CRCS raises questions about co-operative society headed by Karnataka MLA Basanagouda Patil Yatnal

The Union Ministry of Co-operation has raised questions about the financial dealings of Vijayapura-based Siddhasiri Society, over audit, liquidity and an investment of ₹1,065 crore.

Basanagouda Patil Yatnal, MLA, is the president of the society. Mr Yatnal, who was elected on a BJP ticket, has been expelled from the party. His son Ramanagouda Basanagouda Patil is the chairman and a member of the board of directors, as per a letter sent by Central Registrar of Cooperative Societies (CRCS) to the Deputy Commissioner, Vijayapura. 

The CRCS letter seeks detailed responses on at least 11 points. These questions are based on the information uploaded by the society on the CRCS portal.

The Vijayapura-based society successfully applied for conversion from a State-level cooperative to a multi-state cooperative last year. 

Investment in director’s company

The letter questions the society’s investment of ₹10,65,81,20,358.39  in the Chincholi Sugar and Bio Industries Ltd, where Ramanagouda Patil is a director. “Such related-party transactions are not disclosed in the audited accounts. Also, the company appears to have last filed its return with the Registrar of Companies in 2015,” the letter said.  CRCS has asked the society what measures are being taken to safeguard its interests and what return the investment has earned on this. 

The CRCS also asked about ₹18,31,296 in income from an investment in the “Siddhasiri Chit Fund”, which  appears to fall outside the investments permitted under Section 64 of the Act. A detailed explanation has been sought about this. 

Interest-free loans

The Annual Report lists interest-free loans of ₹5.37 crore to grape growers, ₹3.96 crore in raisin-collateral lending, ₹5,000 under the Kesari Self-Reliance scheme, ₹9.17 lakh under the Ashray Housing scheme, and ₹2.84 crore for self-help group empowerment.

The CRCS said that giving interest-free loans to one class of members precludes others from the benefits of membership and creates different classes of members. It asked the society to justify the exercise.

 Tax disputes

The CRCS has sought details of income-tax appeals pending before the CIT (Appeals), Belagavi, for assessment years 2008-09, 2009-10, 2013-14, 2017-18, 2018-19, 2020-21 and 2021-22. It has directed the society to submit copies of the assessment orders, demand notices and grounds of appeal, plus a year-wise statement of demand, amounts paid or adjusted, disputed amounts, refunds due and the current status of each appeal.

Finances

The CRCS used the society’s own balance sheet figures: capital of ₹67.80 crore, reserves and surplus of ₹85.67 crore, investments of ₹389.13 crore, total deposits of ₹4,117.94 crore, and loans and advances of ₹3,038.60 crore. Cash in hand was ₹14.73 crore and bank balances ₹20.63 crore. Unsecured cash credit loans stood at ₹2,448.07 crore.

According to the letter, some transactions of the society fall outside some norms. Its cash and equivalents were 0.86% of deposits, against a minimum of 2%, the investment liquidity was 9.45% of deposits, against a minimum of 13%, and unsecured loans were 80.57% of total loans and advances, against a cap of 15%.

Deposits, commissions and borrowings

The CRCS has asked for a detailed explanation of Schedule-J of the balance sheet, which lists pigmy deposits of ₹156.33 crore and Jatra special deposits of ₹364.58 crore. 

It questioned two items in the profit and loss account — an honorarium of ₹1,21,67,663 and pigmy agent commission of ₹15,72,89,237. The society was asked to explain the rationale behind this, the benefit to the society, and the reasons as to why regular employees were not used for this.

The letter said that as per schedule L, the society borrowed ₹277.96 crore.  The society was asked why it raised funds from banks rather than mobilising deposits or borrowings from its members.

Disclosures and diversification claims

The Annual Return on the CRCS portal discloses related-party transactions in “Rented Properties”, but the Annual Report gives no details of the nature of the transaction, the parties involved, or the person or entity to whom the property was rented.

The society’s annual report describes a diversification of revenue beyond lending, including E-Stamping, insurance brokerage, PAN card services, digital payment kiosks (Mini ATMs), a 423 KLPD ethanol plant and a 30 MW power generation facility in Chincholi. The CRCS asked how these assets and income were accounted for.

Audit process 

There are also some questions over the audit process. The society uploaded the financial statement on the  CRCS portal, but not the Auditor’s Report for FY 2024-25. The statements were signed by the Managing Director on August 30, 2025, but not by the statutory auditor. The society was registered as a multi-state society on October 1, 2025, and a CA firm certified it, but did not sign the statements on July 1, 2026.

The names of two auditors in the 19th Annual Report of the society are different from the auditor named on the balance sheet. It also said no information on concurrent audits was furnished, despite deposits exceeding the ₹500 crore threshold under Section 70A.

The  CRCS office sent the letter to the society’s CEO. The letter has the file number L-11017/10/2026, and a hand-corrected date of August 14, 2026. Vinay Sheel Gautaum, director in the office of the CRCS, had asked the CEO to send a detailed reply by August 31. It is not known if the response was sent. 

The society had not publicly responded to this at the time of writing. The story will be updated when messages and emails sent to Mr. Yatnal, the society CEO, and the CRCS receive responses.