COOPERATIVE DEPARTMENT

From
Thiru. Jatindra Nath Swain, I.A.S.,
Registrar of Cooperative Societies,
170, Periyar EVR High Road,
Kilpauk, Chennai - 600 010.
To
The Additional Registrar of
Cooperative Societies,
Chennai.
All Regional Joint Registrars,
All Circle Deputy Registrars.

Rc.No.115215/2009/SF2, dated: 20.12.2010

Sir,

Sub: Act and Rules – TNCS Act, 1983 – inquiry under Sect.81- /
Inspection under section 82 of the TNCS Act, 1983 –
Consolidated instructions – issued.

Ref: 1) Registrar‟s circular No.50/82 J2, dated: 08.10.1982.

2) Registrar‟s circular Rc.53937/2003 SF3, dated:
06.05.2003.
3) Registrar‟s circular Rc.74780/2003 SF2, dated:
08.10.2003.
4) Registrar‟s circular Rc.27696 /04 SF2, dated: 03.06.2004.
5) Registrar‟s circular Rc.9091/04 CP1, dated:15.12.2004
(Circular No.15/2004).
6) Registrar‟s circular Rc.122653/07 SF4, dated:16.10.2007
(Circular No.27/2007).
7) Registrar‟s circular Rc.149349/07 SF4, dated:05.12.2007
(Circular No.29/2007).
-----

It has been noticed that the inquiry ordered under section 81 of the TNCS Act
1983 is not completed quickly and that there were undue delay in the completion of
the inquiry. Further in many cases it is found that the statutory inquiry conducted is
perfunctory, and that the inquiry report is incomplete and that in certain cases the
inquiry report has not been submitted by the Enquiry Officer within the time limit of 10
days from the date of completion of the inquiry as specified in clauses(a) of sub rule
(6) of rule 104 of the TNCS Act Rules, 1988.
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Even though instructions on this subject have been issued from time to time, it is
noticed that in many cases the Enquiry Officer did not observe the correct procedure
and formalities, did not follow the provisions contained in section 81 of the TNCS Act,
1983 and Rules 104 of the TNCS Act, Rules 1988 and did not adhere to the
instructions already issued on the subject while holding the inquiry under section 81.
Further it has also been noticed that in certain cases there were delays in taking
effective follow-up action the inquiry report by the circle Deputy Registrars / Regional
Joint Registrars / Additional Registrar. Due to these outcomes the very purpose of
ordering the inquiry has been defeated. Therefore, with a view to ensuring that the
inquiry ordered under sec.81 of the TNCS Act, 1983 is conducted properly and
completed quickly and the inquiry report is submitted in perfect and complete shape
and within the time limit specified and timely effective follow up action taken, the
instructions hitherto issued on the subject are consolidated and issued in the Master
circular appended. All other instructions issued on the subject in the previous
circulars are superseded.

All the officers and staff of the Department are requested to keep in mind the
instructions contained in the Master Circular appended herewith and follow them
scrupulously while ordering or conducting Inquiry under section 81 and for taking
follow up action on the Inquiry report or giving evidence before the trial court, as the
case may be. The instructions issued in the Master Circular appended shall be
followed in the case of inspection or investigation under Section 82 of the TNCS
Act,1983.
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I request you to acknowledge at once the receipt of the letter and the Master
Circular enclosed. The Circle Deputy Registrars are also requested to communicate a
copy of the Master Circular to all the subordinate officers and department staff working
in the filed under their control, and get their acknowledgement therefore and keep
them in their office file.

Sd./- Jatindra Nath Swain

Registrar

//By Order//
for Registrar
Copy to : All the Officers in the office.
Copy to : All sections in the office.
Copy to : O.E Section in duplicate.
Copy to : Stock File.
 Inquiry under Section 81 of the TNCS Act, 1983.

1.1 Sec 81 of the TNCS Act, 1983 and Rule 104 of the TNCS Rules 1988
deal with inquiry. A complete knowledge, understanding and appreciation of the said
Sec. 81 and Rule 104 are quite necessary for the subordinate officers under the
control of the Registrar of Cooperative Societies in discharging their official duties
more effectively and efficiently. The powers under Sec.81 should not be invoked
indiscriminately in a casual manner as such an improper use of the power to order
Inquiry under Section 81, would adversely affect the public image of the society and
undermine its credibility in the eyes of the public. But at the same time there should
not be any reluctance in ordering inquiry under Sec.81 in cases of gross
mismanagement or misappropriation or misfeasances etc., as the circumstances
warrant since an 81 enquiry is a basic requisite to unearth the irregularities, which will
facilitate proceeding of civil, criminal and departmental action against the persons
responsible.

1.2 Sec.81 of the Act and Rule 104 of the Rules narrate in depth about
ordering and holding the inquiry, powers and functions of the enquiry officer and the
various reports that are to be submitted by him as to how, when and whom Section 81
and Rule 104 are not reproduced here verbatim in this Master circular. The Officers of
the department should be well acquainted and thoroughly conversant with them and
equip themselves correctly and, completely so that they may deal with the cases
attracting Sec.81 more effectively, efficiently and prudently.

1.3 The term used under Sec.81 of the Act is Inquiry and not Enquiry. But
sub rule (4) of rule 104 of the Rules designates the person holding the Inquiry as
Enquiry Officer. While ordering an inquiry, the terms „Inquiry” and “Enquiry Officer” as
found in Sec.81 of the Act and rule 104(4) of the Rules may invariably be used in the
order of inquiry issued by the officers of the Department.
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2. Subject matter of Inquiry

2.1 The inquiry may be ordered into the constitution, working and financial
condition of a society of confined to any alleged misappropriation, fraudulent retention
of any money or property or breach of trust or corrupt practice or mismanagement in
relation to the society or into any particular irregularity or aspect of the working of the
society.
2.2 Unless the context otherwise requires normally the inquiry may not be
into the constitution working and financial condition of a society in general but be
confined to the alleged frauds or to any specific irregularity or specific activities or
functions carried out by the society.
2.3 Inquiry under Section 81 shall not be resorted to in a routine manner
when the purpose can be achieved by other procedure such as inspection,
investigation etc.,

3. Authority who can hold the inquiry

3.1 The Registrar on suo-motu or the person authorized by the Registrar in

this behalf can conduct the inquiry under Section 81. The powers of the Registrar
under Section 81 have been conferred on the Additional Registrars, Regional Joint
Registrars and Deputy Registrars in the case of all societies and of the Cooperative
Sub Registrars only in the case of Primary Societies. In the case of a primary society
a CSR need not specifically be authorized to hold the inquiry (as he has got inherent
power of the Registrar) and he may be directed to invoke the provision of Sec.81 and
hold the inquiry.
3.2 The inquiry u/s 81 in respect of a branch of a society shall be ordered
only by the Regional Joint Registrar or the circle Deputy Registrar as the case may
be, have administrative jurisdiction over the society itself and not by any other
Regional Joint Registrar or circle Deputy Registrar in whose jurisdiction the branch of
the society lies.
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4. The Order / Proceedings ordering inquiry
4.1 The Inquiry order should speak that it is ordered under Section 81 of the
TNCS Act, 1983 and the terms Inquiry and Enquiry Officer should be used in the
order.
4.2 The authorization of the person to hold the inquiry shall normally be by
the designation of the Officer, but in special cases it may be by the name of the Officer
who shall hold the inquiry. The Inquiry Order shall be signed only by the officer
ordering the enquiry.
4.3 The inquiry order should state whether the inquiry is to be held into a
specific allegation or any particular aspect of the working or other wise.
4.4 The inquiry Order should be delivered immediately to the Enquiry Officer
in person and in any case within 3 days from the date of order and should also be
communicated to the society, the financing bank, the federal society concerned and to
the applicant, if any.
4.5 Date line for the completion of inquiry should not be specified or fixed in
the inquiry order. But in a separate memo the E.O. should be asked to commence the
inquiry immediately and in any case within 5 days from the date of ordering the inquiry
and to submit an Action Plan with in 5 days from the date of commencement of the
inquiry. Thereafter a dateline should be fixed for completion of the inquiry and the
E.O. should be asked to complete the inquiry and submit his report before the date
line fixed.
4.6 The inquiry ordered can be withdrawn by the Registrar form the person
authorized, and can be held by the Registrar himself or entrusted to any other person
as he deems fit. ( vide sec 81(6) ).
5. Planning for completion of inquiry
5.1 Before commencing the inquiry, the „Enquiry Officer‟ should form a clear
idea of the various aspects of the working of the society to be inquired into and the
accounts, books and documents to be examined with reference to the issues referred
to for inquiry. The Enquiry Officer shall list out the accounts.
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books and documents to be verified, the persons to be enquired into and the
witnesses to be examined.
5.2 The Enquiry Officer should draw an Action Plan and submit it within 5
days from the date of commencement of the inquiry to the Circle Deputy Registrar or
the Regional Joint Registrar, as the case may be, who has ordered the inquiry. The
Action Plan of the Inquiry Officer should specify the details of works involved, the
accounts, books and documents to be examined further, the evidences to be
gathered, the persons to be inquired into, the persons and the witnesses to be
examined on oath, the time required and schedule for each item of work and date of
its completion and the probable date by which the inquiry will be completed.
5.3 The Circle D.R / the Regional Additional Registrar / Joint Registrar shall
examine the Action Plan submitted by the E.O. and fix date line for completion of the
inquiry and submission of the inquiry report. It should be noted that in cases where
the inquiry is ordered into any specific allegation or any particular aspect of the
working of a society ordinarily it would be possible to complete the inquiry within a
fortnight or a month. This should be kept in mind while fixing the date for completion
of the inquiry and submission of the inquiry report. A time schedule to be adhered to
stage by stage to complete inquiry under section 81 is given in Annexure I for
guidance. The time schedule may be reduced wherever feasible taking into account
of the nature of the inquiry and the volume of work involued but not to be increased for
any reason what so ever.
5.4 The date line fixed for completion of the inquiry and submission of the
inquiry report should be communicated to the Enquiry Officer, with a direction to
adhere to the date lines fixed.
5.5 The Enquiry Officer should submit a fortnight by report to the DR/AR/JR
indicating the work attended to during the fortnight and the residuary work to be
attended to. The Enquiry Officer should be pulled up if the report reveals any delay or
backlog in adhering to the time limit specified in the Action Plan.
5.6 After the examination of the accounts and books are over, the Enquiry
Officer should list out the persons to be examined on oath and statements to be
obtained. He should prepare a questionnaire containing direct questions and indirect
questions on the particular aspect for each of the witnesses and the
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delinquents to be examined. The E.O. should bear in mind that some times the
delinquents may not come forward to reply his direct questions in which case replies
to indirect questions would help for arriving at a conclusion.

6. Power of the Enquiry Officer

6.1 He shall, at all reasonable times have free access to books, accounts,
documents, securities, cash and property etc., belonging to or in the custody of the
society.
6.2 He may summon any person in possession of, or responsible for the
custody of, any books, accounts, documents, securities, cash or other properties of
the society to produce the same at any place at the head quarters of the society or
any branch thereof, but not necessarily in the head office or branch office of the
society. However it should be noted that the E.O. should not require the person to
produce them at any place outside the headquarters of the society.
6.3 He may summon any person who, he has reason to believe, has
knowledge of any of the affairs of the society and examine such person on oath at
any place even outside the headquarters of the society.
6.4 He may summon any person to produce any books, accounts or
documents belonging to him or in his custody if he has reason to believe that such
books, accounts or documents contain any entry relating to the transactions of the
society, at any place even outside the headquarters of the society or its branch.
6.5 He has the power to seize the records of the society on production and
under acknowledgement.
6.6 He has the power to require any Officer of Officers of the Society to
call a general body meeting or board meeting for the limited purpose connected with
the inquiry and to call such meeting if the Officer or Officers refuses or fails to call
such meeting.
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7. Issue of summons
7.1 Summons may be issued for the purposes specified in supra. Summons
should be in proper format with all particulars regarding the documents, records etc.,
the place date and time of the inquiry, filled in legibly, avoiding corrections and over
writings and duly signed with date and seal.
7.2 The mode and procedure for the service of summons as mentioned
under Rule 111 & 112 should be followed.
8. Disobedience of Summons
8.1 Some of the difficulties encountered by the Enquiry Officer are failure to
produce accounts, books or records, refusal to sign statement after giving the
statement.
8.2 In such cases action can be launched either under Section 157(2) of
the TNCS Act, or under section 174, 175, 179, 180 or 186 of the IPS against
persons who were summoned and who,
(i) disobey the summons and fail to appear
(ii) appear but fail to produce the records
(iii) refuse to give deposition
(iv) refuse to answer questions
(v) refuse to sign in the deposition and
(vi) obstruct in discharge of public function.

8.3 When the E.O. is not able to get at the summoned person or the person
has refused to sign his deposition he has to report the matter to the Circle D.R.
and the Circle Deputy Registrar on receipt of the report from the E.O., should take
action under the provisions of the IPC by making complaints before the concerned
Magistrate with necessary supporting evidence to prove the case.

8.4 Instead of taking action under Section 157 (2) of the TNCS Act, 1983
action may be initiated under IPC in as much as it will have a statutory effect in
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enforcing appearance of summons. Punishment contemplated under the sections of

the IPC is imprisonment ranging from one to six months and fine upto Rs.1000/-
9. Seizure of books accounts or documents of the society

9.1 The E.O shall invariably seize the books, accounts or documents of the
society, if he considers that such seizure is necessary to ensure the safety of such
books, accounts or documents or to facilitate his inquiry. If this is not done by the
E.O. due to efflux of time the records which may be required for follow up action
pursuant to the enquiry report may not become available or be tampered with or
destroyed.
9.2 When can be seizure made
The E.O can seize the records on production or while examining the records
during the course of inquiry. It should be noted that the E.O. has no power to enter
and search any place where the books accounts or documents of the society are
kept or believed to be kept and to seize such books, accounts or documents.

9.3 Receipt for seizure of records to be given

The E.O. shall give the person from whose custody the books, accounts or
documents have been seized, a receipt for the same.
9.4 Moving the records for safe custody
If the records seized by the Enquiry Officer are kept in the office premises of
the society, even under the lock and key of the E.O., it is possible that they can be
tampered with or destroyed by the vested interests. Therefore, the E.O. shall keep
the records seized by him in his safe custody in a place other that the office
premises of the society or its branch, for safe custody.
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9.5 Period of retention of seized record

The E.O. can retain the books, accounts or documents seized by him so long
as may be necessary for their examination and for the purpose of inquiry. But he
cannot retain them for more than three months at a time except with the permission
of the next higher authority. After the enquiry is over, he may return them to the
person from whom they were seized and obtain his acknowledgment for the receipt
of the same or he shall hand over them to the D.R. Office for safe custody if he
considers that they will be required by the Police or the Department to take further
follow up action pursuant to the Inquiry Report and get acknowledgment.

10. Procedure regarding issue of summons to departmental officers

10.1 When the enquiry officer is enquiring into alleged commission of
offences under IPC or into any other serious irregularities committed by a person
other than the departmental officer the enquiry officer need not issue summons to
the departmental officer and examine him on oath just for the purpose of eliciting
certain information from the departmental officer. The enquiry officer may contact in
person the departmental officer and gather the information he requires or address
the departmental officer confidentially indicating the points on which he require the
information. However in any case where there is need for recording statements from
the departmental officer on oath, the enquiry officer may issue summons to the
departmental officer.
11. Recording of Depositions -
11.1 Procedure
Under Section 81(2) of the TNCS Act, 1983 the E.O. is vested with the
powers to summon any person who he has reason to believe, has knowledge of any
of the affairs of the society and examine such person on oath necessitating the
recording of deposition. The E.O. should bear in mind that such deposition and
endorsement thereon form part of important admissible evidence under the Indian
Evidence Act during the course of trial in the appropriate judicial forums.
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The E.O. should therefore follow the due procedure for the proper recording of
depositions.

11.2 Manner of recording deposition

The enquiry officer should record the deposition in his own hand. When he is
unable to record the deposition in his own hand under any exceptional
circumstances, he may utilize a Government servant attached to him to record the
deposition in his presence. In such cases, the reasons for not recording the
deposition by himself should be recorded in the enquiry report.

11.3 Contents of deposition

The deposition recorded shall contain the information among others, that it
was recorded after administration of oath; the section under which it was recorded;
the place at which the deposition was recorded; the name and the designation of the
enquiry officer before whom the deposition was given.
11.4 Confessional deposition
While recording deposition from a delinquent which is of a confessional
nature, the mere confessional statement alone is not sufficient. Deposition covering
full details regarding the nature and manner of commission of offences confessed
should be taken which can be used as extra judicial evidence.

11.5 Authentication of deposition

The E.O should endorse in the deposition that it was recorded by him, read
over to the deponent or read by the deponent and accepted by him as correct and
attest the same. Depositions recorded on different dates from a particular person
shall be in the form of a separate deposition on oath.

11.6 Numbering and attesting of depositions

Pages of deposition shall be serially numbered. Each page of the deposition
shall be signed by the deponent. Corrections, if any on each page shall be attested
by the deponent.
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12. Assessment of quantum of civil liability

12.1 The E.O should assess the amount misappropriated or fraudulently
retained or the amount of deficiency caused to the assets of the society by breach of
trust or willful negligence or has made any payment which is not in accordance with
the Act, the rules or the bylaws and fix the civil responsibility on the persons
concerned. The civil responsibility may be jointly and severely. It should be noted
by the E.O that through the criminal liability could be fixed on any person who is
directly involved or abetted in the misappropriation or fraud or criminal breach of
trust, civil liability by way of surcharge under Section 87 cannot be fixed on any
person other than a person (present or past) who is or was entrusted with the
organization or management of the society.
12.2 The E.O can recommend action under Section 87 on a person
entrusted with the management of the society i.e., the Board, the President or the
Vice President or a member of the board or a present or past Officer or Servant of
the society for,
(i) Misappropriation of money or property of the society
(ii) Fraudulent retention of money or property of the society
(iii) Guilty of breach of trust in relation to the society
(iv) Causing any deficiency in the assets of the society by breach of trust
or wilful negligence
(v) Any payment which is not made in accordance with the provisions of
the Act, Rules or the bylaws
12.3 The E.O should clearly establish the duties and obligations of the
person concerned while fixing the civil liability on such person.

13. Assessment of Criminal Liability

13.1 In the case of commission of criminal offences like criminal breach or
trust, forgery and cheating it should be explained as to how they have been
perpetrated, the amount involved in each case and the criminal liability of each of the
delinquents. The E.O should clearly establish the duties and obligation of
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the person concerned with reference to the Act, the rules, bylaws, office orders etc.
while fixing criminal liability on such persons.

13.2. It is very important that the Enquiry Officer should assess the modus
operandi by which the frauds or irregularities are committed and report the same in
his enquiry report. Such an assessment can be made from the records and
documents or the witnesses he has examined or on the depositions given before
him by the delinquents. While examining the delinquents and witnesses, the E.O.
should elicit from them the modus operandi of the frauds or irregularities committed.

14. Evidences
14.1. The evidences may be,
(i) documentary,
(ii) oral and
(iii) Circumstantial

14.2. The E.O. should gather the evidences for each item of fraud or irregularity.
In the case of documentary evidences the E.O. should list out the documents and
specify the persons who have written, passed and signed the entries inn each
document and explain as to how they would prove the frauds or irregularities.

14.3. In the case of oral evidences, though the E.O. would have gathered too
many evidences during the course of inquiry, he need not include all of them in his
report. It should be noted that too many oral evidences would either spoil the
criminal case or cause difficulties in the investigation, prosecution and trial. He
should include only those important and vital evidences which would enough to
prove the frauds or irregularities committed beyond reasonable doubt which may be
in limited number.

14.4. The E.O. should correlate the circumstantial evidences in such a

manner that they tend to prove the commission of the fraud or irregularities. In the
case of abetment, the involvement of each abettor should be discussed.
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15. Enquiry Officer’s power to convene general Meeting of the members or a

Meeting of the Board.
15.1. Clause (e) of sub section (2) of section 81 of the TNCS Act, 1983 gives
power to the Enquiry Officer to require any Officer to call a general meeting or a
meeting of the board to consider such matters as may be specified by him. If the
said Officer refuses or fails to call such meeting, the E.O. shall have power to call
the meeting himself. Such meeting shall be connected with the enquiry. The calling
of such meeting for the expulsion of members or removal of members of the board
would be outside the scope of inquiry under Section 81.

16. Arriving conclusions based on records and evidences

16.1. The statements given by the delinquents and the witnesses should be
briefly discussed. They should be correlated to the offences or irregularities
committed. Wherever the depositions given by the delinquents are not acceptable,
the E.O. should discuss how they cannot be acceptable. The E.O. should analyze
the matters and arrive his conclusion based on the records and evidence gathered.
While arriving the conclusion the E.O. should bear in mind the saying that the
“Records would never lie”.

17. Time limit for completion of Inquiry.

17.1. Sub-section (4) of Section 81 of the TNCS Act, 1983 specifies that the
inquiry ordered shall be completed within three months from the date of ordering the
Inquiry or such further period or periods not exceeding three months at a time as the
next higher authority may permit provided that such extended period shall not
exceed six months in the aggregate. It should be noted that the period of 3 months
is only the maximum time limit and the Enquiry Officer shall not take 3 months time
in each and every case for the completion of the Inquiry ordered. In all cases where
the inquiry is ordered into a particular aspect of the working of a society and in all
simple case the inquiry can be completed with in much shorter period than 3 months
i.e, within 10 days or 15 days or at the maximum a month or two depending the
volume of work involved.
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17.2. In as much as the time limit for completion of inquiry under Secretary.81
commences from the date of ordering of the inquiry.
(i) the order of inquiry should be communicated to be Enquiry Officer,
immediately after the order is issued and in any case within 3 days from the date of
order, and
(ii) the Enquiry Officer should commence the inquiry at once and take
possession of the records connected with the issues for which the inquiry has been
ordered and in any case within 4 days from the date of ordering the inquiry.

17.3. Normally a Departmental Officer in the rank of Cooperative Sub

Registrar or a Senior Inspector who is holding a particular post is being appointed as
Enquiry Officer by the Circle Deputy Registrar inn exercise of the powers of the
Registrar under section 81 and he has to attend the inquiry work in addition to the
routine work attached to the post he/she is holding. Therefore the Enquiry Officer
may some times find it difficult to devote his undivided attention to this item of work.
Whatever may be the position, the Enquiry Officer shall devote not less than 4 days
in a week exclusively to attend the inquiry work till the enquiry ordered is completed.
In sensitive cases the Enquiry Officer should give top priority and devote more days
to this item of work. The Enquiry Officer should attend the inquiry work more
earnestly and sincerely. The Enquiry Officer shall draw monthly tour programme
accordingly. In case the Enquiry Officer has other regular departmental work which
cannot be kept pending indefinitely till the completion of the inquiry, the Enquiry
Officer can attend to such work during the remaining days.

17.4. The Enquiry Officer shall see that the Inquiry ordered is completed as
early as possible and at the most in any case within 3 months from the date of
ordering the Inquiry and that extension of time beyond 3 months is not ordinarily
asked for. However, in exceptional cases, where the inquiry ordered could not be
completed within 3 months from the date of ordering the inquiry for reasons beyond
the control of the Enquiry Officer, he shall make an application sufficiently before the
expiry of the 3 months period to his next higher authority,
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requesting extension of time. The application shall interalia furnish,

the information as required in the Performa in Annexure II (vide Registra‟s
Circular No.2/2020/SA1 dated 18.2.2020)

17.5. An application for further extension of time shall also the reason for
non-completion of the Inquiry with in the extension of time already granted. Such an
application seeking extension of time or further extension of time shall reach the next
higher authority well in advance before the expiry of 3 months period or the expiry of
the extended period, as the case may be.

17.6. On receipt of the application, the next higher authority namely the
circle Deputy Registrar of Cooperative Societies shall examine and grant extension
of time as considered by him necessary and such permission shall be
communicated to the Inquiry Officer, the society, the financing bank and the federal
society concerned. If the inquiry is ordered by the Regional Joint Registrar, such
extension may be granted by the J.R. himself. The extension or extensions of time
granted by the next higher authority shall not exceed six months in the aggregate.

17.7. Where-ever extension of time is required by the Enquiry Officer the

next higher authority ie., the circle Deputy Registrar / Regional J.R, before granting
the extension. should obtain in time prior administrative approval of the Registrar by
justifying the reasons for such extension.

17.8. It should be noted that if the inquiry ordered u/s 81 is not completed
with in the maximum time limit of 9 months from the date of ordering the inquiry
(normal time limit of 3 months plus the aggregate period of extension of time of 6
months) the Enquiry Officer shall have no locus-standi to continue the inquiry. In
such a case exemption from the provision of sub section (4) of
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section 81 of the TNCS Act 1983 will have to be obtained from the Government for
continuing the inquiry beyond 9 months from the date of ordering the inquiry.
Getting such an exemption order from Government is a difficult process. Hence the
Enquiry Officer shall plan for completing the enquiry within the maximum time limit of
9 months.
18. Time limit for submission of Inquiry Report by the Enquiry Officer.
18.1. As per clause (a) of sub rule (6) of rule 104 of the TNCS Rules 1988
the Enquiry Officer shall submit his report on the matters on which the inquiry is
ordered to be held to the circle Deputy Registrar/ JR, as the case may be, within
such time as may be specified by him but not exceeding ten days from the date of
completion of the inquiry. This statutory maximum time limit of ten days from the
date of completion of Inquiry for submission of the inquiry report should invariably be
complied with. It should be noted that there is no provision in rule 104(6) for giving
extension of time to submit the Inquiry report.
18.2. Legally the Inquiry report submitted after the expiry of this statutory
time limit of 10 days may be said to be an invalid document and any follow up action
that may be taken under the TNCS Act, 1983 and TNCS Rules, 1988 based on the
belated report may be challenged in a court of law by parties aggrieved by such
inquiry. Therefore the Enquiry Officer should ensure the submission of the inquiry
report sufficiently before the tenth day from the date of completion of the inquiry.
The Enquiry Officer should desist from giving a covering letter indicating that the
Inquiry report is sent herewith without actually enclosing the Inquiry Report Itself in
order to comply with statutory requirements.

19. Reporting
19.1. The reference no and date of the authority who has ordered the inquiry
under Section 81, and the appointment of E.O., the date of commencement of the
Inquiry, the dates on which the inquiry were conducted the date of completion of the
inquiry shall invariably be indicated in the Enquiry report. If any extension of time is
applied for and granted by the higher authority for the completion of the inquiry
beyond 3 months from the date of ordering the
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inquiry, the Ref. no. and date of the proceeding of such higher authority in which the
extension of time was granted and the expiry of the period of extension granted shall
also be specified in the Enquiry report.
19.2. The inquiry report shall contain the findings of the E.O. which shall be
supported by documentary or other evidences as recorded or gathered by him
during the course of his inquiry and also the procedure followed in case if it was into
a specific allegation. He shall not include, as far as practicable, any matter of
confidential nature in his main report but submit such matter or matters in a separate
confidential report. Where any matter of confidential nature has to be discussed in
the main report, the report may be drafted in such a manner that the matter of
confidential nature can either be segregated or be not communicated except to the
party concerned.
19.3. Depending upon his findings, the E.O. may have to give separate
reports on the followings:-
(i) Report for prosecution
(ii) Report for surcharge under Section 87
(iii) Report for taking disciplinary action against the erring staff
(iv) Report for disqualification or removal under Section 36.
(v)Report for suspension of paid Officer or servant under Section 76
(vi)Report for winding up of the society under Section 137.
(vii)Report for supersession of the Board u/s88 of the Act.

19.4. In such case, the enquiry report should be prepared separately or in

separate portions, in the report in a self contained manner i.e., in such a manner that
the irregularities warranting particular action are clearly brought out in those parts
without mingling with the facts relating to other aspects. Such parts of enquiry /
report should be self contained to enable the officers to pursue action thereon
without reference to other parts of the report. This will also enable the
communication of the relevant part of the enquiry report to the person / persons
concerned without disclosing the other portions of the enquiry report which may
contain materials not connected to the particular portion / aspect and
 17

Which may sometimes contain also misdemeanor of other arsons and the action
suggested therefor.

19.5. Any fact or matter of confidential nature, the disclosure of which will
affect public interest, is not included in the enquiry / report but such fact or matter of
confidential nature should be sent separately. Besides furnishing any matter of
confidential nature, the disclosure of which the reporting officer may consider as
affecting public interest, it is desirable that the enquiry officer does not even refer to
the confidential matters in the main report, not to speak of including or mingling with
other matters in the main report. Since a copy or extract of the main report will have
to be furnished to the person against whom action may have to be taken under
Tamil Nadu Cooperative Societies Act, 1983 or under Tamil Nadu Cooperative
Societies Rules, 1988 or under various sections of Indian Penal Code.

19.6 Report for prosecution

If the E.O is of the opinion that prima-facie the inquiry reveals frauds such as
criminal misappropriation, criminal breach of trust, forgery, falsification of accounts
etc., which are offences under the IPC and require launching of prosecution he
should submit a separate report for prosecution. This report for prosecution should
invariably contain all the information as required in the Annexure-III.

19.7 Report for Surcharge under Section 87

Where in the course of inquiry under Section 81 if it appears to the E.O. that
any person who is or was entrusted with the organization and management of the
society or any past or present officer or servant of the society has,-
(a) misappropriated or fraudulently retained any money or other property; or
(b) been guilty of breach of trust in relation to the society; or
(c) caused any deficiency in the assets of the society by breach of trust or willful
negligence; or
(d) has made any payment which is not in accordance with the Act, the rules or the
bylaws, the E.O. shall send a separate report for taking surcharge action under
Section 87 of the TNCS Act, 1983.
 18

The E.O. should note that surcharge action under section 87 shall not lie
against the Officer or employee of the financing bank or federal society though he
has hand in glove with the officer or servant of the society in which the
misappropriation or forgery or criminal breach of trust took place and though he has
been included as one of the delinquents in the criminal case. In such cases the E.O.
should recommend for a separate inquiry under Section 81 or Inspection or
Investigation under Section 82 into this particular aspect in the concerned financing
bank or the federal society, as the case may be, in which the Officer or employee is
or was employed, in respect of the same matter/aspect for taking surcharge action
under section 87 against such officer or employee of the financing bank or federal
society.

19.8 Report for disciplinary action

The E.O. shall send a separate report pointing out the lapses in the
discharge of duties on the part of any paid officer or servant of the society or of the
financing bank or of the Government responsible for administration or supervision or
audit or an officer or servant of any other organization noticed if any, during the
inquiry suggesting suitable action against him.

19.9 Report for disqualification and removal under Section36

During the inquiry if it appears to the E.O. that a person who is, or was, a
member of the board has misappropriated or fraudulently retained any money or
other property or has been guilty or breach of trust in relation to the society or of
gross or persistent negligence in connection with the conduct of management of, or
gross mismanagement of the affairs of the society, the E.O. shall submit a separate
report for action under Sec.36 for disqualification and removal of such person.
 19

19.10 Report for Suspension of a paid officer or servant of a society

Where in the course of inquiry under Section 81, if it appears to the E.O. that
a paid officer or servant of the society has committed or has been responsible for
misappropriation or breach of trust or other offences in relation to the society, and if
in the opinion of the E.O. there is a prima facie evidence against such paid officer or
servant and the suspension of such paid officer or servant is necessary in the
interests of the society, the E.O. shall, pending completion of the inquiry, submit an
interim report to the Circle Deputy Registrar concerned suggesting for the
immediate suspension of the paid officer or servant concerned. On receipt of the
interim report, the Circle Deputy Registrar shall forthwith communicate a copy of it to
the society concerned for placing the paid officer or servant under suspension,
pending enquiry into grave charges by the society under the relevant special bylaws
relating to the service conditions of its employees.
If the society fails to place the paid officer or servant concerned under
suspension immediately, the Deputy Registrar shall send a copy of the interim report
of the Enquiry officer to the Regional Joint Registrar concerned for suspension of
such paid officer or servant of the society under section 76 of the TNCS Act, 1983.
19.11 Report for winding up of the society under Section 137

If in the course of inquiry under section 81, the E.O. is of the opinion that the
society ought to be wound up the E.O. shall submit a report for winding up of the
society under Section 137 of the TNCS Act, 1983.
19.12 Supersession of the board

If warranted the Enquiry Officer may submit a report for superseding the
board of the society by invoking the provision u/s 88 (1) (a) (i) of the Act.
19.13 Interim report

Where in the course of inquiry under Section 81 if it appears to the E.O. that
Criminal Prosecution of the offenders has to be urgently launched or
 20
surcharge under Section 87 has to be immediately instituted pending completion of
the inquiry, the E.O. shall submit necessary interim reports with the required details
to the Circle Deputy Registrar for necessary action.
19.14 Cost of Inquiry
The E.O. shall also specify in his report he cost of the inquiry together with his
recommendation as to the manner in which the entire cost/or part thereof may be
apportioned among partied specified for recovering the cost as contemplated in sec
85 (1).
20. Scrutiny of the Report
20.1 The Deputy Registrar or the Joint Registrar/ Additional Registrar who
has ordered the inquiry should personally examine the inquiry report carefully and
pass appropriate orders on the follow up actions, both criminal and civil actions, to
be taken and send the report to the section concerned to take further follow up
action. This should be done within 3 days from the date of receipt of the inquiry
report.
20.2 Whenever the Additional Registrar/Joint Registrars or the Deputy
Registrar finds that the inquiry report is defective or want of some additional
information, the Additional Registrar/Joint Registrars or the Deputy Registrar should
call on the Enquiry Officer and ask him to rectify the defects or deficiencies or
discrepancies on the spot. If any additional information is needed the E.O. should be
asked to furnish them without delay. If the inquiry report is perfunctory or incomplete
the Additional Registrar/Joint Registrar or the Deputy Registrar may order for a fresh
inquiry and should take severe disciplinary action against the Enquiry Officer who
has given such perfunctory or incomplete report.
21.Follow up action
Criminal action against the delinquents
21.1.1 If the Deputy Registrar on examination of the Inquiry report finds a
prima facie case for taking criminal action against the delinquents, within seven days
from the date of receipt of the Inquiry Report, send the proposals to the Regional
Joint Registrar concerned seeking permission to give criminal complaints to the
Police.
22.1.2 The A.R / J.R should examine the proposal received from the D.R
and give permission within seven days from the date of receipt of the proposal
 21

from the D.R. If the permission has to be obtained from the Registrar, the A.R./ J.R.
should send the proposal to the Registrar within seven days from the date of receipt
of the proposal from the D.R. Criminal case should not be registered as a routine
manner.
21.1.3. Wherever a regional A.R./ Joint Registrar decides not to accord
permission or a circle Deputy Registrar decides not to seek permission, to lodge
criminal complaints with the police, though the inquiry report suggests for
prosecution, the regional A.R./ Joint Registrar should send proposal to the Registrar
and the circle Deputy Registrar should send proposal to the regional A.R./ Joint
Registrars concerned and get the administrative permission from the Registrar or the
regional A.R./ Joint Registrar, as the case may be, before dropping the criminal
action.
21.1.4. The D.R./J.R./ A.R. shall file the complaint to the Police for criminal
prosecution within seven days from the date of receipt of the permission from the
Regional A.R./ J.R or the Registrar, as the case may be.
21.1.5. All the accounts, books and records required for investigation by the
Police should be handed over to the Police under acknowledgement within seven
days of the registration of the complaint or immediately when a requisition in this
behalf is made by the Police.
21.1.6. The DR should watch whether the FIR has been filed by the Police
immediately when complaint has been filed by him and obtain from the Police a copy
of the FIR. The DR should render all the assistance required by the Police till the
Police investigation is completed and charge sheet filed.
21.2 Surcharge action under Section 87
On the examination of the Inquiry report if it appears to the DR that there is a
case for surcharge under Section 87, the Deputy Registrar either of his own motion
or on application should commence action under Section 87and issue a surcharge
notice to the persons concerned within 15 days from the date of receipt of the Inquiry
report. Wherever surcharge action is initiated, the Deputy Registrars shall take
action under Section 167 of the TNCS Act, 1983 and rule 140 of the TNCS
 22

Rules 1988 for the conditional attachment of the properties of the persons
concerned. The surcharge cases should be disposed of as quickly as possible and
generally within 6 months from the date of show cause notice to make good the
deficiency caused to the assets of the society even though higher time limit is
provided under Section 87. The Deputy Registrar should follow the due procedure
while dealing with surcharge cases.

21.3. Disqualification and removal under Section 36

Action under Section 36 to disqualify and remove a member of the board
should be initiated within 15 days from the date of receipt of the inquiry report and
final orders passed after following due procedure without delay.

21.4 Disciplinary action

Disciplinary action against the departmental officers and employees of
Cooperative Societies for the irregularities committed in the society or for serious
lapses on the discharge of duty should be initiated within 15 days from the date of
receipt of the inquiry report and final orders passed without delay, after following the
due procedure.

21.5 Action for suspension of paid officer or servant

On the examination of the inquiry report, if it appears that there is a prima-
facie case for suspension of a paid officer or servant of the society, other than the
departmental officer, the Deputy Registrar should, by an order in writing under sub
section (6) of Section 81 of the Act, direct the society to take immediate action under
the special bylaws relating to the service conditions of employees of the society for
placing such paid officer or servant of the society under suspension. If the society
disobeys or fails to comply with the direction issued under subsection (6) of Section
81 of the Act, he shall immediately send a proposal to the Additional Registrar/ Joint
Registrar of the region concerned for suspension of such paid officer or servant of
the society under section 76 of the Act.
 23

21.6. Action for winding up of society

Even if the E.O. has recommended for winding up of the society, action for
the winding up of the Coop. Society may be taken only as a last resort, after all the
measures taken to revive the society have proved futile.
21.7. Communication of result of inquiry

The results in brief and not the reports themselves without going into details
should be communicated within a period of three months from the date of receipt of
the report to :-

(i) the Government or to any officer appointed by the Govenment, if the

Government have subscribed to the shares of the society,
(ii) the financing bank,
(iii) the society concerned,
(iv) the federal society concerned and
(v) the District Collector in case the inquiry is ordered at his request Rule
104(I).

21.8. Action to remedy the defects, if any disclosed in the inquiry report

The Circle Deputy Registrar may by order in writing direct any officer of the
society or its financing bank specifying the action to be taken to remedy the defects
disclosed in the inquiry report and also fix time limit for compliance. When such as
order is issued under Sec.81(6) of thee TNCS Act, 1983, non compliance of the
order will constitute an offence under section 157(2) of the Act.

22. Giving Evidence by the Enquiry Officer before the trial court

22.1. An important duty has been cast on the Enquiry Officer as to depose
before the courts, where, cases are under trial, on the basis of the report for
prosecution submitted by Enquiry Officer. it is only through Enquiry Officer the
various material evidences such as the records, documents seized and depositions
recorded during the inquiry are marked as Exhibits of the prosecution to substantiate
and prove the prosecution charges framed against the accused.
 24

22.2. It is therefore very much imperative on the part of the E.O. to appear
before the court on the summoned date without fail and to give evidence in a fit and
proper manner so that the prosecution succeeds and not suffers on account of his
evidence. This is a vital role on the part of the Enquiry Officer, who should diligently
exercise in the court and not make it an exercise of mockery. And for this purpose,
he should get in touch with the Police Officials and the Assistant Public Prosecutor,
as the case may be, who are conducting the case sufficiently in advance and get
himself fully equipped for such exercise and thoroughly conversant with all such
Exhibits that are to be marked through him. III-equipped Enquiry Officers are likely
to draw adverse remarks from the judiciary. The Enquiry Officer should realize the
importance of his presentation in the court during trial of the case. The important of
his Inquiry would be felt only if the prosecution charges are proved and delinquents
punished.

23. Model draft order for inquiry under Section 81 o

Model draft orders of inquiry under Section 81 is given in the Annexure II for
guidance.
 ANNEXURE I

TIME SCHEDULE TO BE ADHERED TO, STATE BY STAGE, TO COMPLETE

INQUIRY UNDER SECTION 81
(Vide R’s Circular 48/2013 dated 31.12.2013 (RC.117345/2013 SF2)
Stage – I

Time 1 Week 1. Inquiry Officer has to assume the powers of inquiry Officer
Schedule :
2. To Take possession of the Records connected with the issues for
which the of inquiry has been ordered, under proper
acknowledgement and keeping them in safe custody.

Stage – II

Time 1 Week 3.Inquiry Officer has to go through the records and arrive at the frame
Schedule : work of the nature of the Crime or Wrong Committed.

4. Inquiry Officer has to enlist the Officers or Members of the Board /

Society or any other individuals connected with the inquiry for
issuing summons to them.

Stage – III

Time 2 Weeks 5. Ensure Summons have been issued / served. Date Fixed for
Schedule : recording depositions and no of cases programmed and how many
cases depositions have been recorded.

6. Programme for completion of Recording of the depositions in

pending issues.
Stage – IV

Time 4 Weeks Part - A

Schedule :
Scrutiny of depositions and drafting of Rough / Sketch Report or
Skeleton Report. - Suggesting criminal action etc. . .

Time 2 Weeks Part – B

Schedule :
Preparation of Rough / Sketch Report. – Suggesting civil action.
Surcharge, Arbitration, Disciplinary Action against all concerned and
suggestion for prevention of such Wrongs etc . . .

Stage – V

Time 2 Weeks Part - A Finalisation of the Report / Final Drafting, and Submission to Enquiry
Schedule : ordering authority.

Total 12
 Inspection and investigation under section 82 of the
Tamil Nadu Cooperative Society Act, 1983

1.1 Section 82 (1) provides that the Registrar may, of his own motion, or on the application
of a creditor of a registered society inspect or investigate or direct any person authorised by
him in this behalf to general or special is writing to inspect the affairs of the registered
society in general or to investigate into any alleged misappropriation, fraudulent retention of
money or property, breach of trust corrupt practice or mismanagement in relation to that
society or into any particular aspect of the working of that society.

2.1 In powers of the Registrar under, section 82 have been conferred on the Additional
Registrars, Regional Joint Registrars and Deputy Registrars in the case of all societies and on
the Cooperative Sub Registrars only in the case of primary events. In the case of the primary
society need not specifically be authorised to hold inspection or investigation and he may be
directed to invoke the provision of section 82 (1) and hold the inspection or investigations.

1.2 No such inspection or investigation shall be made or directed on the applications of

creditor unless the creditor –

(a) satisfies the Registrar that the debt is a sum then due and that he has demanded
payment there of and has not received satisfaction with in a reasonable time ; and

(b) deposits with Registrar such sum as security for the cast of the proposed
inspection or investigation as the Registrar may require.

1.3 The Registrar or the person so authorised shall have all the powers of the Registrar when
holding an inquiry under section 81.

3.1 All the instructions issued in respected of inquiry under section 81 except the
instructions in Paras 21.7 and 23
Shall be followed in the case of inspection or investigation under section 82.

3.2 However, in the case of inspection or investigation the results in brief and not the
reports themselves without going into details should be communicated with in a period of
three months from are date or receipt of the report to :-

(i) The society concerned,

(ii) The financing bank to which the society is affiliated
(iii) The creditor concerned where the inspection or investigation is made on the
application of the creditor.

4. Model draft order of inspection / investigation under section 82 is given in the Annexure
for guidance.
 ANNEXURE – III

REPORT ON MISAPPROPRIATION

1. Preliminary

State the full circumstances relating to the detection of the fraud. The date
when the fraud was first noticed, the officer who noticed it whether it was done in the
course of his routine duties such as audit or inspection or on information furnished
by others if so, by whom, and what kind of information, the date on which the Inquiry
under section 81 was ordered, the date on which the officer, submitted his report.
2. The delinquents

Who are the delinquents ? Give their names designation, their position in the
society, the period for which they have been connected with the society, their
present position and where abouts, if known.
3. The items of fraud
Give all the items of fraud, whether supported by adequate evidence or not.
The date, amount and nature of the fraud should be given briefly. The items should,
however, be grouped conveniently. eg.,
(a) fraud through short crediting; (b) fraud through belated credit; (c) falsification
of counterfoil receipts etc., entries made in the ledgers without any entries in
the cash book and so on (amplify).

4. The legal offences

State the items of frauds of which prosecution can be launched and the
persons to be charged.

5. Investigation
Furnished the names and other details of the persons examined in the course
of the inquiry under Section 81 and whether statements were recorded from all of
them; if not; state the reasons for the omission. Have the delinquents and all the
necessary witnesses, including the auditors and other departments staff, (if
warranted) been examined and their written statement obtained? If not state the
circumstances in which it could not be done. State thee salient points of
the depositions of each party and the extent to which they could be made use of for
the prosecution.

6. Mens rea
It is “Mens rea” (Criminal intention that is important for a successful
prosecution. Misappropriation of fraud will result in either wrongful gain to one or
wrongful loss to another. As such the intention of the delinquent in regard to his
wrongful gain by his criminal act should be examined and stated.

7. Evidence
Classify the evidence available into (a) documentary; (b) Oral and
(c) circumstantial and discuss briefly the reliability of the evidence available from the
point of view of prosecution and whether the evidence is adequate for a successful
prosecution. It should be shown whether any material witnesses are likely to turn
hostile during trial. It should be examined whether entrustment can be proved in the
case of a charge of breach of trust. Whether office bearers other than the
delinquents can be charged with the abetment or conspiracy and if so, to what
extent should be stated. Facts like, who was maintaining the cash book and other
accounts, who is the officer responsible under the bylaws for the custody of the cash
balances, whether the cash book was signed by the Secretary or the Accountant,
together with the President and how far they are liable, responsible and accountable
for the fraud or misappropriation, their duties and responsibilities as per the bylaws
and special bylaws etc., should be stated. State whether all the documentary
evidence have been seized and kept in safe custody.
O/c

REGISTRAR
 SURCHARGE UNDER SECTION 87 OF THE TAMIL NADU COOPERATIVE
SOCIETIES ACT, 1983
(Vide Registrar’s Circular No.78/88 CL Dated 25.10.1982,
Registrar’s order No,3.2018 dated 25.4.2008 (RC 10243/2018 WPA1 dated 25.4.2018
and Registrar’s letter RC 38614/2009 SF2(1) dated 6.4.2008.
1. Section 87 of the Tamil Nadu Co-operative Societies Act. 1983 deals with surcharge. The
three important aspects of section 87 are :
A. The pre-requisites for initiating surcharge action under section 87.
B. The persons against whom such surcharge orders under section 87 can be passed.
C. The circumstances under which action under Section 87 can be instituted

2.The above three aspects are discussed below:

A. Pre-requisites:
There should be:
(i) an audit under section 80; or
(ii) an inquiry under section 81; or
(iii) an inspection or investigation under section 82; or
(iv) the winding up of a society.

The prerequisite for initiating surcharge action under Section 87 is complied

with, if there was an audit or inquiry or inspection, etc., at some time previous to the
action taken under that section, though not immediately preceding such action and the
results of the audit or inquiry or inspection, as the case may be, was communicated as
required in the relevant sections. (Vide sec 81(3) sect82(2) and Rule 104(7) Matters
appearing in interim report of audit or inquiry or inspection are not excluded from the
provisions of this section in view of the expression “where in the course of” used at the
beginning of sub-section (1).
B. The persons against whom the surcharge order may be passed:
(i) Any person who is or was entrusted with the organization or management of the
society.
(ii) Any past or present officer of the society.
(iii) Any past or present servant of the society.
 (iv) in the case of a deceased of person falling under item (i) to (iii), above the
representative who is write the estate of the deceased person.
C. The circumstances under which action under section 87 can be instituted:
(i) Misappropriation of money or property:
The offence of criminal misappropriation consists in dishonest misappropriation
by a person of conversion to his own use of any movable property.

(ii) Fraudulent retention of money or other property:

According to section 25 of the I.P.C. a person is said to do a thing fraudulently,
if he does the thing with intent to defraud but not otherwise. Fraudulent retention of
money or other property implies that the money or property though still intact has been
dishonestly kept back by the person or officer or servant.

(iii) Gulity of breach of trust in relation to the Society:

According to section 405 of I.P.C. “whoever, being in any manner entrusted
with property, or with dominion over property, dishonestly misappropriates or converts
to his own use that property, or dishonestly uses or disposes of that property in
violation of any direction of law prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or implied, which he has made, touching
the discharge of such trust, or willfully suffers any other person so to do, commits
criminal breach of trust”.

For invoking section 87, breach of trust need not necessarily be criminal breach
of trust. Every act of omission or commission amounting to a breach of duty in the
case of an officer (As defined in section 2(19) of the Tamil Nadu Co-operative
Societies Act, 1983) for a co-operative society in a fiduciary relationship to the society
will amount to breach of trust.

(iv) Causing any deficiency in the assets of the society by breach of trust or willful
negligence:
The general loss sustained in the normal course of business of the society or the loss
suffered on account of sale of goods in good faith by reduction in price to avoid further
loss may not come under the purview of section 87. The fact that an institution has
incurred business loss by itself cannot form the basis for initiating action under section
87 of the Act. Only the deficiency to the assets of the society caused by breach of trust
or willful negligence by the member of the board, officer or servant of the society will
come under the purview of section 87.

(v)Any payment which is not made in accordance with the provisions of the Act, Rules
or the bylaws:
This means any unauthorized or irregular payment not in accordance with the
provisions of the Act, the Rules or the bylaws. If the funds are misutilised,