Criminal Application No.1216 of 2001,Criminal Application No.1220 of 2001,Criminal Application No.1237 of 2001

25th October, 2001

Petitioner Counsel: Shri SHASANK MANOHAR
Respondent Counsel: Shri BHUSHAN GAWAI, Shri SANJAY DOIFODE

Cases Cited:
Sushil Kumar Gupta Vs. Joy Shankar Bhattacharjee, AIR 1971 SC 1543 [Para 13]
Pokar Ram Vs. State of Rajasthan, AIR 1985 SC 969 [Para 13]
State Rep. by C.B.I. Vs. Anil Sharma, AIR 1997 SC 3806 [Para 13]
State of Andhra Pradesh Vs. Bimal Krishna Kundu, 1997 Cr.L.J.4056 [Para 13]
Dukhishyam Benupani, Asstt. Director Enforcement Directorate (FERA) Vs. Arun Kumar Bajoria, AIR 1998 SC 696 [Para 13]
Jiwan Dass Vs. State of Haryana, AIR 1999 SC 1301 [Para 13]
Bachchu Singh Vs. State of Haryana, AIR 1999 SC 2285 [Para 13]
State of Maharashtra Vs. Mohan Radhakrishna Pednekar, 1999(2) Mh.L.J.459 [Para 14]
Harshad S.Mehta Vs. Union of India, 1992 Cri.L.J. 4032 [Para 17]

JUDGMENT

JUDGMENT :- All these applications for anticipatory bail arise out of the same crime and as such the same were heard together and are being disposed of by a common order.

2. The applicants apprehending arrest for offences under Sections 406, 409 read with Section 34 of I.P.C., sought anticipatory bail which was rejected by the learned Additional Sessions Judge, Akola. The applicants have, therefore, approached this court for anticipatory bail.

3. In order to appreciate the submissions advanced by the learned Advocates for the applicants and learned P.P., it is necessary to first give a brief background of the matter leading to the filing of F.I.R. By order dated 03.06.1995 passed under Section 77-A of the Maharashtra Co-operative Societies Act, 1960 (hereinafter called the said Act), the Board of Directors of Akola Sahakari Sut Girni Maryadit, Akot, district Akola was abolished and the Board of Administrators was appointed for a period of six months. This order was continued for a period of about three years. The Board of Administrators consisted of, (1) Rameshwar Wasudeo Karale, Chief Administrator; (2) Surendra Gulabrao Potey, Administrator; (3) Nilkanth Trimbakrao Kukade, Administrator; (4) Arvind Wasudeo Tidke, Administrator; and (5) Madhukar Mahadeo Bodakhe, Administrator. The applicants before me are the Administrators of the said board.

4. Applicant Surendra Gulabrao Potey took charge as Administrator on 04.06.1995 and he continued till 17.07.1997. In the application his contention is that the F.I.R. is politically motivated, malicious and mala fide. He has given explanation in relation to the four items referred to in the F.I.R. and I shall refer to the explanation offered by him while discussing the said items. The applicant also states that the entire records are available with Sudhakar Gangane and Fasate; that no recoveries are required to be made from the applicant and the custody of the applicant is not required.

5. Applicant Arvind Tidke, in Criminal Application No. 1220 of 2001, took charge as Administrator on 03.06.1995 and resigned on 17.07.1995. His contention in the application is that he was working as the General Manager of the Akola District Central Co-operative Bank Limited, Akola when he was a member of the Board of Administrators and that during the period he was member of the said Board, he attended only three meetings dated 06.06.1995, 23.06.1995 and 16.07.1995. According to him, he resigned on 17.07.1995 and informed the Director of Handloom, Powerloom and Textile at Nagpur. In the letter of resignation, he stated that looking into the financial affairs of the Sut Girni, the losses incurred by the Co-operative Spinning Mill cannot be made up because of uncontrolled and inefficient administration and that in future the Co-operative Spinning Mill will have to incur further losses and as such it is not possible for him to work any longer as a member of Board of Administrators. The case of the applicant further is that during the three meetings which he attended, no policy or major decisions were taken; no expenditure was sanctioned; no advances were paid or no financial liabilities were undertaken.

6. Applicant Nilkanth Kukade, in Criminal Application No.1237 of 2001, took charge of Administrator on 03.06.1995 and continued up to 11.06.1996. The case of the applicant is that the F.I.R. is based upon the report of Special Auditor who carried out the audit of three financial years 1994-95; 1995-96 and 1996-97 and that so far as 1994-95 is concerned the applicant was not Administrator. His contention is that for the rest of the period during which he was not the Administrator the persons responsible have not been brought to book and even the General Manager who had encashed false T.A. bills has not been arrayed as an accused. His contention is that on the basis of F.I.R., no offence is made out since in the F.I.R. there are only allegations of mismanagement, resulting in loss of Rs.1,48,90,015/-; that all relevant documents are in possession of the accountant Fasate and Sudhakarrao Gangane.

7. The prosecution case, as reflected in the reply and other material placed before me, in brief, is that the complainant who has filed the F.I.R. had audited the accounts of the Sut Girni for the period 01.04.1994 to 31.03.1997 and during this period, it was found that all accused persons have mismanaged, committed irregularities, acted without any right and authority and against bye laws and provisions of law as a result of which there was huge loss of more than Rs.1,48,90,015/- to the Sut Girni with intention to get personal gain benefit and interest and as such the accused have committed criminal breach of trust. It is also stated that the accused have intentionally, wilfully in collusion committed said offence as a result of which society has suffered heavy losses due to illegal acts of the applicants. It is further alleged even though the accused persons were entrusted with Sut Girni money, amount, funds and property for particular purpose yet wilfully, intentionally it was not used for the said purpose and on the contrary utilised the said funds without any right and authority and against the provision of law and as such the applicants and the other co-accused have cheated and misappropriated the said amounts. It appears that even before Audit Report dated 26.06.1998 was submitted and enquiry was conducted by the Sut Girni and Enquiry Committee report dated 15.11.1997 of the Sut Girni held the applicants and co-accused responsible for the heavy losses to the Sut Girni. After the audit report, a high level committee was constituted and the High Level Committee submitted its report dated 30th September 2000 and this High Level Committee also held the applicants and co-accused responsible for incurring heavy losses to the Sut Girni. On 20th April 2001, notices were issued to the applicants and the co-accused informing that they were responsible to make the payment of the amount of losses incurred within 15 days. On 22.05.2001, the F.I.R. was lodged with the police. In this F.I.R., it was stated that the applicants along with the co-accused with common intention have mismanaged the amount of Rs.1,48,90,015/- in respect of Mill's dead stock, grants and salary of employees and amount towards sale of seeds. The break up of the amounts therein has been given in the F.I.R. and it is stated that there is mismanagement of total amount of the said sum of Rs.1,48,90,015/-. It is further stated in the F.I.R. that in respect of the mismanagement, legal advice was taken from the Government Pleader, Amravati and 15 days notice was given to the Administrators to pay the amount. Surendra Potey, applicant had filed reply. As the amounts were not paid by the Administrators, the F.I.R. in question was filed.

8. Learned Advocate Shri Madkholkar argued the anticipatory bail applications of applicants Arvind Tidke and Nilkanth Kukade and the learned Advocate Shri Shasank Manohar argued the anticipatory bail application of Surendra Potey. Learned Public Prosecutor Shri Bhushan Gawai assisted by Shri Sanjay Doifode, Additional Public Prosecutor argued on behalf of the State.

9. In respect of applicant Arvind Tidke, it has been urged that he was Administrator only with effect from 04.06.1995 to 17.07.1995 that is to say for a period of about 40 days or so and during this period no major policy decisions or financial dealings took place and he resigned on 17.07.1995 explaining the reasons for resigning to which reference has already been made above. He, therefore, submits that there is absolutely no material in so far as this applicant is concerned and that he be enlarged on anticipatory bail. In respect of this applicant, there is no serious opposition on behalf of the Public Prosecutor for enlarging him on anticipatory bail.

10. Learned Advocate Shri Madkholkar submitted on behalf of the applicant Nilkanth Kukade that he was Administrator for about one year; no overt act has been alleged in the reply filed by the State; that the F.I.R. is based upon audit of three years out of which practically for two years 1994-95 and 1996-97 the applicant was not the Administrator. He also pointed out that there are no signatures of the applicant on the meetings of the Board of Administrators dated 18.03.1996; 18.06.1996; 30.06.1996 and 28.07.1996. Learned Advocate for the applicant also took me through the relevant provisions of the said Act. His contention is that under Section 81 of the said Act, the Registrar is required to get the audit done at least once in each cooperative year, but no such audit each year was carried out. He also pointed out that the Registrar exercises control in terms of Section 77-A(2) and Section 78(2) over the Committee or the administrator and that the enquiry under Section 88 of the said Act has already been initiated by the Registrar which is pending and in this enquiry this applicant as well as the applicant Arvind Tidke have already filed their reply. It was also pointed out that all records are available with the authorities and no recoveries are required to be made from the applicants. Accordingly, it was urged that the applicants be enlarged on bail on whatever conditions are considered fit.

11. Learned Advocate Shri Shasank Manohar argued before me that the applicant Surendra Potey is practising Advocate and was also Assistant Government Pleader and is presently Sub Government Pleader at Akot as also President of the Akot Bar Association. According to him the allegations in the F.I.R. have been squarely dealt with in the application and that all the instances on the basis of which the F.I.R. has been filed may at the best amount to mismanagement, but the same do not disclose any offence. It was also urged by him that enquiry under Section 88 of the said Act has already started in which the applicant has filed his reply to show cause and that at this stage it would be premature to determine any criminal liability on the part of the applicant; that all records are available with the authorities and nothing is to be recovered from the applicant; that the applicant is ready to cooperate with the police during investigation and the applicant be released on anticipatory bail on whatever conditions are considered necessary.

12. Learned P.P. argued that the enquiry committee report of Sut Girni dated 15.07.1997 as also High Level Committee report dated 30th September 2000 found many irregularities and that it is expected that the Board should have acted in prudent manner so that there was no loss to the Sut Girni, but in spite of that the affairs were conducted by the Board of Administrators in such a manner that there have been huge losses and it is in this context that custodial interrogation of the applicants is required. He took me through the records under each head where losses have occurred and I shall refer to the same while dealing with the said items. He specifically urged before me that there is direct involvement of applicant Surendra Potey not only in the computer purchase but also the Yarn sold by him in respect of which he was the authority to take decision which resulted in heavy losses. According to the learned P.P., the enquiry under Section 88 would fix individual liability and the F.I.R. has been filed on the basis of joint liability in view of the audit report. According to him the decision was taken to conduct enquiry by the Registrar on 12.02.2001 and as such show cause notice dated 24.05.2001 has been issued to all. It was submitted by him that the replies have been filed by the applicants Arvind Tidke and Nilkanth Kukade, but no reply has been filed by applicant Surendra Potey against whom the enquiry is proceeding exparte. He pointed out that the enquiry under Section 88(1) of the said Act is in addition to any criminal liability and in this connection my attention has been drawn to sub Section 3 of Section 88 of the said Act. He also pointed that the enquiry will only determine the liability and recovery of the amount for which responsibility is fixed on each member of the Board severally or jointly. He also pointed out that the said enquiry is now fixed for framing of charge and it may take a minimum of six months to complete the said enquiry. According to the learned P.P. on the basis of material on record, there is a prima facie case under Sections 406, 409 read with Section 34 of I.P.C. against the applicants and the anticipatory bail applications be rejected.

13. Learned P.P. in support of his submissions that the anticipatory bail should not be granted, placed reliance on Sushil Kumar Gupta Vs. Joy Shankar Bhattacharjee (reported in AIR 1971 SC 1543); Pokar Ram Vs. State of Rajasthan (reported in AIR 1985 SC 969); State Rep. by C.B.I. Vs. Anil Sharma (reported in AIR 1997 SC 3806); State of Andhra Pradesh Vs. Bimal Krishna Kundu and another (reported in 1997 Cri.L.J.4056); Dukhishyam Benupani, Asstt. Director Enforcement Directorate (FERA) Vs. Arun Kumar Bajoria (reported in AIR 1998 SC 696); Jiwan Dass Vs. State of Haryana (reported in AIR 1999 SC 1301); and Bachchu Singh Vs. State of Haryana (reported in AIR 1999 SC 2285). According to learned P.P., custodial interrogation of the applicants is essential in order to unearth large scale misappropriation involved in the management of the Sut Girni.

14. In reply, learned Advocate Shri Madkholkar, appearing for applicants Arvind Tidke and Nilkanth Kukade, urged that the rulings upon which reliance has been placed are relating to the serious cases which cannot be applied to the case under consideration and in turn he has placed reliance upon State of Maharashtra Vs. Mohan Radhakrishna Pednekar (reported in 1999(2) Mh.L.J.459). Learned Advocate Shri Shasank Manohar appearing on behalf of applicant Surendra Potey pointed out to the record connected with the items including the charge report of taking of stock dated 04.06.1995.

15. Before dealing with the matter on merits, I would refer in brief to the rulings upon which reliance has been placed. Learned P.P. has placed reliance on paras 6 and 7 of Sushil Kumar Gupta Vs. Joy Shankar Bhattacharjee (supra). The appellant in this case was held to have committed criminal breach of trust and to have either misappropriated or misapplied the funds of the Society dishonestly to benefit himself or his relations and close friends. The Apex Court found that the counsel had failed to point out any legal infirmity in the final conclusion drawn in the impugned order from the overall picture. However, ultimately the counsel admitted that the money had been advanced against the rules of the Society and also to the persons not entitled to it, but his contention was that it did not constitute criminal offence and that in any event the Board of Directors of the society having ratified the advances, the foundation for the criminal charge must be deemed to have disappeared. This contention was not accepted by the Apex Court. The Apex Court, further, held that the appellant's manner of dealing with the money entrusted to his custody clearly constitutes criminal breach of trust. The counsel was not able to point out any provision empowering the Directors to prescribe the mode of making advances and the attention of the Apex Court was not drawn to any overriding provision conferring power on the Board of directors to ratify use of the trust money contrary to the directions contained in the bye laws. In this case there were findings to the effect that the funds had been spent contrary to the bye laws or without any authority under the bye laws to dishonestly benefit the appellant, his relations and friends. The loans and advances in this case had been disbursed to the relations, servants, friends of Directors contrary to the bye laws of the Society.

16. The next ruling upon which reliance has been placed by the learned P.P. is Pokar Ram Vs. State of Rajasthan (supra), which lays down that the relevant considerations governing the court's decision in granting anticipatory bail under Section 438 are materially different from those when an application for bail by a person who is arrested in the course of investigation as also by a person who is convicted and his appeal is pending before the higher court and bail is sought during the pendency of the appeal. In this case, the apex Court was dealing with the grant of anticipatory bail in a murder case and the Apex Court has laid down that some very compelling circumstances must be made out for granting bail to a person accused of committing murder and that too when the investigation is in progress. The order of anticipatory bail was accordingly set aside.

17. In Harshad S. Mehta Vs. Union of India and another (reported in 1992 Cri.L.J.4032), the matter related to grant of anticipatory bail in FERA violations. In this case the petitioner was ready for custodyless interrogation by the Enforcement Directorate Officers and that the petitioner was not likely to abscond or tamper with witnesses yet, it was held that the public interest must prevail and the Enforcement Directorate ought to be given full and proper opportunity to effectively investigate into the complex web of FERA offences and hence request for anticipatory bail was rejected.

18. In State of Andhra Pradesh Vs. Bimal Krishna Kundu and another (supra), the Apex Court was dealing with a case of grant of anticipatory bail in a matter relating to leakage of question papers of Public Service Commission as also conspiracy by printers. The Apex Court found the respondents printers had been black listed for leakage of question papers of Public Service Commission, but despite black listing of the respondents they managed to obtain the printing work of question papers with collusion with the Secretary of Public Service Commission by putting forward the name of the another person. The prosecution case therein was that the criminal conspiracy was hatched by the respondents with some officers of the Board of Intermediate Education. The Apex Court pointed out that if respondents in such case are equipped with such an order before they are interrogated by the police it would greatly harm the investigation and would impede the prospects of unearthing all the ramifications involved in the conspiracy and the public interest would also suffer as consequence. The Apex Court also pointed out to the nature and seriousness of the criminal conspiracy and the adverse impact of it on the careers of millions of students. Accordingly, the Apex Court cancelled the anticipatory bail granted to the respondents.

19. In State Rep. by C.B.I. Vs. Anil Sharma (supra), in a case under Section 13(2) of the Prevention of Corruption Act where there were allegations that the respondent had acquired wealth to the tune of Rs.16,65,000/- as against his known sources of income which could not reach over half of that amount. It was pointed out that the custodial interrogation is qualitatively more elicitation orientated than questioning a suspect who is well ensconced with a favourable order under Section 438 of the Code. It was further pointed out that in case like this, effective interrogation of suspected person is of tremendous advantage in disinterring many useful informations and also materials which should have been concealed. The Apex Court further pointed out that success in such interrogation would elude if the suspected person knows that he is well protected and insulated by a pre-arrest bail order during the time he is interrogated and very often such interrogation would be reduced to a mere ritual. The anticipatory bail granted was, therefore, cancelled by the Apex Court.

20. In Dukhisyam Benupani, Asstt. Director Enforcement Directorate (FERA) Vs. Arun Kumar Bajoria (supra), the matter pertains to a serious case of FERA violation involving whopping sum of Rs. 37 crores and it was held that the grant of anticipatory bail to such accused was improper.

21. The two other rulings quoted by learned P.P., namely Jiwan Dass Vs. State of Haryana (supra) and Bachchu Singh Vs. State of Haryana (supra) are based upon facts of the cases therein and are on merits after the full fledged trial was held.

22. Learned Advocate Shri Madkholkar relied upon State of Maharashtra Vs. Mohan Radhakrishna Pednekar (supra). The Division Bench of the High Court was dealing with acquittal of an accused for the offence under Section 408 of I.P.C. In this case, there was shortage of cash from Bank Safe and the accused working as cashier in the Bank was charged with criminal breach of trust. It was found that there was no evidence to show that the accused had taken the amount, though he was answerable for the missing amount as cashier; no witness had spoken that amount was taken by accused nor was it recovered either from his person or house. In this set of facts it has held there was no dishonest misappropriation by accused so as to constitute offence of criminal breach of trust and he had no intention of causing wrongful gain either. Hence the acquittal was not interfered with.

23. At this stage, it is necessary to refer to some of the relevant provisions of the Act under which the applicants were appointed as Administrators of the Sut Girni. I have already pointed out that the applicants were appointed as Administrators to the Board vide order dated 03.06.1995 under Section 77-A of the said Act. Section 77-A (2) and Section 78 (2) provide that a committee or an administrator so appointed shall, subject to the control of the Registrar and to such instructions as he may from time to time give, have power to exercise all or any of the functions of the committee or of any officer of the society, and take all such action as may be required in the interests of the society. Section 8 of the said Act provides that the Registrar shall audit, or cause to be audited, at least once in each co-operative year, by a person authorised by him by general or special order in writing in this behalf, the accounts of every society which has been given financial assistance etc. Section 83(1) of the said Act empowers the Registrar to conduct enquiry and provides that the Registrar may of his own motion, and shall on the application of one-third of the members of a society, himself or by a person duly authorised by him in writing in this behalf, hold an inquiry into the constitution, working and financial condition of a society. Section 88 of the Act also empowers the Registrar to make inquiry and reads as under :-

"88 (1) Where, in the course of or as a result of an audit under section 81 or an inquiry under section 83 or an inspection under section 84 or the winding up of a society, the Registrar is satisfied on the basis of the report made by the auditor or the person authorised to make inquiry under section 83 or the person authorised to inspect the books under section 84 or the Liquidator under section 105 or otherwise that any person who has taken any part in the organisation or management of the Society or any deceased or past or present officer of the society has, within a period of five years prior to [the date of commencement of such audit or date of order for inquiry inspection or] winding up, misapplied or retained, or become liable or accountable for, any money or property of the society, or has been guilty of misfeasance or breach of trust in relation to the society, the Registrar or a person authorised by him in that behalf may frame charges against such person or persons, and after giving a reasonable opportunity to the person concerned and in the case of a deceased person to his representative who inherits his estate, to answer the charges, make an order requiring him to repay or restore the money or property or any part thereof, with interest at such rate as the Registrar or the person authorised under this section may determine, or to contribute such sum to the assets of the society by way of compensation in regard to the misapplication, retention, misfeasance or breach of trust, as he may determine.

(2) The Registrar or the person authorised under sub-section (1) on making any order under this section, may provide therein for the payment of the cost or any part thereof, as he thinks just, and he may direct that such costs or any part thereof shall be recovered from the person against whom the order has been issued.

(3) This section shall apply, notwithstanding that the act is one for which the person concerned may be criminally responsible."

The enquiry under Section 88 can be conducted as a result of audit under Section 81 or enquiry under Section 83 or inspection under Section 84 etc. once the Registrar is satisfied on the basis of report made by auditor or enquiry under Section 83 or inspection under Section 84 as to misapplication, retention or liability to account for any money or property of the Society or misfeasance or breach of trust in relation to the Society against any person who has taken any part in the organisation or management of the society or past or present officer of the society within the period of five years prior to the date of commencement of audit, enquiry or inspection. If the Registrar is satisfied he has to frame charges against such persons and after giving a reasonable opportunity to them to answer the charges, the Registrar is empowered to make an order requiring them to repay or restore the money or property or any part thereof, with interest. Sub section 3 of Section 88 provides that this section shall apply, notwithstanding that the act is one for which the person concerned may be criminally responsible. Therefore, this inquiry is in addition to criminal liability.

24. To recapitulate the facts in brief, audit report dated 26.06.1998 for the years 1994-95, 1995-96 and 1996-97 found heavy losses on various counts. Prior to the audit report, enquiry committee report of Sut Girni dated 15.11.1997 found the applicants and the co-accused responsible for the same. The High Level Committee report dated 30.09.2000 also fixed responsibility on the applicants and the co-accused. On 12.02.2001, the Registrar decided to conduct inquiry under Section 88 of the said Act and issued show cause notices on 24.05.2001. In this enquiry, replies have been filed by all the applicants. On 24.04.2001, a notice was issued by the complainant-auditor to the applicants and other co-accused to make payment within 15 days. Since no payment was made, F.I.R. was filed on 22.05.2001.

25. In so far as the case of applicant Arvind Tidke is concerned, he was one of the Administrators of the Board for the period 14.06.1995 to 17.07.1995 and he had resigned on 17.07.1995. He had attended three meetings dated 06.06.1995, 23.06.1995 and 16.07.1995. According to this applicant, during these meetings, he assessed the financial affairs of the Sut Girni and found that the losses incurred by the Co-operative Spinning Mill cannot be made up because of uncontrolled and inefficient management. He was also of the view that in future also Co-operative Spinning Mill will have to incur further losses and that it was not possible for him to work as member of the Board of Administrators. There has been in fact no serious opposition to grant of anticipatory bail in so far as this applicant is concerned. Therefore, I am of the view that the applicant Arvind Tidke be enlarged on anticipatory bail.

26. Coming now to the case of the other two applicants, the allegations which are required to be considered as against them can be conveniently grouped under the following heads.

(1) Yarn Sale Loss.

(2) Dead Stock.

(3) Computer purchase.

(4) Cotton Seed Loss.

(5) Salary Payment Loss.

(6) Permission to Nawalji Cot Spin to run Sut Girni.

(7) SICOM subsidy.

27. I shall now take up these items one by one.

29th October 2001.

(1) YARN SALE LOSS

(i) The auditor found that during the period 1995-96 and 1996-97, the estimated loss on account of sale of yarn was to the tune of Rs.1,26,18,255/-. After taking into consideration the average rate of sale price by the Sut Girni in question when compared with the average rate during the said period of Saint Gadge Baba Sut Girni which is said to be at a distance of 30 kms. from the Akot Sut Girni in question. The figures arrived at by the auditor are as under :-

Year	Total sale of yarn in kgs	Average rate of sale price	Total sale price	Comparative sale with St.Gadge Baba Sut Girni.	difference	Lesser than the estimated.
95-96	1482801	77.70	115218871	81.86	4.16	6168452
96-97	1212369	70.67	85603245	77.93	5.32	6449803
Lesser sale price of the yarn due to the lesser rate of sale than Daryapur Cotton Mill.

When the sale during the said period by the Akot Sut Girni in question is compared with the rate at Nilkanth Cotton Yarn Mill which is stated to be 45 kms. from the Sut Girni in question, the loss for the period June 1995 to March 1996 is stated to be Rs.60,89,757/-; from April 1996 to March 1997 Rs.67,50,494/- and from April 1997 to May 1997 Rs.15,43,878/-. Charts on the basis of which above working has been arrived at have been filed by the learned P.P.

(ii) The case of the applicant Surendra Potey in the application is that the auditor has only stated about loss caused to the society, but it does not speak of any misappropriation. It is further stated by the applicant that the price of yarn is dependant upon the count of the yarn and other circumstances like level, strength, colour etc. of the yarn and the price of yarn fluctuates in the market and is dependant upon many factors and as such the price of no two yarn can be compared. It is also stated that the Managing Director is a technical person who looks after the management of the spinning mill and the rates of yarn are taken by the Managing Director from various agents and are fixed by the Managing Director in consultation with the other members of the Board as per the market fluctuations. It is also stated that the entire payment has been made by demand draft and not by cash. The applicant has given yarn rates for different counts for the year 1994-95, but the rates for the years 1995-96 and 1996-97 with which we are concerned have not been given by the applicant either in the application or in the two replies filed by the applicant before the authorities.

(iii) The auditor has taken into consideration the rates of Nilkanth Cotton Yarn Mill as also the count of the product sold and after that was worked out the loss caused to the society. Though, it is stated that the Managing Director and Administrator who were jointly empowered to sell yarn had sold the same after verification of the market rates and market rates from news papers and also from 19 agents of Sut Girni and Daryapur Girni, yet no record in respect of the same appears to be available. For the sale of yarn, Board of Directors had appointed a committee vide resolution dated 05.06.1995, consisted of five Directors and one Managing Director and the said Board of Directors by resolution dated 09.06.1995, authorised the sales of the yarn to be made by the applicant and the Managing Director Pankaj Banerjee. According to learned P.P., during the period 06.12.1996 to 27.03.1997 out of 28 sales, 23 sales have been made to Nawalji Cot Spin, Akola. Prima facie, therefore, the Auditor's Report shows loss on account of sale of yarn during the period June 1995 to May 1997 to the tune of Rs.1,41,62,133/-.

(iv) The next item under this head is yarn sold on credit which for the period 1996-97 is Rs.6,56,338/-. According to the learned P.P., there is nothing in bye laws for sale on credit and in addition there are instructions of the Registrar, Cooperative Societies not to sell on credit. In this respect, learned Advocate for the applicant Surendra Potey, submitted in rejoinder that the yarn was never sold on credit by the applicant or the Board of Administrators. However, the auditor found the sale of yarn on credit. Details of which are recorded in the Auditor's Report at page 28 and prima facie the same have to be accepted at this stage.

(v) Another item under the same head is commission paid to three agents and there was no resolution to employ commission agents and no agreements with the commission agents were available. In this respect, learned Advocate for the applicant Surendra Potey, has stated that all the spinning mills are selling yarn through commission agents and that is the proper method of selling yarn and even auditor at page No.6 of the Audit Report has stated that the sale of yarn is best done through commission agents as per law laid down by All India Spinning Mills Federation. Learned P.P. stated that the commission has been paid to the agents only during the period 01.04.1997 to 30.06.1997 and not during the earlier period of audit which commenced from years 1994-95. It appears that no record relating to any agreement with the commission agents is available.

(vi) The above discussion would go to show that for the period 06.12.1996 to 27.03.1997, 23 out of 28 sales were made to Nawalji Cot Spin, Akola and from 01.04.1997 to 30.06.1997, it was made through commission agents. Besides the heavy losses to the tune of Rs.1,41,62,133/- for the sale of yarn, there is sale of yarn on credit to the tune of Rs.6,56,338/- and also commission paid to the agents to the tune of Rs.1,07,336/-.

(2) DEAD STOCK

(i) When the applicants took over as Administrators, statement of stock including Dead Stock/furniture verification was prepared on 4th June 1995. The items which were not found in the Dead Stock are shown in minus. The list of the Dead Stock as on 04.06.1995 is as under :-

Sr. No.	Items	As counted	As per Records	Excess/ (Deficit)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.   38. 39. 40.	Typewriter (Marathi) Typewriter (English) Godrej Electronic Typewriter. Modi Xerox Machine Air Conditioners Colour T.V. Refrigerators Water Cooler Electric Geysers Air Coolers Bicycle Paintings Eureka Forbes Vacuum Cleaner. Sewing Machine Faxing Machine Iron Cupboards Leather Briefcase Sofas Cordless Telephone Intercoms Shegadi Iron beds Wall Clocks Harmonium Khanjeri Tabla Set Bat(musical instrument) Juicer (Fruit) Steel Drums for drinking water Name Plate Carpet Racks (In stores Department) Wooden Tables Wooden Cupboards Fans Toast Maker Drum equipment - side drums Taase Exercise Equipment Seating arrangements 4-5 joint chairs Gas Cylinder	1 None 1 1 3 1 2 1 3 2 None 6 None 1 1 12 None 12 1 17 2 10 8 1 1 1 1 None 2 1 None 21 92 29 69 None 3 2 16 7 2	1 1 1 1 5 1 2 1 5 5 1 None 1 1 1 12 1 10 1 None 2 6 1 1 1 1 1 1 2 1 1 11 82 None 19 1 None None 23 None None	- (-)1 - - (-)2 - - - (-)2 (-)3 (-)1 (+)6 (-)1 - - - (-)1 (+)2 - (+)17 - (+)4 (+)7 - - - - (-)1 - - (-)1 (+)10 (+)10 (+)29 (+)50 (-)1 (+)3 (+)2 (-)7 (+)7 (+)2
This verification was done in the presence of Mr. Rase who is maintaining dead stock register.
		FOR R.B.BAHETI & COMPANY Chartered Accountants.

The auditor found that Dead Stock worth Rs.2,46,811/had been sent out of the mill, sent on loan, for repairs or sample and has not been returned back. As per Resolution No.7(6) dated 26.02.1995 passed by the managing committee, responsibility in respect of the material has been given to Stores Department, but the managing body and administrative board cannot evade that responsibility. The details of the same are given at page 10 of the Audit Report and include computer which shall be dealt with under the next head. In addition to this, the auditor found that Dead Stock worth Rs.58,303/- was not available. The list of the short items is given at page 293 and at page 359. Some of the items at page 293 are reported to have been returned. Items which are shown at page 359 were not still found. The said items are :-

Sr. No.	Particulars of property held in No.		Date of purchase or acquisition	Book Value	Value likely to be realised	Estimated loss	Remarkds regarding action to be taken, recovery to be effected etc.
1.	English Typewriter-1		07.07.87	7038/-	—	7038/-	As per dead stock register when fac- tual verification was conducted, these items were not seen in mill. who took it, there is no record, or whether as it has spoiled, it has been right of, no record was shown in this regard. Detailed inquiry is necessary Board of Directors should take immediate action (page 293 to 294).
2.	Cycle-1		17.06.87	595/-	—	595/-
3.	Iron Main Gate-1		15.09.85	3500/-	—	3500/-
4.	Electric Motor 1/2 H.P.-1		28.04.88	1156/-	—	1156/-
5.	Air Cooler-1		23.04.91	10700/-	—	10700/-
6.	Crain Foundation-20		18.03.92	4575/-	—	4575/-
7.	Cordless telephone-1		30.06.94	5300/-	—	5300/-
8.	Name plate-1		20.08.94	7595/-	—	7595/-
9.	Carpet/ Satranji-1		17.11.88	2600/-	—	2600/-
10.	Cleaning machine-1		19.03.93	3990/-	—	3990/-
11.	Galicha-1		31.03.94	10940/-	—	10940/-
12.	Mosambi Juice Machine-1.		20.03.94	814/-	—	814/-
				58803/-		58803/-
					Sd/- Special Auditor, Cooperative Societies, Amravati.

It is to be noted that English Typewriter, Cycle, Air Cooler, Carpet, cleaning machine and juice machine, do not even figure in the list of stock taken over by the applicants on 04.06.1995. Some of the other items like iron main gate, electric motor 1/2 H.P., Crain foundation, Galicha also do not figure in the list of stock taken over by the applicants on 04.06.1995. The other items which were not found are not of much value and according to the auditor the responsibility in respect of the same is primarily of the stores department. The auditor had directed that immediate action be taken to get back the said items. It appears that no action has been taken in the matter. One Shri Darode is the Departmental Head of Stores which includes the Dead Stock. The said items are at page 358 of the Audit Report and are as under :-

Sr. No.	Particulars of property held in No.		Date of purchase or acquisition	Book Value	Value likely to be realised	Estimated loss	Remarkds regarding action to be taken, recovery to be effected etc.
1.	Mona Meter-1			Not given	—	—	From the information supplied by Shri Darode Departmental Head, the following dead stock is sent for loan, repairs and sample out of mill. It has yet to return in mill. Strong action or follow up action is not taken. Immediate action be taken. Else dead stock would be misplaced and it is possible that the amount would lost. Learned Directors Board should make office inquiry and by taking proper decision should take action for recovery (see page 272 to 275 of Audit)
2.	Exost Fan-1			1500/-	—	1500/-
3.	A.C.C.Set-1			29500/-	—	29500/-
4.	Cotton Canvas-2			16600/-	—	16600/-
5.	Magnetic Contractor-1			6975/-	—	6975/-
6.	Cotton Canvas-2			16600/-	—	16600/-
7.	Transfermor-1			1925/-	—	1925/-
8.	Magnetic Contractor SK 65-1			6975/-	—	6975/-
9.	Cotton Tarpoline-1			8300/-	—	8300/-
10.	Cotton Tarpoline-1			16600/	—	16600/
11.	Magnetic clutch-1			39400/-	—	39400/-
12.	A.C.Cover-1			2000/-	—	2000/-
13.	Computer Set-1			80136/-	—	80136/-
14.	Wall fan-1			1800/-	—	1800/-
15.	A.C.Set-1			29500/-	—	29500/-
				246811/-		246811/-
					Sd/- Special Auditor, Class Cooperative Societies, Amravati.

(3) COMPUTER PURCHASE

(i) The Administrative body in its meeting dated 30th June 1996 had accorded sanction for purchase of computer. The auditor found that due procedure had not been followed in respect of the same including justification for purchase and prior sanction. It was also found that neither quotations were called nor tender was invited. The auditor found that in the meeting dated 30th June 1996 under subject No.9, name of S.P. Computer, Akot had been erased and in its place, Vishnu Trading Company, Akola had been inserted. A cheque for an amount of Rs.80,136/- was given from the Savings Bank Account to Vishnu Trading Company, but it appears that the same was not sent and subsequently cheque for Rs.40,000/- was issued in favour of the said Company as an advance. This cheque of Rs.40,000/- was collected by Shri Sudhir Potey. The delivery of this computer was taken on 10.09.1996. On 05.05.1997 vide Gate Pass No.482, said computer was taken out from the mill for repairs on instructions from applicant Surendra Potey and Pankaj Banerjee, Managing Director. The computer was not delivered back after repairs since the remaining payment had not been made and to that effect a letter dated 27.05.1997 sent by said Sudhir Potey on behalf of M/s. Vishnu Trading Company. In this letter, it was stated that the computer had been brought for repairs and maintenance two months back, but the gate pass is of 05.05.1997. This Sudhir Potey is stated to be a service engineer of Vishnu Trading Company, Akola and is said to be related to Surendra Potey. The transaction of purchase of computer for Rs.80,136/ is, therefore, shrouded in mystery.

(4) COTTON SEED LOSS

(i) The auditor found that the sale in respect of cotton seed was made without inviting tender or without auction and that the cotton seeds are sold at different rates. At page 225 of the Audit Report, the details relating to period of verification from 01.04.1994 to 31.03.1997 are given. Out of this list, last four transactions are of dated 10.06.1995 during the period when the applicants were Administrators. On 15.05.1995, it had been decided that the cotton seeds should be sold by public auction only. The said resolution also states that the cotton seeds are partially damaged due to rains and storms. In the statement of stock as on 4th June 1995 prepared by the Chartered Accountant, the Chartered Accountant was informed that except for quantity lying at Ganpati Temple other cotton seed is heated to certain extent and as such will fetch less rates. Since the sale on 10.06.1995 has been made at different rates on the same day, the matter would require investigation. Besides this, at pages 224 and 225 of Audit Report, it is stated that the cotton seeds were sold without any provisions for sale on credit and the transactions with them were without inviting any tender or without any auction. The details of the same are as under:-

Bill No. & date	Type	Total weight	Rate	Amount
331/ 09.06.94	AKH4	29-35	575-00	16,876-25
334/ 09.07.94	AKH4 LRA	44-80	100-00	4,480-00
709/ 12.04.95	AKH4	22-40	525-00	11,995-00
724 02.06.95	LRA	19-38	525-00	10,378-00

The auditor also found that a sum of Rs.1,62,750.99 was still due as on 31.03.1997, from M/s. Maheshrawari Poppy Peins Pvt. Ltd. Mumbai. This amount is stated to be due from 1993-94 and no efforts were made to recover this amount by the Board of Directors who are said to be responsible for the same. The auditor found this transaction to be dubious transaction.

(5) SALARY PAYMENT LOSS

(i) The auditor found that recruitment had been made contrary to the staffing pattern of the mill due to which the salary expenditure had increased and even for that recruitment rules were not followed since candidates were not called through Employment Exchange and advertisement, but 27 employees were directly recruited in 1995-96 and 18 employees were directly recruited in 1996-97. Those appointments are said to have been made without obtaining prior permission from Joint Director of Handlooms and Textiles in terms of bye laws. The auditor also noticed that even though the mill was continuously in losses, there was more expenditure on salaries. The case of the applicant Surendra Potey is that there is no finding of auditor that payment was not made, but shown to have been made and that the increase in the salary component was on account to various reasons including increase in production. The auditor found that during the period June 1995 to 31.03.1997, a sum of Rs.65,146/- was drawn though the workers were not present and in this respect the auditor stated that the recoveries to be made from the said workers. The auditor also noticed that increased salary of Rs.1698/- was paid during 1996-97 without order and a sum of Rs.86,661/- was given by way of double advance in spite of the earlier advance being in arrears which had not been recovered.

(6) PERMISSION TO NAWALJI COT SPIN TO RUN SUT GIRNI

(i) The auditor also noticed that the Board of Administrators had given permission to run the Akot Sut Girni to Nawalji Cot Spin without permission of the government or resolution during the period 20.11.1996 to 30.06.1997. It is earlier noticed that between 06.12.1996 to 27.03.1997, 23 out of 28 sales of cotton yarn had been made to this Nawalji Cot Spin. In this respect, no explanation has been given by the applicant. There is thus prima facie more that what can meet eye in this arrangement it is reported to be loss of Rs.40,85,515/-. The transactions for the period 1.4.97 to 30.6.97 were not complete and according to auditor the transactions are suspicious.

(7) SICOM SUBSIDY

(i) During the period 1996-97, the Sut Girni, Akot had received more that Rs.25,00,000/- from SICOM. The Director, Handloom, Powerloom and Textiles, Nagpur had issued instructions not to spend that amount, but in spite of the said directions, a sum of Rs.6,91,000/was spent. Learned P.P. stated that during the course of investigation, the Investigating Officer has found that a sum of Rs.24,97,406/- is spent out of the said SICOM subsidy of Rs.25,00,000/-. In this respect, no explanation has been given by the applicants. The details of the said expenditure have been furnished by the Investigating Officer.

28. There is no doubt that the auditor has recommended enquiry under Section 83 of the said Act and ultimately after a lapse of many years, the Registrar has initiated enquiry under Section 88 of the said Act. Nevertheless, this enquiry has to be independently held. The heavy losses on account of yarn sale, permission to Nawalji Cot Spin to run the Sut Girni, Akot, use of SICOM subsidy against directions of the Director, Handloom, Power and Textile, losses on account of cotton seed sale, sale on credit contrary to the rules and purchase of computer call for thorough investigation. In the facts of this case, I find a very thin line between mismanagement and criminality. Taking into consideration the magnitude and the nature of the transactions, I am of the opinion that the custodial interrogation of applicants Surendra Potey and Nilkanth Kukade is absolutely essential in order to unearth the reasons and complicity of huge losses suffered by the Sut Girni, Akot. Accordingly, I am of the opinion that applicants Surendra Potey and Nilkanth Kukade cannot be ordered to be released on anticipatory bail. The applicant Surendra Potey in some what similar circumstances has filed proceedings under section 409 of I.P.C. against previous Technical Director Prabhakar Ramkrushna Gangane.

29. For the aforesaid reasons, anticipatory bail of Surendra Gulabrao Potey and Nilkanth Trimbakrao Kukade is hereby rejected. However, anticipatory bail of Arvind Wasudeorao Tidke is allowed. Said Arvind Tidke, in the event of arrest, shall be released on bail upon execution of personal bond of Rs.10,000/- (rupees ten thousand) with one surety in the like amount on the conditions that:-

(i) he shall appear before the Investigating Officer as and when directed on five different occasions between 10:00 a.m. and 1:00 p.m. during the period of fifteen days from today, which occasions may be continuous or spread over as desired by the Investigating Officer.

(ii) The anticipatory bail is granted for the period of fifteen days and the applicant shall apply for regular bail before the competent Court at the earliest, but not later than seven days from today. In case such application is filed, the Court shall decide the same within seven days of receipt of the said bail application. In the case no bail application is filed within a period of seven days, the order of anticipatory bail shall stand vacated without reference to this Court. In case any such bail application is filed, the anticipatory bail order shall cease to have effect when the bail application is decided as per instructions above or 15 days from today, whichever is earlier.

Order accordingly.