Case Note & Summary
The judgment dealt with two writ petitions filed under Article 226 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of FIR No. 806 of 2019 registered with Pimpri Police Station for offences under Sections 420, 406, 409, 465, 467, 468, 471 read with 34 of the Indian Penal Code. The petitioners included the Chief Executive Officer, a former Chairman, and a former Director of Seva Vikas Co-operative Bank, a co-operative society registered under the Maharashtra Co-operative Societies Act, 1960. The FIR was lodged at the instance of respondent No.2, a private individual, based on an inspection report prepared by Mr. Jadhawar, Joint Registrar (Audit), Sugar Commissionorate. The background involved a dispute over the management of the bank and allegations of financial irregularities. The Registrar of Co-operative Societies had passed an order on 14 February 2019 directing a test audit of 104 accounts under Section 81(3)(i) of the Act, specifically assigning the audit to Mr. Jadhawar. This order was challenged by a director of the society in Civil Writ Petition No. 4828 of 2019. On 16 April 2019, a Division Bench of the Bombay High Court granted an interim stay on the operation, implementation, and effect of the Registrar’s order. Despite the stay, the audit was carried out, and an inspection report was submitted. The police inspector sought the report, and on 18 July 2019, respondent No.2 lodged the FIR citing the inspection report, alleging that loans were advanced to ineligible or non-creditworthy persons, funds were diverted, and money was siphoned off, resulting in non-productive assets of around Rs. 238 crores. The petitioners contended that the FIR was a nullity because it was based on a report obtained in violation of the court’s stay order. They further argued that under Section 81(5B) of the Act, only the auditor with prior written permission of the Registrar, or a person authorized by the Registrar, could file an FIR for such offences, and a private complaint was barred. The prosecution argued that the inspection report was not covered by the stay and that respondent No.2 was entitled to lodge an FIR based on information. The court, after examining the facts and legal provisions, found merit in the petitioners’ contentions. It held that the authorities had acted in conscious disregard of the interim stay order, rendering the inspection report void ab initio and the resulting FIR unsustainable. Additionally, the court interpreted Section 81(5B) as a mandatory provision that exclusively vests the power to lodge an FIR for audit-detected offences in the auditor with the Registrar’s written permission, and if the auditor fails, in a person authorized by the Registrar. Since the FIR was lodged by a private individual, it was statutorily barred. The court concluded that the entire prosecution was a colourable exercise of power, malafide, and an abuse of the process of the court. Accordingly, both writ petitions were allowed, FIR No. 806 of 2019 was quashed, all proceedings arising therefrom were set aside, and connected applications were disposed of.
Headnote
A) Criminal Procedure – Quashing of FIR – Effect of Violation of Court Stay Order – Constitution of India, Article 226; Code of Criminal Procedure, 1973, Section 482 – The petitioners sought quashing of FIR No. 806 of 2019 registered for offences under the Indian Penal Code on the ground that the inspection report underpinning it was obtained in blatant violation of an interim stay order dated 16 April 2019 passed by the High Court in a related writ petition. The stay had restrained the operation, implementation and effect of the Registrar’s order directing audit. The authorities, despite being aware of the stay, proceeded with the audit and submitted an inspection report. Held, an action taken in the teeth of a court order is void and the FIR based on such report is illegal and constitutes an abuse of process of court; FIR quashed (Paras 2(f), 2(k), 3-15). B) Cooperative Law – Offences and Prosecution – Authority to Lodge FIR – Maharashtra Co-operative Societies Act, 1960, Sections 81(3)(i), 81(5B) – Section 81(5B) of the Act provides a specific statutory scheme for filing a first information report when an audit report reveals offences relating to accounts. It requires the auditor, with prior written permission of the Registrar, to file the FIR; if the auditor fails, the Registrar may cause an FIR to be filed by a person authorized by him. The FIR in the present case was lodged by a private individual, respondent No.2, who was not an auditor nor authorized by the Registrar. Held, the FIR was barred by the express statutory provision and thus legally unsustainable (Paras 2(k), 16-22). C) Criminal Law – Abuse of Process – Malafide Prosecution – When a prosecution is launched with the oblique motive of circumventing a court order and the statutory bar under Section 81(5B), it is a colourable exercise of power and an abuse of the process of the court, warranting quashing of the FIR. The Court found that the respondents resorted to a device of obtaining an inspection report from the same auditor despite the stay and set up a private complainant to bypass the statutory requirement. Held, the prosecution was malafide and must be quashed (Paras 23-30).
Issue of Consideration
Whether an FIR based on an inspection report obtained in violation of an interim court stay order is sustainable; whether a private individual has locus to lodge an FIR under Section 81(5B) of the Maharashtra Co-operative Societies Act, 1960; whether the prosecution is malafide and an abuse of the process of court.
Final Decision
Both writ petitions allowed. FIR No. 806 of 2019 registered with Pimpri Police Station quashed and set aside. Rule made absolute. Connected applications disposed of.
Law Points
- Article 226 of the Constitution
- Section 482 CrPC
- Section 81(3)(i) and (5B) of Maharashtra Co-operative Societies Act
- 1960
- effect of court stay order
- statutory authority to lodge FIR
- abuse of process
- mala fides
