Short Answer

Yes, if society funds are misused or misappropriated, members have the right to take legal action to recover the assets and hold the responsible persons accountable.

Under Section 93 and Section 96 of the Gujarat Cooperative Societies Act, 1961, the Registrar of Cooperative Societies has the authority to initiate inquiries, order recovery, and prosecute committee members or officers found guilty of financial irregularities.

Detailed Explanation

The Gujarat Cooperative Societies Act, 1961 provides a clear mechanism for dealing with misuse, embezzlement, or diversion of society funds.

Members play a vital role in reporting such misconduct, after which the Registrar can step in to ensure financial recovery and impose penalties.

• Relevant Legal Provisions:

Section 93 – Inquiry into Mismanagement or Misappropriation:

If any society member suspects misuse of society funds, they can make a written complaint to the Registrar of Cooperative Societies.

The Registrar has the power to conduct an inquiry or inspection of the society’s records and audit reports.

If financial misappropriation or irregularities are proven, the Registrar can:

Order recovery of the misused funds from the responsible person(s).

Suspend or dissolve the managing committee.

Appoint an administrator to manage the society’s affairs.

Section 96 – Recovery of Losses from Officers or Members:

If an audit, inspection, or inquiry finds that any committee member, officer, or employee is responsible for misappropriation, fraud, or breach of trust, the Registrar can issue a “Recovery Certificate.”

The misused amount can then be recovered as arrears of land revenue, meaning the defaulter’s property can be attached or auctioned to recover the loss.

Section 83 – Power of Registrar to Conduct Audit or Re-Audit:

In case of suspicion or complaint, the Registrar can order a re-audit of accounts to trace financial discrepancies.

• Member Rights and Actions:

If members believe funds have been misused, they can take the following steps:

Submit a written complaint to the Registrar with evidence (audit irregularities, bank records, or receipts).

Request a special audit or inquiry under Section 83 or 93.

If the Registrar confirms wrongdoing, a recovery proceeding will begin under Section 96.

Members can also file a police complaint (FIR) under the Indian Penal Code (Sections 403, 406, 409) for criminal breach of trust or fraud.

In extreme cases, members can approach the Cooperative Court or District Registrar for judicial intervention.

• Role of the Registrar and Authorities:

The Registrar acts as a quasi-judicial authority to investigate financial mismanagement.

After due inquiry:

The guilty committee members can be removed or disqualified from holding office in the future.

The Registrar can freeze the society’s accounts to prevent further misuse.

The amount misused can be recovered through attachment of property or bank accounts.

Real-world Scenarios

Scenario 1: In Ahmedabad, members discovered that the treasurer had withdrawn funds without approval. The Registrar ordered an inquiry under Section 93, recovered ₹5 lakh from the treasurer, and dissolved the committee.

Scenario 2: A Surat housing society’s chairman diverted maintenance funds for personal use. After a re-audit under Section 83, a recovery order under Section 96 was issued, and the amount was recovered by attaching his property.

Scenario 3: In Vadodara, members collectively filed a complaint about irregular rent collection. The Registrar appointed an administrator and initiated police proceedings against the committee.

Step-by-step process for members:

Identify misuse through financial statements or audit discrepancies.

File a written complaint to the Registrar with evidence.

Registrar orders inquiry under Section 93 or re-audit under Section 83.

Recovery proceedings start under Section 96 if misuse is proven.

Guilty persons face legal and financial penalties, including disqualification.

References

Section 83 – Power of Registrar to Audit or Re-Audit Accounts, Gujarat Cooperative Societies Act, 1961: Official PDF

Section 93 – Inquiry into Mismanagement or Misappropriation, Gujarat Cooperative Societies Act, 1961: Official PDF

Section 96 – Recovery of Losses from Officers, Gujarat Cooperative Societies Act, 1961: Official PDF