Madras HC Upholds Setting Aside ₹2.98-Crore Award Against Handloom Society Employee, Says Section 90 Could Not Be Used And Action Was Late

The Society alleged that its employee, A.P. Subramaniam, was responsible for stock deficits and manipulation of accounts during financial years 2007–08 and 2008–09.

The alleged misconduct came to light through an audit report in 2017. Proceedings were initiated under Section 90 of the Tamil Nadu Co-operative Societies Act, 1983, resulting in an arbitration award dated 2 February 2018 imposing liability of ₹2,98,63,285 and a conditional attachment order dated 14 February 2019.

The Co-operative Tribunal, by a common order dated 29 October 2025, allowed Subramaniam’s challenge on limitation grounds.

The Society filed these revisions seeking restoration of the award and attachment order.

Section 90(1) of the Tamil Nadu Co-operative Societies Act provides for adjudication of specified disputes touching a society’s constitution, management or business, while excluding disputes regarding disciplinary action against a paid servant taken by the competent authority, Registrar, society or its board.

Under Section 90(9)(a), the limitation period for specified disputes involving acts or omissions is six years; Section 90(9)(b) permits the Registrar to admit a late dispute where sufficient cause is shown.

Sections 81 and 87 provide the statutory route for inquiry and surcharge proceedings concerning matters such as misappropriation, fraudulent retention, breach of trust or wilful negligence; the first proviso to Section 87 bars commencement of action after seven years from the relevant act or omission, and Section 87 contains no equivalent to Section 90(9)(b).

The Court relied on The Kattabettu Industrial Co-operative Tea Factory Ltd. v. V. Radhakrishnan for the principle that later discovery of a deficiency does not shift the limitation period from the date of the act or omission to the date of the audit report.

The Court treated the claim as one seeking action against an employee for alleged misconduct, and held that Section 90 could not be used to bypass the statutory procedure applicable to such claims.

It considered Sections 81 and 87 to be the appropriate route, but the alleged acts occurred in 2007–08 and 2008–09, while the audit report was filed only in 2017.

The later discovery of the alleged irregularities did not postpone the limitation period, and Section 90(9)(b)’s extension power could not be imported into Section 87, which contains a seven-year bar without a corresponding relaxation provision.

The Court therefore found the Section 90 proceedings without jurisdiction and the action belated.

The connected miscellaneous petition was also dismissed, with no order as to costs.