Mrityunjay Kumar v. Union of India & Ors.

8. These petitions, inter alia, seek enforcement of the above and other similar orders passed by the Cooperative Ombudsman, since the Respondent Society has failed to comply with the same. In addition, in cases where no orders have been passed by the Cooperative Ombudsman, the prayer in the writ petitions, inter alia, is for release of their respective deposits by the Society.

II. Proceedings before this Court

9. Initially, four writ petitions, including W.P.(C) 6272/2025, came to be filed before the Court seeking enforcement of the order dated 17th February, 2025 passed by the Cooperative Ombudsman. These were considered by the Court on 9th April, 2025 on which date the Respondent Society was duly represented and various objections were raised as to the maintainability of the said petitions. Further, after perusing the observations recorded by the Cooperative Ombudsman as to the poor financial situation of the Respondent Society, the Court had called for details of all its movable and immovable assets. The relevant portions of the order dated 9th April, 2025 passed in W.P.(C) 6272/2025 is extracted hereunder:

10. Thereafter, on 1st May, 2025 the Court had considered W.P.(C) 5699/2025. On the said date again the Respondent Society was duly represented and it was submitted that active steps are being taken to liquidate assets of the Respondent Society to pay the Petitioner therein and similarly placed members. Accordingly, the Court had directed the Respondent Society to place on record an affidavit in respect of the steps taken towards payment of the dues. The relevant portion of the order dated 1st May, 2025, reads as under:

11. Thereafter, further writ petitions were filed by the Petitioners herein which were tagged along with the initial four writ petitions. The Ld. Counsels for the Petitioners have repeatedly urged before this Court that majority of the Petitioners are senior citizens who are retired employees of SAI, and had invested their hard earned money into the fixed deposit which were made with the Respondent Society.

12. This batch of petitions were first considered on 22nd July, 2025 on which date the Court had noted that despite the directions passed in the orders dated 9th April, 2025 and 1st May, 2025, the Respondent Society has neither taken steps to give effect to the orders of the Cooperative Ombudsman nor placed its affidavit on record. It was further observed by the Court that though Section 85A of the MSCS Act provides for a redressal mechanism to members of Multi-State Cooperative Societies, there appears to be no provision for enforcing the orders passed by the Cooperative Ombudsman. Accordingly, the Court had directed the Central Registrar to file an affidavit suggesting the mode and method for enforcement of orders passed by the Cooperative Ombudsman. Relevant extracts of the order dated 22nd July 2025, is set out below:

13. Thereafter, the Central Registrar filed an affidavit dated 1st August, 2025 in respect of the statutory scheme under the MSCS Act qua orders of the Cooperative Ombudsman and procedure for winding up of the Multi-State Cooperative Societies under Section 86 of the said Act. As per the said affidavit, the Central Registrar vide letter dated 24th December, 2024 had directed the Registrar of Cooperative Societies, West Bengal to conduct an inspection of the Respondent Society under Section 108 of the MSCS Act. The inspection report dated 21st March, 2025, as received by the Central April, 2025, seeking comments and reply to the same. A reminder letter dated 28th May, 2025 was also sent to the Respondent Society. However, no response was received from the Respondent Society. In the said affidavit of the Central Registrar, it is also stated that the Respondent Society had been granted a hearing through video conferencing on 25th July, 2025. In the said hearing, the then Chairperson of the Respondent Society had stated that the Respondent Society will appear before this Court and plan for refunding the amounts due. Accordingly, it was stated in the affidavit that in absence of a satisfactory response from the Respondent Society, the Central Registrar shall consider issuing orders for winding up of the Respondent Society under the MSCS Act.

14. The said affidavit of the Central Registrar was considered by the Court on 1st August, 2025, and after considering the relevant provisions of the MSCS Act, the Court had directed the Central Registrar to pass relevant orders for conducting a special/forensic audit as provided under Section 86 of the MSCS Act, before taking steps for winding up of the Respondent Society.

15. Further to the above order, another affidavit was filed by the Central condition under Section 78 of the MSCS Act, had been initiated before taking steps for winding up under Section 86 of the said Act. It was also informed that vide order dated 8th August, 2025 the Institute of Public Auditors of India (hereinafter “IPAI”) had been appointed for conducting the said inquiry. The said affidavit was considered on 11th August, 2025, and after hearing the ld. Counsels for the parties, the Court had passed the following directions:

16. In respect of the above directions, on 22nd August, 2025 the Court was apprised by the Central Registrar of certain difficulties being faced from the new Managing Committee of the Respondent Society in completing the aforementioned inquiry. However, it was stated that the same shall be concluded by 12th September, 2025 and the report shall be placed on record by 17th September, 2025.

17. On 24th September, 2025, the Court had perused the inquiry report dated 12th September, 2025 prepared by IPAI, as per which, the financial health of the Respondent Society had become severe. The relevant observations of the Court in respect of the findings of IPAI are as under:

20. The forensic audit was conducted and a report dated 30th October, 2025 was placed on record by way of an affidavit dated 4th November, 2025. The said audit report shows that there are several immovable properties in the form of lands, holiday homes etc., which belong to the Respondent Society. However, the audit report itself claims that there is a net deficit of Rs. 3,64,84,03,714.

21. In the light of the said audit report, this Court had, vide order dated 2nd April, 2026 directed the Respondent Society and the then Chairman - Mr. Amitava Sarkar, to file an affidavit containing the following information:-

23. In addition, the affidavit also reveals that relevant proceedings have been initiated by the Directorate of the Economic Offences, Government of West Bengal under various provisions and FIRs have also been registered in respect of the same. The details of the same are as under: “I state that in compliance with the directions of this Hon’ble Court, the particulars of the proceedings initiated by the Directorate of Economic Offences, Government of West Bengal, in relation to the affairs of the Society, are being set out hereinbelow for the kind consideration of this Hon’ble Court: i) I state that on 06.02.2026, the Directorate of Economic Offences, Government of West Bengal, vide Memo No. 155, issued a communication referring to six cases registered at Charu Market Police Station, particulars whereof are set out hereinbelow: a. Charu Market P.S. Case No. 05 dated 09.01.2025 under Sections 61(2)/316(2)/316(5)/318(4) of the Bharatiya Nyaya Sanhita, with Section 3 of the West Bengal Protection of Interest of Depositors In Financial Establishments Act, 2013 (Special Case No. 30/2025); b. Charu Market P.S. Case No. 06 dated 10.01.2025 under Sections 61(2)/316(2)/316(5) BNS read with Section 3 of the West Bengal Protection of Interest of Depositors In Financial Establishments Act, 2013 (Special Case No. 45/2025); c. Charu Market P.S. Case No. 08 dated 14.01.2025 (Special Case No. 49/2025); d. Charu Market P.S. Case No. 20 dated 05.02.2025 (Special Case No. 44/2025); e. Charu Market P.S. Case No. 21 dated 05.02.2025 (Special Case No. 43/2025); and f. Charu Market P.S. Case No. 54 dated 22.04.2025 under Sections 61(2)/316(2)/316(5)/318(4) BNS read with Section 3 of the West Bengal Protection of Interest of Depositors In Financial Establishments Act, 2013 (Special Case No. 42/2025). ii) I further state that by way of the aforesaid communication, the Society was called upon to furnish information and documents for the purposes of investigation. I further state that subsequently, on 24.03.2026, the Directorate of Economic Offences, Government of West Bengal, vide Memo No. 374, issued a further communication calling upon the Society to furnish additional documents and information in connection with the aforesaid cases. iii) I further state that the Directorate of Economic Offences carried out seizures in connection with Charu Market Police Station Case No. 57 dated 26.04.2025 under Sections 61(2), 316(2), 316(5) and 318(4) of the Bharatiya Nyaya Sanhita read with Section 3 of the WBPIDFE Act, 2013 (Special Case No. 50/2025), further, seizure were carried out in connection with Charu Market Police Station Case No. 05 dated 09.01.2025 under Sections 61(2), 316(2), 316(5) and 318(4) of the Bharatiya Nyaya Sanhita read with Section 3 of the WBPIDFE Act, 2013 (Special Case No. 30/2025). iv) I further state that, in or about mid-February 2026, the Directorate of Economic Offences proceeded to freeze all bank accounts of the Society across various banks, which has had a substantial impact on its functioning and day-to-day operations. v) I further state that, I was informed that the erstwhile Chairman/Secretary was arrested by the Directorate of Economic Offences sometime towards the end of February, 2026.”

24. It is also stated that the Respondent Society has a membership of 12,520 members and the amount payable to depositors and members is approximately Rs.430 crores. Allegations have also been made against Mr. Jyotirmoy Chakraborty who was stated to be the Chairperson of the erstwhile Board of the Respondent Society.

IV. Analysis

25. The Court has heard the ld. Counsels for the parties and has also perused the documents placed on record, including the inquiry report of IPAI and the forensic audit report. It is clear from the record that the Respondent Society has substantial assets, however, due to financial mismanagement the liabilities have overshadowed the same. Further, the affidavit of the Respondent Society dated 27th April, 2026, shows that there is already a freezing order in respect of all the assets of the Respondent Society, pursuant to the actions taken by the Directorate of Economic Offences, West Bengal.

26. The Petitioners herein are persons who had put their hard earned earnings into the Respondent Society in the form of Fixed Deposits and despite favourable orders of the Cooperative Ombudsman, the amounts have not been paid back to them till date.

27. It is also possible that there may be other such members who may have sought foreclosure or who may have deposited amounts with the Respondent Society. The said persons’ interest would be paramount as they cannot be punished for no fault of theirs. Statutory Scheme qua Cooperative Ombudsman

28. One of the peculiar issues highlighted in these proceedings is that the Petitioners have been struggling to seek implementation of orders passed by the Cooperative Ombudsman, directing the Respondent Society to repay the dues with interest. As noted by this Court earlier, there appears to be a lacuna in the MSCS Act in respect of any provision for implementing the orders passed by the Cooperative Ombudsman, especially in the event of noncompliance of the same by Societies.

29. At this stage, it would be necessary to briefly consider the statutory scheme governing the Cooperative Ombudsman. The Multi-State Co- Operative Societies (Amendment) Act, 2023, inter alia, introduced Chapter IXA titled Redressal of Complaints containing Section 85A mandating appointment of Cooperative Ombudsman by the Central Government. The Section 85A of the MSCS Act reads as under: “CHAPTER IXA REDRESSAL OF COMPLAINTS 85A. Co-operative Ombudsman.— (1) The Central Government shall appoint, one or more Co-operative Ombudsman with territorial jurisdiction for inquiring into the complaints made by any member of the multi- State co-operative societies regarding their deposits, equitable benefits of society’s functioning or any other issue affecting the individual rights of the concerned member, in such manner, as may be prescribed. (2) The Co-operative Ombudsman shall, on receipt of a complaint, complete the process of inquiry and adjudicate within a period of three months from the date of receipt of the complaint and may issue necessary directions to the society during the course of inquiry and the society shall be bound to comply with the same within a period of one month from the date of issuance of such directions. (3) The multi-State co-operative society aggrieved by any directions of the Ombudsman may file an appeal in such manner as may be prescribed, within a period of one month before the Central Registrar who shall decide the appeal within a period of forty-five days and the decision of the Central Registrar shall be final and binding: Provided that the Central Registrar may entertain the appeal after the expiry of said period of one month, if he is satisfied that the society was prevented by sufficient cause from preferring the appeal in time. (4) The Ombudsman shall submit periodic reports to the Central Registrar of Co-operative Societies. (5) The Co-operative Ombudsman while conducting the inquiry under sub-section (1), shall exercise the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, (5 of 1908)–– (a) for summoning and enforcing the attendance of persons; (b) examining them on oath;

(c) discovery and production of books of account and other documents; and

(d) any other matter which may be prescribed.”

30. The Report of the Parliamentary Joint Committee on the Multi-State Co-Operative Societies (Amendment) Bill, 2022, considered the above provision and records the rationale for introduction of the same as under: “Rationale behind the amendment 2.266 “Strengthening Governance and Transparency This newly proposed entity would address grievances of members and ensure financial and operational discipline through timely, expeditious and impartial redressal of complaints of the members.”

31. A perusal of the provision in light of the above rationale would show that the Co-operative Ombudsman was introduced for resolving grievances of the members specifically regarding the deposits and any issue affecting the individual rights of the members. The timelines for deciding the complaints have been clearly mentioned. The inquiry and adjudication of the complaint is to be completed within three months from the date of receipt of complaints. Significantly, the necessary directions passed by the Cooperative Ombudsman are binding on the Society and the same is required to be complied with within one month from the date of issuance.

32. However, what stands out from a reading of the provision is that the liberty to challenge an order of the Cooperative Ombudsman has been granted only to the Society, and not to the members. Under the MSCS Act, there is no provision for a member to seek enforcement of the orders passed under Section 85A of the Act. Moreover, no adverse consequence has been prescribed under the MSCS Act, especially in terms of Section 108 which specifies offences and penalties, in the event the Society either fails to implement the order under Section 85A within one month, or where the Society blatantly refuses to comply with the same.

33. As is the unfortunate situation in the present case, despite favourable orders directing the Respondent Society to pay the dues to the members, not only has the Respondent Society not complied with the same, but has not even responded to the same for a significant period. As an illustration, the order dated 17th February, 2025, extracted hereinabove, passed by the Cooperative Ombudsman in respect of few of the Petitioners, has still not been given effect after over a year.

34. In the opinion of this Court, orders passed by the Cooperative Ombudsman under Section 85A of the Act become mere `paper orders’ as the provisions lack the teeth to enforce the same. The binding nature of the orders of the Cooperative Ombudsman qua the Society is absolutely nullified by the absence of any adverse consequence flowing from non-compliance.

35. This being the position, the Central Registrar would have to proactively take onus of resolving such adverse situations, considering that under Section 85A (4) the Cooperative Ombudsman has to submit periodic reports to the Central Registrar. The Central Registrar cannot claim ignorance of noncompliance of orders passed under Section 85A of the MSCS Act. Winding Up of the Respondent Society

36. The Court has heard this batch of petitions on several dates and it has noted the Petitioners’ anguish over being denied their hard earned money in time of dire need. The Petitioners cannot be punished in such a manner for no fault of their own, due to a lacuna in the law. Under the MSCS Act, the Central Act to wind-up the Respondent Society and liquidate its assets.

37. In fact the Central Registrar has already issued a show cause notice dated 28th November, 2025 to the Respondent Society, for initiating winding up proceedings, in light of the inquiry report submitted by IPAI under Section 78 of the MSCS Act as also the forensic audit conducted pursuant to orders in this batch. The relevant conclusion of the said notice reads as under:

38. However, the present status of the winding up proceedings is not clear. In terms of Section 86(1) of the MSCS Act after considering an inquiry under Section 78 the Central Registrar is empowered to pass an order for winding up the Society after giving a reasonable opportunity of making its representation. The show cause notice had been issued on 28th November, 2025, providing for 15 days time to respond to the Respondent Society. No response has been received to the same.

39. In view of the same it would be necessary to secure the interests of the Petitioners herein. In the opinion of the Court, the Central Registrar ought to pass an order under Section 86 for winding up and appoint a Liquidator under Section 89 of the MSCS Act. Procedure Qua Winding Up and Priority of Claims

40. At this stage it would apposite to refer to the decision of the Supreme Court in Writers & Publishers (P) Ltd. v. Super Bazar Official Liquidator, (2021) 13 SCC 279. In the said decision the Supreme Court has had the occasion to consider the statutory scheme of winding up under the MSCS Act, as also the priority of claims before the liquidator. The relevant extracts of the decision of the Supreme Court are extracted here: “Statutory scheme applicable to Super Bazar

45. Chapter X of the Multi-State Cooperative Societies Act, 2002 deals with the winding up of multi-State cooperative societies. Under sub-section (1) of Section 86, the Central Registrar is empowered to direct the winding up of a multi-State cooperative society after an audit, special audit or an inquiry or, as the case may be, or an inspection under Sections 70, 77, 78 and 79 respectively. Sub-section 2(b) empowers the Central a multi-State cooperative society which has ceased to function in accordance with cooperative principles. Section 89 provides for the appointment of a liquidator while Section 90 provides for the powers of the liquidator. Under Section 90(1), all the assets of a multi-State cooperative society in respect of which an order of winding up has been passed, vest in the liquidator from the date on which the order takes effect. The liquidator is entrusted with the power to realise monies from the assets. Under clause (b) of sub-section (2) of Section 90, the liquidator is empowered to determine the contribution to be made or remaining to be made by the members or past members or by officers or former officers to the assets of the society. Under clause (c) of sub-section (2) of Section 90, the liquidator is empowered to investigate all claims against the society and subject to the other provisions of the statute, to decide questions of priority between claimants. Under clause (d), the liquidator is empowered to pay claims against the society, including interest up to the date of winding up according to their respective priorities in full or rateably, as the assets of the society may permit. The surplus, if any that remains, has to be applied in the payment of interest from the date of the order of winding up.

46. Rule 28 of the Multi-State Cooperative Societies Rules, 2002 lays down the procedure to be adopted by the liquidator. Rule 29 provides for the order of priority in accordance with which the assets of a multi-State cooperative society shall be applied in the payment of liabilities. Rule 29 provides as follows:

[...]

49. The above view which we have taken of the interpretation of the order dated 29-3-2016 [Super Bazar Karamchari Dalit Sangh v. Union of India, (2019) 12 SCC 633] must also be juxtaposed in light of the statutory provisions which govern an order of winding up under Section 89 and other cognate provisions of the Multi-State Cooperative Societies Act,

2002. The statute lays down the manner in which the liquidator has to function upon taking charge. The Multi-State Cooperative Societies Rules, 2002, in particular, indicate the procedure to be adopted by the liquidator and the manner in which the assets are to be applied. The order of priority is spelt out. A pro rata refund of share capital appears third in the order of priority. The last in the order of priorities is a pro rata payment of dividend on share capital at a rate not exceeding 6.25% for the period of liquidation. To allow the claim of WPL to be refunded its entire investment amount, the major part of which took place through the subscription of share capital, would essentially place it outside the purview of the winding-up proceedings. Accepting the claim would enable it to take away moneys overriding the order of priorities laid down by the Multi-State Cooperative Societies Rules, 2002. [...]

55. The liquidator shall evaluate the claim as determined by the verification report by the CAG in terms of the priorities for the payment of claims as envisaged in the Multi-State Cooperative Societies Act, 2002 and the associated Rules. The liquidator is also directed to treat the amount outstanding to the EPFO in terms of the first priority which is created by the provisions of Section 11(2) of the EPF Act. The liquidator shall also consider the claim of the Union Government. The liquidator is directed to consider the auditor and the CAG's observations with respect to the 14,149 new members inducted during WPL's management not being genuine. The liquidator shall, in the process of winding up, be at liberty to consider all other claims received and to make a determination in accordance with law. In the event any further judicial determinations are required to be made, the parties shall be at liberty to approach the High Court of Delhi and we request the Chief Justice of the High Court to constitute an appropriate Bench to hear any matters arising out of the liquidation of Super Bazar.”

41. It is clear from the above, that as per Rule 29 of the Multi-State Cooperative Societies Rules, 2002, (hereinafter “MSCS Rules”) the deposits made by the Petitioners and other members would be given significant priority.

V. Directions

42. Considering the above discussion, in exercise of its extraordinary writ jurisdiction, this Court deems it fit and expedient to pass the following directions: (a) The Central Registrar shall pass an order by 15th June 2026, under Section 86 for winding up of the Respondent Society and appoint a Liquidator under Section 89 of the MSCS Act. The Liquidator shall take charge of all the assets of the Respondent Society, including bank accounts, moveable and immoveable properties, investments, fixed deposits, mutual funds, etc in terms of the MSCS Act and MSCS Rules. The details of the same have been extracted above as per the affidavit handed over by the Respondent Society today. (b) Both the present and past members of the Board of the Respondent Society, including the Chairman and Secretary, shall cooperate with the Liquidator and assist him/her in whatever capacity necessary for securing the assets of the Respondent Society and hand over all the records of the Society.

(c) All banks and other final institutions, or any other individual in charge/having control of the assets of the Respondent Society shall hand over the charge/control over the same to the Liquidator.

(d) The Liquidator is also free to make inquiries and if there are any other moveable or immoveable assets other than those disclosed in the affidavit dated 27th April, 2026 by the Respondent Society, the same shall also be taken over by the said Liquidator. (e) Upon the Liquidator taking over all the assets, an account shall be created in a nationalized bank by the Central Registrar. All amounts lying in various bank accounts, investments, deposits, mutual funds etc., shall be transferred to the said Bank Account by 15th July 2026. The amounts received shall be retained in fixed deposits. (f) The claims of the Petitioners and any other persons, who have been awaiting for their amounts since several months after the orders of the Ombudsman, shall be honoured in a time bound manner and in any case, an endeavour shall be made to pay the said claims by 15th October 2026. (h) In cases where there is no order passed by the cooperative Ombudsman, the Liquidator shall examine the claims and decide the same in accordance with law. After deciding the claims, the amounts shall be paid expeditiously to the said depositors as well.

(i) The said Liquidator shall be entitled exercise all powers under

43. It is clarified that the above directions shall not, in any manner, come in the way of any criminal proceedings that may have been initiated or being pursued in West Bengal by any police authorities or the Directorate of Economic Offences, under any of the Central or the State Statutes. All the criminal proceedings and any other proceedings against the previous Management of the Society shall proceed as per law.

44. The Petitions are disposed of in the above terms. Pending applications, if any, are also disposed of.

PRATHIBA M. SINGH JUDGE MADHU JAIN JUDGE MAY 19, 2026/b/msh