The Administrator, (Managing Director) vs The Assistant Director of Handlooms and Textiles

2026:MHC:4263
CRP Nos.4903 & 4912 of 2026
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on:08.09.2026 Pronounced on:16.10.2026
CORAM
THE HON'BLE MR.JUSTICE P.B. BALAJI
CRP. Nos.4903 & 4912 of 2026
and CMP. No.21439 of 2026
The Administrator,
EH-113, Chennimalai Kongu Primary
Handloom Weavers Co-opeartive
Production and Sale Society Limited,
Chennimalai - 638 051, Perundurai
Taluk, Erode District.
..Petitioner in CRP. No.4903 of 2026
G.Maragatham, W/o. Ramasamy,
The Administrator,
EH-113, Chennimalai Kongu Primary
Handloom Weavers Co-opeartive
Production and Sale Society Limited,
Chennimalai.
..Petitioner in CRP. No.4912 of 2026
Vs
1. The Assistant Director of Handlooms,
Erode Circle, Erode.
2.The Handloom Inspector/Sale Officer,
EH-113, Chennimalai Kongu Primary
Handloom Weavers Co-opeartive
Production and Sale Society Limited,
Chennimalai.
3.A.P.Subramaniam, S/o.Ponnusami,
D.No.203, Thirunagar, Chennimalai,
Currently residing at D.No.48/A2,
Cavery City, Paravalasu Pirivu,
Perundurai Via Erode District.
..Respondents in both CRPs
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PRAYER in CRP. No.4903 of 2026: This Civil Revision Petition is filed under
Article 227 of the Constitution of India,
(i) to order direction, calling for the records relating to the Common
Order dated 29.10.2025 passed in CMA (CS) No.06 of 2019 by the Cooperative
Tribunal, Erode.
(ii) Consequently, uphold and confirm the Conditional Attachment Order
st
dated 14.02.2019 in CEP. No.02/2018-2019 passed by the 1
respondent/Arbitrator.
PRAYER in CRP. No.4912 of 2026: This Civil Revision Petition is filed under
Article 227 of the Constitution of India,
(i) to order direction, calling for the records relating to the impguned
Common order dated 29.10.2025 passed by the Co-operative Tribunal, Erode, in
CMA (CS) No.06 of 2018, and quash the same as being without jurisdiction,
contrary to law, violative of principles of natural justice and perverse;
(ii) Consequently, uphold and Confirm the Arbitration Award dated
02.02.2018 passed by the 1st Respondent/Arbitrator in ARC No.02/2017-2018,
thereby restoring the surcharge liability of Rs.2,98,63,285/- (Rupees Two
Crores Ninety Eight Lakhs Sixty Three Thousand Two Hundred and Eighty
rd
Five only) against the 3 respondent herein.
(iii) Award cost of these proceedings throughout in favour of the
petitioner.
(in both CRPs)
For Petitioner(s): Mrs.R.Nasrine
For Respondent(s): Mr.P.Sunil,
Government Advocate for R1 & R2
Mr.Sricharan Rangarajan,
Senior Counsel for
Mr.A.K.Athiban Vijay for R3
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2026:MHC:4263
CRP Nos.4903 & 4912 of 2026
COMMON ORDER
The Administrator (Managing Director) of the EH-113, Chennimalai
Kongu Primary Handloom Weavers Co-opeartive Production and Sale Society
Limited, Chennimalai - 638 051, is the revision petitioner. The revision
petitioner challenges the common order dated 29.10.2025 in CMA (CS) No.6 of
2019 on the file of the Cooperative Tribunal, Erode and consequently, seeks to
restore the conditional attachment order dated 14.02.2019, passed by the learned
Arbitrator.
2. I have heard Mrs.R.Nasrine, learned counsel for the petitioner,
Mr.P.Sunil, learned Government Advocate, appearing for the respondents 1 and
2 and Mr.Sricharan Rangarajan, learned Senior Counsel for Mr.Athiban Vijay,
learned counsel for the contesting third respondent.
3. The learned counsel for the revision petitioner would contend that the
learned Arbitrator had considered the entire records before passing the award
against the third respondent. Taking into consideration the oral and
documentary evidence, however, the Appellate Court has proceeded to
discharge the third respondent from all liabilities on the sole ground of
limitation in initiation of proceedings against the third respondent. The learned
counsel for the petitioner would take me through Section 90(9)(b) of the Tamil
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CRP Nos.4903 & 4912 of 2026
Nadu Co-operative Societies Act, 1983 (in short 'Act') and contend that the said
provision has not been considered by the Appellate Court and the approach of
the Appellate Court virtually renders 90(9)(b) of the Act meaningless. She
would further state that the Appellate Court has not gone into the issue of
negligence which has to be necessarily discussed by the First Appellate Court
and has merely proceeded to allow the appeal filed by the third respondent,
finding that the limitation issue was in his favour. She would further state that
accounts have been fudged and huge loss has been caused to the Society and
therefore, in such matters, the rule of Limitation should not be mechanically
applied.
4. In support of her submissions, she has relied on the following
decisions:-
(i) B.Chennamoorthy Vs. The Deputy Registrar of Cooperative Societies,
Krishnagiri Circle, Krishnagiri District and two others, in W.P. No.15070 of
2025, dated 22.01.2026;
(ii) Kurudampalayam Co-operative House Building Society Limited Vs.
The Deputy Registrar (Housing), O/o.Deputy Registrar of Co-operative
Societies, and two others, in CRP. (NPD). Nos.5021 & 5022 of 2011, dated
27.01.2012;
(iii) V.Srinivasan (Died) Vs. R.Balaji and two others, in CRP(MD).
Nos.1001 to 1003 of 2019, dated 08.12.2023;
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(iv) S.V.K.Sahasramam Vs. The Deputy Registrar of Co-op Societies,
Tiruvannamalai Circle, in W.A. No.949 of 2008, dated 29.08.2008 ;
(v) S.Ramadevi Vs. The Special Officer, Ambur Co-opeartive Sugar Mills,
Vadapudupet, Vellore District, in W.A. No.1213 of 2008, dated 05.08.2016;
(vi) P.Elias Vs. The Special Officer, Kumari District Tailoring Women
Development Cottage Co-operative Society Limited, in W.P. Nos.23530 &
33127 of 2023, dated 26.07.2013;
(vi) V.Sundararajan Vs. The Deputy Registrar of Cooperative Societies,
Trichy, in W.P.(MD). No.20216 of 2025, dated 28.07.2025 ;
(vii) Deccan Merchants Co-operative Bank Vs. Dalichand Jugraj Jain
and Others, reported in AIR 1969 SC 1320; and
(viii) A.P.Subramanian and others Vs. The Inspector General of
Registration, Registration Departments and others, in W.P. No.32108 of 2026,
dated 17.08.2026.
5. Per contra, Mr.Sricharan Rangarajan, learned Senior Counsel
appearing for the contesting third respondent, besides contending that the award
was an exparte award, pursuant to which, an order of attachment was passed by
the learned Arbitrator on 29.11.2017, the very assumption of jurisdiction under
Section 90 of the Act, itself was fallacious and erroneous. He would further
state that the proper course of action would have to initiate proceedings under
Sections 81 and 87 before slapping any order of attachment and proceed against
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the third respondent. Pointing out to the language of Section 90, it is his
submission that the third respondent is admittedly an employee of the Society
and therefore, resort could not have been had to Section 90 in the first place. In
any event, it is his contention that in respect of transaction that took place
during the financial years 2007-2008, 2008-2009, the Authorities cannot fall
back on an audit undertaken in the year 2017, to take proceedings against the
third respondent. In support of his submissions, he relied on the following
decisions:-
(i) P.Sundaram Vs. The Registrar of Co-operative Societies, Office of the
Registrar of Co-opeartive Societies, in W.P. No.14633 of 2024, dated
05.08.2024; and
(ii) The Kattabettu Industrial Co-opeartive Tea Factory Limited Vs. V.
Radhakrishnan and others, reported in (1999) 1 MLJ 262 .
6. I have carefully considered the submissions advanced by the learned
counsel for the parties and I have gone through the order of the learned
Arbitrator as well as the judgment passed by the Appellate Tribunal, reversing
the Arbitrator’s decision and thereby, raising the order of attachment.
7. The revision petitioner has alleged that third respondent is liable to be
proceeded against for the deficit in stock and manipulation of accounts during
2007-2008 and 2008-2009, after a period of lapse of 7 years. In fact, even
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before the Appellate Tribunal, the issue of limitation was raised and it was
contended that limitation cannot begin from the date of audit report, but has to
be reckoned from the date of actual commission or omission of the act
complained of. Admittedly, in the present case, in respect of the third
respondent, the only ground on which, the revision petitioner sustains the
complaint is that they came to know about the fudging of accounts in 2017,
when an audit was undertaken and report was filed. The learned Arbitrator has
proceeded to attach the properties of the third respondent, based on the audit
report of the vigilance and anti-corruption police alone, which has been filed
only the in the year 2017. Additionally, CMA C.S. No.6 of 2018, was filed to
set aside the award in ARC No.2 of 2017-2018 dated 02.02.2018 and CMA C.S.
No.6 of 2019, was filed to set aside the order in CEP. No.2/2018-2019 dated
14.02.2019.
8. The contention of the learned counsel for the petitioner is that it is
permissible for action to be initiated from the date of knowledge and therefore,
the rule of limitation cannot be construed as being mandatory, but only
directory.
9. Section 90 (1) and 90(9) of the Tamil Nadu Cooperative Societies Act,
1983, is usefully extracted hereunder:-
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" 90. Disputes. __(1)  If  any  di spute  touching   the  constitution    of the
 board   or  the  management or  the business of  a registered  society (other
than  a  dispute  regarding   disciplinary  action  taken   by  the competent
 authority constituted   under   sub-section  (3)  of  section  75  or  the
 Registrar   or  the  society,  or  its  board  against   a  paid servant of  the
 society) arises__
(a)  among members, past  members  and  persons claiming  through
members,  past  members  and  deceased  members ;    or
  (b)  between  a member,    past   member   or   person  claiming
through  a  member , past   member  or  deceased member  and  the
 society,     its  board  or  any  officer,  agent      or  servant   of the  society,
 or
 (c)  between    the society  or  its board  and  any past board,  any
 officer,  agent or  servant,  or any   past  officer, past   agent   or  past
 servant,   or  the  nominee, heirs   or   legal representatives  of  any
deceased  officer, deceased agent, or deceased  servant  of  the  society, or  
(d)  between the  society   and  any other registered society, 1[or
between the society and the liquidator of another registered society or
between the liquidator of the registered society and the liquidator of
another registered society] such dispute  shall be  referred to the  Registrar
 for
decision. 
Explanation.__  For   the  purposes  of  this  section, a  dispute  shall
 include --
(i) a  claim   by  a  registered   society  for any  debt  or  demand
 due  to   it  from a  member, past member or the  nominee, heir or legal
representative of  a deceased  member whether  such debt or  demand  be
admitted  or   not .
 (ii) a claim by  a registered  society  against  a  member, past
 member or the   nominee, heir or  legal  representative of  a deceased
member for  the  delivery  of  possession  to  the  society  of  land   or  other
  immovable  property resumed  by it  for  breach of  the  conditions of
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assignment or  allotment of  such land or other immovable  property; and
 (iii) a  decision  by the  board under  sub-section (3) of section  34 :
Provided  that no  dispute relating to, or  in connections  with, any  election
 shall be  referred under this sub - section till the  date of  the declaration of
the  result of  such  election.
..................
(9) (a)  The period of limitation for  referring   a  dispute under  this
 section  shall be regulated  by the  provisions of  the Limitation Act, 1963
(Central Act 36 of 1963) as  if the dispute were a  suit and the Registrar, a
Civil Court, subject  to the  following modifications, namely:__
(i) when  the dispute relates to a society  in  respect  of  which  a
2[ an administrator] has been  appointed under section 88 or to a society
which has been ordered to be wound  up  under  section 137, the  period of
limitation shall be six years from the  date of  the  order issued under
section 88 or section 137, as the case may be;
(ii) save  as otherwise provided  in clause  (i),  when the dispute
relates to any  act   or   omission  on the part of  any of the parties  referred
to in clause (b) or  clause (c) of  sub- section (1), the  period  of limitation
shall be  six years from the  date on which the act or omission with
reference to which the dispute arose, took place;
(iii) when  the  dispute is in  respect of, or  in connection with, any
election, the  period of  limitation shall be two  months from the  date of
 declaration of  the  result of  the  election.  
(b) Notwithstanding anything contained in clause (a), the Registrar may
admit a   dispute after the expiry of the period of limitation if the applicant
satisfies the Registrar that he had sufficient cause for not referring the
dispute within such period and the dispute so admitted shall be a dispute
which shall not be barred on the ground that the period of limitation has
expired."
  

10. As can be noticed from Sub Clause (9)(a) of Section 90, the period of
limitation that is fixed for referring a dispute under Section 90, are to be
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regulated by the provisions of the Limitation Act 1963, subject to specific
modifications set out in (i), (ii) and (iii) of Sub Section (9)(a). Thus from the
reading of the relevant provision, when the disputes relates to the Society to
which a Special Officer has been appointed under Section 88 or to a Society
which has been ordered to be wound up under Section 137, the period of
limitation is six years from the date of the order, issued either under Section 88
or Section 137, as the case may be. In cases not covered by Clause (i), when the
disputes relates to any act of omission on the part of any of the parties referred
in Clause (b) and (c) in Sub Section (1), the period of limitation is again six
years from the date on which the act of omission with reference to which the
dispute arose, took place. We are not concerned with Sub Clause (iii), which
pertains to dispute with regard to an election.
11. Coming for Section 90(9)(b), it permits the Registrar to admit a
dispute after the expiry of the period of limitation, if the Applicant is able to
satisfy the Registrar that he had sufficient cause for not referring the dispute
within such period provided and then such dispute shall not be barred on the
ground of limitation period having expired. It is therefore, the contention of
Mrs.Nasrine, learned counsel for the petitioner that when Section 90(9)(b),
provides for the Registrar to admit a dispute, even after the prescribed period of
limitation, then the period of six years mentioned in the relevant sub sections,
pales into insignificance. According to her, in the present case, the willful and
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deliberate omission with a view to defraud the Society of huge monies, came to
light only when the audit report was filed in the ear 2017 and therefore, the first
respondent was well within his right to have entertained the disputes and pass
the award in the ARC proceedings.

12. In this context, it is relevant to decide whether the dispute pertaining
to the third respondent can even be entertained under Section 90, in the first
place. Section 90 would apply specifically to disputes touching the constitution
of the board or the management or business of a registered Society among
members, past members or persons claiming through members, past members
and deceased members, or between a member, past member or persons claiming
through a member, past members or deceased members and the society or its
board and any past board etc., or between the society or any other registered
society. In fact, Section 90(1) specifically excludes a dispute regarding a
disciplinary action taken by the permanent authority constituted under sub
section 3 of Section 75 or the Registrar or the Society or its Board against the
paid servant of the Society.
13. In the present case, admittedly, the third respondent is an employee
of the Society against whom disciplinary action is sought to be initiated.
Therefore, when the statute clearly exempts the operation of Section 90, to such
an employee of the Society, I am unable to countenance the arguments of
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Mrs.Nasrine, learned counsel for the petitioner that though the period of
limitation is prescribed under Section 90(9)(a), in view of the leverage given
under Section 90(9)(b), it is always open to the petitioner to initiate action
against the third respondent. Under Section 81, the Registrar of the Cooperative
Society is empowered to even take suo motu action or act on the application of
majority of the Board of not less than 1/3 of members, to conduct an enquiry
pertaining to allegations of misappropriation, fraudulent retention of money or
property, breach of trust, corrupt practice or mismanagement in relation to that
society or any particular aspect of working of that society. Section 81 deals
with the powers available to the Registrar to hold such enquiry. Section 87,
permits action to be taken, pursuant to audit under Section 80 or enquiry under
Section 81, against any person who was entrusted with the organization or
management of the society, including a past or present officer, or a servant of
the society, when allegations of misappropriation or fraudulent retention of
money or property or breach of trust, or willful negligence are made out, then
the Registrar or the authorised persons can initiate surcharge proceedings. The
first proviso to Section 87, clearly sets out that no action shall be commenced
under Section 87(1) viz., surcharge proceedings after the expiry of 7 years from
the date of any act or omission referred to in Sub Section (1). The second
proviso contemplates completion of action taken under Sub Section 1 of the
Section 87, within a period of six months subject to extensions provided by the
next higher authority, which shall not exceed six months in the aggregate.
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There is no similar provisions like Section 90(9)(b) incorporated in Section 87,
which enables extension of period of limitation beyond 7 years. Therefore,
having found that request could not have been taken to under Section 90, since
the exception to Section 90 clearly excludes action initiated against the
employee outside its purview, then the petitioner is not entitled to take shelter
under Section 90(9)(b). Action could have been only initiated under Section 81
and thereafter, surcharge proceedings being initiated under Section 87, for
which the period of limitation is prescribed from the actual act or omission
being complained of. Thus, I do not see any error committed by the Tribunal in
holding that the action initiated by the third respondent is hopelessly barred by
limitation.
14. Coming to the decisions that have been relied on either side, in
B.Chennamoorthi ’s case (referred herein supra), this Court, on going through
the facts of the said case, the dispute being with regard to a purchase of a
property by the writ petitioner from the wife of the Secretary who was under
suspension, found that before initiation of proceedings under Section 90, the
Deputy Registrar Cooperative Society has conducted an enquiry under Section
81 and a report was also filed by the Cooperative Sub Registrar concerned, who
was appointed as the enquiry officer. On facts, this Court found that the dispute
was well within the ambit of Section 90. Therefore, I am unable to place
reliance on the said decision.
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15. In S.Ramadevi ’s case, (referred herein supra), the Hon’ble Division
Bench of this Court was dealing with facts of a case that arose pursuant to an
enquiry conducted under Section 81 Tamil Nadu Cooperative Societies Act and
consequently, Section 87 of the surcharge proceedings. Admittedly, in the
present case, no such enquiry under Section 81 or surcharge proceedings under
Section 87 have been initiated against the third respondent. However, the
Hon’ble Division Bench only dealt with the time limit for completion of the
enquiry to be directory and not mandatory. Therefore, this decision can also not
be applied to the facts of the present case.
16. In S.V.K.Sahasramam 's case, (referred herein supra), the Division
Bench was again dealing with the period of completion of enquiry alone and not
with the first proviso to Section 87. My order in V.Srinivasan ’s case, referred
herein above, was also a case where, on facts, I applied Section 90 being the
appropriate Section. Here, I have already found that Section 90 itself could not
have been invoked in the first place. In Kurudampalayam Co-operative House
Building Society 's case, (referred herein supra), this Court was again dealing
only with the applicability of Section 90 and therefore, this decision again, is of
no relevance since Section 90 provides for the Registrar admitting a claim
beyond the period of limitation.
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17.In P.Elias 's case, (referred herein supra), on facts, an enquiry was
conducted under Section 81 and thereafter, proceedings under Section 87 for
surcharge were initiated and after due enquiry, an award was passed. In fact,
this Court discussed the difference between proceedings under Section 87 and a
dispute under Section 90 and held that Section 87 and Section 90 are
overlapping and to initiate a proceeding under Section 87, it is necessary that it
should be preceded by an audit under Section 80 or an enquiry under Section 81
or investigation/inspection under Section 82 or inspection of books under
Section 83 or winding-up of Society itself. In order to initiate proceedings
under Section 90, no such audit report under Section 80 or enquiry report under
Section 81, or an inspection or investigation under Section 82 or inspection of
books under Section 83 or winding-up of the society would be condition
precedent and that a claim arising out of a transaction may fall within both the
ambits of Sections 87 and 90 of the Tamil Nadu Cooperative Societies Act.
However, this decision will not come to the rescue of the petitioner for the
simple reason that the categories of persons in respect of whose disputes alone
fall within the ambit of Section 90, was not the point of discussion in the said
decision. Equally, the question of limitation was also not an issue before the
Court in the said case.
18. In V.Sundarrajan ’s case, (referred herein supra), again proceedings
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had been initiated under Section 81, followed by surcharge proceedings under
Section 87 and Section 90 and this Court followed the ratio laid down in
P.Elias 's case (referred herein supra) and held that depending on the nature of
business of the society, misappropriation of fraudulent, retention of money or
property or loss caused to the society, would also constitute a dispute touching
the business of society and in terms of Section 90 of the Act, provided there is
nexus between the business of society and the act of the individual which
resulted in the loss. However, on the facts of the said case, this Court had found
that pursuant to the enquiry under Section 81, surcharge proceedings under
Section 87 as well as Section 90, dispute could be validly initiated. This
decision also does not deal with the question of limitation. Further, admittedly
in the present case, there has been no enquiry under Section 81 in the first place.
19.The Hon’ble Supreme Court in Deccan Merchants Co-operative
Bank 's case, (referred herein supra), was dealing with the scope of the word
‘dispute’, the expression touching the business of society and the person
claiming through a member and held that it would depend on the nature of the
society and the rules and by-laws governing it. Para 15 of the said decision is
usefully extracted herein below, which provides more clarity, with regard to the
interpretation of the phrase "touching the business of a society".
"15. The question arises whether the dispute touching the assets of
a society would be a dispute touching the business of a society.
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This would depend on the nature of the society and the rules and
bye-laws governing it. Ordinarily, if a society owns buildings and
lets out parts of buildings which it does not require for its own
purpose it cannot be said that letting out of those parts is a part of
the business of the society. But it may be that it is the business of a
society to construct and buy houses and let them out to its
members. In that case letting out property may be part of its
business. In this case, the society is a co-operative bank and
ordinarily a co-operative bank cannot be said to be engaged in
business when it lets out properties owned by it. There fore, it
seems to us that the present dispute between a tenant of a member
of the bank in a building, which has subsequently been acquired by
the bank, cannot be said to be a dispute touching the business of
the bank, and the appeal should fail on this short ground."
Therefore, even applying the above ratio laid down by the Hon’ble Supreme
Court, it is clear that the dispute referred to under Section 90, cannot be
extended to the third respondent who is an employee and merely because
provisions under Sections 81, 87 and 90 overlapped, it does not clothe the
society with the power to proceed against an employee under Section 90,
especially when such employee is excluded from the ambit of Section 90 and
that too, beyond the limitation prescribed under Section 90.
20. Coming to the decisions, which have been relied on by the learned
Senior Counsel for the third respondent, this Court in the Kattabettu Industrial
Co-opeartive Tea Factory Limited 's case (referred herein supra), specifically
dealt with an identical issue that arises for consideration in the present revisions
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CRP Nos.4903 & 4912 of 2026
and held that mere fact that the deficiency was found by the authorities at a later
date, would not extend the period of limitation and action will have to be taken
from the date of the act or omission and not from the date of the audit report
being filed.
21. Similarly, in P.Sundaresan ’s case as well, (referred herein supra),
this Court held that, without resort to surcharge proceedings under Section 87,
for recovery of alleged amounts misappropriated, action cannot be taken under
Section 90 of the Act.
22. In view of the above, the very invocation of proceedings by referring
a dispute under Section 90, was clearly without jurisdiction and the initiation of
action is clearly belated and beyond the prescribed statutory period of
limitation. The petitioner cannot fall back on the decisions that have been
rendered in different factual matrix, where it has been held that provisions under
Section 87 and 90 overlap and therefore, the directory Rule of limitation
available under Section 90(9)(b) should be given benefit of even to cases where
belated action, is taken against a delinquent employee of the society under
Section 87, especially when Section 87 does not provide for relaxation of the
period of limitation in the first proviso. I have already dealt with the decisions
relied on by the learned counsel for the petitioner which all relate to only the
second proviso pertaining to extension of period of time for completion of the
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enquiry/action. Therefore, I am unable to see any merit in the revision petitions,
warranting interference.
23. In fine, both the Civil Revision Petitions are dismissed.
Consequently, connected Miscellaneous Petition is dismissed. No costs.
16-10-2026
Index: Yes
Speaking order
Neutral Citation: Yes
RKP
To
1. The Assistant Director of Handlooms,
Erode Circle, Erode.
2.The Handloom Inspector/Sale Officer,
EH-113, Chennimalai Kongu Primary
Handloom Weavers Co-opeartive
Production and Sale Society Limited,
Chennimalai.
3.A.P.Subramaniam, S/o.Ponnusami,
D.No.203, Thirunagar, Chennimalai,
Currently residing at D.No.48/A2,
Cavery City, Paravalasu Pirivu,
Perundurai Via Erode District.
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2026:MHC:4263
CRP Nos.4903 & 4912 of 2026
P.B.BALAJI, J.
RKP
Pre-delivery order in
CRP. Nos.4903 & 4912 of 2026
and CMP. No.21439 of 2026
16-10-2026
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