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Sri Ram Autar Agarwal Vs. District Co-operative Sugarcane Supply Society Ltd., Bareilly - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 131 of 1959
Judge
Reported inAIR1960All500
ActsArbitration Act, 1940 - Sections 30 and 33; Co-operative Societies Act, 1912 - Sections 2; Uttar Pradesh Co-operative Societies Rules, 1936 - Rules 14, 115 and 134
AppellantSri Ram Autar Agarwal
RespondentDistrict Co-operative Sugarcane Supply Society Ltd., Bareilly
Appellant AdvocateN.P. Asthana, Adv.
Respondent AdvocateJagdish Mohan Pant and ;S.C. Khare, Advs.
DispositionAppeal allowed
Excerpt:
.....under a mistaken belief - application to set aside arbitration award under the co-operative society's rule is maintainable. - - but we would like to refer to the affidavit of sri b. thereafter the affidavit recites that security was provided by the applicant and that there was failure to carry out the contract according to its terms. then in paragraph 11 of the said affidavit it is stated that at the end of january and beginning of february 1951 it was found that the applicant had not employed a good staff and had not made sufficient arrangement for the distri-bution of the price of cane at the factory gate with the result that there was great clamour and dissatisfaction among the cane growers, which caused great worry to the society. ' it cannot be clearly said that, by the..........matter to arbitration and the applicant who was neither a member nor an officer of the opposite party society was not bound by the rules under which the reference purports to have been made. no such agreement for reference to the arbitration could be entered into with the applicant, as he worked only as an independent contractor.5. by paragraph 6 the applicant said that no consent of the applicant was taken before referring the matter to arbitration; neither there was any valid agreement in writing on the part of the applicant to refer the matter to arbitration as required by the arbitration act, and that, in any case, the reference being ab initio invalid and without any authority, the further proceedings before the arbitrator were also vitiated and being without jurisdiction were.....
Judgment:

Gurtu, J.

1. On the 22nd October 1952 the appellant, Ram Autar Agarwala, filed case No. 44 of 1952 in the court of Civil Judge, Bareilly, against the District Co-operative Sugar Cane Supply Society Ltd., opposite party. The case was initiated by means of an application under Sections 30 and 33 of the Arbitration Act. The applicant alleged that he was the payment contractor for gate of H. R. Sugar Factory, Bareilly, and was appointed by the opposite party as a contractor for the year 1950-51. The terms of the contract are summarised in the application as follows :

'(a) That the applicant would get commission from the opposite party at Rs. 225/- per lakh maunds on the total weight of 11 1/2 lakh maunds of sugar cane bonded at gate with the aforesaid factory.

(b) That the applicant would also get from the opposite party by way of compensation at Rs. 100/-per thousand of the realisation of loans due to the Society from the cane growers.

(c) That the applicant was to deposit a cash security of Rs. 2000/- over and above the security of the property to the extent of Rs. 20,000/-. The opposite party was to pay interest at Rs. 9/- per annum to the applicant on the above security amount.

(d) That the opposite party was liable to pay all cash for the payment to the growers at the gate of the H. R. Sugar Factory. In case it is paid elsewhere the applicant would get all expenses incurred in taking the same to the factory gate.

(e) That the applicant was to make payments to the growers of cane on production by them of two purchis, one red and the other black. These purchis were to be issued to the growers by the aforesaid factory and the applicant was to retain red purchis with him in proof of the payment made by him. The black purchis were to be returned to the growers.'

2. The original contract, which has been summarised as aforesaid, is on the file of the case.

3. The applicant then alleges in his application that he worked as a payment contractor on behalf of the opposite party from the 6th December 1950 up to the 21st March 1951, and that during the aforesaid period a total amount of Rs. 7667/8/- became due to the applicant. The application then gives a detail of the amount due. The applicant then alleges that at the end of the season the applicant demanded the amount due to him from the opposite party, but its officers who had obtained large amounts from the applicant on the pretext of making payment to the growers but had misappropriated the same instead of making payment to the growers, with a view to forestall the applicant by way of peshbandi, put up entirely a false claim against him.

4. It appears that there was a reference to arbitration in regard to the dispute, as we shall show later, but the applicant's case was that there was no valid legal reference to arbitration and the so called award was not binding and enforceable. By paragraph 5 of the application the applicant alleged that there was absolutely no agreement with the applicant to refer any matter to arbitration and the applicant who was neither a member nor an officer of the opposite party society was not bound by the rules under which the reference purports to have been made. No such agreement for reference to the arbitration could be entered into with the applicant, as he worked only as an independent contractor.

5. By paragraph 6 the applicant said that no consent of the applicant was taken before referring the matter to arbitration; neither there was any valid agreement in writing on the part of the applicant to refer the matter to arbitration as required by the Arbitration Act, and that, in any case, the reference being ab initio invalid and without any authority, the further proceedings before the arbitrator were also vitiated and being without jurisdiction were altogether illegal and void.

6. Then by paragraph 8 the applicant sets out the various grounds on which he stressed that the award was invalid. By paragraph 11 the applicant alleged that the opposite party was trying to realise the amount of the so-called award from the applicant through the Collector, Bareilly, as arrears of revenue under the Co-operative Society Rules, although the said Act and rules made thereunder I;ad no application to the applicant. The applicant, therefore, prayed that the so-called agreement for reference and the award dated 21st July 1952 be declared to be void and set aside and the applicant may be allowed costs of the proceedings.

7. Objections were filed against this application and it was contended by the opposite party that the applicant had no right to maintain the application and that the application was barred by Rule 134 of the U. P. Co-operative Societies Rules and that the court had no jurisdiction to entertain the proceedings. On these pleadings two issues were considered to be material and were framed as follows :

'(1) Whether the applicant has a right to file this application?

(2) Whether the proceedings are barred by Rule 134, U. P. Co-operative Societies Rules and this court has no jurisdiction ?'

8. The court below, after referring to Sections 30 and 33 of the Arbitration Act over-ruled the contention of the opposite party that the application did not lie and held that the application, as framed, could not be thrown out on the ground that the applicant's remedy lay by way of a regular suit for declaration. It is agreed before us now that the applicant's remedy if at all lay by way of an application under the Arbitration Act as held by the court below. The court below held that the applicant was subject to the provisions of Rule 115 of the U. P. Co-operative Societies Rules and so the dispute had to go to arbitration.

It held that, inasmuch as the applicant was an officer within the meaning of that term, as given in the Co-operative Societies Act, (Act No. 2 of 1912), and in Rule 115 of the Co-operative Societies Rules, 1936 framed thereunder, Section 43 of the said Act applied to the applicant. The court below has also pointed out that the applicant himself by Ms application dated 17th October 1951 had referred the dispute to the arbitration of Sri Chandan Singh Cane Development Officer and has referred to the affidavit, paper No. 225D, in this connection. The court below then held that the present proceedings were barred because of Rule 134 of the Co-operative Societies Rules.

9. We will refer to these rules a little later again.

10. An examination of the affidavit of Sri Chandan Singh shows that the applicant did by an application dated 17th October 1951, addressed to him, refer to him for arbitration his entire dispute with the opposite party in respect of the accounts of 50-51 season, and that a copy of the aforesaid reference was sent by the applicant to the opposite party also, which was called upon to file its defence. According to the affidavit of Sri Chandan Singh, the opposite party filed its defence and also refer-red its own claim to him for decision on the basis of accounts, which claim was brought to the notice of the applicant and proceedings were carried on with the consent of the parties as one for rendition and settlement of accounts by both the parties.

Then the affidavit sets out the course of proceedings and finally states that at the time of giving the award on 21st July 1952 he directed that a copy of the award be sent to the applicant and the opposite party, the District Co-operative Sugar Cane Supply Society Ltd. Despite an appeal from the award under Rule 135 of the Arbitration Rules to the Cane Commissioner, the applicant has filed the application ouf of which this first appeal from order arises under Sections 30 and 33 of the Arbitration Act.

11. The basis of the applicant's contention that the entire arbitration proceedings were void rests upon the interpretation whieh the applicant wanted the court below to give to the term 'officer' as defined by Section 2(d) of the Co-operative Societies Act, 1912. The definition of that term as given in the said Act is as follows :

'2 (d) -- 'officer' includes a chairman, secretary, treasurer, member of committee, or other person empowered under the rules or the bye-laws to give directions in regard to the business of the society.'

12. The contention which was advanced with reference to this definition in the court below and which has been repeated before us is that the applicant was not an officer within the meaning of the definition of that word as given above. If the applicant was not an officer, according to the definition of the Act, then there would be no statutory liability that the dispute between the applicant and the opposite party be submitted to statutory arbitration. Rule 115 of the Co-operative Societies Rules runs as follows :

'115. Any dispute touching the business of a registered society (i) between members or past members of a society or persons claiming through a member or past member, (ii) or between a member or a past member or persons so claiming and the society or its committee or any officer of the society, (iii) between the society or its committee and any officer of the society, and (iv) between two or more registered societies, shall be decided either by the Registrar or by arbitration and shall for that purpose be referred in writing to the Registrar.

Explanation 1 -- A dispute shall include claims for amounts due when a demand for payment is made and is either refused or not complied with whether such claims are admitted or not by the opposite party.

Explanation 2 -- An officer shall include a person appointed for the supervision of the society.

Explanation 3 -- The business of a society includes all matters relating to the objects of the society mentioned in the bye-laws as also those relating to the election of office-bearers of a society.'

13. It will be evident that the statutory liability only arises if the applicant is an officer as defined by the Act or as indicated by Explanation 2 of Rule 115. We may note at this stage that a contention was raised by Dr. Asthana before us that Explanation 2 went beyond the scope of the definition of an 'officer' as given in Section 2(d) of the said Act and Explanation 2 which figures in Rule 115 of the Co-operative Societies Rules, 1936, was ultra vires the Act. It is not necessary for purposes of this case to decide this contention. We will assume for purposes of this case that Explanation 2 of Rule 115 is intra vires.

14. Once Rule 115 of the said Rules is attracted, then by Rule 134 of the said Rules, it is enacted,

'134. A decision of an arbitrator or arbitratorsunder these rules if not appealed against within thesaid period and an order of the Registrar shall, as between the parties to the dispute, not be liable tobe called in question in any civil or revenue courtand shall in all respects be final and conclusive.'

15. Rule 135 of the said Rules provides foran appeal from the decision of an arbitrator under Rule 134 to the Registrar, Co-operative Societies, whois the Cane Commissioner. Subject to the orderspassed under Rule 135, by virtue of Rule 134, the decision of the arbitrator cannot be called in questionm any civil or revenue court and is final in allrespects and conclusive. It is for this reason thatthe court below upon its interpretation of the term'officer' and upon its finding that the applicantwas an officer within the meaning of the Act and the Rules, held that the application was barred byR, 134 of the Co-operative Societies Rules. If ithad not been so held, then obviously an applicationwould be competent under Sees. 30 and 33 of theArbitration Act, and this is not disputed beforeus.

16. Now we must in this case decide as to whether the applicant is an officer within the meaning of the Act and the Rule. Before we consider the language of the statutory provisions, we think that it is necessary to get the facts cleared in regard to the position occupied by the applicant vis-a-vis the opposite party. We have already set out the terms of the agreement between the parties in regard to the employment of the applicant as payment contractor. But we would like to refer to the affidavit of Sri B. P. Parashari sworn on the 29th November 1954, paper No. 220B, in regard to how the applicant came to be appointed as payment contractor, because that will show his exact relationship with the opposite party.

It appears that the Board of the Society calledfor tenders from the public, on the conditions notified in the rules which were exhibited on the noticeboard of the Society for information, of personsdesirous of being appointed as payment contractors.It appears that one Ranvir Singh put in a tender for out centre subject to the conditions laid downin the rules for payment of the price of cane. This tender of Sri Ranvir Singh was accepted. Thereafter Ranvir Singh and the applicant Ram Avatarput in an application mentioning that they bothwere partners and they be allowed to work jointlyand their request was accepted by the officers ofthe opposite party, and in this way the applicantbecame joint with Ranvir Singh in the contract forout centre.

So far as the gate of H. R. Sugar Factory Rareilly was concerned, the tender of one Bishambhar Nath was accepted, but he did not join his duty and the applicant applied on the 4th December 1950 for appointment in his place on the same terms and conditions. Thereafter the affidavit recites that security was provided by the applicant and that there was failure to carry out the contract according to its terms. Then in paragraph 11 of the said affidavit it is stated that at the end of January and beginning of February 1951 it was found that the applicant had not employed a good staff and had not made sufficient arrangement for the distri-bution of the price of cane at the factory gate with the result that there was great clamour and dissatisfaction among the cane growers, which caused great worry to the Society.

The Society in consequence agreed to lend the services of its subordinates to the applicant in order to expedite the disbursement of the cane price. The Society accordingly asked the applicant to get a sum of Rs. 5,000/- to distribute amongst the cane growers with the assistance of the seasonal clerks of the Society under his direct supervision and control.

17. The question is whether having regard to the terms of the agreement, which we have set out, and the manner of appointment o the applicant as a contractor and the way in which he was to work, and having regard to the directions to which the applicant had to conform (Ex. 17), the position of the applicant was not that of an independent contractor rather than that of a servant of the opposite party. We are of the view that the position more approximates to that of an independent contractor, because it is evident that the applicant was employing his own men and this having proved unsatisfactory he was loaned the services of certain employees of the Society. The affidavit used the word 'lend'. If the applicant had not occupied a status as an independent contractor, he Would not have been appointing his own assistants and there would be no question of loaning of subordinates belonging to the opposite party to him to assist him to carry out his work.

18. Moreover we think that it is not the normal way of employing a servant by inviting tenders. Further we note that according to the affidavit to which we have referred, the applicant was treated as a partner with one Ranvir Singh. No doubt, he was required to pay, according to the rules framed by the Society, out of the funds given by the Society, but these were rather in the nature of advances made than in the nature of money entrusted to a servant of the Society. It is true that it does not appear that any interest was paid by the applicant on advances, but we do not think that that would alter the situation. It would also appear that there is at least no clear obligation on the applicant to work personally, because the affidavit seems to suggest that when things were going wrong, a request was made to him to personally supervise the work,

19. This being the position, we feel we must keep in mind the broad distinction between a 'servant' and an 'independent contractor'. The distinction, as has been pointed out by their Lordships of the Supreme Court in the case of Dharangadhara Chemical Works Ltd. v. State of Saurashtra,1957 SCR 152 at p. 165 : ((S) AIR 1957 SC 264at p. 270), is that while the former agrees himself,to work, the latter agrees to get other ipersons towork. It was pointed out :

'What determines whether a person is aworkman or an independent. contractor is whetherhe has agreed to work personally or not. If he has, then he is a workman and the fact that he takes assistance from other persons would not affect his status.'

It cannot be clearly said that, by the facts brought out in this case, the applicant was a servant who had agreed to work personally.

20. We will now consider the language of Section 2(d) of the Co-operative Societies Act, which we have already quoted. Although the definition of the word 'officer' is an inclusive definition and the class of people specially mentioned would not exhaust the list of persons who could be considered as 'officers'; nonetheless we must have regard to the clear indication in that definition that an officer must be one who is in a position to give direction with regard to the business of the Society.

Even if we have regard to Explanation 2 of Rule 115 of the Co-operative Societies Rules, an officer has to be a person who is appointed for the supervision of the Society. Supervision, having regard to the intention expressed in Section 2(d) of the Act, must mean .supervision of a directory character. We reject the contention that the word 'officer' is synonymous with the word 'employee' or that all employees are officers within the meaning of the definition of that word. We cannot say that the applicant having regard to the terms of his agreement and the manner in which the duties of a contractor were to be performed, was a person who could be said to have been appointed for the supervision of the Society or for purposes of giving directions in regard to its business.

In these circumstances, the applicant cannot be held to be an 'officer' within the meaning of the term as given in the Act or in the Rules framed thereunder. At best he might have been an employee but he certainly was not an officer, and we think his position more clearly approximates to that of an independent contractor. All employees moreover do not necessarily become 'officers'.

21. Now that being the position, the applicant was not liable to have his dispute, touching the business of the Society decided by statutory arbitration under Rule 115. Hence the applicant can say that, even though he went to arbitration under a mistaken belief that he was an officer, the arbitration proceedings did not bind him at all, because he was not in law an officer, as defined by tile Act and was not subject to compulsory statutory arbitration. In that view the entire proceedings, in so far as they purport to be proceedings under the said Act and the Rules, are without effect and would not bind the applicant.

22. But that does .not finally dispose of the matter, because independently of the statutory arbitration clause, it would be open to this independent contractor or servant, i.e. the applicant to enter into an agreement that the dispute between him and the opposite party would go to arbitration. When we look into the rules, Ex. A10. which are the rules which the contractor has accepted as a part of his contract, we find that Rule 14 provides as follows :

'14. The payment contractor will be employee of the society for the purpose of Co-operative Act and Rules and be bound to the arbitration of Cane Development Officer in his capacity as Registrar Co-operative Society in case of any dispute arising in respect of the conduct of business or arising during the course of business or in the course of employment between the payment contractor and the society or any member or customer of society.'

23. Therefore the question that would arise would be whether this arbitration can be upheld because of the existence of Rule 14, and whether the arbitration award, given by the person indicated in Rule 14, would not bind the applicant subject to his rights under the Arbitration Act. In such a case It will obviously not be a statutory arbitration and so the provisions of the Co-operative Societies Act end the rules shutting out an approach to the civil court under the Arbitration Act would not apply, nor would any decision given on an appeal, which was purported to have been made under the provisions of the Act, be binding or conclusive.

24. The result of the discussion hereinbefore is that this appeal is allowed and the judgment of the learned Civil Judge of Bareilly, dated the 24th April 1956, is set aside and the case is sent back to the learned Civil Judge for determining the effect of Rule 14 and for examining whether the reference and award can be upheld on the basis of parties' agreement and or under the provisions of Rule 14 of the rules 'for making cane price payment ol growers by Payment Contractors Cane Purchasing Out-Centres or Gate etc., on behalf of Cane Society' -- Ex. A10 -- and the provisions of the Arbitration Act.

We have already held that if the arbitration is to^be treated as one under Rule 14 (Ex. A10), or otherwise by agreement between the parties it will not be a statutory arbitration and will not be subject to the limitations of the Co-operative Societies Act and rules framed thereunder and the Arbitration Act will, therefore, fully apply, and all the pleas under the Arbitration Act will be open. We may add that it may be necessary to permit the parties to amend or add to their pleadings, provided such amendments or additions are not contrary to law and to the provisions of Arbitration Act. That will be for the court below to decide.

25. Costs will abide the result.


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