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K. Ramasubramania Mudaliar Vs. the Salem Urban Co-operative Society, Limited, Represented by Its Secretary and anr. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies;Arbitration
CourtChennai
Decided On
Reported inAIR1945Mad434; (1945)2MLJ2
AppellantK. Ramasubramania Mudaliar
RespondentThe Salem Urban Co-operative Society, Limited, Represented by Its Secretary and anr.
Cases ReferredMaung Ba Lat v. Liquidator
Excerpt:
.....i am, therefore, of opinion that the execution was properly conducted through the department and that this objection must also..........and sale or by the sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed.6. rule 22, clause 7 also provider, as amended that--in the attachment and sale (or sale without attachment) of immovable property the following rules shall be observed :-7. the section and the rules make it clear that a sale without attachment is distinctly provided for by the act. if it is a money decree the property should be attached and then alone the property can be sold. mr. ramaswami aiyangar urges that even in a case of a money decree, it is not illegal to sell the property without attachment. but we are not concerned with the question whether such a sale without attachment is absolutely illegal and void, but whether.....
Judgment:

Somayya, J.

1. The question involved in this second appeal is whether the Registrar or an arbitrator appointed by him under Section 51 of the Madras Co-operative Societies Act (VI of 1932) has the power to pass a decree against the property mortgaged to the Society so as to bind a subsequent alienee who was made a party to the arbitration proceedings. The plaintiff is the purchaser from one David Dorairaja of a house which had been mortgaged by the vendor to the defendant, the Salem Urban Co-operative Society, Ltd., for a sum of Rs. 1,500 taken as a loan on the 7th February, 1933, on a mortgage of the suit house. Having purchased the property on the 20th June, 1934, subject to the mortgage in favour of the Society, the plaintiff sent a cheque for a certain amount but the defendant-society refused to accept it claiming a larger amount. Thereafter the respondent-society filed claim No. 170 of 1935, before the Sub-Deputy Registrar of Co-operative Societies implead-ing both the original borrower David Dorairaja and also the appellant, the subsequent vendee. The Sub-Deputy Registrar gave a decision upholding the claim of the present appellant that he was bound only to pay Rs. 1,433 instead of the larger sum claimed by the Society. Unfortunately for reasons best known to himself, the appellant who was also a party to the proceedings before the Registrar did not pay the sum adjudged even though at an earlier stage he had sent a cheque for that sum. Thereupon the respondent-society applied for execution of the decision or decree which is provided for under Section 57-A and rule XXII, Clause 7 of the rules made under the Madras Co-operative Societies Act and the property was purchased by the respondent. The present suit is filed to establish the plaintiff's title and for an injunction restraining the respondent from dispossessing the appellant. Both the lower Courts dismissed the suit and hence this second appeal.

2. The chief argument of Mr. Ramaswami Aiyangar, the learned advocate for appellant, is that under the Act, the Registrar or an arbitrator has no power to give a decision or to pass an award directing sale of the mortgaged property and much less to pass such a decree so as to bind a subsequent mortgagee or a subsequent alienee. The decretal order, as we may call it, runs thus:

That the defendants 1 and 2 do pay plaintiff Rs. 1,433-5-9 without interest. In default the mortgaged property hereunder specified or a sufficient part thereof shall be sold and the proceeds applied in payment of the amount due to the plaintiff, namely, Rs. 1,433-5-9. If the sale proceeds be found insufficient the plaintiff may recover the balance from defendant 1 personally or from his other properties or in both these ways.

3. The material portion of Section 51, clause ,(1) runs thus:

If any dispute touching the business of a registered society .... arises--

* * * * *(4) between a member, past member or person claiming through a member, past member or deceased member and the society, . such dispute shall be referred to the Registrar for decision.

Explanation.--A claim by a registered society for any debt or demand due to it from a member, past member or the nominee, heir or legal representative of a deceased member, whether such debt or demand be admitted or not, is a dispute touching the business of the society within the meaning of this sub-section.

4. This explanation was added in the Madras Act so as to remove any doubt on the question whether a debt due by a member is a dispute touching the business of a registered society. Even prior to this explanation, the Courts held under the Imperial Act, II of 1912, that a claim by the Society to recover a debt due by a member is a dispute under the Act. There cannot possibly be any doubt that the mam business of these registered societies is to advance loans to the members and recover them; and if the loan is not returned and a claim has to be made, it is obviously a dispute touching the business of the Society.

5. Under this definition a dispute between a person claiming through a member on the one side and the society on the otner is a dispute which has to be referred to the Registrar for decision. Under Clause (2) of the same section, the Registrar may either decide the dispute himself and among other things he can also refer it for disposal to an arbitrator or arbitrators. In the present case, the Registrar decided on the merits in favour of the appellant who took part in the proceedings, contested the claim of the Society and succeeded in establishing that the amount which he sent already was the proper sum payable to the Society. I do not find any limitation on the power of the Registrar or of the arbitrator limiting his power to an ordinary money decree. Mr. Ramaswami Aiyangar says that only a money decree is contemplated by the Act and not a decree against the property mortgaged to the Society. If this interpretation is accepted, the vast majority of the loans granted by such societies cannot be recovered by the simple method provided under the Act. Almost invariably a security in the shape of a mortgage is taken by the Society and on the interpretation suggested, the Society will have to go to the Civil Court for getting the amount by sale of the property. Unless there is a distinct provision limiting the authority of the arbitrator or the Registrar, I am of opinion that this argument cannot be accepted. Further Section 57-A which is a new section introduced by Madras Act V of 1935 puts the position beyond all possible doubt. The material portion of that section runs thus:

The Registrar may recover any amount due under a decree or order of a Civil Court, a decision or an award of the Registrar or arbitrator . together with the interest, if any, due on such amount or sum and the costs oJ process by the attachment and sale or by the sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed.

6. Rule 22, Clause 7 also provider, as amended that--

In the attachment and sale (or sale without attachment) of immovable property the following rules shall be observed :-

7. The section and the rules make it clear that a sale without attachment is distinctly provided for by the Act. If it is a money decree the property should be attached and then alone the property can be sold. Mr. Ramaswami Aiyangar urges that even in a case of a money decree, it is not illegal to sell the property without attachment. But we are not concerned with the question whether such a sale without attachment is absolutely illegal and void, but whether there ought not to be an attachment before the property of the judgment-debtor is sold. There cannot possibly be any doubt about it. The property must first be attached and then alone it ought to be brought to sale. Whether a sale held without an attachment is absolutely void or not is not the question that arises here. The provision for both cases--cases of attachment and sale and cases of sale without an attachment-show that the latter portion provides for cases in which there need not be an attachment. That certainly includes decrees for sale of the property such as the one that we have in this case.

8. The next point urged is that the appellant was not a proper party and could not be a party to the proceedings under Section 51 or under the other sections of the Act. Ihis is by no means clear. Section 51, Clause (A), as already set out, includes a person who claims under a member. The object of the Act seems to be to provide not merely for proceeding against the member but also against a person who claims through him. This objection, it may be stated, was not taken before the Registrar. The appellant appeared in the proceedings, contested it and succeeded in reducing the sum claimed by the Society. It seems to me very doubtful whether the principle that submission to jurisdiction renders the decree binding on the party so submitting does not apply to this case. But I prefer to put it on a higher ground, namely, that Section 51 empowers the joinder of such a person in a claim to recover the amount.

9. I shall now refer to a few of the decisions on these points. Before Madras Act VI of 1932 was passed, the Co-operative Societies were governed by the Imperial Act II of 1912, the Co-operative Societies Act. The relevant portion of Section 43, Clause (2)(1) runs thus:

The Provincial Government may make rules to carry out the purposes of this Act. In particular and without prejudice to the generality of the foregoing power, such rules may provide that any dispute touching the business of a society between members or past members of the society or persons claiming through a member or past member or persons so claiming and the committee or any officer shall be referred to the Registrar for decision or, if he so directs, to arbitration, and prescribe the mode of appointing an arbitrator or arbitrators and the procedure to be followed in proceedings before the Registrar or such arbitrator or arbitrators, and the enforcement of the decisions of the Registrar or the awards of the arbitrators.

Under this section the question arose whether a dispute regarding an amount due by a member to the Society came within Section 43, Clause 2 (1). In Dacca Cooperative Industrial Union, Ltd. v. Dacca Co-operative Sankha Silpa Samiti, Ltd. I.L.R. (1938) 2 Cal. 103, it was held by Mitter and Biswas, JJ., that the principal business of a Co-operative Society being to finance its members, a dispute concerning the financial obligations of its members to the Society is a dispute concerning the business of the Society. This provision is in the Madras Act enacted in Section 51. Reliance is placed on the wording of the explanation to Section 51 which has already been set out and it is urged that the explanation shows that it is only:

a claim by a registered society for any debt due to it from a member, past member or the nominee, heir, or legal representative of a deceased member whether such debt or demand be admitted or not

which is a dispute touching the business of the Society within the meaning of the sub-section. The argument is that a claim by a registered society as against a person who claims through a member or past member is not within the explanation. As decided on the analogous wording in Section 43, Clause 2 (1) of the Imperial Act (II of 1912) even without the explanation, a debt due to the Society by a member or a person claiming through a member is a dispute touching the business of the registered society. In the body of Section 51 of the Madras Act express provision is made that a dispute between a member, past member or person claiming through a member regarding a dispute should be referred to the Registrar. The explanation which is intended only to clear a doubt cannot operate to control the operative portion of the section. I hold therefore that the dispute between the appellant who was a person claiming through a member and the Society comes within Section 51`, Clause (b). This also disposes of the question that the Registrar or the arbitrator has no power to proceed against a person who is not a member. Section 51, Clause (b) when using the expression ' or persons claiming through a member, past member' does not obviously restrict the operation of that phrase to a case of a member who claims through another member. If he is himself a member he comes under the first provision of Section 51(b). The expression 'person claiming through a member or past member ' must obviously refer to a person who is not himself a member. The argument that the second defendant was not a proper party to the proceedings under Section 51 must therefore be rejected. Mr. Ramaswami Aiyangar referred me to Toy Gyi v. Maung Yan A.I.R. 1933 Rang. 81, in support of his contention that a decree for the sale of the property cannot be passed by the arbitrators. The decision relied on is that of a single judge. There is no doubt a statement that--

It should not be necessary to point out that a co-operative arbitrator has no power to pass mortgage decrees.

10. In a later decision of the same Court in Yatha Co-operative Society v. Maung Po Mya I.L.R. (1935)Rang. 343, Mosley, J., had to deal with a case where an arbitrator gave an award to the effect that the debtors were to pay a certain sum within three days failing which the mortgaged property was to be sold and the sale proceeds applied towards the debt.

11. The award under Rule 15, Clause (4) of the Burma Co-operative Societies Rules, 1931, was transmitted to the Civil Court for execution. There is a similar provision in the Madras Act that the decision or order of the Registrar or the award of the arbitrator may be enforced either by Civil Courts on its being transferred to that Court or by the Registrar himself or by a person subordinate to him and empowered by the Registrar in that behalf. In the Rangoon case an application was made to the Civil Court for execution. A money decree had been obtained against the same debtors in the Civil Court and the property had been sold in execution of that decree and purchased by the decree-holder himself. The Society applied that they should be allowed to bring the property to sale in execution of the award. That was refused by the executing Court. On appeal the Subordinate Judge held following the earlier decision in Tav Gyi v. Maung Tan A.I.R. 1933 Rang. 81 that the arbitrators had no power to pass mortgage decrees. The matter was taken to the High Court. Mosely, J., referring to the above decision, said this:

This judgment was misconstrued, the emphasis was on the word 'decree.' What was meant was that the arbitrator could only pass an award, but that award can be executed as if it were a decree. It is not an order which cannot legally be passed and of which execution should be refused, as in the case quoted Maung Ba Lat v. Liquidator, Kemmendine Thathanahita Co-operative Society I.L.R.(1933)Rang. 125 I see no difficulty in the position created. The order to be executed as if it were a mortgage decree does not bind other persons claiming to have a mortgage of the same property any more than a mortgage decree of the Court would bind them, but the order is conclusive and binding on the property until it is attacked by way of a regular suit. A stranger to the proceedings by the society cannot dispute the order in execution but must do so by way of a suit. If he sues he can attack the order on exactly the same grounds as if it were a mortgage decree by a Court, that is to say, on the grounds of fraud or collusion, or that the mortgage was not properly registered and so on.

12. I agree with the later decision of Mosley, J., that a decree for sale of the property or what we call a mortgage decree can be passed by the arbitrator under the Act. The appellant having been properly made a party cannot attack it either in the execution department or by way of a regular suit. It is only a stranger who was not a party that can file a separate suit and even then the decree can be attacked only on grounds of fraud or collusion or the like.

13. The next point urged is that under the bye-laws of the respondent-society execution could be had only through a Civil Court. These bye-laws were admittedly framed at a time when execution through the department was not provided as one of the modes of executing the award of an arbitrator or the decision of the Registrar. After the Madras Act (VI of 1932) was passed, this bye-law has not been altered and has been allowed to stand as it was. The argument advanced by Mr. Ramaswami Aiyangar is that the execution contrary to the bye-law is invalid. Madras Act VI of 1932 distinctly provides, as already pointed out. for execution by the department itself, i.e., by the Registrar or by a person subordinate to him and empowered by the Registrar in that behalf. The rules also provide for such execution by the Registrar or by a subordinate. If there is a conflict between a provision contained in the Act itself or in the rules and a bye-law, it is undisputed that the bye-law cannot prevail. It is urged that a bye-law can limit the powers granted by the Act or by the rules. I do not think there is any such limitation in this case. The bye-law was passed at a time when the law then in force did not provide for execution through the department. There is no express limitation in the bye-law relied upon that resort to execution through the department should not be had. I am, therefore, of opinion that the execution was properly conducted through the department and that this objection must also fail.

14. The second appeal fails and is dismissed with costs.

15. No leave.

16. A.A. A.O. No. 154 of 1944.--It is conceded that the decision in the present appeal governs this case. The Civil Miscellaneous Second Appeal is accordingly dismissed. No costs. No leave.


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