Bombay HC Strikes Down Arbitrary Order for Test Audit of Coop Society
Section 81(3)(c) of MCS Act – Order appointing Test Auditor
On 8.9.2020, an order for inquiry into the working of the Society under Section 89(A)(1) was passed on the complaint.
On 27.5.2021, the enquiry report was submitted.
On 1.10.2021, the Society removed the defects and submitted compliance report.
On 18.1.2022, an order for inquiry into the working and conditional condition of the society under section 83 was issued.
On 30.12.2021, the show cause notice under Section 73[c][a] was issued to the members.
The order for inquiry and show cause notice were challenged before the Minister.
On 19.5.2022, the Society was directed to remove the defects found in the report under Section 79(2).
On 25.5.2022, the order for Test Audit of the society for 2015 to 2021 was passed under Section 81(3)[c] on the complaint dated 19.5.022.
The Society challenged both the orders dated 19th and 25th May 2022, before the Minister.
HELD that the test audit is ordered only on the complaint and without verification of correctness of its allegations. The impugned order is not only unreasoned but also passed without recording satisfaction in an arbitrary and capricious manner. The Test audit has been directed without there being any inspection of the audit report for 2015 to 2020. The order shows non application of mind and casual approach of respondent no.2.
Test audit directions can be issued only upon identifying defects in the statutory audit directions and the powers are to be exercised in a judicious manner on satisfaction of the conditions i.e. true and correct facts are not disclosed in the statutory audits of the said period. When there is no inspection of the statutory audits of the said period the question of recording of satisfaction does not arise.
