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Dr. Savitri Bai Nagan Goud and ors. Vs. Gutti Thotappa - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtChennai High Court
Decided On
Case NumberCivil Revn. Petn. No. 671 of 1950
Judge
Reported inAIR1951Mad425; (1950)2MLJ475
ActsMadras Co-operative Societies Act, 1932 - Sections 51; Madras Co-operative Societies Rules, 1932 - Rule 15
AppellantDr. Savitri Bai Nagan Goud and ors.
RespondentGutti Thotappa
Appellant AdvocateB.V. Ramanarasu, Adv.
Respondent AdvocateA. Bhujanga Rao and ;D.R. Krishna Rao, Advs.
DispositionRevision dismissed
Cases ReferredIn Palliser v. Dale
Excerpt:
turst and societies - jurisdiction - section 51 of madras co-operative societies act, 1932 and rule 15 of madras co-operative societies rules, 1932 - petition challenging scope of jurisdiction of civil court - dispute relating to dismissal of respondent from office of presidentship of society -argued that without referring dispute to registrar for decision civil court could not be approached for redressal of grievance - dispute not affecting right of membership nor touching business of society - jurisdiction of civil court cannot be ousted. - - 2. the first six defendants in the lowercourt, as well as the plaintiff, constituted the managing body of the hospet co-operative stores ltd. the defence was that the suit is not maintainable in a civil court because the subject-matter of the..........constituted the managing body of the hospet co-operative stores ltd., registered under the co-operativesocieties act and the society was defendant 7 in the suit. the respondent-plaintiff sued for adeclaration that the resolution of the managing body dated 30-10-1949 purported to have been passed by defendants 1 to 5 removing the plaintiff from the presidentship of the society and appointing defendant 1 as president of the hospet co-operative stores is illegal, unconstitutional and ultra vires of the powers of thedirectors and consequently for a permanent injunction restraining defendant 1 from taking charge as president. the defence was that the suit is not maintainable in a civil court because the subject-matter of the suit is one of domesticconcern relating to the business and.....
Judgment:
ORDER

Govinda Menon, J.

1. The petitioners herein are defendants 1 to 5 and 7 in O. S. No. 2 of 1950 on the file of the Sub-Court of Bellary and they seek to revise the finding given by the lower Court on issues 1 and 2, viz., that the suit is not tarred by Section 51 of the Co-operative Societies Act and that the lower Court has jurisdiction to try the suit.

2. The first six defendants in the lowerCourt, as well as the plaintiff, constituted the managing body of the Hospet Co-operative Stores Ltd., registered under the Co-operativeSocieties Act and the society was defendant 7 in the suit. The respondent-plaintiff sued for adeclaration that the resolution of the managing body dated 30-10-1949 purported to have been passed by defendants 1 to 5 removing the plaintiff from the presidentship of the society and appointing defendant 1 as President of the Hospet Co-operative Stores is illegal, unconstitutional and ultra vires of the powers of thedirectors and consequently for a permanent injunction restraining defendant 1 from taking charge as president. The defence was that the suit is not maintainable in a civil Court because the subject-matter of the suit is one of domesticconcern relating to the business and management of the society and therefore the suit is barred under Section 51, Co-operative Societies Act, as well as the bye-laws of the society. The learned Subordinate Judge tried the first and second issues as preliminary ones and held that as the matter is not a dispute touching the business of the society the suit as framed is maintainable. He directed that the further trial of the suit will go on.

3. The relevant portions of Section 51, Madras Co-operative Societies Act (VI [6] of 1932) run as follows :

'If any dispute touching the business of a registered society (other than a dispute regarding disciplinary action taken by the society or its committee against a paid servant of the society) arises -

(a) among members, past members and personsclaiming through members, past members and deceased members .... such dispute shall be referred to the Registrar for decision.'

It is, therefore, argued that without referring the dispute to the Registrar for decision and abiding by his decision, the plaintiff cannot approach the civil Court for the redress of any grievance that he may have. The language of Section 51, Madras Co-operative Societies Act, is similar to para. 22 of the rules made by the Government of Bengal under Section 43 of the Cooperative Societies Act (II [2] of 1912) and Sub-section (1) of that paragraph reads as follows :

'Any dispute touching the business of a registered society between members or past members of the society, or persons claiming through a member or past member, or between a member or past member or persons so claiming and the committee or any officer, shall be referred in writing to the Registrar.'

The learned Subordinate Judge, on the authority of Haradayal Nag v. Chandpur Central Co-operative Bank Ltd. : AIR1938Cal394 , where Mukherjea J. has interpreted para. 22 of the rules made by the Bengal Government, has come to the conclusion that the suit is maintainable. What happened in the Calcutta case was that some preference share-holders of a Co-operative Bank sued for a declaration that a resolution passed at an extraordinary general meeting of the share-holders rescinding a previous resolution for payment passed at the annual general meeting was ultra vires and as a consequential relief prayed for payment of a dividend and in such a suit it was held by the Calcutta High Court that Rule 22 framed under Section 43, Co-operative Societies Act, was not a bar. At p. 148 the learned Judge observes as follows :

'It is argued that payment of dividend on preference shares is a matter touching the business of a registered society and the dispute having arisen between the plaintiff, who is a member of the society, on the one hand and the committee of management on the other, it was incumbent upon the plaintiff to make a reference to the Registrar. This contention does not appear to me to be sound. The payment of dividend may be a part of the business of the board of directors. But that is a mere consequential relief which the plaintiff has prayed for in this case. He wants among others a declaration that the constitution of the board itself was illegal, that it had no authority to function or to call an extraordinary general meeting of the share-holders, and that the resolution passed at the meeting thus convened was itself ultra vires. I am unable to say that this is a dispute between a member and the committee touching the business of the society. The duties of the Board of Directors are set out in bye-law 31 and none of its clauses can, by any stretch of imagination, cover a matter of this character. This view is supported by two recent pronouncements of this Court, which are to be found in Ramendranath v. Balurghat Central Co-operative Bank Ltd : AIR1932Cal317 and Barisal Co-operative Central Bank Ltd. v. Benoybhushan Gupta : AIR1934Cal537 . Dr. Sengupta has relied upon a decision of S. K. Ghose J. in Ramkrishna Sengupta v. Haripur Co-operative Bank, 39 C.W.N. 1301. The point decided in that case was totally different. The dispute there was as regards the amount of loan which a past member had taken from a co-operative society and it was held by my learned brother and in my opinion rightly, that it came within the purview of Rule 22, and the mere fact that the dispute was described to be one between a past member and the society itself was really immaterial and did not affect the validity of the reference.

In the present case the dispute relates to the constitution of the Board of management itself and its powers to convene an extraordinary general meeting of the shareholders. In my opinion, this is not a matter which is withdrawn from the Court by Rule 22, The first contention therefore fails.'

4. On the other hand the learned counsel for the petitioners in this case relies upon decision in Gopinath v. Ramnath : AIR1925All356 where Ryves and Daniels JJ. came to a conclusion that no suit will lie in civil Court for the purpose of determining the validity of the election of directors of a Co-operative Society governed by the Cooperative Societies Act, 1912. At p. 376, the learned Judges observe as follows :

'It has been contended before us, as it was contended in the Courts below, that the word 'business' in the Act and in these rules is confined to money business such as the giving of loans to members and the settlement of money claims. Having regard to the very wide form in which Section 43 and the rules made under it are couched, we think that the word 'business' was not intended to be understood in any such restricted sense. The election of its officers was certainly a part of the business of the society and we think that the intention of the Act was that this and any dispute of a similar character should be referred for the decision of the Registrar, or the arbitrators appointed by him in accordance with the rules made under Section 43, and not to the civil Court.'

The decisions referred to by Mukherjee J., in Haradayal Nag v. Chandpur Central Cooperative Bank Ltd. : AIR1938Cal394 are Barisal Cooperative Central Bank Ltd. v. Benoy Bhushan Gupta : AIR1934Cal537 and Bamendranath v. Balarghat Central Co-operative Bank Ltd. : AIR1932Cal317 . In the latter case Rankin C. J. and C. C. Ghose J., have held that the disputes which must be submitted to the Registrar under Bengal Rule 22 of the rules framed under Section 43, Clause (1), Co-operative Societies Act, do not include disputes about the constitution of the registered society or as to whether a person is, or is not, a share-holder and the rule does not prohibit the jurisdiction of the ordinary Courts to decide such questions. The learned Chief Justice relies upon the provisions of various English Acts such as the Industrial and Provident Societies Act, 1893, Section 49, the friendly Societies Act, 1896, Section 68, National Insurance Act, 1911, Section 67. The other decision referred to by Mukherjea J. is not of much help in the consideration of the point for decision. In that case the question of the interpretation of the words 'touching the business of the society' did not arise for consideration and therefore we need not make any further reference to that decision.

5. The plaintiff's chief argument is based upon the supposition that the business of the society does not include the election of the office bearers, or their removal or retirement. What is meant by the term 'touching the business' is that the expression should be limited in its application to such matters as transactions regarding the buying and selling of commodities, entering into contracts and businesses of such kind. It cannot be said that when the very foundation of the society is being questioned or when its constitution is itself challenged, that could be said: to be a matter touching the business of the society. While on the other hand the contesting defendants say that every matter relating to the society, whether it deals with its commercial transactions or its constitution, are matters 'touching the business' of the society. In fact the defendants practically adopt the reasoning of the learned Judge in Gopinath v. Ramnath : AIR1925All356 .

6. My attention was drawn by the defendants' learned advocate Mr. Ramanarasu to the bye-laws of the society in question, especially to bye-laws 20 to 23 which deal with management and the last sentence in bye-law 20 which is to the following effect :

'Any member or members of the Board of Directors may at any time be removed by a resolution of the general body'

is relied upon to show that bye-law 20 which relates to the management providing for the removal of a member of the board of directors should be understood as applying to a matter touching the business of the society and therefore in this case since the plaintiff was removed from his post as president by a resolution of the managing committee it is a matter which came within the bye-laws and therefore should be referred to the Eegistrar for his decision. Eeliance was also placed by him on E. 15 framed in 1947 under the Co-operative Societies Act. The respondent's contention, as has already been stated, rests upon the circumstances that the removal by a resolution of the committee of management of the President from his office is not a matter touching the business of the society. It is argued by Mr. Bhujanga Rao that the rules provide for the removal of a member or members of the board of directors at any time by a resolution of the general body. But there is no provision for the removal of a president from his office by a resolution of the managing committee. If that were so, it is open, at any time, for a majority of members of the managing committee to unseat the president if they have some ill-feeling against him. That could not have been the intention when the bye-laws were framed, because if it were so, specific provision would have been made to that effect. Therefore according to the learned counsel, the action of the managing committee by a majority of resolution in removing the president is an act in contravention of the bye-laws and according to certain English decisions to which reference will be made later on, the president who was unseated has got a remedy in an ordinary civil Court. Even granting that bye-law 20 refers to the election of the board of management and therefore any matter relating to such election may be considered to be one touching the business of the society, still there is no bye-law which envisages or contemplates the removal of a president during his term of office, by a majority resolution of the board of management. In any event, even if the removal of the president is vested in any 'body' it can only mean the 'general body' and not the directorate and since the board of management has acted in contravention of the bye-laws, it is a matter affecting the civil rights of the president and as such he is entitled to seek remedy in a civil Court. The action of the directors does not amount to removing the respondent from the board of directors because obviously they have no power to do so. He is removed only from the presidentship for which there is no provision in the bye-law. Under the English Friendly Societies Act, disputes which are to be decided in the manner directed by the rules are enumerated in 15 Halsbury's Laws of England, Hailsham Edn., at pp. 376 and 377 para. 698. It is stated therein that disputes must have relation to the membership of the member; as for example, disputes relating to the distribution of a fund in the hands of trustees of a friendly society, claim for sick pay, construction of rules, the propriety of convening a special meeting for the purpose of amending the rules, the right of a person to be or to continue to be a member as to the conduct of an officer involving expulsion, or the repayment of money deposited by a member and such matters. In Wayman v. Perseverance Lodge of the Cambridgeshire Order of United Brethern Friendly Society, (1917) l K. B. 677 : 86 L. J. K. B. 243, a Division Bench consisting of Lush and Bailhache JJ. had to consider the question regarding Section 68, Friendly Societies Act, 1896, which provided that every dispute between a member of a friendly society and the society, including any dispute arising on the question whether a member or person aggrieved is entitled to be or to continue to be a member, or to be reinstated as a member shall be decided in a manner directed by the rules of the society, and the decision so given shall be binding and conclusive on all parties without appeal. In that particular case, one member was expelled by the committee of management and the question was whether an action brought by him in a County Court for a declaration that the resolution expelling him was ultra vires, is prohibited by Section 68, Friendly Societies Act, 1896. The County Court Judge held that the action was maintainable and the same was confirmed by the Division Court of the King's Bench Division. The learned Judges held that if the committee of management did act in direct opposition to the rules which required that the dispute shall be left to arbitration then the County Court Judge had jurisdiction to declare the resolution to be a nullity. Reliance was placed upon Andrews v. Mitchell, (1905) A. C. 78 : 74 L. J. K. B. 333. In an earlier case Ex parte Wooldridge, (1862) 121 E. B. 927 : (1 B. & Section 844), the questions as to the jurisdiction of the County Court in similar matters was considered. By the rules of a Friendly Society, any member in the receipt of gifts of the society being found imposing on the society must be expelled. A member of the society in the receipt of pay was charged with receiving full pay when he was only entitled to half pay, and, the matter being referred to a committee he was expelled, but without being heard before the committee. Upon an application by him for a mandamus to reinstate him as a member of the society, it was held by Crompton Blackburn and Mellor JJ., Cockburn C. J. dissenting, that the County Court had jurisdiction to order him to be reinstated if he had been improperly expelled. It is not necessary to advert at any length to the decision of the learned Judges because the point in dispute is sufficiently clear from what has been stated above. In Palliser v. Dale, (1897) 1 Q. B. 257 : 66 L. J. Q. B. 236, a similar question arose. A dispute between a Friendly Society and a member who had been expelled, as to the legality of the expulsion is not a dispute which must be decided in the manner provided by the rules of the society. Therefore the jurisdiction of the Court was not ousted with regard to such disputes by the enactments. There is quite a large body of case law under the Friendly Societies Act wherein similar questions have been considered.

7. In view of the principles decided in the aforesaid cases, even if Rule 15 framed in 1947 as well as bye-law 20 have to be considered, still the dispute in the present case being one relating to the dismissal of the respondent from the office of presidentship, it cannot be said that it is a matter touching the business of the society and as such falls outside the scope of the jurisdiction of a civil Court. On the merits something has been said but as the revision petition relates solely to the question of jurisdiction, I do not wish to express any opinion on the merits at all.

8. The civil revision petition is therefore dismissed with costs.


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