Bombay High Court Quashes Arbitrary Test Audit Order Against Kulswami Co-Operative Credit Society
Court Affirms Principles of Natural Justice, Nullifies Registrar’s Directive for Test Audit
In a significant ruling, the Bombay High Court has annulled a contentious order directing a 'Test Audit' of Kulswami Co-Operative Credit Society Ltd., citing violations of natural justice principles and lack of substantiated evidence. The judgment came in response to a writ petition filed by the Society challenging the Registrar's directive issued under Section 81(3)(c) of the Maharashtra Co-operative Societies Act, 1960. The court found the order to be arbitrary and unsustainable, having been passed based solely on complaints from the 'Bachav Committee' without verifying the allegations or inspecting statutory audits for the relevant period.
The case, adjudicated by a division bench comprising Justices Suman Shyam and Manjusha Deshpande, questioned the Registrar's procedural adherence in appointing a Test Auditor based on complaints from ex-office bearers of the Society. The court highlighted that the Registrar acted without examining the accuracy of the allegations or inspecting previous statutory audits, thereby failing to satisfy the legal prerequisites for such an audit under the Act.
The judgment elaborated on the scope and judicious application of powers under Section 81(3)(c), emphasizing that test audits should be initiated only when statutory audit reports fail to present a true and correct depiction of accounts. The bench noted that the Registrar's action lacked a recorded satisfaction of necessary conditions, rendering the order unsustainable.
The petitioner, represented by Mr. Uday B. Nighot, argued that the directive was issued without providing an opportunity to be heard, violating the principles of natural justice. The court agreed, asserting that orders issued without reasoning and subjective satisfaction are liable to be quashed.
Respondent Nos. 5 to 9, who formed the 'Bachav Committee', had previously challenged a favorable revision order for the petitioner in a separate writ petition, which resulted in the High Court setting aside the revision due to procedural reasons. However, the current ruling marks a pivotal turn in the legal battle, reinforcing the necessity for adherence to statutory conditions and natural justice in administrative procedures.
The judgment underscores the court's role in scrutinizing arbitrary administrative orders, especially when fundamental procedural safeguards are overlooked. It serves as a precedent for ensuring that regulatory actions are grounded in verified facts and legal obligations, safeguarding cooperative societies from unwarranted audits and interventions.
Bottom Line:
The Registrar's order directing a 'Test Audit' under Section 81(3)(c) of the Maharashtra Co-operative Societies Act, 1960, without verifying the allegations or conducting inspection of statutory audits for the relevant period, is arbitrary and unsustainable.
Statutory provision(s): Maharashtra Co-operative Societies Act, 1960 - Section 81(3)(c), Section 79(2), Section 83, Section 89(A), Article 227 of Constitution of India
