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Dinkar Wasudeo Joshi Vs. Registrar, Co-operative Societies - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtMumbai
Decided On
Case Number First Appeal No. 306 of 1944
Judge
Reported inAIR1946Bom346; (1946)48BOMLR104
AppellantDinkar Wasudeo Joshi
RespondentRegistrar, Co-operative Societies
DispositionAppeal allowed
Excerpt:
.....servant of the society ' in section 54 of the bombay co-operative societies act does not include a past servant of the society. the legal representatives of a deceased servant do not come under the expression 'servant' and a dispute between the society and the legal representative of a, deceased servant of the society cannot be referred under section 54 of the act to the registrar.;g. i. p. railway employees co-operative bank, ltd. v. bhikhaji karanjia (1942) 45 bom. l.r. 676, not followed-narayana ayyar v. co-operative urban bank, ltd. [1936] a.i.r. mad. 81 followed.;bharmakka v. mattappa (1925) 28 bom. l.r. 598, distinguished. the facts appear fully in the judgment. - - and (3) whether the attachment of the property is bad at law ? 3. the findings on, all these issues are in the..........of 1925) reads thus:if any dispute touching the business of a society arises between members or past members of the society or persons claiming through a member or past member or between members or past members or persons no claiming and any officer, agent, or servant of the society, past. or present, or between the society or its committee, and any officer, agent, member or servant of the society, past or present, it shall be referred to the registrar for; decision by himself or his nominee, or if either of the parties so desires, to arbitration of three arbitrators who shall be the registrar or his nominee and two persons of whom one shall be nominated by each of the parties concerned.before there could have been any reference under the said section in this case it was necessary.....
Judgment:

Sen, J.

1. The plaintiff-appellant brought this suit for a declaration that defendants Nos. 1 to 3 had no right to proceed with the arbitration case No. 9 of 1942 and that the attachment levied against the property mentioned in the plaint was illegal and void, for a permanent injunction restraining the said defendants from proceeding with the case, and for damages amounting to Rs. 1,000.

2. The material facts are these. One Rajaram Govind Joshi was a clerk in the service of defendant No. 3, the Deogad Urban Co-operative Bank, Limited, having been appointed as such on July 27, 1936, He became a member of the bank in October,. 1937, and on September 18, 1941, he passed an indemnity bond furnishing security against misappropriation. In 1942 the accounts of the bank were audited, and it. appears that the auditors discovered that between January, 1939, and March 1942 there had been defalcation to the extent of Rs. 16,008-12-0, and as Rajaram was in charge of the accounts of the bank, it was believed to have embezzled the money. Rajaram, however, died on May 18, 1942, before the audit had been completed. On August 28, 1942, the society of the bank passed a resolution that the question of the recovery of the amount defalcated should be referred to the Registrar and steps taken against the legal representatives of Rajaram, viz. the plaintiff-appellant, his uncle, defendant No. 4, his cousin and defendant No. 5, his widow. The Assistant Registrar, Belgaum, purporting to act under Section 54 of the Bombay Co-operative Societies Act, 1925, appointed defendant No. 2 as his nominee, and the dispute was registered before the said nominee as case No. 9 of 1942, the parties being the Chairman, Deogad Urban Co-operative Bank, Limited, on the one hand and the plaintiff and defendants Nos. 4 and, 5 on the other. Certain properties were attached on September 16, 1942, as belonging to the deceased by the nominee purporting to act under Section 55 of the Act. This suit was filed on August 9, 1943, while the proceedings before the Assistant Registrar's nominee were still going on. The suit was resisted by defendants Nos. 1 and 3 on the ground, inter alia, that the Court had no jurisdiction to entertain it Certain issues were raised, among which three have been tried as preliminary issues, viz.:

(1) Has the Court no jurisdiction to try the suit ?

(2) Whether the plaintiff proves that the arbitration suit No. 8 of 1942 is illegally filed? and (3) Whether the attachment of the property is bad at law ?

3. The findings on, all these issues are in the negative, with the result that the suit has been dismissed. The plaintiff has now appealed.

4. The main argument advanced on his behalf is that this was not a dispute which could have been referred to the Registrar for decision under the provisions of Section 54 of the Bombay Co-operative Societies Act, and that, therefore, the plaintiff was entitled to get the declaration and the injunction as well as the damages sought by him. The first part of Section 54 of the Bombay Co-operative Societies Act (Bom. Act. VII of 1925) reads thus:

If any dispute touching the business of a society arises between members or past members of the society or persons claiming through a member or past member or between members or past members or persons no claiming and any officer, agent, or servant of the society, past. or present, or between the society or its committee, and any officer, agent, member or servant of the society, past or present, it shall be referred to the Registrar for; decision by himself or his nominee, or if either of the parties so desires, to arbitration of three arbitrators who shall be the Registrar or his nominee and two persons of whom one shall be nominated by each of the parties concerned.

Before there could have been any reference under the said section in this case it was necessary that two conditions should have been fulfilled. It was necessary, in the first instance, that there should have been a dispute touching the business of the society,, and, secondly, such dispute had to be between the society, or its committee and any officer, agent, member or servant of the society. It is to be observed that when the society passed a resolution to the effect that the question of recovery of the amount defalcated should be referred to the Registrar, i.e., on August 28, 1942, Rajarara who was alleged to have committed the defalcation had already died, and the bank ultimately, in accordance with the said resolution, had to proceed against his legal representatives, viz. the plaintiff and defendants Nos. 4 and 5.

5. The first question that arises, therefore, is whether it can be said that there was any dispute touching the business of the bank. As to' the meaning to be attached to the expression ' dispute ', Mr. Dharap on behalf of the bank has argued at great length before us that id must be interpreted to mean nothing more than a cause of action, such as would entitle the bank to bring a suit even after the death of the person who had committed the defalcation against his legal representatives. He has contended that the word 'dispute' cannot be taken to mean all disputes whatsoever touching the business of the society, for instance, a dispute between two directors of the society or a director and an officer of the society as to any transaction in which the society has taken part or intends to take part. According; to him a dispute must be said to arise as soon as any legal liability has been incurred whereupon a claim can be made, and it is not necessary that the parties in question should have any actual disagreement regarding any matter. He has further contended that the provisions regarding arbitration in the Bombay Co-operative Societies Act are intended to give the special Court constituted under the Act jurisdiction to try matters which would otherwise have gone to an ordinary Court of law, and that, therefore, the word 'dispute' should not be construed to mean anything more than what would enable any of the parties mentioned in Section 54 to bring a suit in a Court of law if these provisions were absent. His argument, therefore, is that just as in such a case the existence of a cause of action would suffice for the riling of a suit, nothing more should be deemed to be required before a reference under Section 54 can be made to the Registrar. It seems to us, however, that it would, be attaching an unusual meaning to the word ' dispute ' if this view is to be accepted, viz. that ''dispute' means nothing more than the occurrence of a liability or the existence of a cause of action. It may be conceded that every kind of dispute is not intended under this section to be referred to for decision by the Registrar or by his nominee or by arbitration otherwise. In ordinary connotation the word ' dispute' implies some kind of disagreement between the parties concerned; and there can be little doubt that some reference to a legal claim or liability is intended by the use of the said word. It is, however, difficult to hold, as Mr. Dharap has asked us in effect to hold, that as soon as an act of misfeasance, for instance, has been committed, or as soon as some legal liability has been incurred, it can be said that there has been a dispute touching the business of the society within the meaning of:S. 54. In the second paragraph of the said section it is stated that ' a dispute includes -claims by a society for debts or demands due to it from a member'' etc., ' whether such debts or demands be admitted or not.' Mr. Dharap has contended that the last words of this paragraph show that even if a claim or demand be admitted, it would be a case of a dispute. But this paragraph may have been inserted to make it clear that what might not otherwise have been regarded as a dispute is, for the purposes of this section, to be regarded as such. In any case, this paragraph speaks distinctly of claims or demands and not merely of the incurring of a liability. The proviso to is. 54, again, refers to 'the question .at issue between a society and a claimant, or between different claimants.'' We are of opinion that the word ' dispute ' cannot be altogether divorced from the connotation of a claim or demand or a question at issue, and that it cannot be said to be the same thing as a cause of action or the mere incurring of a liability.

6. The next question that arises in this case is: When can it be said that a dispute arose which was referred under Section 54 to the Registrar? Mr. Madbhavi on behalf of the plaintiff has contended that it was only when the society passed its resolution on August 28, 1942, that a dispute can be said to have arisen. Mr. Dharap, on the other 'hand, has argued that the dispute arose as soon as the defalcation took place, as such defalcation provided a cause of action on which a suit could have been filed. Under Section 54 of the Act the dispute has to be referred to ' the Registrar for decision by himself or his nominee or if either of the parties so desires, to arbitration of three arbitrators.' The section does not state who makes such a reference. In the present case it seems that the society of the bank, after the passing of the resolution on August 28, 1942, approached the Assistant Registrar, Belgaum, for action under Section 54. It does not seem to us possible to hold that the dispute which was referred to the Assistant Registrar arose at any time earlier than the resolution of the society. It cannot be said 'that before that resolution was passed, the society intended to take any action in the matter of the defalcation. The society must have received the report of the auditors 'before they passed the resolution. Even that report must have been after the death of Rajaram, because Rajaram is said to have died while the audit was still going on. As we have been unable) to accept the contention of Mr. Dharap as to the meaning to be put on the word ' dispute,' we must hold that it could not have arisen earlier than the date of the resolution, viz. August 28, 1942.

7. That being so, it becomes necessary to see whether at that date the dispute was between the Society or the bank and any officer, agent, member or a servant of the society. Rajaram had already died. The lower 'Court seems to have taken the view that the word ' servant'' implies not only a present servant but a past servant also. It has relied on a decision in G, I. P. Railway Employees Co-operative Bank, Ltd. v. Bhikhaji Karanjia (1942) 45 Bom. L.R. 676 in support of this conclusion. In that case the G. I. P. Railway Employees Co-operative Bank sued one Bhikaji, an employee of the hank, under Section 33 of the Indian Arbitration Act, 1940.. Prior to the filing of the suit there had been proceedings under; Section 54 of the Bombay Co-operative Societies Act, Bhikaji himself having applied to have his dispute referred to arbitration. In the course of the argument it was contended on behalf of the bank that under Section 54 of the Bombay Cooperative Societies Act the dispute could not have been referred to arbitration under the said Act as Bhikaji had not been in the service of the bank at the time when the dispute had been referred to arbitration. This contention was negatived on the ground that Bhikaji had applied to have his dispute referred to arbitrators at a time when he was still in the service of the bank. Having arrived at this conclusion, Mr. Justice Chagla proceeded to remark (p. 682):

Even if he were not [that is, if he were not then in the service of the bank] I am not -prepared to accept the contention sought to be placed by Mr, Daphtary [counsel for the bank] on this particular clause of Section 54 of the Act... The section does not provide that at ,,the time of the initiation of the arbitration proceedings the party other than the society must be in its employment. The curious result that would follow, if 1 were to accept Mr. Daphtary's contention, would be that a servant would be entitled to agitate his claim before the arbitrators before his dismissal with regard to any grievance that he may have relating to the) contract of service, but as soon as he was dismissed he would no longer have the right to resort to the summary proceedings provided by Section 54 of the Bombay Co-operative Societies Act.

As against this argument, MX. Madbhavi has referred to the case of Nmayana Ayyar v. Co-operative Urban Bank, Ltd. A.I.R [1936] Mad. 81, where King J., sitting singly, in a case arising under the Madras Co-operative Societies Act, held that the expression ' officers' in . 51 of the said Act, which is worded in almost the same terms as Section 54 of the Bombay Co-operative Societies Act, could not mean officers past and present. The two clauses of Section 51 referred to were cls. (b) and (c). Clause (A) referred to a dispute .between a member, past member or person claiming through a member, past member or a deceased member and the society; and d. (c) related to disputes between the society and its committee and any officer, agent or servant of the society. King J. remarked that prima facie he would have been inclined to hold that Clause (c) would apply to the case where the dispute was between a co-operative bank and its directors, five of whom were no longer directors of the bank, but that on a reference to two other sections, viz. Sections 91 and 49 (corresponding respectively to Sections 54 and 50A of the Bombay Co-operative Societies Act), he could not take this view. After referring to the material parts of the two last-mentioned sections, he observed (p. 8 2):

When we find these two instances of particular reference being made in the Act itself to past officers and past members it seems to me that if this Clause (c) was intended to apply to a dispute of this kind between the society and its past officens specific mention would have been made to past officers in this clause also,) In the absence of such specific .reference, that clause cannot, I think, apply to the present dispute.

With respect, the line of reasoning adopted in the Madras case appears to us to be preferable to that adopted by Chagla J. It is also- to be observed that the opinion of Chagla J. on the point under consideration was obiter, as it was not necessary for him to hold that the word ' servant' included in its connotation past servant. It does not appear that the Madras decision was referred to in the arguments that were ad-; dressed to Chagla J. nor is there any reference to the wording of Section 50A or of the earlier part of Section 54 in his judgment where 'members or past members' and 'a member or past member' have been specifically referred to. We, therefore, do not think that the Legislature in using the words 'servant of the society' intended to include past servant in the connotation of that expression. In 1943 by an Amending Act it was provided that the words ' past or present' should be inserted, between the words 'servant of the society' and 'or between the society.' It seems to us that the object of this amendment was to fill up a lacuna which existed in the original section.

8. That being our view, it cannot be said that at the date of the suit there was any dispute between the Society and any servant of the Society, even if it be possible for a dispute to exist between a party who is alive and a dead person. The dispute in this case was really between the Society and the three persons who have been proceeded against as the legal representatives of the deceased Rajaram, and it seems to us clear that such legal representatives cannot be held to be covered by the expression ' servant.' The learned Government Pleader, however, has relied on Bharmakka v. Mallappa (1925) 28 Bom. L.R. 598 and has contended that the word ' servant' must be regarded as including, the legal representatives of the servant as well. That; was a case in which there had been arbitration under the old (Central) Act II of 1912, Rule 28 of the Rules framed under which provided inter alia that any dispute touching the business of a Cooperative Society between persons claiming through a member and the committee should be referred to the Registrar. Proceedings were taken against the sons of a deceased debtor of a Co-operative Society who had been a member and his two sureties as well as one Bharmakka, who was described as one of the legal representatives of the principal debtor. Macleod C. J. remarked (p. 600):

Once it is conceded that where a dispute lies between a Co-operative Society and a member who is dead, proceedings can, be continued or entertained between the Society and the legal representatives of the deceased debtor, the arbitrators would be competent to decide who were the legal representatives of the deceased debtor and would have jurisdiction to decide that question.

9. Section 54 with which we have to deal is not in the same terms as Rule 28 of the old Co-operative Societies Act, and in this case it is not conceded by the plaintiff that proceedings can be continued or entertained by the Society against the legal representative of the deceased. It seems to us, therefore, that the case of Bharmakka v. Mallappa cannot be regarded as any authority for the purposes of the present suit, and we must hold that under the present Act a dispute between the Society and the legal representatives of a deceased servant of the Society cannot be referred under Section 54 of the Act to the Registrar.

10. In the result, therefore, the appeal must be allowed and the order of the lower Court set aside, and the suit will be sent down to the trial Court for determination of the issues not decided and decision according to law.

11. The plaintiff-appellant will get his costs in this Court. Costs so far incurred in the lower Court will be costs in the cause.


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