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The Sugauli Sugar Works (Private) Ltd. Vs. the Asstt. Registrar, Co-operative Societies - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtSupreme Court of India
Decided On
Reported inAIR1962SC1367; 1962(0)BLJR687; [1962(5)FLR31]; [1962]Supp3SCR804
ActsConstitution of India - Articles 226 and 227; Indian Companies Act; Bihar and Orissa Co-operative Societies Act, 1935 - Sections 48; Government of India Act - Sections 3 and 80-A; The Co-operative Societies Act, 1912 - Sections 5, 7, 15, 16, 17 and 18
AppellantThe Sugauli Sugar Works (Private) Ltd.
RespondentThe Asstt. Registrar, Co-operative Societies
Cases ReferredUnion of India v. Registrar
the case questioned whether a registrar had a jurisdiction to entertain the claim made by the registered society against a non-member under section 48(1) of the bihar and orissa co-operative societies act, 1935 - the appellant company registered under the indian companies act, was found to manufacture sugar in bihar - the union of co-operative societies, who was a second respondent, made a reference under section 48 of the act, against the appellant claiming the sum of rs. 1,20,809/- as commission and interest for supplying the sugarcane - in lieu to this, the first respondent had registered the reference and issued a notice to the appellant - it was adjudged that the registrar had no jurisdiction in regard to the said matter - it was further stated that as the petition of the appellant..........if any disputetouching the business of a registered society.... arises - (a) amongst members, pastmembers, persons claiming through members, past members or deceased members,and sureties of members, past members or deceased members whether such suretiesare members or non-members; or (b) between a member, pastmember, persons claiming through a member, past member or deceased member orsureties of members, past members or deceased members, whether such suretiesare members or non-members, and the society, its managing committee or anyofficer, agent or servant of the society; or (c)..............................................................(d)..............................................................(e) between a financing bankauthorised under the provisions of sub-section (1) of.....

Sinha, C.J.

1. This appeal, by special leave, is directed against the order of aDivision Bench of the Patna High Court, dated October 30, 1961, dismissing inlimine the appellant's petition dated October 24, 1961, under Arts. 226 and 227of the Constitution, being Miscellaneous Judicial Case No. 954 of 1961, for awrit of Prohibition directing the first respondent not to proceed with theAward Case No. 101 of 1961, and a writ of Certiorari for quashing the order ofthe said respondent, dated September 29, 1961. The appellant is a privatelimited company, incorporated under the Indian Companies Act, with itsregistered office at Calcutta. It carries on the business of manufacturingsugar in its factory at Sugauli in the district of Champaran, in Bihar. Thefirst respondent is the Assistant Registrar, Co-operative Societies, MotihariCircle, Motihari, in the State of Bihar; the second respondent is the Union ofCo-operative Societies, and is registered under the Bihar and OrissaCo-operative Societies Act (B. & O. Act VI of 1935) (to be referred tohereinafter as the Act); the third respondent is the State of Bihar.

2. On August 14, 1961, respondent No. 2 made a reference under s. 48 of theAct, against the appellant, claiming the sum of Rs. 1,20,809/- odd, ascommission and interest for supply of sugarcane during the crushing season1959-60. The said reference was registered by the first respondent as AwardCase No. 101 of 1961, on August 17, 1961. Notice of the said reference wasissued to the appellant. On September 26, 1961, the appellant took apreliminary objection to the jurisdiction of the first respondent to entertainthe reference and to adjudicate upon it, and prayed that the reference berejected. The first respondent, following a decision of the Patna High Court,reported in Union of India v. Registrar, Co-operative Societies, Patna I.L.R. (1961) Pat 7, overruled the appellant's preliminary objection by hisorder dated September 29, 1961. Against that order, the appellant moved itsapplication aforesaid before the High Court of Patna. The High Court, followingits previous decision aforesaid summarily dismissed the application. Theappellant moved this Court and obtained special leave to appeal from the orderof the High Court, dismissing his application. This Court granted the specialleave on December 4, 1961. The appellant moved this Court for stay, which wasfinally heard on January 11, 1962, and the Court directed that the appeal beheard peremptorily on February 15, this year. That is how the matter comesbefore us for hearing of the main appeal.

3. The only question for determination in this appeal is whether under theprovisions of the Act, the first respondent had jurisdiction to hear anddetermine the dispute referred to him at the instance of the second respondent.The answer to the question raised in this appeal must depend upon theinterpretation of the provisions of the Act.

4. Before examining the provisions of the Act, as it stands at present, itis necessary to set out the legislative history of the law on the subject. Whenthe co-operative movement was set up in the beginning of this century, the lawgoverning co-operative societies was enacted as The Co-operative Societies Act(II of 1912), by the Indian Legislature. That Central Act continued in force inBihar and Orissa until it was repealed by the Bihar and Orissa LegislativeCouncil by the Bihar & Orissa Co-operative Societies Act (B. & O. ActVI of 1935), after obtaining the previous sanction of the Governor-General,under sub-s. 3 of s. 80-A of the Government of India Act. The Act of 1935 wasenacted with a view to consolidate and amend the law relating to co-operativesocieties in the Province of Bihar and Orissa, as it then was. As it displacedthe Co-operative Societies Act of 1912, so far as the Province of Bihar andOrissa was concerned, s. 5 enacted that all references to the Co-operativeSocieties Act, 1912, occurring in any enactment made by any authority inBritish India, and for the time being in force in the Province, shall beconstrued as reference to the new Act. under s. 7, a society, which has as itsobject the promotion of the common interests of its members in accordance withco-operative principles, or a society established with the object offacilitating the operation of such a society, may be registered under the Act.On such registration, the Society becomes a body corporate with perpetualsuccession and a common seal, and with power to acquire and hold property, toenter into contracts, to institute and defend suits, etc. Under s. 15, aregistered society shall receive deposits and loans from members andnon-members only to such extent and under such conditions as may be prescribed.Under s. 16, ordinarily a registered society shall not make a loan to anyperson other than a member, except with the general or special sanction of theRegistrar, and subject to such restrictions as he may impose. Section 17further provides for such prohibitions and restrictions, in respect of thetransactions of a registered society with persons other than members, as theProvincial Government may by rules prescribe. Section 48 makes it obligatorythat any dispute touching the business of a registered society, among members,past members, persons claiming through members, past members, persons claimingthrough members, past members or deceased members, whether such sureties aremembers, or non-members, or between them and the registered society, shall bereferred to the Registrar. By virtue of Explanation (1) to the section, a claimby a registered society for any debt or demand due to it from a member or apast member or his heir or legal representative, or from sureties, whether theyare members or a past members or non-members, shall be a dispute within themeaning of the main section, even though such debt or demand is admitted andthe only point at issue is the ability to pay or the manner of enforcement ofpayment.

5. It will thus be seen that the Act is limited in its operation toregistered societies and their members in their dealings with one another. Itis only in exceptional cases of borrowing by a registered society fromnon-members, in accordance with the rules and bye-laws prescribed by thecompetent authority, or in case of loan to a non-member under the provisions ofs. 16, that there could be dealings between registered societies andnon-members, keeping aside the cases of sureties of members, who may benon-members, but who also come within the purview of dealings between a societyand its members.

6. Such were the relevant provisions of the Act when it was amended by theBihar Co-operative Societies (Amendment) Act, 1942, and the Bihar Co-operativeSocieties (Amendment) Act, 1944, enacted by the Governor of Bihar in exerciseof the powers assumed to himself by the Proclamation dated November 3, 1939,issued by him under s. 93 of the Government of India Act, 1935. For ourpurposes, it is only necessary to notice some of the amendments made by theamending Act of 1944 (Bihar Act X of 1944). By s. 2, clause (c) of s. 2 of theAct of 1935 was substituted in these terms :

'(c) 'financing bank' means a registered societythe main object of which is to make advances in cash or kind to otherregistered societies or to agriculturists who are not members of registeredsocieties or to both such societies or to agriculturists '

7. By s. 3, s. 16 of the Act of 1935 was amended by adding sub-s. (3) to s.16, as under :

'(3) Where the Registrar has accorded sanction to afinancing bank under the provisions of sub-section (1), a registered societywhich is a member of such financing bank may, subject to the terms of the sanctionand such other terms and conditions as may be prescribed by the Registrar, actas agent for the financing bank and as such agent carry out, with or withoutany commission, all or any transactions connected with loans or advances madeor to be made by the financing bank.'

8. A consequential change was made in s. 23 of the Act of 1935, by insertings. 23-A, so as to make a debt or an outstanding demand to a registered societyfrom a non-member a first charge on the property of the non-member. The mostimportant amendment was made by s. 6, in s. 48 of the main Act as follows :

'6. In sub-section (1) ofsection 48 of the said Act -

(a) after clause (d), the word'shall be inserted and thereafter the following clause shall be inserted,namely :-

'(e) between a financingbank authorised under the provisions of sub-section (1) of section 16 and aperson who is not a member of a registered society;' and

(b) in Explanation (1), afterthe words 'from a member', the work 'non-member' shall beinserted and after the words 'of a deceased member' the words'or non-member' shall be inserted.

9. It is not necessary to refer to the other consequential amendments madeand the addition of a new chapter 7A, relating to the manner of recovery. Theamendments effected by the amending Act of 1944 had been enacted by theGovernor of Bihar in exercise of his special powers aforesaid. The provisionsof those amendments were re-enacted as Act XVI of 1948. We would, thereforerefer hereinafter to the amendments in question as the amendments of 1948.

10. As already indicated, a Division Bench of the Patna High Court has laidit down, in the case of Union of India v. Registrar, Co-operative Societies.Patna I.L.R. (1961) Pat. 7 that the Explanation to s. 48(1) of the Actcovers a claim by a registered society for any debt or demand from anon-member, and that, therefore, the claim of a registered society against therailway company for compensation for short supply is a dispute within the ambitof s. 48 of the Act, and that, therefore, the Assistant Registrar, Co-operativeSocieties, had jurisdiction to determine the dispute under s. 48(2) of the Act.Relying upon that decision, the High Court dismissed the appellant's petitionunder arts. 226 and 227 of the Constitution, in limine. The appellant hasquestioned the correctness of that decision. The question, therefore, iswhether the High Court has taken a correct view of the provisions of s. 48, therelevant portions of which are as follows :

'48(1) If any disputetouching the business of a registered society.... arises -

(a) amongst members, pastmembers, persons claiming through members, past members or deceased members,and sureties of members, past members or deceased members whether such suretiesare members or non-members; or

(b) between a member, pastmember, persons claiming through a member, past member or deceased member orsureties of members, past members or deceased members, whether such suretiesare members or non-members, and the society, its managing committee or anyofficer, agent or servant of the society; or



(e) between a financing bankauthorised under the provisions of sub-section (1) of section 16 and a personwho is not a member of a registered society;

such disputes shall be referredto the Registrar. ...............................................................

Explanation 1 - A claim by aregistered society for any debt or demand due to it from a member, non-member,past member or the nominee, heir or legal representative of a deceased memberor non-member or from sureties of members, past members or deceased members,whether such sureties are members or non-members, shall be a dispute touchingthe business of the society within the meaning of this sub-section even in casesuch debt or demand is admitted and the only point at issue is the ability topay or the manner of enforcement of payment. ............................................................................................................................

(9) Save as expressly provided inthis section, a decision, of the Registrar under this section, and subject tothe orders of the Registrar on appeal of review, a decision given in a disputetransferred or referred under clause (b) or (c) of sub-section (2), shall befinal.'

11. From the provisions of the Act, set out above, it is manifest that theact created a special tribunal, namely, the registrar of Co-operativeSocieties, to deal with certain disputes specified in s. 48(1)(a) to (e). Thisspecial tribunal was created with a view to shortening litigation and providingspeedy relief to registered societies and their members in their disputes interse in respect of the business of the society. Before the amendments introducedby the Act of 1948, the disputes which could be entertained by the Registrarwere disputes amongst members, past members or their heirs or their sureties,or between a society and other registered societies (without meaning to exhaustall the categories.) But, before the amendments, one who was not a member of asociety or was not claiming through a member or a past member or a deceasedmember, or was not a surety of a member or a deceased member, was not subjectto the jurisdiction of the Registrar under s. 48. That is to say, any disputebetween a society or its members, past members or deceased members or suritiesof such members on the one hand and non-members on the other, was not withinthe purview of the section so that the appellant company, which is not aregistered society, or a member of a registered society, could not have itsclaim, or a claim against it by a registered society, referred to the Registrarfor decision, under this section. Such a dispute by a society or its membersagainst a non-member had to be taken to the ordinary courts for decision.

12. In our opinion, the contention raised on behalf of the appellant iscorrect. By the amending Act of 1948, the aforesaid relevant and importantamendments were introduced into the Act. The effect of these amendments is thata claim by a financing bank against a non-member to whom the former may havemade an advance in cash or kind with the sanction of the Registrar s. 16(1),would be entertainable by the Registrar, on a reference. But that does not meanthat a claim which is not of the description referred to in s. 16(1), read withs. 2(c), by a registered society against any non-member, who is not anagriculturist, is within the purview of s. 48(1) read with the Explanation. TheExplanation cannot be read as adding a new head to the categories (a) to (c)under s. 48(1), of disputes which may be referred to the Registrar. Originally,the Explanation had been added only to make it clear that even if a debt or ademand is admitted and the only point at issue is the ability to pay or themanner of enforcement of payment, the dispute would come within the purview ofthe main s. 48(1). The addition of the word 'non-member'; by the amending Actof 1948, to the first Explanation has not enlarged the scope of the main s.48(1) so as to make all kinds of disputes between a registered society and anon-member cognizable by the Registrar, thus excluding the jurisdiction of theordinary courts.

13. In the instant case, it is manifest that the dispute is between aregistered society, the second respondent, and the appellant, a non-member, inrespect of the claim for commission and interest thereon for supply ofsugarcane, and the appellant alleges that it has a counter-claim of a lakh andfifty thousand rupees for short and irregular supply of sugarcane against thatrespondent. These are matters which, in our view, are wholly beyond the purviewof s. 48 of the Act, when it is remembered that the second respondent is not afinancing bank and that the appellant is not an agriculturist to whom anyadvances in cash or kind had been made or could have been made so as to bringthe appellant within the purview of s. 48(1)(e), and consequentially ofExplanation 1. The decision of the Patna High Court to the contrary is,therefore, not correct.

14. In the result, the appeal is allowed with costs, and it is directed thatthe Registrar should not entertain the reference, and should not adjudicateupon the dispute, and not make an award. The main contesting parties must beleft to their remedies in the ordinary courts.

15. Appeal allowed.

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