Misappropriation of funds in Housing Societies
By Advocate Vivek M. Sharma
Generally misappropriation/frauds are done in the following manners : –
1. Not showing collection done from the members of showing less collection.
2. Expenditure vouchers are hiked false cash memo-bills are attached.
3. Showing false expenditures.
4. Approving higher tender and taking benefits from contractor.
5. Manipulation collection receipts showing lesser amount in the office copy.
6. Handling cash and using for personal purpose.
7. Issuing cheque and payment by over ruling bye law of Co-operative Housing Society.
How to recourse
1. Once the audit is done the members can appoint outside chartered accountant to scrutinize the audited accounts if they feel that there is any misappropriation.
2. That to prevent fraud, members should meets office bearers at least once in three months for informal discussions on society matters.
3. They can approach the managing committee and ask for explanations, if these are unsatisfactory, they can approach the registrar and joint and deputy registrars. As a last resort they can approach the Co-operative Court.
4. U/s. 83.
It is recoverable and punishable offence as per M.S.C. Act, 1960, if fraud has been in the affairs of the society then all members can raise voice and can complaint to Dy. Registrar of Co-op. Dept. U/s. 83 for investigation and recovery of losses done to the society. To complain U/s. 83. 1/3rd of the members signature is required as per M.S.C. Act, 1960. On the complaint letter.
Thus if one third of the members of a society make request to the registrar to hold an inquiry regarding its financial condition, the officer or his nominee is duty bound to conduct such an inquiry. The registrar may direct the applicants to deposit a sum of nominal amount with him and this amount can be forfeited if the allegations made against office bearers turns out to be vexatious or malicious.
If the inquiry discloses substance in the charges made the amount has to be refunded to the applicants if the allegations are not false but yet cannot be proved the state government would bear the cost of inquiry.
The Maharashtra Co-operative Society Act, 1960 provides that all office bearers and members of the society past and present are supposed to co-operate with such inquiry and produce any document that is needed and is in their possession. The registrar is supposed to inform the society as to the findings arrived at through the inquiry. It is open to members to taken action against the office bearers on the basis of find. Under the Act, the registrar has the power to himself (suo-moto) commence an inquiry into the financial condition of the society. This means that even a single member can in an appropriate case, persuade the registrar to initiate proceedings. (Vyankage Vs. Girmaji, 1996 C.T.D. 150, 151) Madhav vs. Samrudhi C.N. Society, 1968 C.T.D. 30,35).
An application by a member of a society alleging the mismanagement of the affairs of the society by the ex-chairman which has caused loss to the society, the Registrar has to decide whether it is a dispute under Section 91(1), or an inquiry U/s 83 is necessary (Vyankaje V/s. Girmaji, 1966 C.T.D. 150, 151)
[Ravindranath T.S.G.N.S. Deopur Dhule Vs. Bajirao Bhll Patil, reported in 1991 C.T.J. 61 (Bom. H.C.) (DB)] In this case the society had passed resolution in the general meeting to expel the former Chairman and Secretary of the Society, as they were guilty of falsification of accounts and misappropriation of large sums. The Bombay High Court held the same.