Skip to content


ikramuddIn and anr. Vs. U.P. Industrial Co-operative Bank Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ No. 4069 of 1966
Judge
Reported in[1968]38CompCas412(All)
ActsCo-operative Societies Act; Co-operative Societies Rules
AppellantikramuddIn and anr.
RespondentU.P. Industrial Co-operative Bank Ltd. and ors.
Appellant AdvocateH.O. Singh, ;Shanti Bhushan and ;S.S. Bhatnagar, Advs.
Respondent AdvocateS.C. Khare and ;S.N. Sahai, Advs.
DispositionPetition allowed
Excerpt:
- - 150 per day from 17th august, 1963, for loss alleged to have been suffered by them in business on account of the failure of the bank to return the pledged goods. 6. before dealing with the petition on merits, i would like to dispose of a contention in the nature of a preliminary objection raised by the respondent bank based on allegations contained in the supplementary counter-affidavit filed on the 14th august, 1967, wherein it is alleged that sri ikramuddin, petitioner no. co-operative societies rules a dispute between a member or past member and the society alone could be referred to an arbitrator and since the petitioners were not members of the bank but were at best nominal members thereof, a dispute raised by them could not be referred to an arbitrator under rule 115 of the.....yashoda nandan, j. 1. the petitioners claimed to be members of the u.p. industrial co-operative bank ltd. (hereinafter referred to as the ' bank '), a society registered under the u.p. co-operative societies act.2. a dispute arose between the petitioners and the bank about the petitioners ' claim for return of their goods said to be worth about rs. 16,000 pledged with the bank. the petitioners claimed the pledged goods and/or rs. 16,000 as their value plus damages at the rate of rs. 150 per day from 17th august, 1963, for loss alleged to have been suffered by them in business on account of the failure of the bank to return the pledged goods. the petitioners submitted in writing the dispute to the registrar, co-operative societies, for decision in april, 1964. the dispute was referred for.....
Judgment:

Yashoda Nandan, J.

1. The petitioners claimed to be members of the U.P. Industrial Co-operative Bank Ltd. (hereinafter referred to as the ' bank '), a society registered under the U.P. Co-operative Societies Act.

2. A dispute arose between the petitioners and the bank about the petitioners ' claim for return of their goods said to be worth about Rs. 16,000 pledged with the bank. The petitioners claimed the pledged goods and/or Rs. 16,000 as their value plus damages at the rate of Rs. 150 per day from 17th August, 1963, for loss alleged to have been suffered by them in business on account of the failure of the bank to return the pledged goods. The petitioners submitted in writing the dispute to the Registrar, Co-operative Societies, for decision in April, 1964. The dispute was referred for decision by the Registrar to Sri Jai Ram Prasad, Industrial Inspector, as the sole arbitrator. The arbitrator refused to decide the question of the petitioners' claim for return of the pledged goods or for payment of their value by the bank on the ground that the goods were in the custody of the court. The claim for damages made by the petitioners was rejected by the arbitrator. Against the award of the arbitrator the petitioners filed an appeal purporting to be under Rule 133 of the Rules framed under the U.P. Co-operative Societies Act before the Registrar, Industrial Co-operative Societies, U.P. The Registrar transferred the appeal for hearing to the Assistant Registrar (Handloom) Industrial Co-operative Societies, U.P., Kanpur. According to the petitioners, during the pendency of the appeal an agreement was arrived at between the parties.

3. On the 28th June, 1966, the Assistant Registrar passed an order, the operative portion of which is as follows:

'(1) The appellants shall pay the full amount of loan outstanding against them plus interest that have accrued till 17-8-63 to the respondent, the U.P. Industrial Co-operative Bank.

(2) The respondent, U.P. Industrial Co-operative Bank, shall release the goods in favour of the appellants after receipt of the said amount.

(3) The respondent shall pay compensation to the appellants at the rate of Rs. 40 per day w.e.f. 17-8-1963 till the date of release of the goods.

(4) The cost of the appeal shall be borne by the parties concerned.' This order of the Assistant Registrar purports to be based on the alleged compromise relied upon by the petitioners.

5. On the 13th July, 1966, the bank filed an appeal against the order of the Assistant Registrar. The appeal was heard by Sri K.N. Mathur, who was at the relevant time a Deputy Registar, Industrial Co-operative Societies, U.P. The order of the Assistant Registrar was set aside by the Deputy Registrar. The Deputy Registrar ordered that the bank should not pay any compensation to the petitioners. The Deputy Registrar, however, ordered that the bank should return the goods pledged by the petitioners after obtaining payment for the same. The costs, according to the order, were to be borne by the parties concerned. By means of this petition, the petitioners have prayed for a suitable order or direction commanding respondent No. 2, the Registrar, Industrial Co-operative Societies, U.P., Kanpur, to bring forth his record before this court and to quash the order of the Deputy Registrar. There is also a prayer for any other suitable writ, order or direction which this court may deem fit and proper in the circumstances of the case.

6. Before dealing with the petition on merits, I would like to dispose of a contention in the nature of a preliminary objection raised by the respondent bank based on allegations contained in the supplementary counter-affidavit filed on the 14th August, 1967, wherein it is alleged that Sri Ikramuddin, petitioner No. 1, was at no time even ' a nominal member of the bank'. As far as Mohammad Yamin, petitioner No. 2, is concerned, according to the supplementary counter-affidavit, he was merely a nominal member of the bank under bye-law No. 5 (C) of the bye-laws of the bank. The contention raised was that under Rule 115 of the U.P. Co-operative Societies Rules a dispute between a member or past member and the society alone could be referred to an arbitrator and since the petitioners were not members of the bank but were at best nominal members thereof, a dispute raised by them could not be referred to an arbitrator under Rule 115 of the U.P. Co-operative Societies Rules and in consequence the entire proceedings were invalid. Learned counsel appearing for the respondent bank contended that if this court came to the conclusion that the order passed by the Deputy Registrar deserved to be quashed it was just and proper that the entire proceedings including the order of the Assistant Registrar which was in favour of the petitioners be quashed.

7. The petition was filed on the 2nd November, 1966. It was alleged in paragraph 1 of the petition that the petitioners are members of the bank. On the 18th May, 1967, a counter-affidavit was filed by Sri A.K. Srivastava, the general manager of the bank, wherein the contents of paragraph 1 of the petition were admitted. At no stage of the proceedings before the authorities constituted under the U.P. Co-operative Societies Act, the contention now sought to be raised was advanced. In the circumstances of the case, I do not consider it fit and proper to permit the respondent bank to take up this plea for the first time in these proceedings. Since I propose to quash the order passed by the Deputy Registrar and to direct that the appeal filed by the bank be decided afresh, it will be open to the appellate authority to allow this contention to be raised if it considers it proper to do so.

8. As far as the merits of this petition are concerned, it was firstly contended by learned counsel appearing for the petitioners that the decision of the Deputy Registrar, Sri K.N. Mathur, was a nullity since the Deputy Registrarbeing one of the directors of the bank was biased and incompetent on that account to hear and decide the appeal. In my judgment, there is force in this contention which must in consequence prevail. According to the allegations contained in the petition, the petitioners objected that Sri K.N. Mathur was not competent to hear the appeal and to pass any orders of stay as he did, since he was one of the directors of the bank and was in consequence interested in the affairs of the bank. A counter-affidavit has been, filed by Sri K.N. Mathur, the Deputy Registrar, who states that he is not one of the elected directors of respondent No. 1 and does not represent its shareholders or any other constituent. He is only one of its ex-officio directors in his capacity as secretary of the U.P. Industrial Co-operative Association ' in order to watch the interests of the Association from which respondent No. 1 has derived much of its finances.........'

9. A copy of the bye-laws of the U. P. Industrial Co-operative Association Ltd. of which Sri K.N. Mathur admittedly was the secretary at the relevant time was made available to me by counsel for the respondent bank. According to bye-law No. 5 the membership of the Association shall be open to all societies registered under the Co-operative Societies Act. The management of the Association, according to bye-law No. 24, vests in the general body, the board of directors, the committee of management, the president and the secretary thereof. The board of directors of the Association consists among others of one ex-officio member appointed by the president as secretary. The Director of Industries, U. P., is the ex-officio president of the Association and Sri K.N. Mathur was, it appears, appointed by him as its secretary and thus became a member of the board of directors. He is also a member of the committee of management of the Association in his capacity as secretary thereof. According to bye-law No. 56, Sri K.N. Mathur as the secretary of the Association subject to the general control of the president was the chief executive officer of the Association and was responsible for its proper working. A copy of the bye-laws of the bank has been filed as an annexure to the petition. The secretary of the U. P. Industrial Co-operative Association Ltd. is, according to bye-law No. 40, an ex-officio member of the general body. The board of directors of the bank, according to its bye-laws is the chief executive body of the bank and all responsibility for its affairs rests in it. In his capacity as the secretary of the U. P. Industrial Co-operative Association Ltd., Sri K.N. Mathur was not only a member of the general body but also of the board of directors of the bank. As a member of the general body, Sri Mathur had a right to take part in the election of the members of the board of directors and as a member of the board of directors he is one of those who are responsible for the affairs of the bank. He admits in his counter-affidavit that in his capacity as the secretary of the U. P. Industrial Co-operative Association he is an ex-officio director of the bank in order to watch the interest of this Association from which the bank derives much of its finances. It is thus clear that he is vitally interested in the affairs of the bank in various capacities and is closely identified with it. It is true that Sri K.N. Mathur had no pecuniary interests of a personal nature in the affairs of the bank but in his official capacity he was so closely identified with the affairs of the bank that I do not find it possible to hold that he could be relied upon to decide the appeal before him in a detached and unbiased fashion such as is expected of a Tribunal required to act judicially. In Manak Led v. Dr. Prem Chand, A.I.R. 1957 S.C. 425Gajendragadkar J. speaking for the court held that: '

' It is well settled that every member of a tribunal that is called upon to try issues in judicial or quasi-judicial proceedings must be able to act judicially; and it is of the essence of judicial decisions and judicial administration that judges should be able to act impartially, objectively and without any bias. In such cases the test is not whether in fact a bias has affected the judgment; the test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the tribunal might have operated against him in the final decision of the tribunal. '

10. It was further held that:

' Where pecuniary interest is not attributed but instead a bias is suggested, it often becomes necessary to consider whether there is a reasonable ground for assuming the possibility of a bias and whether it is likely to produce in the minds of the litigant or the public at large a reasonable doubt about the fairness of the administration of justice. It would always be a question of fact to be decided in each case. '

11. As closely connected as Sri Mathur was to one of the parties to the dispute, I find it difficult to conclude that he could act impartially, objectively, without any bias and that there was no ground for assuming the possibility of bias and partiality in favour of the bank. That the doctrine of bias applies not only to strictly judicial proceedings but also to tribunals and bodies which are given jurisdiction to determine judicially the rights of parties is no longer capable of controversy. In Manak Lal the facts were that in proceedings under Section 145, Criminal Precedure Code, between one Pukhraj and others and Dr. Prem Chand, one Sri Chhangani had appeared as a counsel for* Dr. Prem Chand while Manak Lal represented the opponents of Dr. Prem Chand. During those proceedings Manak Lal, who as already stated was a counsel representing the opponents of Dr. Prem Chand, produced a fictitious copy of an interim order. A complaint was filed against Manak Lal by Dr. Prem Chand under Section 13 of the Legal Practitioners Act alleging that Manak Lal was guilty of professional misconduct and the complainant prayed that suitable action be taken against himin that behalf. The learned Chief Justice of the High Court of Rajasthan under Section 10(2) of the Bar Councils Act as it stood at the relevant time sent the complaint for enquiry to a Tribunal nominated by him. Sri Chhangani was nominated as the chairman of the Tribunal. Sri Chhangani was a senior member of the Bar and was at one time the Advocate-General of the State of Rajasthan. The Tribunal came to the conclusion that Manak Lal was guilty of professional misconduct in having got a false stay order written by a clerk by improper means and thereby he managed to take illegal and undue advantage on behalf of his client and, therefore, deserved to be punished for the same. The High Court agreed with the findings of the Tribunal and it directed that Manak Lal should be removed from practice. It was against that order that Manak Lal appealed to the Supreme Court. The Supreme Court held that it had no hesitation in assuming that when Sri Chhangani agreed to work as the chairman of the Tribunal, he did not remember that he had appeared for the complainant in some proceedings under Section 145, Criminal Procedure Code. It was further held that it was not at all unlikely that Sri Chhangani had no personal contact with Dr. Prem Chand and may not have been aware of the fact that in the case from which the proceedings against Manak Lal arose he had appeared at any stage for Dr. Prem Chand. In spite of these findings, the Supreme Court took the view that the constitution of the Tribunal appointed by the learned Chief Justice of the High Court of Rajasthan suffered from a serious infirmity in that Sri Chhangani, who had appeared for Dr. Prem Chand in the criminal proceedings in question, was appointed a member of the Tribunal and in fact acted as its chairman. It is worthy of note that the interests of Sri Chhangani in favour of Dr. Prem Chand or against Manak Lal were much more remote than the interests of Sri K.N. Mathur in the affairs of the bank.

12. In G. Nageshwara Rao v. Andhra Pradesh State Road Transport Corporation, A.I.R. 1959 S.C. 308 an order passed by the Chief Minister in exercise of the powers under the Motor Vehicles Act was quashed because the hearing of the objection had been done by the secretary of the transport department whose report was approved by the Chief Minister of the State. The Supreme Court quashed the order because it took the view that the secretary of the department who had heard the objection was a part of the department which was a party to the objection to be decided. The position of Sri K.N. Mathur who was one of the directors of the bank, to a certain extent, can be said to be analogous to the secretary of the department of transport.

13. The conduct of Sri K.N. Mathur during the pendency of the appeal lends weight to the contention of the petitioners that the bank's appeal was not heard and decided by an impartial Tribunal. It appears that when theappeal was filed before him by the batik Sri K.N. Mathur on 13th July, 1966, passed an interim order staying execution of the order of the Assistant Registrar. On the same date the petitioners filed an application before the Second Civil Judge. Kanpur, for execution of the order of the Assistant Registrar by the issue of a precept to the Civil Judge, Meerut, for attachment of the bank's property at Meerut. On the 15th July, 1966, the petitioners applied to the Civil Judge that execution be expedited and that instead of a precept being issued for the attachment of Meerut properties, a writ be issued for the attachment of the properties of respondent No. 1 at Kanpur. The learned Civil Judge allowed this request and a writ of attachment was issued to the amin. On the 30th July, 1966, the amin of the court of the learned Civil Judge arrived at the office of respondent No. I at Kanpur and started attaching the movable properties of the bank. It appears that officials of the bank requested the amin not to attach the properties of the bank in view of the interim order granted by Sri Mathur. The officials of the bank having failed to pursuade the amin not to proceed with the attachment proceedings approached Sri Mathur. The Deputy Registrar consequently went to the premises where the attachment proceedings were taking place and submitted before the amin something in the nature of an application, copy of which has been filed as annexure 'B' to the petition. Relevant part of the application is as follows :

'In connection with the attachment order passed by the court against the U.P. Industrial Co-operative Bank, one hour time may kindly be given to bring the order of the court.'

14. In his report to the court the amin stated that in compliance with the order of the court he went to effect attachment of properties of the bank and while there the general manager of the bank met him and he telephoned to Sri K.N. Mathur, Assistant Registrar, who soon arrived at the spot in response to the telephonic call. Sri. K.N. Mathur, according to this report, after some discussion with regard to the order of the civil court asked for one hour's time to obtain an order from the civil court which was granted to him by the amin. In his counter-affidavit, Sri. Mathur has not denied the correctness of the report of the amin or that he applied for time before the amin in order to enable the bank to obtain orders from the civil court. He has only stated that he felt that the execution of the order of the Assistant Registrar having already been stayed on the 13th July, 1966, 'fairness demanded that the respondent No. 1 should get some time to move the civil court for relief', and he, therefore, requested the amin to grant an hour's time to the respondent No. 1 to bring a stay order. This conduct of Sri Mathur who was seized of an appeal which he had to decide judicially was wholly incompatible with his position as a Tribunal entrusted with quasi-judicial functions and, in my opinion, clearly discloses a bias on his part in favour of the respondent bank. His conduct indicates the extent of his interest in the affairs of the bank of which he admittedly was a director. In Andhra Pradesh State Road Transport Corporation v. Satyanarayana Transport Ltd., A.I.R. 1965 S.C. 1303 it was observed by Gajendragadkar C.J., that:

'In dealing with cases of bias, it is necessary to remember that 'no one can act in a judicial capacity if his previous conduct gives ground for believing that he cannot act with an open mind.' The broad principle which is universally accepted is that a person trying a cause even in quasi-judicial proceedings, must not only act fairly, but must be able to act above suspicion of unfairness.'

15. Sri K.N. Mathur, who was charged with the duty of adjudicating between two parties, was required to decide the dispute with an independent mind without any inclination or bias in favour of one party or the other. I have no difficulty in holding that the conduct of Sri Mathur during the pendency of the appeal before him is inconsistent with the conduct required of an impartial tribunal.

16. Learned counsel for respondent No. 1, however, urged that the question with regard to the bias was not raised by the petitioners before Sri K.N. Mathur and consequently the petitioners were disentitled to raise the question now. It was contended that the petitioners according to their own case were aware of the fact that Sri K.N. Mathur was one of the directors of the respondent bank and in spite of it the petitioners did not challenge before him his jurisdiction to proceed to hear the appeal. They took the chance of the appeal being decided in their favour and it was only when the decision turned out to be against them that they are now raising this plea. Reliance was placed by learned counsel on the decision of the Supreme Court in Manak Lal. Relying on this decision, it was contended that the petitioners were precluded from raising this point in this writ petition on account of their waiver or acquiescence. On the material on record, however, I do not find it possible to hold that there was either waiver or acquiescence by the petitioners to the appeal being decided by Sri K.N. Mathur such as to disentitle them to raise this plea before this court. In paragraph 13 of the petition, it has been stated that,

' The petitioners objected that Shri K.N. Mathur was not competent to hear the appeal and to pass any orders of stay as he was one of the directors of the bank and, therefore, was interested in the affairs of the bank and further he had appeared before the amin on behalf of the bank and had asked him for one hour's time to bring a stay order from the court and the appeal was filed at his instance.'

17. True copies of the objection, copy of the application made by Sri K.N. Mathur for time and the report of the amin have been annexed to thepetition as annexures ' A ', ' B ' and ' C ' respectively. Annexure ' A ' to the writ petition purports to be an objection on behalf of the petitioners who were respondents to the appeal before Sri K.N. Mathur, Deputy Registrar. It is dated 5th August, 1966. Paragraphs 3, 4 and 5 of annexure ' A ' are as follows :

'3. That you are not at all competent and have no right, power or jurisdiction to hear the appeal or to pass any order staying the execution of the decree as you are amongst the directors of the appellant bank and being interested in the affairs of the bank.

4. That you gave in writing to the amin on behalf of the bank that one hour's time be given to bring the stay order from the court concerned as such you are deeply interested in the management of the bank at the costs of the respondents.

5. That it has come to the notice of the respondents that the present second appeal has been preferred only at your instance and assurance.'

18. The relevant portion of paragraph 7 of the counter-affidavit filed by Sri K.N. Mathur is as follows:

'The objection dated August 5, 1966, was never formally filed or presented before the deponent. A registered cover containing it appears to have been received in the office of the deponent about the 10th August, 1966, along with the usual dak. It was never actually brought to the notice of the deponent because on August 12, 1966, which was the date fixed for hearing of the appeal, the appeal was not taken up and was adjourned to August 25, 1966, on the ground that the notice of the appeal sent to the petitioners had not been served. When the appeal was taken up for hearing on August 25, 1966, Nizamuddin was present on behalf of the petitioners. The appeal was argued on merits orally on behalf of the parties and on behalf of the petitioners an application dated August 25, 1966, containing their submissions in opposition of the appeal was also filed. No reference was made either in the oral or the written submissions on 'behalf of the petitioners to the objection dated August 5, 1966, which had been received by post.'

19. It is thus admitted that the objection dated 5th August, 1966, in which it was clearly stated that Sri K.N. Mathur was disentitled to hear the appeal on account of his interest in the bank as one of its directors was received under registered cover in the office of Sri K.N. Mathur. All that is stated is that this objection was not brought to the notice of Sri K.N. Mathur on the date fixed for hearing of the appeal and that it was not subsequently pressed at the hearing of the appeal. It appears from the evidence on record that it was the practice for parties to send applications to Sri K.N. Mathur, who was acting as an appellate authority, by post. The petitioners having sent objections in writing to Sri K.N. Mathur, it is not possible to hold that they waived any objection to the jurisdiction of Sri K.N. Mathur to proceed to hear the appeal. If the objection was not brought to the notice of Sri Mathur the petitioners were not to be blamed for it. In the execution case before the learned Second Civil Judge, Kanpur, also the petitioners filed an objection dated 2nd August, 1966, in paragraph 1 where of it is alleged :

' That the Dy. Registrar is the director of the judgment-debtor and as such he has no right, power or jurisdiction to hear the appeal or to pass any order staying the execution of the decree.'

20. It is true that at the time when the appeal was heard, the petitioners did not again raise an objection to Sri K.N. Mathur proceeding to decide the appeal, but, in my opinion, this does not disentitle the petitioners to raise the plea which they are now raising. They had filed an objection in writing and could not have been expected to know that it had not been brought to the notice of Sri K.N. Mathur because of the oversight of his office. They may well have thought that if in spite of the written objection Sri Mathur was proceeding to decide the appeal he had rejected their objection. In the circumstances of the case, I am not prepared to hold that the petitioners submitted to the jurisdiction of Sri K.N. Mathur and waived their plea regarding the bias of Sri Mathur.

21. It was next contended by Sri S.C. Khare, learned counsel for the bank that there are two exceptions to the Rule of bias. It was urged that if the parties to the dispute agreed to the adjudication of their dispute by a person who is biased the doctrine of bias ceases to have any application. It was further contended that if the statute itself contemplates adjudication of a dispute by a person who is biased the doctrine of bias can have no application. Reliance was placed by the learned counsel for the bank for these propositions on a passage in Halsbury's Laws of England, vol. XI, page 67 which is as follows :

' It is an elementary principle that, (in the absence of statutory authority or consensual agreement) no man can be judge in his own cause.'

22. Learned counsel for the bank contended that assuming that the petitioners were shareholders of the respondent bank, by reason of bye-law No. 94, they must be held to have agreed to arbitration by Sri K.N. Mathur who was a ' Registrar '. Bye-law No. 94 is as follows :

' Subject to the Act and the Rules all disputes between the bank and its shareholders concerning the business of working of the bank shall be referred to the registrar for arbitration.'

23. The Co-operative Societies Act and the Rules framed thereunder do not contemplate the existence of a single registrar. It was thus not necessary under either the Act or the Rules or the bye-laws that Sri K.N. Mathur who was admittedly one of the directors of the bank should himself have decided the appeal. Any other registrar who was not one of the directors of the bank could have heard the appeal. It may further be noticed that Sri K.N. Mathur was a director of the bank not in his capacity as the registrar but as the secretary of the U. P. Industrial Co-operative Association Ltd. The bye-laws of the U. P. Industrial Co-operative Association Ltd. were placed before me and bye-law No. 25 thereof indicates that the general body of the association consists amongst others of two officers of the department of industries nominated by the Director of Industries as ex-officio members--one of whom shall be appointed as secretary by the president. It is thus clear that under this bye-law also it was not incumbent on a Registrar of Co-operative Societies to be a secretary of the Association. It is thus clear that neither the principle of necessity justified hearing of the appeal by a director of the bank nor was there any consensual agreement or statutory authority for decision of the appeal by Sri K.N. Mathur. Reliance was placed by Sri Khare on King v. Leicester Justices, [1927] 1 KB. 587 for the proposition that if the statute provides for arbitration of a dispute by a biased person a challenge to the decision on ground of bias is excluded. I have already taken the view that in the instant case the statute does not contemplate arbitration by a biased person.

24. Learned counsel for the bank, however, contended that an examination of the U. P. Co-operative Societies Act discloses that the Registrar who is the person competent to hear an appeal is intimately connected with the working of the Co-operative Societies and is thus bound to be biased and yet the Act and the Rules framed thereunder contemplate adjudication of a dispute between two contending parties by him and thus there is legislative sanction for decision of a dispute by a biased tribunal. There is, in my opinion, no substance in the contention. The Act and the Rules do not contemplate the Registrar being a part of any society which can be a party to a dispute which could be referred to arbitration. The Registrar exercises merely supervisory powers over the working of the co-operative societies and on that account alone cannot be said to have any bias in favour of any particular co-operative society. The principle relied upon thus has no application to the facts of the case.

25. Sri Khare placed reliance on Jagat Bus Service, Saharanpur v. State Transport Authority, Lucknow , A.I.R. 1952 All. 74Visakapatnam Co-operative Motor Transport Ltd. v. G. Bangaruraju, A.I.R. 1953 Mad. 709 and Sarju Prasad Singh v. South Bihar Regional Transport Authority, A.I.R. 1957 Pat. 732for the proposition that merely because the Government owns an undertaking its servants and officials are not disqualified from being appointed as members of the State or Regional Transport Authority. None of these decisions are, however, of any help to the contesting respondents.In Jagat Bus Service the question arose as to whether the Transport Commissioner and the Deputy Inspector-General of Police serving under the State were disentitled to be members of State Transport Authority in view of Section 44(2) of the Motor Vehicles Act. Section 44(2) of the Motor Vehicles Act runs as follows :

' 44. (2) A State Transport Authority or a Regional Transport Authority shall consist of such number of officials and non-officials as the Provincial Government may think fit to appoint; but no person who has any financial interest whether as proprietor, employee or otherwise in any transport undertaking shall be appointed as or continue as a member of a Provincial or Regional Transport Authority, and if any person being a member of any such Authority acquires a financial interest in any transport undertaking, he shall, within four weeks of so doing, give notice in writing to the Provincial Government of the acquisition of such interest and shall vacate office.'

26. It was held that neither of the two officers were employees of the roadways undertaking. It was further held that being Government servants they may be said to possess a bias in favour of the Government, but not a financial interest which is what Section 44(2) requires. The only question arising for consideration before the Bench was as to whether on the express language of Section 44(2) of the Motor Vehicles Act the two officers were disentitled to be members of the State or Regional Transport Authority and it was held by Agarwala J. that an objection to the constitution of that authority must be decided on the language of Section 44, Sub-section (2). The narrow question thus arising for consideration before the Bench was as to whether on the language of Section 44(2) of the Motor Vehicles Act the District Inspector-General of Police and the Transport Commissioner had any financial interest whether as proprietors, employees or otherwise in any transport undertaking and it was held that merely because they were servants of the State they could not be said to have any financial interest in Roadways undertaking.

27. The decision of the Madras High Court in Visakapatnam Co-operative Motor Transport Ltd. instead of being of any assistance to the respondent bank, in my view is an authority that supports the petitioners. The facts of the case were that applications for issue of bus permits were made to the concerned Regional Transport Authority. One of the applicants was the District Co-operative Society for Ex-servicemen. It was common ground that the Collector of the concerned district was the president of the respective Co-operative Societies. It was also common ground that the Collector of the district was a member of the Regional Transport Authority which was to adjudicate on the comparative claims of the applicants and which was undera duty to decide as to who should be granted the permit. Permits were granted by the Regional Transport Authority to the Co-operative Societies of which the Collector happened to be the president who was also a member of the Regional Transport Authority. Objections, inter alia, were taken by and on behalf of the other applicants to the effect that (1) the District Collector was disqualified from being appointed as a member of the Regional Transport Authority, because he had a financial interest in a transport undertaking, and (2) the order of the Regional Transport Authority was contrary to the principles of natural justice because the Collector who was a member of the Regional Transport Authority was also the president of the Co-operative Society which was one of the applicants. Subba Rao J., as he then was, overruled the first objection which was based on Section 44(2) of the Motor Vehicles Act. He held that the Collector of the district did not have any financial interest in the Co-operative Societies of which he was the ex-officio president and therefore, he was not disqualified under that provision. The learned judge, however, upheld the second objection. He held that the order of the Regional Transport Authority issuing a permit to the Co-operative Societies, in the cases was not valid because the president of the Society namely the Collector took part in the proceedings of the Regional Transport Authority as one of its members. He took the view that members of the Regional Transport Authority performed a judicial or quasi-judicial function in deciding on the applications made to the Authority for the grant of a permit and the member of such a body should not have a bias which was likely to affect his impartiality. The presence of a member having a bias vitiated ab intio the constitution of the body itself. On this ground the learned judge quashed the orders of the Regional Transport Authority granting permits to the respective Co-operative Societies. The decision of Subba Rao J. was challenged by way of an appeal which was decided by Rajamannar C.J. and Venkatarama Aiyar J. They upheld the view taken by Subba Rao J. They held that:

' We are also in agreement with the learned judge on the second point. It is not necessary to discuss at length the legal principles which have been well established in dealing with the proceedings of inferior tribunals entrusted with judicial and quasi-judicial functions. One of the great principles of civilised jurisprudence which is a part of the law in Britain and which has been adopted in this country is that no man shall be a judge in his own cause.

Closely allied to this principle is the other salutary principle that it is of fundmental importance that justice should not only be done but manifestly and undoubtedly seem to be done. The combined result of these two well established principles is that irrespective of the possibility or otherwise of actual partiality being proved, the constitution of a tribunal entrusted with judicial or quasi-judicial functions is deemed to be bad if and when it deals with any case in which it can be said that one of the members of that body is among the suitors or litigants before the body.'

28. The case of Sarju Prasad Singh is also of no assistance to the respondent bank. This decision again was based on the express language of Section 44(2) of the Motor Vehicles Act.

29. It was further contended by the learned counsel for the respondent bank that Sri K.N. Mathur had admittedly no financial interest in the bank and was merely an ex-officio director of the bank as the secretary of the U. P. Industrial Co-operative Association Ltd. in order to watch the interest of the Association which had invested funds in the bank. He was thus no more than a trustee for the Association. It was urged that in the circumstances such as these, Sri Mathur cannot be held to have a bias in favour of the bank. Reliance was placed by the learned counsel on Queen v. Rand, (1866) L.R. 1 Q.B. 230. The relevant facts of the case were that by the Bradford Waterworks Act, 1854, the waterworks company were empowered to take the water of certain streams, but it was enacted that they should not take water from streams flowing into the Harden Beck without the assent of the millowners on that beck, until it had been certified by justices that a reservoir, called Doe Park Reservoir had been completed and filled with water, and of a given capacity; the company being required to give ten days' notice to the millowners before applying for the certificate, to the intent that they might oppose the granting of it. By an act of the same session, the municipal corporation of Bradford were empowered to purchase the Bradford waterworks for the benefit of the borough, and they did so. Afterwards, the municipal corporation duly gave notice of their intention to apply for the certificate of justices; it was opposed, but the justices, after hearing evidence and making an elaborate enquiry, decided in favour of the corporation, and granted their certificate. A Rule was obtained for a certiorari to bring up this certificate to be quashed, on the ground that the justices who granted it were interested. It was found that a hospital and a friendly society had invested part of their funds in bonds of the Bradford corporation, charging the borough fund and those bonds were taken in the names of trustees and two of the justices in question were one of them amongst the trustees of the society, and the other amongst the trustees of the hospital. The learned judges dismissed the petition and discharged the rule. It was held that neither of the justices had, nor by any possibility, could have, any pecuniary beneficial interest in these bonds, though no doubt the security of their cestui qui trusts would be improved by anything improving the borough fund, and anything improving the waterworks, after they became the property of the corporation, would produce that effect. It was held that:

' There is no doubt that any direct pecuniary interest, however small, in the subject of inquiry, does disqualify a person from acting as a judge in the matter ; and if by any possibility these gentlemen, though mere trustees, could have been liable to costs, or to other pecuniary loss or gain, in consequence of their being so, we should think the question different from what it is : for that might be held an interest. But the only way in which the facts could affect their impartiality, would be that they might have a tendency to favour those for whom they were trustees ; and that is an objection not in the nature of interest, but of a challenge to the favour. Wherever there is a real likelihood that the judge would, from kindred or any other cause, have a bias in favour of one of the parties, it would be very wrong in him to act; and we are not to be understood to say, that where there is a real bias of this sort this court would not interfere ; but in the present case there is no ground for doubting that the justices acted perfectly bona fide ; and the only question is, whether in strict law, under such circumstances, the certificates of such justices is void, as it would be if they had a pecuniary interest; and we think that Reg. v. Dean of Rochester, (17 Q.B.1) is an authority, that circumstances, from which a suspicion of favour may arise, do not produce the same effect as a pecuniary interest.'

30. This case was decided on its own facts and the view seems to have been taken that the connection of the justices with the parties was too remote to give rise to any real likelihood of bias. The question as to whether there is a real likelihood of bias or not in a particular case is a question of fact depending on the circumstances of a given case and, in my opinion, Sri Mathur's duties as a director and as a member of the general body of the bank made him more or less a part of the bank and he was too intimately identified with it so as to be disentitled to decide the appeal to which the bank was a party. In any view of the matter, his conduct during the appeal clearly indicates a lack of impartiality such as is expected of a Tribunal charged with the duty of acting judicially or quasi-judicially. The decision of Sri K.N. Mathur thus cannot be allowed to stand.

31. Since arguments have been addressed at length with regard to the merits of the decision by Sri Mathur and the Assistant Registrar, I consider it necessary to deal with some of them. Learned counsel for the respondent bank strenuously urged that the decision by the Assistant Registrar which purported to be based on a compromise was clearly unsustainable because he had no power to decide the appeal before him on the basis of a compromise and the decision by the Deputy Registrar setting aside that order was perfectly legal. It was contended that there was in the Co-operative Societies Act or the Rules framed thereunder no provision analogous to Order XXIII of the Code of Civil Procedure empowering the Assistant Registrarto decide the dispute on the basis of a compromise. Under the Rules he was bound to decide only on the basis of evidence produced by the parties. In my opinion, there is no force in this contention. No principle of law compels me to take the view that merely because there is no specific provision permitting the disposal of an appeal or a dispute on the basis of a compromise arrived at between the parties the arbitrator or the appellate authority is powerless to give a decision on the basis of a settlement arrived at between the disputants. If the parties to the dispute themselves desired that their dispute be decided in accordance with an agreement arrived at between them, I find it difficult to hold that the adjudicating authority must nonetheless ignore it. In State of Bihar v. D.N. Ganguly, (1958) 15 F.J.R. 118; A.I.R. 1958 S.C. 1018 a similar argument was repelled. In that case it was urged that if a dispute referred to an industrial tribunal under Section 10(1) of the Industrial Disputes Act is settled between the parties the only remedy for giving effect to such a compromise would be to cancel the reference and to take the proceedings out of the jurisdiction of the industrial tribunal. P.B. Gajendragadkar J., as he then was, speaking for the court, held as follows:

'This argument is based on the assumption that the industrial tribunal would have to ignore the settlement by the parties of their dispute pending before it and would have to make an award on the merits in spite of the said settlement. We are not satisfied that this argument is well-founded. It is true that the Act does not contain any provision specifically authorising the industrial tribunal to record a compromise and pass an award in its terms corresponding to the provisions of Order XXIII, Rule 3 of the Code of Civil Procedure. But it would be very unreasonable to assume that the industrial tribunal would insist upon dealing with the dispute on the merits even after it is informed that the dispute has been amicably settled between the parties. '

32. A similar view was expressed in Sirsilk Ltd. v. Government of Andhra Pradesh, (1964) 24 F.J.R. 478; A.I.R. 1964 S.C. 160 .

33. Thus if there was a valid compromise there would have been no difficulty in holding that Sri K.N. Mathur would have acted beyond the scope of his powers in setting aside the order of the Assistant Registrar passed on the basis of such a compromise, I am, however, of the opinion that there-was in fact no compromise between the parties settling the dispute between themselves. A compromise postulates an agreement bringing about a settlement of a dispute. The term of the alleged compromise relied upon by the petitioners are set out in the communication of the general manager of the bank to the Assistant Registrar dated 27th June, 1966, which is appended to the petition as annexure 'II'. The relevant portion of this communication is as follows:

'......On receipt of the above letter from Shri Gahlot, I also contactedand discussed with Shri Nizamuddin, nominee of Shri Ikramuddin, and Mohd. Yameen the question of payment of damages in the hope that it may be just possible to reach an agreement. Now through this letter, we have to apprise you of our mutual understandings that the bank apart from the release of the goods kept under 'supurdgi' as per orders of the court, shall pay to the party damages due to loss in business at the rate of Rs. 40 per day w.e.f. 17th August, 1963, as per legal advice tendered by our legal advisor and that the party shall pay to the bank the amount advanced to them against pledged goods, plus interest thereof as it stood in our account books on 17th August, 1963, before the goods are released.

The party is still insisting that they have not been paid for the goods which have been damaged while under 'supurdgi', this issue has to be examined by you.'

34. An examination of the alleged compromise discloses that the bank was willing to pay damages at the rate of Rs. 40 per day with effect from 17th August, 1963. The petitioners were to pay to the bank the amount advanced to them by the bank plus interest thereon as it stood in the account books of the bank on the 17th August, 1963, before the goods were to be released to them. No date was fixed for the payment by the petitioners to the bank of the amount advanced to them plus tbe interest. The goods were to be released only after the amount was paid by the petitioners and till such time as the goods were not released the bank was liable for payment of damages at the rate of Rs. 40 per day. The petitioners were thus left free to decide as to when, if at all, they would make the payment to the bank entitling them to the release of the goods. They could postpone payment to the bank indefinitely and thus at their own option continue to increase the damages payable to them by the bank. This alleged compromise was thus clearly indefinite and uncertain. A compromise decree or order is nothing more but an agreement between the parties with the approval of the court appended thereto. Like any other agreement or contract, it can, in my opinion, be inoperative and illegal on account of uncertainty and indefiniteness. There was thus, in my opinion, no compromise in the eye of law and the alleged compromise can at best be treated as a tentative proposal, the details of which had yet to be worked out. One of the issues of the dispute regarding damages claimed by the petitioners on account of deterioration in the goods while under the supurdgi was left open to be decided during the appeal itself. There was thus, in my view, no binding compromise which was capable of being enforced. In the circumstances of the case, I am of the opinion that the statement contained in the counter-affidavit of Sri A.K. Srivastava that in fact there was no compromise, must be accepted. The order of the Assistant Registrar is also, in my opinion, meaningless. He ordered that the bank shall release the goods in favour of the petitioners after receipt of the amount payable by the petitioners. It was left open to the petitioners to determine the date on which they were to make the payment, if at all. On the other hand, the respondent bank was made liable for payment of compensation at the rate of Rs. 40 per day till the date of the release of the gooods, the date of release being dependent on the sweet will of the petitioners. The view taken by the Deputy Registrar that there was in fact no compromise which could be made the basis of an order was in my judgment correct. In the view I have taken with regard to the alleged compromise it is unnecessary for me to decide the question as to whether the general manager was competent or not to enter into a compromise while the appeal was pending before the Assistant Registrar.

35. In the result, this petition is allowed. The order of the Deputy Registrar dated 12th August, 1966, is quashed. Respondent No. 2 is directed to decide the appeal either himself or to have it decided by some other authority competent to decide it in accordance with law and observations contained in this judgment. Parties shall bear their own costs.


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