CA Wasalatilaka and Others v. The Education Employees Co-operative Thrift and
Credit Society Ltd, and Others137
WASALATILAKA AND OTHERS
v.THE EDUCATION EMPLOYEESCO-OPERATIVE THRIFT ANDCREDIT SOCIETY LTD. AND OTHERS
COURT OF APPEALEDUSSURIYA, J.
CA APPLICATION NO. 585/92.
21. 30 SEPTEMBER, 20 OCTOBER AND18 NOVEMBER, 1992.
Certiorari – Order of dissolution of Committee of Thrift and Credit Co-operativeSociety-Effect of amending Act No. 11 of 1992 – Supplies and services essentialto the life of the community vis-a-vis Ministry of Food and Co-operatives – Powerof dissolution.
The petitioners are members of the Committee of the Education EmployeesCo-operative Thrift and Credit Society Ltd. which has as its main objectives firstlythe promotion of thrift among its members and secondly, extension of creditfacilities to its members. The members are officers and other employees of variousinstitutions under the Ministry of Education and Higher Education. The petitionerswere elected to the Committee by the general body of the Society on 20th January1992. The 5th respondent Hon. Weerasinghe Mallimarachchi, Minister of Foodand Co-operatives, by Order dated 21 July, 1992 purported to be made in termsof Regulation 2 of the Emergency (Maintenance of Essential Supplies andServices) Regulation 1 of 1989 framed under section 5 of the Public SecurityOrdinance removed the petitioners and appointed the 2nd, 3rd and 4threspondents as Competent Authority of the Society. The order of removal madeby the 5th respondent was made within hours of the election and was publishedin Gazette Extraordinary No. 724/D of 21 July, 1992. The order was made bythe 5th respondent on the ground "that the continued presence of the petitionersas members of the Committee of Management would be totally detrimental andwould adversely affect the interests of the society and that there is likely to bea disruption of the maintenance of supplies and services essential to the life ofthe community. The order referred to an "interim report" made under s. 47 (2)of the Co-operative Societies Law No. 5 of 1972 but in the affidavit filed by the5th respondent he referred to an inquiry held under s. 46 of the Co-operativeSocieties Law held by one T. B. H. Perera. Section 47(2) was repealed by theamending Act No. 11 of 1992 which came into operation on 6th March 1992.The interim report was said to have been received on 13th March 1992. Thiswas a report by the Commissioner of Food and Co-operative Development ofan alleged investigation under s. 47 (2).
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Held :
Although prior to the amending Act No. 11 of 1992 a Commissioner couldhave, under section 47 (2) proceeded to act under section 48 (1) as amendedby Act No. 32 of 1983 and dissolved a Committee after giving the Committeean opportunity to state its objections to dissolution and after considering suchobjections at a General Meeting, after 6th March 1992 he had no longer anyauthority to remove the Committee and there was no provision of law underwhich the Commissioner could have proceeded with an investigation unders. 47 (2) even if such an investigation had commenced prior to that date. The5th respondent could not have acted on an “interim report” which allegedlycontained material discovered in the course of an investigation under s. 47
which the Commissioner had no right or authority to carry out. No reportmade under s. 46 was before Court
“Supplies and services essential to the life of the community" in the caseof the Ministry of Food and Co-operatives refer to consumer items and otherarticles which are distributed by the Co-operative Societies and so, extensionof credit facilities is not a supply or service essential to the life of the community.Further if credit facilities by the 1st respondent Co-operative Thrift and CreditSociety are not available, government loans are, since the members of the 1strespondent society are all government servants.
After the amending Act No. 11 of 1992 the powers of dissolution of theRegistrar are limited to Co-operative Societies operating with state funds. As faras the other Societies are concerned such powers are now vested solely in thegeneral body of the Society. The 5th respondent had therefore no power to makethe impugned order.
Case referred to :
President of the Eravur Multi-Purpose Co-operative Society Ltd. v. TheMinister of Co-operatives and Others S.C. Application No. 176/86.
APPLICATION for a Writ of Certiorari to quash the order of the Minister of Foodand Co-operatives.
Faiz Mustapha, P.C. with H. Withanachchi for 1st, 3rd, 4th, 5th, 6th, 7th and8th petitioners.
Lalith Athulathmudali, P.C. with Ranjan Gunaratne, Dr. Ranjith Fernando, MahendraAmerasekera, Ranjini Morawaka, Nalini Dissanayake and Gamini Peiris for 2ndand 9th petitioners.
P. L D. Premaratne, P.C., Additional Solicitor-General with K. C. Kamalasabayson,Deputy Solicitor-General for 2nd to 5th respondents.
Cur. adv. vult.
CA Wasalatilaka and Others v. The Education Employees Co-operative Thrift and
Credit Society Ltd, and Others (Edussuriya, J.)139
January 15, 1993.
EDUSSURIYA, J.
The petitioners seek the issue of a Writ of Certiorari quashingthe order made by the 5th respondent dated 21st July, 1992 purportingto act in terms of Regulation 2 of the Emergency (Maintenance ofEssential Supplies and Services) Regulation 1 of 1989 framed undersection 5 of the Public Security Ordinance and appointing a Boardconsisting of the 2nd, 3rd and 4th respondents to be the CompetentAuthority for the 1st respondent society.
The 1st respondent society is a Co-operative Society which hasas its main objectives, firstly, the promotion of thrift amongst itsmembers and secondly, extension of credit facilities to its members.Its members being officers and other employees of various institutionsunder the Ministry of Education and Higher Education.
The petitioners are members of the committee of the firstrespondent society which was elected on 20th July, 1992 and the5th respondent has admitted in his affidavit that he is aware of theirelection to the committee. The petitioners were also members of theprevious committee which had been suspended on 20th January,1992 by the Commissioner of Co-operative Development.
The order of the 5th respondent which is complained of, had beenmade within hours of the said election and was published in theGazette Extraordinary No. 724/3 of 21st July, 1992.
In paragraph 24(b) of his affidavit the 5th Respondent has givenhis reasons for making the said order, wherein he stated that “Ona careful consideration of the matters mentioned in document 5R3,the matters set out in sub-paragraphs (e) to (j) of paragraph 24 andthe on going investigation by the Criminal Investigation Departmentand the nature of the activities carried on by the first RespondentSociety, I was of opinion that the continued presence of the Petitionersas members of the Committee of Management would be totallydetrimental and would adversely affect the interests of the Society,and that there is likely to be a disruption in the maintenance ofsupplies and services essential to the life of the community. In thesaid circumstances, I made the said order of 21st July, 1992".
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The report 5R3, referred to by the 5th respondent is dated16th March, 1992 and has been signed by the Commissioner ofCo-operative Development and addressed to the Secretary to theMinistry of Food and Co-operatives. In the 1st paragraph of 5R3 theSecretary has been requested to bring the contents of 5R3 to theattention of the 5th respondent.
5R3 is referred to as an "interim report of an investigation unders. 47(2)”, which said section was repealed by amending Act No. 11of 1992 which came into operation on 6th March, 1992. However,in the first paragraph itself the Commissioner of Co-operativeDevelopment has stated that on 13th March he received the interimreport relating to an investigation that is now being carried outby the department". Thus 5R3 is not an interim report though theheading says so, but is a report prepared by the Commissioner ofFood and Co-operative Development on an interim report of analleged investigation under s. 47 (2).
The 5th respondent has affirmed in paragraph 24 (a) that the report5R3 is based on the inquiry referred to in paragraph 20 of his affidavit.However, in paragraph 20, the 5th respondent has affirmed thatan inquiry was held under s. 46 of the Co-operative Societies LawNo. 5 of 1972 by one T. B. H. Perera.
Under s. 46 of the Co-operative Societies Law No. 5 of 1972 asamended by Act No. 32 of 1983 a Registrar could hold an inquiryinto the constitution, working and financial condition of a registeredsociety, whereas under s. 47 (2) the Registrar may of his own motioninvestigate or direct the investigation of the affairs of a registeredsociety.
Thus 5R3 is not a report based on an interim report of aninquiry if any, carried out by T.B.H. Perera or anyone else unders. 46 of Law No. 5 of 1972, since the Commissioner of Co-operativeDevelopment has stated therein that it is an interim report of aninvestigation under s. 47 (2).
Prior to the amending Act No. 11 of 1992, a Commissioner couldhave under s. 47 (2) proceeded to act in terms of s. 48 (1) amendedby Act No. 32 of 1983 and dissolved a Committee after giving theCommittee an opportunity to state its objections to its dissolution andafter considering such objections at a general meeting. However, in
CA Wasalatilaka and Others v. The Education Employees Co-operative Thrift and
Credit Society Ud. and Others (Edussuriya, J.)144
this instance, firstly, the Commissioner of Co-operative Developmentacted under a repealed section, secondly, the Committee had notbeen given an opportunity of stating its objections and thirdly, thegeneral body has not had an opportunity of considering the objectionsif any.
It therefore, appears, that when the Commissioner of Co-operativeDevelopment realised that he no longer had the authority to removethe Committee, he prepared a report which he claimed was basedon an interim report of an investigation in an attempt to get the 5threspondent to do what he the Commissioner could not do after theamendment. Needless to say that after 6th March 1992, the dateof the amending Act No. 11 of 1992, there was no provision of lawunder which the Commissioner could have proceeded with aninvestigation under s. 47 (2) even if such an investigation hadcommenced prior to that date.
Thus it is clear that the sole purpose of the Commissioner inpreparing and forwarding 5R3 to the Secretary to the 5th respondentwas to use the 5th respondent as a cat's paw.
In view of the above mentioned reasons the 5th respondent shouldnot have acted on 5R3 which allegedly contained material allegedto have been discovered in the course of an alleged investigationunder s. 47 (2) which the Commissioner had no right or authorityto carry out after 6th March, 1992, the date on which the amendingAct became law.
I may also mention that although in paragraph 20 of his affidavitthe 5th respondent has stated that T. B. H. Perera's report in respectof an inquiry alleged to have been held under s. 46 will be availablefor inspection by Court no such report was filed in Court even later.In any event it is difficult to understand why such a report if availablewas not filed along with 5R3.
In view of these reasons grave doubt arises as to whether therewas in fact any inquiry under s. 46 or any investigation unders. 47 (2) which commenced prior to the amendment No. 11 of 1992.
Further, from the document 5R4 which the 5th respondent hasfiled with his affidavit it is evident that a Co-operative Inspector hadreported that one Mrs. Haneena, the Accountant was responsible for
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the shortage of a sum of Rs. 1,48,772/30. The petitioners havealleged that not only Mrs. Haneena but also the Deputy GeneralManager (Finance), two Assistant Accountants and the Cashierhad been subsequently interdicted by the Committee following areport made by a retired Assistant Commissioner of Co-operativeDevelopment appointed by that Committee to hold a disciplinaryinquiry against the said Mrs. Haneena. The petitioners have alsoalleged that after the former Committee was suspended by theCommissioner of Co-operative Development with effect from 23rdJanuary, 1992 and the 2nd and 3rd respondents and two othersappointed to manage the affairs of the 1st respondent society theyreinstated those officers whom the Committee had interdicted. Thoughthe 5th respondent has claimed to be unaware of this, the 2nd and3rd respondents have not filed affidavits denying the same, nor isthere any statement by them to the effect that those officerswere re-instated after due inquiry. In any event the 2nd and 3rdrespondents could not have said so of Mrs. Haneena in view of 5R4.So that these officers had been reinstated by those appointed bythe Commissioner of Co-operative Development who is the sameperson who prepared 5R3, and if there had been any inquiry orinvestigation by T. B. H. Perera or anyone else after the formerCommittee was interdicted, such inquiring officer would have had torely on these officers who were reinstated, and the books maintainedby them, since these officers were persons entirely responsible formaintaining Books of Accounts and payments and this is evident from5R3 which states that the 2nd petitioner had obtained a large sumof money from the Accountant who is none other than the said Mrs.Haneena.
As stated earlier, the 1st respondent society has as its mainobjective the promotion of thrift amongst its members and the ex-tension of credit facilities to its members.
The question then arises whether the services provided to itsmembers by the 1st respondent society can be brought within themeaning of the words "supplies and services essential to the lifeof the community".
It is my view that "supplies and services essential to the life ofthe community", in the case of the Ministry of Food and Co-operativesrefer to consumer items, and other articles which are distributed bythe co-operative societies throughout the country to the members
CA Wasalatilaka and Others v. The Education Employees Co-operative Thrift and
Credit Society Ud. and Others (Edussuriya, J.)143
of the public and which are necessary for the daily life of thecommunity, and therefore extension of credit facilities to its membersby the 1st respondent society is not a supply or service essentialto the life of the community. All members of the 1 st respondent societywho are employees of the Ministry of Education as governmentservants are entitled to obtain government loans for the purchaseof building sites, to repair or renovate residences, construction ofhouses, distress loans for relief from debt, etc. Therefore, in any event,in view of the availability of government loans for the above mentionedpurposes, the extension of credit facilities to its members by the 1strespondent society cannot be termed a service essential to thelife of the community.
Therefore it is my firm view that the 5th respondent is notempowered under the Emergency Regulations to make the impugnedOrder.
Now, the amendment No. 11 of 1992 to the Co-operative SocietiesLaw draws a distinction in connection with the course of action whicha Registrar can follow, after an inquiry into the constitution, workingand financial conditions or inspections relating to the books of societiesoperating with state funds and those which are not.
The powers vested in the Registrar relating to dissolution ofcommittees and appointment of suitable persons to manage the affairsof a society can now be exercised only in the case of societies operatingwith state funds. As far as the other societies are concerned suchpowers are now vested solely in the general body of the society.
Therefore the purpose of amendment No. 11 of 1992 appears tobe to limit the powers of the Registrar who is an officer of governmentand to remove such societies not operating with state funds fromgovernmental control.
In this particular instance, the membership of the 1st respondentsociety is comprised of government servants and the majority of themare teachers and they must be considered to be quite capable ofhandling their own affairs and besides, the sunending act givesthe general body the power to remove any undesirables from theCommittee.
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In fact the charges that had been framed against the petitionersas members of the previous Committee had been placed before thegeneral body and had been considered by the general body.Thereafter, a vote had been taken on whether a Committee shouldbe elected and the general body had resolved to elect a Committee.At the election the 1st petitioner had been elected unanimously, the2nd and the 3rd petitioners elected uncontested. The 4th, 5th, 6th,7th, and 8th petitioners who had been members of the formerCommittee had also been elected.
The 5th respondent in his affidavit claims to be unaware of theconsideration of the charges by the general body. If in fact the chargeshad not been considered by the general body, the 5th respondentwould have undoubtedly stated, as he has done in respect of otheraverments in the 2nd petitioner’s affidavit, that he is 'reliably informed'that it was not so.
After the amendment No. 11 of 1992, the future and the destinyof the 1st Respondent society lies with the general body since thelaw now provides the general body with the machinery to deal withan errant Committee. Therefore, where the Committee has beendemocratically elected as envisaged by law I do not see how the5th respondent could make the impugned Order.
However, I may mention that the petitioners themselves admit ashortage of Rs. 1,077,849/24 according to a report prepared by oneD. S. Mohotti, Internal Auditor, appointed by the 2nd petitioner, andnow that the powers of the Registrar of Co-operatives have beenremoved, it is in the interests of the members to keep an eye onthe steps taken by the Committee in relation to the shortage. Also,when the same person or persons stand for election over and overagain and there is, as in this case a shortage which runs into overRs. 1,000,000 it is time that the members not only asked themselveswhether such persons are indispensable, but also took a closer lookat the work of the Committee, because if they do not, the time maycome when the 1st respondent society may not be able to fulfil itsobjectives.
According to the 5th respondent's affidavit the 1st respondentsociety has an amount of Rs. 158 million as deposits. Further, thereis no affidavit by anyone that a loan applied for has been refused
CA
Ramanayake v. Sampath Bank Limited and Others
145
due to lack of funds or that there has been delay in processingapplications for loans and that such delays were deliberately caused,because the 1st respondent society had no funds to grant the loansapplied for.
In these circumstances, I am of the view that there was no materialon which the 5th respondent could have reasonably drawn theinference that a disruption of the extension of credit facilities to themembers of the 1st respondent society was likely, even if such aservice is considered to be essential to the life of the community.
In paragraph 24 (a) the 5th respondent has affirmed that instancesof mismanagement were brought to his notice. Sharvananda, C.J. hasheld in President of the Eravur Multi Purpose Co-operative SocietyLtd. v. The Minister of Co-operatives and others,(1) that there canbe mismanagement of a society's affairs without there being anydisruption of essential supplies.
For the above mentioned reasons, this Court grants the reliefsought by the petitioners in paragraph (a) of the prayer to theirPetition. Petitioner are also entitled to costs of this application.
Certiorari issued.
