- 1 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF NOVEMBER, 2025 PRESENT THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE C.M. POONACHA WRIT APPEAL NO. 1081 OF 2024 (CS-RES) BETWEEN: 1. KARNATAKA STATE COLLEGE LECTURERS AND SCHOOL TEACHERS HOUSE BUILDING COOPERATIVE SOCIETY LTD NO 55/1, 3RD CROSS, GURUKULA LAYOUT J.P. NAGAR, KUPPULRU MYSURU - 570 031 BY ITS PRESIDENT MAHADEVASWAMY S/O LATE M. SHIVAPPA AGED 53 YEARS …APPELLANT (BY SRI DEVI PRASAD SHETTY, ADVOCATE) AND: 1. STATE OF KARNATAKA DEPARTMENT OF CO-OPERATION M.S. BUILDING, AMBEDKAR VEEDI BANGALORE - 560 001 REPRESENTED BY ITS PRINCIPAL SECRETARY 2. REGISTRAR OF CO-OPERATIVE SOCIETIES DEPARTMENT TO CO-OPERATION OFFICE OF THE REGISTRAR OF Digitally signed by SUMATHY KANNAN Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 CO-OPERATIVE SOCIETIES No.1, ALI ASKER ROAD BANGALORE - 560 052 3. ADDITIONAL REGISTRAR OF CO-OPERATIVE SOCIETIES (H & M) DEPARTMENT OF CO-OPERATION OFFICE OF THE REGISTRAR OF CO-OPERATIVE SOCIETIES No.1, ALI ASKER ROAD BANGALORE - 560 052 4. THE DEPUTY REGISTRAR OF CO-OPERATIVE SOCIETIES CIRCLE 1, BENGALURU DISTRICT SAHAKARA SOUDHA, MARGOSA ROAD MALLESHWARAM BENGALURU - 560 001 …RESPONDENTS (BY SMT. NAMITHA MAHESH, AGA FOR R-1 TO 4, SRI VINOD PRASAD, ADVOCATE FOR IMPLEADING APPLICANT IN I.A. No.3/2024, SRI PRAJWAL M. BHARADWAJ, ADVOCATE FOR SRI S. KALYAN BASAVARAJ, ADVOCATE FOR IMPLEADING APPLICANT IN I.A. No.4/2024) THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO ALLOW THE TOP NOTED APPEAL BY SETTING ASIDE THE ORDER DATED 01.02.2024 PASSED IN W.P.No.8588/2021. THIS APPEAL, COMING ON FOR PRELIMINARY HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: - 3 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE and HON'BLE MR. JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE) 1. The appellant has filed the present appeal impugning a common order dated 01.02.2024 passed by the learned Single Judge of this Court in a set of three petitions [Writ Petition No.15330/2023 (CS-RES) C/w. Writ Petition No.7314/2021 (CS- RES) and Writ Petition No.8588/2021 (CS-RES)]. 2. The appellant is essentially aggrieved by the impugned order insofar as it relates to W.P.No.8588/2021. The said petition was filed by the appellant impugning an order dated 15.04.2021 passed by the Additional Registrar of Co-operative Societies (Respondent No. 3). 3. In terms of the said order, an inquiry under Section 64 of the Karnataka Co-operative Societies Act, 1959 [hereafter 'the Act'] was directed in respect to certain reference points regarding the - 4 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 allegations of mis-appropriation. We consider it apposite to reproduce the operative part of the said order in extenso: "ORDER I, A.C.Diwakar, KCS, Addl. Registrar of Cooperative Societies (Housing and others) while exercising powers conferred under Section 64(1) of Karnataka Cooperative Societies Act 1959 do hereby appoint Sri.P.Shashidhar, Deputy Registrar of Cooperative Societies, 1st Circle, Bangalore Urban District, Bangalore as enquiry officer to undertake statutory enquiry under section 64 of Karnataka Cooperative Act 1959 by forming the following enquiry points on the alleged misappropriation said to be taken place at "Karnataka State College Lecturers and School Teachers House Building Cooperative Society Ltd" Enquiry points:- 1) In 2015 during the term of office of Mr. M. S. Mahadevaswamy, the president of the society, as a legal opinion, about the misappropriation of funds of Rs.1,35,150/- in the society by creating a receipt without the original receipt of the lawyer. 2. The contractor was assigned to do the site development works on turnkey basis, the contractors and layout guards were carrying out the layout work, and again the society generated receipts for the said works and spent Rs.1,52,750/- unauthorizedly on the society. 3. Regarding the unauthorized expenditure and misuse of Rs.9.36,430/- as per the audit report for the year 2016-17, no action has been taken for recovery even though it has been included in the audit report. 4. About MS Mahadevaswamy, the president of the society, who did not protect the interests of the members and spent and misused the funds of the society as if it were his own money, but also misused his authority by donating - 5 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 Rs.4,50,000/-to the educational institution run by his wife and brother-in-law. 5. The president of society, MS the Mahadevaswamy, has transferred 4 crores of money from the society to MSA Infratech, which is owned by his elder brother and brother-in- law, and misused the money. 6. The members of the society, faculty, teachers, saved money in their salary and paid for the sites for about 10 years in advance, MS Mahadevaswamy disregarding the seniority of the members and making their friends as co- members and allotting the sites. 7. About MS Mahadevaswamy, the president of the society, after taking one time land advance in 6 months and allotting land to his blood relatives. 8. When the NOC asked the society to sell the land of the members who are members of the society, the NOC gave three and a half lakhs for a plot measuring 30*40 and 8 lakhs for a plot measuring 40*60. 9. 35 lakhs was given in cash to the developer of the society for development expenses despite not being allowed to do so, and vouchers were created for the amount given in cash. 10. Discrimination by non-allotment of plots to such members even though the seniority list is not approved by the Regulator of Co-operative Societies. 11. About 25 to 30 co-members who have not been given a place in the manner of seniority and have been directly registered for the place by taking an advance of the place and registering the place directly, which is not only unfair to the real members, but also has taken more money from the fellow members and registered the place. 12. About MS Mahadevaswamy, the president of the society, after allotting the land by the society, he cheated the members by stipulating a condition to give a contract to the organization run by his Bhav Maidun to build a house. - 6 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 13. To examine the fact that Mr. Mahadevaswamy, the president of the society, paid Rs.1.50 crore to his wife in a check through a bank without any legal agreement and after giving the money, the land came into the possession of the society. 14. Regarding the fact that he created the land deeds and forged the signature of the land owner. If any such other serious allegations are found during the course of investigation, then the prior permission of this authority will be inquired into such allegations as well." 4. It is clear from a plain reading of the said order that the allegations in respect of which the inquiry was directed to be held, were serious in nature. It is the appellant's case that the said inquiry was instituted pursuant to an order issued on 23.03.2021 on the direction of the Minister of Co-operation and not independently. Therefore, the said order is required to be set aide. 5. The translated copy of the said instructions is set out below: "NOTE The letter of Member, Karnataka State College Lecturers and School Teachers House Building Cooperative Society has been enclosed herewith. In the said letter it has been stated regarding irregularities taken place in Karnataka State College Lecturers and School Teachers House Building Cooperative Society Ltd., Mysore and requested to undertake enquiry - 7 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 under Section 64 of Cooperative Societies Act. Hence it has been instructed to undertake enquiry under Section 64 of Cooperative Societies Act as per his request." 6. It is the appellant's case that power under Section 64 of the said Act could not be exercised by the Registrar on the instructions of another authority. Section 64 of the said Act is reproduced below: "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.] - 8 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 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 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 - 9 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 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 2 [forty five days] 2 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.]" 7. It is apparent from the plain language of sub-section (1) of Section 64 that the Registrar is empowered to conduct inquiry "of his own motion". There is merit in the contention that the Registrar could not exercise the powers under Section 64 of the said Act under the dictates of another authority. Thus, the order dated 15.04.2021 directing the holding of inquiry under Section 64, would be vulnerable to challenge on the ground that it was issued on the - 10 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 instructions of a third party, if the Additional Registrar had issued the order without being independently satisfied of the necessity of doing so. The learned Single Judge had examined the aforesaid challenge and had rejected the contention that the impugned order dated 15.04.2021 was passed by the Additional Registrar on the instructions of the Minister of Co-operation dated 23.03.2021. The learned Single Judge had noted that in addition to referring to the said instruction, the Additional Registrar had also mentioned other complaints and had taken the decision to institute an inquiry on an overall consideration of the complaints received. 8. As is apparent from the plain language of Section 64(1) of the said Act, the Registrar is empowered to undertake an inquiry "of his own motion". Plainly, the fact that certain instructions had been issued by the Minister of Co-operation, would not debar the Registrar of his power to conduct an inquiry of his own motion, if there was sufficient material before the Registrar to initiate such inquiry. 9. In the given facts, it is difficult to accept that the decision of the Additional Registrar to hold an inquiry is occasioned solely for - 11 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 complying with the instructions dated 23.03.2021 given by the Minister of Co-operation as set out above. It is also relevant to note that it is not the appellant's contention that the Additional Registrar is not empowered to undertake inquiry of his own motion. It is thus apparent that the appellant's grievance stems only from the apprehension that the inquiry has been initiated solely on the basis of instructions issued by the Minister of Co-operation. 10. In our view, the said controversy can be settled by directing the Additional Registrar to reconsider his order dated 15.04.2021 and take a decision uninfluenced by the Note dated 23.03.2021. The Additional Registrar shall once again examine the complaints as received by him as well as the complaints forwarded by the Minister as referred to in the Note dated 23.03.2021. In the event the respondent No.3 is of the view that an inquiry is required to be conducted of his own motion, the Additional Registrar shall reiterate the order dated 15.04.2021 and proceed to conduct the inquiry, in accordance with law. However, if the Additional Registrar finds that there are no grounds to conduct the inquiry or it is not warranted of his own motion, he would refrain from conducting an inquiry and communicate its decision, to the affected parties. - 12 - HC-KAR NC: 2025:KHC:49122-DB WA No. 1081 of 2024 11. We also clarify that in such eventuality, the members of the appellant society are not precluded from taking such further remedial steps as available, in accordance with law. 12. The appeal is disposed of in the aforesaid terms. 13. We request respondent No.3 to take a decision as aforesaid as expeditiously as possible, and preferably within a period of four weeks from date. 14. All pending applications are disposed of. Sd/- (VIBHU BAKHRU) CHIEF JUSTICE Sd/- (C.M. POONACHA) JUDGE KS List No.: 1 Sl No.: 17