Legal Proceedings Against Heirs Under Section 58-B of Cooperative Societies Act Are Maintainable to Extent of Inherited Estate

The appellants are the legal heirs of Late Shri Tekram Kaushik, who served as Prabhari Samiti Prabandhak and died in harness on 26.03.2020.

Following his death, the respondent authorities conducted an ex-parte enquiry into alleged financial irregularities committed by the deceased between 2016 and 2020.

Consequently, the Deputy Registrar issued a show-cause notice dated 28.09.2022 under Section 58-B(1) of the Chhattisgarh Cooperative Societies Act, 1960, proposing a recovery of ₹37,19,664.48 from the heirs.

The appellants challenged this notice via writ petition (WPS No. 7194/2022), which the Single Bench dismissed on 22.04.2026, granting them liberty to reply to the authority.

The appellants moved this intra-court appeal, arguing that recovery proceedings cannot be initiated posthumously without an inquiry being completed during the employee's lifetime.

1. Whether the respondent authorities have the jurisdiction under the Chhattisgarh Cooperative Societies Act, 1960, to initiate recovery proceedings against legal heirs for the alleged misconduct of a deceased employee.

2. Whether the learned Single Judge erred in declining to interfere with a show-cause notice at the preliminary stage.

Section 58-B(1) of the Chhattisgarh Cooperative Societies Act, 1960 empowers the Registrar to enquire into the conduct of officers or employees regarding misappropriation or gross negligence.

Section 58-B(2) specifically mandates that if the Registrar is satisfied of such loss, he may order the "legal representative who inherits [the] estate" of a deceased person to repay or restore the money, provided the liability is limited to the extent of the inherited property.

The first proviso to Section 58-B(2) mandates a "reasonable opportunity of being heard" before a final order is passed, and Section 58-B(3) provides an alternative statutory remedy via appeal to the State Government.

The Court examined the statutory framework and found that Section 58-B explicitly contemplates proceedings against legal representatives to recover losses caused to a Society.

It rejected the appellants' contention that the notice was without jurisdiction, noting that the impugned communication was merely a preliminary show-cause notice and not a final determination of liability.

The Court observed that the appellants were indeed afforded an opportunity to be heard as required by the proviso to Section 58-B(2).

It reasoned that since the competent authority had not yet adjudicated the facts or the extent of liability, judicial interference was premature.

The existence of an efficacious statutory remedy under Section 58-B(3) justified the Single Judge’s refusal to exercise writ jurisdiction at the threshold.

The Court affirmed that the Act permits recovery from legal heirs to the extent of the inherited estate and that the appellants must participate in the statutory process.

The appellants were granted liberty to defend their case before the competent authority in accordance with Section 58-B of the Act.