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by Admin
06 December 2025 9:59 PM
“No Officer Can Be Held Personally Liable Under Section 88 Merely for Participating in Bank Management” – Bombay High Court Orders De Novo Inquiry for Procedural Lapses and Absence of Reasoned Findings
In a reportable decision dated 17 October 2025, the Bombay High Court, through Justice Amit Borkar, delivered a landmark judgment in Sanjeev Bhaskar Pathak & Ors. v. State of Maharashtra & Ors., Writ Petition No. 10750 of 2022 (with connected petitions), quashing the personal liability imposed on former managers and officers of Rupee Cooperative Bank under Section 88 of the Maharashtra Cooperative Societies Act, 1960.
The Court found serious procedural irregularities, failure to follow mandatory due process under Rule 72, absence of specific findings, and lack of causal nexus between each petitioner's act and the financial loss alleged. The impugned orders — one by the Authorized Officer (dated 2 February 2016) and the other by the Appellate Authority (dated 29 December 2021) — were quashed and set aside, with the matter remanded for fresh consideration strictly in accordance with law.
“The findings are written in general terms and treat all persons alike, without distinguishing between the decision-making powers of the Managing Committee and the limited administrative roles of the officers… Section 88 deals with personal liability, not collective or assumed responsibility,” held the Court [Paras 116, 118].
“Mere Participation in Management Is Not Misfeasance” – Officers Cannot Be Penalised Without Specific Acts Proved Against Them
The Court firmly reiterated that personal liability under Section 88 cannot be presumed from mere employment or routine administrative involvement:
“Unless there is evidence that the officer acted dishonestly, manipulated records, or knowingly concealed facts to favour a borrower, he cannot be said to have committed misfeasance or breach of trust,” the Court held [Para 117].
In this context, the Court underlined that Section 88 is a quasi-judicial power, and its invocation requires a clear causal link between an officer’s act and actual loss suffered by the society:
“A finding that ‘officers participated in management’ is too vague to establish culpability. The law does not punish officers merely for being part of the process, it punishes only those whose conduct is proved to have caused wrongful loss to the society” [Para 118].
“Rule 72 Is Not a Form, It Is a Mandate” – High Court Slams Procedural Breach in Imposing Civil Liability
Justice Borkar noted that the mandatory procedure under Rule 72 of the Maharashtra Cooperative Societies Rules, 1961 was not followed by the Authorities:
“The order passed by the Authorized Officer does not show whether each charge was properly framed or supported by evidence. There is no discussion showing what evidence was examined for each specific allegation or how the defence of the petitioners was considered” [Para 126].
The Court emphasised that Rule 72 requires a structured inquiry comprising issuance of clear show-cause notices, framing of charges, opportunity to defend, cross-examination, and reasoned findings — none of which were adequately complied with.
“Any action taken without following Rule 72 would be illegal, as it violates the fundamental principle of natural justice” [Para 88].
“Definition of Officer Not a License for Blanket Liability” – Clerical Staff Not Covered Under Section 88
An important issue in the case was whether the petitioners fell within the definition of “officer” under Section 2(20) of the MCS Act — a prerequisite for action under Section 88. The Court observed:
“Designation alone is not enough to impose liability… The authority must rely on credible and specific evidence to show that the person actually held a position covered under Section 2(20), had the power to direct or manage business decisions, and used or neglected those powers in a way that caused financial loss to the society” [Para 54].
The Court further clarified:
“Ordinary employees who perform routine tasks, like clerks, cashiers, or peons, cannot be treated as officers… The law does not punish those who merely performed subordinate or technical work under instructions” [Para 51].
“Appellate Authority Must Apply Its Own Mind” – Reproduction of Lower Authority’s Findings Not Judicial Adjudication
The Court took serious exception to the lack of independent reasoning in the Appellate Authority’s order, which simply endorsed the Authorized Officer’s findings without scrutiny:
“The order reads more like an endorsement than an adjudication… It fails to examine whether basic procedural requirements were followed or whether findings were based on credible evidence” [Paras 136–138].
Justice Borkar reminded that appellate power under Section 152 of the MCS Act is not a rubber-stamp function, but a quasi-judicial duty requiring scrutiny of facts, law, proportionality, and evidence:
“The appellate stage is meant to correct mistakes of fact or law committed by the lower authority and to ensure that justice is done” [Para 141].
“Section 88 Demands Specificity, Not Collective Blame” – Liability Must Be Proportional and Evidence-Based
On the issue of quantification and attribution of liability, the Court held that liability under Section 88 cannot be imposed mechanically:
“It is necessary to show that the loans were sanctioned due to a wrongful recommendation or negligence of a specific officer… Mere assumption that the officer’s involvement ‘must have’ contributed to the loss is not enough” [Para 135].
The absence of computation of loss attributable to each officer, and the lack of clarity on their individual roles, rendered the impugned orders legally unsustainable.
“The liability under Section 88 is not vicarious. It cannot be inferred merely because a person held a position in the Bank when the irregularity occurred” [Para 119].
Court Emphasises Principles of Fairness, Timeliness, and Credible Evidence Under Section 88 Proceedings
The judgment is a comprehensive restatement of the law under Section 88 of the Maharashtra Cooperative Societies Act, laying down the following foundational principles:
Liability must arise from credible material traceable to audit, inquiry, inspection, or liquidator report.
Each charge must be specific, supported by evidence, and tied to individual conduct.
The officer must fall within the legal definition of “officer” under Section 2(20).
The causal link between the act and loss must be clearly demonstrated.
Dishonest intent, wilful negligence, or breach of trust must be proved.
Rule 72 must be strictly followed in letter and spirit.
Orders must be speaking, reasoned, and proportionate to actual loss.
Appellate authorities must independently apply their mind to all issues.
“Fixing Personal Liability Without Trial-Like Process Is Impermissible” – Matter Remanded for Fresh Inquiry
The High Court, acknowledging the factual complexity and evidentiary gaps, held that it was not possible to fix personal liability in writ jurisdiction:
“The Court cannot, on the paper now before it, say what exact role each petitioner played… These issues call for detailed fact-finding… Writ jurisdiction under Articles 226 and 227 is not the right forum for such reappraisal of primary facts” [Para 143].
Accordingly, the Court quashed both impugned orders and remanded the matter for fresh adjudication, directing:
“The Authorized Officer shall, while conducting the fresh inquiry, strictly follow the procedure laid down in Rule 72… The fresh inquiry shall be completed within a reasonable time, preferably within six months from the date of receipt of this order” [Paras 147–148].
The Bombay High Court's judgment in this case reasserts due process, fairness, and individualised assessment as cornerstones of civil liability under cooperative society law. It sends a strong message that Section 88 proceedings cannot become a tool for collective punishment or mechanical liability, and that every finding must pass the test of legal precision, procedural integrity, and evidentiary rigour.
Date of Decision: 17 October 2025
