Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Audit, Inquiry, Inspection and Surcharge

84. Procedure for appointment of Auditors and for conducting Audit.

1. The audit of accounts of societies shall be conducted by departmental auditors appointed by the Registrar or by certified auditors appointed by the Registrar from time to time on such terms and conditions as he deems fit.

Provided that the Registrar shall draw the panel of departmental auditors and certified auditors in advance, at least, six months before the close of the year so that statutory audit of society is complete in time to enable the society to hold its annual general body meeting as provided under section 29 and also to file income tax returns as prescribed under the law. Where the total sales, turnover or gross receipts of a society exceeds Rs. 4Q,00,000/- (or figure as amended from time to time as per Income Tax Law) in a year, a Tax Audit under section 44(AB) of the Income Tax Act shall also be (inducted by the certified auditors for which additional fee shall be paid as prescribed by the Registrar from time to time. An auditor can undertake the audit of a society for a maximum period of three years. It shall be the duty of the society to select an auditor from the panel approved by the Registrar and inform about the selection to the Registrar within fifteen days of selection through the registered post. If the society foils to get its statutory audit completed within six months of the close of the cooperative year, the Registrar shall be competent to get the audit conducted at the cost risk and liability of the members of the committee of a society who have failed to get the audit of the society conducted in time. The fee shall be a charge against the delinquent officials of the committee of the society and shall be recoverable as an arrears of land revenue. (Amended on 6.8.97)

2. While fixing charges on account of services rendered by the auditors which are payable to them, the Registrar shall beside other things' have regards to th'e turnover or sale or working capital of the society. (Added on 9.9.88)

3. The amount fixed under clause (1) above which is payable to the departmental auditors shall be deposited in the Govt. account and the amount payable to the certified auditors, appointed by the Registrar shall be paid to them directly as per provisions contained in schedule IV of these Rules. (Added on 9.9.88)

Explanation -

1. For purposes of this Chapter, audit shall include annual or periodical audit, continuous or concurrent audit and test or super audit and re-audit.

2. For purpose of this rule, "a certified auditor" includes: -

(a) a Chartered Accountant with in the meaning of the Chartered Accounts Act, 1949,

(b) a lesson who hold Govt. Diploma in Coop. Accounts or Govt. Diploma in Cooperation and Accountancy.

(c) a person who has served as an auditor in the Co-operative Department of any State Government or under the Registrar and whose name has been included by the Registrar in the panel of certified auditors maintained and published by him in the official Gazette at least once in every year.

4. The audit under sub-section (1) ofsection53 shall in all cases extend back to the last date of the previous audit and shall be carried out up to the last date of the co-operative year immediately, preceding the audit or where the Registrar so directs in the case of any particular society or class of societies such other date as may be specified by the Registrar.

5. Unless the Registrar directs other wise, the audit of a co-operative society shall be conducted in the registered office of the society.

6. Previous intimation shall be given to the society before the audit is commenced.

7. The officers and employees of the society shall give the audit officers all assistance necessary for the completion of the audit and for this purpose in particular prepare such statements and take such action with regard to the verification or examination of its accounts the may require.

8. (i) The audit report shall state:-

 (a) whether or not the audit officer has obtained all the information’s and explanations which he required.

(b) whether or not in his opinion the balance-sheet and the profit and loss accounts referred to in the report are drawn up in conformity with the law;

(c) whether or not such balance-sheet exhibits a true and correct account of the state of affairs of the society according to the best of his information and the explanations given to him and as shown by the books of the society:

(d) whether, in his opinion, books and accounts have been kept by the society as required under the Act, the rules and the bye-laws:

(e) whether there has been any material impropriety or irregularity in the expenditure or in the realisation of money due to the society:

(ii) Where any of the matter referred to in sub-clauses (a), (b), (c) or (d) Of clause (8) (i) is answered in the negative or in the affirmative with any remarks, the report shall state the reason for such answer with facts and figures, in support of such reasons.

9. The audit report shall also contain schedules with full particulars of : -

(i) all transactions which appear to be contrary to the provisions of the Act, the rules or the bye-laws of the society:

(ii) all sums which ought to have been brought have not been brought into account by the society;

(iii) any material impropriety or irregularity in the expenditure or in the realization of money due to the society;

(iv) any money or property belonging to the society which appears to the auditor to be bad or doubtful debt; and

(v) any other matter specified by the Registrar in this behalf.

10. The summary of audit report as prepared by audit or shall be read out in general meeting. The audit report together with its accompaniments shall be open to inspection by any member of the society. The Registrar may, however, direct that any portion of the audit report which appears to him to be of objectionable nature or not justified by facts shall be expunged and the portion so expunged shall not form part of the audit report.

11. The audit officer shall examine the monetary transactions of a society in so far as may be necessary for the purpose of ascertaining whether there has been any material impropriety or irregularity in the expenditure for on the realization of moneys due to the society and whether any transaction infringes any provisions of the Act, rules or bye-laws, or any directions of the managing committee. In case of difference of opinion between the audit officer and the society in regard to the propriety of any of its monetary transactions the Registrar shall decide the matter and his decision shall be final.

12. If the result of the audit held under the last preceding rules discloses any defects in the working of a society, the society shall, within three months from the date of audit report, explain to the Registrar the defects or the irregularities pointed out by the auditor, and take steps to rectify the defects and remedy irregularities, and report to the Registrar in Form 16 the action taken by it thereon, the compliance report shall continue to be submitted till all the defects are rectified or irregularities remedied to the satisfaction of the Registrar. The Registrar may also make an order directing the society or the officers to take such action as may be specified in the order to remedy the defects, within the time specified therein, where the society concerned is a member of a federal society.

85. Audit Fee

1. A Co-operative Society shall pay on or before the 31st December of each year, an audit fee «t such rates as may be fixed by the Registrar with the prior approval of the Lt. Governor. (Amended on 18.5.89)

2. The Registrar shall have power to increase the prescribed audit fee, in special cases, for reasons to be recorded in writing.

3. The Audit fee shall be credited to Audit Fee fund to be controlled by the Registrar as per provisional contained in Schedule IV. (Added on 9.9.88)

The Registrar may, at his discretion, remit either wholly or in part the audit fee payable by any society.

86. Procedure and principles for the conduct of inquiry and Inspection.

1. An order authorizing an inspecting officer under section 54 Inquiry officer under section 55 or inspecting officer under section 56 shall among other things constitute the following -.-(Amended on 24.5.82)

(a) the name of 'the person authorized to conduct the inquiry or inspection:

(b) the name of the society whose affairs are to be inquired into or whose books are to be inspected;

(c) the specific point or points on which the inquiry or inspection is to be made, the period within which the inquiry or inspection is to be completed and report submitted to the Registrar;

(d) cost of inquiry:

(e) any other matter relating to the inquiry or inspection.

2. A copy of every order authorizing inspection under section 54, Inquiry under sec. 55 or Inspection under see, 56 shall be supplied to the Financing Bank. (Amended on 24.5.82)

3. If the inquiry or inspection cannot be completed within the time specified in the order referred to in sub-rule (1) the person conducting the inquiry or inspection shall submit an interim report starting the reasons for failure to complete the inquiry or inspection and the Registrar if he is satisfied,\grant such extension of time for the completion of the inquiry or inspection as he may deem necessary or he may withdraw the inquiry or inspection from the officer to whom it is entrusted and hold the inquiry or inspection himself or entrust it to such other person as he deems fit.

4. On receipt of the order referred to in sub-rule (1) the person authorized to conduct the inquiry or inspection shall proceed to examine the relevant books of accounts and other documents in possession of the society or any of its officers members, agents or servants and obtain such information or explanation from any such officers, members, agents or servants in regard to the transactions and working of the society as he deems necessary for conduct of such inquiry or inspection.

5. The person authorized to conduct the inquiry or inspection shall submit his report to the Registrar, on all the points mentioned in the order referred to in sub-rule (1) or rule 86. The report shall contain his findings and the reasons therefore supported by such documentary or other evidence as recorded by him during the course of his inquiry or inspection. He shall also specify in his report the cost of the inquiry or inspection together with reasons and recommend the Registrar the manner in which the entire cost of a part thereof may be apportioned, amongst the parties specified in section 57. The Registrar shall pass such orders thereon as may be considered just after giving a reasonable opportunity of being heard to the person or persons concerned.

6. If the result of any inquiry held under section 55 or an inspection made under section 56 discloses any defects in the working of the society, the Registrar may bring such defects to the notice of the society and if the society is a member of a Federal Society to the notice of the Federal Society. The society shall submit a rectification report in Form 16 and shall continue to submit such rectification reports to the Registrar till all the defects are rectified or the irregularities are remedied to the satisfaction of the Registrar.

7. The Registrar may also make an order, directing the society or its officers or the federal society to take such action, as may be specified, in the order to remedy the defects within the time specified therein.

87. Procedure for assessing damages against delinquent promoters etc. under Section 59.

1. On receipt of the report made by the auditor, or person authorized to make Inspection under section 54 or inquiry under section 55 or inspection under section 56, or by the liquidator or otherwise, the Registrar or Any other person authorized by him may make such further inquiries as he may deem necessary regarding the extent to which the person who has taken any part in the organization or management of a society or any decimal past or present, officer of the society has misapplied or retained, or become liable or accountable, for any money, property of the society, or has committed misfeasance or breach of trust in relation to the society. (Amended 24.5.82)

2. On the completion of the further inquiries under sub rule (1), where necessary, the Registrar or the person authorized by him shall issue a. notice to the person or persons concerned furnishing him on them the particulars «f the acts of misapplication, retention, misfeasance or breach of trust and the extent of his or their liability involved therein and calling upon him or them to put in statements in his or their defense within fifteen days of the date of issue of the) notice.

3. On receipt of the statements referred to in sub-rule (2), the Registrar or the person authorized by him if he is satisfied that there are reasonable grounds for holding the person or persons liable, shall frame charges.

4. The person or persons concerned shall, after the charges are framed, be asked to put in his statement in defense and to indicate the documentary or oral evidence which he would like to produce. The Registrar or the person authorized by him may permit production of other documentary or oral evidence, if considered necessary, subsequently.

5. The Registrar or the person authorized by him. shall thereafter record the evidence led by the society or the liquidator or the person or persons concerned and take on record the documents proved by them, and shall thereafter fix a date for hearing arguments of the parties.

6. On the day fixed for hearing under sub-rule (5), the Registrar or the person authorized by him, shall hear the arguments and may pass his final orders on the same day or on any day fixed by him within twenty days from the date on which the hearing was completed. On the day so fixed, the Registrar or the person authorized by him, as the case may be, shall make his final order either ordering repayment of the money or return of the property to the society together with interest at such rate as may be specified by him or to contribute such amount to the assets, of the society by way of compensation in regard to is application, retention, misfeasance or breach of trust as may be determined or may reject the claim submitted on behalf of the society.

7. The Registrar or the person authorized by him, may also provide in his order for the payment of the-cost of the proceedings under this rule or any part of such cost as he thinks just.

8. The Registrar or the person authorized by him shall furnish a copy of his order, under sub-rule (6) to the party concerned within ten days of the date on which he makes his final order.

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Last Updated : 23 Mar,2014