1. W. P. Nos. 632 of 1951 and 79 of 1952 : These petitions were referred to a Full Bench as conflicting views were expressed regarding the interpretation of the expression "disputes touching the business of a registered society" occurring in Section 51, Madras Cooperative Societies Act (6 of 1932), particularly in two unreported Bench decisions of this Court.
2. W. P. No. 632 of 1951 is the main petition and W. P. No. 79 of 1952 is consequential and the decision in the former will govern the decision in the latter also.
3. The dispute relates to the election of directors of the Pithapuram Co-operative Bank Ltd., by its general body. The Bank was registered as a Co-operative Bank under the Co-operative-Societies Act (Central Act 2 of 1912). A copy of its bye-laws hag been filed in these proceedings and marked as Ex. A. Though the Bank was registered under the Central Act, it is deemed to be registered under the Madras Co-operative Societies Act (6 of 1932) and its bye-laws shall so far as the same are not inconsistent with the express provisions of the Madras Act, continue to be in force intil altered or rescinded. Vide Section 62. The Madras Act repealed the Co-operative Societies Act of 1912 (Central) in so far as it applied to this state. In the arguments before us, reference was made to the provisions of the Madras Act, and both sides proceeded on the basis that the question raised has to be determined by a proper interpretation of Section 51 of the Madras Act (hereinafter referred to as the "Act"). This is mentioned at the outset for the reason, that bye-law 60 of the Bank was framed in accordance with the Central Act, and its scope must be deemed to have been enlarged by Section 51 of the Madras Act.
4. The general body of the bank at its meeting held on 28-7-1950 elected 11 members as Directors & constitute the Board of Directors for the management of the Bank as required by bye-law 19. The term of the previous directors had expired, but they continued in office after the expiry of their term until the constitution of a new Board under bye-law 20. The petitioners, ten in number and respondent 5 were the persons elected at the meeting held on 28-7-1950. This election however was impugned by one D. Y. K. Surya Rao who is the first respondent and a member of the Bank, by proceedings instituted under Section 51 of the Act. Under Section 51, the Registrar referred the matter to the Deputy Registrar, who by his order dated 15-10-1951, set aside the election of the petitioners and respondent 5.
The Registrar, acting under Section 43 of the Act, issued on 23-11-1951 a notice to the directors of the Bank to show cause why the Board should not be superseded. Meanwhile, on 22-10-1951 the petitioners filed W. P. No. 632 of 1951 for the issue of a writ of certiorari, for calling for the records and quashing the order of the Deputy Registrar of Co-operative Societies dated 15-10-1951 setting aside the election of the directors of the Bank. On 26/10/1951 they filed a revision petition against the order of the Deputy Registrar, before the Registrar under Section 51 of the Act. The Registrar on 4-1-1952 made an order under Section 43 of the Act superseding the Board of Management and appointed a Co-operative Sub-Registrar as special officer for a period of six months to manage the affairs of the Bank. On 8-1-1952, W. P. No. 79 of 1952 was filed by one of the petitioners in W. P. No. 632 of 1951 and by another to quash the order of the Registrar of Co-operative Societies superseding the Board. The special officer took charge on 9-1-1952 and his term was extended from time to time. On 14-3-1952, the Registrar dismissed the revision petition filed by the petitioners on the two grounds: (i) that the Board had been superseded under Section 43 of the Act; and (ii) that the petitioners had already filed a writ petition in this Court for quashing the order of the Deputy Registrar. No writ petition was filed against the order of the Registrar dismissing the revision petition.
5. The only question raised by the petition is that the dispute relating to the election of the Board of Directors is not within the purview of Section 51 of the Act, and that consequently the Deputy Registrar had no initial jurisdiction to deal with the matter and set aside the election. The learned Advocate General appearing for respondent 2, the Registrar of Co-operative Societies maintained to the contrary.
6. The learned counsel appearing for the 1st respondent, surya Rao, raised a preliminary objection on the ground that as no exception was taken by the petitioners, who were respondents before the Deputy Registrar regarding the exercise of jurisdiction by the Deputy Registrar and acquiesced in the exercise of jurisdiction by him, they were precluded from now raising the present contention. Reliance was placed upon a decision of this Court in -- 'Latchmanan Chettiar v. Corporation of Madras', AIR 1927 Mad 130 (FB) (A). We think, however, that this preliminary objection is not well founded. The decision relied on was not a case of initial want of jurisdiction. As pointed out by the Supreme Court in the decision, -- 'United Commercial Bank v. Their Workmen', (B), no amount of consent would cure the initial want of jurisdiction. It is not open to a person to confer jurisdiction by consent and no amount of acquiescence would confer jurisdiction upon a tribunal or a Court where such jurisdiction did not exist. The contention raised by the petitioners if well founded would go to the root of the matter, and it would be a case of total lack of jurisdiction, which cannot be cured by consent or acquiescence. The objection, therefore, must be overruled.
7. The learned Advocate-General, however, raised another preliminary objection in a somewhat different manner. As the petitioners carried the matter in revision before the Registrar under Section 51 on the basis, that the decision given by the Deputy Registrar was one with jurisdiction, it is not open to the petitioners now to raise the question of want of jurisdiction. The answer to this objection is that the revision was filed before the Registrar four days after W. P. No. 632 of 1951 was filed in this Court, objecting the jurisdiction of the Deputy Registrar to decide the dispute relating to the election. As they had before the filing of the revision petition objected to the jurisdiction of the Deputy Registrar, their conduct in filing the revision petition cannot be considered as in any manner precluding them from agitating the question raised in the writ petition. We are therefore unable to accept the contention of the learned Advocate General either. This preliminary objection also must be overruled.
8. Section 51(1) of the Act, on the interpretation of which the decision of the question raised turns is 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 persons claiming through members, past members and deceased members, or
(b) between a member, past member or person claiming through a member, past member or deceased member and the society, its committee or any officer, agent or servant of the society, or
(c) between the society or its committee and any past committee, any officer, agent or servant or any past officer, past agent or past servant, or the nominees, heirs or legal representatives of any deceased officer, deceased agent, or deceased servant of the society; or
(d) between the society and any other registered society such dispute shall be referred to the registrar for decision.
Explanation : A claim by 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."
9. To apply the section, two requisites must be fulfilled. The first is it must be a dispute-"touching the business of a registered society" & the second is that it must be between the persons specified in Clauses (a) to (d). Section 43 of the Central Act of 1912 conferred the rule-making powers on the Provincial Government; Section 43(2)(1) empowered it to make a rule 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 between a member or past member or persons so claiming and the committee or any officer shall be referred to the Registrar for decision."
Provision was accordingly made by rules for the decision of disputes referred to in the clause. It may, however, be noted that the scope of this clause is narrower than the scope of Section 51 of the Act, for it does not provide for the decision of a dispute, for example, between a member and the society while the Madras Act does make such provision. This distinction would become important when the decisions interpreting the rules made under the provisions of the Central Act have to be considered.
10. It is common ground that the present case fulfils the second of the two requirements laid down by Section 51 (1), namely, that the dispute is one-among the members of the society. Therefore, there is no difficulty about it. The further question is, whether the present dispute relating to the election of the directors can be legitimately described as a dispute "touching the business of a registered society." On the interpretation of this expression occurring in this section and in the rule made under Section 43 (2) (1) of the Central Act of 1913, there are conflicting decisions and it becomes, therefore, necessary to examine the scope and the ambit of the expression in order to define the limits of the jurisdiction of the Registrar or his nominee to settle disputes under this section.
11. It may be observed at the outset that apart from the Companies Act, statutes both in England and in India provide for the creation of corporations with autonomous powers for various purposes. The Industrial and Provident Societies Act, the Friendly Societies Act, 1896 and the National Insurance Act 1911 are familiar instances under English law. In India, apart from the Co-operative Societies Act there is also the Societies Registration Act. The statutes permitting the registration of corporations of this kind provide, by the provisions of the Act and the rules, for the determination of disputes relating to matters of domestic administration either by creating a statutory tribunal or by enabling the corporators to bring into existence such a tribunal. Where a corporation is created by a statute, it is settled law that its powers are limited & circumscribed by the statute creating it and the rules framed thereunder as well as by the bye-laws permitted to be made by the corporation under the power conferred by the statute and the rules. The power, however, extends not only to what is expressly stated in the statute and the rules and the by-laws but also to what is necessarily and properly required to carry into effect the purposes for which the corporation was brought into existence or may be fairly regarded as incidental to or consequential upon those things, which the Legislature has authorised.
This principle was enunciated by Lord Selbome, L. C. in -- 'Attorney General v. Great Eastern Railway Co.', (1880) 5 AC 473 at p 478 CO which was followed and applied in -- 'Peel v. London and North Western Railway', (1907) 1-Ch 5 (D) by Vaughan Williams, L. J., and recently in --'Attorney General v. Leeds Corporation', (1929) 2-Ch 291 (E). So long as the tribunals have acted within their jurisdiction, even when they committed an error of law, Courts have declined to interfere with such erroneous decisions. It is the duty of the Courts to quote Lord Loreburn, L. C. in -- 'Catt v. Wood', (1910) AC 404 at p 407, (F),
"To obey loyally the enactments which were made in order to prevent multitudinous litigation and to give effect to decisions (if they be honest and not open to a charge of misconduct) of those who are deciding rightly or wrongly within the jurisdiction which is confided to them by the laws of this country."
It is, however, the right and the duty of a Court to see that these tribunals keep within their bounds and do not exceed their jurisdiction & transgress the limits that have been imposed on them by the provisions of the Act and the rules and the bye-laws. In the adjudication of disputes such tribunals should not ignore the principles of natural justice and should not be guilty of legal misconduct for example, before expelling a corporator from the society, it is an elementary principle of law, that he should be given an opportunity to know the charges against him and answer them. The decisions, which are protected from review by Courts are "constitutional" decisions, decisions pronounced in conformity with the Act, the rules and the bye-laws and the principles of natural justice. Lord Halsbury, L. C. in -- 'Andrews v. Mitchell', 1905 AC 78 (G) used strong language in a case in which a person was expelled from a society without a charge and without trial in these terms :
"My Lords, it seems to me that under these circumstances it would be undesirable to go into those questions which were raised in -- 'Palliser v. Dale', (1897) 1-QB 257 (H) because to my mind this most important principle ought to be brought home to the minds of these Courts, presided over as they are by comparatively uneducated men, that some of these forms are matters of substance, and that you must summon a man and you must give him time to consider what he has got to do and you must give him the charge against him in writing. Those are all matters of substance and not mere matters of form. They are the foundation of the subsequent litigation arising between the parties and if they were neglected in this case, it appears to me that there was no jurisdiction to entertain that charge at the time."
In the same case Lord Robertson stated, referring to the Friendly Societies Act 1896, that it
"has not given carte-blanche to the tribunals of these societies to pronounce decisions which shall be exempt from examination in Courts of law. The decisions protected from review are constitutional decisions -- decisions pronounced according to the rules, which, as we know, are registered under the Friendly Societies Act. Now the rules require written notes of a charge such as we are here dealing with. In proceedings involving the grave issue of expulsion, the importance of this safeguard stands out as salient. What happened in this case shows what may take place if this rule be disregarded. This respondent, called to answer a minor accusation is, on the trial of that charge, then and there accused of another and graver charge and then and there expelled. This invasion of the respondent's rights most clearly transcends the class of irregularities and calls for the intervention of the Courts."
12. Other classes of cases in which the jurisdiction of the tribunals is negatived are where the tribunals do or try to do something which is 'ultra vires', something which they ought not to try at all, something which ought to be taken to the Courts. A rule of a society may be within its powers or beyond its powers. The determination of that question depends upon the construction of the constituent documents of the society, i. e. the rules and the Act under which the society is registered. So long as the rule is not 'ultra vires' and the determination of the dispute depended merely upon the construction of a rule or a section of the Act or a bye-law a wrong interpretation placed on them by the tribunal would not give jurisdiction to the Court to interfere. But if the question raised related to the 'ultra vires' nature of the rule or the bye law, a dispute of that nature is undoubtedly without the purview of the tribunal. Similarly, a resolution passed by a society may be beyond the powers of the body. In such a case also, the tribunal would have no jurisdiction. These principles are deducible from the decisions of the Courts in England of which a clear example is the decision -- 'Heard v. Pickthorne', (1913) 3-KB 299 (I) which was approved by the House of Lords in the later case -- Mc. Ellistrim v. Ballymacelligott Co-opsrative Agricultural and Dairy Society', 1919 AC 548 (J).
13. In the case before the Kings Bench Division, a dispute over a resolution requiring that there should be a certificate from a panel doctor instead of a certificate from any doctor as provided by the rules was held to be a dispute not within the purview of Section 49. In the House of Lords case '1919 AC 548 (J)', the question related to certain rules framed by a Society registered under the Industrial and Provident Societies Act, 1893. The provisions of the English Act, it should be noted, do not contain the restriction in Section 51 of the Act, that the dispute should be one touching the business of the Society, but they provided disputes between members were to be within the jurisdiction of the tribunal indicated under the Act. Lord Birkenhead, L. C., 'at page 661' in dealing with the question whether the difference between the parties was a dispute under the provisions of Section 48, Industrial and Provident Funds Act, 1893 or whether an action was competent stated the principle thus :
"I am of opinion that this contention is ill-founded. The question here is whether certain rules were illegal and 'ultra vires'. Such a dispute is not a dispute between a member and the society within the meaning of the statute. The appellant in this case professes that he has not quarrelled with the society as lawfully constituted but complains that the constitution of the society has been illegally altered. The dispute, therefore, rightly viewed, is a dispute between the persons as to the true constitution of the society. I adopt upon this part of the case the reasoning and the decision of the Court of Appeal in --'(1913) 3-KB 299 (I)'.
The rules made in that case altered the constitution of the society. This was applied in a later case -- In re Quinn and National Catholic Benefit and Thrift Society's arbitration' (1921) 2-Ch 318 (K) which was a case under the Friendly societies Act, and the National Insurance Act. The legality of the rules of the society, it was held, could not properly be made the subject of arbitration under Section 63, National Insurance Act, and that it was not a matter of domestic administration.
14. The principle of these decisions was applied in India in the Calcutta High Court by Rankin C. J. in -- 'Ramendranath Mukherjee v. Balurghat Central Co-operative Bank', AIR 1932 Cal 317 (L) who considered the provisions of the Co-operative Societies Act (2 of 1912) and the rules made by the Bengal Government under Section 43 (2) (1) regarding the determination of disputes. The question arose in a suit by the plaintiff for a declaration that a certain resolution passed at the general meeting of the society registered under the Act of 1912 was 'ultra vires', and illegal, and for an injunction restraining the society from acting on it The plaintiff was the holder of 10 preference shares of Rs. 20 each. The effect of the resolution, the legality of which was questioned, was to take away all the preference shares compulsorily at par value and to vest them in the society. It was a mixed society in which the members were partly individuals and partly societies. The object of the resolution was to convert the society into what was styled a "pure type" society i. e., a society from which individuals were eliminated, other societies alone being allowed to continue as members. The objection raised was that the suit was incompetent by reason of Rule 22 enacted by the Provincial Government in exercise of the powers conferred upon it-under Section 43 (2) (1) of the Act of 1912. The rule was as follows :
"Disputes : (1) 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."
In dealing with the objection, Rankin C. J. considered that the dispute was clearly outside the rule notwithstanding the resolution. According to the contention of the plaintiff in that case, he continued to be a preference shareholder and the new constitution brought into existence by the resolution in which ordinary shares were excluded was fundamentally illegal and 'ultra vires'. The matter, therefore, related to the constitution of the society itself and was outside Rule 22. The learned Chief Justice followed the principle of the English cases above noticed and concluded his judgment as follows :
"The terms of the Indian Act and of the Bengal Rule thereunder are certainly somewhat different from the enactments considered in these cases, but I cannot regard a question whether the plaintiff is or is not a shareholder, whether the society's new constitution is valid or invalid, whether it is, in effect of the mixed or pure type, as a mere dispute between members or between a member and an officer 'touching the business of the society'."
It may also be noticed that the dispute in that case was between a member and the society and on that ground also was outside Rule 22, for unlike Section 51 of the Madras Act, it permitted a dispute between a member and a committee or an officer alone to be decided by the Registrar and not a dispute between a member and the society. Though in the arguments reference was made to the meaning of the expression "dispute touching the business of the society", on the one side the contention being that it meant matters of internal administration, while the other side attempted to restrict the word business to anything that the society does or is entitled to do for the fulfilment of its object within the Act and its bye-laws, the learned Judges did not -- there was no necessity for them to do so -- define the scope of the expression. The resolution being one not warranted by the rules and the bye-laws of the society, the matter was within the principle of the decision in -- '1919 A. C. 548 (J)'.
We may now proceed to consider the meaning of the expression "dispute touching the business of a registered society". The words "touching the business of a society" must be given their full import. Here we should bear in mind that the object of the legislation, which brought into existence these corporations for a definite purpose, was not only to confer complete autonomy on them in matters of internal administration but as part and parcel of the same scheme to set up a forum to settle what may be generally referred to as their internal disputes finally and without interference by the ordinary Courts of the land. The word "touching" does not present much difficulty, as its dictionary meaning is "in reference or relation to, respecting, regarding or concerning" thus indicating that the disputes need not directly arise out of the business of the society; but that it is enough that it should have reference or relation to or concern the business of the society. The word "touching" was clearly not intended to restrict the meaning of the word "business"; it was designed to enlarge its scope. The disputes were not to be restricted to matters arising from and out of the business of the society, but were also extended to matters which are in some way concerned or related to the business of the society. The word "business" is used in different senses in different contexts. The dictionary meaning of the word includes "activity, occupation, function and a person's business includes the work to be done on his behalf." Vide Shorter Oxford English Dictionary, page 239. In some Acts, for example, the Companies Act. Section 4 the word "business" is used in a wider sense than the mere trade. Under the Income-tax law, it may mean trade or occupation.
In Section 51 of the Act however there is one indication that the word "business" is not used in a narrow sense for it excludes by the exception disputes regarding disciplinary action taken by the society or its committee against a paid servant of the society, thereby indicating that but for the exclusion it would have been a matter relating to the business of the society. It is no doubt true that some sections of the Act refer to the "affairs, of the society" for example Ss. 14 and 16, while others refer to the business of the society. It was contended on behalf of the petitioners that the word "affair" is wider in its import than the word "business". But we think there is no justification for this distinction. The dictionary meaning of the word "affairs" is : what one has to do or has to do with; business. The words "affair" and "business" in our opinion have been used as interchangeable terms in the Act and are not intended to denote different concepts. The business has to be that of the society, i.e., the corporate activity of the society. What the permissible corporate activities of the society are have to be gathered from the sections of the Act, the rules framed under the Act and the bye-laws made by the corporation.
15. The learned counsel for the petitioners restricted the meaning of the word "business" to all activity within the scope of the objects of the society, though he was willing to include matters necessary and incidental to carry out the objects of the society. On this assumption he contended that the election of directors by the general body was not within the scope of business so defined. In order to find out the business of the society, one cannot confine oneself to the objects enumerated in the bye-laws; one has also to examine the provisions of the Act and the rules and the bye-laws. All that is permitted to be done by the bye-laws, which are 'intra vires' the Act, by the provisions of the Act and by the rules must be deemed to be the business of the society.
For example, taking the bye-laws of this bank along with the provisions of the Act and the rules, it would be seen that the objects of the bank as defined in bye-law 2 are (i) to borrow funds from members or others to be utilised for loans to members for useful purposes, (ii) to act as the agent for the joint purchase of the domestic and other requirements of its members, and (iii) generally to encourage thrift, self help and co-operation among members. Societies are permitted to be registered under Section 4 of the Act (which is exactly the same as Section 4 of Central Act 2 of 1912) if the object 19 the promotion of the economic interests of its members in accordance with co-operative principles, of if it is a society established with the object of facilitating the operations of such a society. The society is also empowered under Section 20 of the Act, which confers on it its corporate status by reason of registration to hold properties, to enter into contracts, to institute and defend suits and other legal proceedings and to do all things necessary for the purposes for which it was constituted. The things that may be done to carry out the purposes for which the society was constituted are defined in the bye laws.
The bye-laws of this bank, which enumerate the objects of the bank also contain provisions for carrying on the business of receiving fixed and recurring deposits, savings bank deposits & also advance loans to members. The executive management of the affairs of the society is vested in a Board of Directors, subject, however to such resolutions as the general body may from time to time pass vide bye law 20. The general body is the ultimate authority in all matters relating to the administration of the society, and under bye law 31, it is authorised among other matters to deal with (i) the election and removal of the Board of directors, (ii) the annual report due to the Registrar of Co-operative Societies, (iii) the Registrar's annual audit certificate (iv) the amendment or repeal of any existing bye-law or the enactment of a new by-law (v) the expulsion of a member (vi) the consideration of any complaint, which any individual member may prefer against the Board of Directors and (vii) the returns that may be prescribed by the local Government. All these matters, it is provided by bye-law 32, should be dealt with in a meeting of the general body of the members convened by the Board of Directors for the conduct of the business. The business, therefore, under bye-law 32 will include all matters enumerated in bye-law 31. The manner in which the business at the meeting should be disposed of is provided for by bye-law 34, i.e., by the expression of the will of the majority of the members present at the meeting.
There are also other matters provided for under the bye-laws. It may be mentioned that the society even at the time of registration is required by Section 10 of the Act to file a copy of the proposed bye-laws, which however ' should not be contrary to the Act or to the rules, and the Registrar is given power to decide whether they are contrary to the provisions of the Act and the rules or not. Under Section 12 the Society is empowered to amend subsequently the bye-laws which, of course, have to be registered in the manner prescribed by the Act. It therefore follows that in order to determine the activities or the "business" of the corporation, one has to look into the provisions of the Act and the rules and the bye-laws framed by the society. All matters comprised in them or are incidental to or necessary for carrying out those matters must be deemed to be the business of the corporation. The power of the corporation is derived from these three sources, and so long as its activity is within those powers, it cannot be questioned as being invalid.
16. Apart from the decisions to be referred to presently, on a plain reading of the provisions, it will be seen that bye-law 32 treats the election of directors by the members at a corporate meeting of the general body as part of the business of the society. A dispute relating therefore to election would undoubtedly be a dispute concerning or relating to the business of the society. It may be asked whether the election of the directors by exercise of the vote of the individual members can be said to be a corporate activity of the society, or whether it should be deemed to be an individual activity of the corporators. It is settled law that a statutory corporation is a distinct legal entity, and its actions, assets, rights and liabilities on the one hand and the individual corporators and their actions, assets, rights and liabilities on the other hand are different; the activities of the individuals and their liabilities and rights cannot be treated as incidental with those of the corporation. This was settled in -- 'Salomon v. Salomon', (1397) AC 22 (M) and in the recent decision of the Judicial Committee in -- 'E. B. M. Company v. Dominion Bank', AIR 1937 PC 279 (N).
It is also well settled that a corporation can only do corporate acts at a corporate meeting, unless a different method is authorised by its constitution. Of course, a corporate, meeting must be summoned and convened by the proper authority indicated under the provisions of the Act or the rules or the bye-laws. A meeting of the corporators, such as a meeting of the general body in the present case, is a corporate assembly, and the will of the majority expressed by their vote at such a meeting is a corporate act of the society and binds the minority and the corporation. A corporation has the right to have an office filled up in accordance with the machinery provided by the bye-laws and though the right to vote is an individual right of the member of the corporator, the resultant action of the meeting is a corporate act done for and on behalf of the corporation. The election, therefore, by the members assembled at a meeting of the general body by exercising their individual vote is therefore an act of the corporation. A corporation can only speak through its members and express its will by the machinery provided under the Act and the Bye-laws. Prom the bye-laws of this Bank, it is obvious that the general body, which is the ultimate authority, is given the power to elect & remove directors, though under bye-law 32, it can only be done in a meeting of the general body convened for the conduct of the business of the society. The activity, therefore, of the members assembled in a meeting is a corporate activity of the society.
17. It now remains to consider the decisions cited at the Bar as throwing light on the question under examination. The word "business" was the subject matter of consideration in some of the decisions. In -- 'G. I. P. Railway Employee Cooperative Bank v. Bhijaki Merwanji', AIR 1943 Bom 341 (O), Chagla J. (as he then was) expressed the opinion that the word "business" was a very wide term & was not synonymous with the objects of the society, and that the expression "touching the business of a society" would mean affecting the business of a society or relating to the business of a society, and that it cannot be said that when a company employs or dismisses a servant, it does not do something which relates to its business. It is true that it is not one of the objects of the company to employ or dismiss servants; but it is something which it does in the ordinary course of business, and whatever is done in the ordinary course Of business certainly relates to or affects the business. The learned Judge followed in this respect a decision of this Court in -- 'P. Dasaratha Rao v. C. Subbarao', AIR 1923 Mad 481 (P), where Krishnan and Venkatasubba Rao JJ. expressed the view that the expression "touching the business of a society" need not be confined to a dispute regarding the internal management of the affairs of a society or disputes in regard to the principles which would regulate the conduct of the business. Even a transaction which arises in the course of the business of the society is within the expression ''touching the business of a society". The learned counsel for the petitioners maintained that the expression "business of a society" should be restricted to "all that activity of the society which is within the objects of the society and which is necessary or incidental to the carrying out or that object" while the Advocate General maintained that every activity of the society within the ambit of the sections, the rules and the bye-laws of the society is business of the society.
The two decisions above cited seem to support the view, which was contended for by the learned Advocate General. (sic) decision which is directly in his favour and supports him is a decision of a Bench of the Allahabad High Court in -- 'Gopinath v. Ramnath', AIR 1925 All 356 (Q), which related to the validity of the election of directors of a co-operative society governed by the Co-operative Societies Act, 1912. This decision was cited with approval by Chagla J. in the Bombay case already referred to. The specific rule framed by the local Government in that case is on the same lines as Clause (1) of Section 43(2) of the Central Act, and the question was whether a suit in which a declaration that the election of the directors was not legal and for an injunction restraining them from acting as such was asked for, was barred by reason of the rule. It was held that the word "business" should not be understood in a restricted sense as confined to monetary transactions of the society, and that the election of its officers was certainly a part of the business of the society, and that such a dispute should be referred to the decision of the Registrar or an arbitrator appointed by him in accordance with the rule made under Section 43, and that the jurisdiction of the civil Court was taken away. Though no reasons were given by the learned Judges in support of their conclusion, that the election of its officers was part of the business of the society, we think in view of what we stated above, that the decision is correct. This decision was pronounced in 1924 and the Madras Act was enacted in 1932. The Legislature must have been aware of this interpretation of the rule, and notwithstanding such knowledge nothing was stated in Section 51 of the Madras Act so as to take out such a dispute from its purview.
18. In -- 'Tanjore Co-operative Marketing Federation v. Krithivasan', (R), our learned brother Govinda Menon J. sitting as a single Judge, held that a suit by an ex-employee of a society to recover a security deposit made by him at the time when he was entertained by the society and for recovery of arrears of salary was not barred by Section 51 and that such a dispute did not relate to the business of the Society. According to the learned Judge to take security deposits was not "business" of the society which was to carry on some kind of co-operative business. Reference was made in that judgment to a decision of one of us in -- 'Narayana Nair v. Secretary T. U. C. S. Ltd.', AIR 1948 Mad 272 (S), as supporting the learned Judge's conclusion, but it may be remarked that the decision in -- 'AIR 1948 Mad 272 (S)', was a case, which was directly within the exception in Section 51, that a dispute regarding the disciplinary action taken by a society or its committee against a paid servant is not within the scope of the section, and it does not in any manner help in construing the expression "touching the business of the society". In our view, this decision takes a very narrow view of the word "business" and does not lay down the law, with great respect to the learned Judge, correctly.
19. Of the three decisions of the Calcutta High Court, -- 'AIR 1932 Cal 317 (L)', has already been referred to and, as pointed out, it does not help us in the interpretation of the expression "touching the business of the society." In the decision in -- 'Barisal Co-operative Central Bank Ltd. v. Benoy Bushan Gupta, AIR 1934 Cal 537 (T), the question raised was whether a person was a legal representative of the deceased and such a question, it was held, wag not a dispute touching the business of a society, as no provision was made by the bye-laws permitting the society to settle such a dispute. The learned Judges relied upon the decision in -- 'AIR 1932 Cal 317 (L)'. in support of their view. The bye-law in that case empowered the Board to deal only with an application for membership and to allot shares but did not authorise the Board to decide a dispute as to who was entitled to succeed as the legal representative of a deceased member. This decision again supports our view that if the matter is within the bye-law of a society it will relate to the business of a society, but if no provision is made in respect of it, it cannot be treated as part of the business of the society.
20. The other decision is the decision of Ma-kerjea J. sitting as a single Judge in -- 'Hardayai Nag v. Chanudpur Central Co-operative Bank', AIR 1938 Cal 394 (U). The rule, which was construed in that case, was a rule framed under Section 43(2)(1), Co-operative Societies Act, 1912, and which was considered by Rankin Q. J. in -- 'AIR 1932 Cal 317 (L)'. The matter arose out of a suit for recovery from a Co-operative Bank of a sum of Rs. 46 as dividend in respect of certain preference shares and for a declaration that a resolution of the managing committee and another resolution passed by the shareholders at a meeting were illegal and 'ultra vires'. The bank at its annual general meeting of the shareholders resolved to pay out of the profits available for distribution for the year a dividend to the preference shareholders. The plaintiff held certain preference shares, in the bank. When he demanded payment of the dividend in respect of his shares, the secretary refused to pay it on the ground that the major portion of the assets shown in the auditor's report was illusory and the real profits were not sufficient to meet the expenses of the society. The committee of management subsequently passed a resolution to that effect, and an extraordinary general meeting of the shareholders was called for in which the earlier resolution was rescinded. The plaintiff attacked also the constitution of the committee as illegal as according to him it was not in accordance with the bye laws of the Bank.
The question was whether the dispute was barred under Rule 22. The payment of the dividend was, no doubt, as pointed out by the learned Judge, a matter touching the business of the society. But the payment of the dividend was merely a consequential relief, which the plaintiff asked for in the suit, the principal relief he wanted being a declaration that the constitution of the Board itself was illegal, that they had no authority to call for an extraordinary general meeting & that, therefore, the resolution passed at the extraordinary general meeting was 'ultra vires'. The duties of the Board were set out in byelaw 31 and the matter was not covered by the bye law. Following the decision in -- 'AIR 1932 Cal 317 (L)' and -- 'AIR 1934 Cal 537 (T)', it was held that the dispute, which related to the constitution of the Board of Management and its power to convene an extraordinary general meeting of the shareholders, was not a matter within Rule 22, and did not bar the jurisdiction of the Court. The suit, however, was finally dismissed on other grounds. This decision again is within the principle enunciated by Rankin C. J. in -- 'AIR 1932 Cal 317 (L)' as the matter was not one, which the Board of Directors were empowered under the bye-law to deal. The dispute did not relate to the election of directors.
21. The decisions of the English Courts in -- Prentice v. London', (1875) 10 CP 679 (V); -- Willis v. Wells', (1892) 2-QB 225 (W) and--'(1897) 1-QB 257 (H)' which related to the expulsion of a member under the English Acts need not detain us as a dispute between a member expelled and the society was not within the purview of the section, as a dispute between a past member and the society was not included in the section. It was, therefore, not treated as a matter relating to the internal management of the society. Those decisions therefore are of no assistance in this case. The decision in -- '(1897) 1-QB 257 (H)' was not approved of by Lord Loreburn, L. C. in (1910) AC 404 (F)' as he expressed the view, that even such a dispute between a person, who ceased to be a member by reason of the expulsion before the litigation began, would fall within the jurisdiction of the domestic forum. The decision in -- 'Krishna Aiyar v. Secretary Urban Bank Ltd, Calicut', A. I. R.1933 Mad 682 (X) was concerned only with the question whether a dispute between a member who acted as the legal adviser of the society and was called to account for certain sums received by him from the Bank while acting as its vakil was liable to be proceeded against under Section 51 of the Madras Cooperative Societies Act. It was held that as the matter did not relate to a dispute between him as a member and the Bank, it was taken out of the purview of Section 61 of the Act.
22. There remain three decisions of this Court, which have occasioned a reference to the Pull Bench. The first case is -- Savitri Bai v. Thotappa (Y), a decision of our learned Brother
Govinda Menon J. sitting as a single Judge. The dispute there related to the dismissal of a person from the office of President of a Co-operative society. A suit was filed for a declaration that a resolution of the managing body removing the plaintiff from the presidentship of the society and appointing defendant 1 as president was illegal, unconstitutional and 'ultra vires'. The defence raised was that the suit was not maintainable in a civil Court as the subject matter of the suit was a matter of domestic concern relating to the business of the society and, therefore, barred under Section 51, Co-operative Societies Act and the bye-laws of the society. The learned trial Judge overruled the preliminary objection, as he was of opinion, that the dispute was not one touching the business of the society. The matter was brought up in revision to the High Court. It was heard and disposed of by our learned brother Govinda Menon J. He considered all the relevant decisions bearing upon the question, and 'at page 427' adverted to the contentions raised on behalf of the plaintiff, that the expression "touching the business" should be limited to such matters as transactions regarding the buying and the selling of commodities, entering into contracts and businesses of such kind, and that when the very foundation of the society is being questioned and when its constitution is itself challenged, a matter of that description could not be said to be a dispute touching the business of the society.
The learned Judge thereafter proceeded to consider whether the bye-laws empowered the general body to remove the president. The bye-laws of that society provided for the removal of a member or a member of the board of directors at any time by a resolution of the general body but there was no provision for the removal of a president during his office by a resolution of the managing committee. As it was, therefore, beyond the power of the society to remove a President, it would undoubtedly be a case falling within the principle of the decision of Rankin C. J. in -- 'AIR 1932 Cal 317 (L)' based upon the decisions of the English Courts as a matter outside the jurisdiction of the tribunal. That decision, therefore can be sustained on the simple-ground that the matter was undoubtedly outside the business of the society.
23. In 'C. M. P. Nos. 6730 and 7779 of 1950', the Honourable the Chief Justice and Viswanatha Sastri J. had to consider the question, whether a dispute relating to the expulsion of a member from a society was within Section 51 of the Act. The petitioner in that case moved the Registrar under Section 51 of the Act for a decision as to the validity of his expulsion, but the Registrar declined jurisdiction on the ground, that the dispute was not one within the scope of Section 51. An appeal to the Government by the petitioner was unsuccessful, and he then moved this Court by a writ, which, as the learned Judges held, should have been for mandamus directing the Registrar of Co-operative Societies to proceed to decide the dispute. The bye-law of the society under which the power Was exercised of expelling the member was as follows :
"If a member deceives the society in any way, or if his general conduct is such as to render his removal necessary in the interests of the society, it shall be open to the general body to expel such member. A member expelled shall be paid money due to him from the society. A member who drives the society to Court to recover the money due from him shall, for that reason be expelled from membership. A member expelled shall be liable as provided in bye-law 3 for the debts due by the society as they stood on the date of his expulsion for a period of two years after such expulsion."
24. The learned Chief Justice held that there being provision in the bye-laws for the expulsion of a member, and having regard to the language of Section 51, the dispute was undoubtedly within the scope of Section 51. The learned Chief Justice, who delivered the judgment of the Court, observed :
"We fail to see how a dispute raised by one of the members of the society against an action of the society taken at a meeting of the general body of the society in the exercise of a power conferred by one of the society's bye-laws cannot be said to be a dispute touching the business of the society. On the day when the resolution was passed expelling the petitioner from membership admittedly this matter of expulsion was one of the items of business on the agenda of the meeting. We do not think it extravagant to hold that the expulsion of an undesirable member is also a part of the business of the society. If so any dispute relating to such an expulsion would be a dispute touching the business of the society."
We respectfully agree with these observations of the learned Chief Justice concurred in by Viswanatha Sastri J. that if a bye law not being 'ultra vires' empowers a society to do a particular act, that act would be the business of the society. It would also be a corporate activity of the society when the decision of expelling a member is taken at the corporate meeting of the general body in the exercise, of the power conferred upon it by the bye-laws of the society. The learned Chief Justice, considered also the three decisions of the Calcutta High Court already referred to and distinguished them as not applicable to the facts of the case before the learned Judge on the ground that in the case before him, the petitioner complained against the action of the society, an action which was sought to be justified by bye-law 35 of the society. No doubt, to quote the learned Chief Justice:
"The bye-law gives to the society the right to expel a member by a resolution passed at a meeting of the general body. The only question is whether the power so conferred was rightly exercised by the society. This matter is, in our opinion, clearly a dispute touching the business of a registered society within the meaning of section 51, Co-operative Societies Act."
The Registrar was, therefore, directed that as it is a matter within his jurisdiction, he should proceed to take up the petition filed by the petitioner and decide the dispute referred to him. With great respect to the learned Judges, we entirely agree with the decision as laying down the law correctly.
25. In 'W. P. Nos. 317 and 318 of 1951' Govinda Menon and Panchapakesa Aiyar JJ. had again to consider the question of the expulsion of a member from a society. The dispute related to the Madura Mills Workers' Co-operative Stores Ltd. The Madura Labour Union was admitted under bye-law 5 of the society as a member of the society, and under bye-law 19, the executive management of the affairs of the society was vested in a Board of directors of not more than five, one of whom had to-be a nominee of the Madura Labour Union. Bye-law 20 provided for the election of the other directors. The Board of Directors was superseded under Section 43 of the Act by the Registrar, and he appointed a special officer to manage the affairs of the society. The Special Officer convened a general body meeting of the society, which was held on 18-3-1951, wherein certain amendments to the bye laws were made. One of the amendments to bye-law 5 and its effect were to make it no longer obligatory to have a nominee of the Madura Labour Union on the Board of Directors. By an amendment to bye-law 14, power was conferred on the general body to remove the nominee of the Madura Labour Union from the Board of Directors and resolutions were also passed under bye-law 35, which is in the same terms as the bye law quoted in the unreported judgment of the learned Chief Justice and Viswanatha Sastri J. already referred to.
In the petition for the writ of mandamus, the petitioners, the Madura Labour Union, attacked the validity of the resolutions passed at the meeting on 18-3-1951 and the amendments made to the constitution and also the resolution expelling the Union from membership. It was held by the learned Judges that the expulsion of the Madura Labour Union by a resolution passed at the meeting on 18-3-1851 was illegal as the Union was not given an opportunity of explaining and defending itself, and the principles of natural justice were not observed, and the maxim 'audi alteram partem' was violated. The point raised was whether the petitioners' remedy was a suit or a reference under Section 51 of the Act.
It was contended on behalf of the petitioners that Section 51 did not apply as the expulsion of a member was not a matter touching the business of the society and, therefore, outside the purview of Section
51. The learned Advocate General also did not dispute that position as his contention was that the petitioners had another remedy, viz, a suit and therefore, the writ should not be issued. The decision of the learned Chief Justice and Viswanatha Sastri J. was brought to the notice of the learned Judges as therein it was decided that a dispute relating to the expulsion of a member was a dispute touching the business of a society under bye-law 35, and therefore, the exclusive jurisdiction to decide the dispute vested in the Registrar under Section 51 of the Act. But the learned Judges adhered to the view taken by Govinda Menon J. sitting as a single Judge in -- ' (Y) as expressing the sounder view and dissented from the decision of the learned Chief Justice and Viswanatha Sastri J. It would be seen that there was really no conflict as -- ' (Y)' was a case in which the society was not empowered by the bye-law to remove the President, while in the case before the learned Chief Justice and Viswanatha Sastri J. the bye-law authorised the expulsion of the member by the general body. In the one ease the removal of the President was not the business of the society, while in the other case the expulsion of the member was within its scope. The dispute in the case before Govinda Menon and panchapakesa Ayyar JJ. relating to the expulsion of the member, viz, the Madura Labour Union, was undoubtedly within bye law 35 and, therefore, exclusively triable by the Registrar under Section 51 of the Act. If the principles of natural justice were violated by the authority concerned in passing the resolution expelling the member, it would have been perfectly open to the Registrar to consider that aspect and give relief to the petitioner.
It is one thing to say that the adjudication by a tribunal is vitiated by the non-observance of the principles of natural justice and a totally different thing to say that a general body has violated such principles. The violation of the principles by the general body is a matter, which could be rectified and considered by the Registrar acting under Section 51 of the Act, while an adjudication by a tribunal under such circumstances could be set aside by a Court. Instead of the learned Judges dissenting from the judgment of a Bench, if we may say so with respect, they could have adopted the course of referring it to a Pull Bench as was pointed out by the Full Bench in -- 'Seshmma v. Venkata Narasimharao', AIR 1940 Mad 356 at p. 362 (Z), Leach C. J. observed as follows:
"The Division Bench is the final Court of Appeal in an Indian High Court, unless the case is referred to a Full Bench, and one Division Bench should regard itself bound by the decision of another Division Bench on a question of law. In England, where there is the Court of Appeal, Divisional Courts follow the decisions of other Divisional courts on the grounds of judicial comity ...... If a Division Bench does not accept as correct the decision on a question of law of another Division Bench the only right and proper course to adopt is to refer the matter to a Full Bench, for which the rules of this Court provide. If this course is not adopted, the Courts subordinate to the High Court are left without guidance. Apart from the impropriety of an appellate Bench refusing to regard itself bound by a previous decision on a question of law of an appellate Bench of equal strength and the difficulty placed in the way of subordinate Courts administering justice, there are the additional factors of the loss of money and the waste of judicial time."
The conclusion reached by the learned Judges, that the dispute was not one within Section 51 of the Act is, in our opinion, erroneous. The learned Judges also went into the question, whether a writ of mandamus. could be issued against a body like a co-operative Society which is not a public body. It is unnecessary for us to go into that question as it docs not arise for consideration in the present case.
26. We are, therefore, of opinion, that the adjudication of the Deputy Registrar setting aside the election of the petitioners and respondent 5 in the present case was within his jurisdiction and cannot be set aside or quashed in these proceedings.
27. It follows that W. P. NO. 632 of 1951 should be dismissed with costs, Rs. 250; W. P. No. 79 of 1952 is also dismissed but without costs.