1998 (6) TMI 565 - HC - Indian Laws

Summary

Issues:
1. Validity of the second audit report and its challenge in a writ petition.
2. Binding nature of the first audit report approved by the general body.
3. Reliance on either the first or second audit report for justice and future audits.
4. Proceedings initiated by the Registrar under Sections 64 and 68 of the Karnataka Co-operative Societies Act.

Analysis:
The judgment primarily deals with the challenge to the second audit report dated 16.05.1991, which found the petitioners guilty of alleged misappropriation. The petitioners contended that the first audit report, which was approved by the general body and similar to the second audit report, should have been binding on the respondents, and there was no legal provision for a second audit on the same matter. They sought to quash the second audit report based on this argument.

The court noted that subsequent audits for the following years were based on the first audit report, and the general body of the society believed that the first audit report should be the basis for any action against the petitioners. The Registrar had also initiated proceedings against the petitioners under Sections 64 and 68 of the Act, relying on both audit reports. The court considered the implications of relying on either the first or second audit report for the ends of justice and future audits of the society.

Ultimately, the court held that the second audit report was liable to be quashed, revising the first audit report dated 07.11.1991. Consequently, the second audit report dated 16.05.1991 was quashed, and the matter was directed to proceed in accordance with the first audit report without reference to the second audit report. The court clarified that this decision would not impact the actions taken by the society and authorities under Sections 64 and 68 of the Act. The writ petition was disposed of with no order as to costs.