising quasi-judicial function does not give reasons for its conclusion, the Court can interfere with such finding in exercise of its jurisdiction under Article 227. Reasons in support of a conclusion ensure that the conclusion is reached in accordance with law and is not an outcome of whim or fancy or policy or expediency. Action of the executive authority exercising appellate power under any statute in passing an order seriously prejudicing the rights of the party concerned without any discussion of the materials or without giving reasons for his conclusion, amounts to negation of the rule of law. The proceeding against the directors under Section 49 of the Madras Co-operative Societies Act on the charge of breach of trust is rather serious in nature and apart from the financial liability, it casts aspersion on the conduct of the directors and also puts the reputation of the directors :n the society at stake. A quasi-judicial authority, therefore, must give serious consideration to all the available materials and must come to a conclusion after giving reasons so that the conclusion is amenable to scrutiny by the higher tribunals. We find, however, the appellate authority in this case has not discussed the materials nor has he given reasons for his conclusions and has merely confirmed the conclusions of the Registrar; Whether an appellate authority confirms or reverses the conclusion of the lower tribunal, he must give reasons for his conclusion. In our view, the appellate authority has failed to do the same and as such, the appellate order is liable to be interfered with by this Court.

12. Mr. P. V. Ramdas appearing for other directors in O. J. C. Nos. 696 and 769 of 1978 adopts the stand taken by Mr. R. Mohanty, the learned counsel for the petitioner in O. J. C. No. 512 of 1978 and, therefore, we need not discuss any further about those cases. But so far as O. J. C. No. 513 of 1978 is concerned, it has been filed by the Cashier of the Society. Mr. Ramdas for the petitioner contends that though the charge was one of 'misappropriation' there has been no finding on that charge and, therefore, the proceeding so far as the Cashier is concerned is liable to be quashed. He has also contended that on the selfsame allegations criminal cases were lodged and the petitioner has been acquitted and, therefore, a second proceeding under the provisions of the Act should not have been taken. Acquittal of a person in a criminal case does not absolve his liability under the provisions of the Co-operative Societies Act, and, therefore, the said contention of Mr. Ramdas is of no force. But the other contention regarding absence of a finding of 'misappropriation' is well-founded. Mr. Patra, the learned Additional Government Advocate, also conceded that there has been no finding in respect of the charge of misappropriation and, therefore, the order so far as it relates to the Cashier also cannot survive.

13. In the result, we allow the writ applications, quash the order of the appellate authority as per Annexure-2 in respect of the directors of the society and also the Cashier of the society Sri N. Satyanarayana and remit the matter to the appellate authority for a fresh disposal in accordance with law and in the light of our above observations after giving the parties a reasonable opportunity of being heard. We would make it clear that the appellate authority will dispose of the appeal on the materials available on record and no further materials should be permitted to be placed.

14. In the circumstances, we make no order for costs in this court.

P.K. Mohanti, Actg. C.J.

I agree.


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