The Bombay High Court held that the Registrar under the Maharashtra Cooperative Societies Act, 1960 (MCS Act) is empowered to investigate the affairs of cooperatives, based on complaints filed by non-members.

A society approached the High Court against orders of the Deputy Registrar and the Divisional Joint Registrar. They had initiated an inquiry against the said society after a complaint was filed by a non-member.

The Court allowed the Petition and emphasized that the Deputy Registrar made the decision without due application of mind and therefore was liable to be set aside.

The Bench of Justice Sandeep V. Marne observed, “Thus, there cannot be an absolute proposition that a non-member can never file a complaint with the Registrar or that the Registrar cannot look into such complaint for suo moto ordering an inquiry”.

Advocate S.S. Panchpor appeared for the Petitioner and Additional Government Pleader A.P. Vanarase appeared for the State.

The petitioner, a Cooperative Credit Society, approached the High Court challenging the decision of the Deputy Registrar to appoint a Special Auditor to investigate allegations made by non-members. The Petitioner argued that the statutory framework of the MCS Act, does not permit an inquiry based on a non-member's application.

The Court framed the following issue: “Whether an inquiry into working or financial affairs of a Society can be ordered by the Registrar on the basis of an application made by a non-member”.

The Bench observed that, per Section 83 of the MCS Act, an inquiry into a society's constitution, workings, or financial conditions can be initiated in three situations: (i) suo moto by the Registrar, (ii) on the application of 1/5th members of the society, and (iii) based on a special report under the 3rd proviso of section 81(5B).

Furthermore, the Bench noted that the use of the term 'may' for the Registrar's suo moto inquiry suggests discretionary power, indicating that the Registrar can choose to order an inquiry or not upon receiving information. While the Registrar is obliged to conduct an inquiry if 1/5th members apply, there is no such obligation for suo moto inquiries from non-members.

Therefore, the Court disagreed with the argument that a non-member could never file a complaint. The Court noted that a complaint from a non-member could serve as a source of information for the Registrar's discretionary suo moto power. The decision to entertain an application from a non-member depends on the specific circumstances, the information provided, the complainant's familiarity with society affairs, and the Registrar's application of mind to such information.

The Court observed that there was no evidence of the Deputy Registrar's thoughtful consideration of the allegations in the complaint, and the decision was made mechanically, treating the complaint on par with a mandatory requisition by 1/5th of members. The Court noted that the four ex-employees who resigned allegedly due to disciplinary proceedings had signed the complaint, using the name of an ex-president of a political party. The Bench observed that the Deputy Registrar did not apply an independent mind to the complaint, and the decision to order an inquiry was therefore considered erroneous.

Accordingly, the Court allowed the Petition and set aside the orders of the Deputy Registrar and the Divisional Joint Registrar.

Cause Title: Janhit Nagari Sahakari Pat Sanstha Maryadit v State of Maharashtra & Ors. (2023:BHC-AS:38113)

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