ORISSA HIGH COURT, CUTTACK. W.P. (C) Nos. 4353 and 15148, both of 2006 In the matter of applications under Articles 226, 227 and 14 of the Constitution of India and Section 62 of the Orissa Co-operative Societies Act 1962 read with the Rules contained in Chapter-VI of the Orissa Co-operative Societies Rules, 1965. ------------- In W.P. (C) No. 4353 of 2006 Sri Gadadhara Parida … Petitioner Versus State of Orissa and five others. … Opposite Parties AND In W.P. (C) No. 15148 of 2006 Pradipta Kumar Sahani … Petitioner Versus State of Orissa and four others … Opposite Parties For Petitioners : M/s. Pitambar Acharya, S.R. Pati, P.K. Ray and S.P. Swain. (In W.P.(C) No.4353 of 2006) M/s. Susanta Das, A. Mishra, P.Chuli, S. Soren. Mr. Pramath Pattnaik. (In W.P.(C) No.15148 of 2006) For Opp. Parties : M/s. S.K. Pattnaik, A.K. Rath, U.C. Mohanty, P.K. Pattnaik, S.K. Pattnaik and N. Satapathy. Mr. Ashok Kumar Rath. (for O.P.5). ------------- PRESENT : THE HONOURABLE MR. JUSTICE L. MOHAPATRA AND THE HONOURABLE MR. JUSTICE C.R. DASH --------------------------------------------------------------------------------------------------- Date of Judgment : 27.07.2010 --------------------------------------------------------------------------------------------------- C.R. Dash, J. Both the writ petitions are taken up together for disposal, as they arise out of the same transaction. 2. In both the writ petitions legality of special audit report concerning clearance sale-cum-exhibition held during the period from 16.03.2001 to 11.10.2002 and accounts of its five agency sale depots in Calcutta and one at Durgapur covering the period up to 31.03.2004 is impugned in these writ petitions, both on merit and on technicalities. 3. During the relevant period from 23.12.1998 to 31.08.2003 Sri Gadadhar Parida (petitioner in W.P.(C) No.4353 of 2006) was the Managing Director of Orissa State Handloom Weavers Co-operative Societies Ltd. During the relevant period from 09.05.2000 to 20.11.2003 Pradipta Kumar Sahani (petitioner in W.P. (C) No.15148 of 2006) was the Secretary of the aforesaid Co- operative Society. As asserted in both the writ petitions, during the period covered under the special audit, movable properties of the aforesaid society like damaged clothes and other damaged stock were disposed of by clearance-cum-exhibition sale. It is further asserted 2 that such a move was undertaken on the basis of decision of the Managing Committee of the Society after proper revaluation of the old and damaged stock. During the incumbency of Sri Gadadhar Parida (petitioner in W.P.(C) No.4353 of 2006) and Pradipta Kumar Sahani (petitioner in W.P.(C) No.15148 of 2006) as Managing Director and Secretary respectively of the aforesaid Society, steps were also taken to downsize the staffing pattern of the Society for optimum profit and efficiency of the staff. At the behest of some dissatisfied staff members, the special audit in question was conducted without following the procedure prescribed in the Orissa Co-operative Societies Act, 1962 (‘Act’ for short) and the Rules made thereunder. It is alleged that the Auditor concerned having not followed the rules in conducting the audit and having conducted the audit in most improper manner, the special audit report suffers from gross infirmity, inherent defects, absurd findings and irrational conclusions. 4. Mr. Pitambar Acharya, learned counsel for the petitioner in W.P.(C) No.4353 of 2006, besides assailing the audit report on merit, submits that the audit has been conducted in gross violation of Section 62 (1)(iii) of the Act and Rule 58-A of the Rules made thereunder. 5. Mr. Pramath Pattnaik, learned counsel for the petitioner in W.P.(C) No.15148 of 2006 adopts the argument of Mr. Pitambar Acharya and further submits that the audit report being only a document containing process of official examination of accounts in order to make sure that such accounts have been properly maintained, 3 the same cannot be made the basis of further proceeding against the petitioner. Mr. Pattnaik relies on the decision of the Hon’ble Allahabad High Court in the case of Dilip Singh Rana vrs. State of U.P., 1994 LAB. I.C. 491, to substantiate his contention. 6. So far as the grounds of challenge of the special audit report on merit is concerned, we, in exercise of our writ jurisdiction, do not feel inclined to delve into the merit, inasmuch as examination of the audit report on merit involves hosts of questions of facts, which cannot be gone into properly, effectively and efficiently by this Court in a writ jurisdiction. So far as the question of admissibility or otherwise of the audit report in evidence or probative effect thereof for initiation of Disciplinary Proceeding is concerned, the Writ Court is not the proper forum to go into such fact. The decision in the case of Dilip Singh Rana (supra), which relates to finding arrived at in a Disciplinary Proceeding on the basis of audit report does not apply to the fact of the present case. In that view of the matter, we propose to examine the legal points raised by learned counsels for the petitioners on technicalities, mainly concerning propriety of the audit report on the ground of contravention of Section 62 of the Act and Rule 58-A of the Rules made thereunder. 7. On technicalities, the special audit report has been impugned on the following grounds - (i) According to Section 62 (1)(iii) of the Act, the special audit report in question, which covers a period of three years, is not sustainable in the eye of law, as one Auditor 4 cannot audit the accounts of the same Society for two consecutive Co-operative years. (ii) It is the requirement of law that the Auditor should issue half-margin memo to the person, against whom recovery has been suggested. In the present case, however, no half-margin memo has been issued by the Auditor in respect of the petitioners in both the writ petitions, and such a course by the Auditor is violative of the Rule 58-A of the O.C.S. Rules. The Auditor-General (O.P.4) has filed counter affidavit to the effect that initially order was passed for conducting special audit of accounts of clearance -cum-exhibition sale from 20.05.2001 to 31.10.2001. Subsequently the scope of the audit was expanded from 16.03.2001 to 11.10.2002 on receipt of complaint to the effect that there has been misappropriation in selling the stock of the Society in the sale depots in Calcutta and Durgapur. The scope of the audit was further expanded to agency sales in five sale depots of the Society in Calcutta and one sale depot of the Society at Durgapur. It is further averred in the counter affidavit that the special audit has been conducted in accordance with Section 62 (1)(ii) of the Act and there has been no illegality. It has also been averred in the counter affidavit that on completion of the special audit on all the aforesaid accounts, the Auditor submitted the special audit report before the deponent (O.P.4) on 09.05.2005. On receipt of the special audit report, opposite party no.4 after complying with the requirement of Rule 58-A(2) of the O.C.S. Rules, communicated the special audit report to opposite 5 party no.5, the Co-operative Society concerned and other administrative departments. 8. In order to appreciate the question of non-compliance of Section 62(1)(iii) of the Act, it is beneficial to quote the relevant provisions of the said Section, which reads as follows - “62. Audit – (1)(i) The Auditor-General shall audit, or cause to be audited by an Auditor duly authorized by him in that behalf, the accounts of every Society for each Co-operative year, and complete such audit within six months of the closure of the year, at least once or for such number of times as may be directed by the State Government from time to time in respect of any Society or class of Societies. (ii) The Auditor-General may, of his own motion or on a requisition from the Registrar and shall, on a directive from the State Government, arrange for special audit, re-audit or concurrent audit of the accounts of any Society or class of Societies or day-to-day or such other basis as may be directed. (iii) The Auditor-General shall so arrange the audit that the same Auditor shall not audit the accounts of the same Society for two consecutive Co-operative years.” A cursory reading of the aforesaid provisions makes it clear that provision of Section 62(1)(ii) applies to special audit and it has also been asserted by the Auditor-General (O.P.4) in his counter affidavit that the special audit was conducted in accordance with Section 62 (1)(ii) of the Act. Sub-sections (1)(i) and (iii) of Section 62 applies to normal / general or annual audit of a co-operative society conducted in each co-operative year. Sub-section (1)(iii) of section 62 is in the nature of a dictum to the Auditor General to arrange the audit 6 in such a manner that the same Auditor shall not audit the accounts of the same Society for two consecutive co-operative years. Provisions contained in sub-sections (1)(i) and (1)(iii) of Section 62 make it undoubtedly clear that both the provisions apply to annual audit of a co-operative society. Sub-section (1)(ii), however, applies to special audit, re-audit or concurrent audit of the accounts of any Society or class of Societies on day-to-day basis or such other basis as may be directed. 9. In the present case, irregularities relating to transactions in a particular event have been audited. That particular event is exhibition-cum-clearance sale of damaged old clothes and other immovables. Such event spreads within the period audited in course of the special audit. The special audit being concerned with a particular event, such event on the basis of co-operative years could not have been fragmented or separated for audit by different auditors. Rightly, therefore, same auditor has conducted the special audit in respect of the events in question and such a course in case of special audit is required to be followed to maintain uniformity of the auditing process. Regard being had to the provisions contained in Section 62 of the Act in its entirety, we are not in a position to accept the contention of learned counsel for the petitioners in both the writ applications that sub-section (1)(iii) of Section 62 applies even to a special audit and there being contravention of the said provision, the entire audit report is vitiated. This contention, therefore, merits no consideration and must fail. 7 10. Coming to the second contention regarding non compliance of Rule 58-A of the Rules, it is submitted that though the Auditor conducting audit was required to issue half-margin memos/ objection memos for compliance, no such half-margin memos having been issued to the petitioners, the entire audit report is vitiated. 11. So far as this ground is concerned, learned counsels for the petitioners in both the writ petitions rely heavily on the proviso 2 to Rule 58-A(1) of the Rules, which reads as follows – “Provided further that every Auditor conducting audit on behalf of the Auditor-General shall forthwith endorse copies of all objection memos and compliance received thereto, as and when filed with, or received from the society along with his finding, if any, thereon, to the Auditor-General, who shall take those into account for giving such directions to the society as he may deem proper.” The aforesaid provisions, as clearly understood, relates to endorsement of the copies of all the objection memos by the Auditor conducting audit to the society and forwarding of the compliance received from the society along with his finding to the Auditor General so that the Auditor General shall be in a position to give proper direction to the society audited. There is nothing in the proviso to suggest that any findings adverse to any individual in his capacity as Office Bearer of the Society concerned should be endorsed to that particular person for his view / reply or explanation on the findings of the Auditor. The Auditor-General (O.P.4) in his counter affidavit has clearly averred that Rule 58-A of the O.C.S. Rules has been complied 8 with. In that view of the matter, we are not inclined to accept the aforesaid contention of learned counsels for the petitioners in both the writ applications. 12. Before parting with the order, we feel inclined to observe here that the petitioners in both the writ applications are anxious about the prospective disciplinary action against them on the basis of the special audit report in question and, in order to wriggle out of such action or apprehending such action, the petitioners have called in question legality of the special audit report, which may become the very basis of such apprehended action. 13. Regard being had to the nature of the special audit conducted and duties asserted to be discharged by the petitioners in their official capacities, we feel inclined to observe here that wisdom of the auditor in the special audit report should not be made the basis of any disciplinary action against the petitioners without affording them proper opportunity to explain their conduct. With the aforesaid observation, both the writ petitions are dismissed. …………………… L. Mohapatra, J. …………………… Orissa High Court, Cuttack. 9 The 27th day of July, 2010. /Parida. 10