(1) Every multi-State co-operative society shall cause to be audited by an auditor referred to in sub-section (2), its accounts at least once in each year.
(2) Every multi-State co-operative society shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting and shall, within seven days of the appointment, give intimation thereof to every auditor so appointed:
Provided that such auditor or auditors may be appointed from a panel of auditors approved by the Central Registrar or from a panel of auditors, if any, prepared by the multi-State co-operative society.
(3) Every auditor appointed under sub-section (1) shall, within thirty days of the receipt from the multi-State co-operative society of the intimation of his appointment, inform the Central Registrar in writing that he has accepted, or refused to accept, the appointment.
(4) A retiring auditor shall be re-appointed unless--
(a) he is not qualified for re-appointment;
(b) he has given the multi-State co-operative society a notice in writing of his unwillingness to be re-appointed;
(c) a resolution has been passed at the general meeting of members appointing somebody instead of him or providing expressly that he shall not be re-appointed; or
(d) where notice has been given of an intended resolution to appoint some person or persons in the place of a retiring auditor, and by reason of the death, incapacity or disqualification of that person or all those persons, as the case may be, the resolution cannot be proceeded with.
(5) Where at an annual general meeting no auditors are appointed or re-appointed, the Central Registrar may appoint a person to fill the vacancy.
(6) First auditor or auditors of a multi-State co-operative society shall be appointed by the board within one month of the date of registration of such society and the auditor or auditors so appointed shall hold office until the conclusion of the first annual general meeting:
Provided that--
(a) the multi-State co-operative society may, at a general meeting, remove any such auditor or all or any of such auditors and appoint in his or their places any other person or persons who have been nominated for appointment by any member of the multi-State co-operative society and of whose nomination notice has been given to the members of the multi-State co-operative society not less than fourteen days before the date of the meeting; and
(b) if the board fails to exercise its powers under this sub-section, the multi-State co-operative society in the general meeting may appoint the first auditor or auditors.
(7) (a) The multi-State co-operative society may fill any casual vacancy in the office of an auditor; but while any such vacancy continues, the remaining auditor or auditors, if any, may act:
Provided that where such vacancy is caused by the resignation of an auditor, the vacancy shall only be filled by the multi-State co-operative society in general meeting.
(b) Any auditor appointed in a casual vacancy shall hold office until the conclusion of the next annual general meeting.
(8) Any auditor appointed under this section may be removed from office before the expiry of his term by the multi-State co-operative society in general meeting.
(9) The remuneration of the auditors of a multi-State co-operative society--
(a) in the case of an auditor appointed by the board or the Central Registrar may be fixed by the board or the Central Registrar, as the case may be; and
(b) subject to clause (a), shall be fixed by the multi-State co-operative society in general meeting or in such manner as the multi-State co-operative society in general meeting may determine.
Explanation.-- For the purposes of this sub-section, any sums paid by the multi-State co-operative society in respect of the auditors' expenses shall be deemed to be included in the expression "remuneration".
Section 71 - Provision as to resolutions for appointing or removing auditors
(1) A special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-appointed.
(2) On receipt of notice of such a resolution, the multi-State co-operative society shall forthwith send a copy thereof to the retiring auditor.
(3) Where notice is given of such a resolution and the retiring auditor makes with respect thereto representations in writing to the multi-State co-operative society (not exceeding a reasonable length) and requests their notification to members of the multi-State co-operative society, the multi-State co-operative society shall, unless the representations are received by it too late for it to do so,--
(a) in any notice of the resolution given to members of the multi-State cooperative society, state the fact of the representations having been made; and
(b) send a copy of the representation to every member of the multi-State cooperative society to whom notice of the meeting is sent, whether before or after the receipt of the representations by the multi-State co-operative society,
and if a copy of the representations is not sent as aforesaid because they were received too late or because of the multi-State co-operative society's default, the auditor may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting.
Section 72 - Qualifications and disqualifications of auditors
(1) A person shall not be qualified for appointment as an auditor of a multi-State co-operative society unless he is a chartered accountant within the meaning of the Chartered Accountants Act, 1949(38 of 1949).
(2) None of the following persons shall be qualified for appointment as auditor of a multi-State co-operative society--
(a) a body corporate;
(b) an officer or employee of the multi-State co-operative society;
(c) a person who is a member, or who is in the employment, of an officer or employee of the multi-State co-operative society;
(d) a person who is indebted to the multi-State co-operative society or who has given any guarantee or provided any security in connection with the indebtedness of any third person to the multi-State co-operative society for an amount exceeding one thousand rupees.
(3) A person shall also not be qualified for appointment as an auditor of a multi-State co-operative society if he is, by virtue of sub-section (2), disqualified for appointment as an auditor of any other body corporate or multi-State co-operative society or co-operative society.
(4) If an auditor becomes subject, after his appointment, to any of the disqualifications specified in sub-sections (2) and (3), he shall be deemed to have vacated his office as such.
Section 73 - Powers and duties of auditors
(1) Every auditor of a multi-State co-operative society shall have a right of access at all times to the books, accounts and vouchers of the multi-State co-operative society, whether kept at the head office of the multi-State co-operative society or elsewhere, and shall be entitled to require from the officers or other employees of the multi-State cooperative society such information and explanations as the auditor may think necessary for the performance of his duties as an auditor.
(2) Without prejudice to provisions of sub-section (1), the auditor shall inquire,--
(a) whether loans and advances made by the multi-State co-operative society on the basis of security have been properly secured and whether the terms on which they have been made are not prejudicial to the interests of the multi-State co-operative society or its members;
(b) whether transactions of the multi-State co-operative society which are represented merely by book entries are not prejudicial to the interests of the multi-State co operative society;
(c) whether personal expenses have been charged to revenue account; and
(d) where it is stated in the books and papers of the multi-State co-operative society that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance-sheet is correct, regular and not misleading.
(3) The auditor shall make a report to the members of the multi-State co-operative society on the accounts examined by him and on every balance-sheet and profit and loss account and on every other document required to be part of or annexed to the balance-sheet or profit and loss account, which are laid before the multi-State co-operative society in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view,--
(a) in the case of the balance-sheet, of the state of the multi-State co-operative society's affairs as at the end of its financial year; and
(b) in the case of the profit and loss account, of the profit or loss for its financial year.
(4) The auditors' report shall also state--
(a) whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purposes of his audit;
(b) whether, in his opinion, proper books of account have been kept by the multi-State co-operative society so far as appears from his examination of those books, and proper returns adequate for the purposes of his audit have been received from branches or offices of the multi-State co-operative society not visited by him;
(c) whether the report on the accounts of any branch office audited by a person other than the multi-State co-operative society's auditor has been forwarded to him and how he has dealt with the same in preparing the auditor's report;
(d) whether the multi-State co-operative society's balance-sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns.
(5) Where any of the matters referred to in clauses (a) and (b) of sub-section (3) or in clauses (a), (b), (c) and (d) of sub-section (4) is answered in the negative or with a qualification, the auditor's report shall state the reason for the answer.
Section 74 - Signature of audit report, etc.
Only the person appointed as an auditor of the multi-State co-operative society shall sign the auditor's report, or sign or authenticate any other document of the multi-State co-operative society required by law to be signed or authenticated by the auditor.
Section 75 - Reading and inspection of auditors report
The auditor's report shall be read before the multi-State co-operative society in the general meeting and shall be open to inspection by any member of the multi-State co-operative society.
Section 76 - Right of auditor to attend general meeting
All notices of, and other communications relating to, any general meeting of a multi-State co-operative society, which any member of the multi-State co-operative society is entitled to have sent to him, shall also be forwarded to the auditor of the multi-State co-operative society; and the auditor shall be entitled to attend any general meeting and to be heard at any general meeting which he attends on any part of the business which concerns him as auditor.
Section 77 - Power of Central Government to direct special audit in certain cases
(1) Where the Central Government is of the opinion--
(a) that the affairs of any multi-State co-operative society are not being managed in accordance with self-help and mutual aid and co-operative principles or prudent commercial practices; or with sound business principles; or
(b) that any multi-State co-operative society is being managed in a manner likely to cause serious injury or damage to the interests of the trade, industry or business to which it pertains; or
(c) that the financial position of any multi-State co-operative society is such as to endanger its solvency,
the Central Government may at any time by order direct that a special audit of the multi-State co-operative society's accounts for such period or periods as may be specified in the order, shall be conducted and may by the same or a different order appoint either a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949(38 of 1949) or the multi-State co-operative society's auditor himself to conduct with special audit:
Provided that the Central Government shall not order for special audit of a multi-State co-operative society's accounts if that Government or the State Government either by itself or both hold less than fifty-one per cent. of the paid-up share capital or of the shares in such multi-State co-operative society.
(2) The chartered accountant or the multi-State co-operative society's auditor appointed under sub-section (1) to conduct a special audit as aforesaid is hereafter in this section referred to as the special auditor.
(3) The special auditor shall have the same powers and duties in relation to the special audit as an auditor of a multi-State co-operative society has under section 73:
Provided that the special auditor shall, instead of making his report to the members of the multi-State co-operative society, make the same to the Central Government.
(4) The report of the special auditor shall, as. far as may be, include all the matters required to be included in the auditors' report under section 73 and, if the Central Government so directs, shall also include a statement on any other matter which may be referred to him by that Government.
(5) The Central Government may by order direct any person specified in the order to furnish to the special auditor within such time as may be specified therein such information or additional information as may be required by the special auditor in connection with the special audit.
(6) On receipt of the report of the special auditor, the Central Government may take such action on the report as it considers necessary in accordance with the provisions of this Act or any other law for the time being in force:
Provided that if the Central Government does not take any action on the report within four months from the date of its receipt, that Government shall send to the multi-State cooperative society either a copy of, or relevant extract from, the report with its comments thereon and require the multi-State co-operative society either to circulate that copy or those extracts to the members or to have such copy or extracts read before the multi-State co-operative society at its next general meeting.
(7) The expenses of, and incidental to, any special audit under this section (including the remuneration of the special auditor) shall be determined by the Central Government which determination shall be final and paid by the multi-State co-operative society and in default of such payment, shall be recoverable from the multi-State co-operative society as an arrear of land revenue.
Section 78 - Inquiry by Central Registrar
(1) The Central Registrar may, on a request from a federal co-operative to which a multi-State co-operative society is affiliated or a creditor or not less than one-third of the members of the board or not less than one-fifth of the total number of members of a multi-State co-operative society hold an inquiry or direct some person authorised by him by order in writing in this behalf to hold an inquiry into the constitution, working and financial condition of a multi-State co-operative society:
Provided that no inquiry under this sub-section shall be held unless a notice of not less than fifteen days has been given to the multi-State co-operative society.
(2) The Central Registrar or the person authorised by him under sub-section (1) shall have the following powers, namely:--
(a) he shall at all reasonable times have free access to the books, accounts, documents, securities, cash and other properties belonging to or in the custody of the multi-State co-operative society and may summon any person in possession or responsible for the custody of any such books, accounts, documents, securities, cash or other properties to produce the same, at any place specified by him;
(b) he may, notwithstanding any bye-law specifying the period of notice for a general meeting of the multi-State co-operative society, require the officers of the society to call a general meeting of the society by giving notice of not less than seven days at such time and place at the headquarters of the society to consider such matters, as may be directed by him; and where the officers of the society refuse or fail to call such a meeting, he shall have power to call it himself;
(c) he may summon any person who is reasonably believed by him to have any knowledge of the affairs of the multi-State co-operative society to appear before him at any place at the headquarters of the society or any branch thereof and may examine such person on oath.
(3) Any meeting called under clause (b) of sub-section (2) shall have all the powers of a general meeting of the society called under the bye-laws of the society and its proceedings shall be regulated by such bye-laws.
(4) The Central Registrar shall, within a period of three months of the date of receipt of the report, communicate the report of inquiry to the multi-State co-operative society, the financial institutions, if any, to which the society is affiliated, and to the person or authority, if any, at whose instance the inquiry is made.
Section 79 - Inspection of multi-State co-operative societies
(1) The Central Registrar may, on a request from a federal co-operative to which a multi-State co-operative society is affiliated or a creditor or not less than one-third of the members of the board or not less than one-fifth of the total number of members of a multi-State co-operative society by general or special order in writing in this behalf, inspect or direct any person authorised by him by order in writing in this behalf to make an inspection into the constitution, working and financial condition of a multi-State co-operative society:
Provided that no inspection under this sub-section shall be made unless a notice of not less than fifteen days has been given to the multi-State co-operative society.
(2) (a) For the purpose of inspection under sub-section (1), the Central Registrar or the person authorised by him under that sub-section shall at all times have access to all books, accounts, papers, vouchers, securities, stock and other property of that society and may, in the event of serious irregularities discovered during inspection, take them into custody and shall have power to verify the cash balance of the society and subject to the general or special order of the Central Registrar to call a meeting of the board and also a general meeting of the society where such general meeting is, in his opinion, necessary.
(b) Every officer or member of a multi-State co-operative society shall furnish such information with regard to the working of the society as the Central Registrar or the person making such inspection may require.
(3) A copy of the report of inspection under this section shall be communicated to the multi-State co-operative society within a period of three months from the date of completion of such inspection.
Section 80 - Inspection of books of indebted multi-State co-operative societies
(1) The Central Registrar shall, on the application of a creditor of a multi-State cooperative society, inspect, or direct some person authorised by him by order in writing in this behalf to inspect, the books of the society:
Provided that no such inspection shall be made unless the applicant--
(a) satisfies the Central Registrar that the debt is a sum then due, and that he has demanded payment thereof and has not received satisfaction within a reasonable time;
(b) deposits with the Central Registrar such sum as security for the costs of the proposed inspection as the Central Registrar may require.
(2) The Central Registrar shall communicate the result of any such inspection to the creditor.
Section 81 - Costs of inquiry and inspection
Where an inquiry is held under section 78 or an inspection is made under section 79, the Central Registrar may apportion the costs, or such part of the costs, as he may think fit, between the multi-State co-operative society, the members or creditors demanding an inquiry or inspection, and the officers or former officers and the members or past members of that society:
Provided that--
(a) no order of apportionment of the costs shall be made under this section unless the society or the person liable to pay the costs thereunder has had a reasonable opportunity of being heard;
(b) the Central Registrar shall state in writing under his own hand the grounds on which the costs are apportioned.
Section 82 - Recovery of costs
Any sum awarded by way of costs under section 81 may be recovered, on application to a magistrate having jurisdiction in the place where the person, from whom the money is claimable, actually and voluntarily resides or carries on business, and such magistrate shall recover the same as if it were a fine imposed by himself.
Section 83 - Repayment, etc.
(1) If in the course of an audit, inquiry, inspection or the winding up of a multi-State co-operative society, it is found that any person, who is or was entrusted with the organisation or management of such society or who is or has at any time been an officer or an employee of the society, has made any payment contrary to this Act, or the bye-laws or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has misappropriated or fraudulently retained any money or other property belonging to such society, the Central Registrar may, of his own motion or on the application of the board, liquidator or any creditor inquire himself or direct any person authorised by him, by an order in writing in this behalf, to inquire into the conduct of such person within a period of two years from the date of the report of the audit, inspection or inquiry or the date of the order of winding up, as the case may be:
Provided that where the Central Registrar is satisfied that such inquiry could not be commenced during the period of two years aforesaid on account of fraud or concealment of facts, he may make or direct the inquiry to be made within such period not exceeding six years from the date of the report of the audit, inspection or inquiry or the date of the order of winding up, as he thinks fit.
(2) Where an inquiry is made under sub-section (1), the Central Registrar may, after giving the person concerned a reasonable opportunity of being heard, make an order requiring him to repay or restore the money or property or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such extent, as the Central Registrar may consider just and equitable.