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Krishnanath Alias Kishanrao Nanasaheb Deshmukh Vs. S.B. Kulkarni - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtMumbai High Court
Decided On
Case NumberSpecial Civil Appication No. 455 of 1974
Judge
Reported in(1978)80BOMLR287; 1978MhLJ431
AppellantKrishnanath Alias Kishanrao Nanasaheb Deshmukh
RespondentS.B. Kulkarni
DispositionAppeal allowed
Excerpt:
maharashtra co-operative societies rules, 1961, rule 58(1)(a) - disqualification for election as a member of a committee of a society.; the disqualification contemplated by rule 58(1)(a) was intended only in a case where the person who was intended to be disqualified satisfied the character of a borrower or a surety.; unless it is specifically found that the default is in respect of money borrowed or in respect of money or loan transaction for which the member is a surety, the disqualification under rule 58(1)(a) will not be attracted.; a provision relating to disqualification must be strictly construed and unless a case squarely falls within the disqualifying provision, a case cannot be brought in the rule by stretching the meaning of the word 'default.'; where there is an outstanding..........(a) of rule 58(1) of the maharashtra co-operative rules, 1961 (hereinafter referred to as 'the rules'). rule 58(1)(a) of the rules reads as follows:no person shall be eligible for appointment or election as a member of the committee of a society, if-(a) he is in default to any society in respect of any dues from him, either as a borrower or as a surety for such period as is specified in this behalf in the by-laws of the concerned society, or for a period exceeding three months, whichever is less,...the commissioner found that the by-laws of the bhagwant society permitted sales to be made on credit up to four times the advance deposited by the members or rs. 100, whichever was less, for a period up to one month only. the commissioner found that an amount of rs. 1,759.23 was due from.....
Judgment:

Chandurkar, J.

1. At an election held for membership of the Board of Directors of the Sholapur District Central Co-operative Bank Ltd., the petitioner was declared elected from constituency No. 11 known as Barsi Constituency, he having secured hundred votes as against respondent No. 3 who had secured only fifty votes. Respondent No. 3 along with respondent No. 2 who was a voter in the constituency challenged the election of the petitioner by an election petition under Section 144-T of the Maharashtra Co-operative Societies Act, I960, on the ground that the petitioner was in arrears of Rs. 2,309.64 which were due by him to Sarva-Vyavasayi Shri Bhagwant Sahakari Puravatha Mandali Ltd., Barsi (hereinafter referred to as the 'Bhagwant Society'). The election petition was tried by the Commissioner, Poona Division, who came to a finding that on the material date, the petitioner was in arrears of the amount of Rs. 2,309.64 to the Bhagwant Society. The petitioner's case that the said amount was already repaid by him was rejected on evidence and that finding is not challenged in these proceedings. The relevant clause with reference to which the disqualification of the petitioner had to be determined is Clause (a) of Rule 58(1) of the Maharashtra Co-operative Rules, 1961 (hereinafter referred to as 'the Rules'). Rule 58(1)(a) of the Rules reads as follows:

No person shall be eligible for appointment or election as a member of the committee of a society, if-

(a) he is in default to any society in respect of any dues from him, either as a borrower or as a surety for such period as is specified in this behalf in the by-laws of the concerned society, or for a period exceeding three months, whichever is less,...

The Commissioner found that the by-laws of the Bhagwant Society permitted sales to be made on credit up to four times the advance deposited by the members or Rs. 100, whichever was less, for a period up to one month only. The Commissioner found that an amount of Rs. 1,759.23 was due from the petitioner as on September 25, 1971 which had remained unpaid throughout. It appears that the Commissioner directed his attention to the question as to whether the petitioner could be called a defaulter and he took the view that a default in payment for the goods obtained from the society made the petitioner a defaulter. Having thus reached a finding that the petitioner had not paid his dues to the Bhagwant Society for years together and that he had never any intention of paying them and that they were still unpaid on October 16, 1973, the Commissioner proceeding on the footing that the petitioner was a defaulter held that he was disqualified for election to the Committee of the Sholapur District Central Cooperative Bank Ltd. under Rule 58(1)(a) of the Rules. He further proceeded to declare respondent No. 2 who was the only other candidate at the time of election as having been duly elected. This order is challenged by the petitioner in this petition.

2. The contention raised on behalf of the petitioner by Dr. Naik is that the Clause (a) relating to disqualification does not use the word 'defaulter' which is admittedly wide in its content but that what is required for the purpose of Rule 58(1)(a) was that the petitioner must be in default in respect of dues from him either as a borrower or as a surety. According to the learned Counsel, this necessarily contemplates the operation of the rule of disqualification only in case the transaction is a loan transaction and that Rule 58(1)(a) is not attracted in the case of dues outstanding on account of commercial transaction relating to sale of articles like fertilizers.

3. Neither respondent No. 2 who as a voter had exercised his right to challenge the election of the petitioner nor respondent No. 3 who was originally the defeated candidate but was duly declared elected by the Commissioner have appeared in these proceedings. However, it appears that yesterday, an affidavit found its way on the table of the Superintendent of the Special Civil Application Branch of this Court which is sworn by respondent No. 3 stating that he was persuaded to file the election petition by respondent No. 2 but that 'I am now convinced that the decision of the respondent No. 1 challenged in the present petition cannot be sustained in view of the decision of the Supreme Court in Veerpal Singh v. Co-op. Societies, Meerut.'1 He further states that he should be permitted to withdraw the election petition filed by him and the order of the Commissioner should be set aside. The original election petition having been filed by respondent No. 2 also, prayer of respondent No. 3 for withdrawal of the original petition would not by itself result in vacating the order passed by the Commissioner in the exercise of his statutory jurisdiction. Since respondent No. 2 has not appeared, we have heard Dr. Naik on behalf of the petitioner and Mr. Mandlik who appears on behalf of respondent No. 4.

4. Having regard to the words used in Rule 58(1)(a) it appears to us that the disqualification contemplated by Rule 58(1)(a) was intended only in a case where the person who was intended to be disqualified satisfied the character of a borrower or as a surety. Normally where goods are sold by a society, the transaction is one of sale by the society and purchase by the member thereof. The purchaser member no doubt makes himself liable for payment of the price and though if he fails to pay the price within the stipulated period as provided by the relevant by-laws, he can be classified as a defaulter, such a kind of default is not contemplated by Rule 58(1)(a). Where a person is sought to be adjudged a defaulter, if there is no reference in the relevant provision dealing with the nature of particular liability in respect of which the default can be said to have been committed, then the sweep of the word 'default' or 'defaulter' would be taking within it all kinds of liabilities or outstandings whatever may be their nature. The concept of borrowing is, however, entirely different from the concept of purchase or sale transaction. Normally when something is borrowed, the borrower undertakes to return the same thing in species. When articles such as fertilizers are made available to the members by a co-operative society, the obligation of a member is not to return the fertilizer but the only liability incurred is merely to pay the purchase price thereof. However, when money is borrowed, the obligation of the borrower is to return the money along with interest that may be stipulated. Thus though Rule 58(1)(a) refers to 'default to any society', the nature of that default is further clarified because it is made clear in the rule itself that the default must be as a borrower or surety. It is this latter part of the Clause (a) which seems to have been overlooked by the learned Commissioner who seems to have concentrated his attention only on the question as to whether the petitioner can be said to be a defaulter. Unless it is specifically found that the default is in respect of money borrowed or in respect of money or loan transaction for which the member is a surety, the disqualification under Rule 58(1)(a) will not be attracted. It must be remembered that a provision relating to disqualification must be strictly construed and unless a case squarely falls within the disqualifying provision, that case cannot be brought in the Rule by stretching the meaning of the word 'default'. It is not in dispute that the transaction relied upon in order to fasten the disqualification under Rule 58(1)(a) on the petitioner was the transaction of the sale of fertilizer to him by the Bhagwant Society. Such a transaction, as we have already held, is clearly outside the purview of Rule 58(1)(a) of the Rules.

5. Dr. Naik has placed reliance on a decision of the Supreme Court in Veerpal Singh v. Coop. Societies, Meerut, where the Supreme Court has held that price of goods supplied by the Federation to its constituent member, a Co-operative Union, if outstanding, does not constitute a 'loan' within by-law No. 1(Ta) which was relevant in that case. We may briefly refer to the facts in that case because, in our view, that decision clearly supports the view which we have taken. The petitioner Veerpal Singh before the Supreme Court and Rajendra Singh and Yograj Singh were removed by the Deputy Registrar of Co-operative Societies from the Board of Directors of the District Co-operative Federation, Bulandshahr, and declared them to be disqualified for the office of the Directors of the Bulandshahr Federation for a period of three years. Veerpal Singh and the said two other persons were delegates from Co-operative Unions of Jarcha, Raura and Unchagaon to the Bulandshahr Federation. The Deputy Registrar found that the three constituent members of the Federation, namely, Sehkari Sangh Raura, Sehkari Sangh Jarcha and the Co-operative Union Unchagaon were defaulters in respect of their dues to the Bulandshahr Federation and therefore the delegates from these three constituent members were not qualified to be elected as members of the Board of Directors of the Bulandshahr Federation. The question which arose before the Supreme Court was whether the petitioners could be said to be disqualified in accordance with by-law No. 1(Ta) which provided that no person shall be eligible to be or continue to be a member of the committee of management if he, in respect of any loan or loans taken by him, is in default to the federation or to any other society or the society he represents is in default to the federation for a period of at least six months. On facts it appeared that the three Co-operative Unions at Jarcha, Raura and Unchagaon owed money to the Federation in respect of supply of fertilizers by the Federation to the three Unions and that none of the three Co-operative Unions ever took any loan from the Federation. It was further found that the petitioner and the two other persons who were the delegates from the three Co-operative Unions did not owe any money whatever to the Co-operative Unions or to the Federation. Holding that the dues due on account of supply of fertilizers to the Co-operative Unions did not fall within the by-law referred to above, the Supreme Court observed as follows (p. 1055):

The Federation is not a credit society. The Federation does not have any loan transactions with the Cooperative Unions. The Cooperative Unions did not have any loan transactions with the petitioner. The dues of the Cooperative Unions are in respect of supplies of goods by the Federation to the Cooperative Unions. These are commercial transactions. These are commercial debts. Price of goods supplied, if outstanding, does not constitute a loan within the meaning of the bye-law. The impugned order proceeded entirely on an illegal basis and wrong interpretation of the bye-law. The order is bad.

We are not concerned with the rest of the judgment, but it is clear that the Supreme Court held that where there is an outstanding liability in respect of price of goods, that liability cannot be called a loan within the meaning of the by-law. It is no doubt true that the relevant by-law in Veerpal Singh's case positively referred to a default 'in respect of any loan or loans'. That, however, will not make any difference because the same concept is contained in Rule 58(1)(a) where the default must be in the capacity of 'a borrower or as a surety'. The capacity of a borrower would be filled in only if there is a loan transaction. The decision of the Supreme Court was cited before the Commissioner who, however, distinguished it on an entirely untenable ground that the dues in the present case were not commercial debts because the goods were purchased by the petitioner for his own use and further that the relevant by-law in the Supreme Court decision related to the Federation of Co-operative Unions. It is apparent that the view taken by the learned Commissioner with regard to the Supreme Court decision was not justified. Merely because in the Supreme Court decision the goods were sold by the Federation to the primary society and in the instant case the goods were sold by a society to its member, the essential nature of the transaction does not become different and the liability arising out of such a transaction of sale and purchase continues to be a transaction giving rise to a commercial debt. Similarly on principle there would be no difference in respect of the nature of the liability, whether the liability is owed by a society to a federation or by a member to a society. We are, therefore, satisfied that the order passed by the learned Commissioner holding that the petitioner was disqualified proceeded on an entirely erroneous construction of Rule 58(1)(a) of the Rules and is liable to be quashed.

6. The learned Counsel appearing on behalf of the petitioner has further contended that the respondent No. 3 was himself disqualified under by-law No. 31 to be a member of the Board of Directors because membership of the Board of Directors is open only to representatives of agricultural credit societies or multipurpose societies in A or B class. Reliance was sought to be placed on an audit report in respect of Pimpari (Shripat) Budruk Vividh Karyakari Seva Sahakari Society Ltd. which respondent No. 3 purported to represent. This audit report classifies the society of respondent No. 3 as of 'C' category. It does not appear from the order of the Commissioner that the question with regard to the basic disqualification of respondent No. 3 was raised before him which could have been properly raised by the petitioner if he so desired. We consider that it will not be proper to permit such a question to be raised for the first time in this petition, especially when there is no appearance on behalf of respondent No. 3 who seems now to have conceded the claim of the petitioner as a validly elected member of the Board of Directors.

7. In the view which we have taken, the order of the Commissioner holding that the petitioner was disqualified and the consequent order declaring respondent No. 3 to be elected in place of the petitioner is quashed. Rule absolute. There will be no order as to costs.


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