Chapter V ACCOUNTS, AUDIT AND INQUIRY

Maintenance of records, Accounts, etc. (1) Every Co-operative shall maintain at its registered office the following, namely:- (a) a copy of the Karnataka Souharda Sahakari Act, 1997 with upto date amendments; (b) registration certificate and registered bye-laws and the amendments registered from time to time in original; (c) a copy of the bye-laws of the Federal Co-operative and each of its subsidiaries, if any; (d) a register of members with details regarding voting rights for the current year updated within thirty days of closure of the cooperative year and the memberwise use of various services; (e) accounts of all sums of money received and expended by the Co-operative and its branch, if any, and purposes; (f) accounts of all purchases and sales of goods by the Co-operative; (g) accounts of the assets and liabilities of the Co-operative; (h) the minutes book (i) copies of the board resolution; and (j) annual report and audit report and where a Co-operative has branch office, accounts and records related to such branch. (1A) Every cooperative shall provide opportunity to every member to peruse the books, information and accounts of the cooperative kept in regular transaction of its business with such member. (2) Copies of the resolutions of the board and general meetings, voters list, bye-laws, statement of annual accounts and such accounts relating to a member, shall be made available to any member during the business hours after payment of necessary fees as may be decided by the board. (3) The books of accounts of every Co-operative together with supporting records and vouchers shall be preserved for such period as may be decided by the board.

Furnishing Information. Within six months from the close of the cooperative year, every cooperative shall furnish the following returns and information to the Registrar and the Federal cooperative and in the case of Co-operative Bank also to the Reserve Bank namely:- (a) annual report of the activities for the preceding cooperative year and the programme for the ensuing cooperative year; (b) audited financial statements; (c) plan for disposal of surplus as approved by the general body; (d) list of directors and their terms of office; (e) list of amendments to the bye-laws of the Co-operative; and (f) declaration regarding the date of conducting the general body meeting and elections, if any. (g) any information required by the Registrar and the Federal cooperative under the provision of this Act

(1) The Registrar may conduct an inquiry or cause an inquiry to be conducted expeditiously into any specific matter touching the constitution, management, working or financial condition of a Co-operative. (2) An inquiry of the nature referred to in sub-section (1) shall be held on the application of.- (a) the Federal Co-operative to which the Co-operative is affiliated; or (b) not less than one third of the members of the Board of the Co-operative or (c) not less than one-tenth of the total number of members of the Co-operative or a minimum of ten members of the Co-operative. (3) The application under sub-section (2) shall be accompanied by such fee as may be prescribed. (4) The Registrar may himself conduct the inquiry or appoint an inquiry officer to conduct the inquiry. The cost of inquiry shall be met by the creditor or the Federal Co-operative or the Co-operative, as the case may be, as may be decided by the Registrar. (5) An inquiry under sub-section (2) shall be completed within a period of twelve months which may however be extended by the Registrar for a further period of six months for reasons to be recorded in writing. (6) When an inquiry is made under this section, the Registrar shall, within a period of one month from the date of receipt of inquiry report, send a copy of the inquiry report to- (a) the applicants; (b) the Co-operative concerned; (c) the creditors concerned; (d) the Federal Co-operative and (e) the Reserve Bank in case the inquiry conducted under this section relates to a Co-operative Bank.

Power to summon and examine persons and documents. (1) The Registrar or the Enquiry Officer as the case may be, shall issue to the concerned Co-operative, a notice in writing of not less than fifteen days regarding the date of commencement of the inquiry: Provided that, for reasons to be recorded in writing, a shorter notice may be issued. (2) The Registrar or the Enquiry Officer conducting inquiry may provide a reasonable period of not less than seven days to comply with sub-section (3). (3) For the purpose of inquiry under this Act, the Registrar or the inquiry officer conducting such inquiry:- (a) may require in writing the President or Chairperson or the Chief Executive or other authority concerned to produce such receipts, vouchers, statements, returns, correspondence, notice or any other documents as he may consider necessary for the purpose of inquiry. (b) shall, at all time, have free access to the books, accounts, documents, securities, cash and other properties belonging to, or in the custody of, the Co-operative 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 public office at the headquarters or at the head office of the Co-operative or any branch thereof; (c) may summon any officer of a financing bank or a credit agency as the case may be or any person having any kind of business relationship with the cooperative or any person who is connected with the functioning of and who has knowledge about the affairs of the cooperative to produce any records or documents, if any, related to the transactions with and working of the cooperative and furnish such information and the explanations, at the registered office or branch of the cooperative or at any public office at the headquarters of the cooperative, as the inquiry officer may require for the purpose of the inquiry (d) may, notwithstanding any rule or bye-law specifying the period of notice for a general meeting of the Co-operative, require the office bearers of the Co-operative to call a general meeting at such time and place at the head quarters of the Co-operative or any branch thereof and to determine such matters as may be directed by him, and where the office bearers of the Co-operative refuse or fail to call such a meeting he shall have power to call it himself; Explanation:- Any meeting called under clause (d) shall have the powers of the general meeting called under the bye-laws of the Co-operative and its proceedings shall be regulated by such bye-laws except that no quorum shall be necessary for such meeting.

Action on inquiry Report. The Registrar, after such inquiry, if satisfied that any or all of the office bearers or directors or Chief Executive is or are responsible for any payment contrary to the Act, rules or the bye-laws and has or have caused loss or deficiency in the assets of the Co-operative by breach of trust or negligence or has or have misappropriated or fraudulently retained any money or property belonging to such Co-operative, without prejudice to any civil or criminal proceedings to which they may be liable, may direct the board to convene the general meeting within such reasonable time as or the Registrar, specify to discuss the findings of the inquiry report and for initiating necessary action against the concerned. The general body if fails to initiate action against culprits and Registrar shall issue direction to take action against the culprits, and follow up action till the defects are rectify.

Surcharge. (1) If in the course of an audit under section 33, inquiry under section 35, inspection under section 53 or the winding up of a Co-operative under section 48, it is found that the board of such cooperative or the President, Vice-President, the Chairperson, Vice chairperson or any other member of the board or any person who is or was entrusted with the organization or management of such co-operative or who is or has at any time been an officer or an employee of the co-operative has made any payment contrary to the Act, the rules or the bye-laws or has caused any deficiency in the assets of the co-operative by breach of trust or negligence or has misappropriated or fraudulently retained any money or other property belonging to such Co-operative, the Registrar may, on an application of the board, Liquidator or any creditor or the Federal cooperative, frame charges against such person or persons and after giving such person and in the case of a deceased person, to his representative who inherits his estate, an opportunity of making representation, make an order requiring him to pay or restore the money or property or any part thereof with interest at such rate as he may determine or to contribute such sum to the assets of the co-operative by way of compensation to such extent as he may consider just and equitable. (2) This section shall apply, notwithstanding that the act is one for which the person concerned may be criminally liable. (3) The order made by the Registrar under sub-section (1) may also provide for recovery of cost of surcharge proceeding from the person against whom the order is made at such rate and in such manner as may be prescribed. (4) The application under sub-section (1) shall be decided within a period of twelve months excluding the period of stay granted by the court if any. However, the Registrar may for reasons to be recorded in writing extend the said period upto eighteen months. provided that the State Government may, on a report made by the Registrar, extend the period of inquiry beyond eighteen months, if it is satisfied that there are genuine or valid grounds for such extension.