What when no AGM is called for approval of accounts

Rajan Devarajan

Ours is a coop society of 16 members in Mumbai. Redevelopment was initiated in 2009. Since then society prepared annual reports got it audited and also got audit report. No AGM was called for approval of accounts for four years

I C Naik

Consequences of failure to convene AGM of a CHS

Rajan Devarajan’s CHS (presumable in Maharashtra) of 18 members have got aannual accounts audited but not approved in AGM as not one was called over last 4 years. He wants to know the consequences and remedial measures.

The Constitution of India in its new part “IXB: Cooperative Societies” guarantees to Indian citizens that the State Laws shall regulate cooperative societies in recignistion of principles of  voluntary formation, democratic member-control, member-economic participation and autonomous functioning (Article 243ZI). Side by side in the same part certain mandates are also laid down for cooperatives. These mandates include

1.Maintenance of accounts by the co-operative societies and the auditing of such accounts at least once in each financial year.

2.The accounts shall be audited within six months of the close of the financial year to which such accounts relate.

3.The annual general body meeting of every co-operative society shall be convened within a period of six months of close of the financial year to transact the business as may be provided in such law ( AA 243ZM & N)

4.Most critical requirement as specified directly in this part of the Constitution itself vide Art. 243ZP is as under

5.Every co-operative society shall file returns, within six months of the close of every financial year, to the authority designated by the State Government including the following matters, namely:—

(a) annual report of its activities;

(b) its audited statement of accounts;

(c) plan for surplus disposal as approved by the general body of the co-operative society;

(d) list of amendments to the bye-laws of the co-operative society, if any;

(e) declaration regarding date of holding of its general body meeting and conduct of elections when due; and

(f) any other information required by the Registrar in pursuance of any of the provisions of the State Act.

Accordingly the State law has made provisions in the MCS Act 1960 vide Maharashtra cooperative societies (Amendment) Act 2014  which has come in to force with effect from 14 2 2013 i.e Financial years 2012-13 and 2013-14 and 2014-15 are already covered by new provisions.

As required by the Constitution vide Articles AA 243ZM & N Sub-Section  (2) of Section 75 of the MCS Act 1960 requires that  at every annual general body meeting of a society, the committee shall lay before the society,—

1. a statement showing the details of the loans, if any, given to any of the members of the committee or any member of the family of any committee member, including a society or firm or company of which such member or members of his family is a member, partner or director, as the case may be; the details of repayment of loan made during the preceding year and the amount outstanding and overdue at the end of that year;
2. annual report of its activities;

iii. plan for disposal of surplus;

(iv) list of amendments of the by-laws of the society, if any;

1. declaration regarding date and conduct of its election of its committee, when due;
2. audit report of the preceding financial year;
3. rectification report of earlier audit;

vii. annual budget for next year;

viii. any other information required by the Registrar in pursuance of any of the provisions of the Act and rules; and

1.such other business will be transacted as may be laid down in the by-laws and of which due notice has been given.

Sub-Section (4) of Section 75 provides  “(4) At every annual general body meeting the audited balance sheet, the audited profit and loss account, audit report of the preceding financial year submitted by the auditor appointed under section 81, rectification report of earlier audit and the committee’s report shall be placed for adoption and such other business will be transacted as may be laid down in the by-laws, and of which due notice has been given.”;

Consequences of the failure in above compliances are also prescribed under the State Law in  Sub-Section (5) of Section 75 and Sub-Section 3 of Section 79

1.If default is made, in calling a general body meeting within the period  the Registrar may by order declare any officer or member of the committee  whose duty it was to call such a meeting disqualified for being elected and for being any officer or member of the  committee for such period not exceeding five years, as he may specify in such an order  and, if the officer is a servant of the society, impose a penalty on him to pay an amount  not exceeding fivethous and  rupees.

2.Where any society is required to take any action including filing of returns under this Act, the rules or the byelaws, or to comply with an order made under the foregoing sub-sections, and such action is not taken–

(a) within the time provided in this Act, the rules or the bye laws, or the order as the case may be, or

(b) where no time is so provided, within such time, having regard to the nature and extent of the action to be taken, as the Registrar may specify by notice in writing. the Registrar may himself, or through a person authorized by him, take such action, at the expense of the society; and such expense shall be recoverable from the society as if it were an arrear of land revenue.

3.Where the Registrar takes action under sub-section 2 above, the Registrar may call upon the officer or officers of the society whom he considers to be responsible for not complying with the provisions of this Act, the rules or the bye-laws, or the order made by him and after giving such officer or officers an opportunity of being heard, may require him or them to pay to the society the expenses paid or payable by it to the State Government as a result of their failure to take action and to pay to the assets of the society such sum not exceeding one hundred rupees as the Registrar may think fit for each day until the Registrar’s directions are carried out.

The offences of the CHS of Rajan Devarajan are grave enough in the context of the above and it is advisable to seek directions from the Dy. Registrar of the Ward. Two factors can weigh in favour to get a lenient penalties : Size of the CHS and introduction of strict compliance only about two years ago(August 2013).