Telangana High Court
Allala Srikanth Reddy vs The State Of Telangana on 21 January, 2025
THE HONOURABLE SMT JUSTICE T.MADHAVI DEVI
W.P.NOS. 26692, 27330, 27742, 27755 & 28153 OF 2024
COMMON ORDER:
In Writ Petition No.26692 of 2024, the petitioner society is
challenging the proceedings of the respondent No.2 dated
09.09.2024 for conduct of inspection of the books of accounts of
the petitioner society under Section 52 of the Telangana
Cooperative Societies Act, 1964 (for short, ‘the Act’) as illegal,
arbitrary and without jurisdiction and to set aside the same and to
pass such other order or orders in the interest of justice.
2. The petitioners in W.P.Nos.27330, 27742, 27755 and 28153
of 2024 are all challenging the proceedings in Rc.Nos.2247/2024-
C, 2252/2024-C, 2251/2024-C and 2247/2024-C, dated
25.09.2024 respectively issued by respondent No.3 purportedly
exercising the powers under Section 21AA (1)(b) of the Act as illegal
and arbitrary and consequently to set aside the same and pass
such other order or orders.
W.P.No.26692 of 2024
3. Brief facts leading to the filing of the present writ petition are
that the petitioner in W.P.No.26692 of 2024 is the Primary
Agricultural Cooperative Society set up in Pegadapalli Village of
Jagtial District. It is submitted that the respondent No.2 vide
2
proceedings dated 09.09.2024 has ordered an inspection under
Section 52(1) of the Act for inspection of the books of accounts of
the petitioner society from the years 2014-2018 and 2018-2023
and the same is challenged in this Writ Petition.
4. The learned counsel for the petitioner submitted that the
said action of the respondent No.2 is not suo motu as mentioned in
the impugned proceedings, but it is on the directions of the
Government, which in turn has issued the directions at the behest
of the ruling party MLA. It is submitted that under Section 52 of
the Act, inspection can be ordered both suo motu or at the request
of one of the creditor of the society and not even at the request of
any member of the society, whereas in this case, the request was
by the MLA of the ruling party who is neither a member or creditor
of the society. Therefore, according to the learned counsel for the
petitioner, the action of the respondent No.2 is biased and is at the
behest of the third party and is therefore not sustainable.
5. This Court therefore, being satisfied about the prima-facie
case in favour of the petitioner, had granted interim suspension of
the impugned notice and the same has been extended from time to
time.
6. In the meanwhile, the respondent No.3 has filed a counter
affidavit on behalf of the respondents No.1 to 5 and thereafter, the
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respondent No.2 also has filed a separate counter affidavit
justifying the issuance of the order under Section 52(1) of the Act.
7. Learned counsel for the petitioner has drawn the attention of
this Court to the Government Memo No.5958/Coop.II/1/2024,
dated 05.09.2024 of the APC and Secretary to Government,
Telangana, Hyderabad, which in turn has referred to the request to
conduct Vigilance/enquiry on (6) PACS and (2) DCMS of Jagitial
District which included the petitioner society. In the said
Government Memo, there was a reference to the letter of the MLA,
Dharmapuri, dated 02.09.2024. It is submitted that it is clear
therefrom, that the inquiry ordered in the impugned order is not
suo motu, but it is only on the direction of the MLA and therefore, it
is not sustainable. The learned counsel for the petitioner referred
to the provisions of Section 52 of the Act to demonstrate that the
inspection can be ordered by the registrar only of his own motion
or on the application of the creditor of the society and not
otherwise. He placed reliance upon the following judgments in
support of the contentions:
(1) Dr.Premachandran Keezhoth and Another Vs.
Chancellor Kannur University and Others 1;
(2) D.Ramesh Sinha Vs. Cadre Authority for Key
Personnel of Co-operative Central Banks/Apex Bank 2;
1 2023 SCC OnLine SC 1592
2 2001 SCC OnLine AP 1206
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(3) Mohinder Singh Gill and Another Vs. The Chief
Election Commissioner, New Delhi and Others 3;
(4) M.Laxminarsimha Reddy Vs. The State of Telangana,
rep by its Principal Secretary Agriculture and Cooperation APC
Department Secretariat, Hyderabad, Telangana and Others 4;
(5) Managing Committee of the Bureau of Economics and
Statistics Employees Cooperative Housing Society Limited Vs.
Commissioner for Cooperation and Registrar of Cooperative
Societies, A.P.Gruhakalpa Buildings, Nampally, Hyderabad 5;
(6) S.Ramu Vs. The A.P.Cooperative Tribunal,
Visakhapatnam, rep. by its Registrar and Others 6.
He therefore prayed to set aside the impugned notice.
8. Learned Special Government Pleader appearing for the office
of the Advocate General, however, supported the impugned order
and submitted that under Section 52 of the Act, the registrar has
the power to suo motu order inspection of books and he submitted
that for taking the suo motu action, the source or information can
be from any party and therefore, after the letter has been
addressed by the concerned MLA, the Government has verified the
same and has come to the conclusion that necessary action should
be taken on the report and thereafter the respondent No.2, after
being satisfied that the inspection is required under Section 52 of
the Act, has ordered so.
3 (1978) 1 SCC 405
4 W.A.No.622 of 2023, dt. 01.09.2023
5 W.A.No.1262 of 2004, dt.01.09.2004
6 W.P.No.17226 of 2009, dt. 18.02.2014
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9. In support of his contentions that suo motu power under
Section 52 of the Act can be exercised and the source or
information for taking such action can be from any source.
10. Learned Government Pleader has submitted the copy of the
MLA letter vide Letter No.823/TGSLA/GW/DMP/ Agl./2024, dated
02.09.2024 and also copy of the Government Memo i.e., Memo
No.5958/Coop.II/1/2024, dated 05.09.204. He thus relied upon
the judgment of the Hon’ble Supreme Court in the case of Araja
Narasimha Rao Vs. District Co-operative Officer/Joint Register
and Others 7 in support of this contention.
11. Having regard to the rival contentions and the relevant
material on record, this Court finds that the respondent No.2
claims to have exercised suo motu powers for ordering the
inspection of the books of accounts of the petitioner society under
Section 52 of the Act. As submitted by the learned Special
Government Pleader, before exercising the power under Section 52
of the Act, the respondent No.2 has to be satisfied about the
requirement to order the inspection and for before doing so, as held
by the Andhra Pradesh High Court in the case cited supra, by the
learned Government Pleader the source of information can be any
person. However, for exercising the powers under Section 52 of the
7 MANU/AP/0500/2007
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Act, the officer has to be satisfied about the requirement for
inspection. The impugned order refers to “financial irregularities
committed by the respective PACS during the period 2014-18 and
2018-23” for coming to the conclusion about the need for
inspection of the books of account. However, no instances of such
financial irregularities are mentioned therein, but in the counter
affidavit filed by the respondents, it has been stated that the PACS
have constructed a huge shopping complexes in a small village
without conducting any cost benefit analysis and therefore, there is
misuse of funds of the society and therefore, the interim order has
to be vacated and the respondents should be permitted to carry out
the necessary inspections.
12. Learned counsel for the petitioner, however, pointed out that
there is a statutory audit every year by the officers of the
department and no qualification whatsoever has been pointed out
by the authorities at any point of time in all these years. He has
drawn the attention of this Court to the audit reports of all the
years filed along with the writ petitions to demonstrate that no
irregularity has been committed and is noticed or pointed out by
the audit party. According to him, the action of the respondent
No.2 in ordering inspection is therefore not justified.
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13. This Court finds that the contentions of the learned counsel
for the petitioner are not controverted by the respondent and the
financial irregularities pointed out by the respondent No.2 is only
in the counter affidavit filed by him and not in the impugned
orders.
14. As held by the Constitutional Bench of the Hon’ble Supreme
Court in the case of Mohinder Singh Gill and Another Vs. The
Chief Election Commissioner, New Delhi and Others (cited
supra), when a statutory functionary makes an order based on
certain grounds, its validity must be judged by the reasons so
mentioned and cannot be supplemented by fresh reasons in the
shape of affidavit or otherwise. Therefore, this Court can only go
into the reasons given by the authorities in the impugned order.
The impugned order refers to the Government Memo for conduct of
a detailed enquiry based on the records and random field
verification and to enquire into the integrity of the financial
transactions done in the six PACS and two DCMS braches of
Jagitial District during the period from 2014-18 and 2018-2023.
The specific instances of the financial irregularities are not pointed
out in the said memo. The impugned proceedings also do not
mention that the respondent No.2 has verified the information
furnished by the Government to feel satisfied that there is a need
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for inspection of books of the accounts of the concerned PACS. He
seems to have acted on the directions of the Government, which in
turn had made the reference to the letter of the MLA. The fact that
the accounts of the PACS are audited regularly, itself demonstrates
that the registrar cannot interfere with the same without any
reasonable cause. That reasonable cause has to be mentioned in
the impugned order itself. As the required information is lacking in
the impugned order dated 09.09.2024, this Court is of the opinion
that it cannot be sustained. This Court is supported by the
following decisions for coming to this conclusion:
(1) In the case of Managing Committee of the Bureau of
Economics and Statistics Employees Cooperative Housing
Society Limited (cited supra), it has held that “Learned counsel for
the appellant, before the learned Single Judge, with reference to
Section 52 of the Act, urged that the said provision is not applicable,
in case, Respondent No.2 had thought it appropriate to consider the
representation dated:17.7.2004 submitted by the members and
residents of the colony. Section 52 of the Act could have been
invoked by the second respondent on his own motion or on the
application of a creditor of the society, and, Respondent No.2 would
have thereafter either inspected or directed inspection of the books of
the Society. Representation of the members of the society or
allegation made therein will not empower the Registrar to order
inspection. He also represented that, at the most, Section 51 of the
Act would have been invoked. But, that was not invoked. The
learned Single Judge turned down the request without even taking
up the said question raised by the petitioner.”
(2) In the case of S.Ramu (cited supra), it has held that “the
Division Bench of this Court in W.A.No.1262/2004 held as under:
Learned counsel for the appellant, before the learned Single
Judge, with reference to Section 52 of the Act, urged that the said
9provision is not applicable, in case, Respondent No.2 had thought it
appropriate to consider the representation dated:17.7.2004
submitted by the members and residents of the colony. Section 52 of
the Act could have been invoked by the second respondent on his
own motion or on the application of a creditor of the society, and,
Respondent No.2 would have thereafter either inspected or directed
inspection of the books of the Society. Representation of the
members of the society or allegation made therein will not empower
the Registrar to order inspection. He also represented that, at the
most, Section 51 of the Act would have been invoked. But, that was
not invoked. The learned Single Judge turned down the request
without even taking up the said question raised by the petitioner.
When Appeal was taken up for consideration, we have asked
learned counsel for the respondents to take appropriate instructions
in the matter. Learned counsel for respondents, rightly and frankly,
concedes that in the given facts and circumstances, orders could not
have been passed by Respondent No.2 under Section 52 of the Act
directing inspection of the books of the Society. We also find that on
the given facts, order of the respondent No.2 is bad in law, and,
contrary to the letter and spirit of Section 52 of the Andhra Pradesh
Cooperative Societies Act, 1964. Consequently, we allow the appeal,
and, set aside the impugned order with liberty reserved to the
respondents to deal with the representation of members of the
Society in accordance with law. No costs”.
(3) In the case of D.Ramesh Sinha (cited supra), it was held
that “Having regard to the aforementioned notings in the records, we
have no doubt whatsoever that the impugned orders of suspension
have been passed pursuant to and in furtherance of the directions
issued by the State Government. Power to initiate disciplinary
proceedings against an employee or place him under suspension
emanates from a statute. While exercising such statutory power, the
competent authority, must therefore, apply its mind independently
as to whether the conditions precedent for exercising such power
exist. It is now trite that if a statutory authority acts at the behest of
some other authority, however high he may be, who has no statutory
role to play in the matter, then such action/or any order passed by
him, would be a nonest in the eye of law. It is also well settled that
while passing an order, if the statutory authority ignores the
10relevant factors or takes into considerations, factors not germane for
the passing of the order, then such action or the order flowing from
such action, would be vitiated in law. Equally well settled is the
principle that the statutory authority while exercising statutory
powers, must pose correct questions so as to apply correct legal
principles and arrive at correct conclusions basing on the actual and
exact state of affairs, and if he fails to do so, the same would
amount to misdirection in law. Although decisions on this score are
galore, suffice it to refer to the decision of the apex Court in COMMR.
OF POLICE. V. GORDHANDAS, and the decision of the Court of
Appeal, Civil Division, in SECRETARY OF STATE v. TAMESIDE,
(1976) 3 All ER 665″
15. In view of the same, the impugned order in this writ petition
is set aside and the writ petition is accordingly allowed.
W.P.NOs. 27330, 27742, 27755 & 28153 OF 2024
16. In these writ petitions, the petitioners are the President and
Members of the Managing Committees respectively and the
impugned order is passed under Section 21 AA(1)(b) of Act
pursuant to the inspection report submitted by the Assistant
Registrar under Section 52 of Act consequent to the proceedings
dated 09.09.2024. Since the proceedings dated 09.09.2024 have
been set aside by order even dated in the above paragraphs, the
impugned orders in these writ petition are also liable to be set
aside.
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17. In view of the same, the impugned orders in these writ
petitions are set aside and the writ petitions are accordingly
allowed.
18. Miscellaneous petitions, if any, pending in these writ
petitions, shall stand closed.
____________________________
JUSTICE T.MADHAVI DEVI
Date: 21.01.2025
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