Special statutory procedure for audit-based prosecutions cannot be bypassed by treating stayed test-audit material as an inspection report.
The Maharashtra Co-operative Societies Act, 1960 prescribes a special procedure for criminal action arising from audit findings, including a report to the Registrar and written permission before an FIR is filed. The Court noted that the FIR was founded on material traced to a test audit that had been stayed, and held that the prosecution could not be sustained by relabelling that material as a mere inspection report. It further stated that the general rule governing cognizable offences could not override the Act's specific initiation mechanism. The impugned criminal action was therefore treated as contrary to the statutory mandate and liable to be quashed.
Issues: Whether the FIR, founded solely on an inspection report generated in the course of a stayed test audit, could validly be registered at the instance of the first informant, and whether such initiation of prosecution was barred by the special procedure under section 81(5B) of the Maharashtra Co-operative Societies Act, 1960.
Analysis: The statutory scheme under section 81 of the Maharashtra Co-operative Societies Act, 1960 distinguishes between audit, test audit, inspection by flying squad, and re-audit. Where an auditor concludes that offences relating to the accounts are disclosed, the Act requires a specific report to the Registrar, followed by written permission before filing of an FIR by the auditor, and if the auditor does not act, the Registrar may authorise another person to do so. The record showed that the report relied upon for the FIR was traced to the very exercise of test audit ordered under section 81(3)(c), and that such test audit had been stayed by the High Court. The Court held that the respondents could not circumvent the statutory bar by describing the document as a mere inspection report, because the source of authority remained the stayed test audit order. It also held that the general rule of registration of cognizable offences could not override the special procedure prescribed by the Act.
Conclusion: The initiation of prosecution was held to be contrary to the statutory mandate and unsustainable, and the FIR was liable to be quashed.
Final Conclusion: The petitions succeeded because the impugned criminal action was founded on a stayed audit-related exercise and was commenced without compliance with the special statutory procedure governing such prosecutions.
Ratio Decidendi: Where a special statute prescribes an exclusive mode for initiating criminal action on the basis of audit findings, that procedure must be followed strictly and cannot be bypassed by recasting the audit-derived material as an inspection report.
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