AUDIT, INQUIRY, INSPECTION AND SUPERVISION
81.
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Audit. — [* Was
substituted By MAH. XXIV of 1961]
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(1-a)
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The society shall cause to be
audited its accounts at least once in each financial year and also cause it
to be completed within a period of four months from the close of financial
year to which such accounts relate by auditor or auditing firm from a panel
prepared by the Registrar and approved by the State Government or an
authority authorised by it in this behalf, possessing required qualifications
and experience as may be prescribed, to be eligible for auditing accounts of
societies, appointed by the general body of a society, as provided in
sub-section (2A) of section 75 and shall lay such audit report before the
annual general body meeting. In case of apex society, the audit report shall
also be laid before both Houses of the State Legislature, in such manner, as
may be prescribed:
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Provided that,
if the Registrar is satisfied that the society has failed to intimate and file
the return as provided by sub-section (2A) of section 75 and sub-section (1B)
of section 79, by order, for the reasons to be recorded in writing, he may
cause its accounts to be audited, by an auditor from the panel of the
auditors approved by the State Government or an authority authorised by it in
this behalf :
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(b)
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The societies other than the societies referred to in
clause (a) shall arrange to get their accounts audited, at least once in each
co-operative year by an auditor from the panel of auditors maintained by the
Registrar, or by a chartered accountant holding a certificate in co-operative
audit issued by the institute of Chartered Accountants of India: [* Was deleted By MAH. XXIV of 1961]
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Provided that, the Registrar may, for reasons to be
recorded in writing, audit or cause to be audited accounts of any such
societies of any year and at any time.
[* Was deleted By MAH. XXIV of 1961]
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Provided
further that, no auditor shall accept audit of more than twenty societies for
audit in a financial year excluding societies having paid up share capital of
less than rupees one lakh :
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Provided also
that, the Registrar shall maintain a panel of auditors and auditing firms as
approved by the State Government or an authority authorised by it in this
behalf.
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(b)
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The manner of
preparation, declaration and maintenance of the panel of auditors and
auditing firms by the Registrar shall be such as may be prescribed.
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(c)
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The committee
of every society shall ensure that the annual financial statements like the
receipts and payments or income and expenditure, profit and loss and the
balance-sheet along with such schedules and other statements are audited,
within four months of the closure of the financial year.
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(d)
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The Registrar
shall submit the audit report of every apex co-operative society to the State
Government annually for being laid before both the Houses of the State Legislature
in the manner prescribed.
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(e)
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The auditor's
report shall have,-
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(i)
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all
particulars of the defects or the irregularities observed in audit and in
case of financial irregularities and misappropriation or embezzlement of
funds or fraud, the auditor or the auditing firm shall investigate and report
the modus operandi, the entrustment and amount involved ;
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(ii)
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accounting
irregularities and their implications on the financial statements to be
indicated in detail in the report with the corresponding effects on the
profit and loss;
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(iii)
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The
functioning of the committee and sub-committees of the societies be checked
and if any irregularities or violations are observed or reported, duly fixing
the responsibilities for such irregularities or violations.
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(f)
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The
remuneration of the auditor or auditing firm of a society shall be borne by
the society and shall be at such rate as may be fixed by general body of the
society.
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(g)
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The Registrar
shall maintain the list of society’s district wise, the list of working
societies, the list of societies whose accounts are audited, the list of
societies whose accounts are not audited within the prescribed time and
reasons therefor. The Registrar shall co-ordinate with the societies and the
auditors or auditing firms and ensures the completion of audit of accounts of
all the co-operative societies in time every year.
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Explanation
I.- For the purposes of this section, the expression, “possessing required
qualifications” for being included in the panel duly approved by the State
Government or an authority authorised by the State Government in this behalf,
from time to time, shall mean and include-
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(a)
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a person who
is a Chartered Accountant within the meaning of the Chartered Accountants
Act, 1949, who has a fair knowledge of the functioning of the societies and
an experience of at least three years in auditing of societies with a working
knowledge of Marathi language;
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(b)
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an auditing
firm which is a firm of more than one Chartered Accountants within the
meaning of the Chartered Accountants Act, 1949, who have a fair knowledge of
the functioning of the societies with a working knowledge of Marathi language;
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(c)
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“a certified
auditor", who is a person holding a Degree from a recognised University
and also has completed a Government Diploma in Co-operation and Accountancy
and who has a fair knowledge of the functioning of the societies and an
experience of at least three years in auditing of societies with a working
knowledge of Marathi language;
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(d)
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a Government
Auditor, who is an employee of the Co-operation Department of the State,
possessing the Higher Diploma in Co-operative Management or the Diploma in
Co-operative Audit or Government Diploma in Co-operation and Accountancy with
a working knowledge of Marathi language and who has completed the period of
probation successfully;
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Explanation-II.-
The terms and conditions for inclusion and retention of name as an auditor or
auditing firm in the panel of auditors shall be subject to the terms and
conditions, as may be prescribed.’’;
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(2)
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The audit under sub-section (1) “be carried out as per Auditing
Standards notified by the State Government from time to time and shall also”;
[*
Was inserted By MAH. XXIV of 1961] shall
include examination or verification of the following items, namely:
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(i)
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over dues of debts, if any;
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(ii)
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cash balance and securities and a valuation of the
assets and liabilities of the society
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(iii)
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whether loan and advances and debts made by the society
on the basis of security have been properly secured and the terms on which
such loans and advances are made or debts are incurred are not pre-judicial
to the interest of the society and its members;
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(iv)
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whether transactions of the society which are presented
merely by book entries are not prejudicial to the interest of the society;
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(v)
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whether loans and advances made by the society have
been shown as deposits;
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(vi)
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whether personal expenses have been charged to revenue
account;
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(vii)
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whether the society has incurred any expenditure in
furtherance of its objects;
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(viii)
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whether the society has properly utilised the financial
assistance granted by government or Government undertakings or financial
institutions, for the purpose for which such assistance was granted;
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(ix)
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Whether the society is properly carrying out its
objects and obligations towards members.
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(2-A)
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Where, in the opinion of the State Government, it is
necessary in the public interest “or in the interest of the society” [* Was inserted By MAH. XXIV of 1961]
to do so in relation to any society or class of societies for ensuring
management thereof in accordance with sound business principles or prudent
commercial practices, the State Government may, by order, direct that such
society or class of societies shall prepare and maintain its accounts in the
form determined by the State Government, from time to time and that cost
audit or performance audit or both, of such society or class of societies, as
may be specified in the order, shall be conducted.
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(2-B)
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Where any order is issued under sub-section (2A), the “Society shall cause its audit to be
conducted” [*
Was substituted By MAH. XXIV of 1961] by a cost accountant who is a
member of the Institute of Cost and Works Accountants of India constituted
under section 3 of the Cost and Works Accountants Act, 1959.
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(3a)
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The “Auditor” [*
Was substituted By MAH. XXIV of 1961] shall, for the purpose of audit, at
all times have access to all the books, accounts, documents papers,
securities cash and other properties belonging to, or in the custody of, the
society, and may summon any person in possession or responsible for the
custody of any such books, accounts, documents, papers, securities, cash or
other properties, to produce the same at any place at the headquarters of the
society or any branch thereof.
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(b)
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If the Registrar has reason to
believe that there exists an element of fraud, misapplication of funds,
manipulation of the accounts and the accounts of the society are likely to be
tampered with, thereby causing loss to the society, he shall be competent to
depute Flying Squad to a society or societies for examination of books,
records, accounts, and such other papers and for verification of cash
balance. The report of the Flying Squad shall be treated as sufficient
evidence for further action, if any. ” [* Was substituted By MAH. XXIV of 1961]
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(c)
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If it is brought to the notice of
the Registrar that the audit report submitted by the auditor does not
disclose the true and correct picture of the accounts, the Registrar or the
authorised person may carry out or cause to be carried out a test audit of
accounts of such society. The test audit shall include the examination of
such items as may be prescribed and specified by the Registrar in such
order.”[*
Was substituted By MAH. XXIV of 1961]
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(4)
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Every person who is, or has at any time been, an
officer or employee of the society, and every member and past member of the
society, shall furnish such information in regard to the transactions and
working of the society as the Registrar, or the person authorised by him, may
require.
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(5)
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The auditor appointed under sub-section (1) shall have
the right to receive all notices and ever communication relating to the
annual general meeting of the society and to attend such meeting and to be
heard thereat, in respect of any part of the business with which he is
concerned as auditor.
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(5A)
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If, during the course of audit of any society, the
auditor is satisfied that some books of accounts or other documents contain
any incriminatory evidence against past or present officer or employee of the
society the auditor shall immediately report the matter to the Registrar and,
with previous permission of the Registrar, may impound the books or documents
and give a receipt thereof to the society.
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(5B)
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The auditor shall submit “his audit report within a period of one
month from its completion and in any case before issuance of notice of the
annual general body meeting,” [*
Was substituted By MAH. XXIV of 1961] to the society and to the Registrar
in such form as may be specified by the Registrar, on the accounts examined
by him and on the balance sheet and profit and loss account as on the date
and for the period up to which the accounts have been audited, and shall
state whether in his opinion and to the best of his information and according
to the explanation given to him by the society the said accounts give all
information required by or under this Act and present the true and fair view
of the financial transactions of the society.
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Provided that,
where the auditor has come to a conclusion in his audit report that any
person is guilty of any offence relating to the accounts or any other
offences, he shall file a specific report to the Registrar within a period of
fifteen days from the date of submission of his audit report. The auditor
concerned shall, after obtaining written permission of the Registrar, file a
First Information Report of the offence. The auditor, who fails to file First
Information Report, shall be liable for disqualification and his name shall
be liable to be removed from the panel of auditors and he shall also be
liable to any other action as the Registrar may think fit: [* Was inserted By MAH. XXIV of 1961]
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Provided
further that, when it is brought to the notice of the Registrar that, the
auditor has failed to initiate action as specified above, the Registrar shall
cause a First Information Report to be filed by a person authorised by him in
that behalf: [*
Was inserted By MAH. XXIV of 1961]
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Provided also
that, on conclusion of his audit, if the auditor finds that there are
apparent instances of financial irregularities resulting into losses to the
society caused by any member of the committee or officers of the society or
by any other person, then he shall prepare a Special Report and submit the
same to the Registrar along with his audit report. Failure to file such
Special Report, would amount to negligence in the duties of the auditor and
he shall be liable for disqualification for appointment as an auditor or any
other action, as the Registrar may think fit.” [* Was inserted By MAH. XXIV of 1961]
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(6)
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If it appears to the Registrar, on an application by a
society or otherwise, that it is necessary or expedient to re-audit any
accounts of the society, the Registrar may by order provide for such re-audit
and the provisions of this Act, applicable to audit of accounts of the
society shall apply to such re-audit.
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(7)
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Special audit of co-operative bank if requested by the
Reserve Bank of India shall be conducted and report thereof shall be
submitted to the Reserve Bank of India under intimation to the Registrar
along with the Special Audit Report.
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82.
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If the result of the audit held under the last
preceding section discloses any defects in the working of a society the
society shall within three months from the date of audit report, explain to
the Registrar the defects, or the irregularities pointed out by the auditor,
and take steps to rectify the defects and remedy irregularities and report to
the Registrar the action taken by it thereon. “and place the same before the next
general body meeting” [* Was inserted By MAH. XXIV of 1961] The Registrar may also make an order directing the
society or its officers to take such action, as may be specified in the order
to remedy the defects within the time specified therein. “If, the committee of a society
fails to submit the audit rectification report to the Registrar and to the
annual general body meeting, all the members of the committee shall be deemed
to have committed an offence under section 146 and accordingly shall be
liable for penalty as provided in section 147. Where the society concerned is
a member of a federal society, such order of imposition of penalty shall be
made after consulting the State federal society concerned”. [* Was
substituted By MAH. XXIV of 1961]
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Provided that,
the Registrar or the person authorised by him shall scrutinise the audit
rectification report accordingly and inform the society about such report
within six months from the date of receipt thereof: [* Was substituted By MAH. XXIV of 1961]
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Provided
further that, it shall be the responsibility of the auditor concerned to
offer his remarks on the rectification report of the society, item wise, till
entire rectification is made by the society and submit his report to the
Registrar :
[* Was substituted By MAH. XXIV of 1961]
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Provided also
that, such federal society shall communicate its opinion to the Registrar
within a period of forty-five days from the date of receipt of communication,
failing which it shall be presumed that such federal society has no objection
to the proposed action and the Registrar shall be at liberty to proceed
further to take action accordingly.” [* Was substituted By MAH. XXIV of 1961]
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83.
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(1)
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“The Registrar may suo motu, or, on
the application of the one-fifth members of the society or on the basis of
Special Report under the third proviso to sub-section (5B) of section 81,
himself or by a person duly authorised by him in writing, in this behalf,
shall hold an inquiry into the constitution, working and financial conditions
of the society.” [* Was substituted By MAH. XXIV of 1961]
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(2)
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Before holding any such inquiry on an application the
Registrar may having regard to the nature of allegations and the inquiry
involved, require the applicant to deposit with him such sum of money as he
may determine towards the cost of the inquiry. If the allegations made in the
application are substantially proved at the enquiry, the deposit shall be
refunded to the applicant, and the Registrar may under section 85, after
following, the procedure laid down in that section, direct from whom and to what
extent the cost of the inquiry should be recovered. If it is proved that the
allegations were false, vexatious or malicious, the Registrar may likewise
direct that such cost shall be recovered from the applicant. Where the result
of the inquiry shows that the allegations were not false, vexatious or
malicious, but could not be proved, such cost may be borne by the State
Government.
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(3-a)
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All officers, members and past members of the society
in respect of which an inquiry is held, and any other person who, in the
opinion of the officer holding the inquiry is in possession of information,
of books and papers relating to the society, shall furnish such information
as in their possession, and produce all books and papers relating to the
society which are in their custody or power, and otherwise give to the
officer holding an inquiry all assistance in connection with the inquiry
which they can reasonably give.
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(b)
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If any such person refuses to produce to the Registrar
or any person authorised by him under sub section (1), any book or papers
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 after
hearing any statement which may be offered in defense, punish the defaulter
with a penalty not exceeding “five thousand rupees” [* Was substituted By MAH. XXIV of 1961]. Any sum imposed as
penalty under this section shall, on the application by the Registrar or the
person authorised by him, to a Magistrate having jurisdiction, be recoverable
by the Magistrate as if it were a fine imposed by him.
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(c)
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“The Registrar
or the officer authorised by him shall complete the inquiry and submit his
report as far as possible within a period of six months and in any case not
later than nine months.” [* Was inserted By MAH. XXIV of 1961]
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(4)
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The result of an enquiry under this section shall be
communicated to the society whose affairs have been investigated.
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(5)
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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.
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84.
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(1)
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On the application of a creditor of a society who;
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(a)
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satisfies the Registrar that the debt is a sum then
due, and that he has demanded payment thereof and has not received
satisfaction within reasonable time, and
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(b)
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deposits with the Registrar such sum as the Registrar
may require as security for the costs of any inspection of the books of the
society the Registrar may, if he thinks it necessary, inspect or direct some
person authorised by him by order in writing in this behalf to inspect the
books of the society.
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(2)
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The Registrar shall communicate the result of any
inspection to the applicant, and to the society whose books have been
inspected.
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(3)
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It shall be competent for the Registrar to withdraw any
order of inspection from the officer, to whom it is entrusted, and to inspect
himself or entrust it to any other person as he deems, fit.
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(4)
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The powers of inspection conferred on the Registrar by
this section may be exercised by him of his own motion in respect of any
society, which is indebted to Government or for which share capital (wholly
or partly) is provided by Government or where any financial interest of
Government is otherwise involved.
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85.
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(1)
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Where an inquiry is held under section 83 or an
inspection is made under the last preceding section, the Registrar may
apportion the costs, or such part of the costs as he may think just between
the society, the members or creditors demanding the inquiry or inspection,
the officers or former officers and the members or past members or the
estates of the deceased members of the society “and pass such order within a period of
six months from the date of submission of inquiry report” [* Was inserted By MAH. XXIV of 1961]
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Provided that;
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(a)
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no order of apportionment of the costs shall be made
under this section unless the society or person or the legal representative
of the deceased person liable to pay the costs there under, has or have been
heard, or has or have had a reasonable opportunity of being heard;
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(b)
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the Registrar shall state in writing the grounds on
which the costs are apportioned.
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(2)
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No expenditure from the funds of a society shall be
incurred, for the purpose of defraying any costs in support of any appeal
preferred by any person other than the society against an order made under
the foregoing sub-section.
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86.
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Any sum awarded by way of costs under the last
preceding section, may be recovered, on an application by the Registrar to a
Magistrate having jurisdiction in the place where the person from whom the
money is claimable resides or carries on business, and such Magistrate shall
proceed to recover the same in the same manner as if it were a fine imposed
by himself.
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87.
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(1)
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If the result of any inquiry held under section 83 or
an inspection made under section 84 discloses any defects in the
constitution, working or financial condition or the books of society, the
Registrar may bring such defects to the notice of the society. The Registrar
may also make an order directing the society or its officers to take such
action as may be specified in the order to remedy the defects, within the
time specified therein.
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(2)
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The society concerned may, within sixty days from the
date of any order made by the Registrar under the foregoing sub-section,
appeal against it to the State Government.
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(3)
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The State Government may, in deciding the appeal,
annul, reverse, modify or confirm the order of the Registrar.
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(4)
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If a society fails to rectify the defects disclosed in
the course of or as a result of an audit under section 81 or fails to rectify
the defects as directed by the Registrar, and where no appeal has been made
to the State Government within the time specified in the order, or where on
the appeal so made the State Government has not annulled, reversed or
modified the order, the Registrar may himself take steps to have the defects
rectified, and may recover the cost from the officer or officers of the
society, who in his opinion, has or have failed to rectify the defects
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88.
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(1)
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Where, in the course of or as a result of an audit
under section 81 or an inquiry under section 83 or an inspection under
section 84 or the winding up of a society, the Registrar is satisfied on the
basis of the report made by the auditor or the person authorised to make
inquiry under section 83 or the person authorised to inspect the books under
section 84 or the Liquidator under section 105 or otherwise that any person
who has taken any part in the organisation or management of the society or
any deceased, or past or present officer of the society has, within a period
of five years prior to the date of commencement of such audit or date of
order for inquiry, inspection or winding up, misapplied or retained, or
become liable or accountable for, any money or property of the society, or
has been guilty misfeasance or breach of trust in relation to the society,
the Registrar or a person authorised by him in that behalf may frame charges
against such person or persons and after giving a reasonable opportunity to
the person concerned and in the case of a deceased person to his
representative who inherits his estate, to answer the charges, make an order
requiring him to repay or restore the money or property or any part thereof,
with interest at such rates 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.
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“Provided
that, proceedings under this sub-section shall be completed by the authorised
person within a period of two years from the date of issue of order by the
Registrar: [*
Was inserted By MAH. XXIV of 1961]
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Provided
further that, the Registrar may, after recording the reasons therefor, extend
the said period for a maximum period of six months.” [* Was inserted By MAH. XXIV of 1961]
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(2)
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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 cost or any part thereof, as he thinks just, and he
may direct that such costs or any part thereof shall be recovered from the
person against whom the order has been issued.
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(3)
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This section shall apply, notwithstanding that the act
is one for which the person concerned may criminally responsible.
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88-A.
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Where the Registration his own motion decides and
orders an inquiry under section 83 or proceeds or authorizes to make inquiry
under section 88, he may, having regard to the nature of allegations and the
inquiry involved, require the society concerned to deposit with him such sum
of money as he may determine, towards the cost of inquiry. If the sum so
determined is not deposited with the Registrar within 15 days from the date
of receipt of the order requiring the society to deposit the sum, it shall on
a certificate issued by the Registrar, be recoverable as an arrears of land
revenue,
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89.
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The Registrar or the person authorised by him, when
acting under section 83, 84 or 88 shall have the power to summon and enforce
the attendance of any person and examining him on oath or affirmation or by
affidavit or to compel the production of any document or other material
object by the same means and in the same manner as is provided in the case of
a Civil Court under the Code of Civil Procedure, 1908.
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89-A.
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(1)
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It shall be competent for the Registrar to inspect or
cause to be inspected the working of any society to ensure that-
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(a)
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the provisions of the Act, rules and bye-laws of the
society are being properly followed by the society;
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(b)
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the records and books of accounts are kept in proper
forms;
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(c)
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Overall view is taken to ensure
that the business of the society is being run on sound business principles
and under professional and efficient management; [* Was substituted By MAH. XXIV of 1961]
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(d)
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the society is following the co-operative principles
and the directives or directions given by the State Government in accordance
with the provisions of this Act and the rules made there under :
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Provided that, inspection of the societies specified
under Section 73-G shall be undertaken by the Registrar or by the officer not
below the rank of Deputy Registrar of Co-operative Societies authorised by
him in this behalf. [* Was deleted By
MAH. XXIV of 1961]
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(e)
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“The returns as provided by section
79 are submitted to the Registrar regularly and properly.” [* Was inserted By MAH. XXIV of 1961]
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(2)
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For the purpose of supervision over the societies, the
Registrar shall have the power-
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(a)
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to inspect the records and books of accounts of the
society and for that purpose he shall have, at all times, access to all the
records and books of accounts of the society; and
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(b)
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to summon any officer or employee who has the custody
of the records or books of accounts of the society to produce them before him.
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(3)
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The State Government may levy supervision fees on any
society or class of societies at such rates, as the State Government may,
having regard to the area of operation, the nature of business and the
objects of the society, by notification in the Official Gazette, fix from
time to time.
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(4)
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Every society liable to pay the fees levied under
sub-section (3) shall pay such fees by such date and in such manner as the
State Government may specify in the notification issued under sub-section
(3).
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(5)
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The State Government may, having regard to the
financial position of any society or class of societies, by general or
special order published in the Official Gazette, exempt such society or class
of societies from payment of such fees for such period as may be specified in
such order, or reduce or remit in whole or in part such fees.
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90.
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(1)
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The State Government may constitute or recognize one or
more co-operative federal authorities, in such manner as may be prescribed
and subject to such conditions as the State Government may impose, for the
supervision of a society or a class of societies and may frame rules for
making grants to such an authority.
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(2)
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The State Government may, by general or special order,
require a society or a class of societies to make contribution of such sum
every year as may be fixed by the Registrar towards the reimbursement of
expenditure which the State Government or any person authorised in that
behalf has incurred or is likely to incur, in respect of supervision of
societies:
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(3)
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A society to which sub-section (2) is applicable shall
pay to such authority such fee as may be prescribed within a reasonable time
and, if it fails to pay such fee within a reasonable time, the authority may
recover it as if it were arrears of land revenue.
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