Maharashtra Co-Operative Societies Act Does Not Curtail Power Of Police Investigation Under CrPC: Supreme Court

A three-judge Bench of the Supreme Court, while hearing an appeal, held that: “The police have an independent power and even duty under the CrPC to investigate into an offence once information has been drawn to their attention indicating the commission of an offence. This power is not curtailed by the provisions of the 1960 Act (Maharashtra Co-operative Societies Act).”

The Bench comprised of Chief Justice of India Dhananjaya Y Chandrachud, Justices J B Pardiwala and Manoj Misra.

Brief Background

Several complaints were lodged by individuals, members, shareholders, and depositors of the bank against the management of Seva Vikas Co-operative Bank, registered under the provisions of the Maharashtra Co-operative Societies Act 1960 (1960 Act), alleging acts of cheating and misappropriation of funds.

The first respondent was the Chief Executive Officer. The second respondent was the former Chairperson of the bank. Based on the complaints, the Economic Offences Wing (EOW) at Pimpri-Chinchwad registered an FIR and conducted investigations in January 2019. On 2 May 2019, a letter was addressed by the Police Inspector of the EOW, Pimpri-Chinchwad, to the Commissioner of Co-operation and Registrar of Co-operative Societies Maharashtra seeking a copy of the forensic audit report of the bank. In a letter dated 9 May 2019, the Commissioner of Co-operation and Registrar of Co-operative Societies requested the Joint Registrar (Audit) to conduct an investigation and provide the documents the EOW sought. An investigation was conducted, and an inspection report dated 12 June 2019 was submitted.

Based on this report, the appellant (a shareholder of the co-operative society) lodged an FIR against the respondents. The substance of the FIR was based on the inspection report prepared by the Joint Registrar (Audit), which allegedly indicated financial irregularities by the office bearers of the bank.

High Court’s Proceedings

Respondents approached the High Court via writ petition under Article 226 of the Constitution for quashing the FIR. The High Court decided the appeal in favour of the respondents by holding: "Section 81(5B) (1960 Act) contains special provisions for the submission of a special report and the obtaining of the permission of the Registrar before the lodging of an FIR.” The High Court concluded that the FIR was based on the report of the auditor who was appointed under Section 81(3)(c) (1960 Act). Hence, it was not open to the appellant to fall back on the general principle that the criminal law can be set in motion by any individual upon which the police are duty-bound to register an FIR absent a statutory prohibition. Thus, the present appeal.

Issue Under Adjudication

The narrow issue for the determination by the Apex Court, in the present appeal, was whether the provisions of Section 81(5B) (1960 Act) can be construed as preventing a shareholder of the society such as the appellant, who was also an erstwhile director, from independently setting the criminal law in motion.

Court’s Observations

At the outset, the Apex Court refused to accede to the observation of the High Court. It opined:

“Neither expressly nor by necessary implication does the 1960 Act preclude the setting into motion of the criminal law by any person other than the auditor or the Registrar.”

The Court, thereafter, mulled over Section 4 of the CrPC, which provides that all offences under the IPC shall be investigated, inquired, and tried according to the provisions of the CrPC. Further, Section 4(2) states that the CrPC’s provisions shall apply to all offences under any other law apart from the IPC. However, the application of the CrPC will be excluded only where a special law prescribes special procedures to deal with the investigation, inquiry, or trial of the special offence.

Against this backdrop, the Court observed: “In determining whether a special procedure will override the general procedure laid down under the CrPC, the courts have to ascertain whether the special law excludes, either specifically or by necessary implication, the application of the provisions of the CrPC.”

It examined Section 81(5B) of the 1960 Act and opined that the provision does not restrict the filling of an FIR by an auditor or the Registrar, and the same can be filed by other persons as well.

“Section 81(5B) of the Act casts a positive obligation on the auditor or the Registrar to file an FIR. It does not use any negative expression to prohibit persons other than the auditor or the Registrar from registering an FIR. Therefore, it would be contrary to basic principles of statutory construction to conclude that Section 81(5B) debars persons other than the auditor or the Registrar from filing an FIR.”

“Section 81(5B) cannot be interpreted to mean that any other person who comes to know about the financial irregularity based on the audit report is debarred from reporting the irregularity to the police.”

Notably, the Court also observed that the interests of the society will be safeguarded if financial irregularities in co-operative banks are reported to the police, who can subsequently take effective actions to investigate crimes and protect the commercial interests of the members of the society.

Based on the above observations, the Court, while allowing the appeal held:

“In the circumstances, we are of the view that the High Court has erred in quashing the FIR which was lodged by the appellant. It is correct that the FIR adverted to the audit which was conducted in respect of the affairs of the co-operative society. However, once the criminal law is set into motion, it is the duty of the police to investigate into the alleged offence. This process cannot be interdicted by relying upon the provisions of sub-section (5B) which cast a duty on the auditor to lodge a first information report.”

Case Title: Dhanraj N Asawani vs Amarjeetsingh Mohindersingh Basi and Others [Criminal Appeal No 2093 of 2023]

Citation : 2023 LiveLaw (SC) 652

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