R88

Inquiries Under Section 83 & 88
Of
The Maharashtra CoCo-operative Societies Act 1961
BY CA. B. B. MANE
132 Certificate Course in Audit of Co-op
Banks & Societies
B. B. Mane & Co., Chartered Accountants Ph. (020) 2687 3684 (M) 9422308272
1
1
Sections and Rules under which Inquires are

conducted The MCS Act 1960 and
The MCS Rules1961
1.
2.
3.
4.
Section 83 Inquiry by Registrar

Rule 71 Procedure and principles for the conduct
inquiry and inspectionSection 88 Power of Registrar to Assess damages
against delinquent promoters, etc.
Rule 72 Procedure for assessing damages against
delinquent promoters etc. under section 88
2
2
Nature of Inquiry under Section 83

An enquiry is of the constitution, working
and financial conditions of Society
Sec 83 inquiry may be order by registrar
on his own motion and should be ordered
on the application of one-third members
of society.
It is administrative nature inquiry of
society and not individuals. Tirath Singh v
Poona Contractors Co-op Bank
1970CTD 278-B
3
3
Who can conduct inquiry

U/s 88 & 83 of MSC Act 1960
a)
b)
Registrar himself; or
Person authorized by him.
4
4
Qualification of authorized officer (Inquiry

Officer) circular No. ADM/184(Su) Dt. 22-12
12--1963.
He should be held an post not lower in rank that is
District Dy Registrar, Dy Collector, or Civil Judge
ii. If above persons are not available than the person to
be selected should possess legal qualification and
background, which will help him to take judicious
view.
iii. The character, moral background and reputation
should indicate capacity to give judgment without
fear or favour.
i.
5
5
Basis on which Registrar can order

inquiry U/s 88 of MCS Act1960
a.
b.
c.
d.
e.
Auditors report; or
An authorized persons inquiry report U/s 83; or
An authorized persons inspection report U/s84; or
Liquidators report U/s 105; or
Otherwise, i.e. any other departmental report; or any
other information which registrar may have in
possession.
6
6
Registrar should satisfy on the basis of report, that any

persons who has taken part in the
1)
2)
3)
Organization; or
Management or
Winding up; of society
and who have taken such part, within period of 5 years prior to
commencement of audit or inquiry, inspection, winding up of
society; (such person may be deceased / past / present officer of
society)
Such persons should have
a)Misapplied or
b)Retained or
c)He has became liable or accountable for
i.
Any money; or
ii. Property;
and such person has been guilty of

Misfeasance; or

Breach of trust;
in relation to Society
7
7
Procedure to be adopted while conducting enquiries

A. Enquiry Procedure most of the time is prescribed
by the statute under which enquiry is ordered.
B.
Enquiry officer has to follow stringent tests laid
down by Evidence Act, to accept any material as
evidence.
C. Enquiry officer more particularly in case of QuasiJudicial inquiry will have to work as a Court and he
requires to give reasonable opportunity to prove
the persons his/her/its point of view against whose
enquiry has ordered.
D. Inquiry order some time has to be pronounced.
E.
Inquiry officer need to act in different role as
investigator, judge, expert and pleader while
conducting inquiry
8
Procedure to be adopted while conducting enquiries

F.
There is no standard format of enquiry report,

however one needs to cover following points
i. Procedure adopted while conducting enquiry
ii. Reasons to frame opinion in respect of
framing of charges sheet or to carry any act
like enquiring any person or investigating
activity and its relevance.
iii. Inquiry officer also required to state in brief
why particular procedure has been adopted to
conduct enquiry.
iv. Inquiry officer needs to maintain diary, which
will establishes how evidence has been
collected and which chronological order has
followed by Inquiry officer.
9
Procedure to be adopted while conducting inquiries

v.
Even inquiry officer needs to give reasons, if any

person who has named in inquiry order and if
inquiry officer is of opinion that such persons
name to be excluded from inquiry.
vi. Inquiry officer should analysis arguments of
attorneys and advocates and give reasoning for
acceptance or non acceptance of arguments.
vii. Inquiry officer should take precaution to obtain
proper power of attorney from authorized
representative,
advocates,
Chartered
Accountants those who are appearing before
Inquiry officer
10
10
Negligence by itself does not constitute misconduct. However,

gross negligence in the performance of duties is misconduct
even though it may not involve mens rea.
Recording of Statement of Witnesses: The Enquiry officer
need not record the evidence of the witnesses as in regular
courts, Sukh Dev Viswanth Berge Vs. Food Corporation of
India., 1989 (2) LLJ 277 (Bom).
The Rules of making of a memorandum of the substance of
what the witness deposes and such memorandum shall be
written and signed. However it is advisable to record in detail
the statement of witnesses examined before the enquiry officer
to avoid accusation of bias, malafides.
The General principal of Law of Burden of proof is basic
principal which an enquiry officer has to follow.
11
11
MISFESANCE

Improper performance of some lawful Act, In other
words it means misconduct, delinquency and breach of
duty resulting loss to the Institution
(Delinquency means neglect of duty or wrong doing or
misdeed)
LOSSES

Proceeding Under Section 88 have to be ordered when
losses are actually incurred by a Society and not on
losses may occur depending on some future events.
Losses to society must be direct one and not remote
one.
BREACH OF TRUST

Violation or non-performance of duty imposed by law
on a person standing in a fiduciary relation to another.
12
12
Kumari Jethi T. Sipahimalani vs The Maharashtra State ..

(1974) 76 BOMLR 179
Section 88 can be invoked by the Registrar only when he

comes to the conclusion prima facie that the persons
concerned with the management or organisation of the
society had "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" and every such person, who according to the
Registrar is liable, should contribute such sum to the Society
by way of compensation in regard to the appropriation, or
retention or misfeasance or breach of trust. Having regard to
the General Body Resolutions passed in the present case in
exercise of its plenary powers under Section 72, the Registrar
had no power to come to such a conclusion.
13
Misfeasance & Negligence case Law

It appears to us that the Tribunal was completely wrong in

not examining the profitability and/or advisability of the
transaction of October 3, 1951 and arriving at its finding
regarding negligence and misfeasance of the petitioner.
Without examining first these questions the Tribunal should
not have proceeded to hold that the petitioner was guilty of
misfeasance. Gangadhar Dattatraya Sule vs The C.K.P.
Co-Operative Credit ... AIR 1973 Bom 186, (1972) 74
BOMLR 814
14
14
MISAPPLICATION
Using the money of the society in a manner not
warranted by the law or rules made under the Act
or by the bye-laws of the society.
RETENTION
Retention is an act of retaining or withholding or
keeping for oneself. In such a case the property
may not be misapplied but it is kept by the person
for his own use in his own custody unlawfully.
REASONABLE OPPORTUNITY
Reasonable opportunity implied: 1) One is person against whom the charges are leveled
should be informed about the details of charges.
2) Reasonable time is given to him to put forth his say about
the charges leveled against him for submitting his
explanation against charges. The reasonable opportunity
means real and adequate opportunity.
15
15
Misapplication & Breach of Trust Case law

It could not be said that honorarium paid was misapplication

when it was granted by the General Body in exercise of its
powers. It could not also be said that it was retained illegally
by petitioner No. 6 or any one else, or any of them had
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 could not have,
therefore, directed the enquiry under Section 88. In the facts
and circumstances of this case, the Inquiry Officer could not
have framed any charges in this case. Kumari Jethi T.
Sipahimalani vs The Maharashtra State (1974) 76
BOMLR 179
B. Mane & Co.,

Co Chartered Accountants Ph. (020) 2687 3684 (M) 9422308272
16
Kisanlal S/O Dagdulal Rathi vs The State Of Maharashtra

CRIMINAL WRIT PETITION NO. 922 OF 2008
There
cannot be two opinion about the legal proposition that

when the FIR does not indicate any material about complicity
of the petitioners, then the same may be quashed in the
exercise of writ jurisdiction under Article 227 of the
Constitution. The civil dispute cannot be ordinarily allowed to
be converted into criminal action. At the same time, it is well
settled that if on same set of facts, civil wrong as well as
criminal wrong is shown to have been committed, then the
mere existence of civil remedy is not a ground for quashing the
FIR.
. B. Mane & Co.,

17
Kisanlal S/O Dagdulal Rathi vs The State Of Maharashtra

CRIMINAL WRIT PETITION NO. 922 OF 2008
For the reasons stated hereinabove, I am of the opinion that

there is some material, which may not be sufficient enough to
immediately reach conclusion of the guilt, but has some
potentiality to indicate connivance of the petitioners with the
Directors and officials of the CPCO Bank for creating the
loan documents with oblique intention to misappropriate the
amounts. It cannot be overlooked that the financial bunglings
of the concerned Directors, officials and such borrowers have
ultimately brought severe financial crisis to the discredit of
the CPCO Bank. Considering these aspects, I do not find any
substantial reason to interfere with the FIRs at the premature
stage.
B. B. Mane & Co.,

18
Case Laws of FIR

In
"R. Kalyani v. Janak C. Mehta and others" (2009) 1 SCC 516,

the Apex Court held that where the allegations do not show
that the property was entrusted with the appellant or
otherwise had dominion over it, or any criminal breach of trust
was committed, the quashing of the FIR would be proper and
need not be interfered with.
In "Mahesh Chaudhary v. State of Rajasthan and another"
(2009) 4 SCC 439, the Apex Court held that ( 28 ) dispute
being primarily of a civil nature by itself is not a ground to
quash the proceedings because in cases of forgery and fraud,
there would always be some element of civil nature. The
evidence pertaining to charge of conspiracy is yet to be
collected.
B. B. Mane & Co.,

19
Charge sheet should include following

things: Details of charges leveled.
Specific allegations against each of the individual,
one who has charge-sheeted.
How misfeasance or nonfeasance has led to a loss.
The amount of loss should clearly indicated.
20
20
List of Documents and Records to be

maintained by Inquiry Officer
1.
2.
3.
4.
5.
6.
Copy of Order of Appointment of inquiry officer,

Copy appointment acceptance/rejection letter,
Copy of summons issued to principal officer,
Working papers of prima-facie Inquiry,
Any other Inquiry report or Special audit report,
audit report or liquidators report, or inspection
report or any other report on which basis inquiry
has been institute.
List of delinquents along with their address.
21
21

7)
8)
9)
10)
11)
12)
13)
List of all relatives of decease delinquent who have

inherited property of delinquent.
Copies of show cause notices issued to delinquents.
Replies received from delinquents to show cause
notice.
List of delinquents to be prepared and maintained on
whom charges are framed.
Copies of charges framed to be maintained.
List of witnesses.
Replies received from delinquents to charges.
22
22

Analysis of Arguments of attorneys and advocates
and reasoning of acceptance or non acceptance of
arguments.
15) Relevant laws and other statutory circulars etc.,
should be kept in separate file.
16) Notes, noting of important points to be verified
subsequently, come across during hearing.
17) Preparation of Enquiry Report
14)
23
23
U/s 89 Of MCS ACT 1960

Power to enforce, attendance etc.,
The registrar or the person authorized by him,
when acting under section 83, 84 or 88 shall have the
power to summon and enforce the attendance of any
person 4[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.
24
24
Elements of fraud

1.
2.
3.
4.
5.
6.
7.
8.
9.
Common law fraud has nine elements:

a representation of an existing fact;
its materiality;
its falsity;
the speaker's knowledge of its falsity;
the speaker's intent that it shall be acted upon by the
victim;
plaintiff's ignorance of its falsity;
plaintiff's reliance on the truth of the representation;
victim's right to rely upon it; and
consequent damages suffered by victim.
25
25
Ingradience of Financial Enquiries

1)
2)
3)
4)
One needs to find out who was rightful person who is

authorized to utilize funds and its purpose for which same has
been sanctioned.
What are duties cast upon the persons or organization who are
dealing with funds?
In case of Financial enquiry Inquiry officer needs to interpret
financial records, before accepting any financial records as a part
of enquiry material and its relevance and creditability to be
tested.
Inquiry officer need to give reasonable opportunity to concern
person to prove or to allow any other interpretation of records
by record keeper to prove his view.
26
26
Ingradience of Financial Enquiries

5)
6)
7)
Inquiry officer in case of financial enquiry require to

understand prevalent commercial practice in the country,
trade or activity to be enquired.
Enquiry reports and/or order in case of financial enquiry
needs to be Judicious.
Inquiry officer can accept oral evidence/information but
it requires to be passed through or stringent test of
Evidence Act.
27
27
//20..
DRAFT OF SUMMONS
USA/INQ./1/20..-20..
To
The Principal Officer
Ref.: - Registrar of Co-operative Societies Order No. 100 /
NESS /
NEYAMAN / INQUIRY / 88 / 20.., Dated //20
Sir,
As an Inquiry Officer, appointed by the Registrar of Cooperative Society, Delhi, by his order dated //20 Issued
Under Section 88 of The Maharashtra Co-operative Societies
Act, 1960, to assess damages and to pronounce final order of
recovery of damages with interest from delinquent persons.
Whereas your attendance is necessary, you are hereby
required to produce documents and papers as listed below, and
give information before me on the day of 20.. at :.. am/pm
in the forenoon/afternoon at our/ your office. If you are fail to
comply with this order without lawful excuse,
28
28
you will be subject to the consequences of non-attendance laid

down in Rule 12 of order XVI of Code of Civil Procedure, 1908.
GIVEN under my hand and the seal of an Enquiry Officer,
this day of 20
SD/(U. S. Know)
(Inquiry Officer)
Copy to: -
The Inquiry officer appointing authority.
Enclosed List of Documents to be produced.

1. Names of directors alongwith present address for the
period 19..-20..
2. An expenses details of Purchases of lime, Mill Sanitation
Material and advances., etc., stated in above referred
order issued by inquiry officer appointing authority.
3. An audit report alongwith Balance Sheet, Profit & Loss
Accounts for period as stated above.
29
29
TALANT & TACT

Talent knows what to do,
Tact knows how to do,
Talent makes man respectable,
Tact makes man acceptable.
Talent is wealth
Tact is ready money
Dont waste time learning the tricks of trade,
Instead learn the trade.
GOOD INQUIRY OFFICER IS ONE, WHO HAS
EAGLES EYE, LIONS HEART AND HAVE RIGHT
COMBINATION OF TALENT & TACT
30
30
31
31

R88

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

R88

Uploaded by

Copyright:

Available Formats

Inquiries Under Section 83 & 88

Sections and Rules under which Inquires are

Section 83 Inquiry by Registrar

Nature of Inquiry under Section 83

Who can conduct inquiry

Qualification of authorized officer (Inquiry

Basis on which Registrar can order

Registrar should satisfy on the basis of report, that any

Procedure to be adopted while conducting enquiries

Procedure to be adopted while conducting enquiries

There is no standard format of enquiry report,

Procedure to be adopted while conducting inquiries

Even inquiry officer needs to give reasons, if any

Negligence by itself does not constitute misconduct. However,

Kumari Jethi T. Sipahimalani vs The Maharashtra State ..

Section 88 can be invoked by the Registrar only when he

Misfeasance & Negligence case Law

It appears to us that the Tribunal was completely wrong in

Misapplication & Breach of Trust Case law

It could not be said that honorarium paid was misapplication

B. Mane & Co.,

Kisanlal S/O Dagdulal Rathi vs The State Of Maharashtra

cannot be two opinion about the legal proposition that

. B. Mane & Co.,

Kisanlal S/O Dagdulal Rathi vs The State Of Maharashtra

For the reasons stated hereinabove, I am of the opinion that

B. B. Mane & Co.,

Case Laws of FIR

"R. Kalyani v. Janak C. Mehta and others" (2009) 1 SCC 516,

B. B. Mane & Co.,

Charge sheet should include following

List of Documents and Records to be

Copy of Order of Appointment of inquiry officer,

List of Documents and Records to be

List of all relatives of decease delinquent who have

List of Documents and Records to be

U/s 89 Of MCS ACT 1960

Common law fraud has nine elements:

Ingradience of Financial Enquiries

One needs to find out who was rightful person who is

Ingradience of Financial Enquiries

Inquiry officer in case of financial enquiry require to

you will be subject to the consequences of non-attendance laid

The Inquiry officer appointing authority.

Enclosed List of Documents to be produced.

TALANT & TACT

You might also like