Bombay High Court
Girish C. Lodha vs Divisional Joint Registrar, ... on 25 January, 2024
Author: Sandeep V. Marne
Bench: Sandeep V. Marne
2024:BHC-OS:1563
k 1/17 60_wpl_36428.22_os.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.36428 OF 2022
Girish C. Lodha
Aged 61 years, Occ. Business
Residing at: B-502, Kandivali
Kesar Ashish Co-operative Housing
Society Limited, Plot No.17,
CTS No.1/C/1/1, Mahavir Nagar,
Off Link Road, Kandivali (West)
Mumbai - 400 067. ....PETITIONER
V/S
1 Divisional Joint Registrar,
Co-operative Societies,
Mumbai Division, Mumbai
Having office at Malhotra House,
6th floor, Opp. G.P.O., Fort,
Mumbai - 400 001.
2 A.D. Patil
The Special Auditor, Class-I,
Co-operative Societies (Flying Squad)
Mumbai Division, Mumbai
Having office at Malhotra House,
6th floor, Opp. G.P.O., Fort,
Mumbai - 400 001.
3 Kandivali Keasr Ashish Co-operative
Housing Society Limited
Having its registered office at:
Plot No.17, CTS No.1/C/1/1,
Mahavir Nagar, Off Link Road,
Kandivali (West), Mumbai -400 067.
katkam 1/17
::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 :::
k 2/17 60_wpl_36428.22_os.doc
4 Milap K. Doshi,
An adult, Indian inhabitant
Residing at : C-1802, Kandivali
Kesar Ashish CHSL, Mahavir Nagar,
Off Link Road, Kandivali (West)
Mumbai - 400 067.
5 Ashwin Lalji Gogari
An Adult, Indian inhabitant
Residing at 1202, 1 Second Floor,
Sathe Co-opeative Housing
Society Limited, Sir BH Alchanda
Road, Matunga, Mumbai - 400 019.
6 Pratibha Mhatre
An adult, Indian inhabitant
Residing at : B/507 Rainbow Tower
Sector - 20, Navi Mumbai - 400 708. ....RESPONDENTS
...
Mr. Simil Purohit with Mr. Amey C. Sawant for the Petitioner.
Mr. Mohit Jadhav, Additional GP with Mr. Manish Upadhye, AGP for
Respondent No.1/State.
Mr. Karl Tamboly and Mr. Anoshak Daver with Mr. Viraj Jadhav i/b
Mr. Chinmaya Acharya for Respondent Nos.4 and 6.
Mr. Shailesh C. Naidu with Mr. Karl Tamboly and Mr. Kevin Pereira i/b
Mr. Chinmaya Acharya for Respondent No.5.
...
CORAM: SANDEEP V. MARNE, J.
DATE : JANUARY 25, 2024.
PC:
1 Petitioner has filed this Petition challenging the order dated 26 September 2022 passed by the Divisional Joint Registrar, Co-operative katkam 2/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 3/17 60_wpl_36428.22_os.doc Societies, Mumbai Division, by which Petitioner's application dated 25 October 2021 for initiation of action under provisions of section 80(3) and section 81(3)(b) of the Maharashtra Co-operative Societies Act, 1960 (MCS Act) has been disposed of. Petitioner's grievance in the Petition essentially pertains to the failure on the part of the Divisional Joint Registrar to take the proceedings initiated by him under Sections 80(3) and 81(3)(b) of the MCS Act to their logical conclusion by directing conduct of reaudit of Society's accounts and by taking action against its Managing Committee members. It is Petitioner's case that by taking cognizance of application dated 25 October 2021, the Divisional Joint Registrar had appointed Special Auditor (Flying Squad) under provisions of section 81(3)(b) of MCS Act to conduct enquiry into the accounts of Society. That the said Special Auditor, who conducted enquiry, ought to have made final recommendations to the Divisional Joint Registrar for taking action against Society and its office bearers. That however the Special Auditor failed to record any final findings on the pretext of pendency of Dispute filed by the Petitioner under section 91 of the MCS Act before the Co-operative Court. The Divisional Joint Registrar has failed to take the proceedings initiated by him under provisions of sections 80(3) and 81(3)(b) of the Act to their logical end and has left the same incomplete on the pretext of pendency of Dispute before the Co-
operative Court. Aggrieved by the action of the Divisional Joint Registrar in closing the proceedings initiated under Sections 80(3) and 81(3)(b) of the Act vide Order dated 26 September 2022, Petitioner has filed the present Petition.
katkam 3/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 :::k 4/17 60_wpl_36428.22_os.doc 2 Petitioner contends that there is a large-scale fraudulent
transactions in the accounts of the Society, which are required to be audited by the Registrar by seizure of Society's records. Petitioner, along with Ms. Sunita Lodha have instituted Dispute No.CCIV/117 of 2021 before the Co-operative Court for various reliefs including production/seizure of records and conduct of reaudit. In that Dispute, some of the Respondents therein filed application under provisions of Order 7 Rule 11 of the Code of Civil Procedure, 1908 (the Code) seeking rejection of Dispute on the ground of Registrar's jurisdiction under the MCS Act to seize records and conduct reaudit. Petitioner has accordingly filed application dated 25 October 2021 before the Divisional Joint Registrar under provisions of sections 80(3) and 81(3)(b) of the MCS Act seeking seizure of Society's records and appointment of flying squad to verify its accounts. The Divisional Joint Registrar appointed Special Auditor (Flying Squad) by letter dated 18 November 2021. The Special Auditor accordingly conducted inquiry and submitted report. However instead of recording specific findings about the allegations raised by Petitioner, the Special Auditor referred the Dispute filed by Petitioner before Co-operative Court and did not recommend any specific action against the Managing Committee members. The Divisional Joint Registrar took cognizance of the report of the Special Auditor and has closed the proceedings by passing order dated 26 September 2022, which is the subject matter of challenge in the present petition.
3 I have heard Mr. Purohit, the learned Counsel appearing for Petitioner, Mr. Naidu, the learned Counsel appearing for Respondent katkam 4/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 5/17 60_wpl_36428.22_os.doc No.5, Mr. Tamboly, the learned Counsel appearing for Respondent Nos.4 and 6 and Mr. Jadhav, the learned AGP for Respondent/State.
4 After having considered the submissions canvassed by the learned counsel appearing for parties and after perusal of the documents placed on record it is seen that the Petitioner-Girish Lodha and Ms. Sunita Lodha have instituted Dispute No.CC/IV/117 of 2021 under Section 91 of the MCS Act on or about 17 June 2021 before the Co-operative Court seeking following prayers:
"17. The Disputants therefore pray that:
a) The present dispute be adjudicated u/s. 91 to 96 of the MCS Act, 1960;
b) This Hon'ble Court be pleased to order and direct the Opponents for production of all lawful maintenance of original accounts and registers of the Opponent no.1 society from the date registration to up to date as per the provisions of the MCS Act 1960, the MCS Rules 1961, circulars, notifications framed there under and Its approved Byelaws of the society and supply one set of certified true copies of all such documents, accounts and registers to the Disputants within the time period as this Hon'ble Court deem fit and proper:
c) This Hon'ble Court be pleased to order and direct the Opponents to comply all the requisitions, clarifications and documents as demanded by the Disputants no. 1 and 2 through their last advocate letter dated 12.05.2021 within the time period as this Hon'ble Court deem fit and proper;
d) This Hon'ble Court be pleased to order and direct the Opponent society and its office bearers/committee members to withdraw the wrong allegations made against the Disputants in the advocate letter dated 23.05.2021 of the Opponent no. 1 society as it is illegal, bad in law and contrary to the provisions of the MCS Act 1960, the MCS Rules 1961, circulars, notifications framed there under and its approved Byelaws of the society;
e) This Hon'ble Court be pleased to order and direct the Opponent society to conduct re-audit of all Opponent society's accounts through the Government Auditor/Auditing Authority attached to Co-operative Department in a time frame manner as this Hon'ble Court deem fit and proper;
or in alternative, This Hon'ble Court be pleased to order and direct the Government Auditor/Auditing Authority attached to Co- operative Department to appoint flying squad to conduct re-audit of all Opponent society's accounts from the katkam 5/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 6/17 60_wpl_36428.22_os.doc date of registration to up to date in a time frame manner as this Hon'ble Court deem fit and proper;
f) Pending the hearing and final disposal of the present dispute by grant of injunction, the Opponents their agents, servants, persons claiming through or under them be directed and ordered to supply certified true copies of all requisitions, clarifications and documents as demanded by the Disputants no. 1 and 2 through their last advocate letter dated 12.05.2021 within the time 7 period as this Hon'ble Court deem fit and proper;
g) Ad-interim reliefs in terms of prayer clause (f) above;
h) Cost of the Dispute be provided;
i) Any other reliefs as this Hon'ble Court deems fit and proper may be granted."
(emphasis and underling supplied)
5 Thus the Dispute filed by Petitioner and Ms. Sunita Lodha before
the Cooperative Court contains specific prayers for conduct of reaudit of Society's accounts and for appointment of flying squad for conducting such reaudit. Within short duration of filing of the Dispute, Petitioner filed Complaint before the Divisional Joint Registrar on 25 October 2021 under provisions of sections 80(3) and 81(3)(b) of the MCS Act seeking following prayers:
16. The Applicants therefore pray that:
a) The present application/complaint be adjudicated u/s. 80(3) and Sec.81(3)
(b) of the MCS Act, 1960;
b) This Hon'ble Authority may be pleased to apply to the Executive Magistrate within whose jurisdiction the society is functioning for seizing and taking possession of the records of society.
c) That pending the final hearing and disposal of present application/complaint this Hon'ble Authority be pleased to order and direct for to depute flying squad to the respondent society for examination of books, records, accounts, and such other papers and for verification of cash balance.
d) That pending the final hearing and disposal of present application/complaint this Hon'ble Authority be pleased to order and direct immediate action for an order to seize all such books, records or funds of the society after reasonable notice at any reasonable time enter and search without warrant all such katkam 6/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 7/17 60_wpl_36428.22_os.doc premises where the Hon'ble Authority believes such books, records or funds to be and inspect and seize such books, records or funds, and further order and direct the officer or officers of the society responsible for the custody of such books, records and funds shall deliver such books, records or funds forthwith to this hon'ble Authority. With further order and direction for the purpose of execution of the said order, request the officer-in-charge of the nearest police station to give necessary assistance.
6 Thus in his Complaint filed on 25 October 2021, Petitioner sought adjudication of the Complaint under provisions of sections 80(3) and 81(3)(b) of the MCS Act with further directions for seizure and taking possession of records of Society. By way of interim order, he also sought deputation of flying squad for examination of books, records and accounts of the Society.
7 Section 80 of the MCS Act confers power on the Registrar to seize records of the Society after recording a satisfaction that such records are likely to be suppressed, tampered with or destroyed. In a given case where immediate action is required to be taken, and the Executive Magistrate is not available, the Registrar is empowered to seize books and records of the Society. Section 80 of the MCS Act reads thus:
"80. Registrar's power to seize records etc.-
(1) Where the Registrar is satisfied that the books and records of a society are likely to be suppressed, tampered with or destroyed, or the funds and property of a society are likely to be misappropriated or misapplied, the Registrar or the person authorised by him may apply to the Executive Magistrate within whose jurisdiction the society is functioning for seizing and taking possession of the records and prop-
erty of the society.
(2) On receipt of an application under sub-section (1) the Magistrate shall forthwith consider such application and, if satisfied that immediate action is required, shall authorise any police officer, not below the rank of a sub-inspector, to enter and search any place where the records and property are kept or likely to be kept, and to katkam 7/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 8/17 60_wpl_36428.22_os.doc seize them and hand over possession thereof to the Registrar or the person autho- rised by him, as the case may be.
(3) Where the Registrar or an officer not below the rank of District Deputy Registrar (hereinafter referred to in this section as "the said officer") is satis- fied that Immediate action is required to be taken or that the Executive Magistrate having jurisdiction is not likely to be available at the head-quarters for a consecutive period of three days or the books and records of a co-operative society are in the im - mediate danger of being tampered with or funds and property of a society are in the immediate danger of being misappropriated or misapplied, the Registrar or the said officer may, notwithstanding anything contained in sub-sections (1)and (2), make an order to seize such books, records or funds of the society either himself or through an officer authorized by him in this behalf, and for that purpose the Registrar or the said officer or the officer so authorised may after reasonable notice at any reasonable time enter and search without warrant any premises where he believes such books, records or funds to be and inspect and seize such books, records or funds, and the of - ficer or officers of the society responsible for the custody of such books, records and funds shall deliver such books, records or funds forthwith to the Registrar, the said officer or the officer so authorised, who shall acknowledge receipt of the books, records or funds of the society so seized. The Registrar, the said officer or the officer so authorised, may, for the purpose of execution of the said order, request the officer- in-charge of the nearest police station to give him necessary assistance and such po- lice officer shall thereupon give him such assistance."
8 Under section 81 of the MCS Act, the Society is under obligation to get its accounts audited atleast once in each financial year. Under section 81(3)(b) of the MCS Act, the Registrar is empowered to depute a Flying Squad for examination of books, records and accounts and for verification of cash balance, if the Registrar has a reason to believe that there exists an element of fraud or misappropriation of funds or manipulation of accounts or tampering of accounts has taken place. Section 81 of the MCS Act reads thus:
"81. Audit (1) (a) The society shall cause to be audited its accounts at least once in each financial year and also cause it to be completed within a period of four months from the close of financial year to which such accounts relate by auditor or auditing firm from a panel prepared by the Registrar and approved by the State Government or an katkam 8/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 9/17 60_wpl_36428.22_os.doc authority authorized by it in this behalf possessing required qualifications and experience as may be prescribed to be eligible for auditing accounts of societies, appointed by the general body of a society, as provided in sub- section (2A) of section 75 or by the Committee, as provided in sub-section (2B) of apex society, the audit report shall also be laid before both Houses of the State Legislature, in such manner, as may be prescribed:
Provided that, if the Registrar is satisfied that the society has failed to intimate and file the return as provided by sub-section (2A) of section 75 and sub-section (1B) of section 79, by order, for the reasons to be recorded in writing, he may cause its accounts to be audited, by an auditor from the panel of the auditors approved by the State Government or an authority authorised by it in this behalf:
Provided further that, no auditor shall accept audit of more than twenty societies for audit in a financial year excluding societies having paid up share capital of less than rupees one lakh:
Provided also that, the Registrar shall maintain a panel of auditors and auditing firms as approved by the State Government or an authority authorised by it in this behalf;
Provided also that, for the financial year 2019-2020 and year 2020-2021, the society shall cause its audit to be completed within a period of nine months from the close of the financial year 2019-2020 and year 2020-2021.
(b) The manner of preparation, declaration and maintenance of the panel of auditors and auditing firms by the Registrar shall be such as may be prescribed;
(c) The committee of every society shall ensure that the annual financial statements like the receipts and payments or income and expenditure, profit and loss and the balance-sheet along with such schedules and other statements are audited, within, four months of the closure of the financial years.
(d) The Registrar shall submit the audit report of every apex co-operative society to the State Government annually for being laid before the both Houses of the State Legislature in the manner prescribed.
(e) The auditor's report shall have,-
(i) all particulars of the defects or the irregularities observed in audit and in case of financial irregularities and misappropriation or embezzlement of funds or fraud, the auditor or the auditing firm shall investigate and report the modus operandi, entrustment and amount involved;
(ii) accounting irregularities and their implications on the financial statements to be indicated in detail in the report with the corresponding effects on the profit and loss;
(iii) the functioning of the committee and sub-committees of the societies be checked and if any irregularities or violation are observed or reported, duly fixing the responsibilities for such irregularities or violations;
(f) the remuneration of the auditor or auditing firm of a society shall be borne by the society and shall be at such rate as may be prescribed.
(g) The Registrar shall maintain the list of societies district-wise, the list of working societies, the list of societies whose accounts are audited, the list of societies whose accounts are not audited within the prescribed time and reasons therefor. The Registrar shall co-ordinate with the societies and the auditors or auditing firms and ensure the completion of audit of accounts of all the co-operative societies in time every year.katkam 9/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 :::
k 10/17 60_wpl_36428.22_os.doc Explanation-I.- For the purposes of this section, the expression, "possessing required qualifications" for being included in the panel duly approved by the State Government or an authority authorised by the State Government in this behalf, from time to time shall, mean and include -
(a) a person who is a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949, who has a fair knowledge of the functioning of the societies and an experience of atleast one year in auditing of societies with a working knowledge of Marathi language;
(b) an auditing firm which is a firm of more than one Chartered Accountant within the meaning of the Chartered Accountants Act, 1949, who have a fair knowledge of the functioning of the societies with a working knowledge of Marathi language;
(b-1) a person who is Cost Accountant within the meaning of the Cost and Works Accountants Act, 1959, who has a fair knowledge of the functioning of the societies and an experience of at least one year of auditing in societies with a working knowledge of Marathi language;
(b-2) an auditing firm, which is a firm of more than one Cost Accountants within the meaning of the Cost and Works Accountants Act, 1959, having a fair knowledge of the functioning of the societies with a working knowledge of Marathi language;
(c) a certified auditor who is a person holding a Degree from recognised University and also has completed a Government Diploma in Co-operation and Accountancy and who has a fair knowledge of the functioning of the societies and an experience of atleast three years in auditing of societies with a working knowledge of Marathi language;
(d) a Government Auditor who is an employee of the Co-operation Department of the State, possessing the Higher Diploma in Co-operative Management or the Diploma in Co-operative Audit or Government Diploma in Co-operation and Accountancy with a working knowledge of Marathi language and who has completed the period of probation successfully;
Explanation II.- The terms and conditions for inclusion and retention of name as an auditor or auditing firm in the panel of auditors shall be subject to the terms and conditions, as may be prescribed.
(2) The audit under sub-section (1) shall be carried out as per Auditing Standards notified by the State Government from time to time and shall also include examination or verification of the following items, namely:-
(i) over dues of debts, if any;
(ii) cash balance and securities and a valuation of the assets and liabilities
of the society,
(iii) whether loan and advances and debts made by the society on the basis of security have been properly secured and the terms on which such loans and advances are made or debts are incurred are not prejudicial to the interest of the society and its members;
(iv) whether transactions of the society which are represented merely by book entries are not prejudicial to the interest of the society;
katkam 10/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 11/17 60_wpl_36428.22_os.doc
(v) whether loans and advances made by the society have been shown as
deposits;
(vi) whether personal expenses have been charged to revenue account;
(vii) whether the society has incurred any expenditure in furtherance of its objects;
(viii) whether the society has properly utilised the financial assistance granted by Government or Government undertakings or financial institutions, for the purpose for which such assistance was granted;
(ix) whether the society is properly carrying-out its objects and obligations towards members.
(2A) Where, in the opinion of the State Government, it is necessary In the public interest tor in the interest of the society to do so in relation to any society or class of societies for ensuring management thereof in accordance with sound business principles or prudent commercial practices, the State Government may, by order, direct that such society or class of societies shall prepare and maintain its accounts in the form determined by the State Government, from time to time and that cost audit or performance audit or both, of such society or class of societies, as may be specified in the order, shall be conducted.
(2B) Where any order is issued under sub-section (2A), the Society shall cause its audit to be conducted by a cost accountant who is a member of the Institute of Cost and Works Accountants of India constituted under section 3 of the Cost and Works Accountants Act, 1959.
(3)(a) The Auditor shall, for the purpose of audit, at all times have access to all the books, accounts, documents, papers, securities, cash and other properties belonging to, or in the custody of, the society, and may summon any person in possession or responsible for the custody of any such books, accounts, documents, papers, securities, cash or other properties, to produce the same at any place at the headquarters of the society or any branch thereof.
(b) If the Registrar has reason to believe that there exists an element of fraud, misapplication of funds, manipulation of the accounts and the accounts of the society are likely to be tampered with, thereby causing loss to the society, he shall be shall be competent to depute flying squad to a society or societies for examination of books, records, accounts, and such other papers and for verification of cash balance. The report of the Flying Squad shall be treated as sufficient evidence for further action, if any.
(c) If it is brought to the notice of the Registrar that the audit report submitted by the auditor does not disclose the true and correct picture of the accounts, the Registrar or the authorised person may carry out or cause to be carried out a test audit of accounts of such society. The test audit shall include the examination of such items as may be prescribed and specified by the Registrar in such order.
(4) Every person who is, or has at any time been, an officer or employee of the society, and every member of the society, shall furnish such information in regard to katkam 11/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 12/17 60_wpl_36428.22_os.doc the transactions and working of the society as the Registrar, or the person authorised by him, may require.
(5) The auditor appointed under sub-section (1) shall have the right to receive all notices and every communication relating to the annual general meeting of the society and to attend such meeting and to be heard thereat, in respect of any part of the business with which he is concerned as auditor.
(5A) If, during the course of audit of any society, the auditor is satisfied that some books of accounts or other documents contain any incriminatory evidence against past or present officer or employee of the society the auditor shall immediately report the matter to the Registrar and, with previous permission of the Registrar, may impound the books or documents and give a receipt thereof to the society.
(5B) The auditor shall submit his audit report within a period of one month from its completion and in any case before issuance of notice of the annual general body meeting, to the society and to the Registrar in such form as may be specified by the Registrar, on the accounts examined by him and on the balance sheet and profit and loss account as on the date and for the period up to which the accounts have been audited, and shall state whether in his opinion and to the best of his information and according to the explanation given to him by the society the said accounts give all information required by or under this Act and present the true and fair view of the financial transaction of the society.
Provided that, where the auditor has come to a conclusion in his audit report that any person, is guilty of any offence relating to the accounts or any other offences, he shall file a specific report to the Registrar within a period of fifteen days from the date of submission of his audit report. The Auditor concerned shall, after obtaining written permission of the Registrar, file a First Information Report of the offence. The auditor who fails to file First Information Report, shall be liable for disqualification and his name shall be liable to be removed from the panel of auditors and he shall also be liable to any other action as the Registrar may think fit:
Provided further that, when it is brought to the notice of the Registrar that, the Auditor has failed to initiate action as specified above, the Registrar shall cause a First Information Report to be filed by a person authorised by him in that behalf:
Provided also that, on conclusion of his audit, if the auditor finds that there are apparent instances of financial irregularities resulting into losses to the society caused by any member of the committee or officers of the society or by any other person, then he shall prepare a Special Report and submit the same to the Registrar alongwith his audit report. Failure to file such Special Report, would amount to negligence in the duties of the auditor and he shall be liable for disqualification for appointment as an auditor or any other action, as the Registrar may think fit.
(6) If it appears to the Registrar, on an application by a society or otherwise, that it is necessary or expedient to re-audit any accounts of the society, the Registrar may by order provide for such re-audit and the provisions of this Act applicable to audit of accounts of the society shall apply to such re-audit.katkam 12/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 :::
k 13/17 60_wpl_36428.22_os.doc (7) Special audit of the Co-operative Bank if requested by the Reserve Bank of India shall be conducted and report thereof shall be submitted to the Reserve Bank of India under intimation to the Registrar alongwith the Special Audit Report."
(emphasis supplied) 9 Deputation of Flying Squad under section 81(3)(b) of the MCS Act is for the purpose of conducting audit/re-audit of the Society so as to take further action against the Society or its Managing Committee under provisions of section 88 of the MCS Act which reads thus:
"88. Power of Registrar to assess damages against delinquent promoters, etc. (1) Where, in the course of or as a result of an audit under section 81 or an inquiry under section 83 or an inspection under section 84 or the winding up of a society, the Registrar is satisfied on the basis of the report made by the auditor or the person authorised to make inquiry under section 83 or the person authorised to inspect the books under section 84 or the Liquidator under section 105 or otherwise that any person who has taken any part in the organisation or management of the society or any deceased, or past or present officer of the society has, within a period of five years prior to the date of commencement of such audit or date of order for inquiry, inspection or winding up, misapplied or retained, or become liable or accountable for, any money or property of the society, or has been guilty of misfeasance or breach of trust in relation to the society, the Registrar or a person authorised by him in that behalf may frame charges against such person or persons, and after giving a reasonable opportunity to the person concerned and in the case of a deceased person to his representative who inherits his estate, to answer the charges, make an order requiring him to repay or restore the money or the property or any part thereof, with interest at such rate as the Registrar or the person authorised under this section may determine, or to contribute such sum to the assets of the society by way of compensation in regard to the misapplication, retention, misfeasance or breach of trust, as he may determine.
Provided that, proceedings under this sub-section, shall be completed by the authorised person within a period of two years from the date of issue of order by the Registrar:
Provided further that, the Registrar may, after recording the reasons therefor, extend the said period for a maximum period of six months:
Provided also that, in case of the proceedings under this sub-section which has not been completed within the aforesaid period on the date of commencement of the Maharashtra Co-operative Societies (Amendment) Act, 2017, the Government may, on the report of the Registrar or suo moto, for the reasons to be recorded in writing, extend the period, from time to time, for completion of such proceedings as may be required.katkam 13/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 :::
k 14/17 60_wpl_36428.22_os.doc (2) The Registrar or the person authorised under sub-section (1) on making any order under this section, may provide therein for the payment of the cost or any part thereof, as he thinks just and he may direct that such costs or any part thereof shall be recovered from the person against whom the order has been issued.
(3) This section shall apply, notwithstanding that the act is one for which the person concerned may be criminally responsible."
10 If the prayers made by Petitioner in his application dated 25 October 2021 are seen, he merely sought seizure of records through Executive Magistrate and deputation of Flying Squad for examination of records and accounts of the Society. There is no other substantive relief in the application dated 25 October 2021 filed by Petitioner before the Divisional Joint Registrar. As against this, a substantive relief of direction to conduct re-audit of accounts of the Society through Government Auditor/Auditing Authority is made in prayer clause (e) of the Dispute filed before the Co-operative Court. The combination of prayers made in application dated 25 October 2021 before Divisional Joint Registrar and in Dispute filed before the Co-operative Court would indicate that relief of seizure of records and deputation of Flying Squad under sections 80(3) and 81(3)(b) of the MCS Act was sought essentially for the purpose of conduct of re-audit of the Society, which is the substantive relief sought in Dispute filed before the Co-operative Court. In his application filed before the Divisional Joint Registrar, Petitioner did not pray for taking action under section 88 of the MCS Act against the Society or Committee members.
11 Thus it appears that both the proceedings simultaneously instituted before the Co-operative Court and the Divisional Joint katkam 14/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 15/17 60_wpl_36428.22_os.doc Registrar are aimed at the same result of seeking re-audit of the Society's accounts. Since a substantive prayer for seeking re-audit of Society's account is already raised in Dispute before the Co-operative Court, Petitioner in fact should not have filed application before the Divisional Joint Registrar under provisions of sections 80(3) and 81(3)(b) of the MCS Act. In that view of the matter, the approach adopted by the Divisional Joint Registrar in awaiting decision of the Dispute before Co-operative Court cannot be seriously faulted.
12. Also of relevance is the fact that specific alternate prayer for appointing Flying Squad to conduct re-audit of the Society's accounts has been raised in the Dispute. Therefore, Petitioner could not have moved parallel machinery of Registrar for seeking same relief of deputation of Flying Squad for re-audit of Society's accounts. In my view therefore the application dated 25 October 2021 filed by the Petitioner was gross abuse of process of law.
13. Faced with the difficulty that the Dispute filed before the Co- operative Court contains substantive prayers for conduct of re-audit of the accounts of the Society and for appointment of flying squad, Mr. Purohit has submitted that an application has been filed before the Co-operative Court seeking deletion of prayer clause (e). However, he fairly admits that as of now the said prayer continues to exist in the Dispute. Though he expressed readiness before me to delete prayer katkam 15/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 16/17 60_wpl_36428.22_os.doc clause (e) in the Dispute, in my view it would be unfair to judge Divisional Joint Registrar's order based on such subsequent deletion.
14 Mr. Purohit has attempted to justify filing of application dated 25 October 2021 by referring to the application filed by the some of the Respondents under Order 7 Rule 11 of the Code seeking rejection of Dispute on the ground of Registrar having jurisdiction to order conduct of re-audit. However as of now the Dispute filed before the Co-operative Court continues to remain pending. It has not been rejected consequent to application filed by those Respondents. In fact, Mr. Naidu has stated that the said application has been withdrawn and jurisdiction of Co- operative Court is not disputed by his client.
15 Be that as it may. It is clear that Petitioner has simultaneously triggered actions before two parallel forums of Co-operative Court and Divisional Joint Registrar for seeking same reliefs. The reliefs of deputation of Flying Squad and seeking seizure of Society's records are ultimately aimed at conduct of re-audit of the Society, which is a substantive prayer in the Dispute pending before the Co-operative Court. In my view therefore the Divisional Joint Registrar has rightly decided to await the orders passed by the Co-operative Court.
16 I therefore do not find any error being committed by the Divisional Joint Registrar in closing the proceedings by impugned order dated 26 September 2022.
katkam 16/17 ::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 ::: k 17/17 60_wpl_36428.22_os.doc
17 The Writ Petition, being devoid of merits, is dismissed without any
orders as to costs.
(SANDEEP V. MARNE, J.)
katkam 17/17
::: Uploaded on - 29/01/2024 ::: Downloaded on - 19/02/2024 23:43:14 :::