NEUTRAL CITATION
C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9627 of 2022
With
CIVIL APPLICATION (FOR INTERIM RELIEF) NO. 1 of 2022
In R/SPECIAL CIVIL APPLICATION NO. 9627 of 2022
With
R/SPECIAL CIVIL APPLICATION NO. 9629 of 2022
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2022
In R/SPECIAL CIVIL APPLICATION NO. 9629 of 2022
With
R/SPECIAL CIVIL APPLICATION NO. 9630 of 2022
With
CIVIL APPLICATION (FOR INTERIM RELIEF) NO. 1 of 2022
In R/SPECIAL CIVIL APPLICATION NO. 9630 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? =============================================================== KESHABHAI PARTHIBHAI GOL Versus JOINT REGISTRAR AND SPECIAL AUDITOR CO-OPERATIVE SOCIETIES, (VIBHAGIYA), AHMEDABAD =============================================================== Appearance:
MR DIPEN DESAI(2481) for the Petitioner(s) No. 1 MR AAYAN PATEL, AGP for the Respondent(s) No. 1,2,3 =============================================================== Page 1 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 04/08/2023 CAV JUDGMENT
1. Heard learned advocate Mr.Dipen Desai for the petitioners and learned Assistant Government Pleader Mr.Aayan Patel for the respondents.
2. Rule, returnable forthwith. Learned Assistant Government Pleader Mr.Aayan Patel waives service of notice of rule for the respondents.
3. By these petitions, the petitioners have challenged the notice dated 08.04.2022 as well as communication/order dated 11.05.2022 passed by the respondent No.1-Joint Registrar and Special Auditor whereby the petitioners are directed to deposit additional audit fees of Rs.81,000/- in each of the petition with interest at the rate of 12% and further audit Page 2 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined work given to the petitioners of the other Societies was cancelled as the petitioners did not deposit the amount as directed.
4. As the facts arising in all the three petitions are similar, the same were heard analogously and are being disposed of by this common judgment and order.
4.1. The petitioners are the panel auditors of Co-operation Department. After retirement, the petitioners were appointed as panel auditors by the Registrar, Co-operative Societies, Gujarat State by notification dated 21.05.2020.
4.2. Rule 38A of the Gujarat Co- operative Societies Rules, 1965 (for short
'the Rules') provides that scale of audit fees payable by the society shall be as specified in Schedule-A appended to the Rules. The Page 3 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined Schedule-A of the Rules provides for different audit fees for different kind of societies. However, the respondents have adopted audit fees prescribed by the notification dated 06.07.1982.
4.3. On 08.03.2016, the respondent No.1 allotted audit of the co-operative society to the petitioners for audit of the year 2015- 2016. Petitioner of Special Civil Application No.9427 of 2022 namely, Keshabhai Parthibhai Gol carried out the audit of Palanpur Taluka Prathmik Shikshakoni Dhiran Ane Sahakari Mandali Limited and proposed to initiate action under Section 93 of the Gujarat Co- operative Societies Act, 1961 (for short 'the Act, 1961') for recovery of the amount misappropriated and recommended to initiate action against nine committee members of the society and one manager namely, Shri Somabhai Page 4 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined Bhatiya.
4.4. It is the case of the petitioners that being aggrieved, Shri Somabhai Bhatiya- Manager of the said Co-operative Society made a complaint against the petitioners for recovering the additional audit fees paid by the Society to the petitioners. 4.5. The respondent-authorities, pursuant to the complaint of Shri Somabhai Bhatiya issued show cause notice to the petitioners to show cause as to why the additional audit fees should not be recovered as the petitioners were paid audit fees of Rs.90,000/- for three years instead of Rs.9,000/- as per the aforesaid Schedule and the notification. The petitioners were therefore called upon to refund the amount of Rs.81,000/- towards fees received from the Co- Page 5 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023
NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined operative Societies with 12% simple interest within ten days from the date of issuance of the notice on 02.11.2020 to the petitioners. 4.6. The petitioners filed a reply contending that there is no illegality committed by the petitioners and the audit fees were charged which is permissible under the notification dated 06.07.1982. It was also pointed out by the petitioners that other auditors are also charging similar audit fees from other societies and therefore the petitioners should not be targeted as petitioners did not commit any illegality. 4.7. It is the case of the petitioners that the concerned Co-operative Societies also filed their replies before the respondent No.1 and pointed out that the audit fees charged by the petitioners were in consonance with the Page 6 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined notification dated 06.07.1982 and the audit fees were paid by the Account Payee Cheque by the societies to the petitioners. The petitioners also submitted the receipts of the audit fees charged by the other auditors in other societies before the respondent No.1. 4.8. It is the case of the petitioners that the respondent No.1 without considering the reply of the petitioners and without considering the facts on record, issued the impugned notice dated 08.04.2022 directing the petitioners to deposit amount of Rs.81,000/- with simple interest at the rate of 12% per annum, total Rs.2,05,000/- by each of the petitioners with respect to the audit conducted of five Co-operative Societies. 4.9. It is further the case of the petitioners that the petitioners were also Page 7 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined coerced to give an undertaking on 30th April, 2022 that the petitioners would deposit the said amount, failing which, the name of the petitioners would be cancelled from the panel of auditors.
4.10. The petitioners thereafter by letter dated 03.05.2022 informed the respondent No.1 that the petitioners would like to challenge the notice dated 08.04.2022 before the appropriate legal Forum and therefore, would not deposit additional audit fees as directed by the respondent No.1.
4.11. The petitioners thereafter preferred these petitions on 4th May, 2022. 4.12. Thereafter, it appears that as the petitioners did not deposit the amount directed by the impugned notice dated 08.04.2022, the respondent No.1 passed an Page 8 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined order dated 11.05.2022 cancelling the audit work given to the petitioners for the year 2022-2023 under Section 84(1) of the Act, 1961.
4.13. This Court vide order date 13th June, 2022 issued the notice and granted stay on the recovery pursuant to the impugned notice dated 08.04.2022 which has continued till final disposal of these petitions. The petitioners also amended the petitions by challenging the order dated 11.05.2022 which was also granted. 5.1. Learned advocate Mr.Dipen Desai appearing for the petitioners submitted that the respondent-authorities have initiated action on the basis of the complaint filed by Shri Somabhai Bhatiya-Manager of Palanpur Taluka Prathmik Shikshakoni Dhiran Ane Sahakari Mandali Limited as the petitioners Page 9 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined recommended actions against the Directors of the Co-operative Society under Section 93 of the Act, 1961 due to the irregularities found out during the course of the audit of the society.
5.2. It was submitted that the petitioners have not charged any additional or excessive audit fees as per the notification dated 06.07.1982 of the State Government. It was submitted that the Co-operative Societies have paid the audit fees by Account Payee Cheque to the petitioners and no complaint is filed by such society for excess audit fees paid to the petitioners.
5.3. It was further submitted that the respondent-authorities have passed the impugned order without considering the reply of the petitioners.
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NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined 5.4. It was submitted by learned advocate Mr.Dipen Desai that the petitioners were coerced to give undertaking for refund of the audit fees as per the impugned order which was later on cancelled by the petitioners to file these petitions in order to challenge the impugned order. It was submitted that after filing of the petitions, respondent No.1 has cancelled the audit allotted to the petitioners by the order dated 11.05.2022 without issuing notice or without providing any opportunity of hearing to the petitioners. It was therefore prayed that the impugned notice as well as the order are liable to be quashed and set aside.
6.1. On the other hand, learned Assistant Government Pleader Mr.Aayan Patel
for the respondents submitted that the present Page 11 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined petitions are not maintainable in view of the undertaking dated 30th April, 2022 submitted by the petitioners wherein the petitioners admitted having charged excessive audit fees which was undertaken to be reimbursed to the Co-operative Societies with interest at the rate of 12% per annum by 20th May, 2022 but the same was not repaid under the pretext of coercion which is not true and correct. 6.2. It was submitted that in view of the principles of estoppel, the petitioners are required to be prevented from agitating these petitions in view of the undertaking dated 30th April, 2022 and the petitioners cannot contend that the fees charged by the petitioners were not excessive in nature. 6.3. It was further submitted by learned Assistant Government Pleader Mr.Patel Page 12 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined that the audit fees would be chargeable as per the notification dated 06.07.1982 of the State Government wherein it is specified that in case of Service (PACS) i.e. Primary Agricultural Credit Societies and Credit Societies in general, a maximum amount of Rs.3,000/- would be chargeable as fees. It was therefore submitted that the petitioners could not have charged the excess audit fees. 6.4. Learned Assistant Government Pleader Mr.Aayan Patel thereafter referred to and relied upon the Rule 38A of the Rules which provides for scale of audit fees payable in terms of Schedule-A to the Rules and submitted that the petitioners could not have paid the fees of more than Rs.3,000/- as audit fees even as per the said Schedule.
6.5. It was submitted that the Page 13 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined petitions are therefore required to be dismissed with cost.
7. Having heard the learned advocates for the respective parties and having considered the submissions made on behalf of the petitioners and the respondent-authorities, it appears that the respondent authorities initiated action against the petitioners for recovery of the alleged excessive audit fees upon the complaint made by the disgruntled person namely, Shri Somabhai Bhatiya-Manager of the Co-operative Societies, as the petitioners recommended action under Section 93 of the Act, 1961 for the irregularities found during the course of the audit of the Society.
8. It is also not in dispute that the petitioners have been asked to give an undertaking to reimburse the amount as per the Page 14 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined impugned order with 12% interest per annum to the respective Society and thereby prevented the petitioners from challenging the impugned order which appears to be contrary to the notification dated 06.07.1982 read with Rule 38 of the Rules, as the said notification and the Rules provide maximum audit fees of Rs.3,000/- for only those societies which have undertaken distribution activities. The audit fees charged by the petitioners was for the audit of the societies which do not undertake distribution activities and therefore, the impugned order of recovery of the excess audit fees is contrary to the notification dated 06.07.1982 as well as Schedule appended to Rule 38A of the Rules.
9. The appointment order dated 21.05.2020 also clearly shows that the petitioners are entitled to charge the audit fees in Page 15 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023 NEUTRAL CITATION C/SCA/9627/2022 CAV JUDGMENT DATED: 04/08/2023 undefined accordance with the notification dated 06.07.1982 and there is no stipulation that maximum audit fees of Rs.3,000/- shall be charged in the said order of appointment. Even earlier also in the appointment orders dated 29.11.2016 and 12.11.2007 issued by the respondent No.1 in the years 2016 and 2017, there is no such stipulation that maximum audit fees of Rs.3,000/- would be charged by the petitioners.
10. It appears that the respective Co- operative Societies have never complained of charging excess audit fees by the petitioners more than the alleged maximum amount of Rs.3,000/- towards the audit fees. The Societies have paid Rs.30,000/- towards audit fees for each year by Accout Payee Cheque and no grievance is raised for payment of such audit fees.
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11. The notification dated 06.07.1982 prescribes for charging the audit fees by the different types of Co-operative Societies under the Rule 38A of the Rules, 1965 read with Section 84(7) of the Act, 1961. As per the Non-agricultural Credit Co-operative Societies and Service Employees Credit Co- operative Societies, the audit fees is prescribed as on the working capital and not as maximum Rs.3,000/- which is prescribed only for the societies engaged in distribution activities. The respondent-authorities without considering the nature of the activities of the respective Co-operative Societies have applied the maximum audit fees of Rs.3,000/- applicable to the societies which are engaged in distribution activities which is not as per the notification dated 06.07.1982. Page 17 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023
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12. Further, when the petitioners have informed the respondent-authorities that they are intending to challenge the impugned order and cancelled the undertaking which was alleged to have been taken under alleged coercion, the respondent authorities could not have issued the order dated 11.05.2022 recalling/cancelling the audit of the Co- operative Societies already allotted to the petitioners. The petitioners were never given any opportunity of hearing before passing the order dated 11.05.2022 and merely because the petitioners did not deposit the amount as per the impugned notice dated 08.04.2022, the respondent authorities could not have unilaterally passed the order dated 11.05.2022 cancelling the allotment of audit to the petitioners.
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13. In view of the foregoing reasons, petitions succeed and are accordingly allowed. The impugned notice dated 08.04.2022 and order dated 11.05.2022 are hereby quashed and set aside. Civil Applications also stand disposed of as the Special Civil Applications are allowed. Rule is made absolute to the aforesaid extent. No orders as to cost.
(BHARGAV D. KARIA, J) PALAK Page 19 of 19 Downloaded on : Sun Sep 17 00:08:42 IST 2023