Does an order directing an inquiry under Section 81 of the Tamil Nadu Co-operative Societies Act provide a cause of action for instituting legal proceedings?

(Judgment of the Court was delivered by S.M.Subramaniam, J.) The present intra-court appeal under Clause 15 of the Letters Patent has been instituted by Venbavur Primary Agricultural Co-operative Credit Society, challenging the writ order dated 25.06.2026 passed in WP.No.23397 of 2026.

The respondent, who held the post of Secretary of the appellant/Co-operative Society, had retired from service. Admittedly, employment in a co-operative society is a non-pensionable establishment. His terminal benefits have not been settled on account of the pendency of disciplinary proceedings as well as surcharge proceedings.

The writ petition was filed seeking direction against the respondent/co-operative society to furnish copy of the order dated 28.04.2026, wherein a statutory inquiry under Section 81 of the Tamil Nadu Co-operative Societies Act, 1983 (hereinafter referred to as ‘the Act’) has been ordered. The question arises whether such relief can be granted in a writ petition in the context and provisions of the Tamil Nadu Co-operative Societies Act.

Chapter IX of the Act, speaks about audit, inquiry, inspection and investigation, surcharge and supersession. Section 80 of the Act provides for the conduct of an audit in a registered society to maintain the accounts. Section 81 of the Act governs inquiry, while Section 82 of the Act deals with inspection and investigation. Specifically, Section 81(1) stipulates that ‘the Registrar may, of his own motion and shall, on the application of a majority of the board or of not less than one third of the members or on the request of the financing bank or of the District Collector, hold an inquiry, or direct some person authorised by him by order in writing in this behalf to hold an inquiry into the constitution, working and financial condition of a registered society or any alleged misappropriation, fraudulent retention of any money or property, breach of trust, corrupt practice, or mismanagement in relation to that society or into any particular aspect of the working of that society.’

The scope of a statutory inquiry under Section 81 of the Act is wide enough to cover all aspects relating to the administration of the society. Rule 104 of the Tamil Nadu Co-operative Societies Rules, 1988, contemplates the procedure regarding inquiry, inspection or investigation. Thus, a statutory inquiry is ordered and conducted by the competent authorities to ascertain the correctness of the accounts, administration and the entire affairs of a co-operative society registered under the Act. The statutory inquiry may cover multiple aspects, including irregularities, illegalities, misappropriation of funds, frauds, corrupt practices and mismanagement.

Upon submission of the statutory inquiry report under Section 81 of the Act, the competent authority is empowered to initiate action against the employees, directors of the society and other persons connected with its affairs. Three-fold actions are permissible under the Act based on the report submitted under Section 81. They are: a. Departmental disciplinary proceedings may be initiated. b. A criminal case can be registered before the Commercial Crime Investigation Wing (CCIW) c. Surcharge proceedings may be initiated under Section 87 of the Act to recover any financial loss caused to the society.

All the three-fold actions may be initiated simultaneously, as the procedures contemplated for each are distinct and different. There is no bar to conduct all these proceedings independently and simultaneously and the actions do not depend on one other.

Departmental proceedings are initiated based on the discipline, appeal and conduct rules applicable to the society’s employees. A criminal case can be registered under the provisions of criminal law wherever a statutory offence under the law has been committed. Surcharge proceedings can be initiated if financial loss is caused to a co-operative society. Since these three-fold actions are independent and distinct, Courts are not expected to stall in any one of the proceedings based on the pendency of another.

In the present case, the dispute has reached the stage of surcharge proceedings. Section 87 of the Act contemplates the procedures for surcharge proceedings. Based on the report submitted under Section 81 of the Act, a notice under Section 87(1) may be issued by the authority to initiate surcharge proceedings. An inquiry must then be conducted by the competent authority by affording an opportunity to be heard to all parties.

A final order passed under Section 87 of the Act is appealable under Section 152 of the Act. Section 152 provides for an appeal to the Special Tribunal for Co-operative Societies (constituted under Section 151 of the Act) where the respective Principal District Judges are notified as the Special Co-operative Tribunal to deal with such appeals. An appeal under Section 152 of the Act constitutes judicial proceedings conducted by a judicial forum. Therefore, a writ petition is not maintainable against an order passed under Section 87 of the Act.

The High Court cannot adjudicate disputed facts in surcharge proceedings where allegations relating to financial losses to a society are dealt with. This is precisely why High Courts do not entertain writ petitions against notices or final orders passed under Section 87 of the Act. When an efficacious alternative judicial remedy before the Principal District Judge/Special Co-operative Tribunal is available, an aggrieved person is expected to approach the Tribunal for an effective adjudication of the issues. Only after the disposal of an appeal under Section 152 of the Act does a remedy lie before the High Court under Article 227 of the Constitution of India.

In the present case, the respondent herein filed a writ of mandamus seeking a direction to furnish a copy of the order dated 28.04.2026, which directed an inquiry under Section 81 of the Act. Such an order cannot be construed as a valid cause of action for initiating writ proceedings. It is an order passed by the competent authority to conduct an inquiry under Section 81 of the Act, which is an internal departmental action which per se does not provide a cause of action for instituting legal proceedings.

A cause of action will arise only if further actions are initiated against the writ petitioner following the inquiry and the submission of the final report, but not otherwise. Even after an inquiry is conducted, there is a possibility that further actions against the employees or other persons may be dropped. Therefore, it is premature to approach the Court to seek particulars or reports relating to the conduct of an inquiry under Section 81 of the Act. The statutory report is meant solely for administrative consideration. Only in the event that further action is initiated based on Section 81 inquiry report, can an aggrieved person approach the competent authority.

Therefore, in the present case, the writ petition seeking a copy of the inquiry order issued by the competent authority under Section 81 of the Act need not be complied with and consequently, the writ petition is not maintainable.

At this juncture, the learned counsel for the appellant submitted that departmental proceedings have been initiated against the first respondent, but no subsistence allowance has been paid to him. Regarding the payment of subsistence allowance to co-operative society employees, the special bye-laws contemplate such payment during service. The subsistence allowance must be paid in compliance with the Rules or Bye-laws. An employee under suspension must produce the necessary certificates and particulars to enable the management of the co-operative society to sanction and disburse the subsistence allowance. Undoubtedly, subsistence allowance is a legal right of an employee under suspension. However, such an allowance is to be paid by complying with the procedures contemplated under the special bye-laws, as well as under the provisions of the Act and Rules. Regarding retired employees of a co-operative society, they belong to a non-pensionable establishment and are allowed to retire without prejudice to the departmental disciplinary proceedings.

In the present case, the main prayer in the writ petition is only for furnishing a copy of the order initiating the Section 81 inquiry and therefore, the question of considering the payment of subsistence allowance does not arise.

In view of the discussions made above, this Court is of the considered view that the impugned writ order cannot be sustained. Consequently, the writ order passed in WP.No.23397 of 2026 is hereby set aside and the writ appeal stands allowed. Connected civil miscellaneous petition is closed. (S.M.S.,J.) (K.G.R.,J.) 21-08-2026