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IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD
S.V. GANGAPURWALA, A.M. DHAVALE, JJ.
Maharashtra State Co-Operative Patsanstha Federation Ltd Mumbai - Appellant
Vs.
State Of Maharashtra, Through The Secretary, Co-Operation And Textile Department, Mantralaya, Mumbai - Respondent
Writ Petition No. 1209 of 2018
Decided on : 08-04-2019.
Maharashtra Co-operative Societies Act, 1960 -3,81, 83,84,79,79(1),79(1)(a),79A,81(2A),81(6),81(3)(b),81(3)(c),165,81(3), 165(2)(xliv) - Petitioner federation is representing cooperative credit societies in State of Maharashtra - Members of petitioner federation viz Co-operative credit societies are governed by provisions of Act of 1960 - Under impugned circular respondent No. has given guidelines for conducting test audit of societies and for that purpose concerned District Deputy Registrar and District Special Auditor are required to prepare a programme - Respondent No. has directed to conduct test audit of 20% societies per year of which regular audits are conducted upto 31st September - Whether State Government has approved impugned directives issued by Commissioner Co-operation and Registrar Co-operative Societies - Held, Registrar has to arrive at subjective satisfaction based on objective assessment and issue directions for carrying out test audit - Section 81(3)(c) of Act of 1960 does not give blanket power to Registrar to direct a test audit even in case where no deficiencies are pointed out or where audit report discloses true and correct picture of accounts - In absence of any powers in that regard general directions issued under circular are not countenanced by law - Said circular apart from being beyond statutory power is arbitrary - Arbitrariness is antitheses to rule of law - requires a particular act to be done in a particular manner it has to be done in that manner only - Section 81(3)(c) empowers Registrar or authorized person to carry out test audit of accounts of a society if it is brought to his notice that audit report submitted by auditor does not disclose true and correct picture of accounts and test audit shall include examination of such item as may be prescribed or specified by Registrar for such year - Perusal of said provision it is manifest that the Registrar is empowered under Statute to direct/order to carry out a test audit of accounts of such society wherein it is brought to his notice that audit report submitted by auditor does not disclose true and correct picture - Circular restricts the carrying out of test audit to only 20% of societies whose audits have been conducted - Scheme of Section 81 is comprehensive and deals with each and every eventuality - Section 81 of Act of 1960 gives ample powers to Registrar to take steps and corrective measures on defalcation by society and report not disclosing the true and correct picture of account - Powers are not restricted to 20% of societies whose audit is conducted - Amplitude and width of powers of Registrar under Sec. 81(3(c) of Act of 1960 is very wide - In each and every case wherein it is brought to notice of Registrar that audit report submitted by auditor does not disclose true and correct picture of account Registrar is empowered to carry out or cause to be carried out test audit of such society - There are no fetters on powers of the Registrar in issuing such directions - Rule accordingly
S.V. GANGAPURWALA, J.
1. Rule. Rule made returnable forthwith. With the consent of parties taken up for final hearing.
2. The petitioner assails the circular dated 25.10.2017 issued by the Commissioner for Co-operation and Registrar Cooperative Societies, Maharashtra State, Pune.
3. The petitioner is a society registered under the provisions of the Maharashtra Co-operative Societies Act, 1960 (for short “Act of 1960”) and has its area of operation in the State of Maharashtra. The petitioner federation is representing the cooperative credit societies in the State of Maharashtra. The members of the petitioner federation viz Co-operative credit societies are governed by the provisions of the Act of 1960.
4. Under the impugned circular the respondent No. 2 has given guidelines for conducting test audit of the societies and for that purpose the concerned District Deputy Registrar and District Special Auditor are required to prepare a programme. The respondent No. 2 has directed to conduct the test audit of 20% societies per year of which regular audits are conducted upto 31st September.
5. Mr. Suryawanshi, the learned advocate for the petitioner submits that, the respondent No. 2 had forwarded the copy of the impugned circular to the respondent No. 1 for approval. However, the respondent No. 1 refused to grant approval under communication dated 02.12.2017. The respondent No. 2 does not possess the authority under law to issue such a circular. The learned counsel further submits that, it is only the State Government that can issue directions. The impugned circular is not in consonance with Sec. 81(3)(c) of the Act of 1960. The learned counsel relies on the judgment of the Division Bench of this Court in a case of Maharashtra Certified Auditors Association (Regd.) and another Vs. State of Maharashtra and others, (2011) 1 AllMR 20 to submit that power U/Sec. 81(1)(a) of the Act of 1960 cannot be exercised by issuing administrative circular.
6. The learned Assistant Government Pleader for respondent Nos. 1 and 2 supports the circular and submits that, to over view the activities of financial co-operative societies and the empaneled private auditors, the office of the respondent No. 2 has issued the impugned circular, wherein only 20% of the total societies are included in the test audit programme with a view to conduct test audit of a society once in five years. In the action programme of the test audit 20% societies are included with priority of the societies in financial crises and societies against whom the field officers or office of the respondent No. 2 has received the complaints, so also the societies of which the audit report includes serious observations. The respondent No. 2 has issued the circular dated 25.10.2017 in the capacity of Registrar as per the powers vested in him under Section 3 of the Act of 1960. The respondent No. 2 has all the powers under Section 81 of the Act of 1960 to regulate and control the matters related to audit of co-operative societies. No audit fee is charged to the society for conducting the test audit by the department. It is purely a measure for the sustainable growth of co-operative movement.
7. Before we advert to the contentions of the respective parties, it would be appropriate to refer to the relevant provisions of the Maharashtra Co-operative Societies Act, 1960.
The Maharashtra Co-operative Societies Act, 1960
1. ........
2. ........
3. Registrar and his subordinates --
The State Government may appoint a person to be the Registrar of Co-operative Societies for the State; and may appoint one or more persons to assist such Registrar with such designations, and in such local areas or throughout the State, as it may specify in that behalf and may, by general or special order, confer on any such person or persons all or any of the powers of the Registrar under this Act. The person or persons so appointed to assist the Registrar and on whom any powers of the Registrar are conferred, shall work un
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