Case Note & Summary
The petitioner, Janhit Nagari Sahakari Pat Sanstha Maryadit, a Cooperative Credit Society registered under the Maharashtra Cooperative Societies Act, 1960 (MCS Act), challenged an order dated 02 July 2019 passed by the Deputy Registrar appointing a Special Auditor to conduct an inquiry into its affairs, and the subsequent order dated 26 November 2019 by the Divisional Joint Registrar dismissing its revision application. The inquiry was initiated on the basis of a complaint dated 06 June 2019 by one Sudhir Ramchandra Alhat, a non-member, and four ex-employees of the society. The society, which claimed to have 4986 members and a consistent 'A' grade, contended that the Registrar had no jurisdiction to order an inquiry on a complaint by a non-member under the MCS Act, as the statutory scheme only permitted inquiry either suo motu by the Registrar, on application by one-fifth of the members, or on a special report under Section 81(5B), or at the instance of a creditor under Section 84. The petitioner relied on judgments in Vitthal Co-operative Housing Society, Mumbai v. Divisional Joint Registrar and Ashok Saha v. State of Maharashtra to argue that a non-member has no locus to seek an inquiry. The respondent State, on the other hand, argued that the complaint by ex-employees familiar with the society's affairs justified the inquiry, that full opportunity would be given, and that the petition was premature. The High Court analyzed Section 83 of the MCS Act and observed that the use of 'may' for suo motu inquiry contrasted with 'shall' for inquiry on members' application, indicating that while the Registrar had discretion to act on information from any source, including a non-member's complaint, the non-member had no right to demand an inquiry. Thus, there was no absolute bar against entertaining a non-member's complaint for suo motu purposes. However, the court found that in the present case, the Deputy Registrar had not applied his mind to the nature of the allegations. The complaint lacked specific details of fraud or misappropriation, yet the order directly appointed a Special Auditor for a regular inquiry under Section 83 without first considering a preliminary inquiry under Section 84, making the order disproportionate. Accordingly, the court quashed both impugned orders and remitted the matter to the Deputy Registrar for de novo consideration, with liberty to proceed in accordance with law, and directed the petitioner to cooperate. No order as to costs.
Headnote
A) Cooperative Societies - Inquiry by Registrar - Suo Motu Power - Maharashtra Cooperative Societies Act, 1960, Section 83 - The Registrar may hold inquiry suo motu, on application of one-fifth members, or on special report under third proviso to Section 81(5B) - 'May' signifies discretion, 'shall' indicates mandatory inquiry - A complaint by a non-member can be a source of information for suo motu exercise, but the non-member has no right to demand an inquiry - Held that there is no absolute bar against the Registrar entertaining a complaint from a non-member for the purpose of ordering a suo motu inquiry (Paras 10). B) Cooperative Societies - Inquiry by Registrar - Exercise of Power - Maharashtra Cooperative Societies Act, 1960, Sections 83, 84 - An order under Section 83 must be proportionate and based on proper application of mind to the nature of allegations, the familiarity of the complainant with the society's affairs, and the necessity of a regular inquiry - Where the complaint was made by a non-member and ex-employees with no detailed particulars, and the Registrar directly ordered a special audit without conducting a preliminary inquiry under Section 84 or recording reasons, the order was held to be disproportionate and without due application of mind, and was quashed with direction to reconsider de novo (Paras 15-19).
Issue of Consideration
Whether an inquiry into the working or financial affairs of a cooperative society can be ordered by the Registrar on the basis of an application made by a non-member; and whether the impugned order of inquiry was passed with due application of mind and was proportionate.
Final Decision
Petition allowed. Impugned orders dated 02 July 2019 and 26 November 2019 quashed and set aside. Matter remitted to Deputy Registrar for de novo consideration, with liberty to proceed in accordance with law. Petitioner-society directed to cooperate. No order as to costs.
Law Points
- Legal points not extracted
- Registrar can suo motu order inquiry under Section 83 MCS Act on complaint by non-member
- Use of 'may' for suo motu power indicates discretion
- Non-member cannot demand inquiry as of right
- Order of inquiry must be proportionate and based on proper application of mind
- Preliminary inquiry under Section 84 may be necessary before ordering regular inquiry under Section 83
- Disproportionate order without due application of mind is liable to be quashed
