Cooperative societies may provide security services and collect charges if authorized by bye-laws and general body resolutions.

The Petitioner Society, registered in 1956, provides 'Watch and Ward' (security) services to its members based on resolutions passed in Annual General Meetings (AGMs) since 1993.

In 2016, following complaints by certain resident-members (Petitioners in W.P.(C) 7396/2021) alleging financial irregularities and illegal collection of security charges, the Registrar of Co-operative Societies (RCS) issued a Show Cause Notice and appointed an Inquiry Officer.

The Society challenged these actions, eventually approaching the Financial Commissioner; however, due to a lack of timely orders from the Commissioner, the Society filed W.P.(C) 927/2018 to quash the inquiry order dated October 30, 2017.

Conversely, the resident-members filed W.P.(C) 7396/2021 seeking to wind up the Society’s Managing Committee and conduct fresh elections.

During proceedings, the Anand Niketan Residents Welfare Association (ANRWA) submitted a resolution stating it lacked the funds and infrastructure to manage security services and requested the Society to continue its operations.

1. Whether the order dated October 30, 2017, appointing an Inquiry Officer to investigate 'Watch and Ward' services and Society accounts, was legally sustainable given the long-standing AGM resolutions and RWA’s expressed inability to manage such services.

2. Whether the complaints of the resident-members necessitated the winding up of the Managing Committee and the appointment of an administrator.

The Court primarily considered the Delhi Co-operative Societies Act, 2003, specifically Section 61 regarding the power of the Registrar to conduct inspections/inquiries.

It also referenced Section 112 regarding statutory remedies and the Delhi Co-operative Societies Rules, 2007, regarding the requirement for independent auditors.

Furthermore, the court relied on the Society’s Bye-laws (3(iv) and 10(e)), which empower the Society to undertake welfare activities and maintain "Watch and Ward" funds for the benefit of residents.

The Court observed that the Society had been managing security services for decades pursuant to valid AGM resolutions, and that the RCS had previously clarified in 2000 that such charges constituted valid "Society dues".

The Court highlighted the practical reality that the ANRWA had formally resolved that it was incapable of handling the security system due to a lack of infrastructure and funds.

The Court reasoned that disrupting a functional security arrangement based on the grievances of a few members would cause "serious prejudice" to the entire colony.

It found that the Society and RWA must work in a "collaborative and co-operative manner" rather than being subjected to intrusive inquiries that impede functioning.

However, to ensure financial transparency, the Court held that the RCS must continue to monitor audit reports through independent auditors as prescribed by the 2007 Rules.

The Court held that the Society shall continue to manage 'Watch and Ward' services as per the RWA’s request.

The RCS was directed to supervise the Society’s functioning solely through the monitoring of Audit Reports and ensuring the independence of auditors under the 2007 Rules.

Additionally, the Court directed the reinstatement of Petitioner Mr. W.S. Chona as a full member of the RWA without further payment, subject to maintaining harmony.

Both writ petitions were disposed of with no further orders regarding the winding up of the Managing Committee.