FIR against society committee members quashed for violating mandatory procedure under section 81(5B) of Act 1960

Bombay HC quashed FIR against society committee members charged under IPC sections 420, 406, 409, 465, 467, 468, 471 read with 34. Court held prosecution legally unsustainable on two grounds: inspection report was outcome of audit stayed by court order dated 16th April 2019, and FIR was registered in contravention of mandatory procedure under section 81(5B) of the Act, 1960. Where allegations are solely based on statutory audit under section 81, prescribed peremptory procedure must be scrupulously followed before FIR registration. Petition allowed without examining merits of allegations.

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Issues Involved:
1. Legality of the initiation of prosecution based on the inspection report.
2. Compliance with the interim order dated 16th April 2019.
3. Applicability of Section 81(5B) of the Maharashtra Co-operative Societies Act, 1960.
4. Authority of the auditor to file an FIR.
5. Validity of the inspection report as a basis for the FIR.

Detailed Analysis:

1. Legality of the initiation of prosecution based on the inspection report:
The petitions under Article 226 of the Constitution of India and section 482 of the Code of Criminal Procedure, 1973, sought to quash FIR No. 806 of 2019 registered with Pimpri Police Station. The FIR was based on an inspection report by Mr. Jadhawar, revealing alleged financial misconduct by the petitioners. The petitioners argued that the prosecution initiation was legally unsustainable because the inspection report was not a valid basis for the FIR.

2. Compliance with the interim order dated 16th April 2019:
The petitioners asserted that the interim order dated 16th April 2019, stayed the execution, operation, and implementation of the test audit order dated 14th February 2019. Despite this stay, the authorities proceeded with the audit, violating the court's order. The court clarified that the interim order indeed stayed the test audit, and the authorities were aware of this stay but continued with the audit, leading to contempt of court.

3. Applicability of Section 81(5B) of the Maharashtra Co-operative Societies Act, 1960:
Section 81(5B) mandates that the auditor must file a specific report to the Registrar and obtain written permission before lodging an FIR if the audit reveals any offenses. The petitioners contended that the FIR was registered without following this statutory requirement, making the prosecution invalid. The court agreed, emphasizing that the statutory procedure must be followed strictly.

4. Authority of the auditor to file an FIR:
The court noted that the auditor, Mr. Jadhawar, was appointed under the order dated 14th February 2019, to conduct a test audit. However, the FIR was registered based on an inspection report, not an audit report. The court held that the auditor did not have the authority to file an FIR without following the procedure outlined in Section 81(5B), which requires a special report and written permission from the Registrar.

5. Validity of the inspection report as a basis for the FIR:
The court found that the inspection report submitted by Mr. Jadhawar was the sole basis for the FIR. Since the inspection was conducted in violation of the court's interim order and without following the statutory procedure, the FIR could not be sustained. The court emphasized that the statutory provisions must be strictly adhered to, and any deviation renders the prosecution invalid.

Conclusion:
The court quashed FIR No. 806 of 2019 registered at Pimpri Police Station, as it was based on an inspection report conducted in violation of the court's interim order and without following the statutory procedure under Section 81(5B) of the Maharashtra Co-operative Societies Act, 1960. The court clarified that it did not delve into the merits of the allegations in the FIR or the legality of subsequently lodged FIRs, which must proceed in accordance with the law.

Order:
1. Writ Petition No. 4134 of 2019 and Writ Petition No. 1110 of 2021 are allowed.
2. FIR No. 806 of 2019 registered at Pimpri Police Station is quashed and set aside.
3. Criminal Application No. 444 of 2019 and Interim Application No. 793 of 2020 are disposed of.
4. The court did not address the merits of the allegations in the instant or subsequent FIRs, which must proceed as per the law.
5. Rule made absolute, no costs.

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