P.S. Kailasam, J.
1. These two writ petitions are filed against the order of the Deputy Registrar of Co-operative Societies, Tirunelveli, holding that the two references A.R.C. Nos. 198 and 199 of 1962-63 fall within the ambit of Section 51 of the Madras Co-operative Societies Act, (VI of 1932).
2. The petitioner was the President of the Palamcottah-Tirunelveli Co-operative Stores, Ltd., in 1959-60. On 1st September, 1960 the petitioner found on receipt of the profit and loss account that there was a stock deficit of Rs. 8,000 and a gross loss of Rs. 6,957. The usual annual profit of Rs. 8,700 was not found. The petitioner became suspicious about the conduct of the business of the society and asked the Secretary for particulars regarding the working of the society. On 12th September, 1960 the petitioner placed the matter before the Board of Directors. On 19th September, 1960 he reported the matter to the Deputy Registrar of Cooperative Societies. On 21st September, 1960 the Deputy Registrar directed an enquiry under Section 38. An Enquiry officer was appointed and he conducted an enquiry. The officer submitted an interim report. In the meantime on 17th November, 1960 the petitioner submitted his resignation which was accepted on 9th January, 1961. On 23rd March, 1961 the Registrar superseded the Board of Directors as and from 30th March, 1961 under Section 43(1) of the Act. The suits A.R.C. Nos. 198 and 199 of 1962-63 were filed before the Deputy Registrar of Co-operative Societies under Rule 15(2) of the Rules framed under Section 65 of the Act. A.R.C. No. 198 of 1962-63 relates to defalcation of a sum of Rs. 4,278-07 which consists of eight excess payments and four bogus payments. It is common ground that the payment was made by the 3rd defendant and the petitioner was impleaded as first defendant as he facilitated the misappropriation by his negligence. A.R.C. No. 199 of 1962-63 relates to a sum of Rs. 3,556-72 which was due to shortage in the remittances of the sale-proceeds in nine fair price shops. In this matter also the petitioner is sought to be made liable as he failed to perform his duties and facilitated the commission of the offence by the third defendant and others.
3. Before the Deputy Registrar the petitioner took a preliminary objection as to the jurisdiction. He did not file a statement regarding the merits, but contended that on the allegations the enquiry should be under Section 49 of Act VI of 1932 and not under Section 51.
4. Section 49 of the Act provides that where in the course of an audit under Section 37 or an inquiry under Section 38 or an inspection under Section 39 or the winding-up of a society it appears that any person who has taken part in the organisation or management of the society or any past or present officer of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society, the Registrar may proceed under this section. Before proceedings under Section 49 can be taken, it is necessary that the misappropriation or fraudulent retention or breach of trust in relation to the society. should appear in the course of an audit under Section 37 or an inquiry under Section 38 or an inspection under Section 39 or the winding-up of the society. So far as the requirement that the misappropriation should appear in the course of an audit under Section 37 or an inspection under Section 38 is concerned, there cannot be much dispute that A.R.C. No. 198 of 1962-63 was as a result of only an audit and A.R.C. No. 199 of 1962-63 was as a result of an inquiry under Section 38. The position is made clear in A.R.C. No. 198 of 1962-63 where in the plaint it is alleged that the cause of action arose in the year 1961 during the audit when the fraudulent acts were detected. So far as A.R.C. No. 199 of 1963 is concerned, in his affidavit the petitioner has stated that an inquiry under Section 38 was ordered on 29th January, 1960, that in pursuance of the order a preliminary inquiry was conducted and that an interim report was submitted. These allegations are not denied in the counter-affidavit and so it has to be taken that the inquiry under Section 38 disclosed that there was a shortage of funds for which the proceeding in A.R.C. No. 199 of 1962-63 is sought to be taken. Thus the first requirement under Section 49 that misappropriation or fraudulent retention or breach of trust should appear during an audit under Section 37 or an inquiry under Section 38, is fulfilled.
5. The next question is whether there was any misappropriation or fraudulent retention of money or breach of trust in relation to the society. It is now contended on behalf of the respondents that so far as the petitioner is concerned, there is no allegation that he misappropriated or fraudulently retained or committed breach of trust. In the plaint it is stated that the petitioner failed and neglected to perform his functions and thus facilitated defendants 3 to 4 to indulge in the acts of misappropriation which had resulted in a heavy loss to the plaintiff's Stores. It is also stated that the petitioner had failed to sign the cash chittah daily and failed to check the cash stores from time to time with reference to the cash chittah maintained by the Manager, and that the negligence on the part of the petitioner contributed not a little to the heavy loss incurred by the Stores as a result of the fraudulent acts of the Manager and the Accountant. The stand taken by the respondents that it is not alleged that the petitioner is no way connected with the misappropriation or fraudulent retention or breach of trust cannot be accepted. On the allegations the proper section would be Section 49 and the preliminary objection of the petitioner should have been upheld. The order of the Deputy Registrar in A.R.C. Nos. 198 and 199 of 1962-63 that the references fall within the ambit of Section 51 of the Act is quashed. The Deputy Registrar is at liberty to take such further proceedings in the matter as may be available to him under law.
6. The writ petitions are allowed. No order as to costs.