Shetkari Sahakari Ginning And Oil ... vs State Of Maharashtra And Anr.
2005 Latest Caselaw 662 Bom

JUDGMENT

F.I. Rebello, J.

1. Petitioner No. 1 is a co-operative society operating in Katol Tahsil. Registrar of Co-operative Societies has the right to audit the accounts of the petitioner society every year. Petitioners are bound by provisions of the Maharashtra Co-operative Societies Act, 1960 and Rules framed thereunder (which hereinafter shall be referred to as the Act and the Rules). Section 90 of the Act provides for constitution of federal authority to supervise the working of the society and the State Government can direct the societies to pay such sum every year as would be fixed by the Registrar, towards the recoupment of expenditure of supervision. Under Section 155 of the Act some of the dues from societies are recoverable as arrears of Land Revenue. The petitioners by this petition are challenging the action of the respondents in levying and collecting Audit Fee and Supervision Fee from petitioner No. 1 -society.

2. It is the case of the petitioners that respondent No. 2 is levying fees towards Audit Charges under Rule 74 of the Rules framed under the Act. Section 165 of the Act confers power on the State Government to make Rules. It is set out that a perusal of the provisions of the Act would indicate, that no power has been conferred under any Rule in respect of Audit Charges. Reference is then made to Section 165 which is the Rule making power, to frame rules in respect of various matters including under Section 81 of the Act. Powers have been conferred on the Government to prescribe rate of contribution, more specifically under Section 69-A of the Act. It is therefore, set out that Rule 74 insofar as it provides for levying of Audit Charges is ultra vires the powers of State Government. There is no provision, it is contended under Section 81 for payment of any Audit Fee and as such demand made by respondents for Audit Charges is illegal and arbitrary.

Rule 74 it is submitted itself suffers from the vice of excessive delegation as no guidelines are laid down for the Registrar in fixing Audit Charges. The delegation therefore, is uncontrolled and arbitrary. It violates Article 14 of the Constitution of India and as such Rule 74 be quashed and set aside, even otherwise under Section 165, Rules framed by State Government are required to be placed before both the Houses and are further subject to condition of previous publication.

3. The next contention is that the demand for Supervision Fee is arbitrary and unsupported by the provisions of the Co-operative Societies Act. Reference is then made to Section 90 of the Act. It is contended that Section 90 of the Act and Rule 74 has been utilised by the respondents to levy Supervision Charges. Referring to Section 90 it is set out that Sub-section (3) provides for payment of Supervision Charges. It is pointed out that the Registrar can register certain Cooperative societies as Supervision Co-operative Societies. No societies, however, at the time the petition was filed were constituted or recognized under Section 90 of the Act. As there is no society recognized as Co-operative Federal Authority for supervision of a 'A Class Society', no Supervision Charges can be levied or collected from the petitioner No. 1.

Rule 74 it is then pointed does not prescribe fee and leaves it to the Registrar. Under Section 90(3) the fee is to be prescribed by the Rules and as such Rule 74 is ultra vires Section 90 of the Act. It is submitted therefore that no Supervision Fees can be collected from the petitioner No. 1 - Society.

Section 89-A it is averred has been inserted by Maharashtra Act No. 20/1986. It prescribes for inspection of record of society by Registrar. Subsection (3) permits State Government to levy Supervision Fee and rate thereof is to be fixed by the State Government. Registrar, it is pointed out, has not inspected any record of petitioner No. 1 Society and as such there is no question of levying any fee under Section 80-A. The Supervision Fee being levied and collected is not under Section 89-A. It is therefore, set out that respondents be restrained from levying and collecting any Supervision Fee from petitioner No. 1 Society.

4. The petitioner No. 1 - society, it is pleaded, has started working since 1962. It received a demand notice dated 2-2-1988 claiming current Audit Fee of Rs. 10000/- and arrears of Rs. 1,30,478=50 on this account. It has also received a demand notice for Supervision Fees, in an amount of Rs. 503=90 for the year 1986-87. Similarly Supervision Fees of Rs. 4587- has been claimed for the year 1987-88. It is pointed that petitioner No. 1 is in losses since last 17-18 years and is not in a position to pay Audit Fee or the Supervision Charges. It is submitted that petitioner No. 1 is not liable to pay any such Fee or Charges. The respondent No. 2 however, by order dated 19-11-1988 has attached immovable property under Section 155 of the Act. The attachment is also in respect of the Share Redemption amount due and payable to the Government. Then there are additional averments to show that the society is in financial difficulties and how it is raising money. The other averments are not necessary for purpose of deciding the controversy in issue. Petition was admitted in 17-4-1989. However, interim relief was declined.

On behalf of respondents no reply has been filed. Learned A.G.P. however has argued based on the record as available.

5. Learned counsel for the petitioner submits as under :

i) Rule 74 insofar as it provides for levy of Audit charges is ultra-vires Section 81 of the Act.

ii) Rule 74 suffers from vice of excessive delegation. No guidelines have been laid for the Registrar for fixing the Audit Fees, 'the power is unchanalised.

iii)     Rule 74 is ultra-vires Section 90 of the Act.
 

iv) The demand for audit and Supervision Charges is in the absence of any power in respondents and as such the demand is arbitrary and unsupported by authority.
 

On behalf of respondents-State the learned A.G.P. relying on the various provisions in the Act and the Rules, contends that it is open to the respondents to have levied both Audit Fees as well as Supervision Charges. It is submitted that neither Rule 74 is ultra vires or suffers from the vice of excessive delegation or is ultra vires of Section 90. It is submitted that demand for Supervision Fees is neither arbitrary or unsupported by law and consequently there is no merit in the petition.

Apart from that the learned A.G.P. draws attention to the fact that there is no averment in the petition that demand made is not based on any notification. In the absence of such an averment in the petition even if the Court otherwise comes to the conclusion that the demand as raised is illegal, the Court should not examine whether the amount demanded is with the authority or without authority of law.

6. We may not consider the first contention. The contention as urged is Rule 74 insofar as it provides for levying of Audit Charges is ultra vires the rule making power of the State Government. In other words there is no provision in the Act by which the State Government could make a rule for demanding Audit Charge. We may at once peruse the provisions of Section 81 of the Act. Section 81 is included in Chapter VIII. The chapter speaks of Audit, Inquiry, Inspection and supervision. Sub-section l(a) confers powers on the Registrar to audit the societies specified under that section. Sub-section 81(l)(b) provides for audit of societies other than the societies referred to in clause (a) 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. The other provisions provide the manner in which the Audit shall be carried out and the manner in which the Auditor must submit his report. Sub-section (6) provides that if it appears to 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 order for such re-audit and the provision of this Act would be applicable in the manner that they applied to audit of account of such society.

We may now refer to Section 165 of the Act. Section 165 provides that State Government may, for the whole or any part of the State and for any society or a class of societies make rules for the conduct and regulation of the business of such society and for carrying out the purposes of this Act. The opening part of sub-section (2) as also Section 165(2)(xlvi) and (xlvii) are relevant and may be quoted :

"165(2) In particular, and without prejudice to the generality of the foregoing power, such rules may....

(xlvi) prescribe the procedure for conducting an audit, the matters on which the auditor shall submit a report, the form in which the statement of accounts shall be prepared for his audit, the limits within which the auditor may examine the monetary transactions of a society, the form of audit memorandum and report and the charges, if any, to be paid by a society for audit;

(xlvii) prescribe the procedure for appointment of auditors under Section 81;"

Then Rule 74 reads as under :

"74. Levy of audit charges and supervision charges. - (1) The registrar may levy audit charges and supervision charges payable annually on or before a specified date by all or any class of societies including the societies in liquidation at such rates as may be fixed by him with the approval of the State Government. Such charges, if not paid, by the specified date, shall be recoverable under sub-section (2) of Section 155. (2) The State Government may authorize the Registrar to grant total or partial exemption from the payment of audit charges and/or supervision charges assessed to any society or class of societies."

A conjoint reading therefore, of Section 85 and Section 165 would clearly show that the Registrar has to maintain a panel of auditors or direct a Chartered Accountant to carry on audit of a co-operative. Society, Section 165(2)(xlvi) clearly provides the procedure for appointment of Auditor under Section 81. The procedure for appointment of Auditor necessarily would contemplate the power to fix the fees or the remuneration of the auditors. Apart from that as we have held earlier Section 165(2) (supra) uses the expression, in particular and without prejudice to the generality of the foregoing power, in other words even if something is not specifically set out in sub-section (2), it will be still open for the Government to make rules for the purpose of conduct or regulation of business of society, class of society. Rule 74 therefore, as made was within the rule making power of the State. That rule provides for levying audit charges and supervision charges as set out therein. Our attention was invited to a judgment of the Division Bench of this Court namely Sangli District Central Co-op. Bank Ltd. v. State of Maharashtra, 1995 C.T.J. 177 which was disposed of on 24-11-1992. The contention raised there was that unless the audit is carried out the fees or charges should not be recovered. Dealing with the contention the learned Division Bench held considering the fact that audit has to be carried out and auditor has to be appointed and the audit fees has to be charged, observed as under:

"The appointment of auditors and the staff is not made on a piecemeal basis but for the entire year and the Registrar is required to pay the salary of the staff. The audit charges payable by the society is of negligible amount and it is unable to accede to the submission that the Registrar should be restrained from recovering audit charges unless audit is carried out as per the time frame under Section 81 of the Act. Accepting the contention of the petitioners would lead to absurd results and therefore it is not possible to accede to the contention, the first contention of learned counsel must therefore fail".

It is no doubt true that in the judgment of Sangli District Central Cooperative Bank and another (supra) there was no challenge to vires of Rule 74 itself. The contention urged was that unless the audit is carried fees is not payable. In instant case what was urged was that Rule 74 is ultra vires the Act. We have however held that Rule 74 was within the rule making power of the State Government. The first contention as urged therefore, must be rejected.

7. The second submission is that Rule 74 suffers from the vice of excessive delegation. No guideline has been laid down for the Registrar to fix audit fees and the power is unchanalised. We have earlier reproduced the Rule 74 of the rules. By virtue of the powers conferred by Section 165(2)(xlvii) the State Government was empowered to make rules in the matter of audit. Rule 74 provides for levying of audit charges by the Registrar, Rule itself provides that Registrar who have been authorized to levy the audit charges can only fix the rates with the previous approval of the State Government. In other words the delegate has a control over the sub-delegate in the matter of fixing of charges.

We may next consider Section 165(4) which reads :

"165(4) All rules made under this section, shall be laid for not less than thirty days before each House of the State Legislature, as soon as possible after they are made, and shall be subject to such modification as the Legislature may make, during the session in which they are so laid, or the session immediately following."

In other words rules as made have to be placed on the floor of the Houses. It is now settled preposition of law and the issue is no longer res integra, that when the Act provides for laying the rules in the house, then the challenge to the rule on the ground that it suffers from the vice of excessive delegation is negatived. For that purpose, we may gainfully refer to the judgment of the Apex Court in A.V. Nachane and Anr. v. Union of India and Anr., . The Apex Court agreed in its approval in following paragraph observed in D.S. Garewal v. State of Punjab, :

"This makes it perfectly clear that parliament has in no way abdicated its authority, but is keeping strict vigilance and control over its delegate."

We will once again the State of Madhya Pradesh v. Mahalaxmi Fabric, 1995(1) SCALE 147 while rejecting the challenge of excessive delegation the Apex Court noted that - Procedure for laying down is a safety valve and once it is so provided it cannot be said that the exercise of delegated legislative power by Central would suffer from being excessive delegation of legislative power of the parliament." We are therefore, clearly of the view that the second contention as urged must also be rejected.

8. The third challenge is that Rule 74 is ultra vires Section 90 of the Act. Section 90 provides for the constitution or recognition of federal authority to supervise the work of societies. In that context sub-section (1) provides for constitution or recognition of one or more co-operative federal authorities. Subsection (2) provides that 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 recoupment of expenditure which the State Government or any person authorized in that behalf has incurred or is likely to incur, in respect of supervision of societies. Reading of Section 90, subsections (1) and (2), it would be clear that this is a power to levy supervision charges on constitution of a federal authority which is recognized. In other words until such a federal society is set up no charges can be recovered from a society. We may also point out that Section 89-A, which was introduced by Maharashtra Act of 1986 has provided power for the Registrar for inspection. Sub-section (2) specifically provides for supervision over the societies. Sub-section (3) sets out that State Government may levy the supervision fees on any other 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. We have noted earlier Rule 74 which provides for both audit fees and supervision fees. Before Section 89-A was introduced, the fees as chargeable for supervision would be under rule 74 only for societies recognized under Section 90. Admittedly, there is no material to show that such a society under the Act was constituted or recognised. We find that this very issue was an issue before the learned Division Bench in Sangli District Co-operative Bank and another (supra). Similar contention was taken that no fees for supervision could be charged unless the federal society had been constituted or recognised. The learned Division Bench after noting Section 89-A of the Act, held that the petition was filed in 1984 and therefore, they were not concerned with Section 89-A of the Act. It was therefore, held that no fees for supervision under sub-section (2) of Section 90 could be charged unless and until there is a compliance with procedure set out under Section 90(1). The power to levy audit or supervision charges under Section 89-A of the Act was upheld. Similarly before Section 89-A, by virtue of Section 90(2) it was open to the State Government to make a rule for charging supervision fees. The challenge to that effect must be negated as there was power under Section 90(2) read with Section 165(2), to make a rule for levying audit fees.

9. That brings us to the last contention that the demand for audit and supervision charges is unsupported by any notification validly made. As has been urged and rightly so urged on behalf of respondents - petitioners have no where urged that there has been no charge fixed by the State Government. All that was pointed out to us is notification issued after 1984 to contend that before 1984 no notification has been issued. We may only note that the Division Bench of this Court in The Sangli District Central Co-op, Bank Ltd. Mahavir Nagar, Sangli and Ors. v. The State of Maharashtra and Ors. did in fact note that - audit fees have been fixed as can be seen in paragraph 3 of the judgment. It is therefore-clear, that audit fees had been fixed. The demand made by respondents therefore, was under the authority of law, even otherwise, there are no averments in the pleadings that there was no notification based on which the demand has been made. However, insofar as Supervision charges are concerned considering the ruling in Sangli District Central Co-operative Bank Limited (supra) before the amendment of 1986, in the absence of recognizing a Co-operative Federal Authority no supervision charges could be demanded. The demand is insofar as 1986-87 and thereafter, it was within jurisdiction. We are therefore, clearly of the opinion that said contention must be rejected.

10. Rule discharged. In these circumstances there shall be no order as to cost.