Bombay High Court
T.S Natrajan vs State Of Maharashtra on 6 February, 2025
Author: Bharati Dangre
Bench: Bharati Dangre
2025:BHC-OS:1820-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3828 OF 2024
T.S Natrajan
An Adult, R/at : Flat No. D-901, Opp.
Majas Dept., Oberoi Splendor JVLR,
Andheri (East), Mumbai - 60. .. Petitioner
Versus
1. State Of Maharashtra
Through the Principal Secretary,
Cooperation Department,
Government of Maharashtra,
Mantralaya, Mumbai 400 032.
2. Commissioner of Cooperation and
Registrar, Cooperative Societies,
2nd Floor, New Central Building,
Ambedkar Wellesly Rd, Pune -
411 001.
3. The District Deputy Registrar, Co-
operative Societies, Mumbai- 3,
Gruha Nirman Bhavan, Room
No.69, Ground Floor, Bandra
East, Mumbai - 51.
4. Splendor Complex Co-operative
Hsg. Soc. Ltd.
CTS 1, Jogeshwari east, Mumbai
400 060. .. Respondents
...
Mr. Mohit Bhardwaj, for the Petitioner.
Ms. Prachi Tatake, Addl.G.P., for the Respondent Nos.1 and 3.
Mr. Ajit Anekar a/w Ms. Ashlesha Modak and Ms.Priyanka
Shrivastava i/b Auris Legal, for the Respondent No.4.
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CORAM : ALOK ARADHE, CJ. &
BHARATI DANGRE, J.
RESERVED ON : 24th JANUARY, 2025
PRONOUNCED ON : 06th FEBRUARY, 2025
JUDGMENT :
(PER BHARATI DANGRE, J.) :-
1. The present Writ Petition is filed by a member of the
Respondent No.4 - Splendor Complex Co-Operative Hsg. Soc.
Ltd., Mumbai, on being aggrieved by the Government
Resolution dated 29.10.2014 as well as the Circular dated
14.12.2015 issued by the Respondent No.2. The Petitioner also
seek issuance of writ in nature of mandamus directing the
Respondent No.3 to do all such acts, deeds, matters and things
as may be required, in accordance with law upon her
appointment to carry out re-audit as per the Order dated
10.11.2023 of the Respondent No.4 - Society, for the period of
2014-2015 to 2017-2018, and by way of an alternative prayer it
is prayed that test audit shall be conducted instead of re-audit
for the year 2018-2019, 2020-2021, 2021-2022.
2. We have heard the learned counsel Mr. Mohit Bhardwaj
for the Petitioner and the learned Addl.G.P. Ms. Prachi Tatake,
for the Respondent Nos.1 to 3. Advocate Mr. Ajit Anekar a/w
Ms. Ashlesha Modak has represented the Respondent No.4.
By consent of the respective counsel representing the
parties, we issue Rule and by making it returnable forthwith,
we have taken up the Petition for final hearing.
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3. The Petitioner claim to be the first purchaser of the flat
through an agreement under Section 4 of the Maharashtra
Ownership of Flat Act, 1963, (for short "the MOFA") and assert
that he became a member of the co-operative housing society
i.e. the Respondent No.4 and though he has attempted to
project before us that he has no grievance against the society
but on reading of the pleadings, we find this statement to be
completely incorrect and we would be justifying our conclusion
to the aforesaid effect as we proceed to deal with the Petition.
4. The Petitioner has specifically pleaded that he being the
owner of the flat and member of the Respondent No.4 was
regular in payment of bills of the society, related to his shares
and he was never a defaulter, but despite this, he was denied
services by the society. When the society approached the
Registrar, it was refused a recovery certificate under Section
154-B against the Petitioner on 28.09.2021.
Narrating that since the services were denied to him, he
was constrained to file a Consumer Case bearing
No.CC/84/2024 to recover the amount that he has paid to the
society but denied the services, he has pleaded that the society
make frivolous claims against him, which has no merit and
substance.
5. The Petitioner has pleaded his locus to file this
proceedings by referring to himself as "alert member", who
gained knowledge about huge level of misappropriation of
money by the managing committee of the society and since the
society did not budge to his request, he obtained specific
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directions for conduct of the audit by the statutory auditor for
the year 2020-2021.
However, on perusal of the audit report of the financial
year 2020-2021 submitted by the Chartered Accountant Mr.
Priyesh Khirad, he noted serious lapses and the Petitioner as a
member issued notice to the auditor requesting him to make
the necessary changes but since there was no response, he
preferred a representation to the District Deputy Registrar,
Co-operative Societies, and also provided him the necessary
material in support of his claim that it is necessary to conduct
a re-audit of the society from the financial year 2014-2015 to
2021-2022.
A summary of the factual statement justifying the re-
audit or test audit of the society is annexed to the Petition as
Exh-A and under various heads, several objections are flagged
by the Petitioner alongwith his comments, where he alleged
that the auditor had failed to verify report about the AGMs
held and the decision taken therein and also as to how the
accounts of the bank were operated despite the fact that it was
frozen.
6. The Respondent No.3 on 10.11.2023 appointed an
auditor to carry out re-audit of the society for the year 2018-
2019, 2020-2021, 2021-2022 by appointing Smt. Manisha
Patil (Auditor Class-I) as an auditor in exercise of the powers
under Section 81(3)(c) under the Maharashtra Co-operative
Societies Act, 1960. The said order however clarified that the
audit fee for undertaking audit shall be deposited by the
Petitioner and on completion of audit within a period of two
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months, the reports should be forwarded to the Deputy
Registrar Co-operative Society, East Division, Mumbai.
The Petitioner is not satisfied with the aforesaid since the
re-audit for the earlier years 2014-2015 to 2017-2018 was not
allowed in the wake of Circular issued by the Respondent No.2
limiting the re-audit to previous five years.
Be it so. As per the case of the Petitioner that the Deputy
Registrar, Co-operative Societies, K East Ward conducted
hearing on multiple dates but despite the fact that the
Petitioner had pointed out the fallacies in the audit report and
since it was open even for a member of a public to raise the
issue and, since, he was better placed as a member of the
society and the society being a corporate body collecting funds,
the request made by him ought to have been considered within
the four corners of the powers of the Deputy Registrar.
7. The Petitioner's grievance is that based on the impugned
circular with reference No. 1330 of 2015 dated 14.12.2015 and
the impugned checklist basis circular dated 15.03.2010 the
audit of the earlier years was not permitted as it contemplated
that re-audit can be done only for a period within five years of
the order and the very said circular made it imperative for the
Petitioner to pay the audit fees.
8. The Circular issued on 14.12.2015 has taken a note of
Section 81(6) of the Maharashtra Co-operative Societies Act,
1960, which permitted to re-audit of the accounts of the
society and all the provisions of the Act shall apply with equal
force to such re-audit but the Circular by taking recourse to
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Section 88 of the Act, which relate to the power of Registrar to
assess damages against delinquents, promoters and
authorized fixing up of the financial liability only up to the
period preceding five years prior to the date of commencement
of such audit from the date of inquiry, inspection, the
Authority deemed it appropriate to restrict the re-audit only to
last five years, when the re-audit is directed.
In addition, the Petitioner is also aggrieved by the fact
that for requesting the re-audit and pursuant thereto an order
being passed to conduct the re-audit, he has been directed to
deposit the fees whereas for conducting of an audit of the
society as per Section 81(1)(f), the remuneration of the audit
is to be borne by the society as such rates as are prescribed.
He has, therefore, raised a challenge to the said
stipulations in the Circular dated 14.12.2015 and 15.03.2010
passed at Exh-C and D of the Petition.
In addition, it is the contention of the Petitioner that if
the re-audit of the society is to be carried out at his expense,
without admitting that he is liable to bear the audit fees, the
computation of the fees by the Respondent No.3 based on the
Government Resolution dated 29.10.2014 without prescribing
the maximum limit, has made it expensive and punitive for
him, when considering member wise fee structure and the
learned counsel for the Petitioner has urged before us that
though an order of re-audit has been passed at his request, the
order directing him to pay the audit fee and that too an
exorbitant rate is an onerous condition imposed upon him.
A challenge is also raised to a condition in the circular
issued by the State Government exempting the co-operative
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housing societies from bearing the audit fee and this is
described by the Petitioner to be discriminatory in nature.
9. On hearing the counsel for the Petitioner and the learned
A.G.P. who has relied upon the affidavit-in-reply filed by the
District Deputy Registrar, Co-operative Societies, on behalf of
the Respondent Nos.1, 2 and 3, we have taken note of the fact
that the Petition is nothing but an attempt to grind an axe
against the society, though very boldly the Petition contain a
statement that there is no dispute between the Petitioner and
the society but the issue raised, is in respect of prima-facie
incorrect audit reports, which the Petitioner sought to rectify.
We repeatedly inquired with the counsel for the Petitioner as to
what is the locus of the Petitioner as a member of the society
since the society itself has not made any grievance in regard to
the audit report, we received no answer, but when we have
perused the representations preferred by the Petitioner, we
could easily draw an inference that the whole focus of the
Petitioner is on exposing the alleged illegal acts by the
managing committee of the society and as to how the audit
reports have been maliciously prepared to be presented to the
authority and this we could clearly discerned from Exh-'A of
the Petition, which according to the Petitioner are the reasons
and objections for which the re-audit of the society is prayed
for.
It may be true that as per the scheme of Maharashtra Co-
operative Societies Act and in specific Section 81, provision
contained in Chapter-VIII, which pertain to Audit, Inquiry,
Inspection and Supervision, the manner in which the audit of
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the society shall be carried out is clearly contemplated which
shall include the manner of preparation, declaration as well as
the maintenance of the panel of the auditors and auditing
firms by the Registrar.
Clause (f) of sub-Section (1) of Section 81 clearly
prescribe that the remuneration of the auditor/auditing firm of
the society shall be borne by the society and shall be at such
rate, as may be prescribed. It is in exercise of his power, the
Commissioner, Cooperation and Registrar, Co-operative
Societies from time to time has issued various directions in
form of Circulars in respect to the conduct of the audit. The
Circular dated 14.12.2015 issued the modified guidelines as
regards re-audit as contemplated under Section 81(6) as it is
within the powers of the Registrar, on an application by society
or otherwise to order such re-audit and the provisions of the
Act of 1960 as applicable to the audit of the accounts of the
society shall apply to such re-audit. The Commissioner of Co-
operation, by taking into consideration the rise in the number
of co-operative societies which are required to be subjected to
audit and similarly considering the request made for re-audit,
test audit repeatedly and so as to bring coordination and
uniformity in conduct of the audits, issued the Circular on
14.12.2015, when it has restricted the number of financial
years while conducting a re-audit and it has been restricted to
preceding five years, when the re-audit is sought.
The Circular also direct that if some complaints are
received in respect of the audit reports for last five years, by
deciding the points on which a re-examination is called for,
instead of re-audit, as per Section 81(3)(c), it is directed that
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the Registrar or the authorized person may carry out or
caused to be carried a test audit of accounts of such society
which shall include the examination of such items as may be
prescribed and specified by the Registrar in such order.
We find no infirmity in the aforesaid directions and in
any case we are not inclined to examine the validity of such
directions at the instance of a Petitioner which is not a society
but is just one of the member of the society and who is not
clear in his objective of seeking a re-audit/test audit when the
society has never demanded so.
10. In fact, at the request of the Petitioner, the Respondent
No.3 issued an order of re-audit of the Society on 10.11.2023
by taking recourse to sub-Section (6) of Section 81 of the
Maharashtra Co-operation Societies Act and the auditor was
directed to complete the re-audit within two months after
payment of audit fees by the Petitioner and submit the report.
The Petitioner is aggrieved by the part of the order which
direct him to bear the audit fee.
11. Keeping in consonance the provision contained in
Section 81(1)(f), it is the specific stand of the State
Government that the Government had constituted a study
committee to fix audit fee of co-operative societies and
submitted its report to the Government for its decision to
ensure that the quality of audit is not downgraded it, and
keeping this in view though a lower fee is not prescribed, a
maximum limit of the fees has been set out, to ensure that the
fees do not travelled beyond the certain limit, and accordingly
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in Clause 38 of the Table annexed to the Government
Resolution the audit fee for the Co-operative Housing Society
have been fixed according to the Metropolitan Area, Municipal
Corporation, Taluka and Nagar Parishad level.
Since the rate per member is the criteria adopted for this
fixation, it do not prescribe the maximum limit, however it is
also stated in the Affidavit that since the rate fixation of other
co-operative societies is based on annual turn over/working
capital/income of the organization, the maximum limit has
been fixed. It is categorically indicated in the Government
decision that the rates of re-audit of the Co-operative societies
shall remain the same as fixed for statutory audit, test audit,
special audit, etc. and the Registrars have been instructed to
charge the fees depending upon the nature and scope of work
to be done for the type.
12. Dealing with the accusation of arbitrariness as against
the co-operative societies, the Affidavit filed on behalf of the
Respondents categorically state thus :
"A co-operative housing society is not-for-profit organization, but
the bye-laws provide for the collection of maintenance fee by
distributing the administrative expenses of the society equally to
the members. A large number of complaints are received from the
members of the cooperative housing societies regarding the
functioning of the cooperative housing societies. If the complaining
members demand a re-audit of the organization in connection with
such a complaint, if the burden of its fees is imposed on the
organization, then the organization will suffer a huge loss as a
result and the burden will fall on the members.
In this regard, the government has fixed the rate only after
considering the cooperative housing societies while fixing the audit
fee as per the provisions of the Cooperative Act, so the government
decision taken regarding these audit fees is correct."
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13. At the time when the Petitioner made a request for re-
audit in terms of Rule 74(4) alongwith the proviso of the
Maharashtra Co-operative Societies Rules, 1961, it was
indicated in the order that before the re-audit is ordered, he
shall deposit the fee and therefore it was his responsibility to
take the re-audit fee. Rule 74 of the Rules of 1961 reads thus :
"74. Remuneration of the auditor
(1) Remuneration of the auditor or auditing firm who has
conducted audit of a society shall be borne by the society and shall
be at such rates as may be notified by the State Government from
time to time depending upon the class of societies and their
financial parameters.
(2) When auditor or auditing firm is appointed by the
Registrar on his own, remuneration of auditor or auditing firm shall
be at rates as per sub-rule (1) above.
(3) If the Registrar, orders re-audit of a society after
recording reasons thereof, shall specify remuneration payable to
such auditors as per sub-rule (1) above.
(4) When re-audit is requisitioned by society or any member
of society, the remuneration of auditor or auditing firm shall be as
per sub-rule (1) above :
Provided that, when such re-audit is requisitioned by the
society or any member of the society, the remuneration of auditor
for auditing firm shall be deposited by such society or member, as
the case may be, with the Registrar prior to commencement of such
audit :"
14. In the wake of the aforesaid provision, since the society
had already borne the audit fees when its regular audit was
conducted, but the audit report was objected to by the
Petitioner and on his demand the re-audit was ordered, subject
to a condition that he shall pay the fees for the re-audit, we see
no reason why we should entertain the Petitioner making a
grievance about the rates of audit, re-audit or his challenge to
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the discrimination, as he is not a society but just one member
of the society who want the re-audit to be carried out as he
suspects certain illegalities/irregularities in the regular audits
of the society which was conducted. One relevant provision in
the Rules of 1961 is the proviso appended to the Rules 74
which reads thus :
"Provided further that, if it is found in the re-audit, that the
appointed auditor has not conducted audit as per the auditing
standards and norms as notified from time to time and if it is
proved that he is negligent in performing audit of the society and he
has not detected fraud, mis-utilisation of funds, inadequate
provisioning, resulting into loss or profit to the society, then audit
fees shall be recoverable as per sub-section (1) of section 156 of the
Act, from the said auditor who had conducted the audit and same
shall be refundable, to the society and remuneration of re-audit
shall be refundable to the society or any member demanding re-
audit. The said auditor shall also be subject to action under sub
clause (viii) of clause (g) of sub - rule (1) of rule 69 :"
15. The Petitioner is not clear about his stand as he has
prayed for a direction to the Respondent No.3 to direct the
auditor who is nominated to carry re-audit or to conduct test
audit for the years 2014-2015 to 2017-2018 rather than re-
audit as per order dated 10.11.2023. The aforesaid order has
been passed at the request of the Petitioner since he sought re-
audit under Section 81(6) of the Maharashtra Co-operative
Societies Act, for the period 2018-2019, 2020-2021 and 2021-
2022. A re-audit is nothing but full audit of the
regular/statutory audit. The Petitioner has also sought test
audit for the period 2014-2015 to 2017-2018, instead of re-
audit and the order for test audit are passed under Section
81(3)(c), when the Registrar may order a test audit if the
report of the auditor will not disclose the true and correct
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picture of the accounts, but it is distinct from re-audit, as it will
be restricted to the points set out in the order. All the while the
request of the Petitioner was for re-audit and therefore it is
imperative for him to deposit the necessary audit fees.
16. We find that on 21.03.2024, the District Deputy
Registrar, Co-operative Societies had asked the Petitioner to
deposit the audit fee in terms of the Circular dated 19.06.2023
and in absentia, the Petitioner definitely cannot seek the
reliefs as now he is dragging his feet by raising a challenge to
the Circular alongwith the checklist issued by the Department
of Co-operation by projecting himself to be a whistle blower,
which stand of his we fail to acknowledge since he is a member
of the society and has even dragged the society to the
Consumer Court. Now the stand adopted by him that he is
ready to deposit a sum of Rs.15,000/- per year for the test
audit is of no consequence as the Respondent No.3 has already
issued a direction on 10.11.2023 for re-audit and the Petitioner
must comply with the same.
Finding no merit and substance in the Petition, the same
is dismissed.
No order as to costs.
(BHARATI DANGRE, J.) (CHIEF JUSTICE)
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