Chapter IX AUDIT, INQUIRY AND SURCHARGE

59[(1) Every society shall prepare and maintain its accounts of each financial year in the prescribed form and manner. 60[(2) Every society shall cause its accounts to be audited by an auditor or auditing firm appointed by the committee of the society from amongst the panel approved under sub-section (4): Provided that where the committee of the society fails to appoint an auditor or auditing firm within the time stipulated therefor, the Registrar may appoint an auditor or auditing firm for the audit of the society from the panel approved under sub-section (4): Provided further that no auditor or auditing firm shall be appointed for the audit of the accounts of the society for more than two years in continuation: Provided also that the Registrar may, by an order, appoint an auditor(s) or auditing firm(s) to cause accounts of a society or a class of societies to be audited for a particular period, which shall be binding on the society or the class of societies, as the case may be.] (3) The accounts of every society shall be audited within six months of the close of the financial year to which such accounts relate.

1. (4) For the purposes of sub-section (2), the Registrar shall prepare, approve and notify a panel, in the prescribed manner, of eligible auditors and auditing firms.
2. (5) Following shall be the minimum qualification and experience for auditors and auditing firms that shall be eligible for auditing accounts of the societies, namely:-
   • (a) in case of an auditor, -
     • (i) he must be a Chartered Accountant as defined in the Chartered Accountants Act, 1949 (Central Act No. 38 of 1949) and should have at least three years postqualification experience of auditing accounts; or 61[(ii) he must be a person in service of the Co-operative Department of the Government of Rajasthan, not below the rank of an Inspector, and]
   • (b) in case of an auditing firm, it must be a firm of Chartered Accountants as defined in the Chartered Accountants Act, 1949 (Central Act No. 38 of 1949) and should have at least three years experience of auditing accounts.
3. (6) Cost of the audit shall be decided and paid by the cooperative society concerned: 61[Provided that the fee of the auditors referred to in sub-clause (ii) of clause (a) of sub-section (5) and the auditor(s) appointed by the Registrar under the sub-section (2) shall be prescribed by the State Government.]
4. (7) The society shall render, to the auditor or, as the case may be, auditing firm, access to all the books, accounts, documents, papers, securities, cash and other properties belonging to the society.
5. (8) Every person, who is, or has at any time been, an officer or an employee or an agent of the society and every member and past member of the society shall furnish such information in regard to the transactions and working of the society as the auditor or, as the case may be, auditing firm may require.
6. (9) The auditor or, as the case may be, auditing firm shall have the right to receive all notices, and every communication relating to the annual general meeting of the society and to attend such meeting and to be heard thereat. 62[(10) The auditor or, as the case may be, auditing firm shall prepare audit report in the Proforma prescribed by the Registrar and submit the audit report to the society and also to the Registrar.]
7. (11) The auditor or, as the case may be, auditing firm auditing the accounts of a short term co-operative credit structure society shall endorse a copy of the audit report to the Reserve Bank of India, the National Bank and the Registrar. 62[(12)If it comes to the knowledge of the Registrar that, prima facie, any financial irregularity has occurred in a society, the Registrar may get a special audit of the society conducted for the period during which such irregularity is believed to have taken place: Provided that the Registrar shall ensure conduct of special audit of the Rajasthan State Co-operative Bank or a Central Co-operative Bank, if requested by the Reserve Bank of India, in the manner and form stipulated by the Reserve Bank of India within the time stipulated.]
8. (13) The society shall send a copy of the audit report along with compliance thereof 63[in the prescribed manner] after consideration and approval of the same by the General Body of the society to the Registrar and to its affiliating society, if any.
9. (14) The Registrar shall submit to the State Government the audit report of the accounts of the Apex Co-operative Society and the State Government shall cause such report to be laid before the State Legislature.
10. (15) If the State Legislature resolves to make any direction or recommendation on the audit report laid before it, the society shall, as soon as possible, comply with the directions or, as the case may be, recommendations.

1. (1) The Registrar may, on the application of -
   • (a) a co-operative society to which the society concerned is affiliated; or
   • (b) a majority of the members of the committee of the society; or
   • (c) not less than one-tenth of the total number of members of the society, or, of his own motion, either by himself or by a person authorised by him by order in writing, hold and inquiry into the constitution, working and financial condition of a co-operative society.
2. (2) The Registrar, or the person authorised by him under subsection (1), shall, for the purpose of an inquiry under this section, 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 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 summon any person, who, he has reason to believe, has knowledge of any of the affairs of the society, to appear before him at the headquarters of the society or any branch thereof and may examine such person on oath; and (c)(i) 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 or any branch thereof and to determine 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;
     • (ii) any meeting called under sub-clause (i), shall have all the powers of a general meeting called under the byelaws of the society and its proceedings shall be regulated by bye-laws.
3. (3) All officers, members and employees of the society, whose affairs are investigated under this section, shall furnish such information in their possession in regard to the affairs of the society as the Registrar or the person authorised by the Registrar may require.
4. (4) It shall be competent for the Registrar to withdraw any enquiry from the officer to whom it is entrusted, and to hold the enquiry himself or to entrust it to any other person as he deems fit.
5. (5) When an inquiry is made under this section, the Registrar shall communicate the result of the inquiry to the society and to the cooperative society, if any, to which that society is affiliated.
6. (6) The Registrar may, by an order in writing, direct any officer of the society or its financing bank or any other society to take such action as may be specified in the order to remedy, within such time as may be specified therein, the defects, if any, disclosed as a result of the enquiry. 64[55-A.Inspection by Registrar. - (1) The Registrar may subject to such conditions, as may be prescribed, of his own motion, by himself or by a person authorized by him by an order in writing, hold inspection of the books of a co-operative society.
7. (2) The Registrar, or the person authorized by him under subsection (1) shall, for the purposes of the inspection under this section, 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 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 a place and time, as directed by the Registrar or the person authorised by the Registrar; and
   • (b) he may summon any person who, he has reason to believe, has knowledge of any of the affairs of the society, to appear before him at any place, and may examine such person on oath.
8. (3) All officers, members and employees of the society whose books are inspected under this section shall furnish such information in their possession in regard to the affairs of the society as the Registrar or the person authorized by the Registrar may require.
9. (4) The Registrar may, by an order in writing, direct the society or any officer of the society or its financing bank or any other organisation to take such action as may be specified in the order to remedy, within such time as may be specified therein, the defects, if any, disclosed as a result of the inspection.]

A financing bank shall have the right to inspect the books of any co-operative society which is indebted to it. The inspection may be made either by an officer of the financing bank or by a member of its paid staff certified by the Registrar on the recommendation of the 65[ Chief Executive Officer] of such bank as competent to undertake such inspection. The officer or member so inspecting 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 society and may also call for such information, statement and returns as may be necessary to ascertain the financial condition of the society and the safety of the sums lent to it by the financing bank.

1. (1) If on the basis of an audit, inquiry, inspection or a Liquidator's report made under the provisions of this Act, it comes to the knowledge of the Registrar that any person, who has taken any part in 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 the provisions of this Act, the rules or the bye-laws or has caused any deficiency in the assets of the society by wilful negligence or has misappropriated or fraudulently retained any money or other property belonging to such society, the Registrar may, 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 inquiry into the conduct shall be done under this section by a person who has earlier submitted report of audit, inquiry, inspection or liquidation in the same matter: Provided further that no such inquiry shall be held after the expiry of six years from the date of an act or omission or after the expiry of two years from the date of knowledge of the Registrar of such act or omission: Provided also that any business loss occurred due to an act done or decision taken in the interest of the society with a common business prudence shall not be a subject matter of such inquiry.
2. (2) Where an inquiry is made under sub-section (1), the Registrar may, after giving the person concerned an opportunity of representing his case, 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.
3. (3) This section shall apply notwithstanding that such person or officer may have incurred criminal liability by his act. Explanation:-66[x x x]