Chapter VII AUDIT, INQUIRY, INSPECTION AND SURCHARGE

(1) The Registrar shall audit or cause to be audited by a person authorised by him by general or special order in writing in this behalf, the accounts or every co-operative society at-least once in each year. (2) The audit under sub-section (1) shall include an examination of overdue debts, if any, the verification of the cash balance and securities, and a valuation of the assets and liabilities of the co-operative society. (3) The person auditing the accounts of a co-operative society shall have free access to the books, accounts, papers, vouchers, stock and other property of the society and shall be allowed to verify its cash balance and securities. (4) The directors, members of the staff, administrators and other officers of every co-operative society shall furnish to the person auditing its accounts all such information as to its transactions and working as such person may require-- (5) The Registrar or the person authorised by him under sub-section (1) to audit the accounts of a co-operative society shall have power, where necessary – (a) to summon at the time of his audit any officer, agent, servant or member of the society, past or present, who, he has reason to believe, can give valuable information in regard to transactions of the society or the management of its affairs ; and (b) to require the production of any book or document relating to the affairs of, or any cash or securities belonging to, the society by any officer, agent, servant or member of the society in possession of such books, documents, cash or securities and in the event of serious irregularities discovered during audit, to take them into custody. (6) If at the time of audit the accounts of a society are not complete, the Registrar or the person authorised by him under sub-section (1) to audit, may cause the accounts to be written up at the expense of the society. (7) Audit fee, if any, due from any co-operative society shall be recoverable in the same manner as is provided in section 67. Every co-operative society accepting deposits and granting cash credits shall maintain fluid resources in such form and according to such standards as may be fixed by the Registrar from time to time by general or special order.

(1) The Registrar, or any person authorised by the Registrar by general or special order in this behalf, may inspect a co-operative society. (2) For the purpose of inspection, the Registrar or the person authorised to make the inspection shall at all times have access to all books, accounts, papers, vouchers, securities, stock and other property of the co-operative society and may in the event of serious irregularities discovered during the 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 Registrar to call a meeting of the committee and a general meeting. (3) Every officer or member of a co-operative society shall furnish such information with regard to the working of the society as the Registrar or the person authorised to make the inspection may require. The Registrar may, from time to time issue such directive as he considers necessary for the successful conduct of the business of a society or class of co-operative society.

(1) Registrar may, of his own motion or on the application of a majority of the members of the committee or of not less than one-third of the members, 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 co-operative society. (2) The 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, documents, securities, accounts, cash and other properties belonging to or in the custody of the 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 the headquarters of the society or any branch thereof; (b) he may, notwithstanding any rule or bye-law specifying the period of notice for a General meeting of the society, require the officers of the society to call a general meeting 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 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 called under the bye-laws of the society and its proceedings shall be regulated by such bye-laws. (4) The Registrar shall communicate the brief summary of the report of the inquiry to the society, the credit agency, if any, to which the society is affiliated, and to the persons or authority, if any, at whose instance the inquiry is made. Save in a producer’s co-operative society, no relative of any member of committee or of any other officer of co-operative society shall be appointed to any office in the co-operative society, except with previous sanction of the Registrar.

(1) The Registrar shall, on the application of a creditor of a co-operative 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 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; and (b) deposits with the Registrar such sum as security for the costs of the proposed inspection as the Registrar my require. (2) The Registrar shall communicate the result of any such inspection to the creditor. (1) The audit under section 48 shall in all cases extend back to the last date of previous audit and shall be carried out up to the last date of the co-operative year immediately preceding the audit or where the Registrar so directs in the case of any particular co-operative society or class of co-operative societies, such other date as may be specified by Registrar. (2) Unless the Registrar directs otherwise, the audit of a co-operative society as provided in section 48 of the Regulation, shall be conducted in the registered office of the co-operative society. (3) The officers and the employees of co-operative society shall give the auditor all assistance necessary for the conduct and completion of audit and take such action with regard to the verification or examination of its accounts and stock as he may require. (4) The Registrar shall, in cases where the audit is done by him, prepare, and in case where the audit so done by a person authorised by him under subsection (1) of section 48, obtain from such person, an audit report in the form specified by the Registrar on the account and on every balance sheet and profit and loss account examined by him and shall state whether in his opinion and to the best of his information as given to him, the said accounts give all the information required by the Regulation and give a true and fair view: (i) in the case of the balance sheet, of the state of the affairs of the co-operative society as at the end of the co-operative year or any other subsequent date to which the accounts are made up and examined by him; and (ii) in the case of profit and loss account, the profit or loss of the co-operative year, or the period covered by audit, as the case may be. (5) The audit, report shall include statement under the appropriate parts with full particulars of: (a) all transactions which appear to be contrary to the provisions of the regulations, rules or the bye-laws of the co-operative society; (b) all sums which ought to have been but not have been brought into account by the co-operative society; (c) the amount of any deficiency or loss which appears to have been incurred by breach of trust, wilful negligence, misappropriation or fraudulent retention of any money or property of any person; (d) any transaction which appears to him to require further investigation; (e) any of the assets which appear to be bad or doubtful; and (f) any other matters specified by the Registrar in this behalf. (6) The person who does the audit shall also state: (a) Whether he had obtained relevant records/information which to the best of his knowledge and belief were necessary for the purpose of his audit; (b) Whether in his opinion proper books of accounts, as required by the Regulation, rules and the bye-laws of the co-operative society have been kept and regularly maintained by the co-operative society so far as it appears from his examination of such records; and (c) Whether the balance sheet and final accounts examined by him are in agreement with books of accounts and returns of the co-operative society. (7) Where any of the matters referred to in sub rule(6) are answered in the negative or with a qualification, the person who does the audit shall specify in his audit report the reasons for such facts and figures in support of such reasons. (8) The auditor shall examine the monetary transactions of a society in so far as may be necessary for the purpose of ascertaining whether there has been any material impropriety or irregularity in the expenditure or in the realisation of moneys due to the co-operative society and whether any transaction infringe any provisions of the Regulation, Rules or bye-laws or any directions of the committee. In case of difference of opinion between the auditor and the co-operative society in regard to the propriety of any of its monetary transactions; the Registrar shall decide the matter and his decision shall be final. (9) The Registrar shall issue direction regarding treatment of certain assets as bad and doubtful. Before proceeding to take action to write off any assets considered bad all possible steps be taken by the committee to realise the same. Any assets considered bad and irrecoverable may be written off by the general body meeting; provided, any approval of the financing agency if any and the Registrar is obtained before the writing off is made. (10) After every audit, the Registrar shall grand to the concerned co-operative society an audit certificate and copy of the audit report duly signed by him after exercising the test audit wherever necessary. The Registrar may modify or expunge any portion of the audit report which appear to him objectionable or not justified by fact. (11) The Co-operative society shall publish- (i) the audit certificate granted by Registrar under sub rule (10), (ii) the statements showing the receipts and disbursements, profit and loss accounts and the balance sheet in the manner specified by the Registrar and shall keep them open for inspection by any member of the co-operative society. The summary of defects as revealed by audit report shall also be read out in the general body meeting of the co-operative society. A rectification of the report based on the deliberations of the meeting on the defect pointed out in the audit report shall be forwarded to the Registrar within three month of the receipt of the report by the co-operative society. The Registrar may direct the co-operative society or its officers to take such action, and within such time, as may be specified by him, to remedy the defects disclosed in the audit. (b) Whether in his opinion proper books of accounts, as required by the Regulation, rules and the bye-laws of the co-operative society have been kept and regularly maintained by the co-operative society so far as it appears from his examination of such records; and (c) Whether the balance sheet and final accounts examined by him are in agreement with books of accounts and returns of the co-operative society. (7) Where any of the matters referred to in sub rule(6) are answered in the negative or with a qualification, the person who does the audit shall specify in his audit report the reasons for such facts and figures in support of such reasons. (8) The auditor shall examine the monetary transactions of a society in so far as may be necessary for the purpose of ascertaining whether there has been any material impropriety or irregularity in the expenditure or in the realisation of moneys due to the co-operative society and whether any transaction infringe any provisions of the Regulation, Rules or bye-laws or any directions of the committee. In case of difference of opinion between the auditor and the co-operative society in regard to the propriety of any of its monetary transactions; the Registrar shall decide the matter and his decision shall be final. (9) The Registrar shall issue direction regarding treatment of certain assets as bad and doubtful. Before proceeding to take action to write off any assets considered bad all possible steps be taken by the committee to realise the same. Any assets considered bad and irrecoverable may be written off by the general body meeting; provided, any approval of the financing agency if any and the Registrar is obtained before the writing off is made. (10) After every audit, the Registrar shall grand to the concerned co-operative society an audit certificate and copy of the audit report duly signed by him after exercising the test audit wherever necessary. The Registrar may modify or expunge any portion of the audit report which appear to him objectionable or not justified by fact. (11) The Co-operative society shall publish-(i) the audit certificate granted by Registrar under sub rule (10), (ii) the statements showing the receipts and disbursements, profit and loss accounts and the balance sheet in the manner specified by the Registrar and shall keep them open for inspection by any member of the co-operative society. The summary of defects as revealed by audit report shall also be read out in the general body meeting of the co-operative society. A rectification of the report based on the deliberations of the meeting on the defect pointed out in the audit report shall be forwarded to the Registrar within three month of the receipt of the report by the co-operative society. The Registrar may direct the co-operative society or its officers to take such action, and within such time, as may be specified by him, to remedy the defects disclosed in the audit. Explanation: - (i) For the purpose of this chapter, audit shall include annual or periodical audit, continuous or concurrent audit and test or super audit and re-audit. (ii) For the purpose of this rule: A person authorised” means (a) A person who is serving in the Co-operative Department of this Union Territory and authorized to audit the accounts of the Co-operative Societies. (b) A person who holds a Higher Diploma in Co-operation or Diploma in Co-operative Audit or Co-operative Management or Degree in Cooperation or Degree in Commerce and whose name is included in the panel of certified auditors of Co-operation Societies maintained in the office of the Registrar of Co-operative Societies. (C) an ‘Accountant’ means a Chartered Accountant whose name is included in the panel of certified Auditors of Co-operative Societies maintained in the Registrar’s Office. (12) Every registered Co-operative Society shall pay to the Government for the audit of accounts conducted by the Co-operative Department for each Co-operative year in accordance with the scale prescribed in respect of class of society as under:- i). The audit fee to be levied on a Co-operative Society shall not exceed Rs. 25,000 that the minimum fee payable by the society shall be Rs. 250 in a Co-operative year. ii). The scale of audit fees payable by the societies are as follows:- a). The Co-operative Societies dealing in consumer goods shall pay audit fee at the rate of Rs. 0.25 paise per every hundred rupees or part thereof on their sale in a co-operative year. b). The audit fees to be levied in respect of Agricultural credit Co-operative Societies shall be at the rate of Rs. 0.10 paise per every Rs. 100 or part thereof the working capital of the Institution. c). The audit fees to be levied in respect of Thrift and Credit Co-operative societies, Credit Co-operative and Co-operative Banks shall be paid at the rate of Rs. 0.25 paise per every Rs. 100 or part thereof of the working capital of the institution. d). The scale of audit fees leviable from Transport Printing, Industrial Co-operative Societies shall be at the rate of Rs. 0.25 paise per every Rs. 100 or part thereof the turnover of these societies in a Co-operative year. e). The scale of audit fees leviable from Labour Contract, Fisheries, Milk, Poultries Farming and other Agricultural Produces and Marketing Co-operative Societies, Co-operative Societies for tribal and weaker sections of the Society shall be at the rate of Rs. 0.10 paise per every Rs. 100 or part thereof of the turnover of these societies in a co-operative year. f). In respect of Housing Co-operative Societies the audit fees chargeable at the rate of Rs. 25 per member upon the total member of these societies in each co-operative year. g). All other Co-operative Societies shall be required to pay audit fee at the rate of 3% of the net profit earned by the societies in each co-operative year. iii). Provided further that the scale of audit fees prescribed above shall not be apart to those Co-operative Societies which are being classified as ‘D’ Class by the Auditor and those Co-operative Societies which are being put under liquidation. These types of Co-operative Societies are being exempted from payment of audit fee. iv). In respect of Co-operative Societies, authorisation of audit of which is given to Chartered Accountants the rate of audit fee shall be negotiated by the concerned Chartered Accountant with management of the concerned Co-operative Society, subject to final approval of Registrar of Co-operative Societies in this regard. v). The audit fee payable by the Co-operative Societies whose audit is conducted by the departmental officers so authorised shall be deposited in the office of the Registrar of Co-operative Societies Andaman and Nicobar Islands and the receipt against it should be obtained under TR. (13). The Registrar may at his discretion remit in whole or in part the audit fees payable under clause (ii) of sub-rule (12) by the Society or a class of societies for any year or for any specific period. b). The audit fees to be levied in respect of Agricultural credit Co-operative Societies shall be at the rate of Rs. 0.10 paise per every Rs. 100/- or part thereof the working capital of the Institution. c). The audit fees to be levied in respect of Thrift and Credit Co-operative societies, Credit Co-operative and Co-operative Banks shall be paid at the rate of Rs. 0.25 paise per every Rs. 100/- or part thereof of the working capital of the institution. d). The scale of audit fees leviable from Transport Printing, Industrial Co-operative Societies shall be at the rate of Rs. 0.25 paise per every Rs. 100/- or part thereof the turnover of these societies in a Co-operative year. e). The scale of audit fees leviable from Labour Contract, Fisheries, Milk, Poultries Farming and other Agricultural Produces and Marketing Co-operative Societies, Co-operative Societies for tribal and weaker sections of the Society shall be at the rate of Rs. 0.10 paise per every Rs. 100/- or part thereof of the turnover of these societies in a co-operative year. f). In respect of Housing Co-operative Societies the audit fees chargeable at the rate of Rs. 25/- per member upon the total member of these societies in each co-operative year. g). All other Co-operative Societies shall be required to pay audit fee at the rate of 3% of the net profit earned by the societies in each co-operative year. iii). Provided further that the scale of audit fees prescribed above shall not be apart to those Co-operative Societies which are being classified as ‘D’ Class by the Auditor and those Co-operative Societies which are being put under liquidation. These types of Co-operative Societies are being exempted from payment of audit fee. iv). In respect of Co-operative Societies, authorisation of audit of which is given to Chartered Accountants the rate of audit fee shall be negotiated by the concerned Chartered Accountant with management of the concerned Co-operative Society, subject to final approval of Registrar of Co-operative Societies in this regard. v). The audit fee payable by the Co-operative Societies whose audit is conducted by the departmental officers so authorised shall be deposited in the office of the Registrar of Co-operative Societies Andaman and Nicobar Islands and the receipt against it should be obtained under TR. (13). The Registrar may at his discretion remit in whole or in part the audit fees payable under clause (ii) of sub-rule (12) by the Society or a class of societies for any year or for any specific period.

Where an inquiry is held under section 50, or an inspection is made under section 51, the Registrar may apportion the costs, or such part of the costs as he may think fit between the society, the members or creditor demanding an inquiry or inspection, and the officers and the members or past members of the society. Provided that – (a) no order of appointment of the costs shall be made under this section unless the society or the person liable to pay the costs there-under has had a reasonable opportunity of being heard; (b) the Registrar shall state in writing under his own hand the grounds on which the costs are apportioned. (1) An order authorising inspection under section 49 or section 51 or any inquiry under section 50 shall, among other things, contain the following: (a) name of the person authorised to conduct the inspection or inquiry; (b) the name of the co-operative society whose affair are to be inspected or inquired into; (c) the specific point or points on which inspection or inquiry is to be made, the period within which the inspection or inquiry is to be completed and report submitted to the Registrar; (d) cost of inquiry; and (e) any other matter relating to the inspection or inquiry as may be considered relevant by the Registrar. (2) A copy of every order authorising an inspection under section 49 or section 51 or an inquiry under section 50, shall be supplied to the federal co-operative society or societies to which the co-operative society in respect of which the order is issued, is affiliated. (3) If the inspection or inquiry cannot be completed within the time specified in the order referred to in sub-rule (1), the person conducting the inspection or inquiry shall submit an interim report stating the reasons for failure to complete the inspection or inquiry in time and the Registrar, if he is satisfied with such reasons may grant such extension of time for the completion of the inspection or inquiry as he may deem necessary or he may withdraw the inspection or inquiry from the person to whom it is entrusted and hold the inspection or inquiry himself or entrust it to such other person as deems fit. (4) On receipt of the order referred to in sub-rule (1), the person authorised to conduct the inspection or inquiry shall proceed to examine the relevant books of accounts and other documents in possession of the co-operative society or any of its officers, members, agents or servants and obtain such information or explanation from any such officer, member, agent or servant of the co-operative society in regard to the transactions and working of the co-operative society as he may deem necessary for the conduct of such inspection or inquiry. (5) The person authorised to conduct inspection or inquiry shall submit his report to the Registrar on all points mentioned in the order referred to in sub rule (1). The report shall contain his findings and the reasons therefore duly supported by such documentary or other evidence as recorded by him during the course of his inspection or inquiry. He may also specify in his report the costs of inspection or inquiry together with reasons and recommend to the Registrar the manner in which the entire cost of part thereof may be apportioned amongst the parties. The Registrar shall pass such orders thereon as may be considered just after giving a reasonable opportunity of being heard to the person or persons concerned. (6) The cost of the inspection or inquiry apportioned by the Registrar under section 52 shall be recovered as provided for in section 53. The Registrar may direct that such costs or any part thereof shall be paid in the first instance from the funds of the co-operative society or in case of inspection, from the amount deposited by the creditor under clause (b) of sub section (1) of section 51 and then recovered and repaid to the co-operative society or the creditor, as the case may be.

Any sum awarded by way of costs under section 52f 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. Any federal co-operative society duly authorised by a resolution of its committee may submit a requisition to the Registrar to hold an inquiry under section 50 in respect of any co-operative society affiliated to it, duly setting out the grounds on which the inquiry is sought. A copy of such requisition shall be supplied to the society in respect of which the requisition is made.

(1) If in the course of an audit, inquiry, inspection or the winding up of a 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 Regulation, the rules 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 Registrar may, of his own motion or on the application of the committee, 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: Provided that no such inquiry shall be held after the expiry of six years from the date of any act or omission referred to in this sub-section. (2)Where an inquiry is made under sub-section (1) the Registrar may after giving the person concerned an 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 Registrar may consider just and equitable. (1) Every co-operative society which is subject to levy of audit fee as prescribed shall remit such fees in the mode specified by the Registrar within three months from the date of issue of demand notice in this behalf. (2) The Registrar may levy supervision charges payable annually, on or before specified date, on all or any class of co-operative societies including the co-operative societies under liquidation at such rate as may be fixed by him with the approval of Chief Commissioner. (3) Such charges, or fees if not paid by the specified date, shall be recovered as provided for in section 67. (4) The Chief Commissioner may authorise the Registrar to grant total or partial exemption from the payment of audit fee and / or supervision charges assessed to any co-operative society or class of co-operative societies.