Section 81 - Audit
[(1) (a) The Registrar shall audit, or cause to be audited at least once in each cooperative
year, by a person authorised by him by general or special order in writing in
this behalf the account of every society which has been given financial assistance
including guarantee by the State Government,
[or Government undertakings, from time
to time, and the accounts of the apex societies, State and District Level Federal Societies,
District Central Co-operative Banks, Co-operative Sugar Factories, Urban Co-operative
banks, Co-operative Spinning Mills, District and Taluka Co-operative Sale and Purchase
Organisations, and any such Society or class of Societies which the State Government
may, from time to time, by notification in the Official Gazette, specify.]
(b) The societies other than the societies referred to in clause (a) shall arrange to get their
account 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:
[* * * * * *]
Provided that every third year the accounts of such societies shall be audited by the
Registrar of by a person authorised by him in this behalf.
[* * *] that, the Registrar may, for reasons to be recorded in writing, audit or
cause to be audited accounts of any such societies or any year and at any time.]
(2) The audit under sub -section ( 1) shall include examination or verification of the
following items, namely:--
(i) overdues of debts, if any;
(ii) cash balance and securities and a valuation of the assets and liabilities of the society;
(iii) whether loan and advances and debts made by the society on the basis of security
have been properly secured and the terms on which such loans and advances are made or
debts are incurred are not prejudicial to the interest of the society and its members;
(iv) whether transactions of the society which are represented merely by book entries are
not prejudicial to the interest of the society;
(v) whether loans and advances made by the society have been shown as deposits;
(vi) whether personal expenses have been charged to revenue account;
(vii) whether the society has incurred any expenditure in furtherance of its objects;
(viii) whether the society has properly utilised the financial assistance granted by
Government or Government undertakings or financial institutions, for the purpose for
which such assistance was granted;
(ix) whether the society is properly carrying-out its objects and obligations towards
[(2A) Where, in the opinion of the State Government, it is necessary in the public
interest to do so in relation to any society or class of societies for ensuring management
thereof in accordance with sound business principles or prudent commercial practices, the
State Government may, by order, direct [that such society or class of societies shall
prepare and maintain its accounts in the form determined by the State Government, from
time to time and] that cost audit or performance audit or both, of such society or class of
societies, as may be specified in the order, shall be conducted.
(2B) Where any order is issued under sub -section (2A), the Registrar shall cause such
audit of such society or class of societies to be conducted by a cost accountant who is a
member of the Institute of Cost and Works Accountants of India constituted under
section 3 of the Cost and Works Accountants Act, 1959.]
(3) [(a) The Registrar or the person auhorised shall, for the purpose of audit, at all times
have access to all the books, accounts, documents, papers, securities, cash and other
properties belonging to, or in the custody of, the society, and may summon any person in
possession or responsible for the custody of any such books, accounts, documents,
papers, securities, cash or other properties, to produce the same at any place at the
headquarters of the society or any branch thereof.
[(b) The Registrar shall be competent to depute Flying Squard to a society or societies
for examination of books, records, accounts, and such other papers and for verification of
cash balance. The report of the Flying Squad shall be deemed to be an audit report for the
purpose of taking further action, if necessary.
(c) The Registrar or the person authorised by him in this behalf may carry out or cause to
be carried out the test audit of the accounts of any society. The test audit shall include the
examination of such items as may be prescribed.]
(4) Every person who is, or has at any time been, an officer or employee of the society,
and every member and past member of the society, shall furnish such information in
regard to the transaction and working of the society as the Registrar, or the person
authorised by him, may require.
(5) The auditor appointed under sub-section (1) shall have the right to receive all notices
and every communication relating to the annual general meeting of the society and to
attend such meeting and to be heard thereat, in respect of any part of the business with
which he is concerned as auditor.
[(5A) If, during the course of audit of any society, the auditor is satisfied that some
books of accounts or other documents contain any incriminatory evidence against past or
present officer or employee of the society the auditor shall immediately report the matter
to the Registrar and, with previous permission of the Registrar, may impound the books
or documents and give a receipt thereof at the society.
(5B) The auditor shall submit an audit memorandum duly signed by him 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 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.]
(6) If it appears to the 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 by order
provide for such re-audit and the provisions of this Act, applicable to audit of accounts of
the society shall apply to such re-audit.
1. Sub-section ( 1) was substituted, by of Mah. 20 of 1986, s. 43(a).
2. This portion was sub stituted for the words "Government undertakings, or financial institution, from time to time by Mah. 13 of 1994, s. 8.
3. This proviso deleted by Mah. Co-operative Societies (Amendment) Act, 1995 s. 4 (a). Act XXVII of 1996 MGG 1996 5 - 9 - 1996 pt. 8 p. 775. Deleted proviso read as under:--
Provided that every third year the accounts of such societies shall be audited by the Registrar or by a person authorised by him in this behalf
4. The word "further" was deleted by Mah. Co-operative Societies (Amendment) Act, 1995 s. 4(b).
5. Sub-section ( 1) was sub stituted, by of Mah. 20 of 1986, s. 43(a).
6. Sub-sections ( 2 A) and ( 2B) were inserted, by Mah. 20 of 1986, s. 439(c).
7. This portion was inserted by Mah. 10 of 1988, s. 16.
8. Sub-section ( 3) was re-lettered as clause (a) thereof and clause (b) and (c) were added, by Mah. 20 of 1986, s. 43(d).
9. Sub -sections ( 5A) and ( 5B) were inserted, by Mah. 10 of 1988, s. 439(e).
Section 82 - Rectification of defects in accounts
If the result of the audit held under the last preceding section 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 the
action taken by it thereon. The Registrar may also make an order directing the society or
its 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, such order shall be made after consulting the federal society.
Section 83 - Inquiry by Registrar
[(1) The Registrar may of his own motion, and shall on the application of one-third of
the members of a society, himself or by a person duly authorised by him in writing in this
behalf, hold an inquiry into the constitution, working and financial conditions of a
(2) Before holding any such inquiry on an application, the registrar may
to the nature of allegations and the inquiry involved, require the applicant to deposit with
him such sum of money as he may determine,] towards the cost of the inquiry. If the
allegations made in the application are substantially proved at the inquiry, the deposit
shall be refunded to the applicant, and the Registrar may under section 85, after
following, the procedure laid down in that section, direct from whom and to what extent
the cost of the enquiry should be recovered. If it is proved that the allegations were false,
vexatious or malicious, the Registrar may likewise direct that such cost shall be recovered
from the applicant. Where the result of the inquiry shows that the allegations were not
false, vexatious or malicious, but could not be proved, such cost may be borne by the
(3) (a) All officers, members and past members of the society in respect of which an
inquiry is held, and any other person who, in the opinion of the officer holding the
enquiry is in possession of information, books and papers relating to the society, shall
furnish such information as in their possession, and produce all books and papers relating
to the society which are in their custody or power, and otherwise give to the officer
holding an inquiry all assistance in connection with the inquiry which they can
(b) If any such person refuses to produce to the Registrar or any person authorised by him
under sub-section (1), any book or papers which it is his duty under clause (a) to produce
or to answer any question which put to him by the Registrar or the person authorised by
the Registrar in pursuance of sub-clause (a) the Registrar or the person authorised by the
Registrar may certify the refusal and the Registrar after hearing any statement which may
be offered in defence punish the defaulter with a penalty not exceeding five hundred
rupees. Any sum imposed as penalty under this section shall on the application by the
Registrar or the person authorised by him to a Magistrate having jurisdiction be
recoverable by the Magistrate as if it were a fine imposed by himself.
(4) The result of any inquiry under this section shall be communicated to the society
whose affairs have been investigated.
(5) It shall be competent for the Registrar to withdraw any inquiry from the officer to
whom it is entrusted and to hold the inquiry himself or entrust it to any other person as he
1. Sub-sections ( 1) and ( 2) were substituted by Mah. 3 of 1974, s. 19.
2. These words were sub stituted for the words, letters and figures "require the applicant to deposit with him a sum of Rs. 100 " by Mah. 20 of 1986, s. 44.
Section 84 - Inspection of books of indebted society
(1) On the application of a creditor of a society who,--
(a) satisfies the Registrar that the debt is a sum then due, and that he has, demanded
payment thereof and has not received satisfaction within reasonable time, and
(b) deposits with the Registrar such sum as the Registrar may require as security for the
costs of any inspection of the books of the society, the Registrar may, if he thinks it
necessary, inspect or direct some person authorised by him by order in writing in this
behalf to inspect the books of the society.
(2) The Registrar shall communicate the result of any inspection to the applicant, and to
the society whose books have been inspected.
(3) It shall be competent for the Registrar to withdraw any order of inspection from the
officer to whom it is entrusted, and to inspect himself or entrust it to any other person as
he deems fit.
(4) The powers of inspection conferred on the Registrar by this section may be
exercised by him of his own motion in respect of any society, which is indebted to
Government or for which share capital (wholly or partly) is provided by Government or
where any financial interest of Government is otherwise involved.
1. Sub-section (4) was added by Mah. 3 of 1974, s. 20.
Section 85 - Costs of inquiry and inspection
(1) Where an inquiry is held under section 83 or an inspection is made, under the last
preceding section, the Registrar may apportion the costs, or such part of the costs, as he
may think just between the society, the members or creditors demanding the inquiry or
inspection, the officers or former officers and the members or past members or the estates
of the deceased members of the society:
(a) no order of apportionment of the costs shall be made under this section unless the
society or person or the legal representative of the deceased person liable to pay the costs
thereunder, has or have been heard, or has or have had a reasonable opportunity of being
(b) the Registrar shall state in writing the grounds on which the costs are apportioned.
(2) No expenditure from the funds of a society shall be incurred, for the purpose of
defraying any costs in support of any appeal preferred by any person other than the
society against an order made under the foregoing sub-section.
Section 86 - Recovery of costs
Any sum awarded by way of costs under the last preceding section, may be recovered, on
an application by the Registrar to a Magistrate having jurisdiction in the place where the
person from whom the money is claimable resides or carries on business, and such
Magistrate shall proceed to recover the same in the same manner as if it were a fine
imposed by himself.
Section 87 - Registrar to bring defects disclosed in inquiry or inspection to notice of society
(1) If the result of any inquiry held under section 83 or an inspection made under section
84 discloses any defects in the constitution, working or financial conditions or the books
of society, the Registrar may bring such defects to the notice of the society. The Registrar
may also make an order directing the society or its officers to take such action as may be
specified in the order to remedy the defects, within the time specified therein.
(2) The society concerned may within sixty days from the date of any order made by the
Registrar under the foregoing sub-section appeal against it to the State Government.
(3) The State Government may, in deciding the appeal, annul, reverse, modify or confirm,
the order of the Registrar.
(4) If a society fails to rectify the defects disclosed in the course of or as a result of an
audit under section 81 or fails to rectify the defects as directed by the Registrar, and
where no appeal has been made to the State Government within the time specified in the
order, or where on the appeal so made the State Government has hot annulled, reversed
or modified the order, the Registrar may himself take steps to have the defects rectified,
and may recover the costs from the officer or officers of the society who, in his opinion,
has or have failed to rectify the defects.
Section 88 - Power of Registrar to assess damages against delinquent promoters, etc.
(1) Where, in the course of or as a result of an audit under section 81 or an inquiry under
section 83 or an inspection under section 84 or the winding up of a society, the Registrar
is satisfied on the basis of the report made by the auditor or the person authorised to make
inquiry under section 83 or the person authorised to inspect the books under section 84 or
the Liquidator under section 105
or other wise that any person who has taken any part in
the organisation or management of the society or any deceased, or past or present officer
of the society has, within a period of five years prior to [the date of commencement of
such audit or date of ord er for inquiry, inspection or] winding up, misapplied or retained,
or become liable or accountable for, any money or property of the society, or has been
guilty of misfeasance or breach of trust in relation to the society, the Registrar or a person
authorised by him in that behalf may frame charges against such person or persons, and
after giving a reasonable opportunity to the person concerned and in the case of a
deceased person to his representative who inherits his estate, to answer the charge, make
an order requiring him to repay or restore the money or property or any part thereof, with
interest at such rate as the Registrar or the person authorised under this section may
determine, or to contribute such sum to the assets of the society by way of compensation
in regard to the misapplication, retention, misfeasance or breach of trust, as he may
(2) The Registrar or the person authorised under sub- section ( 1) in making any order
under this section, may provide therein for the payment of the cost or any part thereof, as
he thinks just, and he may direct that such costs or any part thereof shall be recovered
from the person against whom the order has been issued.
(3) This section shall apply, notwithstanding that the act is one for which the person
concerned may be criminally responsible.
1. These words were sub stituted for the words "date of such audit, inquiry, inspection or ord er for" by Mah. 33 of 1963 s. 18.
Section 88A - Deposit towards fees of inquiry
Where the Registrar on his own motion decides and orders an inquiry under section 83 or
proceeds or authorises to name inquiry under sections 88, he may, having regard to the
nature of allegations, and the inquiry, involved, require the society concerned to deposit
with him such sum of money as he may determine, towards the cost of inquiry. If the sum
so determined, is not deposited with the Registrar within 15 days from the date of receipt
of the order requiring the society to deposit the sum, it shall on a certificate issued by the
Registrar, be recoverable as an arrears of land revenue.
1. Section 88 A was inserted by Mah. 20 of 1986, s. 45.
Section 89 - Power to enforce, attendance etc.
The Registrar or the persons authorised by him, when acting under section 83, 84 or 88
shall have the power to summon and enforce the attendance of any person [and
examining him on oath or affirmation or by affidavit] or to compel the production of any
document or other material object by the same means and in the same manner as is
provided in the case of a Civil Court under the Code of Civil Procedure, 1908.
1. These words were sub stituted for the words "to give evidence", by Mah. 33 of 1963, s. 19.
Section 89A - Power to inspect working of society
(1) It shall be competent for the Registrar to inspect orcause to be inspected the working
of any society to ensure that--
(a)the provisions of the Act, rules and bye-laws of the society are being properlyfollowed
by the society;
(b)the records and books of accounts are kept in proper forms;
(c)the business of the society is being run on sound business principles;
(d)the society is following the co-operative principles and the directives ordirections given
by the State Government in accordance with the provisions ofthis Act and the rules made
Provided that, inspection of the societies specified under section 73G shall be undertaken
by the Registrar or by the officer not below the rank of
[Deputy Registrar] of Cooperative
Societies authorised by him in this behalf.
(2) For the purpose of supervision over the societies,the Registrar shall have the power--
(a)to inspect the records and books of the accounts of any society and for that purpose he
shall have, at all times, access to all the records and books of accounts of the society; and
(b)to summon any officer or employee who has the custody of the records or books of
accounts of the society to produce them before him.
(3) The State Government may levy supervision fees on any 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.
(4) Every society liable to pay the fees levied under sub-section (3) shall pay such fees by
such date and in such manner as the State Government may specify in the notification
issued under sub-section (3).
(5) The State Government may having regard to the financial position of any society or
class of societies by general or special order published in the Official Gazette exempt such
society or class of societies from payment of such fees for such period as may be specified
in such order or reduce or remit in whole or in part such fees.
1. Section 89A was inserted by Mah. 20 of 1986,s. 46.
2. These words were substituted for the words "Joint Registrar" by Mah. 13 of 1994, s. 9.
Section 90 - Constitution or recognition of federal authority to supervise working of societies
(1) The State Government may constitute or recognise one or more co-operative federal
authorities, in such manner as may be prescribed and subject to such conditions as the
State Government may impose, for the supervision of a society or a class of societies and
may frame rules for making grants to such an authority.
(2) The State Government may, by general or special order, require of 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
authorised in that behalf has incurred or is likely to incur, in respect of supervision of
(3) A society to which sub-section (2) is applicable shall pay to such authority such fee as
may be prescribed within a reasonable time and, if it fails to pay such fee within a
reasonable, time the authority may recover it as if it were an arrear of land revenue.