Third parties suspected of colluding in cooperative society misappropriation can face surcharge proceedings under amended law, Madras High Court rules

The appellant, proprietor of Sri Amman Traders, challenged a notice dated 21 May 2026 initiating surcharge proceedings against him under Section 87 of the Tamil Nadu Co-operative Societies Act, 1983.

He contended that he was a third party, neither an employee nor a member of the Society, and that proceedings against him were therefore without jurisdiction.

The Single Judge rejected the challenge, holding that Section 87, as amended in 2022, permitted proceedings against him.

The appellant appealed that decision.

Whether Section 87 of the Tamil Nadu Co-operative Societies Act, 1983, as amended in 2022, permits surcharge proceedings against a person who is not an employee or member of the Society.

Whether the notice issued against the appellant was liable to be set aside for want of jurisdiction.

Section 87 of the Tamil Nadu Co-operative Societies Act, 1983, as amended by Act 33 of 2022 with effect from 20 June 2022, authorises the Registrar or a specially authorised person, in the circumstances specified in the section, to frame charges and order repayment, restoration, or contribution where misappropriation, breach of trust, wilful negligence, or other specified misconduct has caused loss to a Society.

The Court held that the amended provision extends surcharge proceedings beyond Society officers, servants, or members to include another person involved in the misappropriation.

The Court considered the appellant’s jurisdictional objection in light of the 2022 amendment.

It reasoned that the amendment expanded the reach of Section 87 to cover another person involved in misappropriation alongside a Society officer, servant, or member.

As the Society suspected the appellant’s involvement, the authority had jurisdiction to issue the notice and proceed under the amended provision; the notice’s validity on that ground did not depend on the appellant being an employee or member.

The Court also clarified that the appellant’s reply must be considered on its merits and that any resulting order must not be influenced by the observations in the writ proceedings or appeal.

It dismissed the writ appeal, directed that any order in the surcharge proceedings be decided on its own merits, made no order as to costs, and closed the connected miscellaneous petition.