This article deals with certain naked and stunning facts about the Economic and Fiscal Mismanagement in many Housing Societies about the wilful suppression of various financial affairs which are never brought by any of the Office Bearers to the knowledge of the innocent and gullible Members of the Society.

The Audit and Inspection of such Housing Societies indicate the signals of serious and major irregularities in ill-handling of Society’s Fund resulting in to the economic and financial fraud allegedly committed by the Office Bearers i.e. Chairman, Secretary and Treasurer of the including stray incidents of misuse of cash received from the Members by way of huge arrears in Maintenance Charges. The cash amounts of arrears received from the Members are retained by the Office Bearers for the misuse instead of depositing the fund in the Bank’s account.

 In addition to this at times, the Office Bearers in connivance with each other, unlawfully, illegally and fraudulently withdrew huge cash at intervals by self-bearer cheques from the Society's Bank account. Such acts amount to an intentional and well planned attempt of Office Bearers with ulterior motive to defraud the Society and its Resident Members and siphon away their hard earned money paid to the Society towards the Maintenance and Other Charges.

There are neither Minutes nor any mention in any of the Managing Committee Meetings with regard to all these withdrawals and they surprisingly go undetected for long. In absence of such information, the Members present in the various Special General Meetings are also unaware as such withdrawals are neither noticed, nor discussed to ascertain the reasons for such huge retention and withdrawals of cash.

It is also observed that the vouchers maintained are neither properly drawn nor initialed/signed. In many vouchers, the supporting bills are not attached and signatures of recipients are neither taken nor affixed. The actual bill amounts are inflated or cash is withdrawn by altering the amount of bills. The filing of the vouchers is irregular and maintained in slipshod manner.

The most poor status and daylight lapses prevail in procedural aspects in inconformity of the Bye laws of the Housing Societies with regard to the maintenance of Society’s/members’ important Records, Registers, Files as also the Records of holding of Meetings of the Managing Committee and Special General Body.

To recourse such fraudulent management of Society’s fund, 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. To prevent frauds, Members should meet Office Bearers at least once a month for informal discussions on Society matters. The Members can approach the Managing Committee and ask for explanations if the responses are unsatisfactory, they can approach the Dy. Registrar Joint Registrar or approach Registrar. As a last resort they can approach the Co-operative Court.

The Section 83 of MCS Act stipulates that the financial loss incurred by the Society on account of fraudulent acts of the Office Bearers is recoverable and punishable offence. The Members can complaint to Dy. Registrar of Co-op. Dept. under Section 83 for investigation and recovery of losses caused to the Society. To complain under Section 83, 1/3rd of the Members signature is required as per the Act on the complaint letter.

Thus, if one third of the Members of a Society make request to the Dy. Registrar to hold an inquiry regarding its financial mismanagement, the Officer or his Nominee is duty bound to conduct such an inquiry. The Dy. Registrar may direct the complainants to deposit a sum of nominal amount with him and this amount can be forfeited if the allegations made against the Office Bearers turns out to be malicious.

If the inquiry discloses substance in the charges made then the amount shall to be refunded to the complainants yet if the allegations are not false but yet cannot be proved then the State Government would bear the cost of inquiry.

The Maharashtra Co-operative Society Act, 1960 (MCS Act) provides that all Office Bearers and Committee 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 Dy. Registrar is supposed to inform the Society as to the findings arrived at through the inquiry.

Under the Act, the Dy. Registrar has the power to himself (suo-moto) to initiate an inquiry into the financial position of the Society. This means that even a single Member can in an appropriate case, persuade the Dy. 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 single Member of a Society alleging the mismanagement of the funding affairs of the Society by the Ex-Chairman which had caused loss to the Society, the Dy. Registrar had to decide whether it is a dispute under Section 91(1), or an inquiry under Section 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 (Bombay High Court) (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.