Skip to content


A-i Co-operative Housing Society Limited Vs. Laxminarayan Goel - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtMumbai High Court
Decided On
Case NumberO.C.J. Appeal No. 19 of 1969
Judge
Reported in(1969)71BOMLR616; 1969MhLJ886
AppellantA-i Co-operative Housing Society Limited
RespondentLaxminarayan Goel
DispositionAppeal dismissed
Excerpt:
.....of 1961), sections 72, 73 - whether general body of members of society can override actions of its managing committee.;under section 72 of the maharashtra co-operative societies act, 1960, the general body of members of the society have overriding powers over the actions of the managing committee of the society. the managing committee is not the sole arbiter as to how the affairs of the society must be managed.;john shaw & sons (salford) ltd. v. shaw [1935] 2 k.b. 113, automatic self-cleansing filter syndicate company limited v. cuninghame [1906] 2 ch. d. 34 and kumaran v. state of tra. co. [1952] a.i.r.t.c. 264, refered to.;quaere : whether in an appropriate case the court should not have power to interfere where the directors of a company are acting contrary to the interests of the..........no. 17, the society, is one of the defendants. as the defendants are in a majority in the managing committee, they employed solicitors acting under their directions to defend the suit. in accordance with their wishes the society resisted the suit. the plaintiffs thereupon took out a notice of motion for various reliefs stating all the facts, and, praying that the appearance of the attorneys of defendant no. 17 should be struck off. in any event, the view of the majority of the members of the society should be ascertained and consequential directions should be made. on january 11, 1969, the matter was heard by mr. justice tulzapurkar and after hearing all the parties, the learned judge appointed an officer of this court, mr. dhanboora, to convene a meeting and ascertain the.....
Judgment:

Patel, J.

1. This is an appeal against an order made by Mr. Justice Tuhzapurkar on March 7, 1969, in a notice of motion. Defendant No. 17 is a Co-operative Housing Society and is registered under the Co-operative Societies Act. It is a building Society and it has got eighty two flats. The plaintiffs are the purchasers of three flats. The suit arises under the following circumstances: Defendant No. 1 is a private limited Company of which defendants Nos. 2, 1 and 10 and other members of their family are the shareholders and/or directors. Defendant No. 16 is a partnership firm of which defendants Nos. 2, 7 and 10 are partners. Defendants Nos. 2, 3, 5, 7, 10 and 11 are closely related and defendants Nos. 4, 6, 8, 9 and 12 are employees and/or nominees of defendant No. 2.

2. Defendant No. 1 was the owner of two pieces of lands. On these lands! there were structures and an old bungalow. In September 1963 defendants Nos. 1 and 2 thought of building ownership flats and in order to attract purchasers on September 24, 1963 it appears that defendants Nos. 2 to 12 represented to the various purchasers of the flats, that, after the new buildings were completed, the occupiers of the bungalow and the structures would be given accommodation in the buildings to be built, and thereafter the bungalow and the structures would be demolished. The purchasers of the flats acted on this representation. Later, accordingly when the Society was formed, the property was conveyed to the Society by conveyance which included the term that the main bungalow and the other constructions would be demolished. Defendants Nos. 2 to 12 are also members of the Society and from the record it appears that they have been in substantial management throughout, defendant No. 2 being its chairman. Being in management of the Society it is understandable that they were not prepared to take effective steps to have the constructions demolished which under the conveyance ought to be demolished. It appears that defendant No. 18 the Municipal Corporation has issued notice for demolishing these constructions, but it is being resisted and nothing further is being done.

3. There can be no doubt that the majority of the owners of the flats want that those constructions should be demolished as per the representations made at the time of selling of the flats and as contained in the conveyance. The reason is obvious. They may probably have paid a high price for the flats for the comfortable living promised to them. Open spaces for a large building are essential. The allegations show that calling of meetings is being avoided and defendants Nos. 2 to 12 want to keep the control of the Society in their hands so that the day of demolition of the structure, could be avoided or delayed. It seems, the members of the Society convened a meeting and decided to compel the enforcement of the covenants on defendant No. 1-vendors and also against the Society, which, acting through defendants Nos. 2 to 12, who were in majority in the Committee, refused to enforce the covenants. Accordingly, the three plaintiffs filed the present suit for enforcing the said covenants, on behalf of themselves and as representatives of all other purchasers of flats except defendants Nos. 1 to 16.

4. Defendant No. 17, the Society, is one of the defendants. As the defendants are in a majority in the managing committee, they employed solicitors acting under their directions to defend the suit. In accordance with their wishes the Society resisted the suit. The plaintiffs thereupon took out a notice of motion for various reliefs stating all the facts, and, praying that the appearance of the attorneys of defendant No. 17 should be struck off. In any event, the view of the majority of the members of the Society should be ascertained and consequential directions should be made. On January 11, 1969, the matter was heard by Mr. Justice Tulzapurkar and after hearing all the parties, the learned Judge appointed an officer of this Court, Mr. Dhanboora, to convene a meeting and ascertain the wishes of the members of the Society by taking votes on the two questions as directed by the learned Judge. The appellants filed an appeal being Appeal No. 7 of 1969 under Clause 15 of the Letters Patent. This appeal was heard by the learned Chief Justice and Kantawala J, After hearing the arguments fully, the learned Judges dismissed the said appeal on February 7, 1969. Thereafter, Mr. Dhanboora held a meeting and ascertained the wishes of the majority of the members present. Though there are eighty two flats the defendants appear to have managed to show one hundred and two members in the Society which under the law of Co-operative Societies is not possible as also under by-law No. 6(2) of the By-laws of the Society. Out of one hundred and two members notices could be effectively served upon eighty six members. Out of these eighty six members, fifty eight were present and they unanimously voted that the construction should be demolished and that J.B. Shah, Laxminarayan Goel, Bagulal S. Jajodiya, E. B. Makharia and S. T. Tijoriwala should be allowed to represent the Society in its name. Accordingly, Mr. Dhanboora made his report. Thereafter, the matter came again before Mr. Justice Tulzapurkar who made the consequential order taking the appearance of the said members on behalf of the Society on file. This appeal is directed against that order.

5. It is argued that as in the case of a company the managing committee is the sole arbiter as to how the management of the affairs of the society should be done, how it should be represented in a litigation and what defence should be taken. The decisions in John Shaw & Sons (Salford) Ld. v. Shaw [1985] 2 K.B. 113 and Automatic Self-Cleansing Filter Syndicate Company, Limited v. Cuninghame [1906] 2 Ch. D. 34 are relied upon and it is contended that the same law should be applied. It is argued that the learned trial Judge was in error in convening a meeting through an officer of the 'Court and ascertaining the wishes of the majority of the members of the Society. It is contended that the shareholders of the Society are different from the Society itself and the managing committee is not an ordinary agent of the shareholders and is not bound to carry out the directions of the majority of the shareholders. A perusal of these cases clearly indicates that the Court emphasized the fact that the articles of association of the company did not provide, that, the directors shall carry out the majority direction in the course of management and held that unless the power to veto any action of the board of directors is reserved in the general body, the majority of the general body cannot insist on the directors carrying out their wishes.

6. The provisions of the Maharashtra Co-operative Societies Act are substantially different, and desirably so. Experience has shown gross mismanagement of affairs in a large number of Societies. If managing committees are allowed full liberty to carry on the work as they choose, then certainly Societies would never function with effectiveness as is intended to be done by the co-operative movement. Section 72 of the Co-operative Societies Act reads as follows:

Subject to the provisions in this Act and the rules, the final authority of every society shall vest in the general body of members in general meeting, summoned in such a manner as may be specified in the by-laws.' Section 73 of the said Act provides:

The management of every society shall vest in a committee, constituted in accordance with this Act, the rules and by-laws, which shall exercise such powers and perform such duties as may be conferred or imposed respectively by this Act, the rules and the by-laws.

Under these provisions the Society has framed by-laws under which it has vested the general management of the society in the managing committee. This does not mean that the by-laws made under Section 73 override the provisions of Section 72. Section 72 specifically vests the final authority of every society in the general body, and it is subject only to the Act and the rules which under g. 2 (26) means rules framed under the Act. There are no rules giving absolute authority to the managing committee. Even if, therefore, by the bye-laws some power is vested in the managing committee that power is, of course, subject to the provisions of Section 72 and it cannot be affected by any power vested in the managing committee. The general body of the Society is not entitled to abdicate its powers of control over the managing committee. We have no doubt that so far as the Co-operative Societies constituted under the Maharashtra Co-operative Societies Act, 1960, are concerned, the general body has overriding powers over the actions of the managing committee, and it is impossible to rely on the principles determined under the Companies Act and say that the managing committee must be the sole arbiter as to how the affairs of the Society shall be managed.

Even apart from this, bye-law 50 of the Society refers to the powers of the Committee and it reads as follows:

The management of the business of the Society shall be vested in the committee who in addition to the powers and authorities by the rules and these By-laws or otherwise expressly conferred upon them may exercise all such powers and do all such acts and things as may be exercised or done by the Society and are not hereby or by statute expressly directed or required to be done by the Society in General Meeting but subject nevertheless to the provisions of the Act, the Rules, the By-laws and to any regulations from time to time made by the Society in General Meeting provided that no regulations so made shall invalidate any prior act of the committee which would have been valid if such regulation had not been made.

The word 'regulation' has not been defined in the bye-laws nor has it been defined in the aforesaid Act. There is no provision for making of general regulations in the Act. It might mean ordinary business rules or it might mean any special regulation as and when the occasion arises. If the managing committee is acting in a manner prejudicial to the interests of the Society, the Society in a general meeting is entitled to pass a resolution-call it a regulation or by any other name,-and call upon the managing committee to act according to the said resolution.

7. In our view, therefore, having regard to the provisions of Sections 72 and 73 of the Co-operative Societies Act and bye-law 50 of the Society, which is and must be subject to Section 72 and rules under the Act, the Society has ample powers by majority to direct the committee to carry out its directions and if it refuses to do so, it can come to Court and obtain relief.

8. Reliance was placed on the decision in Kumaran. v. State of Tra.Co. A. I. R. [1952] T. C. 264 where a learned single Judge followed the decision in John Shaw & Sons (Bedford) Ld.'s case and held that the managing committee was entitled to act as an independent entity without being subject to the veto of the majority of the general body, We d not know the provisions of the Co-operative Societies Act as in force in that area. No further comments are, therefore, necessary on that decision.

9. Even though under the Companies law the directors have got a right to manage the affairs of the company independently of the shareholders, cases are not wanting where the Court in its equity jurisdiction has interfered where there is oppression of minority by the majority. If the 'Court has got the power of intervening in cases of oppression of minority by majority, prima facie we do not see why in an appropriate case the Court should not have power to interfere where the directors are acting contrary to the interests of the Company. That, however, is a different question and does not fall to be considered in the present case.

10. The appeal stands dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //