The Maharashtra Cooperative Societies Rule 1961

Chapter VII - Audit, Inquiry, Inspection and Supervision

Rule No 69 to 74

Rule No 69. Procedure for appointment of auditors and for conducting audit

(1) The audit of accounts of societies shall be conducted by Departmental Auditors or by certified auditors appointed by the Registrar from time to time on such terms and conditions as he deems fit :
Provided that any society or class of societies notified by the Registrar may get their accounts audited by an auditor selected from the panel of certified auditors maintained by the Registrar and published by him in the Official Gazette.
Explanation 1:-
For the purposes of this Chapter, audit shall include annual or periodical audit, continuous or concurrent audit and test or super audit and reaudit.
Explanation 2:-
For purposes of this rule, "a certified auditor" includes
(a) a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949;
(b) a person who holds a Government Diploma in co-operative accounts or a Government Diploma in co-operation and accountancy; or
(c) a person who has served as an auditor in the Co-operative Department of the State Government, 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 every three years.

(2) The audit under Section 84 shall in all cases extend back to the last date of the previous audit and shall be carried out upto 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.

(3) The auditor shall submit an audit memorandum to the society and to the Registrar in the form 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, the said accounts give all the information required by the Act in the manner so required and give true and fair view:-
(i) in the case of the balance sheet, of the state of societys affairs as at the end of the financial year or any other subsequent date up to which the accounts are made up and examined by him, and

(ii) in the case of the profit and loss account, of the profit or loss for the financial year or the period covered by the audit, as the case may be.

(4) The audit memorandum shall state:-
(i) whether the auditor had obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit;

(ii) whether in his opinion proper books of accounts, as required by the Act, these rules and the by-laws of the society have been kept by the society so far as it appears from the examination of these books; and

(iii) whether the balance sheet and profit and loss account examined by him are in agreement with the books of accounts and returns of the society.

(5) Where any of the matters referred to in sub-rule (4) are answered in the negative or with a qualification, the audit memorandum shall specify the reasons for the answer

(6) The audit memorandum 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 by-laws of the society;
(ii) all sums which ought to have been but have not been brought into account by the society;
(III) any material impropriety or irregularity in the expenditure or in the realisation of moneys due to the society;
(iv) any money or property belonging to the society which appear to the auditor to be bad or doubtful debt; and
(v) any other matters specified by the Registrar in this behalf.

(7) The summary of audit memorandum as prepared by auditor shall be read out in a general meeting. The audit memorandum 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 memorandum 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 memorandum.

(8) The Registrar may from time to time specify the form or forms in which the statements of accounts and information shall be prepared for audit by the society.

(9) On completion of his statutory audit, the auditor shall award an audit classification letter to the society whose accounts he has audited in accordance with the instructions issued by the Registrar from time to time. The list of societies to be published under sub-section (3) of Section 12 shall also specify the audit class of the society.

Rule No 70. Requisition of the federal society for inquiry

Any federal society duly authorised by a resolution of its committee, may submit a requisition to the Registrar to hold an inquiry under Section 83 in respect of any society affiliated to it, duly setting out the grounds on which the inquiry is sought. A copy of such requisition shall be supplied to the society in respect of which the requisition is made.

Rule No 71. Procedure and principles for the conduct of inquiry and inspection

(1) An order authorising inqiry under Section 83 or inspection under Section 84 shall, among other things, contain the following:-
(a) the name of the person authorised 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 authorising inquiry under Section 83 or inspection under Section 84 shall be supplied to the federal society or societies to which the society in respect of which the order is issued is affiliated.

(3) If the inquiry or inspection cannot be completed within the time specified in the order referred to in sub-rule (I), the person conducting the inquiry or inspection shall submit an interim report stating 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 (J), the person authorised 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 of the society in regard to the transactions and working of the society as he deems necessary for the conduct of such inquiry or inspection.

(5) The person authorised to conduct the inquiry or inspection shall submit his report to the Registrar, on all the points mentioned in the order referred to in subrule (i). The report shall contain his findings and the reasons therefor 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 costs of the inquiry or inspection together with reasons and recommend to the Registrar the manner in which the entire cost or a part thereof may be apportioned, amongst the parties specified in sub-section (I) of Section 85. 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) The costs of the inquiry or inspection apportioned by the Registrar under subsection (1) of Section 85 shall be recovered as provided in Section 86. The Registrar may direct that such costs or any part thereof shall be paid in the first instance from the funds of the society or in case of inspection, from the amount deposited by the creditor under clause (b) of sub-section (i) of Section 84 and then recovered and repaid to the society or the creditor, as the case may be.

Rule No 72. Procedure for assessing damages against delinquent promoters, etc. under Section 88

(1) On receipt of a report referred to in Section 88 or otherwise, the Registrar or any other person authorised 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 organisation or management of a society or any deceased, past or present officer of the society has misapplied or retained, or become liable or accountable for, any money or property of the society, or has committed misfeasance or breach of trust in relation to the society.

(2) On the completion of the further inquiries under sub-rule (J), where necessary, the Registrar or the person authorised by him shall issue a notice to the person or persons concerned furnishing him or them with particulars of 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 statement in his or their defence 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 authorised 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 defence and to indicate the documentary or oral evidence which he would like to produce. The Registrar or the person authorised by him may permit production of other documentary or oral evidence, if considered necessary subsequently.

(5) The Registrar or the person authorised by him shall thereafter record the evidence led by the society 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 both the parties.

(6) On the day fixed for hearing under sub-rule (5), the Registrar or the person authorised by him, shall hear the arguments and may pass his final orders on the same day or any date fixed by him within sixty days from the date on which the hearing was completed. On the date so fixed, 1 [the Registrar or, as the case may be, the person authorised by him 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 misapplication, retention, misfeasance or breach of trust as may be determined or may reject the claim submitted on behalf of the society.

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

(8) The Registrar or the person authorised 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.

Rule No 73. Form of Rectification Report

On receipt of an order, directing a society or its officers to rectify the defects and remedy the irregularities, issued by the Registrar under Section 82 and on receipt of an order issued by the Registrar under Section 87, the society shall, subject to the provisions of sub-sections (2) and (3) of Section 87, submit to the Registrar a rectification report in Form O. The society 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.

Rule No 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 authorise 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.

Footnote:
1. Substituted by G.N. of 23-11-1963.


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