Bombay High Court
Rangrao S/O Sonbaji Panpate, vs The State Of Maharashtra Thr. Pso, Ps, ... on 29 September, 2025
2025:BHC-NAG:9979-DB
apl.1320.2024 & 1314.2024.Judgment....odt
(1)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
CRIMINAL APPLICATION (APL) NO.1320 OF 2024
Rangrao s/o Sonbaji Panpate,
Age : 74 Years,
Occupation : Retired Government Servant,
R/o 41-A, Jagruti Colony, near NIT
Garden, Katol Road,
Nagpur - 440013. ..... APPLICANT
// VERSUS //
1. State of Maharashtra,
Through Police Station Officer,
Police Station Sadar,
District Nagpur.
2. Laxman Ramji Burade,
Aged about 68 Years,
Occupation : Nil,
R/o. House No.426,
Phule lane, behind Ram Bhandar,
Badkas Chowk, Mahal,
Nagpur - 440008. ....NON-APPLICANTS
-------------------------------------------
Mr. Parvez Mirza, Counsel for the applicant.
Mr. K. R. Lule, APP for non-applicant No.1/State.
Ms. S. W. Deshpande, Counsel for non-applicant No.2.
-------------------------------------------
WITH
CRIMINAL APPLICATION (APL) NO.1314 OF 2024
Shri Prakash s/o Nilkanth Chandrayan,
Age : 70 Years,
Occupation: Retired Government Servant,
R/o. Plot No.16, Mehar Apartment,
Naik Layout, Subhash Nagar,
Nagpur - 440022. ..... APPLICANT
// VERSUS //
1. State of Maharashtra,
Through Police Station Officer,
apl.1320.2024 & 1314.2024.Judgment....odt
(2)
Police Station Sadar,
District Nagpur.
2. Laxman Ramji Burade,
Aged about 68 Years,
Occupation : Nil,
R/o. House No.426,
Phule lane, behind Ram Bhandar,
Badkas Chowk, Mahal,
Nagpur - 440008. ....NON-APPLICANTS
-------------------------------------------
Mr. Parvez Mirza, Counsel for the applicants.
Mr. K. R. Lule, APP for non-applicant No.1/State.
Ms. S. W. Deshpande, Counsel for non-applicant No.2.
-------------------------------------------
CORAM : URMILA JOSHI-PHALKE AND
NANDESH S. DESHPANDE, JJ.
RESERVED ON : 09.09.2025
PRONOUNCED ON : 29.09.2025
JUDGMENT :
(PER: URMILA JOSHI-PHALKE, J.)
1. Both the applications are filed by the applicants for
quashing of the FIR in connection with Crime No.257/2008 dated
30.09.2008 and charge sheet No.122/2009 bearing RCC
No.3257/2009 pending before the 19 th Joint Civil Judge Junior
Division and Judicial Magistrate First Class, Nagpur.
2. As per the contention of the applicant namely, Rangrao
s/o Sonbaji Panpate in Criminal Application (APL) No.1320/2024,
joined as a Storekeeper in the year 1972 in the Central Ground
Water Board (hereinafter referred as 'CGWB'), whereas the another
applicant namely, Prakash s/o Nilkanth Chandrayan in Criminal
Application (APL) No.1314/2024 joined as a Surveyor in the year
apl.1320.2024 & 1314.2024.Judgment....odt
1974 at Nagpur in CGWB. In the year 1988, a Cooperative Society
was formed for the welfare of the members of the Society namely
"The Central Ground Water Board (CR) Staff Credit Co-operative
Society, Ltd., Nagpur". The applicant Rangrao Panpate became
Chairman, whereas the applicant Prakash Chandrayan became
Secretary since 1992 to 2008. Now, the crime is registered against
them on the basis of report lodged by Mr. L. R. Burade, Nodal
Officer, on filing written complainant dated 30.09.2008. On an
allegation that they were involved in the embezzlement of
Rs.5,65,000/- in the Society. It is alleged that they have
misappropriated the said amount. In the year 2008, the executive
body took a decision to conduct an "Internal Audit" of the society
for the year 2006-07, by a committee formed under the
chairmanship of Mr. K. P. Banerjee. In the said internal audit,
certain financial alleged irregularities in respect of ten loan accounts
came to the knowledge of the committee, on the basis of which the
present criminal prosecution was initiated against the present
applicants. On the basis of the written complaint, Crime
No.257/2008 came to be registered.
3. Now, both the applications are filed by the applicants on
the ground that even accepting the allegations in the FIR as it is, it
would not prima facie constitute any offence against the present
applicants. It is further contended that they are already exonerated
apl.1320.2024 & 1314.2024.Judgment....odt
during the departmental inquiry and therefore, the criminal
prosecution could not lie against them. The present FIR is based on
the inspection report and not audit report as required under the
Maharashtra Co-operative Societies Act, 1960 (hereinafter referred
'the said Act'). For all the above grounds, they seek the quashing
of the FIR.
4. Heard learned Counsel Mr. Parvez Mirza for the
applicants. He submitted that charge in the departmental inquiry
and the prosecution launched against the applicants is of a similar
nature. The standard of proof required for the departmental inquiry
is lower than the standard of proof required for the criminal trial. As
the charges could not be proved in the departmental inquiry, it
would be difficult for the prosecution to prove the charges in the
criminal proceeding. Moreover, in view of Section 81 of the said
Act, no audit was carried out and entire prosecution is on the basis
of the inspection report. Thus, there is no compliance in view of
Section 75(2A) and 81 of the said Act. Therefore, in view of
Section 81(5B), there is a legal bar to initiate the prosecution
against the applicants. In view of that both applications deserve to
be allowed.
5. Per contra, learned APP submitted that as far as the
applicant Prakash Nilkanth Chandrayan is concerned, he is not
exonerated, but the inquiry was dropped for want of original
apl.1320.2024 & 1314.2024.Judgment....odt
papers. Charges in both the proceedings are distinct. The
applicant Prakash Nilkanth Chandrayan during his departmental
inquiry had already accepted the liability. Whether there is a
compliance under Section 75(2A) of the said Act, is there or not, is
a matter of trial. At this stage, prima facie material is sufficient to
proceed with the criminal trial. The misappropriation is alleged
against the present applicants is of Rs.5,65,000/- during the period
of 2002 to 2008 by misusing their position and therefore, the
applications deserve to be rejected.
6. Learned Counsel for the non-applicant No.2 Ms. S. W.
Deshpande, reiterated the said contentions and submitted that the
applicant Prakash Chandrayan has already accepted his liability and
the inquiry was dropped, the applicant Prakash Chandrayan is not
from the said charges.
7. On hearing both sides and on perusal of the entire
investigation papers, it not disputed that the applicants respectively
Rangarao Panpate was working as a Chairman of the Central
Ground Water Board (CR) Staff Credit Co-operative Society Ltd.,
Nagpur and the other applicant Prakash Chandrayan was working
as Secretary since 1992 to 2008. In the year 2008, the executive
body took a decision to conduct an "Internal Audit" of the society
for the year 2006-07. The inspection shows that the applicant
Parakash Chandrayan has shown the loans in the name of various
apl.1320.2024 & 1314.2024.Judgment....odt
employees. In fact, the said employees never obtained the loan
and the said amount was misused by him for his own benefit.
During the investigation, the statements of various employees are
recorded and from the said statements and the various applications
filed by them before the executive committee shows that the
employees namely Madhusudan Baburao Mendhekar, Kirtiprasad
Ajitkumar Banarji, Prakash Wasudeo never obtained any loan, but
the loan was shown in their names and the said amount was
misused by the applicant Prakash Chandrayan.
8. The article of charge levelled against the Prakash
Chandrayan is concerned which was to the extent that while
working as a head Surveyor and while functioning as a Secretary of
the Central Ground Water Board Central Region Staff Credit
Co-operative Society Ltd., Nagpur with effect from July 1992 has
embezzled / misappropriated the money of the aforesaid society as
given below:
Outstanding regular loan : Rs. 2,99,200/-
Interest on loan up to 31.03.2008 : Rs. 2,66,105/-
Total loss to the Society : Rs. 5,65,305/-
9. The inquiry report and operative portion of the inquiry
report shows that the inquiry was dropped against him for want of
documents. The specific observation of the Chairman of CGWB
shows that he has considered the circumstances and come to the
apl.1320.2024 & 1314.2024.Judgment....odt
conclusion that charge framed could not be proved due to
nonavailability of certain original documents incorporated in the
charge sheet. Therefore, undersigned in exercise of powers
conferred under Rule 15 of the CCS (CC&A) Rules, 1965 has
decided to drop the charge framed against Mr Chandrayan and
orders accordingly. Thus, as far as the applicant Chandrayan is
concerned he is not exonerated from the liability but the inquiry
was dropped against him for want of original documents.
10. As far as the applicant Panpate is concerned,
admittedly, he is exonerated from the liability and during inquiry,
the other applicant Chandrayan has accepted his liability. The
applicant Panpate is concerned, admittedly, there is no material to
connect him with the alleged offence.
11. First point raised by the applicants in the applications as
to non-compliance of Section 81 and 75(2A) of the Maharashtra
Co-operative Societies Act. It may be apposite to note the relevant
provisions of sub-Section (5B) of Section 81 which is reads as
follows:
(5B) 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,] 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
apl.1320.2024 & 1314.2024.Judgment....odt
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 transaction of the
society.]
[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:
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:
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
apl.1320.2024 & 1314.2024.Judgment....odt
the society or by any other person, then he shall
prepare a Special Report and submit the same to the
Registrar alongwith 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.]
12. Sub-Section (1) of Section 81 casts a duty on the
society to cause its accounts to be audited at least once in each
financial year 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. In the event of failure of
the society to intimate and file the return as provided by
sub-section (2A) of section 75 and sub-section (1B) of section 79,
the first provision of Section 81 empowers the Registrar to cause
the accounts of the society to be audited by the Auditor from the
panel of Auditor approved by the State Government or an authority
authorized by it in this behalf. Under Section sub section (2A) of
Section 75, the State Government is empowered to direct cost audit
or performance audit or both, if it is of opinion that it is necessary
in the public interest to have such audit in relation to any society or
class of societies. Clause (b) of Sub Section 3 of Section 81
authorises the Registrar 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. Clause (c) of Sub
apl.1320.2024 & 1314.2024.Judgment....odt
Section 3 of Section 81 empowers the Registrar or the authorized
officer to carry out or cause to be carry out test audit of accounts of
a Society where the audit report submitted by the auditor does not
disclose the true and correct picture of the accounts. Sub-Section
(6) empowers the Register to order re-audit any accounts of the
Society.
13. Thus, on a plain reading of section 81, it becomes
abundantly clear that provisions have been made for annual audit,
in the ordinary circumstances, special cost or performance audit, to
be ordered by State Government or the authorized officer, and for
test audit by the Registrar or the authorized officer where the
regular audit is found to be not satisfactory.
14. The action on audit report is to be taken in accordance
with the provisions contained in sub-section (5B). The first proviso
to sub-section 5B addresses a contingency where the auditor comes
to a conclusion that any person is guilty of any offence relating to
the accounts or any other offences, and in that event, he is
enjoined to file a special report to the Registrar within a period of
fifteen days from the date of submission of his audit report. The
first proviso casts a further duty on the auditor to file a First
Information Report of the offences, so disclosed, after obtaining
written permission of the Registrar. The default in initiating such
action entails disqualification and removal of name from the panel
apl.1320.2024 & 1314.2024.Judgment....odt
of auditors in addition to any other action as the Registrar may
think fit. The second proviso empowers the Registrar to cause a
first information report to be fled by a person authorized by him in
that behalf, where the auditor fails to initiate action in terms of the
first proviso.
15. In the light of the above said provisions, the legality of
registration of the first information report, on the basis of the
internal inspection which is solely based on the inspection report is
required to be considered. Learned Counsel for the applicants
submitted that where the law provides a manner in which a
particular act is to be done, it has to be done in that manner alone
and no other. The aforesaid submission of the learned Counsel
appears to be well grounded in facts. The inspection report on
record shows that the inspection was conducted in view of the
directions given by the executive committee. To consider the
submission of the learned Counsel the decision of the Privy Council
in the case of Nazir Ahmad and the King-Emperor
MANU/PR/0111/1936: AIR 1936 PC 253(2), wherein it was
enunciated that 'the rule which applies is a different and not less
well recognised rule, namely, that where a power is given to do a
certain thing in a certain way the thing must be done in that way or
not at all. Other methods of performance are necessarily forbidden'.
apl.1320.2024 & 1314.2024.Judgment....odt
16. The aforesaid pronouncement was also followed by the
Hon'ble Apex Court in the case of State of Uttar Pradesh Vs.
Singhara Singh and Ors. MANU/SC/0082/1963:AIR 1964 SC
351 wherein by referring the observation of the Nazir Ahmad
referred supra the Hon'ble Apex Court expounded the legal position
as under:
"In Nazir Ahmed's case, the Judicial Committee
observed that the principle applied in Taylor v. Taylor
to a Court, namely, that where a power is given to do
a certain thing in a certain way, the thing must be
done in that way or not at all and that other methods
of performance are necessarily forbidden, applied to
judicial officers making a record under Section 164
and, therefore, held that magistrate could not give oral
evidence of the confession made to him which he had
purported to record under Section 164 of the Code. It
was said that otherwise all the precautions and
safeguards laid down in Sections 164 and 364, both of
which had to be read together, would become of such
trifling value as to be almost idle and that it would be
an unnatural construction to hold that any other
procedure was permitted than that which is laid down
with such minute particularity in the sections
themselves."
17. In the case at hand, undisputedly the Auditor had not
lodged the First Information Report. It is not the case of the
prosecution that the Auditor submitted a special report in terms of
apl.1320.2024 & 1314.2024.Judgment....odt
the first proviso to sub section (5B) of Section 81 of the Act 1960
and thereupon the Registrar gave a permission to the Auditor to
lodge the report. In contrast, facts on record shows that the
inspection report on the basis of which the FIR came to be lodged
which does not constitute the audit report envisaged by sub-section
(5B) of section 81. It is pertinent to note that the authority
empowered to lodge the FIR is the Auditor or any other officer
authorised by the Registrar, has not lodged the report. The
method of initiation of the prosecution which is enumerated in the
provision that a special report is required to be submitted by the
auditor and thereupon the Registrar has to grant permission to
lodge the report. A document titled "inspection report" cannot be a
substitute for the statutorily prescribed procedure for initiation of
the prosecution.
18. In Mahadevrao Uttamrao Rajurkar and Anr Vs.
State of Maharashtra (2020 SCC OnLine Bom 3648), a
Division Bench decision wherein an identical fact situation, this
Court quashed the first information report and the consequent
prosecution as the FIR was lodged in breach of the provisions
contained in sub-section (5B) of section 81 of the Act, 1960. In the
said case also, the first information report was lodged by the
President of the society. The said first information report was
indeed accompanied by the audit report. After noting the provisions
apl.1320.2024 & 1314.2024.Judgment....odt
contained in sub-section (5B) of section 81, the Division Bench
analysed the import of the said provision as under:
"16. The complete reading of Section 5-B shows that
the auditor is required to submit 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 of the society.
17. The first proviso shows that where the auditor has
come to the conclusion in his audit report that any
person is guilty of any offence relating to the accounts
or any other offences, he is under obligation to file
specific report to the Registrar within a period of 15
days from the date of submission of his audit report.
The said proviso further reads that concerned auditor
after obtaining written permission from the Registrar
shall file a First Information Report of the offence. If an
Auditor fails to file the First Information Report, he shall
be liable for disqualification and his name can be
removed from the panel of the Auditors and also liable
for any other action as the Registrar may think fit.
18. What is important is that, even before lodging the
First Information Report by the Auditor himself, he has
to obtain prior permission of the Registrar, though the
word "prior permission" is not engrafted in the said
proviso, use of words are, "The Auditor concerned shall
after obtaining written permission of the Registrar, file
a First Information Report of the offence". In order to
give harmonious construction, "prior permission from
the Registrar in writing" will have to be read by
applying the principles of reading down.
apl.1320.2024 & 1314.2024.Judgment....odt
19. Thus, what emerges from the above discussion is
that under Section 81 (5-B) of the Act, 1960, 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 annual general body meeting,
presenting the true and fair view of the financial
transaction of the society and where he comes to a
conclusion that any person is guilty of any offence
relating to accounts or any other offences, he shall file
a specific report to the Registrar within a period of 15
days from the date of submission of audit report and
shall after written permission of the Registrar, file a
First Information Report. On failure to do so, shall be
liable for any action as the Registrar may think fit,
including disqualification and removal from panel of
auditors. Furthermore, when it is brought to the notice
of the Registrar such failure on the part of the auditor,
the Registrar shall cause a First Information Report to
be fled by a person authorised by him in that behalf."
19. The aforesaid pronouncement appears to be squarely
applicable to the facts of the present case. From the perusal of the
FIR, it becomes explicitly clear that the FIR is solely based on the
report furnished by Chairman, Internal Audit (Inspection
Committee). The first informant had lodged the report on the basis
of the said inspection report.
20. In a given case, the offences are alleged to have been
committed in the capacity of President and the Secretary who are
apl.1320.2024 & 1314.2024.Judgment....odt
office bears of the Society. Admittedly, the law does not require
that before registering the First Information Report, there must be
an audit report and the finding of the commission of the offences
recorded by the Auditor. However, where the allegations of
commission of the offences are solely based on the audit conducted
under section 81 of the Act, 1960, then the procedure prescribed in
sub-section (5B) of section 81 is required to be scrupulously
followed. Since the FIR in question is based on the report of the
internal audit inspection, it is not open for non-applicant No.2 to fall
back on the general proposition that anybody can set the criminal
law in motion and the police are duty-bound to register the FIR.
21. The communication rendered by him addressing to the
President CGWB Employees Credit Co-operative Society shows that
he has accepted the liability that the Society had a direct loss in the
form of recovery of regular loan and interest thereupon.
Admittedly, the charges against the applicant Chandrayan were to
the extent that being the Secretary of the Central Ground Water
Board Central Region Staff Credit Co-operative Society from July
1992 had misappropriated the money of the aforesaid Society has
given below and on the similar ground, the FIR was registered
against him. Learned Counsel for the applicants placed reliance on
the decision of Ashoo Sundernath Tewari Vs. The Deputy
Superintendent of Police (referred supra) wherein by referring
apl.1320.2024 & 1314.2024.Judgment....odt
the decision of Radheshyam Kejriwal vs. State of West Bengal
and Another, (2011) 3 SCC 581, the ratio culled out can broadly
be stated as follows:
(i) Adjudication proceedings and criminal prosecution can
be launched simultaneously;
(ii) Decision in adjudication proceedings is not necessary
before initiating criminal prosecution;
(iii) Adjudication proceedings and criminal proceedings are
independent in nature to each other;
(iv) The finding against the person facing prosecution in the
adjudication proceedings is not binding on the proceeding
for criminal prosecution;
(v) Adjudication proceedings by the Enforcement
Directorate is not prosecution by a competent court of law
to attract the provisions of Article 20(2) of the Constitution
or Section 300 of the Code of Criminal Procedure;
(vi) The finding in the adjudication proceedings in favour of
the person facing trial for identical violation will depend
upon the nature of finding. If the exoneration in
adjudication proceedings is on technical ground and not on
merit, prosecution may continue; and
(vii) In case of exoneration, however, on merits where the
allegation is found to be not sustainable at all and the
person held innocent, criminal prosecution on the same set
of facts and circumstances cannot be allowed to continue,
the underlying principle being the higher standard of proof
in criminal cases."
apl.1320.2024 & 1314.2024.Judgment....odt
22. The inquiry report against the applicant Chandrayan
shows that considering the circumstances and facts of the case,
charge framed could not be proved due to the nonavailability of
certain original documents incorporated in the charge sheet and
therefore, the inquiry against the Prakash Chandrayan was dropped
and order was passed accordingly.
23. Thus, on going through the charges framed in the
departmental inquiry and the charges levelled against the
applicants, it reveals that the charges are similar. The charges
against the applicants are to the extent of misappropriation of the
funds of the Society and on the similar allegation the FIR was
lodged. As already observed that against the applicant the inquiry
was dropped.
24. This situation is clearly covered by the proposition
contained in clause (6) of para 102 of the judgment in the case of
State of Haryana and others Vs Bhajan Lal and others
reported in 1992 Supp. (1) SCC 335 wherein the observations are
as under:
"(6) Where there is an express legal bar engrafted in
any of the provisions of the Code or the concerned Act
(under which a criminal proceeding is instituted) to the
institution and continuance of the proceedings and/or
where there is a specific provision in the Code or the
concerned Act, providing efficacious redress for the
grievance of the aggrieved party."
apl.1320.2024 & 1314.2024.Judgment....odt
25. In view of the above discussion and considering the fact
that due procedure prescribed in Section 81(5B) of the Act was not
followed before lodging of the FIR subject to the aforesaid
observations, the petition deserves to be allowed. Hence the
following order:
ORDER
(i) Criminal Application (APL) No.1320/2024 and
Criminal Application (APL) No.1314/2024 are allowed.
(ii) The First Information Report bearing Crime
No.257/2008 dated 30.09.2008 registered with Police
Station Sadar, District Nagpur for the offence punishable
under Sections 408, 477-A read with Section 34 of the
Indian Penal Code and RCC No.3257/2009 pending before
the 19th Joint Civil Judge Junior Division and Judicial
Magistrate First Class, Nagpur, arising out of the same,
stands quashed and set aside, against the present
applicants.
(iii) It is clarified that we have not at all entered into the
merits of the allegations in the instant FIR.
The application is disposed of in the above terms.
(NANDESH S. DESHPANDE, J) (URMILA JOSHI-PHALKE, J.)
Sarkate.
Signed by: Mr. A.R. Sarkate
Designation: PA To Honourable Judge
Date: 30/09/2025 18:52:37
