- 1 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF AUGUST, 2025 BEFORE THE HON'BLE MR. JUSTICE R. NATARAJ WRIT PETITION NO. 23533 OF 2021 (CS-RES) BETWEEN: 1. KANOOR PRIMARY AGRICULTURAL CREDIT CO-OPERATIVE SOCIETY KANOOR VILLAGE, PONNAMPET TALUK, KODAGU DISTRICT, REPRESENTED BY: SRI. V.R. UMESH, CHIEF EXECUTIVE OFFICER, S/O. V.T. RAMAIAH, AGED ABOUT 58 YEARS, KOTHUR VILLAGE AND POST, PONNAMPET TALUK, KODAGU DISTRICT-571216 2. SRI. A.A. VIVEK S/O. LATE A.M.AIYAPPA AGED ABOUT 57 YEARS, KANOOR VILLAGE AND POST, PONNAMPET TALUK, KODAGU-571216 3. SRI. K.P. NANJAPPA S/O. K.B. PONNAPPA, AGED ABOUT 74 YEARS, KANOOR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216 4. SRI. K.G. SADASHIVA S/O. LATE K.S.GANAPATHI, AGED ABOUT 56 YEARS, KOTHUR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216. Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 5. SRI. K.R. SURESH S/O LATE V.P. RAMAIAH, AGED ABOUT 55 YEARS, KOTHUR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216. 6. SRI. C.B. BELLIAPPA S/O. LATE C.P. BHEEMAIAH, AGED ABOUT 54 YEARS KANOOR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216. 7. SRI. H.K. BHOGGRU S/O. LATE KARIYA, AGED ABOUT 69 YEARS, KOTHUR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216. 8. SMT. REKHA BOPANNA W/O. SRI. C.A. BOPANNA, AGED ABOUT 44 YEARS KANOOR VILLAGE AND POST PONNAMPET TALUK, KODAGU-571216 9. SMT. M.N. ASHWINI W/O. SRI. M.K. NANDA, AGED ABOUT 45 YEARS KOTHUR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216. 10. SMT. P. LEENA BOPANNA W/O. SRI P.S. BOPANNA, AGED ABOUT 46 YEARS KOTHUR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216. 11. SRI. M.N. SATHISH S/O. LATE SRI. M.P. NANJAPPA, - 3 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 AGED ABOUT 65 YEARS KOTHUR VILLAGE AND POST, PONNAMPET TALUK, KODAGU -571216. …PETITIONERS (BY SRI. SACHIN B.S., ADVOCATE) AND: 1. THE ASSISTANT REGISTRAR OF COOPERATIVE SOCIETIES MADIKERI SUB DIVISION, MADIKERI, KODAGU DISTRICT-571201 2. DEPUTY REGISTRAR OF COOPERATIVE SOCIETIES, MADIKERI, KODAGU DISTRICT-571201 …RESPONDENTS (BY SRI. S.R.KHAMROZ KHAN, ADDITIONAL GOVERNMENT ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER DATED 03.12.2021 IN APPEAL NO.01/2021-22 PASSED BY THE SECOND RESPONDENT VIDE ANNEXURE-A AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP , THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE R. NATARAJ ORAL ORDER The petitioners have challenged an order dated 03.12.2021 passed by the respondent No.2 in Appeal No.01/- 2021-22. They have also challenged an order bearing No.AR- - 4 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 35/RSR/Kalam-Pa.65/03/2019-20 dated 03.03.2021 passed by the respondent No.1. 2. (i) The facts in brief are that the petitioner No.1 was registered under the Karnataka Co-operative Societies Act, 1959 (henceforth referred to as 'Act, 1959' for short) and is managed by a Board of directors. The society was granted with a lease of 50 acres of Government land for a period of 35 years which expired on 03.03.2014. This lease was for a purpose of raising a coffee plantation. The petitioner Nos.2 to 11 who were the managing committee members held a board meeting on 20.06.2016 where it was resolved to utilize the income generated from the land for the purpose of getting an extension of the lease. A sum of Rs.25,19,600/- was the expenditure for renewal of lease for another term of 10 years. The general body accepted the resolution passed by the petitioners. (ii) Based on a complaint lodged by one of the members of the petitioner No.1 who alleged that members of the board had misappropriated a sum Rs.25,19,600/- under the pretext of getting the lease renewed, the Assistant Registrar of Co-operative Society, Madikeri appointed a Co-operative - 5 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 Development Officer to look into the allegations against the society. The Co-operative Development Officer submitted a report dated 25.07.2018 inter alia stating that a sum of Rs.25,19,600/- was utilised for getting the lease renewed as per the resolutions dated 19.03.2014, 20.06.2016 and 19.09.2016 and that there was no objection in the audit. It was also stated that the complainant who had attended annual general body meeting on 19.09.2016 did not raise any objection regarding the expenditure. (iii) The petitioners contend that the Assistant Registrar of cooperative society found certain inadequacies in the report submitted by the Co-operative Development Officer. Therefore, he directed further enquiry to be conducted by him accordingly, a further enquiry was conducted where it was held that the petitioners had failed to draw proper vouchers to establish that a sum of Rs.25,19,600/- was utilised for the purpose of extension of lease and therefore, there was an administrative lapse on the part of Chief Executive Officer and the Management of the petitioner No.1. - 6 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 (iv) The petitioners contend that it was not mentioned in the report of Co-operative Development Officer that the petitioners had misappropriated the said sum of Rs.25,19,600/-. On the other hand, it only suggested that the Board of the petitioner No.1 had resolved to utilise the said sum for the purpose of extension of lease and same was approved by the general body and thereafter the lease was renewed for a further period of 10 years. The petitioner contends that without following due process of law and without application of mind to the report submitted by the Co-operative Development Officer, the respondent No.1 passed an order dated 03.03.2021 under Section 68(1) of the Act, 1959 directing the petitioner No.1 to rectify the defects and irregularities as mentioned in the enquiry report and to take suitable action for recovery of a sum of Rs.25,19,600/-. (v) The petitioners challenged the said order before the respondent No.2 in Appeal No.1/2021-22 which was dismissed. Being aggrieved by the same, the petitioners are before this Court. - 7 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 3. The learned counsel for the petitioners contend that the respondent No.1 was bound to furnish a copy of the report submitted by the Co-operative Development Officer so as to enable the petitioners to respond to it or to comply with the same. The respondent No.2 could have taken appropriate action thereafter. He contends that the cooperative development officer did not impute any illegality to the petitioners in applying a sum of Rs.25,19,600/- for the purpose of getting the lease renewed. On the contrary, he was of the opinion that the same was utilised by the petitioner No.1 for extension of lease and that no audit party had raised any objection and even general body had accepted the same. He therefore, contends that except accusing the petitioner No.1 of administrative lapses, there was no allegation or finding that the petitioners had misappropriated the said sum of Rs.25,19,600/-. He therefore, contends that the respondent No.1 must have put the petitioners on notice, should have called for an explanation before passing a drastic order such as, directing the respondent No.1 to recover a sum of Rs.25,19,600/- from the petitioners. - 8 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 4. Per contra, learned Additional Government Advocate orally submitted that the Cooperative Development Officer had conducted an enquiry in which the petitioners had participated and had produced all the material documents which were available with them. He contends that the Co- operative Development Officer was of the opinion that there were no proper vouchers to justify that a sum of Rs.25,19,600/- was utilised or used for the purpose of getting the lease renewed. He therefore, contends that the respondent No.1 was justified in directing the recovery of a sum of Rs.25,19,600/- from the petitioners. He therefore, contends that there is no illegality in the order passed by the respondent No.1 and consequently no indulgence is warranted to interfere with the impugned order. He further contends that the respondent No.1 has taken out proceedings under Section 29C of the Act, 1959 for disqualification of the petitioners for misutilising the funds of petitioner No.1. 5. I have considered the submissions made by the learned counsel for the petitioner and the learned Additional Government Advocate for the respondents. - 9 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 6. The procedure for an enquiry by a registrar into any complaint regarding the constitution working and financial condition of a cooperative society is in Section 64 of the Act, 1959 which reads as follows: "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. [(2-A) An inquiry under sub-section (1) shall be completed [within a period of twelve months which may, however be extended by [by the Registrar for the reasons to be recorded in writing], for a further period of six months] :] - 10 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 [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.] (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 of 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 - 11 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 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 bye-laws except that - 12 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 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 - 13 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 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.]" 7. Section 64(4) of the Act, 1959 specifically provides that when an enquiry is made a copy of the enquiry report shall be communicated to the society concerned and on receipt of the report, it shall be the responsibility of the board to initiate immediate necessary action for rectification of the defects and place the same before the annual general body meeting or a special general body meeting convened for the purpose of the same. In the instant case, though the enquiry was conducted, the report of the enquiry was not furnished to the petitioners. The respondent No.1 has proceeded under Section 68(1) of the Act, 1959 to pass the impugned order directing action to be taken to recover a sum of Rs.25,19,600/- from the petitioners, on the premise that there were no corresponding vouchers justifying the expenditure of a sum of Rs.25,19,600/- by the members of the society. - 14 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 8. Therefore, without going into the merits of the report submitted by the Co-operative Development Officer, it is appropriate to direct the respondent No.1 to redo the exercise. Now that the petitioners have received a copy of the report which is enclosed along with the writ petition, the respondent No.1 shall hear out the petitioners and pass appropriate orders not only regarding a sum of Rs.25,19,600/- which is allegedly spent by the petitioners for renewal of the lease but also to take out necessary proceedings in accordance with law. 9. Hence, the writ petition is allowed. The impugned order dated 03.12.2021 passed in Appeal No.01/2021-22 passed by the respondent No.2 (Annexure -A) and the impugned order bearing No.AR/35/RSR/Kalam-Pa.65/03/2019- 20 passed by the respondent No.1 is set aside. In order to expedite the re-consideration of the matter, the petitioners are directed to appear before the respondent No.1 on 09.09.2025 at 11:00 a.m., and submit their objections if any. The respondent No.1 shall consider the objections if any and also any oral submission that may be made and pass appropriate orders within a period of one month thereafter. - 15 - HC-KAR NC: 2025:KHC:32850 WP No. 23533 of 2021 10. It is also open for the respondent No.1 to take out any other proceedings including but not limited to disqualification of the petitioners, but the same shall be in accordance with law. 11. In view of disposal of main petition, pending interlocutory applications, if any, do not survive for consideration and the same stand disposed off. Sd/- (R. NATARAJ) JUDGE HJ List No.: 1 Sl No.: 25