Gujarat High Court
Mehsana District Cooperative Milk ... vs State Of Gujarat & on 31 March, 2017
Equivalent citations: AIR 2017 (NOC) 811 (GUJ.), آ AIR 2017 (NOC) 811 (GUJ.)
Author: S.G. Shah
Bench: S.G. Shah
C/SCA/6089/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 6089 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE S.G. SHAH
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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MEHSANA DISTRICT COOPERATIVE MILK PRODUCERS UNION
LIMITED....Petitioner(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR MIHIR THAKORE, SENIOR ADVOCATE WITH MR DIPEN DESAI,
ADVOCATE for the Petitioner(s) No. 1
MR PRAKASH JANI, ADDL.ADVOCATE GENERAL WITH MS MANISHA L
SHAH, GOVT. PLEADER WITH MR ROHAN YAGNIK, AGP for the
Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE S.G. SHAH
Date : 31/03/2017
ORAL JUDGMENT
INDEX I.Preface.............................................................................................................4 II.Prayers............................................................................................................4 Page 1 of 95 HC-NIC Page 1 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT III.Issues for which Special Audit is directed by impugned order:.....................7 (1) Scam in Selling Milk Power at lower rate than rate by the federation:....7 (2) Scam in Purchasing sugar at higher rate than market rate by the federation:.......................................................................................................8 (3) Creating Huge Liability of the Society by taking unnecessary Loans:.....8 (4) Unnecessary expenses without tender and permission - unauthorised and illegal purchase:.......................................................................................8 (5) Scam by establishing new huge plant at Dharuhera (in Haryana) without actual need and without tender process:.......................................................9 (6) Undue high expenses for inauguration functions of Jagudan and Dharuhera plants:...........................................................................................9 (7) Huge payment towards advocate fees at High Court and Supreme Court:..............................................................................................................9 (8) Huge expenses under the pretext of hospitality and spending 458 Crores rupees for construction without permission of competent authority:............10 (9) Scam in Purchasing Gunny bags for Sagardan (processed food for cattle) at higher rate than market rate: ........................................................10 (10)Scam by establishing new huge plant for Sagardan at Jagudan without actual need and without tender process in purchasing raw-material:..........11 (11)Purchasing properties at New Delhi & Ahmedabad without any reason:
......................................................................................................................11 (12)Less payment to the milk producers and utilising that amount for scams:
......................................................................................................................11 (13)Non action on the part of Government officers against scam, which results in to encouragement for more scams::.............................................12 (14)Frustrating the objects of the Co-Operative Milk Producers Society:....13 (15)Wrongful and unwarranted appointment on several posts:...................13 (16)Undue financial and work force support extended to the Chairman's house at Gandhinagar:.................................................................................14 (17)Unnecessary purchase of three luxurious cars for the Chairman:........14 (18)Illegal payment of bonus to works of contractors engaged by the petitioner:......................................................................................................14 (19)Illegal appointment to one Jayati Keba Patel as an officer of the Petitioner, though he was not having requisite qualifications:.....................15 (20)No explanation is given for the loss in Cattle feed factories of the Petitioner:......................................................................................................15 (21)Tender process is not being followed for purchasing different items:. . .15 (22)Order of recovering penalty from supplier of Gunny bag is not complied with:..............................................................................................................16 (23)Unwarranted expenses for inaugural functions at Jagudan and Kadi:. .16 (24)Huge investment of Rs.458 crores without approval of competent Page 2 of 95 HC-NIC Page 2 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT authority:.......................................................................................................16 (25)Payment to some unknown person as an advocate fees though he is not advocate and without deducting TDS:...................................................17 (26)Use of 4 -5 cars outside the area of operation of petitioner:.................17 (27)Utilizing funds of the Petitioner Union for private functions of the chairman and purchasing flat at higher price and siphoning away huge amount from sale transaction :.....................................................................17 (28)Noncompliance of issues raised by the authority::................................18 IV.Issues raised by the petitioner objecting and challenging impugned order:
.........................................................................................................................18 V.Legal Provisions:..........................................................................................21 Section 2: Definitions....................................................................................21 Section 74C. Provision for conduct of elections committees and officers of certain societies and term of office of members of such committees:-........22 SCHEDULE: APEX SOCIETIES (See section 74C).................................24 Section 84: Audit of Accounts of society:-....................................................25 Section 85: Rectification of defects or irregularities in accounts and inspection report of the Society:-..................................................................28 Section 86: Inquiry by Registrar:-.................................................................28 Section 93: Power of Registrar to assess damages against delinquent, promoters, etc.:-...............................................................31 Rule 38: Qualifications for auditors:-.......................................................33 Rule 39: Requisition of a federal society for enquiry of its member society:-.....................................................................................................34 VI.Discussion on merits:..................................................................................34
1) Issue No. (1) regarding difference between Special Audit and Inquiry:...34 Definitions of audit.....................................................................................41 Noun....................................................................................................41 Verb.....................................................................................................41 Noun....................................................................................................41 Verb.....................................................................................................41
2) Issue No. (2) and (3) Regarding powers of audit with reference to the statute and facts:..........................................................................................46
3) Issue No. (4) regarding Provisions of Law and remedy in case of liability of erring persons with reference to Section 93 of the Act:...........................55
4) Issue No. (5) regarding extending reasonable opportunity to explain with reference to the judgment in case of Chimanbhai Dadubhai Desai reported in 1971 GLR 31............................................................................................62
5) Issue No. (6) regarding Auditor appointed are not qualified to act as an Auditor pursuant to Rule 38 of the Rules.....................................................64
1)Issue No. (7) regarding Registrar's power to pass impugned order with reference to nomination by him of his representative in the Committee of the Page 3 of 95 HC-NIC Page 3 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT petitioner.......................................................................................................67
6) Issue No. (8) regarding malafide of the respondent:..............................80 VII.Determination.............................................................................................91 VIII.Conclusion.................................................................................................95 I. Preface
1. Heard learned senior counsel Mr Mihir Thakore appearing with learned Advocate Mr. Dipen Desai for the petitioner and Learned Additional Advocate General Mr Prakash Jani with Learned Government Pleader Ms. Manisha L. Shah assisted by learned AGP Mr. Rohan Yagnik for the Respondents. Perused the record.
2. The Petitioner has prayed for following directions from the Court, seeking exercise of extra ordinary jurisdiction under Articles 14, 19 and 226 of the Constitution of India, in the matter of disputed under the Gujarat Co-Operative Societies Act, 1961. (Hereinafter referred as "the Act").
II. Prayers
A. The Hon'ble Court be pleased to issue a writ
of certiorari or writ in the nature of certiorari or any other appropriate writ, order or direction, quashing and setting aside the order dated 22.05.2015 passed by the respondent No.2 -Page 4 of 95
HC-NIC Page 4 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Registrar herein at Annexure-A to this petition.
B. Pending final hearing and disposal of the petition, the Hon'ble Court be pleased to stay the execution, operation and implementation of the order dated 22.05.2015 passed by the respondent No.2 - Registrar herein at Annexure-A to this petition.
C. The Hon'ble Court may be pleased to grant such other and further relief/s as deemed just and proper by this Hon'ble Court in the interest of justice.
3. By the impugned order dated 22.05.2015, the Registrar, Co-operative Societies, Gujarat State at Gandhinagar has ordered special audit of petitioner Co-operative Society as per provision of Section 84 (5A) of the Act. Earlier, some members of erstwhile managing committee had filed Special Civil Application No. 9017 of 2015 challenging the same order dated 22.05.2015. There was interim relief in their favour against execution and implementation of impugned order 22.05.2015. The aforesaid Special Civil Application was placed for hearing before this Court on 14.03.2017. It was argued at length and therefore this Court has benefit to know the basic issues raised in this petition. However Page 5 of 95 HC-NIC Page 5 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT when it was found during the submissions by petitioners of that Special Civil Application that there are least chance to succeed in the matter, they sought permission to withdraw the Special Civil Application. It may be considered by them that after passage of time they lost their locus standi to challenge the impugned order because they do not continue as members / directors of the petitioner which was now managed by newly elected members and new committee. It was also apprehended by them that observation and discussion on merits would hamper their aim to delay the audit as per impugned order. An attempt was made by the petitioner society to be implemented in such previous petition, but when that previous petition was infructuous, now petitioner has filed this fresh petition challenging the same order.
4. The Respondent No. 2, Registrar, Co-operative Societies has, by impugned order dated 22.05.2015 at Annexure - A to the Special Civil Application, constituted two teams for the purpose of carrying out special audit under Section 84(5A) of the Act with respect to 28 issues as referred in and annexed with a separate list with impugned order dated 22.05.2015.
5. While seeking to quash and set aside such Page 6 of 95 HC-NIC Page 6 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT impugned order dated 22.05.2015, interim relief is also prayed for, whereby stay of execution, operation and implementation of the impugned order dated 22.05.2017, with reference to several provisions of the Act.
6. Thus, nature, contents and requirement of impugned order needs to be examined with reference to the provisions of the Act being Sections 2, 74C, 84, 85, 86, 93 etc. read with Rules 38 & 39 etc. of the Gujarat Co-Operative Societies Rules, 1965 as referred by the petitioner. (Hereinafter refereed as "the Rules").
7. By impugned order dated 22.05.2017 Respondent No. 2 has, by exercising its powers under Section 84(5A) of the Act, directed special audit of the petitioner Society by two teams concerning 28 issues. Therefore, initially it would be appropriate to recall those issues for which audit is to be carried out, so as to scrutinize that whether those issues can be subject matter of the audit, as it is objected by the petitioner. With impugned order, Respondent has annexed following issues for which special audit is directed.
III. Issues for which Special Audit is directed by impugned order:
(1) Scam in Selling Milk Power at lower rate than rate by the federation:
As per audit report of the year, 2012-13 federation (Gujarat Milk Producer's Union Page 7 of 95 HC-NIC Page 7 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT federation) was purchasing milk powder at Rs. 205/- per Kg. At that time, present chairman had sold 7000 Metric Tons of milk powder at Rs.164/- per Kg (directly in market) and thereby he committed scam of Rs. 28 Crores.
(2) Scam in Purchasing sugar at higher rate than market rate by the federation:
During the year 2013-14, Sabar Dairy and other dairies were purchasing sugar at the rate of Rs. 30/- per Kg. from market. At the same time, Chairman of Mehsana Dairy had purchased sugar in the volume of 1750 Metric Tons at the cost of Rs. 47/- per kg. and thereby he caused loss of Rs. 7/- Crores to the Union Society.
(3) Creating Huge Liability of the Society by taking unnecessary Loans:
Loan of Crores of Rupees is taken and huge liability of the dairy (Petitioner Society) is created on. Managing Committee has misused funds and thereby has caused loss to the society running into Crores of rupees.
(4) Unnecessary expenses without tender and permission - unauthorised and illegal purchase:
Huge unnecessary /nonessential expenses were done without following the system of purchasing material by issuing tenders and Page 8 of 95 HC-NIC Page 8 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT without seeking permission of the State Government in unauthorized and in illegal manner so as to give benefits to their own people. Thereby petitioner society is put to loss of crores of rupees.
(5) Scam by establishing new huge plant at Dharuhera (in Haryana) without actual need and without tender process:
Processing plant is constructed at Dharuhera with capacity of thirty Lacs Liters without following tendering process. Crores of rupees are spent and wasted on it since inflow of milk is only four lacs liters. Resultantly, the plant and machineries worth crores of rupees is lying ideal and machineries is getting rusted.
(6) Undue high expenses for inauguration functions of Jagudan and Dharuhera plants:
Under the pretext of expenses of inaugurating of plant at Jagudan and Dharuhera, bills of crores of rupees are placed and expenses are debited.
(7) Huge payment towards advocate fees at High Court and Supreme Court:
During the year 2013-14, society spent amount of Rs. 598 lacs for advocate fees for the cases before High Court and Hon'ble Supreme Court.
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(8) Huge expenses under the pretext of
hospitality and spending 458 Crores rupees for construction without permission of competent authority:
During the year 2012, expenses of Rs. 19 lacs are shown under the head of expenses for hospitality. The society has put up construction of Rs. 458 Crores of rupees without seeking permission from the competent authority and thereby huge corruption has taken place. Contractors of their choices are gifted. All these constructions are made without following any tender process and by joining hands with contractors, which results into corruption of considerable magnitude and loss to the petitioner Society.
(9) Scam in Purchasing Gunny bags for Sagardan (processed food for cattle) at higher rate than market rate:
Price of Gunny bag of Sagardan was Rs.63.25 per one Gunny bag. However, payment made at Rs.71.50 i.e. Rs.8.25 per bag higher than market price. The society had purchased 1,56,600 bags and thereby paid amount of Rs. 12,52,000/- higher than actual price of the Gunny bags to the suppliers of Gunny bags for Sagardan,against commission.
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(10) Scam by establishing new huge plant for Sagardan at Jagudan without actual need and without tender process in purchasing raw-
material:
Though there is factory of the society for manufacturing Sagardan (cattle feed) at Village Boriyavi and Village Ubhal, in spite of need of new plant, at Village Jagudan, new cattle feed plant of 1000 Metric Tons capacity is established at the costs of Rs. 46.76 Crores. This plant has suffered loss of Rs. 64 Crores in one year. Present Chairman and Members of the Managing Committee have joined hands with suppliers of raw-materials for cattle feed and thereby they have caused loss of Rs. 64 Crores by misappropriating funds.
(11) Purchasing properties at New Delhi & Ahmedabad without any reason:
Petitioner Society has purchased property in Chanakyapuri area of Delhi at the cost of Rs. 18 Crore. It has also purchased office at Ahmedabad at the costs of Rs. 2.75 Crores. These expenses are without any reason and requirement.
(12) Less payment to the milk producers and utilising that amount for scams:
Banas Dairy is paying Rs. 510/- per kg. Of milk fat to its members. As against that, Mehsana Dairy - the Petitioner is paying Rs. 473/- per kg. of milk fat. Thus, Page 11 of 95 HC-NIC Page 11 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT members of the petitioner society - milk producers are getting Rs. 37/- less per kg. milk fat. The Petitioner Society is receiving 16 lacs liters of milk every day. Accordingly every month, it would be 4.80 lacs liters. If counted annually, it would come to 57,60,00,000 litter milk. If Rs. 37/- difference is considered (per litter of milk), it would come to 213 Crores and 12 Crores lacs. If average fat is taken as 6%, it would come to Rs. 127/-Crores.
Amount of Rs. 127 Crores is paid less to the producers of Mehsana District Milk Producers Union - the petitioner herein. (in fact it would be more than 129 Crores of rupees) (13) Non action on the part of Government officers against scam, which results in to encouragement for more scams::
In the audit report of milk union, it has been pointed out that there are serious irregularities and audit report had recommended taking legal actions. In spite of that, government officers (deputed in committee or concern for supervision of the activities of such societies) have fallen to allurement and consistently neglected such irregularities and thereby they have helped wrong doers in exploiting people. It is because of these reasons managing committee of the society has become emboldened and numerous scandals have taken place causing huge loss to the society.
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(14) Frustrating the objects of the Co-Operative Milk Producers Society:
The petitioner society - Dairy was
established with object that in the
surrounding villages, which are operational area for the Petitioner dairy, milk producers can live honorable and respectful life without investing huge capital for their earnings and with their hard work they can earn their livelihood and give better education to their children and they are not required to migrate in search of job. Such loss in business has resulted in to serious death blow damage is to the object for which Co-Operative Society was formed. During the year 2010, average milk production was 25 lacs liters per day. As against that in the year 2012, average liter of milk production is 16 lacs, which shows that people are disinclined from diary. As against that in other milk societies and other private dairies, production has increased.
(15) Wrongful and unwarranted appointment on several posts:
The Chairman has given appointment to large member of person, who do not fulfill requisite criteria and thereby society is put to loss of crores of rupees. The wrong, illegal appointments and higher pay scales are given to such employees, which has resulted into crores of rupees.
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(16) Undue financial and work force support extended to the Chairman's house at Gandhinagar:
Chairman is residing at Gandhinagar. About five employees of the society are placed at the bungalow of chairman. Salary of these five employees and and other expenditures for telephone bills etc, are borne by the Petitioner Union since last six years and though necessary noting in this regard is made in the report of government auditor, even then no steps are taken to recover such amount by the Petitioner.
(17) Unnecessary purchase of three luxurious cars for the Chairman:
For the use of chairman, one car at the cost of Rs. 60/- lacs, two cars at the cost of Rs. 30 lacs and one car at the costs of Rs. 10/- lac is purchased. Total comes to Rs. 1.30 Crores.
(18) Illegal payment of bonus to works of contractors engaged by the petitioner:
Petitioner dairy has engaged private contractors. Workers working with private contractors were paid bonus amounting to Rs. 28 lacs by dairy in the year 2009-10. Auditor has directed to recover it.
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(19) Illegal appointment to one Jayati Keba Patel as an officer of the Petitioner, though he was not having requisite qualifications:
As per desire of Vipul Chaudhary (the Chairman of the Society), one Jayant Keba Patel has been appointed as an officer in Petitioner Union - Dairy. He is getting very high salary and enjoying luxuries of the services. However, he obtained employment in petition by showing educational qualification of his cousin brother Jayanti Jetha Patel even keeping Vipul Chaudhary in dark. Said Jayanti Jetha is serving as a Talati in Idar Taluka (of Sabarkantha District). If it is inquired, a big scandal would come up.
(20) No explanation is given for the loss in Cattle feed factories of the Petitioner:
As per the balance sheet dated 31-3-2013, there is loss of Rs.64,25,84,761/- into the factories of cattle feed. In the year 2011- 12, loss was Rs.3,89,71,123/-. Therefore though in the year 2012-13, loss has increased to Rs.60,36,30,638/- the auditor has only sought explanation.
(21) Tender process is not being followed for purchasing different items:
The society places purchase order for the purchase of small or big items instead of following tender process.
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(22) Order of recovering penalty from supplier of Gunny bag is not complied with:
One party was imposed with penalty of Rs. 29,172/- in view of delay in supply of Gunny Bag during the year 2011-12. It needs to be find out that whether penalty is recovered or not and if not, reasons for the same. From the firm named Glory Polyfilm for the pouch of 500 MG., 6000 KG polyfilm is purchased and for packing standard milk of 500 MG, 36 K.G. of film is purchased. In the said purchases Rs. 17.90 Per Kg. are paid more compared to R.A.L. price.
(23) Unwarranted expenses for inaugural functions at Jagudan and Kadi:
For the inaugural function of Jagudan Cattle Feed, expenses of Rs. 4.20 Crore was made. For inaugural function of new plant at Kadi, expenditure of Rs. 89.15 lacs was done and both expenses were absolutely unwarranted and thereby milk union has suffered loss.
(24) Huge investment of Rs.458 crores without approval of competent authority:
The District Milk Union has made investment of Rs. 458/-lacs without prior approval of Registrar of Co-operative Societies or District Registrar, Co-operative Society, Mehsana.
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(25) Payment to some unknown person as an advocate fees though he is not advocate and without deducting TDS:
Earlier Shri Vipul Chaudhari was removed under Section 76(b) of the Gujarat Co- operative Societies Act. Expenses and advocate fees are debited into account of Co-operative Union. No TDS is deducted from the advocate bills. The concerned person was not advocate even then payment is made two times and thereby amount is misappropriated.
(26) Use of 4 -5 cars outside the area of operation of petitioner:
Shri Vipul Chaudhari uses four to five cars outside the area of operation of Mehsana Dudhsagar Dairy. Same is used at Gandhinagar office and Ahmedabad office and for personal use.
(27) Utilizing funds of the Petitioner Union for private functions of the chairman and purchasing flat at higher price and siphoning away huge amount from sale transaction :
The chairman of dairy had arranged religious function of Mahashivratri at his residence. Expenditures of such religious function were debited into account of dairy. Additionally, expenditure undertaken of the function arranging ceremony named as 'Jivat - Charya' meaning thereby one Page 17 of 95 HC-NIC Page 17 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT invites all relatives, friends during his / her lifetime and serves food and sweets. The chairman had spent money of this ceremony of his mother from the account of dairy. By purchasing flat in Delhi, the chairman and vice-chairman have deflected and taken commission in purchase of the flats i.e. siphoning away huge amount from sale transaction. Which may amount to misappropriation.
(28) Noncompliance of issues raised by the authority::
The applicant has made application on 16- 11-2013. Copy of the same was provided to the co-operative union. The Chairman had settled certain proceedings, which needs to be inquired into and as also Management committee proceedings needs to be inquired into.
IV. Issues raised by the petitioner objecting and challenging impugned order:
8. The Learned Senior Counsel for the petitioner has raised main eight issues to challenge the impugned order, which are as under;
(1) There is difference between "Special Audit" as referred in Section 84 (5A)and "Inquiry' contemplated under Section 86, submitting that though impugned order is directing to conduct Special Audit, in fact it is purported to Page 18 of 95 HC-NIC Page 18 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT "Inquire" issues as per list Annexed with the impugned order;
(2) During Special Audit, only entries in account can be checked and irregularities or other misdeeds cannot be inquired, (3) Factually, all the issues as per list attached with the impugned order may be subject matter of inquiry and not audit;
(4) Provision of Section 93 of Act provides remedy in case of liability of erring person(s) and therefore special audit cannot be allowed, when regular audit and re-audit is completed, submitting that Registrar may fix the liability of person and may require such person(s) to repay or restore the money or property or any part thereof, with interest as provided under the Section;
(5) In such cases of inquiry, principles of natural justice is to be followed, whereby opportunity to explain the issues is to be given to the concerned person; as ruled in decision by the High Court in Chimanbhai Dadubhai Desai Vs. Chaturbhai P Patel, Dist Registrar Co-Operative Societies reported in 1971 GLR 31, but Respondent does not want to extend such opportunity and Page 19 of 95 HC-NIC Page 19 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT hence impugned order is passed under Section 84(5A) but effectively it is an order for Inquiry, which cannot be done in the name of Special Audit;
(6) Auditors appointed by impugned order are not qualified to act as an auditor pursuant to provision of Rule 38 of the Rules.
(7) Registrar (Respondent No 2) could not exercise powers under Section 84 (5A) since he has nominated his representative in the committee of the petitioner's Society and pursuant to Government Resolution No. MKT/102003-2795-G dated 15/4/05 and Notification of even no. dated 26-4- 2005, copies of which are produced at Annexure "R" collectively with the petition (page Nos. 322-324); and (8) There is malafide intention on the part of the respondents in disturbing the management of petitioner Society due to political rivalry. In support of such submission, petitioner is relying upon history of disputes between parties in the form of action taken by respondent u/s 93 of the Act so also non holding of election of the petitioner society, so also contempt proceedings need to be initiated by the Society against respondents and some other similar issues, which Page 20 of 95 HC-NIC Page 20 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT are elaborated in greater detail in para 2.2 to 2.28 of the petition and by Annexures "B to "O"
(page nos. 27 to 228)
V. Legal Provisions:
9. When several provisions of the Act are referred and relied upon, it would be relevant to refer them for ready reference, since it is to be applied in its proper perspective to the issues raised in this petition. Therefore, they are reproduced hereunder.
Section 2: Definitions In this Act unless the context otherwise requires,-
(1) "auditor" means a certified auditor appointed either by the Registrar or by a society to audit the accounts of the society;
x x x x x x x x x (4) "Certified auditor" means a person who possesses the prescribed qualifications and is authorized of the affairs by the Registrar as an auditor under section 84;
x x x x x x x x x (9) "federal society" means society, not less than ten members of which are themselves societies;
10. Section 74C being part of Chapter VII of the Act, regarding Management of the Society wherein there is Provision for conduct of elections of Page 21 of 95 HC-NIC Page 21 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT committees and officers of certain societies and term of office of members of such committees, but it is referred mainly for the purpose of identifying the Petitioner Society as an "Apex Society" or "Federal Society". Sub section (2), (3) & (4) of the section are with reference to term of the office of elected members and bodies; hence not reproduce herein, since only Sub section (1) is referred to emphasize the scope of considering the petitioner as Apex Society, so as to get it out of the scope of the provision of Section. Therefore, relevant text is highlighted in bold fonts.
Section 74C. Provision for conduct of elections committees and officers of certain societies and term of office of members of such committees:-
(1) The election of the members of the committees and of the officers by the committee, of the societies of the categories mentioned below shall be subject to the provisions of Chapter XI-A and shall be conducted in the manner laid down by or under this Chapter:-
(i) Apex societies mentioned in the Schedule and such other apex societies as the State Government may, by general or special order, published in the Official Gazette, from time to time specify in this behalf, having regard to financial position and share capital of such Page 22 of 95 HC-NIC Page 22 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT societies;
(ii) all District Central Co-operative Banks;
(iii) all Primary Land Development Banks;
(iv) (a) all District Co-operative Sale and Purchase Organisation;
(b) all Taluka Co-operative Sale and Purchase Organisations;
(v) all Co-operative Sugar Factories;
(vi) all Co-operative Spinning Mills.
(vi)(a) all district co-operative milk unions;
(vi)(b)all taluka co-operative processing societies;
(vii) any other society or class of societies, which the State Government may, by general or special order published in the Official Gazette, from time to time specify in this behalf, regard being had to the financial position and share capital of such institutions.
(2) X X X X X X X X X
(3) X X X X X X X X X
(4) X X X X X X X X X
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SCHEDULE: APEX SOCIETIES (See section 74C) (1) The Gujarat State Co-operative Land DevelopmentBank Limited.
(2) The Gujarat State Co-operative Bank Limited.
(3) The Gujarat State Co-operative Consumers Federation Limited, Ahmedabad.
(4) The Gujarat Pustkalaya Sahayak Sahakari Mandal Limited, Vododara.
(5) The Gujarat State Co-operative Kheti Sangh Limited.Ahmedabad.
(6) The Gujarat State Poultry Farmers' Co-
operativeFederation Limited, Bharuch.
(7) The Gujarat State Co-operative Housing FinanceSociety Limited, Ahmedabad.
(8) The Gujarat Co-operative Milk Marketing Federation Limited, Anand.
(9) The Gujarat State Co-operative Marketing Federation Limited, Ahmedabad.
(10) The Gujarat State Co-operative Cotton MarketingFederation Limited, Ahmedabad.
(11) The Gujarat State Co-operative Oil Seeds Growers' Federation Limited, Bhavnagar.
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(12) The Gujarat State Co-operative Oil
Industries Limited. Ahmedabad.
(13) The Gujarat State Co-operative Fruits
and Vegetable Federation Limited,
Bardoli. District Surat.
(14) The Gujarat Industrial Co-operative Bank Limited. Ahmedabad.
(15) The Gujarat State Co-operative
Industrial Association Limited,
Ahmedabad.
(16) The Gujarat State Mitha Utpadak Sahkari Sangh Limited, Surendranagar.
11. Sections 84, 85, 86 & 93, as referred by the petitioner, are part of Chapter VIII regarding Audit, Inquiry, Inspection and Supervision; which reads as under:
Section 84: Audit of Accounts of society:-
(1) The Registrar shall audit, or cause to be audited by a person possessing prescribed qualifications and authorized by the Registrar by general or special order in writing in this behalf, the accounts of every society at least once in each year. The person so authorized shall be an auditor for the purposes of this Act:
Provided that the audit of the Central Co-
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operative Banks and the State Co-operative Banks shall be conducted only by the Chartered Accountants from the panel approved by the National Bank.
(2) {Sub Section (2) gets omitted due to substitution of sub-section (1) and (2) by the Gujarat Co-Operative Societies (Amendment) Act, 2015 w.e.f. 10-4-2015,since at present there is no sub-section (2)} (3) The audit report of the accounts of an apex Co-operative society shall be laid before the State Legislature as soon as possible after it is received.
(4) 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 be produced the same at any place at the headquarters of the society or any branch thereof.
(5) If it appears to the Registrar on an application or otherwise that it is necessary or an expedient to get any account of the society re-audited, the Registrar may, by an order, provide for such re-audit and the provisions of this Act applicable to the audit of accounts of the society shall apply to such re-audit.Page 26 of 95
HC-NIC Page 26 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT (5A) The Registrar shall, by an order, provide for a special audit of any society on its own or on the basis of the recommendation of the Reserve Bank of India or, as the case may be, the National Bank. The provisions relating to audit of accounts of the society made under this section shall also apply to such special audit.
(6) For auditing the accounts of a society under this section, every society shall be liable to pay to the auditor such amount as audit fee as may be prescribed by the Government for different categories or class of societies.
(7) The Registrar shall, in consultation with the National Bank prescribe Prudential Norms including Capital to Risk Weighted Assets Ratio for Primary Agricultural Credit Cooperative Societies.
(8) The Registrar shall, by an order, provide for the periodical inspection by the officers subordinate to the Registrar or by the federal society or by the financial bank, for a class of society under Sec. 87 or Sec. 88.
(9) The State Government may by rules, provide for the form and manner in which and the period within which the accounts of the society or the class of society shall be prepared and submitted for the purpose of online audit..
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Section 85: Rectification of defects or irregularities in accounts and inspection report of the Society:-
If the result of the audit held under Sec. 84 and inspection held under sub-sec. (8) of Sec. 84, Sec. 87 and Sec. 88 discloses any defects in the working of the society, the society shall within a period of two months from the date of the audit and inspection report, clarify to the Registrar as regards the defects or the irregularities so pointed out in audit and inspection report, and if clarification in respect of any defect or irregularity is not accepted, take steps to rectify the defects and remedy irregularities within such period as may be specified by the Registrar and shall report to the Registrar, failing which the Registrar shall have power to impose a penalty of such amount not exceeding rupees five thousand. Where society concerned is a member of a federal society, such order shall be made after consulting the federal society.
Section 86: Inquiry by Registrar:-
(1) The Registrar may of his own motion himself, or by a person duly authorised by him in writing in this behalf, hold an inquiry into the constitution, working and financial conditions of a society.
(2) The Registrar shall hold such an Inquiry-
(a) on the requisition of a society duly authorised by rules made in this behalf to make such requisition, in respect of any of its members, such member being Page 28 of 95 HC-NIC Page 28 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT itself a society, or
(b) on the application of a majority of the committee of a society, or
(c) on the application of one-third of the members of a society.(3)
(a) Every officer, member and past member of the society in respect of which an inquiry is held, and any other person who is in possession of information, books and papers relating to the society, shall on being so required furnish such Information as is in his possession, and produce all books and papers relating to the society which are in his custody or power, and otherwise give to the officer holding the inquiry all assistance in connection with the Inquiry which he can reasonably give.
(b) If any such person refuses to produce to the Registrar or any person authorised by him under sub-section (1), any book or paper which it is his duty under clause
(a) to produce or to answer any question which is put to him by the Registrar or the person authorised by the Registrar in pursuance of sub-clause (a) the Registrar or the person authorised by the Registrar may certify the refusal and the Registrar may impose on the defaulter a penalty of an amount not exceeding five hundred Page 29 of 95 HC-NIC Page 29 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT rupees. Before imposing such penalty, the Registrar shall give, or cause to be given a reasonable opportunity to the defaulter, of showing cause against the action proposed to be taken in regard to him.(4)
(a) If at any stage of the Inquiry under this section the Registrar is satisfied that In the interest of the members of the society it is necessary to take over all books and papers relating to the society during the period of inquiry, he may make an order in writing to that effect and directing the society to hand over all books and papers relating to the society to such officer as may be specified in the order. The Registrar may also issue a direction to the society to refrain from doing such acts or engaging in such activities as may be specified in the direction.
(b) The society shall be bound to comply with any direction issued to it under clause
(a).
(c) The books and papers taken over under clause (a) shall be returned to the society on the completion of the inquiry.
(5) When the inquiry is held under this section the Registrar shall communicate the result of the inquiry-Page 30 of 95
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(i) in case the State Government have subscribed directly to the share capital of the society or in case any moneys are due from the society to the Principal State Partnership Fund or to the Subsidiary State Partnership Fund, to the State Government or to any officer appointed by it in this behalf;
(ii) to the federal co-operative society concerned, and
(iii) to the society concerned.
(6) It shall be competent for the Registrar to withdraw any inquiry from the officer to whom it is entrusted, and to hold the inquiry himself or entrust it to any other person as he deems fit.
Section 93: Power of Registrar to assess damages against delinquent, promoters, etc.:-
Where, in the course of or as a result of an audit under Sec. 84, or an inspection under sub-sec. (8) of Sec. 84, or an inquiry under Sec. 86 or an inspection under Sec. 87 or Sec. 88, 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 Sec. 86, or the person authorised to inspect the books under sub-sec. (8) of Secs. 84, 87 or 88 or the Liquidator under Sec. 110,that any person who has taken any part, in the organisation Page 31 of 95 HC-NIC Page 31 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT 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 such audit, inquiry, inspection or order for 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 investigate the conduct of such person or persons and after framing 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 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.
(2) The Registrar or the person authorised under sub-section (1) in making any order under this section, may provide therein for the payment of the costs or any part thereof of such investigation, 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
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that the act is one for which the person concerned may be criminally responsible.
Rule 38: Qualifications for auditors:-
Subject to the provisions of Sub-rule (2) a person shall be qualified for being authorised by the Registrar under sub-section (1) of section 84 if-
(a) he is a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949, or
(b) he holds a Government Diploma in co-operative accounts or a Government Diploma in co-
operation and accountancy, or
(c) he has served as an auditor in the Co-
operative Department of the State Government and, whose name has been included by the Registrar in panel of auditors maintained by him and Published in the Official Gazette at least once every three years.
Notwithstanding anything contained in Sub- Rule (1), in the case of Central Co-operative Banks and the State Co-operative Banks, the audit shall be conducted by the Chartered Accountant from the panel approved by the National Bank.
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Rule 39: Requisition of a federal society for enquiry of its member society:-
A federal society in respect of a society which is its member may, on an application properly supported by a resolution of its managing committee, and after giving an opportunity of being heard to such member society, demand an enquiry by the Registrar under section 86.
VI. Discussion on merits:
1) Issue No. (1) regarding difference between Special Audit and Inquiry:
12. It is submitted by the Learned Counsel for the petitioner that the powers for direction of special audit u/s 84(5A) cannot be exercised by the Respondent No.2 for several reasons, viz:
(a) Section 84(5A) is inserted in the Act only with effect from 10.4.2015, whereas special audit is directed for the year 2012-
13 and 2013-2014.
(i) There is no substance in such submission for the simple reason that the Amendment Act came into force with effect from 10.4.2015, but there is no restriction or confirmation that the effect of provision shall be prospective only. When Act is amended, the Page 34 of 95 HC-NIC Page 34 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT amended provision will be effective for all purposes to all concerned in absence of specific restriction for being effective retrospectively. The Section 84(5A) of the principal Act of 1961 is amended by the provisions of Section 23 of the Gujarat Co- Operative Societies (Amendment) Act, 2015; which simply confirms while introducing new sub-section (5A) that "In the principal Act, in section 84, after sub-section (5), the following new section shall be inserted, namely:-". Therefore, there is no reason to hold that provision of such section is applicable only prospectively and there cannot be order of special audit of previous years. It is quite clear and obvious that generally audit is to be carried out for the previous year's accounts and not for coming years.
(ii) Whereas in answer to the submission by learned senior counsel for the petitioner that provision of Section 84(5A) cannot be made applicable for auditing the accounts of the previous years i.e. 2012-13 and 2013-14 when such section is amended in the statute only in the year 2015; The learned Addl. Advocate General is relying upon the following case:-
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(a) Darshan Singh Vs. Ram Pal Singh reported in AIR 1991 SC 1654;
(b) M/s.Orient Paper and Industries Ltd.
Vs. State of Orissa reported in AIR 1991 SC 672;
(c) Yadlapati Venkateswarlu Vs. The State of Andhra Pradesh reported in AIR 1991 SC 704;
(d) Zile Singh Vs. State of Haryana
reported in (2004)8 SCC 1; and
(e) N. B. Posiya Vs. Director of
Agriculture Market and Rural Finance
reported in 2002(2) GLR 1132 (FB).
All such decisions confirms the rule that an amendment Act must be read as if the words of amendment had been written into the Act except where that would lead to an consistency. (Shamarao V. Parulekar v. District Magistrate, Thana Bombay, 1952 SCR 683 at p. 689: (AIR 1952 SC 324 at p. 327-
8)). Power of the Legislature to pass a law includes the power to validate actions retrospectively, of course, within Constitutional limitations.[Para 7 of Yadlapati Venkateswarlu (supra)] In above cases the Court explained as to how the declaratory statute would operate. The principles of interpretation propounded by Page 36 of 95 HC-NIC Page 36 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT the aforesaid decisions were helpful in appreciating the submissions of the respondent about the applicability of Section 84(5A) Act to his case.
(b) The special audit can only check accounts and entries within account but could not inquire about misdeeds, misappropriation, or any other irregularities.
(i) There is no substance in such submission also. For the purpose, one has to realise that what is the meaning of audit and what is the difference between audit and inquiry. It is true that powers to direct audit is provided under Section 84 and powers for direction regarding inquiry is under section
86. However, by and large the meaning and concepts of both the words are overlapping each other.
(ii) For the dictionary meaning of "audit" petitioner has relied only upon two Xerox pages probably part of Black's Law Dictionary, and submits that Audit means a formal examination of an individual's or organization's accounting records, financial situation or compliance with some other set of standards. Learned counsel has tried to explain by referring some other phrase with the word audit explained on these two pages to emphasize that audit would never be termed as inquiry. However, the same two pages are also explaining few more concepts with reference to audit, viz: Compliance Audit - An audit conducted by regulatory agency, an organization or third party to assess Page 37 of 95 HC-NIC Page 37 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT compliance with one or more set of Laws and regulations; Event Driven Audit - An audit that focus on particular transaction or activities that may raise significant legal issues. Unlike routine periodic audits, an event-driven audit can focus substantial auditing recourse on analysing particular event.
(iii) In Judicial Dictionary by LexisNexis, the term audit is explained thus; Audit means examining of accounts. An audit may be either detailed or administrative, and is usually both. A detailed audit is a comparison of vouchers with entries of payment, in order that the party whose accounts are audited may not debit his employer with payments not in fact made. An administrative audit is a comparison of payments with authorities to pay, in order that the party whose accounts are audited may not debit his employer with payments not authorised. If in either branch of audit an improper entry is discovered, the auditor surcharges the party whose accounts are audited; whereby the payment must be made by such party out of his own pocket. Where no fraud is suspected, however, and when there has been no negligence, it is common for the surcharge to be remitted. Thus, the audit is also used to detect fraud. Prem's Judicial Dictionary confirms that an auditor has to mention that there is non-compliance with the statutory direction.
(iv) Whereas synonyms of the word "audit"
includes: inspect, examine, survey, look
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over, go over, go through, scrutinize, probe, vet, investigate, look into, enquire into, check, check into, assess, appraise, evaluate, review, analyse, study, pore over, peruse, sift, dissect, go over with a fine- tooth comb, delve into, dig into; check out;
(v) As defined in ISO 19011:2011--Guidelines for auditing management systems, an audit is a "systematic, independent and documented process for obtaining audit evidence [records, statements of fact or other information which are relevant and verifiable] and evaluating it objectively to determine the extent to which the audit criteria [set of policies, procedures or requirements] are fulfilled." Several audit methods may be employed to achieve the audit purpose;
(c) Therefore, there is no substance in submission that "audit" has a restricted meaning and therefore the impugned order is practically for inquiry under section 86, but respondent have intentionally declare the order under Section 84(5A) so as to avoid to follow principles of natural justice.
(d) It is also contended that in all the
issues to be audited as listed with the
impugned order is declaring to do some
inquiry only when Gujarati world -
Tapas is used in all items. However, the
word - Tapas is having several meanings
including the meaning as "audit", which can Page 39 of 95 HC-NIC Page 39 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT be seen from the synonyms of the word -
Tapas as listed below.
Translations of
, , , ,
Check
,
checking ,
, , , ,
screening
enquire , ,
enquiry
, , , ,
exaggeration
exploration ,
, ,
scouting
,
search , ,
noun
Detection
inspection
inquest
trial ,
verb
audit
13. Similarly translation of word audit in Gujarati means:
Translations of audit
-
verb
14. Whereas definition synonyms of word "audit" are as under:
Page 40 of 95HC-NIC Page 40 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Definitions of audit Noun An official inspection of an individual's or organization's accounts, typically by an independent body.
Verb Conduct an official financial examination of (an individual's or organization's accounts).
Synonyms: inspect, examine, survey, go through, scrutinize, check, probe, vet, investigate, inquire into, assess, verify, appraise, evaluate, review, analyse, study, inspect, scrutinize Synonyms Noun Inspection, examination, verification, scrutiny, probe, investigation, assessment, appraisal, evaluation, review, analysis, going-over, once-over Verb Inspect, examine, survey, go through, scrutinize, check, probe, vet, investigate, inquire into, assess, verify, appraise, evaluate, review, analyse, study, inspect, scrutinize Page 41 of 95 HC-NIC Page 41 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT
15. Therefore when dictionary meaning and synonyms of the word "audit" includes the bare meaning of word "inquiry" also, prima facie it becomes clear that respondents have right to order for special audit when there are several allegation as per list attached with the impugned order irrespective of different consideration for inquiry under section 86, because unless there is audit, there cannot be a clear picture for inquiry under section 86.
16. Similarly when dictionary meaning and synonyms of the word "inquiry" includes the bare meaning of word "audit" also, at the most co-operative society or aggrieved person may ask to follow principal of natural justice, though it is misconception on their part.
17. However it is not permissible to say that for any society or its member or director that whatever irregularities are there in the accounts of the society, respondent should not direct for special audit as per statute, that too only on the ground that respondents are having political grudge, more particularly when it is evident from the list of issues raised in list with impugned order that there are several serious issues which require to be scrutinized and scrutiny cannot be denied by the management of the society, only Page 42 of 95 HC-NIC Page 42 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT because they have succeeded to continue in the management. This democratic set up is well seen in several such other cases like 2G Scam, coal scam etc., where in fact misdeed of elected party has been visualized only after audit report. It cannot be ignored that there is prima facie material in the accounts to prove scam of Rs.54.7 crores of rupees of the society coupled with improper utilization of funds to the extent of Rs.545 crores and less payment of Rs.127 crores to the members of the society than the members of the similarly situated society of Banaskantha District. Thereby, there is fraud of Rs.717 crores, and for doing so, more than Rs.128 crores are not paid to the members of the society, though it is the basic concept of the co- operative concept.
18. It seems that total scam or fraud may be quite more than Rs.717 crores and therefore there is certainly a need for special audit of the petitioner union to find out that whether there is actually any scam and if it is so then to what extent and how and who is responsible. So far as powers of the respondents under the statute are concerned, it is not the case of the petitioner that respondents have no power to scrutinize all such issues, the only allegation is that it is being ordered due to political rivalry and the Page 43 of 95 HC-NIC Page 43 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT only objection is that in the pretext of special audit, respondents in fact wants to inquire about the issues, which they could not do under the provision so section 84(5A), since those powers are under section 86 where opportunity of hearing is to be extended to the society to explain their stand, but; as it is alleged that; respondents does not wants to give any opportunity to any one and wants to take over the management of the petitioner only because of political rivalry. There is no substance in such submission also, since it is only apprehension of the petitioner, and even if there is some apprehension to that effect, there can be way out of it rather than dragging the issue for years together.
19. It cannot be ignored that previously few ex members / directors of the petitioner union had opted to challenge the same impugned order and may be because of the lacuna in judicial system; of not being able to deal with each case at the earliest considering the issues raised in it; and to some extent may be because of the tactics by litigant to get the matters adjourned for different reasons once favourable interim relief is there in favour of them, the stay against the impugned order was continued from 01.06.2015 till 14.03.2017, when matter was withdrawn after being fully argued by advocate for those Page 44 of 95 HC-NIC Page 44 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT petitioner before this Court. This court is at advantage because such previous round of litigation was before this court only, wherein at the time of actual hearing, initially court has specifically raised a query about locus standi of those petitioner to continue with such litigation and ultimately after submissions by the advocate for those private petitioners, since they were ex members of the petitioner society, they realised that petition would be dismissed for wants of locus and therefore discussion on merits would disturb the right of the present petitioner, that petition was withdrawn, though present petitioner has filed an application to join them as a petitioner. That exercise was only with a view to see that interim relief continues for a long time.
20. Speedy disposal of cases or matters is not a simple criteria; the disputes should be resolved speedily. Therefore, when there are allegations of political rivalry by respondents, which are yet not proved, there is reason to believe that the petitioner is also taking disadvantage of several situation making it in their favour by different means. Time has come where speedy disposal needs to be considered as speedy redressal of grievances and not merely the speedy disposal of particular file / case / matter or Page 45 of 95 HC-NIC Page 45 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT issue on hand only. An attempt is made to avoid multiplicity of litigation on similar or same issue and to see that truth comes out at the earliest. Therefore, the final decision would see that there may not be multiplicity of litigation and grievances may be redressed in one exercise only.
21. Therefore when there is provision under the statute to order special audit of any society, and when there is no restriction whatsoever upon the respondents for directing special audit, there is no reason to restrict the respondents from doing so merely on presumption and apprehension by the petitioner that under the pretext of the audit, respondents would start inquiry of the issues raised by impugned order, impugned order cannot be stayed without considering the facts of those issues.
2) Issue No. (2) and (3) Regarding powers of audit with reference to the statute and facts:
22. Since these two issues are interconnected and correlated with each other, they are discussed and answered together:
23. It is evident from those issues that for the period under reference i.e. the financial years 2012 - 13 and 2013 - 14, Page 46 of 95 HC-NIC Page 46 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT (1) When price of milk powder in the market was Rs.205/-, the petitioner union has sold 7000 metric ton (1 metric ton = 1000 kg.) milk powder at the lower price of Rs.164/-; irrespective of fixing liability of the wrong doer, therefore it is necessary and essential to find out that how these sales are shown in the books of accounts, considering the fact that probable loss to the union, a co- operative society formed for the benefit of its members is about 28 Crores rupees;
(2) When sugar was available in the market at the rate of Rs.30/- per kg., the petitioner has paid as much as Rs.47/- per kg. for 1750 metric ton sugar, therefore it is necessary and essential to find out that how these purchases are shown in the books of accounts, considering the fact that probable loss to the union, a co-operative society formed for the benefit of its members is about 7 Crores rupees, (3) To find out that why huge loan is taken i.e. for what purpose and where such funds have been utilized; the core issue which needs to be addressed would be the necessity of raising funds by loan when petitioner - society is financially sound and may not require any financial support, more particularly in the form of bank loan so as to pay higher rate of interest on such loan amount. For all such inquiry, by all means, access to original accounts of the petitioner is very much material;
(4) Similarly, if any requisite item for the Page 47 of 95 HC-NIC Page 47 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT society was purchased without following tender process, and without express sanction by the Government, then, it becomes clear that there is arbitrariness and financial irregularities and therefore, it is to be verified from the account that how such item has been procured so as to initiate further inquiry;
(5) Though there is intimation regarding non-utilisation of milk processing plant at Dharuhera Village, before initiating further inquiry, it needs to be verified from the accounts about the actual loss and damages suffered by the petitioner - Union;
(6) Similarly, if huge amount is spent for inauguration programme of Jagudan and Dharuhera plants, then, there is need to verify during special audit that to whom such payment is made so as to take further steps in accordance with law;
(7) Similarly, when in one financial year a huge amount of Rs.598/- Lacs is debited towards advocate fees, then, there is certainly a need to verify from the accounts that for which case and to whom such huge amount is paid and that too whether it is for pending cases or otherwise. All such facts may have a prima facie detail, but accounts would certainly disclose the further details regarding actual mode of payment, date of payment and details of person to whom such amount is paid. Therefore, audit is not restricted to the calculation and entry part only; otherwise, audit would not have any Page 48 of 95 HC-NIC Page 48 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT meaning at all. As already discussed herein above, audit also includes some inquiry and more particularly, it would certainly include verification of the mode of payment, the date of payment and relevant information, so as to conduct further inquiry and therefore, it cannot be said that the word 'audit' has a limited meaning and all such facts cannot be gathered under the ambit of audit.
(8) Similarly, there is serious allegation regarding expenditure of Rs.19 Crores for extending hospitality and spending of Rs.458 Crores for construction. Therefore, when details should disclose in previous audit report that such amount was spent for which construction and for whose hospitality, then, naturally, further audit is required to verify such fact so as to initiate further proceedings against the wrongdoers. When gunny-bags were purchased by making 12.52 Lacs additional payment, then, it is to be verified that how such payment is made and to whom.
(9) When unwarranted plant for Sagardan at Jagudan was established with extra-ordinary capacity of 1000 M.T. at the cost of Rs.46.76 Crores and thereafter, when loss of 64 Crores is shown in the accounts for such plant, respondents have received intimation that office-bearers of the petitioner's Committee have committed a scam by making huge payment towards raw-materials whereby raw-materials were purchased without requirement at heavy cost, which resulted into loss to the plant to the tune of Rs.64 Crores, it is necessary Page 49 of 95 HC-NIC Page 49 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT to find out the details of such transaction.
(10) Though petitioner's area of operation is restricted to Mehsana District and though they are connected and concerned with Gujarat Co-operative Milk Marketing Federation Ltd. at Anand in Gujarat State only, the petitioner has purchased the property in posh area of Delhi, namely, Chanakyapuri at the cost of Rs.18 Crores only for the benefit of Chairman and similarly, though there is no activity of the petitioner in Ahmedabad, an office property is purchased in Ahmedabad at the cost of Rs.2.75 Crores. This also requires to be verified that from whom such properties were purchased and to whom payment is made so as to initiate necessary action against them.
(11) The most important and scandalous scam is to pay less price of milk to the members of the petitioner's Union though the members of the neighbouring Districts of similar Union are getting Rs.510/- per kilogram of milk fat, the petitioner has paid only Rs.473/- per kilogram of milk fat to its members. The calculation shows that thereby, the petitioner has not paid or distributed atleast minimum Rs.128 Crores to its members though it is the primary function of the Unions like petitioner to see that their members get maximum profit. Surprisingly, an attempt was made to emphasize that if less amount is paid to the members, then, it is not a scam, but it is profit to the society, and unfortunately, the petitioner has failed to realise that these arguments on the Page 50 of 95 HC-NIC Page 50 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT contrary confirm that on the one hand, the administrative body of the petitioner - Union is not paying/distributing Rs.128 Crores to its members in a year and on the other hand, the office bearers of the petitioner are spending huge amount without following procedure for which details are discussed herein, whereby, practically, they have committed scam and now, they are trying to avoid audit of such scam so that they may not be prosecuted either under general law or may not be debarred under the Act for being a member of the Committee or there may not be an order of recovering such amount from them. This attitude goes to the root of the dispute. An attempt was made to convince the Court that non-payment to members at initial stage, is not negative, since at the end of financial year, generally, petitioner is paying the difference as per the market rates to its members. If it is so, then, petitioner should not be afraid of the special audit. On the contrary, the petitioner should have come forward with all relevant entries and information to prove that there is no scam at all irrespective of list of 28 items in that order. However, the way in which petitioner is trying to avoid special audit is concerned, the only presumption would be against the petitioner when they have to hide certain facts and therefore, by one or other reason, and by any means, they want to stop the special audit and thereby, further inquiry u/s.86 and under any other general law applicable to the facts and evidence that may be available on such special audit, and they also want to rescue themselves from order u/s.93 for repaying the amount, which Page 51 of 95 HC-NIC Page 51 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT is utilized by them unofficially, unauthorizedly and by irregular as well as illegal means and method.
(12) When petitioner has challenged the powers of respondent No.2 in ordering special audit contending that it would amount to inquiring his own nominee, then, petitioner should not be afraid of similar treatment with them, inasmuch as the impugned order on the contrary confirms the scope of the audit that it would also cover the misdeeds, if any committed by any Government officer either deputed with the petitioner or working in the department, when it is contended that such officers have let-go the irregularities by the petitioner, which resulted into encouraging the petitioner in continuing its unlawful and irregular activities. Therefore, when the scope of audit would certainly result into identifying and collecting the details of scam and details of responsible person, the persons who may be responsible for such scam cannot be allowed to object the special audit.
(13) Another serious issue is regarding inflow of milk, which was 25 Lacs litres in the year 2010, but it is reduced to 16 Lacs litres in the year 2012, which results into frustrating the main object of the petitioner
- society. Therefore, when such information is received by way of a complaint from an outsider, then the purpose of special audit is to verify the facts.
(14) It is also conveyed to the respondent by Page 52 of 95 HC-NIC Page 52 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT the public that the petitioner has appointed several employees and paying huge salary to them, though their services were not required, resulting into loss to the society. One such incident is with reference to appointment of Patel Jayanti Geba, though he was not qualified, he secured appointment as an Officer by producing documents of his cousin, namely, Jayanti Jetha. Therefore, what salary is being paid to this person and in what name and all such other information needs to be collected by auditing the accounts.
(15) In cattle field factory, the loss has been increased year after another, and though there is noting by the auditor to inquire about such loss, it was not properly taken care of and therefore, further loss, if any debited in the account books needs to be verified.
(16) Some of the issues are overlapping and repeated in the list. However, one more surprising incident is with reference to payment of advocate fees without deducing the TDS and atleast in case of two payments, though payment is in the name of advocate, it was released in favour of a person, who is not advocate at all. Therefore, where such amount has been credited by those persons, needs to be examined.
(17) There is serious allegation regarding expenditure for religious functions carried out at the residence of the Chairman.
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24. All above factual details are having basic
information that how those facts have been
noticed by the respondents, amongst which most of them are by way of complaint by the public and therefore, it is necessary to audit the accounts, initially to ascertain that whether in fact there is a scam, if at all committed by the petitioner or its members. Therefore, petitioner should not be afraid of the special audit, because if they have not committed any scam, then, there would be no proof or detail of such scam as alleged in the list of items with the impugned order and thereby, there will be no further difficulty to the petitioner, but if petitioner is afraid of special audit and is attempting to resist it vehemently, then, the presumption would be simple and clear that there is some evidence of scam in the books of accounts and therefore, petitioner does not want to be subjected to special audit.
25. Thus only because petitioner apprehends that respondents are going to start inquiry as contemplated under Section 86 under the pretext of special audit as contemplated under Section 84(5A), the impugned order cannot be stayed. At the most, rights of the petitioner with reference to legal dictum on the powers of the respondents for the inquiry under Section 86 can be taken care of.
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3) Issue No. (4) regarding Provisions of Law and remedy in case of liability of erring persons with reference to Section 93 of the Act:
26. It is settled legal position that statute alone cannot be made applicable to any case irrespective of particular facts and circumstances, which is otherwise emerging from record. Therefore, if we peruse the factual details annexed with the impugned order, it becomes clear that though there is a disclosure with almost all the issues annexed with the impugned order that such issue needs to be inquired into, the fact remains that before initiating any inquiry contemplated u/s.86 of the Act or before passing any order of recovery as contemplated u/s.93, the authority certainly needs adequate evidence and material on hand for taking any steps against any particular individual. Therefore, though with all items, when it is stated that it needs to be inquired, such inquiry during special audit, would be limited to confirmation and conclusion of scam rather than, confirming the liability of particular person. It cannot be ignored that out of 28 items listed with impugned order, several items are based upon the complaint or intimation received by the respondent No.2 and therefore, to ascertain its veracity, accounts needs to be Page 55 of 95 HC-NIC Page 55 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT audited to verify that whether there is any substance in any complaint or not. It is surprising to note that when order is only for special audit u/s.84(5A) of the Act, the petitioner is apprehending an inquiry u/s.86 and taking shelter of Section 93 submitting that if some misappropriation or misdeed is committed by any person, the respondent may order to repay or restore the money or property with interest. Thereby, it seems that probably petitioner is aware about the misdeeds and therefore, they do not want any further audit or inquiry. However, there cannot be an order u/s.93 without inquiry and there cannot be a order to fix the liability of particular person without having basic and prima facie details and evidence regarding commission of any illegal act, including scam, fraud, misappropriation or otherwise. Therefore, if petitioner is afraid of special audit, then, prima facie there is reason to believe that they are aware about some misdeed at their end and therefore, they are trying to save their skin by taking disadvantage of delay in judicial process by filing different petitions. In that case, impugned order cannot be stayed as prayed for except to clarify that if at all respondent No.2 wants to fix the liability of any particular person, then, separate inquiry u/s.86 may be initiated, where respondent may give reasonable Page 56 of 95 HC-NIC Page 56 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT opportunity to the petitioner and such proposed delinquent or any other person to explain that how and why action should not be taken against them as per the general law or u/s.93 of the Act. It is evident that though the elected body of the petitioner - Union is duty-bound, not only to stop such scam and misdeeds, but also to find out the culprits of the same, considering the huge loss to the society and therefore, if society is objecting to such audit, it seems that elected body of the society is probably involved in the scam.
27. It is also evident that there may be a hidden agenda of the persons who are involved in such scam to delay the process of special audit and investigation u/s.86 so as to see that evidence against them gets destroyed or they can win-over or tamper the evidence, which may prove their misdeeds. Therefore, such matters are required to be dealt with at the earliest when huge money has been siphoned away by the office bearers of the public institution and when they are trying to drag such litigation, by different ways for couple of years. Therefore, irrespective of outcome of or status of any litigation, the petitioner shall maintain all the relevant records in proper condition and shall make it available to the competent authority for its Page 57 of 95 HC-NIC Page 57 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT inspection.
28. The submission regarding conducting inquiry as per Section 86 under the pretext of special audit u/s.84 (5A) is also misconceived, inasmuch as the impugned order is very much clear that the respondent wants to conduct special audit and therefore, at the most respondents may be directed to restrict themselves from carrying out the activities of special audit only, but with a permission to initiate appropriate proceedings against the wrongdoers in accordance with law.
29. The discussion herein above makes it clear that so far as the special audit and inquiry is concerned, the respondents being statutory and competent authority, in absence of any restriction in their powers to order either special audit or inquiry, there cannot be any grievance against any such order, including impugned order. At the most, considering the settled legal position, with reference to different provisions of law and dictum by the competent Court on the issue, the competent authority and respondents may take care of such provisions and direction in any judgment on the subject or issue under consideration.
30. In view of above position, practically, reference Page 58 of 95 HC-NIC Page 58 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT of Section 93 is unwarranted and on the contrary it is in favour of the respondents to proceed further in completing the audit as per the impugned order. The statute empowers the respondent No.2 to assess the damages against the delinquent and promoters. Thereby, to decide the damages, there must be consideration of misdeeds and wrong committed by the delinquent or promoters etc. At the most, before doing so, the respondents may have to call upon the delinquent or promoters to explain their stand by extending an opportunity to represent their case so as to comply with the principles of natural justice.
31. The bare reading of Section 93 of the Act on the contrary confirms 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 such audit, inquiry, inspection or order for 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, and if the Registrar is satisfied i.e. respondent No.2 on the basis of the report made by the Auditor or the person authorised to make inquiry u/s.86 or the person to inspect the books under Page 59 of 95 HC-NIC Page 59 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Sub-section (8) of Sections 84, 87 or 88 or the liquidator u/s.110, the Registrar or a person authorised by him in that behalf may inspect the conduct of such person or persons and after framing charges against such person or persons and after giving an opportunity to the person concerned and in the case of 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 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. Therefore, on the contrary, an audit is must when there is prima facie evidence regarding misapplication of the funds of the petitioner - Union so as to ascertain that whether there is retention and misfeasance of the funds also or not. Only requirement is with reference to fixing personal liability of any person where reasonable opportunity is to be extended to answer the charges. Therefore, it cannot be said that even audit cannot be completed without offering reasonable opportunity to answer the charges. It is quite clear and obvious that before passing any order either Page 60 of 95 HC-NIC Page 60 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT u/s.86 or u/s.93 of the Act, there is no need to extend reasonable opportunity though it is to be offered if any order is to be passed u/s.93 of the Act.
32. Therefore, reference to Section 93 and submission, that when Registrar is empowered to repay or restore the money or property or any part thereof with interest and costs, and when prima facie evidence regarding some misdeeds are available, there cannot be a further audit u/s.84 and there cannot be an order u/s.86 or 93 of the Act without offering reasonable opportunity to the concerned person, is misplaced and has no substance to grant any relief as prayed for. On the contrary, this goes to show that the petitioner does not want respondents to investigate and audit their affairs so as to file a report based upon which, the order u/ss.86 or 93 of the Act can be passed. Therefore, it is made clear that because of provision of Section 93, it cannot be said that respondents are not entitled to pass order of report of special audit u/s.84(5A) of the Act.
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4) Issue No. (5) regarding extending reasonable opportunity to explain with reference to the judgment in case of Chimanbhai Dadubhai Desai reported in 1971 GLR 31
33. Submission regarding extending an opportunity to explain the issue is based upon the dictum of the judicial pronouncement. The respondents have explained and distinguished the same, that reasonable opportunity is envisaged by the statute itself only in Section 93 of the Act, and not for order u/s.86 there cannot be second opinion or determination at this stage on such issue. The only differential fact remains is to the extent that, at present, the impugned order is neither u/s.86 nor u/s.93 of the Act, but it is under an order u/s. 84(5A) of the Act for the limited purpose of special audit to ascertain several issues. Therefore, though it is alleged and submitted that an order u/s.84(5A) is only with a view to avoid extending reasonable opportunity to the petitioner or concerned wrongdoers; when statute permits the respondents to pass an order for special audit u/s.84(5A), such order and direction in the form of impugned order cannot be quashed and set-aside and cannot be stayed only on apprehension and allegation that such order is a result of political rivalry.
34. However, irrespective of any submission, facts Page 62 of 95 HC-NIC Page 62 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT and situation that may emerge on record by such judgment and order, when it is made clear that though there cannot be a stay against the impugned order, the respondents shall follow the principles of natural justice before passing any order u/s. 93 of the Act. This issue is answered accordingly and only because petitioner has raised such issue, the impugned order cannot be stayed. Similarly, though there will be an observation and direction to follow the principles of natural justice in the case of order u/s.93 of the Act, there cannot be an order or direction to afford reasonable opportunity with regard to the activities of special audit to be carried out as per the impugned order regarding special audit. At the most, there may be an observation and direction that during the course of special audit, respondents shall not fix the responsibility and liability of any particular individual, since for doing the same, they have to afford reasonable opportunity to such person to answer the charges against him.
35. An audit is collection of evidence and material to prove the allegation against any particular person, who is responsible for such misdeeds. However, at the cost of repetition, it is again made clear that before fixing any liability of any person, respondents shall follow the Page 63 of 95 HC-NIC Page 63 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT principles of natural justice by affording reasonable opportunity to such person to explain his case during inquiry and before passing any order u/s.93. Therefore, the grievance of the petitioner that respondent does not want to extend the opportunity of being heard, would not survive.
5) Issue No. (6) regarding Auditor appointed are not qualified to act as an Auditor pursuant to Rule 38 of the Rules.
36. The learned senior counsel for the petitioner referred Rule 36 of the Rules contending that only Chartered Accountant within the meaning of the Chartered Accountant Act, 1949, can be appointed for such audit since only they are qualified for being authorised by the Registrar under Sub-section (1) of Section 84 of the Act.
37. However, such submission is misconceived if we refer entire Rule 38 properly. The perusal of Rule 38 makes it clear that the Chartered Accountants are not only qualified for being authorised by the Registrar for the purpose, but in all, there are three groups of people, who are qualified for being authorised for the purpose. Amongst them, Chartered Accountant has been disclosed in Rule 38(1)(a); whereas Rule 38(1)
(b), persons who are holding Government Diploma Page 64 of 95 HC-NIC Page 64 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT in Co-operative Accounts or a Government Diploma in Co-operation and Accounting, are also qualified to be authorised under Sub-section (1) of Section 84. Whereas, under Rule 38(1)(c), person who has served as Auditor in the Co- operative Department of the State Government, is also qualified for being authorised by the Registrar under Sub-section(1) of Section 84 of the Act. So far as selection of Auditor is concerned, the provision of Section 2(4) confirms that Certified Auditors means - "a person, who possesses the prescribed qualifications and is authorised of the affairs by the Registrar as an auditor under Section 84; and therefore, there is no substance in the submission that only Chartered Accountant can audit the accounts, as submitted by the petitioner. Therefore, prima facie when it becomes clear from bare reading of the Rules itself that who can work as auditor, there is no substance in such argument by the petitioner that only Chartered Accountant can be appointed for conducting special audit.
38. Whereas, learned counsel for the petitioner has relying upon the list of persons, who are identified and disclosed in the impugned order to conduct the special audit, submitted that atleast amongst the persons listed in the impugned order, R. D. Trivedi, N. B. Pandya and Parth M. Shah are Page 65 of 95 HC-NIC Page 65 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT not qualified for being authorised to conduct audit u/s.84 and therefore, submitted that the impugned order is vitiated because of such selection. However, the learned Addl. Advocate General has vehemently argued that in absence of any specific evidence with the petitioner to confirm that above three persons are not qualified for being authorised for conducting special audit, the petitioner should not object the execution of impugned order. It is specifically submitted by the respondent that the petitioner shall file an affidavit to confirm that above three persons/officers are not qualified to be authorised for the purpose. Whereas, the learned senior advocate for the petitioner has fairly contended and submitted that it is their information and apprehension, otherwise it would be within the special knowledge of the respondent only regarding qualification of the above persons and therefore, it would be appropriate for the respondents to file an affidavit disclosing the qualification of above-referred persons so as to continue them in audit team as per the impugned order.
39. Learned Addl. Advocate General has specifically confirmed that in fact, R. D. Trivedi, N. B. Pandya and Parth M. Shah are eligible to be in a panel of auditors. In view of such categorical Page 66 of 95 HC-NIC Page 66 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT statement, I do not see any reason to interfere with or to stay the impugned order. However, it is made clear that if at any point of time, it is found that any person, is otherwise not qualified for the purpose, then, entire audit may get vitiated and therefore, irrespective of any other facts and circumstances, it would be appropriate for the respondents to declare on oath on record regarding qualification of above persons to avoid any further complications.
1)Issue No. (7) regarding Registrar's power to pass impugned order with reference to nomination by him of his representative in the Committee of the petitioner.
40. It is submitted by learned counsel for the petitioner that when Registrar has nominated his representative to the Committee of the Society, he becomes party to the Committee of the Society and activities carried out by such Committee and therefore, he cannot be a complainant so also witness and party to the proceeding of the Committee and therefore, he is not empowered to pass any order u/s.84 etc. In support of such submission, petitioner is relying upon the Government resolution ('G.R.', for short) dated 15.4.2005 and Notification dated 26.4.2005, copies of which are produced at Annexure-R Collectively (page 322). With reference to such Page 67 of 95 HC-NIC Page 67 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT G.R. and Notification, it is contended that when Government has as back as in the year 2005, delegated the powers of the Registrar to the Committee constituted for the purpose so as to exercise powers of the Registrar u/ss.81 to 94, now, the Registrar cannot pass order u/s.86, but it is only the Committee, which can pass any such order.
41. Considering the difference in the language of the G.R. and Notification, whereby the phrase "Federal Co-operative Societies" is not disclosed in the notification, though it was disclosed in the G.R., it is contended that such G.R. and Notification is applicable to every kind or type of Society and therefore, Registrar cannot pass any order u/s.84 (5A) against the petitioner. It is really a surprising position when such arguments are being advanced on behalf of a well- known institution like the present petitioner, because if we peruse the notification, it becomes clear that the notification is simply conveying the execution of resolution dated 15.4.2005, which is confirmed in the notification that in exercise of the powers conferred by sub-clause
(b) of Section 162 of the Gujarat Co-operative Societies Act, 1961 (as amended from time to time), the Government delegates the powers to the Registrar of Co-operative Societies u/ss.81 to 94 Page 68 of 95 HC-NIC Page 68 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT of the Act to the Committee constituted vide G.R. dated 15.4.2005 issued in pursuance to Rule 39(b) of the Gujarat Co-operative Society Rules, 1965. It becomes clear that, practically, the notification is simply endorsing and declaring the effectiveness of G.R. dated 15.4.2005 without reproducing the contents of such G.R. or any other details and therefore, it is to be read only to the effect that it confirms execution and implementation of the G.R. and not beyond it. Therefore, non-disclosure of the phrase "Federal Co-operative Societies of the State" in notification is not much material. Thereby, it is to be understood that the notification also confirms that this Committee is constituted only for the 'Federal Co-operative Societies' and not for all other type of Societies including the apex society etc.
42. If we peruse the provision of Rule 39(b), it becomes clear that there is a provision regarding constitution of Committee for supervision of 'Federal Co-operative Societies in the State". Sub-rule (4) of Rule 39(b) confirms that the Committee shall carry out its function subject to the supervision and control of the Government in Co-operative Department and shall comply with such directions as may be given to it from time to time by the State Government. The list of Page 69 of 95 HC-NIC Page 69 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Federal Co-operative Societies is disclosed in a table at the end of such rule and identified as such in Sub-rule(1) itself, wherein there is no reference of District Milk Producers Union. Thereby, it is contended by the respondents that District Co-operative Milk Producers Union cannot be termed as Federal Society, but it is only the State level society, which is identified as 'Federal Society' and therefore, provision of G.R. and notification are not applicable to the petitioner.
43. Both the sides have tried to emphasize differently in their favour that pursuant to Rule 39(b), petitioner is a 'Federal Co-operative Society' and against that, petitioner is no a 'Federal Co-operative Society'.
44. In support of their stand, the petitioner has referred the provisions of Section 74C of the Act contending that all District Co-operative Milk Unions are added in the list and therefore, respondent have not authority to pass impugned order.
45. However, if we peruse the provisions of Section 74C, surprisingly, there is no clarity at all that which are 'Federal Co-operative Societies' though there is disclosure of several Co-
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operative Societies. The perusal of section on the contrary makes it clear that the provision of Section 74C would be applicable to different types of societies, including apex societies as mentioned in the schedule under the Section. And such other apex societies as the State Government may by general or special order published as such having regard to financial position and share capital of such society. Whereas, all those societies are apex societies, more particularly when apex society is only one of the items in such list with a clarity that apex societies, which are mentioned in the schedule to such section, are subject to provision of this section with a list of as many as six other different types of societies to which provisions of Section 74C is though equally applicable to the apex society as well as District Co-operative Milk Unions, it cannot be said that District Co- operative Milk Unions i.e. unions like present petitioners are also included as apex societies for which in fact a separate schedule is provided under the statute. It is undisputed fact that in such schedule, there is no reference of the District Co-operative Milk Unions, but there is reference of state level unions only. Therefore, if petitioner is not a apex society as contended by the learned counsel and thereby, if it is not a 'Federal society' also as defined under the Page 71 of 95 HC-NIC Page 71 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Act, then, provision of G.R. and notification under reference would not apply to it.
46. It is contended by learned counsel for the petitioner that considering the different provision and nature of classification, all apex societies are 'Federal Societies', but all 'federal societies' may not be apex societies and that when petitioner is a 'federal society', provision of G.R. and notification would be applicable to it and thereby, Registrar could not pass the order u/s.84(5A).
47. Whereas, learned Addl. Advocate General has submitted that when there is no such clarification or classification in provisions of Section 84(5A) and when Section 84(5A) is not part of the G.R. dated 15.4.2005 and notification dated 26.4.2005, there is no restriction upon the respondents to pass any order under Section 84(5A) of the Act.
48. Irrespective of such unwarranted submissions by the petitioner, the fact remains that by G.R. dated 15.4.2005 and notification dated 26.4.2005, the State Government has simply delegated the powers of the Registrar to some Committee, but in any case the Government has not curtailed or restricted the power of the Registrar in any Page 72 of 95 HC-NIC Page 72 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT manner whatsoever. The Sub-rule (4) of Rule 39(b) confirms that such Committee shall carry out its functions subject to supervision and control of the Government and shall abide by such direction as may be given to it from time to time. But, it nowhere restricts the power of the principal i.e. respondents in any manner whatsoever. It is quite clear and obvious that even if powers are delegated to subordinate officer, the principal officer can certainly exercise the same powers and only because of delegation of powers, it cannot be said that thereafter, principal does not have those powers at all. It is also clear from the statute and rules that Committee is subordinate to the respondents and therefore, it has to function as an agent only and it can never become sole authority on the subject.
49. The bare reading of G.R. dated 15.4.2005 and notification dated 26.4.2005 makes it clear that it nowhere restricts the powers of the respondent No.2 even if some powers are delegated to any such committee.
50. Under the delegation of authority, the delegator or delegation does not surrender his authority completely, but only shares certain responsibility with the subordinate and delegates that much authority, which is necessary to Page 73 of 95 HC-NIC Page 73 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT complete that responsibility.
51. Delegation of authority of power, is a term which like the word "delegate" which does not imply a parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would have to do himself as confirmed by the Ho'ble Supreme Court in the case of Ishwar Singh v. State of Rajasthan, (2005) 2 SCC 334 = AIR 2005 SC 773 = 2005 AIR SCW 385 in following words:
"8 It is an accepted position in law that to 'delegate' to another is not to denude yourself. As was observed by Wills, J. in Huth v. Clarke (25 Q.B.D. 391, 'In my opinion the word, in its general sense and as generally used, does not imply, or point, to, a giving up of authority, but rather the conferring of authority upon someone else". As observed by Lord Coleridge, C.J. in 25 Q.B.D. 304, the word 'delegation' implies that powers are committed to another person or body which are as a rule, always subject to resumption by the power delegating. The person delegating does not denude himself. (Per Wharton's Law Lexicon, 1976 Reprint Ed. at page 316). Delegation implies also the power to withdraw delegation. As indicated in Wharton's Law Lexicon, delegation is a sending away; a putting into commission; the assignment of a debt to another; the Page 74 of 95 HC-NIC Page 74 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT entrusting another with a general power to act for the good of those who depute him. The word 'delegate' means little more than an agent. An agent exercises no power of his own but only the powers of his principal. The observation in Huth's case (supra) was referred to in Roop Chand's case1 (supra). In general, a delegation of power does not imply parting with authority. The delegating body will retain not only power to revoke the grant, but also power to act concurrently on matters within the area of delegated authority except in so far as it may already have become bound by an act of its delegate.
(See Battelley v. Finsbury Borough Council (1958 LGR 165).
9. In Corpus Juris Secondum, Volume 26, 'delegate' has been described as follows :
"As a noun, a person sent and empowered to act for another, one deputed to represent another in a more popular but less accurate sense, a regularly selected member of a regular party convention.
As a verb, in its general sense and as generally used, the term does not imply, or point to, a giving up of authority, but rather the conferring authority upon someone else.
At common law, it is the transfer of authority by one person to another, the act of making or commissioning a delegate.
1Roop Chand v. State of Punjab and another reported in AIR 1963 SC 1503 Page 75 of 95 HC-NIC Page 75 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Expression 'delegation of authority of power' is a term which like the word 'delegate' does not imply a parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would have to do himself."
10. In Collins English Dictionary the word 'delegate' has been stated to be a person who is chosen to vote or make decisions on behalf of a group of other people. If you delegate duties, responsibilities or power to someone, you give them those duties, those responsibilities, or that power so that they can act on your behalf. If you are delegated to do something you are given the duty of acting on someone else's behalf by making decisions, voting, or doing some particular work.
11. In Black's Law Dictionary, 6th Edition, the word 'delegate' has been stated to mean a person who is appointed, authorized, delegated or commissioned to act in the stead of another. Transfer of authority from one to another. A person to whom affairs are committed by another.
'Delegation' according to said dictionary means instructing another with a general power to act for the good of those who depute him; transfer of authority by one person to another.
12. According to Venkataramaiya's Law Lexicon, 'delegation' as the word generally used does not imply a parting with powers by the person who grants the delegation, Page 76 of 95 HC-NIC Page 76 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT but points rather to a conferring of an authority to do things which otherwise the person would have to do himself.
52. The above view is confirmed by the Hon'ble Supreme Court in recent decision in the case of Sidhartha Sarawgi v. Board of Trustees for the Port of Kolkata reported in AIR 2015 SC 1271; where in it observed as under in para 2 of the judgment:
"2. Delegation is the act of making or commissioning a delegate. It generally means parting of powers by the person who grants the delegation and conferring of an authority to do things which otherwise that person would have to do himself. Delegation is defined in Black's Law Dictionary as "the act of entrusting another with authority by empowering another to act as an agent or representative". In P. Ramanatha Aiyar's, The Law Lexicon, "delegation is the act of making or commissioning a delegate. Delegation generally means parting of powers by the person who grants the delegation, but it also means conferring of an authority to do things which otherwise that person would have to do himself". Justice Mathew in Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. v. The Assistant Commissioner of Sales Tax and others (1974) 4 SCC 98 : (AIR 1974 SC 1660), has succinctly discussed the concept of delegation. Paragraph 37 reads as follows:
"37. .......Delegation is not the complete handing over or transference of a power from one Page 77 of 95 HC-NIC Page 77 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT person or body of persons to another. Delegation may be defined as the entrusting, by a person or body of persons, of the exercise of a power residing in that person or body of persons, to another person or body of persons, with complete power of revocation or amendment remaining in the grantor or delegator. It is important to grasp the implications of this, for, much confusion of thought has unfortunately resulted from assuming that delegation involves or may involve, the complete abdication or abrogation of a power. This is precluded by the definition.
Delegation often involves the granting of discretionary authority to another, but such authority is purely derivative. The ultimate power always remains in the delegator and is never renounced."
53. Whereas, so far as cited decision is concerned, on one hand when petitioner is relying upon the judgment of the Division Bench of this Court in the case of Rajkot District Co-operative Bank Ltd. Vs. R. B. Solanki in Special Civil Application No.865 of 1972 dated 15.11.1972 in support of his submission that Registrar being nominating authority of one Director in the Committee of the society like petitioner, he is not empowered to pass any order under the statute and therefore, Government has by G.R. dated 15.4.2005 formed a Committee; the learned Addl.
Advocate General has rightly distinguished the
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fact of such case by pointing out that there is factual difference in cited case and case on hand inasmuch as in the cited case, Registrar himself was deputed and being member of the Rajkot District Co-operative Bank and therefore, the Division Bench has held that he is not permitted to issue orders u/s.86. However, the situation before us is quite different inasmuch as the respondent No.2 is neither a member of the Committee of the petitioner since he was never deputed as such, but he was only the deputing authority and some other officer was deputed in the Committed of the petitioner and therefore, the judgment of Rajkot District Co-operative Bank Ltd. (supra) stands distinguished in factual details. Therefore, according to Addl. Advocate General, there is no harm for the present respondent No.2 to pass appropriate order u/ss.84 or 86 or 93 of the Act. The respondents have on the contrary, made it clear in the impugned order so also in their submission that, in fact, the deputed officer of the department is equally liable and responsible for any misdeeds either committed by himself or by his consent and therefore, respondents are keen to prosecute such officer also, if found guilty. Therefore, only because of such judgment under reference, it cannot be said that respondent No.2 has no authority whatsoever to pass the impugned order.
Page 79 of 95 HC-NIC Page 79 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT 54. The petitioner is also relying upon the provisions of Section 2(9) of the Act, which defines "Federal Society" submitting that
petitioner is a federal society and therefore, provision of G.R. dated 15.4.2005 would be applicable to it.
55. However, as discussed herein above, there is no substance in such submission because delegation of power does not restrict the power of delegating authority.
6) Issue No. (8) regarding malafide of the respondent:
56. In background of above referred basic information, now let us consider the rival submissions and discussion of merits on such submissions.
57. When petitioner is complaining about the malafide attitude of the respondents, it would be appropriate to recall some basic principles of such co-operative societies.
58. Co-operative means living, thinking, and working together to accomplish a common goal through cooperative principles. Consequently, any organisation formed by people to work together to achieve the objects for which it is formed Page 80 of 95 HC-NIC Page 80 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT through the co-operative principles is called a co-operative society. The concept of co-operation envisages a group of persons having one or more common economic needs, who voluntarily agree to pool their resources both human and material and use them for mutual benefit, through an enterprise managed by them in democratic lines, guided by the principle of 'Each for all and all for each'. The essentials of co-operative societies are that (1) a co-operative is a voluntary form of organization (2) it is an association of human beings organized based on equality (3) its objective is the economic interests of its members. The essentials of co- operative societies are thus (1) a co-operative is an enterprise (2) it is an association of users (3) it applies the rules of democracy and (4) it is intended to serve both (a) its own members and (b) the community as a whole.
59. It is undisputed fact that petitioner is union of co-operative milk producers society and is governed by the Act, which is enacted with a view to provide for the orderly development of the Co- operative sector in the State, by organizing the Co-operative societies as self-governing democratic institutions, to achieve objects of equity, social justice and economic development, as envisaged in the directive principles of State Page 81 of 95 HC-NIC Page 81 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Policy of the Constitution of India.
60. It is also undisputed fact that petitioner is a Union and not an individual personality though it is a legal entity and is being managed by the elected body, which has to act for the benefit of its members and not for any individual or for the interest of any group or individuals. It is also undisputed fact that for the purpose to safe guard such interest of such co-operative societies, the Act is providing several restrictions and check on elected body and since such provisions are not unconstitutional, the authorities created by such Act has ample powers to Act in accordance with Law and Rules to see that basic concept and purpose of the Co- Operative activities are neither frustrated nor being misused by group of persons based only upon some majority of supporters, because ultimately society is for the benefit of members and not for the benefit of some group.
61. In light of above background, if we peruse pleadings in para 2.2 to 2.28, it is nothing but history of previous litigation by and against the petitioner. Even if petitioner has succeeded in all or any of such litigation, it cannot be said that it would give a rise or cause to the petitioner to get the impugned order quashed Page 82 of 95 HC-NIC Page 82 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT irrespective of their misdeeds, which are listed with impugned order. Though petitioner is blaming the respondents for not holding the election in time, its own admission in para 2.2 on page 3 confirms that elections were not held in time because the issue regarding delimitation was pending before the Hon'ble Supreme Court. Thus, it is very easy to start a blame game, but it needs to be proved with malafide intention, otherwise everyone has a right to agitate their grievances in appropriate manner and delay thereafter in particular activity was mainly result of the general attitude of litigants to delay the judicial proceedings and to get disadvantage of delay in judicial system, because of huge pendency. However, in such scenario, it cannot be said that respondent's intention is malafide, when they have passed several orders to safeguard the interest of the members of the Society and Union. Therefore, I do not see any reason to discuss all those details of previous litigation so as to conclude that, it amounts to malafide on the part of the respondent.
62. Suffice to refer the litigations preferred by the petitioner and its pendency, being Special Civil Application No: 18836 of 2016 and petition filed by erstwhile members of the petitioner being Special Civil Application No. 9017 of 2015, which Page 83 of 95 HC-NIC Page 83 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT was challenging the same impugned order and stay was operative against impugned order till it was withdrawn on 14/3/2017, i.e. after couple of years though such members were not entitled to raise and continue such issue. Can it be said that it was malafide intention of those petitioners, and more particularly when it was disclosed at the time of active hearing that they have no locus standi, present petitioner has come forward with a Civil Application No. 3847 of 2017 to implement it as a party so as to get the order of injunction against impugned order continue. Therefore, only because respondents have passed several orders against the petitioner and only because petitioner could succeed in litigation against such orders, it cannot be said that the respondent has malafide intention. Therefore on such ground, there cannot be any interim relief in favour of the petitioner.
63. In Indian Railway Construction Company Limited Vs Ajay Kumar [(2003) 4 SCC 579], the Apex Court observed that burden of establishment of malafides is very heavy on the person who alleges it. The allegations of malafides are often mode easily made, than proved, and the very seriousness of such allegations demands proof of a higher order of credibility, observed the Supreme Court. The principle was stated that the Page 84 of 95 HC-NIC Page 84 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT Court should be slow to draw dubious inferences from incompetent facts placed before it by a party, particularly when such grave imputations are made against the order of an office who has high responsibility in the administration.
64. In Mutha Associates Vs State of Maharashtra [(2013) 14 SCC 304], the writ petition was filed by APMC in which the charge of malafides was leveled against the then Minister, but the Court found that the same was without specific particulars or details of how the decision taken by the Minister was influenced by the developer or any other person. The High Court held that the Minister's action was under the influence of the builder, attributing malafides simply because the order was found to be untenable in law. The Apex Court observed that no matter the circumstances enumerated by the High Court may have given a rise to strong suspicion that the Minister acted out of extraneous consideration, but the suspicion, however strong cannot be proof of the charge of malafides.
65. The Supreme Court made following observations by endorsing to the contention of the counsel that mere fact that an order passed by constitutional authority was found to be legally unsustainable, did not ipso facto mean that the order was Page 85 of 95 HC-NIC Page 85 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT malafide, by holding "The law regarding pleading and proof "malice in fact" or malafides as it is in common parlance described is indeed settled by a long line of decisions of this Court. The decisions broadly recognize the requirement of allegations suggesting "malice in fact" to be specific and supported by necessary particulars. Vague and general averments to the effect that the action under review was taken malafide would not therefore suffice. Equally well settled is the principle that the burden to establish that the action under challenge was indeed malafide rests heavily upon the person making the charge; which is taken as quasi-criminal in nature and can lead to adverse consequence for the person who is proved to have acted malafide. There is in fact a presumption that the public authority acted bona fide and in good faith." (Para 42) 7.3 When the pleadings and ground of malafide are examined in light of the aforesaid principles, the case on this count is not only put forth in a cryptic way but falls far short of the facts and the averments on the basis of which malice could be shown in respect of the impugned action. Merely stating that "there has been a shift in political scenario and the ruling party pressurising to remove the petitioner as Vice Chairman and wants to regaining the power of the Market Committee" is not sufficient allegation to Page 86 of 95 HC-NIC Page 86 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT constitute and to conclude that the exercise undertaken is mala fide. Nor the averments in paragraph 3.10 that officer had been given inquiry with regard to employment of staff and he gave ex- parte report against the office bearers, by itself is not indicative of the action being malafide.
66. An action to be considered or treated as malafide has a definite parameters of law as could be noticed above. The vague and bald assertions of the petitioner cannot establish malafide or malice in fact and the said contention has to miserably fall flat.
67. The political pressure or political motive may not be a good argument at all without anything else legally sustainable. Nor does it add to a plea of malafide by itself. The corridors of power always hum with political activities, for; they are the corridors of power. Every hummer and every political move therefrom do not become subject matter of interference by the Court of law and the writ court, of course, unless the action, decision or conduct is in contravention of some statutory provision, is to defeat the law or the interference is necessary to secure and protect some higher legal principle or Constitutional enforcement. Every political Page 87 of 95 HC-NIC Page 87 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT maneuvering, unless amounts to violation of law, is no ground in a court of law.
68. As against the above facts and circumstances and submissions with discussion of merits on the point and issue raised by the petitioner, the learned Addl. Advocate General has submitted that:-
1)Truth should come out in all such cases and therefore, when there is no violation of fundamental rights, but in fact there is violation of rights of poor farmers/milk producers in not getting proper price of the milk, special audit cannot be stayed or restricted.
2)There is no reason to exercise equitable discretionary jurisdiction in favour of the Union/Committee, which has to act for the benefit of its members, rather than to try to hide the misdeeds of its members.
3)It is to be realized that why the petition is filed and who will be benefited, if interim relief is granted as prayed for.
4)As far as qualification of Officers of the team disclosed in the impugned order is concerned, as already discussed herein above, when Rule 38 is clear and permitted different class of people to be appointed as such, there is no substance in such submission by the petitioner.Page 88 of 95
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5)Rest of the submissions by the Addl. Advocate General are taken care of in above discussion and hence, not reproduced. Whereas, there is substance in submission herein above made by learned Addl. Advocate General, and when those submissions are accepted, no further discussion is required.
69. Whereas, so far as cited decision is concerned, on one hand when petitioner is relying upon the judgment of the Division Bench of this Court in the case of Rajkot District Co-operative Bank Ltd. Vs. R. B. Solanki in Special Civil Application No.865 of 1972 dated 15.11.1972 in support of his submission that Registrar being nominating authority of one Director in the Committee of the society like petitioner, he is not empowered to pass any order under the statute and therefore, Government has by G.R. dated 15.4.2005 formed a Committee; the learned Addl. Advocate General has rightly distinguished the fact of such case by pointing out that there is factual difference in cited case and case on hand inasmuch as in the cited case, Registrar himself was deputed and being member of the Rajkot District Co-operative Bank and therefore, the Division Bench has held that he is not permitted to issue orders u/s.86. However, the situation before us is quite different inasmuch as the respondent No.2 is neither a member of the Committee of the petitioner since he was never Page 89 of 95 HC-NIC Page 89 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT deputed as such, but he was only the deputing authority and some other officer was deputed in the Committed of the petitioner and therefore, the judgment of Rajkot District Co-operative Bank Ltd. (supra) stands distinguished in factual details. Therefore, according to Addl. Advocate General, there is no harm for the present respondent No.2 to pass appropriate order u/ss.84 or 86 or 93 of the Act. The respondents have on the contrary, made it clear in the impugned order so also in their submission that, in fact, the deputed officer of the department is equally liable and responsible for any misdeeds either committed by himself or by his consent and therefore, respondents are keen to prosecute such officer also, if found guilty. Therefore, only because of such judgment under reference, it cannot be said that respondent No.2 has no authority whatsoever to pass the impugned order.
70. The petitioner is also relying upon the provisions of Section 2(9) of the Act, which defines "Federal Society" submitting that petitioner is a federal society and therefore, provision of G.R. dated 15.4.2005 would be applicable to it.
71. However, as discussed herein above, there is no substance in such submission because delegation Page 90 of 95 HC-NIC Page 90 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT of power does not restrict the power of delegating authority.
VII. Determination
72. The discussion herein above makes it clear that prima facie there is material before the respondent No.2, which shows that there is huge scam in the administration of the petitioner - Society, which is at present visualized to the tune of almost Rs.717 Crores and therefore, considering the fact that any issue raised in any such petition and delay that may occur in deciding any such matter, would allow the petitioner to destroy the original record or to make it unavailable or atleast requisite information may be disturbed, which would certainly restrict the truth to come out, which can be permitted in any case when there is prima facie evidence of scam of Rs.717 Crores or more. Irrespective of any apprehension, which may be taken care of at the relevant time, at initial stage, there cannot be a stay against scrutiny of such record, which is otherwise very much necessary for collecting the evidence regarding commission of scam, and such evidence cannot be permitted to remain in custody of persons or authority against whom there are serious allegations and who are probably responsible for Page 91 of 95 HC-NIC Page 91 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT such scam. It cannot be ignored that otherwise non-disclosure of record is an offence under the Act. For the purpose, reference of Sections 147(1)(i) and 147(1)(o) so also Section 148(1)(i) and 148(1)(o) is material, which confirms that "if any officer or member of a society, in possession of information, books, records, fails to furnish such information or produce books and papers, or give assistance to a person appointed or authorised by the State Government or the Registrar under Sections 80, 81, 84, 86, 87, 99 or 108 or fails to comply with the requirements of sub-section(4) of Section 84, then, such act is to be considered as an offence under Section 147 for which punishment of imprisonment, which may extend to six months, or with fine which may extend to Rs.500/- or both is prescribed u/s.148. Therefore, granting of injunction as prayed for would amount to permitting commission of an act, which prescribed as an offence under the statute, and therefore, no such stay can be granted.
73. So far as difference between special audit and inquiry is concerned, as discussed herein above, when those words are having overlapping meaning, at the most, at present, when the impugned order is disclosing Section 84(5A) only, respondents may have to pass separate order for their desire to proceed further u/ss.84, 86, 93 etc. but, Page 92 of 95 HC-NIC Page 92 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT thereby, it cannot be said that special audit is not permissible and cannot be allowed and therefore, there cannot be stay against the impugned order and thereby, against the special audit.
74. So far as extending reasonable opportunity is concerned, the decision in Chimanbhai Dadubhai Desai (supra) is in fact not confirming the extension of reasonable opportunity during the special audit or even during inquiry u/s.86. It simply confirms that when order u/s.86 is challenged before the appellate authority, then, appellate authority shall follow the principles of natural justice. Thereby, though this order is not applicable at present, at the most, such issue must be considered while deciding the main petition finally, but on that count, at present, there cannot be an interim relief to stop the special audit.
75. So far as qualification of persons who are included in the team as per the impugned order are concerned, as it has been discussed herein above, there is no irregularity or illegality. In case of necessity, based upon the qualification of any member of either of the team, at the most respondents may have to select a proper person. However, on such count also, there cannot be a Page 93 of 95 HC-NIC Page 93 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT blanket stay against implementation of impugned order for special audit. At this stage, it is to be realised that audit of such institute, which has a turnover of more than Rs.4000 Crores, cannot be carried out by a single person and without the help of the support staff, who may not be having qualification of certified Chartered Accountant as provided under the Act. Therefore, if head of the team or majority of the members of the team are having qualification as Chartered Accountant as per the Act and if one or two clerical staff are deputed with them for helping them to carry out formal and routine clerical activities, then, it cannot be said that there is illegality or irregularity in constitution of such scheme and therefore, there cannot be a blanket stay against special audit, which is a statutory activity.
76. So far as authority of the Registrar to pass such order is concerned, the discussion herein above makes it very much clear that when Registrar is empowered under the statute only because of delegation of his powers to some Committee, his own power does not come to an end in any manner so as to pass appropriate orders in accordance with law.
77. So far as the alleged malafide is concerned, the Page 94 of 95 HC-NIC Page 94 of 95 Created On Sat Apr 01 00:27:02 IST 2017 C/SCA/6089/2017 JUDGMENT overall discussion herein above, more particularly, the details of the illegalities in accounts and management, which results into prima facie evidence regarding scam of Rs.717 Crores, makes it clear that irrespective of proof of malafide, the order of special audit is certainly within the powers of the statutory authority being respondents and therefore, it cannot be stayed.
78. Discussion herein above makes it clear that the word " " used in the impugned order includes the meaning of audit and therefore, on such count, the impugned order cannot be disturbed. The petitioner shall maintain all the relevant records in proper condition and shall make it available to the competent authority for its inspection/audit VIII. Conclusion
79. In view of above facts, circumstances and discussion, no case is made out for interim relief or for any interference in the impugned order. Hence, the petition stands dismissed.
(S.G. SHAH, J.) binoy Page 95 of 95 HC-NIC Page 95 of 95 Created On Sat Apr 01 00:27:02 IST 2017