V.V.S. Rao, J.
1. This common order shall dispose of these two writ petitions. W.P. No. 18835 of 2003 is filed by the Voltas Employees' Co-operative House Building Society, Secunderabad, seeking a declaration that the action of the respondents in not completing the Special Audit as ordered by proceedings, dated 23.7.2002 and 18.2.2003 as illegal, unjust and contrary to the provisions of A.P. Co-operative Societies Act, 1964 (hereafter called 'the Act') and violation of Article 14 of the Constitution of India. W.P. No. 20446 of 2003 is filed by ten (10) persons challenging the proceedings of District Co-operative Audit Officer, dated 18.2.2003 as confirmed by the Commissioner of Co-operation and Registrar of Cooperative Societies (the first respondent) by an order, dated 11.9.2003, as illegal and arbitrary and for a consequential direction to the first respondent to appoint another officer to conduct a comprehensive enquiry into the day-to-day affairs of Voltas Employees' Cooperative House Building Society.
2. The facts leading to filing of these writ petitions may be noted in brief by noticing the pleadings in W.P. No. 20446 of 2003, by referring to the parties as they are arrayed therein. The sixth respondent was registered under the provisions of the Act in the year 1981. The said Society was allegedly running smoothly till a new Managing Committee was constituted in the year 2000. The petitioners are members of the erstwhile Managing Committee. It is alleged that, in the year 1996, thirty-seven (37) persons made an application, to be admitted as members. They were admitted by the sixth respondent, acting upon the directions issued by the Deputy Registrar (Housing). However, in 1999, the Managing Committee cancelled the admission of ineligible thirty-seven (37) members. Challenging the same, W.P. No. 3720 of 1999 was filed, which was dismissed. The Division Bench in W.A. No. 1056 of 1999, disposed of the Writ Appeal, leaving it open to the Society to decide with respect to the membership of those persons without taking into consideration the directions issued by the Deputy Registrar or the Registrar of Co-operative Societies. This dispute regarding membership, lead to a sinister plan against the petitioners. Therefore, the members opposed to the petitioners initiated action before the Co-operative Officials, Co-operative Tribunal, Criminal Courts as well as this Court, some of which were dismissed at the admission stage and in some others, the petitioners are defending the cases.
3. The District Co-operative Officer, Hyderabad (Urban), ordered an enquiry under Section 51 of the Act by proceedings, dated 28.5.1998. The Co-operative Sub-Registrar conducted enquiry and submitted a report, dated 28.9.1998 to the effect that there are no irregularities in the affairs of the sixth respondent, Society. Not satisfied with the same, some members made a representation, dated 30.9.1998 requesting for another enquiry. The Joint Registrar/District Co-operative Officer again ordered enquiry under Section 51 of the Act, with an observation that what is left and uncovered in the earlier enquiry, be covered in the new enquiry ordered. The second Enquiry Officer submitted a report on 30.11.2001 basing on which the Deputy Registrar of Co-operative Societies issued show-cause notices under Section 60 of the Act by proceedings, dated 14.12.2001. Some of the aggrieved persons filed writ petitions being W.P. Nos. 1145 and 4379 of 2002. Other persons filed their explanations to the show-cause notices in the surcharge proceedings.
4. Again representations were made to the Departmental Officials on 18.12.1999, 23.2.2000 and 13.9.2000 seeking re-audit of the sixth respondent, Society. The department did not take any action. Some of the members therefore filed W.P. No. 19002 of 2000 seeking a direction to Departmental Officials to re-audit the affairs of the sixth respondent by an interim order dated 11.10.2000. This Court disposed of the writ petition directing the officials to consider the representations dated 18.12.1999, 23.2.2000 and 13.9.2000. Pursuant to the interim orders of this Court, the District Co-operative Audit Officer appointed P. Jalandhar Reddy, and Shaik Muzaffar Ahmed, Senior Inspectors/Auditors to conduct special audit. It is alleged that on 4.1.2003, the Secretary of the sixth respondent-Society, made a representation to change the Auditors. Acting on the same, the third respondent removed the two Auditors appointed on 27.3.2002 and appointed the fifth respondent to conduct special audit of the Society. The petitioners along with some others made representations on 21.4.2003 and 3.5.2003 to consider the representations and pass appropriate orders regarding special audit. In the meanwhile, W.P. No. 1145 of 2002 was dismissed. In W.A. No. 560 of 2003, filed against the order of the learned Single Judge, the Division Bench gave liberty to the parties to avail other remedies in law. Accordingly, some of the members of the Society aggrieved by the action of the third respondent in appointing a Special Audit Officer preferred a revision petition before the Government. The Government stayed the prosecution initiated by the sixth respondent society.
5. Writ Petition being W.P. No. 19002 of 2003, filed by the petitioners herein, challenging the orders of the third respondent ordering special audit was dismissed by this Court as infructuous on 17.6.2003. The petitioners filed a Revision Petition being R.P. No. 18465 of 2003. The Revision Petition was dismissed by the first respondent by an order, dated 11.9.2003. Aggrieved by the same, the petitioners filed the present writ petition.
6. A counter-affidavit is filed by the third respondent in W.P. No. 20446 of 2003. He also filed a counter-affidavit in W.P. No. 18835 of 2003. It is necessary to refer to the counter-affidavit in W.P. No. 20446 of 2003. The third respondent received representations dated 18.12.1999, 23.2.2000 and 30.9.2000 from the members of the sixth respondent society, making allegations against the petitioners. They requested for re-audit of the sixth respondent society, on the ground that the members of the Ex-Managing Committee have not brought into monetary transactions into the cash book produced to the audit. Therefore, the representation dated 18.12.1999 was referred to the Auditor by letter, dated 6.3.2000 even prior to interim orders of this Court in W.P.M.P. No. 24061 of 2000 in W.P. No. 19002 of 2000 for verification of the contents of the representation. The two subsequent representations were also referred to the Auditor. As the auditor has not furnished any detailed report, the representations were referred to Sri K. Naveen, who submitted a detailed report vide letter, dated 21.7.2001. Thereafter, Senior Inspectors/Auditors P. Jalandhar Reddy and Shaik Muzaffar Ahmed were authorized to conduct special audit in proceedings, dated 23.7.2002. They reported on 4.9.2002 that the sixth respondent society did not turn up to produce the records for audit. Therefore, the fourth respondent was requested to arrange for the production of the records of the Society on 18.12.2002. The Auditors were instructed to attend the office of the third respondent on 18.12.2002 for conducting audit. Though Auditors were present, the sixth respondent did not produce the records and therefore, the Auditors by letter, dated 19.12.2002 expressed their inability to conduct special audit. In view of this, by proceedings, dated 18.2.2003, the third respondent was entrusted with the audit. Audit was commenced and was reported to the third respondent on 9.4.2003. The Chief Auditor of the Co-operative Societies instructed the third respondent to conduct special audit pursuant to the interim orders of this Court dated 11.10,2000 in W.P.M.P. No. 24061 of 2000. Audit was taken up to see whether missing transactions have to be incorporated in the cash book of the sixth respondent-Society. The fifth respondent is authorized person to conduct audit of the sixth respondent-Society.
7. Learned Counsel for the petitioners in W.P. No. 20446 of 2003, Sri P. Srinivas, raised the following contentions. The audit of the sixth respondent. Society, was conducted earlier and in all the audits, no irregularities were pointed out. Therefore, repeated audits are unsustainable. There is no power or jurisdiction vested in Respondent Nos. 2 to 4 to order a special audit as and when a representation is made by the aggrieved members of the society. Before ordering re-audit, no opportunity was given to the petitioners. The fourth respondent has no power to appoint the fifth respondent as Auditor, as there is no proper delegation of powers to the fourth respondent under the provisions of the Act. The present audit is directed to be conducted into the affairs of the society from the date of its inception, which is impermissible under law. The order passed by the first respondent is unsustainable as the same was passed without proper opportunity to the petitioners and without application of mind.
8. Learned Counsel for the sixth respondent, society, Sri Hemendranath Reddy and the learned Counsel for the petitioner in W.P. No. 18835 of 2003, Sri V. Narsimha Goud made submissions to the following effect. The petitioners never objected for the special audit of the sixth respondent, Society. Their only objection was regarding the appointment of the fifth respondent as Senior Inspector. Therefore, the petitioners cannot be permitted to challenge the power of the third respondent to order special audit under Section 50 of the Act. The learned Counsel would rely on the interim orders of this Court in W.P.M.P. No. 24061 of 2000, dated 11.10.2000 in support of the contention that the audit was in fact ordered after considering the representations made by some of the members on 18.12.1999, 23.2.2000 and 13.9.2000, as directed by this Court in W.P.M.P. No. 24061 of 2000. They would also urge that the third respondent appointed the fifth respondent to conduct special audit while withdrawing the earlier appointment of Sri P. Jalandhar Reddy and Shaik Muzaffar Ahmed modifying the earlier order. The petitioners have not specifically challenged the order, dated 23.7.2002 either before the first respondent under revision under Section 77 of the Act or before this Court and therefore, the petitioners must be held to be acquiesced in the action taken by Respondent No. 4.
9. The learned Assistant Government Pleader, Sri Madhusudhan relies on the decision of this Court in Primary Agricultural Society v. B. Malla Reddy, 1996 (2) ALD 803, and contends that though audit under Section 50 of the Act is undertaken periodically or annually, nothing prevents the Respondent Nos. 2 and 3 or the Additional Registrar of Co-operative Societies to order a special audit in the event of compliance of malfeasance and misfeasance against the members of erstwhile Managing Committee.
10. The pleadings and rival submissions would throw up the following questions for consideration:
(1) Whether the Additional Registrar is not competent to entertain and dispose of a revision petition filed by the petitioners under Section 77 of the Act;
(2) Whether Section 50 of the Act enables the Departmental Officials to order special audit of a Co-operative Society; and
(3) Whether the orders/proceedings of the Additional Registrar in R.P.No. 18465 of 2003 dated 11.9.2003 is vitiated by arbitrariness and unreasonableness.
In Re Point No. I
11. The contention of the learned Counsel for the petitioners that under Section 77 of the Act, the power is conferred on the Registrar of Co-operative Societies and the Government and therefore, the Additional Registrar of Co-operative Societies could not have disposed of the Revision Petition filed by the petitioners. This submission is misconceived and devoid of any merits. The term 'Registrar' is defined in Section 2(n) of the Act, as to mean the Registrar of Co-operative Societies appointed under Section 3(1) and includes any other person on whom all or any of the powers of the Registrar under this Act are conferred. Here, we may notice Section 3, which reads as under.
3. Appointment of Registrar and other persons for the purpose of this Act :--(1) There shall be appointed a Registrar of Cooperative Societies for the State and as many other persons as the Government think fit for the purposes of this Act.
(2) Every other person appointed under Sub-section (1) shall exercise under the general superintendence of the Registrar, such powers of the Registrar, under this Act as the. Government may, from time to time, confer on him.
12. The Registrar of Co-operative Societies for a State is appointed by the Government and as per Section 3(2) of the Act "Every other person" shall exercise under the general superintendence of the Registrar and such powers of the Registrar under the Act conferred by the Government from time to time. Be it also noted that under Section 3(1), it is competent for the Government to appoint a Registrar or as many other persons as the Government may think fit. It is not denied before me that Additional Registrar is appointed by the Government under Section 3(1) of the Act. As a necessary corollary, it should be concluded that though for the purpose of administrative convenience, the second Registrar is designated as Additional Registrar for the purpose of the Act under Section 3(1) read with Section 2(n) of the Act, and the Additional Registrar is also the Registrar of Co-operative Societies. Section 77 of the Act confers revision power on the Registrar and the Government to call for and examine the record either suo motu or on an application and examine the record, so as to satisfy as to the regularity, correctness, legality or propriety on any decision passed by a subordinate official. The exercise of revisional power under Section 77 of the Act is, however, not available in respect of a matter against which an appeal would lie to a Co-operative Tribunal under Sub-section (1) of Section 76. Further, the power is circumberated by the rule of audi alteram partem, in that, under Sub-section (2) of Section 77 of the Act, no order prejudicial to any person shall be passed under Sub-section (1), unless such person has been given an opportunity of making a representation. The first point is answered accordingly against the petitioners and in favour of the respondents.
In Re Point No. II
13. The submission made is that the affairs of the sixth respondent-society, were regularly audited annually, and therefore, there cannot be repeated special audit/audits at the behest of the members on unfounded allegations. Alternatively, it is urged that the present Secretary of the society, prevailed over the first respondent, as a result of which, audit was ordered. On many occasions, it is urged, audit was conducted and the same was approved in accordance with the procedure contemplated under Section 50 of the Act. I am afraid none of these submissions can be countenanced.
14. Dealing with this aspect, the Additional Registrar, in impugned order concluded that the special audit ordered is in pursuance of the orders of this Court in W.P.M.P.No. 24061 of 2000 in W.P. No. 19002 of 2000, dated 11.10.2000 and therefore, the audit is in accordance with the provisions of the Act. Indeed, as rightly contended by the learned Counsel for the sixth respondent, what was challenged before the first respondent was the proceedings/order, dated 18.2.2003 issued by the fourth respondent herein whereby and whereunder, the fourth respondent modified earlier orders, dated 23.7.2002 appointing P. Jalandhar Reddy and Shaik Muzaffar Ahmed, Senior Inspectors/Auditors. The proceedings, dated 23.7.2002 under which the Special Auditors were appointed were not specifically challenged. Apart from this, it is not denied before me that this Court while disposing of the writ petition on 7.6.2003, passed the following order:
The case of the petitioners is that certain irregularities have taken place in the affairs of the Society and their grievance is that even though the said irregularities were brought to the notice of the Managing Committee by way of representations, with a request to conduct special audit, no action is being taken.
This Court while admitting the writ petition on 11.10.2000 passed an interim order directing the respondents to consider the representations said to have been made by the petitioners on 18.12.1999, 23.2.2000 and 13.9.2000, pending further orders.
It is brought to my notice that pursuant to the interim orders of the Court, the District Co-operative Audit Officer, Hyderabad issued proceeding dated 18.2.2003 and 24.2.2003 appointing the Enquiry Officer and also prescribing time for completion of the enquiry.
In view of the above proceedings, it is clear that the request of the petitioner has been acceded to by the respondents.
Hence, no further orders need be passed, since nothing remains in the petition for adjudication and the same is accordingly dismissed as having become infructuous. No costs.
Therefore, the first respondent was justified in coming to the conclusion that the special audit was ordered pursuant to the interim orders of this Court, dated 11.10.2000. There is no infirmity in ordering special audit. Secondly, it is to be considered whether the special audit ordered by the fourth respondent is invalid on the ground that the repeated audit are not permissible under Section 50 of the Act. Section 50 of the Act reads as follows:
50. Audit :--(1) There shall be a separate wing for audit in the Co-operative Department headed by the Chief Auditor who will work under the general superintendence and control of the Registrar of Co-operative Societies. The Chief Auditor shall audit or cause to be audited by a person authorized by him by a general or special order in this behalf, the accounts of a society at least once in every year and shall issue or cause to be issued an audit certificate with such particulars as may be prescribed, before the end of the succeeding cooperative year. Such audit shall primarily cover an examination of the debts, overdue, if any, verification of the cash balance and securities and valuations of the assets and liabilities of the society, including prudent management of the affairs of the society in accordance with the Act, Rules and Bye-laws;
Provided that in respect of a society not in receipt of State aid as specified in Section 43 of the Act, the committee of such society shall cause the audit of accounts of the society, every year as per the audit manual prescribed by the Registrar, either through the Chief Auditor or a Chartered Accountant. Where such society opts to get the accounts of the society audited by the Chief Auditor, the later shall audit or cause to be audited the accounts of such society in the manner prescribed.
(2) Every person who is, or has at any time being, an officer or employee of the society and every member including a past member shall furnish such information in regard to, any transaction, working and affairs of the society as Chief Auditor or such person authorized by him may require.
(3) The committee shall prepare and submit or cause to be prepared and submitted within such period not exceeding six months as may be prescribed for different classes of societies after the end of the co-operative year, to the Chief Auditor or the person authorized by him as the case may be, such statements and reports as may be prescribed for the purpose of the audit of accounts of the Society for the co-operative year.
(4) The audit shall be completed within a period of six months from the close of the co-operative year of the registered society concerned and such other further period not exceeding six months as the Chief Auditor may permit for reasons to be recorded in writing.
Section 50 of the Act facilitates a separate wing for audit to be constituted in the Cooperative Department under the control of Chief Auditor. He shall audit or cause to be audited by a person authorized by him by a general or special order in his behalf. The audit of accounts of the society shall be at least once in a year. Every person who is a member or a past member or an officer or employee of the society shall furnish the information in regard to any transaction, working and affairs of the society to the Auditor or the Chief Auditor. The Managing Committee is required to prepare and submit statements and reports, as may be prescribed, once in six months to the Chief Auditor or Auditor. The audit shall be completed within a period of six months from the closing date of the co-operative year. (As per Section 2(c) of the Act, cooperative year means, the period commencing on the 1st day of April of any year and ending with the 31st day of March of the succeeding year)
15. Sub-section (1) of Section 50 of the Act, which mandates annual audit by the Chief Auditor or another Auditor, authorized by him, use the words "at least once in every year". Therefore, it is reasonable to hold that audit of the affairs of the society more than once in a year is also permissible. Further, Sub-section (1) of Section 50 of the Act empowers the Chief Auditor or another Auditor to cause either general audit or special audit. In either case, it would not be possible to say that there shall be only one audit every year. Having regard to the language used by the Legislature, it must be held that there can be special audit more than once in every year or more than once in many years. Here, it is relevant to consider two decisions relied on by the learned Counsel for the petitioners in support of his contention that there cannot be audit into the affairs of the society whose affairs have already been audited.
16. In The Primary Agricultural Cooperative Society v. B. Malla Ready (supra), the Division Bench of this Court has considered the question whether a second enquiry under Section 51 of the Act is permissible. The respondents therein challenged the second enquiry initiated under Section 51 of the Act. The learned Single Judge quashed the enquiry. Though the Division Bench did not interfere with that order, it was observed that the authority is not bound to accept the views of the Enquiry Officer and can also take a different view basing on the same materials. It was further observed as under:
A view was also taken that though sweeping proposition that a second enquiry is not permissible under any circumstances is not acceptable in the best interest of the Co-operative movement and public interest, when a second enquiry is directed in respect of the very same allegations, fair play and justice require that the affected person must be informed of the same and given opportunity to have his say in the matter.
17. In Choutuppal Handloom Weaver's Co-operative Society Ltd. v. Commissioner of Handlooms and Director of Handlooms and Textiles, A.P., , this Court was again considering the question of
permissibility of second enquiry under Section 51 of the Act. Following the decision in The Primary Agricultural Co-operative Society v. B. Malla Reddy (supra), this Court observed as under:
Though it is settled principle that the theory of double jeopardy which is a principle applicable to convictions in criminal law as provided in the Constitution may not be applicable to administrative or quasi-judicial proceedings, the underlying principle of irrational successive enquiries by statutory authorities being hit by the vice of arbitrariness would be applicable to vitiate any successive enquiries which are ordered without any rational reasons. In the circumstances, having regard to the totally cryptic nature of the impugned orders this Court is unable to sustain the same. No reasons as already stated, have been given for ordering a de novo enquiry. The impugned order of R-1 directing a second enquiry by R-3 is accordingly set aside. This invalidation however does not disentitle the R-1 to take action or further proceedings to regulate and preserve the management and affairs of the petitioner-Society or to take action against any or all members of the management for any violation of the Act or of any other law, in accordance with the observations contained in the judgment of the Division Bench extracted supra and in accordance with such other law as would entitle any such action.
After reading the two judgments, it becomes clear that what was challenged in the two decisions cited above is a second enquiry under Section 51 of the Act. Further, this Court did not rule out a second enquiry under Section 51 of the Act, if it is fair and is initiated after due opportunity to the members who would be affected. Furthermore, Section 51 of the Act is not a mandatory provision requiring the Registrar to conduct enquiry annually. Such an enquiry is ordered only on an application of a society or suo motu if there are complaints. The audit under Section 50 of the Act is altogether different and Section 50 of the Act requires the annual audit to be conducted periodically. Therefore, the decisions cited above have no relevance to the facts in this case. Having regard to the language of Section 50 of the Act, I am not able to agree with the learned Counsel for the petitioners that the special audit ordered by the fourth respondent is not permissible. The Point No. 2 is answered accordingly.
In Re Point No. III
18. Under this point, two questions with reference to the submissions need to be considered. Whether the impugned order is arbitrary and unreasonable? And whether the impugned order is violative of principles of natural justice? Learned Counsel for the petitioners would urge that the Auditors appointed earlier to conduct special audit were changed and the fifth respondent was appointed as an Auditor only to suit the requirements of the present Management Committee without any application of mind. Secondly, it is urged that though a counter-affidavit is filed by the officer of the first respondent, the same was not served on the petitioners and therefore the impugned order is unfair being contrary to the principles of natural justice.
19. In the counter-affidavit filed on behalf of the third respondent, the reasons are given for replacing P. Jalandhar Reddy and Shaik Muzaffar Ahmed, Senior Inspectors/Auditors. Even in the counter-affidavit filed in W.P. No. 18835 of 2003, it is stated that the fifth respondent was entrusted with the audit of the affairs of the Society from the years 1981 to 1982 and 1999 to 2000 whereas the other Senior Inspectors/Auditors were entrusted with the audit for subsequent date from the year 2Q01 to 2002. As mentioned earlier, when two Auditors reported that they cannot continue, fifth respondent was appointed as Auditor. This aspect of the matter was not controverted by the petitioners. This explains the appointment of the fifth respondent as Auditor. I do not find any arbitrariness or irrationality in the action of the fourth respondent in appointment of the fifth respondent as a Special Auditor for conducting complete audit.
20. When the matter was pending before the first respondent, the petitioners never raised any objection that the counter-affidavit filed by the office of the Commissioner was not served on them. This submission is raised for the first time in this writ petition. Be that as it is, the petitioners have not pleaded or demonstrated any prejudice caused to them on account of non-service of counter-affidavit on them. It is now well settled that violation of principles of natural justice per se does not vitiate the administration or quasi-judicial action. A person pleading such violation has to show the prejudice caused to him by such violation. If any, authority is required, a reference may be made to the decisions of the Supreme Court in State Bank of Patiala v. S.K. Sharma, and Aligarh Muslim University v. Mansoor Ali Khan, . After perusing the impugned order and the entire record placed before this Court, I do not find any infirmity in the impugned order. The allegations of acts of malfeasance and misfeasance against the petitioners herein have been the subject-matter of the earlier petitions before this Court. When this Court directed the respondents to consider the representations made by the Members, Auditors were appointed. Therefore, the action cannot be said to be arbitrary or irrational. It is also brought to my notice that audit has already been completed and the report has to be prepared by the Auditors. Further, if a report is submitted that is not an end in itself. If, normally, the allegations against the petitioners that they maintained two accounts and that account books did not project all the monies received by the petitioners or members of the Managing Committee is proved, officials are required to take action in accordance with the provisions of the Act. That way, the interest of the petitioners are in no way jeopardized. These writ petitions are devoid of any merits.
21. In the result, for the above reasons, the writ petitions fail and are accordingly dismissed. The fifth respondent shall immediately file/submit the report of special audit to the Respondent Nos. 1 and 3, if not already submitted.