1. Heard learned counsel Sri Aadesh Varma appearing for the appellants, who are respondents No.4 and 5 in W.P.No.11023 of 2026; learned counsel Sri M.Damodar Reddy appearing for respondent No.1, who is the writ petitioner; Ms. B.Mohana Reddy, learned Government Pleader for Cooperation Department, appearing for respondents No.2 to 4.

2. The learned writ court by the impugned judgment, dated 08.06.2026 passed in W.P.No.11023 of 2026, directed respondent No.4 herein to complete the proceedings initiated against the appellants, who are the Directors of respondent 5 – bank and against whom a show cause notice dated 11.03.2026 has been issued after a statutory inspection under Section 52 of the Telangana Co-operative Societies Act, 1964 (hereinafter referred to as, “the Act of 1964”) as to why action under Section 60 of the said Act should not be initiated against them. By the said show cause notice, the appellants were asked to furnish reply within 15 days with documentary evidence, failing which action against them as per the records of the society and the provisions of the Act of 1964 would be taken. The writ petitioner approached the learned writ court with the following prayer:

               “For the reasons stated in the accompanying affidavit the petitioner pray the Hon’ble Court may be pleased to issue an order or direction more particularly one in the nature of Writ of Mandamus declaring the action of the 4th respondent Bank in including the names of the 5th and 6th respondents as Directors of the 4th respondent Bank to attend the meeting of the Managing Committee of the Bank scheduled to be held in the month of April, 2026 though the respondents 5 and 6 are ceased to be Directors of the Bank upon initiation of the proceedings U/Sec.52 and Section 60 of the Act, 1964 upon their indulging in the malpractice causing loss to the tune of Rs.65,47,766/- as illegal, unlawful, contrary to law and consequently direct the 4th respondent Bank to delete the names of the 5th and 6th respondents from the above schedule and also direct the 2nd and 3rd respondents to consider the representation of the petitioner dated 01.04.2026 and declare the 5th and 6th respondents are ceased Directors of the Bank and they shall have no right to participate in the affairs of the 4th respondent bank, and pass such other order or orders which are necessary in the interest of justice.”

3. When the matter was taken up on 10.04.2026, the learned writ court passed the following interim order in the absence of respondent No.5:

               “This Writ Petition is filed with the following prayer:

               “… to issue an order or direction more particularly one in the nature of Writ of Mandamus declaring the action of the 4th respondent Bank in including the names of the 5th and 6th respondents as Directors of the 4th respondent Bank to attend the meeting of the Managing Committee of the Bank scheduled to be held in the month of April, 2026 though the respondents 5 and 6 are ceased to be Directors of the Bank upon initiation of the proceedings U/Sec. 52 and Section 60 of the Act, 1964 upon their indulging in the malpractice causing loss to the tune of Rs 65,47,766/-, as illegal, unlawful, contrary to law and consequently direct the 4th respondent Bank to delete the names of the 5th and 6th respondents from the above schedule and also direct the 2nd and 3rd respondents to consider the representation of the petitioner dated 01-04-2026 and declare the 5th and 6th respondents are ceased Directors of the Bank and they shall have no right to participate in the affairs of the 4th respondent bank and pass…”

               Issue notice to respondents, returnable in four weeks.

               A loan amount of Rs.1,34,40,000/- was sanctioned over the years (2012, 2013 and 2015), for operation of a school, a B.Ed. college and training programs for Telugu and Hindi Pandits.

               The total outstanding amount as on 31.05.2018 was Rs. 1,36,29,735/-. On this amount, the interest was to be charged @ 18% per annum and @ 2% Penal Interest until the realization. The amount to be paid was Rs.2,27,68,947/- as on 31.03.2021, but the bank collected an amount of Rs.1,62,21,180/- leaving a balance amount of Rs.65,47,767/-.

               It is the contention of learned counsel for petitioner that Section 52 of the Telangana Cooperative Societies Act, 1964, r/w Section 21-AA were invoked and show cause notice was issued (Page No.20, dated 11.03.2026). It is the specific contention of counsel for petitioner that once a show cause notice is issued by invoking Section 52 r/w Section 21-AA of the Act, persons to whom the notice is issued will no more be the Directors. It is also contended that the Bhavana Rishi Urban Cooperative Bank Limited has scheduled the meetings on April 17th, 18th and 20th of 2026, in which respondent Nos.5 and 6 are shown as Members of Committee i.e., Investments Committee meeting on 17.04.2026 (Both respondent Nos.5 & 6 are in the committee), NPA Committee meeting on 17.04.2026 (only respondent No.6-C.Balaraj, Board of Management meeting on 18.04.2026 (only respondent No.5-A.Mohan Reddy) and Board of Directors Committee meeting on 20.04.2026 (P5, Page No.26). The Committee meetings are being conducted by Bhavana Rishi Urban Cooperative Bank Limited of which respondent Nos.5 and 6 are part of Committees. The committees in which respondent Nos.5 and 6 are members, they have received the show cause notices/have been issued show cause notices, that they can no more be said to be Directors and hence, they cannot participate.

               Section 21-AA speaks of cessation of membership of committee and Section 52 speaks of inspection. It is observed from Section 21-AA that a member of committee shall cease to hold office if he is found guilty of misuse of property or such other misdeeds as enumerated from Section 21-AA(1) to 21- AA(7).

               Having perused contents of Section 52 r/w Section 21-AA and the material on record, this Court is the considered opinion that respondent Nos.5 and 6 shall withhold themselves from appearing in any of the meetings for a period of four (04) weeks.

               Post the matter on 12.06.2026.”

4. After the appearance of the respondents, the writ petition was decided by the impugned judgment in the following manner:

               “8. Taking into consideration:

               (a) The aforesaid facts and circumstances of the case,

               (b) The submissions made by the counsel for the petitioner and learned Assistant Government Pleader for Cooperation, appearing on behalf of the respondent Nos.1 to 3,

                (c) The discussion and conclusion as arrived at paragraph Nos.5 to 7 of the present order,

               The writ petition is disposed of directing the respondent No.3 to complete the proceedings initiated against the respondent Nos.5 and 6 under Section 60 of the TCS Act, 1964 within a period of eight (8) weeks from the date of receipt of a copy of the order.

               The interim order granted by this Court on 10.04.2026 referred to and extracted above, shall remain in force till appropriate orders are passed under Section 60 of the TCS Act, 1964, in accordance to law, by giving notice and reasonable opportunity of hearing to all the concerned. There shall be no order as to costs.

               Miscellaneous petitions, if any, pending in this Writ Petition, shall stand closed.”

5. Respondents No.5 and 6 in the writ petition, who are the appellants herein, assailed the latter part of the impugned direction whereby the learned writ court has directed that the interim order dated 10.04.2026 shall remain in force till appropriate orders are passed under Section 60 of the Act of 1964 and till the matter is decided by respondent No.4 after notice and reasonable opportunity of hearing to all the concerned. The learned writ court, in its interim order, had referred to Section 52 read with Section 21-AA of the Act of 1964 and was persuaded to direct that the appellants shall withhold themselves from appearing in any of the meetings of the committee, since under Section 21-AA of the Act of 1964, once notice is issued, they will no more be the Directors. According to the writ petitioner, the appellants were shown as members of the committee in the meetings held subsequent to the show cause notice.

6. Section 21-AA(5), Section 52 and Section 60 are extracted hereunder:

               “21-AA. Cessation of Membership of Committee:—

               xxx

                (5) Where the committee of a society fails to place the inquiry report under Section 51 or Inspection report under Section 52 or Section 53 or Audit Report or Special Audit Report under Section 50 along with the findings of the Registrar and action taken on serious irregularities, if any which need immediate corrective action, before the next General Body held after the date of the receipt of the report by the society, the members of the Committee shall, cease to hold such office.

               52. Inspection:— (1) The Registrar may, of his own motion or on the application of a creditor of a society, inspect or direct any person authorised by him by a general or special order in this behalf to inspect the books of the society.

               Such inspection shall be completed within a period of three months from the date of receipt of order of inspection by the Inspecting Officer so appointed.

               Provided that no such inspection shall be made or directed on the application of a creditor unless the creditor:—

               (a) satisfies the Registrar that the debt is a sum then due and that he has demanded payment thereof and has not received satisfaction within a reasonable time; and

               (b) deposits with the Registrar such sum as security, for the costs of the proposed inspection as the Registrar may require.

               (2) The Registrar or any person authorised by him under sub-section (1) shall prepare a report of inspection which shall be communicated to the Managing Committee of the Society together with the findings of the Registrar thereon. It shall be the responsibility of the Managing Committee to place the inspection report together with the findings of the Registrar before the General Body or Special General Body convened for the purpose for its information, within a period of one month of the communication of the inspection report by Registrar. The Registrar shall be competent to initiate action under the provisions of this Act, if the Committee fails to take action as aforesaid:

               Provided that notwithstanding anything contained in this Act and Rules made thereunder, the bye-laws of a society and the action of the society in placing the inspection report along with the findings of the Registrar, the Registrar shall not be precluded from taking, follow up action as may be required on the basis of inspection report:

               Provided further that such action shall not be nullified even if the General Body of the Society passes a resolution negativing the findings of the Registrar:

               Provided also that the Registrar may for reasons to be recorded in writing extend the period of three months for completion of inspection for a further period not exceeding two months.

               Explanation:— For the purposes of this section, “Managing Committee” includes a Committee constituted under Section 31(l)(a), and a person-in-charge appointed under Section 32(7)(a) and also Administrator(s) appointed under Section 34 of the Act.

               60. Surcharge:—(1) Notwithstanding anything contained in any other law for the time being in force where in the course of an audit under Section 50 or an inquiry under Section 51 or an inspection under Section 52 or Section 53, or the winding up of a society, it appears that any person who is or was entrusted with the organisation, affairs or management of the society or any past or present officer or servant of the society has misappropriated or fraudulently retained any money or other property or has been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has made any payment contrary to the provisions of this Act, the rules or the bye-laws, the Registrar himself, or any person specially authorised by him in this behalf, of his own motion or on the application of the committee, liquidator or any creditor or contributor, may inquire into the conduct of such person or officer or servant and make an order requiring him/her or his/her legal heir to repay or restore the money or property or any part thereof with interest at such rate as the Registrar or the person authorised as aforesaid thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, misapplication of funds, fraudulent retention, breach of trust, or wilful negligence as the Registrar or the person authorised as aforesaid thinks just.

               Provided that no order shall be passed against any person referred to in this sub-section unless the person concerned has been given an opportunity of making his representation in the manner as prescribed by the Registrar from time to time”

7. On the interpretation of the application of Section 21-AA of the Act of 1964, a learned Division Bench of the erstwhile High Court of Judicature, Andhra Pradesh at Hyderabad, in Vancha Veera Reddy v. District Co-operative Officer, Nalgonda, Nalgonda District (2010 (3) ALD 526 (DB)) categorically held that the disqualification or cessation in not automatic though such cessation may be ultimately from the date of disqualification.

8. Learned counsel for the appellants and respondent No.5 both submit that the cessation is not automatic and it shall be declared by the General Body as contemplated under Section 31-A(4) of the Act of 1964 read with Section 30(2) of the said Act. Learned counsel for respondent No.5 also referred to the aforesaid Division Bench judgment and the stand of respondent No.5 taken in the counter affidavit.

9. Learned counsel for the writ petitioner submits that during the inspection proceedings pursuant whereto the show cause notice was issued, the appellants had accepted their guilt and, therefore, their cessation should operate on the issuance of the show cause notice.

10. Learned Government Pleader for respondents No.2 to 4, however, disputes the legal position advanced by the learned counsel for the writ petitioner. She has also referred to the Division Bench judgment of the erstwhile High Court of Judicature, Andhra Pradesh at Hyderabad, in Vancha Veera Reddy (supra). It is further submitted that the proceedings have not commenced, as the copy of the impugned judgment has not yet been received.

11. Having considered the submissions of the learned counsel for the parties and the relevant facts noted above, without getting into the merits of the allegations contained in the show cause notice, which would lead to culmination of proceedings upon submission of explanation by the appellants herein, we are of the considered view that the direction of the learned writ court in the impugned judgment to keep the interim order dated 10.04.2026 intact is not as per the provisions of the Act of 1964 as read by the learned Division Bench of the erstwhile High Court of Judicature, Andhra Pradesh at Hyderabad, in Vancha Veera Reddy (supra).

12. In the light of the decision referred to hereinabove, it is trite to reiterate that issuance of a show cause notice in itself does not amount to cessation of membership of the Managing Committee who are also the Directors of the Society, till a finding is recorded in such proceedings. If the findings lead to disqualification, the cessation would relate back to the date of disqualification. This aspect of the matter was not considered by the learned writ court. Therefore, the second part of the impugned judgment is set aside.

13. The writ appeal is allowed in the manner and to the extent indicated above. There shall be no order as to costs.

Miscellaneous applications pending, if any, shall stand closed.