- 1 - NC: 2025:KHC:3725 WP No. 29125 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF JANUARY, 2025 BEFORE THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ WRIT PETITION NO. 29125 OF 2024 (CS-RES) BETWEEN ...PETITIONER (BY SRI. DHANANJAY JOSHI, SENIOR COUNSEL A/W SRI. PURNACHANDRA M. PURANIK., ADVOCATE FOR SRI. VIKRAM UNNI RAJAGOPAL., ADVOCATE) AND 1. STATE OF KARNATAKA DEPARTMENT OF COOPERATION, ROOM N. 610, 6TH FLOOR, 3RD GATE, M.S.BUILDING, BENGALURU - 560001 REPRESENTED BY ITS ADDITIONAL CHIEF SECRETARY. 2. THE DEPUTY REGISTRAR OF COOPERATIVE SOCIETIES, UDUPI DISTRICT, RAJATHADRI, A BLOCK, 1ST FLOOR, DISTRICT ADMINISTRATIVE OFFICES ENCLAVE, MANIPAL - 576104. 3. THE ASSISTANT REGISTRAR OF COOPERATIVE SOCIETIES KUNDAPURA SUB DIVISION, KUNDAPURA, UDUPI DISTRICT - 576 201. THE PRESIDENT AMPARU SAHAKARI VYAVASAYIKA SANGHA (N) AMPARU VILLAGE, KUNDAPURA TALUK, UDUPI DISTRICT - 576 211 ASHPAK KASHIMSA MALAGALADINNI Digitally signed by ASHPAK KASHIMSA MALAGALADINNI Location: High Court of Karnataka, Dharwad Bench Date: 2025.01.29 11:44:12 +0530 - 2 - NC: 2025:KHC:3725 WP No. 29125 of 2024 4. A KIRAN HEGDE, SON OF K. PRABHAKAR HEGDE, AGED: MAJOR, RESIDING AT KANCHAR, AMPARU VILLAGE, KUNDAPURA TALUK, UDUPI DISTRICT - 576 211. …RESPONDENTS (BY SRI. YOGESH D. NAIK., AGA FOR R1 – R3; SRI. RAKSHITH KUMAR., ADVOCATE FOR R4) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER DATED ORDER DTD. 18.10.2024 BEARING NO. SANI38/SAMANYA/ 61/KALAM 65.PA/2024-25 PASSED BY R-3 (ANNX-A). AND ETC. THIS WRIT PETITION COMING ON FOR ORDERS AND HAVING BEEN RESERVED FOR ORDERS ON 19.12.2024, THIS DAY, THE COURT PRONOUNCED THE FOLLOWING: ORDER 1. The Petitioner is before this Court seeking for the following reliefs: a. Set aside the order dated 18.10.2024 bearing No. SANI38/SAMANYA/61/KALAM 65.PA/2024-25 passed by Respondent No.3 (Annexure-A). b. Set aside the letter dated 15.10.2024 bearing No. DRP/U/65/01/2024-25 issued by R2 (Annexure-D); c. Dismiss the application dated 27.09.2024 filed by the R4 before the R3 (Annexure-C); d. Grant such other order as this Hon’ble Court deems fit under the facts and circumstances of the case, in the interests of justice. - 3 - NC: 2025:KHC:3725 WP No. 29125 of 2024 2. The Petitioner claims to be aggrieved by the order dated 18.10.2024, passed by the Assistant Registrar of Co-operative Societies, appointing the Co- operative Development Officer, Udupi to inspect the books of the Petitioner's society in relation to an alleged fraud and misappropriation of funds and submit a report under Section 65 of the Karnataka Co-operative Societies Act, 1959 (for short, ‘the Act of 1959’). 3. The Petitioner claims to be incorporated with the objective of developing cooperative spirit by imparting knowledge regarding agriculture practices. The Society is stated to cater to various villages in Kundapura Taluk and that this Society undertakes various activities to facilitate social and education developments, at present having 3,516 ‘A’ category members, 4,079 ‘B’ category members and 511 ‘D’ category members. - 4 - NC: 2025:KHC:3725 WP No. 29125 of 2024 4. Shri Dhananjay Joshi, learned Senior Counsel appearing for the Petitioner would submit that: 4.1. In terms of Section 63 of the Act of 1959, every co-operative society would get its accounts audited at least once in a year before the first of September following the close of the cooperative year by an auditor. A detailed audit of the accounts would be carried out and report submitted, which has been so done in the case of the Petitioner, to the Cooperative Societies, Audit Department. 4.2. In the audit, it was found that there was a misappropriation of Rs.3,95,65,000/-, as regards which the former Acting Chief Executive Officer and Manager were held responsible. The Society being in the process of initiating civil and criminal action, the Society having accepted that they are the violators, there is no further action required to be taken by anyone. - 5 - NC: 2025:KHC:3725 WP No. 29125 of 2024 4.3. He submits that Respondent No.4, being one of the Directors of the Society, with the ulterior political motive of damaging the reputation of the management of the Society, had made an application to Respondent No.3 to conduct an inquiry, regarding the fraud and misappropriation which has already been accepted by the Society and action initiated. When the Petitioner is in the process of initiating action, the question of Respondent No.3 vide the impugned order appointing the Cooperative Development Officer to conduct a further investigation, the audit having already been conducted is not sustainable. 4.4. The audit conducted by the auditor under Section 63 of the Act of 1959 not having been faulted with, a detailed audit having been conducted, the persons responsible for misappropriation having been identified, there - 6 - NC: 2025:KHC:3725 WP No. 29125 of 2024 is no further rowing enquiry which is required to be conducted by the Co-operative Development Officer. 4.5. His submission is that an audit having been conducted in terms of Section 63 of the Act of 1959, the auditor having access to all the books has verified the same and has held that an amount of Rs.3,95,65,000/- has been misappropriated. This audit report being acted upon, there is no need for a further enquiry under section 64 of the Act of 1959. This Society being a reputed one will take care of the internal requirements of the Society. 4.6. In this regard, he relies on the citations stated in the Memo dated 17.12.2024, wherein he relies on the judgment of this Court in the case of Bangalore Grain Merchants Association - 7 - NC: 2025:KHC:3725 WP No. 29125 of 2024 v. District Registrar for Societies1, more particularly Para 9 thereof, which is reproduced hereunder for easy reference: 9. Now, we come to the more crucial and controversial question i.e., what is the meaning and import of the expression ‘on his own motion’ and what is its interrelation to the immediately following clauses of the same sub-section. There could be, no doubt, that the expression ‘on his own motion’ is synonymous to suo-motu, which according to the dictionary means, “on one's own initiative”. ‘Own motion’ obviously implies application of mind and formation of one's own opinion. It does not matter how and from what source he gets information. But, it does not mean that the authority conferred with such power should eschew from consideration information or material furnished by external sources and should look to the information collected by his own self-effort. The exercise of powers suo-motu or on one's own motion, cannot and ought not to be construed in a narrow sense and in a sense which defeats the salutary purpose of the provision. No fetters can be placed on the specified authority from the stand point of source material on which it should exercise the power. An authority exercising the suo-moto power is not debarred from obtaining informations and materials from various sources. The only requirement is that on the basis of such informations and materials gathered either on its own initiative or received from other sources, the concerned authority has to come to the conclusion, on an active application of mind whether to take up the 1 ILR 2001 KAR 766 - 8 - NC: 2025:KHC:3725 WP No. 29125 of 2024 enquiry or not. Undoubtedly, the decision must be his own. He cannot mechanically act at the behest of some other person or authority without independent application of mind to arrive at a conclusion on the need and expediency of holding an enquiry. It is not argued before us nor can it be disputed that the suo-motu exercise of power does not cease to be such merely because a member of the public or someone in the know of things brings relevant facts to the notice of the prescribed authority, in this case, the Registrar. The Registrar, on a consideration of such facts has to decide whether it is a fit case warranting initiation of enquiry in the over-all interests of the society. The decision must be his and the decision must ofcourse be based on relevant factors, but there is no limitation as to the sources by which he should be prompted to action. 4.7. By relying on Bangalore Grain Merchants Association’s case (supra), the submission is that there has to be an application of mind by the concerned authority to come to a conclusion whether to take up the inquiry or not. The decision should be of the concerned authority, and the authority cannot mechanically act at the behest of some other person or authority without independent application of mind. In - 9 - NC: 2025:KHC:3725 WP No. 29125 of 2024 this case, he submits that, merely because respondent No.4 has submitted a request, respondent No.3 could not have directed an enquiry. 4.8. He further relies on the judgment of this Court in the case of Century Club vs. District Registrar of Societies and others2 more particularly Paras 10, 14 and 15 thereof, which are reproduced hereunder for easy reference: 10. I have considered the submissions made by learned counsel on both the sides and have perused the record. Before proceeding further it is apposite to take note of Section 25(1) of the Act, which reads as under: 25. Enquiry by the Registrar, etc.- (1) The Registrar may on his own motion and shall on the application of the majority of the members of the governing body or of not less than one-third of the members of the society, hold an enquiry or direct some person authorised by him by order in writing in accordance with the rules made in this behalf to hold an enquiry into the constitution, working and financial condition of a registered society. The scope and ambit of power of the Registrar under Section 25(1) of the Act was considered by full Bench of this court in BANGALORE GRAIN 2 W.P.Nos.15717-718/2019 dated 6.8.2019 - 10 - NC: 2025:KHC:3725 WP No. 29125 of 2024 MERCHANTS ASSOCIATION VS. DISTRICT REGISTRAR FOR SOCIETIES AND OTHERS’, ILR 2001 KAR 766. The full Bench inter alia while dealing with meaning and import of the expression ‘on his own motion’ held that an authority exercising the suo motu power is not debarred from obtaining information and materials from various sources. The only requirement is that on the basis of such information and materials gathered either in its own initiative or received from other sources, the concerned authority has to come to the conclusion on an active application of mind whether to take up the enquiry or not. It has further been held that undoubtedly, the decision must be of the authority and he cannot mechanically act at the behest of some other person or authority without independent application of mind and arrive at a conclusion on the need and expediency of holding an enquiry. 14. It is well settled law that Supreme Court in the case of ‘S.N. MUKHERJEE V. UNION OF INDIA’, (1990) 4 SCC 594 has held that the decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. - 11 - NC: 2025:KHC:3725 WP No. 29125 of 2024 15. It is trite law that even a quasi-judicial authority is required to assign reasons for passing the order. In view of the decision laid down by the Supreme court in ‘VICTORIA MEMORIAL HALL vs. HOWRAH GANATANTRIK NAGRIK’, 2010 (3) SCC 732, reasons were held to be the heartbeat of every conclusion, apart from being an essential feature of the principles of natural justice, that ensure transparency and fairness, in the decision making process. [SEE: ‘MAYA DEVI VS. RAJ KUMARI BATRA AND OTHERS’, (2010) 9 SCC 486, ‘SANT LAL GUPTA AND OTHERS VS. MODERN CO-OPERATIVE GROUP HOUSING SOCIETY LIMITED AND OTHERS’, (2010) 13 SCC 336, ‘UNION OF INDIA AND ANOTHER VS. TALWINDER SINGH’, (2012) 5 SCC 480, and ‘UNION OF INDIA VS. RAVINDER KUMAR’, (2015) 12 SCC 291.] 4.9. By relying on Century Club's case (supra), he submits that the Registrar under sub-section (1) of Section 25 of the Karnataka Societies Registration Act, 1960, the decision of the authority that is the Registrar has to be of his own and not on the behest of someone else and there have to be reasons which have to be recorded by the authority before exercising powers under sub-section (1) of Section 25. - 12 - NC: 2025:KHC:3725 WP No. 29125 of 2024 4.10. He further relies on the judgment of this Court in the case of Lingasugur Taluk, Halumata Abhivrudhi Samiti and others vs. The State of Karnataka and others3, more particularly Paras 7, 14, 15 and 16 thereof, which are reproduced hereunder for easy reference: 7. The short question that arises for consideration in the present matter is whether the Registrar of Societies under Section 25 of the Act, can initiate an enquiry based on complaint received by him or his powers are restricted to only three circumstances: namely (i) suo moto; (ii) complaint by majority of the governing Body or (iii) complaint by not less than 1/3rd of the General body? 14. As regards first category, the Registrar may on his own motion institute an enquiry. It is the mean and purport of “on his own motion” which is up for consideration in the present matter. Merely because the third party were to submit a complaint, the Registrar cannot initiate an enquiry without application of his mind. If a complaint is received by the Registrar and if the Registrar on perusal of the said complaint were to be of the opinion that enquiry is to be instituted, then he can order to do so and when such an order is made by the Registrar, it can only be said to be on his own motion, since there is an independent application of mind by the Registrar. 3 W.P.No.201552/2023 dated 9.6.2023 - 13 - NC: 2025:KHC:3725 WP No. 29125 of 2024 15. It is only in the event of the non-application of mind by the Registrar and or the Registrar blindly following the complaint lodged by a third party that there is an embargo under Sub Section (1) to Section 25 of the Act and such an enquiry would not come within the purview of Sub Section (1) to Section 25 of the Act. 16. In the present case, as could be seen from the order of appointment of Enquiry Officer, on receipt of a complaint, the Registrar issued two notices for a preliminary enquiry and to find out whether there is prima facie truth in the allegations. It s upon receipt of the said report that the Registrar applied his mind to the report and came to an independent conclusion that an enquiry is required to be held. Thus the appointment of Enquiry Officer in the present case is not based on the complaint received but the registrar has acted upon it by instituting a preliminary enquiry and acted upon the preliminary enquiry as regards which he applied his mind. This application of mind, in my considered opinion, would constitute “on his own motion”. 4.11. By relying on Lingasugur Taluk, Halumata Abhivrudhi Samiti's case, he submits that even if the Registrar were to be authorized to initiate suo moto proceedings, the same cannot be merely because a third party were to submit a complaint. If a complaint is received by the Registrar and the Registrar were to be of the - 14 - NC: 2025:KHC:3725 WP No. 29125 of 2024 opinion that inquiry is to be instituted, his application of mind is to be evidenced by the order. Without that application of mind, the Registrar could not have initiated enquiry. On the basis of all the above, the submission of Sri.Dhananjay Joshi, learned Senior Counsel is that the impugned order passed is only at the behest of a complaint filed by Respondent No.4. There is no independent application of mind. As such, the petition is required to be allowed. 5. Shri Jayakumar S.Patil, learned Senior Counsel, appearing for Shri Rakshit Kumar on behalf of Respondent No. 4, would submit that: 5.1. It having been categorically established that there was misappropriation of monies to an extent of Rs.3,95,65,000/-, an Annual General Meeting of the Society was held, wherein, 1,034 members present unanimously resolved for inquiry to be carried out with respect to the - 15 - NC: 2025:KHC:3725 WP No. 29125 of 2024 management and misappropriation of Society’s funds and it is in furtherance thereof, a representation was submitted to Respondent No.3 to take action in terms of Section 64 of the Act of 1959. 5.2. The representation submitted by Respondent No.4 is not on behalf of himself but is on behalf of and behest of 1,034 members who were present in the meeting and who have all unanimously resolved for inquiry to be conducted. This being necessitated on account of the President of the Society not having taken any immediate steps; there being several resolutions which have been inserted in the minute book; it is not just the accounts but several actions on part of the management of the Society which are required to be looked into and inquired into since it is the collective responsibility of the Office Bearers to discharge their duties in a proper and required manner. - 16 - NC: 2025:KHC:3725 WP No. 29125 of 2024 His submission is that the concerned officers have not acted in a proper manner requiring a proper inquiry to be held in terms of section 65 of the Act of 1959. 5.3. In this regard, he relies upon the decision of Bangalore Grain Merchants Association v. District Registrar for Societies4, more particularly Paras 9 and 10 thereof, which are reproduced hereunder for easy reference: 9. Now, we come to the more crucial and controversial question i.e., what is the meaning and import of the expression ‘on his own motion’ and what is its interrelation to the immediately following clauses of the same sub-section. There could be, no doubt, that the expression ‘on his own motion’ is synonymous to suo-motu, which according to the dictionary means, “on one's own initiative”. ‘Own motion’ obviously implies application of mind and formation of one's own opinion. It does not matter how and from what source he gets information. But, it does not mean that the authority conferred with such power should eschew from consideration information or material furnished by external sources and should look to the information collected by his own self-effort. The exercise of powers suo-motu or on one's own motion, cannot and ought not to be construed in a 4 ILR 2001 KAR 766 - 17 - NC: 2025:KHC:3725 WP No. 29125 of 2024 narrow sense and in a sense which defeats the salutary purpose of the provision. No fetters can be placed on the specified authority from the stand point of source material on which it should exercise the power. An authority exercising the suo-moto power is not debarred from obtaining informations and materials from various sources. The only requirement is that on the basis of such informations and materials gathered either on its own initiative or received from other sources, the concerned authority has to come to the conclusion, on an active application of mind whether to take up the enquiry or not. Undoubtedly, the decision must be his own. He cannot mechanically act at the behest of some other person or authority without independent application of mind to arrive at a conclusion on the need and expediency of holding an enquiry. It is not argued before us nor can it be disputed that the suo-motu exercise of power does not cease to be such merely because a member of the public or someone in the know of things brings relevant facts to the notice of the prescribed authority, in this case, the Registrar. The Registrar, on a consideration of such facts has to decide whether it is a fit case warranting initiation of enquiry in the over-all interests of the society. The decision must be his and the decision must ofcourse be based on relevant factors, but there is no limitation as to the sources by which he should be prompted to action. 10. A three Judge Bench of the Supreme Court held in the Board of Revenue, Madras vs. Raj Brothers Agencies that a suomotu power conferred on the Board of Revenue to call for and examine an order passed and proceeding recorded by the subordinate authority under the - 18 - NC: 2025:KHC:3725 WP No. 29125 of 2024 Madras General Sales Tax Act does not preclude the Board to exercise its power at the instance of an assessee. The Supreme Court observed that the power is conferred on the Board to remedy any injustice. It is open to an assessee or the Revenue to bring to the notice of the Board any error made by the subordinate authority. It is upto the Board to consider whether the case is a fit case for exercising its revisional jurisdiction.” 5.4. He submits that the usage of the word ‘own motion’ in Section 65 of the Act of 1959 would include on the basis of an application made by any person, once it was brought to the knowledge of Respondent No.3 that there are irregularities and/or violations, and the Registrar if satisfied that the allegations are serious requiring inquiry, merely because a complaint is filed by a one person or a third party, so long as the Registrar has applied his own mind and directed enquiry, the same would not fall foul of Section 65 of the Act of 1959. The Annual General Meeting having been conducted, the quorum being present for - 19 - NC: 2025:KHC:3725 WP No. 29125 of 2024 the said AGM, the members present and voting having resolved unanimously for inquiry to be conducted, the resolution will have to be taken to be a resolution passed by the entire Society and therefore, the Registrar acting on a resolution passed by the members of the Society cannot be found fault with. In this regard, he relies upon the decision of the Hon’ble Apex Court in the case of Bengal Secretariat Cooperative vs. Aloke Kumar5 more particularly Para 53, thereof which is reproduced hereunder for easy reference: 53. By now it is well established position that once a person becomes a member of the Co- operative Society, he loses his individuality with the Society and he has no independent rights except those given to him by the statute and bye-laws. The member has to speak through the Society or rather the Society alone can act and speaks for him qua the rights and duties of the Society as a body (see : Daman Singh v. State of Punjab, reported in (1985) 2 SCC 670 : AIR 1985 SC 973). This view has been followed in the subsequent decision of this Court in the case of State of U.P v. Chheoki Employees Co- operative Society Ltd., reported in (1997) 3 SCC 5 Civil Appeal No.7261/2022 dated 18.10.2022 - 20 - NC: 2025:KHC:3725 WP No. 29125 of 2024 681 : AIR 1997 SC 1413. In this decision, this Court further observed that the member of a Society has no independent right qua the Society and it is the Society that is entitled to represent as the corporate aggregate. This Court also observed that the stream cannot rise higher than the source. Suffice it to observe that so long as the Resolutions passed by the General Body of the Appellant Society are in force and not overturned by a forum of competent jurisdiction, the said decisions would bind the Respondent No. 1. He cannot be permitted to take a stand alone position but is bound by the majority decision of the General Body. Notably, the Respondent No. 1 has not challenged the Resolutions passed by the General Body of the Appellant Society to redevelop the property and more so, to appoint the Hi-Rise as the Developer to give him all the redevelopment rights. 5.5. He submits that the Assistant Commissioner having applied his mind and discussed in detail about the misconduct and thereafter having passed the order, no fault can be found with. The monies which have been misappropriated are public monies and therefore the Respondent - authorities are well within their right to initiate such proceedings. - 21 - NC: 2025:KHC:3725 WP No. 29125 of 2024 6. In reply, Shri Dhananjay Joshi, learned Senior Counsel for the Petitioner submits that 6.1. the AGM held on 21.9.2024 consisted of ineligible members. They, being ineligible in terms of Clause (a-iv) of Sub-Section (2) of Section 20 of the Act of 1959, thus, any resolution passed in the said meeting cannot be said to be a resolution of the Society, nor it can be binding on all the members of the Society. His further submission is that the Petitioner lacks locus standii to file the present petition. 6.2. His submission is that the present petition has been filed by the President. Allegations have been made against the Chief Executive Officer and the Manager of the Society, and they being held to be responsible, there being no Chief Executive Officer of the Society, the petition could not be filed by the Chief Executive Officer and as such has been filed by the President - 22 - NC: 2025:KHC:3725 WP No. 29125 of 2024 acting in the interest of the Society. Thus, he submits that the petition as filed is proper and maintainable. 7. Heard Shri Dhananjay Joshi, learned Senior Counsel appearing for the Petitioner and Sri.Jayakumar S.Patil, learned Senior Counsel for respondent No.4 and perused papers. 8. The points that would arise for consideration of this Court are: 1) Whether a direction for holding an inquiry under Section 65 of the Act of 1959 on the basis of a representation submitted by a single member would satisfy the requirement of Section 65 of the Act of 1959 or not? 2) Whether on the basis of the contention of the Society that the Society is taking action against delinquent Directors and Officers of the Society, an inquiry under Section 65 of the Act of 1959 can be dispensed with? 3) What order? - 23 - NC: 2025:KHC:3725 WP No. 29125 of 2024 9. Section 64 and Section 65 of the Act of 1959 are reproduced hereunder for easy reference: 64. Inquiry by Registrar.- (1) The Registrar may, of his own motion, by himself or by a person authorized by him, by order in writing, hold an inquiry into [any matter specified in the order touching] the constitution, working and financial condition of a co-operative society. (2) An inquiry of the nature referred to in sub-section (1) shall be held on the application of,— (a) a co-operative society to which the society concerned is affiliated; (b) a majority of the members of the *board* of the society; or (c) not less than one-third of the total number of members of the society. (2A) An inquiry under sub-section (1) shall be completed [within a period of twelve months which may however be extended [by the Registrar for the reasons to be recorded in writing] for a further period of six months] [Provided that the State Government shall, on a report made by the Registrar, shall have power to extend the period for holding the enquiry beyond eighteen months if it is satisfied that, there are genuine grounds for the extension.] - 24 - NC: 2025:KHC:3725 WP No. 29125 of 2024 (3) The Registrar, or the person authorized by him under sub-section (1) shall, for the purposes of an inquiry under this section have the following powers, namely:— (a) he shall, at all times, have free access to the books, accounts, documents, securities, cash and other properties belonging to or in the custody of the society and may summon any person in possession or responsible for the custody of any such books, accounts, documents, securities, cash or other properties to produce the same at any public office at the headquarters of the society or any branch thereof; (b) the inquiry officer may also summon any officer of a financing bank or a credit agency as the case may be or any person having any kind of business relationship with the society or any person who is connected with the functioning of and who has knowledge about the affairs of the society to produce any records or documents, if any, related to the transactions with and working of the society and furnish such information and the explanations, at the registered office or branch of the society or at any public office at the headquarters of the society, as the inquiry officer may require for the purpose of the inquiry.] (c)(i) he may, notwithstanding any rule or bye-law specifying the period of notice for a general meeting of the society, require the [office bearers] of the society to call a general meeting at such time and place at the headquarters of the society or any branch thereof and to determine such matters as may be directed by him, and where the [office bearers] of the society refuse or fail to call such a meeting he shall have power to call it himself; (ii) any meeting called under clause (i) shall have the powers of the general meeting called under the bye-laws of the society and its proceeding shall be regulated by such - 25 - NC: 2025:KHC:3725 WP No. 29125 of 2024 bye-laws except that no quorum shall be necessary for such meeting. (4) When an inquiry is made under this section, the Registrar shall [send a copy of the inquiry report and communicate] the result of the inquiry to the society and to the co-operative society, if any, to which that society is affiliated [and also to the Director of Co-operative Audit] 4A) On receipt of the inquiry report and the result of the inquiry from the Registrar, it shall be the responsibility of the board to initiate immediate necessary action for rectification of deficits, if any, therein and place the report before the annual general meeting or a special general meeting convened for the purpose at the earliest. Provided that the general body of the cooperative society shall not be competent to pass a resolution negativing the findings of the inquiry] (5) If the result of the inquiry held under sub-section (1) discloses any defects in the working of the society, the society shall within [forty five days] from the date of the receipt of the inquiry report and communication of the result of the inquiry explain to the Registrar the defects or the irregularities pointed out in the inquiry and take steps to rectify the defects and remedy the irregularities and report to the Registrar the action taken by it thereon. The Registrar may also make an order directing the society or its office bearers to take such action, as may be specified in the order to remedy the defects within the time specified therein.] 65. Inspection of books of a co-operative society.- (1) The Registrar may of his own motion, or on the application of a creditor of a co-operative society, inspect or direct any person authorized by him by order in writing in this behalf, to inspect the books of the society: - 26 - NC: 2025:KHC:3725 WP No. 29125 of 2024 Provided that no such inspection shall be made on the application of a creditor unless the applicant,— (a) satisfies the Registrar that the debt is a sum then due, and that he has demanded payment thereof and has not received satisfaction within a reasonable time; and (b) deposits with the Registrar such sum as security for the costs of the proposed inspection as the Registrar may require. (2) The Registrar shall [send a copy of the inspection report and communicate] [the result of any such inspection to the Director of Co-operative Audit and] (a) where the inspection is made of his own motion to the society; and (b) where the inspection is made on the application of a creditor, to the creditor and the society. (2A) On receipt of the inspection report and the result of the inspection from the Registrar, it shall be the responsibility of the board to initiate necessary action for rectification of defects, if any, therein and place the report before the annual general meeting or a special general meeting convened for the purpose at the earliest. Provided that the general body of the cooperative society shall not be competent to pass a resolution negativing the findings of the inspection] (3) If the result of the [inspection] held under sub-section (1) discloses any defects in the working of the society, the society shall within [forty five days] from the date of the receipt of the [inspection] report and communication of the - 27 - NC: 2025:KHC:3725 WP No. 29125 of 2024 result of the [inspection] explain to the Registrar the defects or the irregularities pointed out in the [inspection] and take steps to rectify the defects and remedy the irregularities and report to the Registrar the action taken by it thereon. The Registrar may also make an order directing the society or its office bearers to take such action, as may be specified in the order to remedy the defects within the time specified therein 65A. Report of inquiry, inspection and final report to be made available to a credit agency.- The Registrar shall draw the attention of a credit agency financing a co- operative society to [the defects noticed in any inquiry] or inspection of such co-operative society and shall also supply a copy of each of [such inquiry or inspection report] , if demanded in writing by such credit agency. [Explanation.—For the purpose of this section and section 65B credit agency includes a financing Bank.] 65B. Inspection of books of co-operative society by a credit agency.- (1) A credit agency shall have the right to inspect the books of any co-operative society which has either applied to the credit agency for financial assistance or is indebted to it. (2) The inspection may be made either by an officer of the credit agency or a member of its paid staff authorized by the credit agency as competent to undertake such inspection. (3) The officer or member so inspecting shall, at all reasonable times, have free access to the books, account, document, securities, cash and other properties belonging to or in the custody of the co-operative society and may also call for such information, statements and returns as may be necessary to ascertain the financial conditions of the co- - 28 - NC: 2025:KHC:3725 WP No. 29125 of 2024 operative society, and to ensure security of the sums lent to it by the credit agency;] 10. Answer to Point No.1: Whether a direction for holding an inquiry under Section 65 of the Act of 1959 on the basis of a representation submitted by a single member would satisfy the requirement of Section 65 of the Act of 1959 or not? 10.1. The facts are not in dispute, inasmuch as even the petitioner admits that as per the audit report, an amount of Rs.3,95,65,000/- has been misappropriated. It is on the basis of the said audit report that a meeting was held of about 1,034 members who had unanimously resolved for inquiry to be conducted and authorized Respondent No.4 to submit a representation to the Registrar. In furtherance of which Respondent No.4 had submitted a representation. Thus, it cannot be said that the representation and/or complaint filed by Respondent No. 4 is an individual complaint or representation, but can be said to be a - 29 - NC: 2025:KHC:3725 WP No. 29125 of 2024 representation submitted at least on behalf of 1,034 members. 10.2. Though Shri Dhananjay Joshi, learned Senior counsel submits that they were ineligible members and no meeting could be held by such ineligible members, the fact remains that they are members and the aspect of whether they could pass such a resolution pales into insignificance in the face of the admission made by the petitioner itself that there is a misappropriation of a sum of Rs.3,95,65,000/-. It is on the basis of such a representation that the Assistant Registrar of Cooperative Societies appointed the Cooperative Development Officer, Udupi to inspect the books of the Petitioner Society and submit a report under Section 65 of the Act of 1959. 10.3. Section 65, which has been extracted hereinabove provides for the Registrar to, on his own motion or on the application of a - 30 - NC: 2025:KHC:3725 WP No. 29125 of 2024 creditor of a Co-operative Society, inspect or direct any person authorized by him by order in writing in that behalf to inspect the books of the Society. Section 64 provides for inquiry by the Registrar, where the Registrar may, of his own motion, by himself or by a person authorized by him, by order in writing, hold an inquiry into any matter specified in the order touching the Constitution working and financial condition of a Cooperative Society. 10.4. What is sought to be contended by Sri Dhananjay Joshi, learned Senior Counsel is that, there is no application of mind by the Assistant Registrar and without such application of mind, the Cooperative Development Officer could not be directed to inspect the books and submit a report in terms of Section 65. 10.5. This brings me to the question as to what is the application of mind, required of by the Assistant Registrar of Cooperative Society. When an - 31 - NC: 2025:KHC:3725 WP No. 29125 of 2024 allegation is made in a complaint, it would be required of the Assistant Registrar to apply his mind to the allegation to ascertain the veracity and the truth thereof and if and only if he is satisfied as regards the prima facie veracity of the allegation, an inquiry could be ordered. This aspect would arise if the allegation made in the complaint were to be denied by the Society and its officers. In the present case, when the Society itself has admitted to the misappropriation, the allegations made in the representation/complaint by respondent No.4 on the basis of meeting held by 1034 members is not denied by the petitioner. In fact, the petitioner has accepted the same. If that be so, there would be no requirement of the Assistant Registrar applying his mind to arrive at a conclusion as to whether there is any misappropriation or not. The misappropriation having been accepted, the representation not - 32 - NC: 2025:KHC:3725 WP No. 29125 of 2024 having been submitted by a single member, but in furtherance of a meeting held by 1,034 members, I am of the considered opinion that the direction issued by the Assistant Registrar appointing the Cooperative Development Officer to inspect the books and submit a report is sufficient compliance with Section 65 of the Act of 1959. 10.6. Though it is contended by Shri Dhananjay Joshi, learned Senior Counsel that action is proposed to be initiated against two of the officers, it would be required to be ascertained if there is anyone else who is guilty of such misappropriation or who has participated in the said misappropriation. The decisions relied upon by the learned Senior Counsel for the petitioner would only indicate that there has to be an independent application of mind by the concerned authority before passing an order of inquiry. As observed, the application of mind - 33 - NC: 2025:KHC:3725 WP No. 29125 of 2024 would be required if the allegations are disputed, but when there is an admission made and an audit report already on the record indicating the misappropriation, the same would satisfy the requirement of Section 65. 10.7. Hence, I answer Point No.1 by holding that the direction issued by respondent No.3 for holding an inquiry under Section 65 of the Act of 1959 on the basis of a representation submitted, though by a single member, by the same being on the basis of an auditor's report which evidenced misappropriation, which misappropriation has been accepted by the Society, is proper and correct and does not suffer from any legal infirmity. 11. Answer to Point No.2: Whether on the basis of the contention of the Society that the Society is taking action against delinquent Directors and Officers of the Society, an inquiry under Section 65 of the Act of 1959 can be dispensed with? - 34 - NC: 2025:KHC:3725 WP No. 29125 of 2024 11.1. In the present case, it is not in dispute that there is a misappropriation of monies. In fact, the Petitioner itself admits that an amount of Rs.3,95,65,000/- has been misappropriated as per the report of the auditor, which had been submitted. The only contention of Shri Dhananjay Joshi, learned Senior counsel for the petitioner is that the said misappropriation has been done by the former Acting Chief Executive Officer, and the Manager of the Society. The President and other Office Bearers cannot be held to be responsible or liable for the same. The President and other Office Bearers are taking action against the former Acting Chief Executive Officer and Manager. Therefore, further enquiry is not required to be held. His submission is that the Office Bearers have established bona fides by intending to take action. - 35 - NC: 2025:KHC:3725 WP No. 29125 of 2024 11.2. This submission would have to be taken into consideration by referring to the audit report, which has been produced along with the petition. The audit report indicates that the misappropriation of the aforesaid amounts has happened over a period of time, and it is not that the said misappropriation happened at one go or at one time or overnight. 11.3. Though the Petitioner were to contend that it is the former Acting Chief Executive Officer and the Manager of the Society who were responsible, it is yet to be ascertained as to who was is responsible since the audit report only indicates that there is a misappropriation which has occurred. For the purpose of ascertaining and fixing responsibility as to who has misappropriated money, which is admitted to be misappropriated, it is required that a proper inquiry is held in that regard. - 36 - NC: 2025:KHC:3725 WP No. 29125 of 2024 11.4. Merely because the Board of the Society is coming forward to say that they are proposing to take action, when in fact no action has been taken till date, the audit report having been submitted on 20.9.2024 does not inspire any confidence in the actions on part of the Petitioner. If at all the Petitioner were serious about action being taken, they would have done so by now and not kept quiet. 11.5. Be that as it may, even if action were taken by the Society against two persons, that would not mean that no other person is responsible for the admitted misappropriation. Any inquiry under Section 65 would only lay bare the facts and the truth of the matter which would be in the interest of all the members of the Society. 11.6. In my considered opinion it would be required for an inquiry to be conducted and affix responsibility on the wrongdoers. Merely because the Petitioner is stating that they have - 37 - NC: 2025:KHC:3725 WP No. 29125 of 2024 identified two persons who are allegedly responsible for the misappropriation and an action is proposed to be taken, would not absolve the requirement of inquiry under Section 65 of the Act of 1959. 11.7. Hence I answer point no.2 by holding that merely on the basis of the contention of the Society that the Society is taking action against delinquent Officers of the Society, an inquiry under Section 65 of the Act of 1959 can not be dispensed with, an enquiry would have to be conducted to ascertain the true facts and affix responsibilities as also liabilities. 12. Answer to Point No.3: What order? 12.1. In view of my answer to Point Nos.1 and 2 above, no grounds being made out, the petition stands dismissed. Sd/- (SURAJ GOVINDARAJ) JUDGE PRS/List No.: 19 Sl No.: 2