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The South Kanara Central Co-operative Bank Ltd., by Its Secretary G. Venugopala Rao Vs. the Chikumudnur Co-operative Society Ltd., No. 1759, by Its President, B. Narasinga Rai and anr. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtChennai
Decided On
Reported in150Ind.Cas.172; (1934)66MLJ475
AppellantThe South Kanara Central Co-operative Bank Ltd., by Its Secretary G. Venugopala Rao
RespondentThe Chikumudnur Co-operative Society Ltd., No. 1759, by Its President, B. Narasinga Rai and anr.
Cases ReferredHarihar Prasad v. Bansi Missir I.L.R.
Excerpt:
- .....and by attachment of his movable and immovable properties. the decree was against chikumudnur co-operative society no. 1759 represented by (1) its president, b. narasinga rai, and (2) the said b. narasinga rai. the lower court refused execution on the ground that the decree is against the co-operative society as a corporate body and not against the shareholders or members of the society in their individual capacity. against this order the present appeal has been filed.2. the respondent is not represented. the learned advocate for the appellant quotes kuppu govinda chetty v. secretary, co-operative central bank, conjeevaram 1932 m.w.n. 18. that ruling is in his favour though the point was hardly discussed and seems almost to have been considered as incontrovertible. he has however with.....
Judgment:

1. The decree holder in Claim No. 183 of 1927-28 on the file of the Deputy Registrar of Co-operative Societies, Coimbatore, put in an execution petition praying to recover Rs. 5,407-8-8 by arrest of 2nd defendant and by attachment of his movable and immovable properties. The decree was against Chikumudnur Co-operative Society No. 1759 represented by (1) its President, B. Narasinga Rai, and (2) the said B. Narasinga Rai. The Lower Court refused execution on the ground that the decree is against the Co-operative Society as a corporate body and not against the shareholders or members of the Society in their individual capacity. Against this order the present appeal has been filed.

2. The respondent is not represented. The learned Advocate for the appellant quotes Kuppu Govinda Chetty v. Secretary, Co-operative Central Bank, Conjeevaram 1932 M.W.N. 18. That ruling is in his favour though the point was hardly discussed and seems almost to have been considered as incontrovertible. He has however with great fairness pointed out to us a Full Bench ruling in Harihar Prasad v. Bansi Missir I.L.R. (1931) Pat. 174 in which the matter is most elaborately discussed and it is held that the individual liability of members of a corporation does not arise until the stage of winding up is reached. In that case the defendant was 'a village Co-operative Society registered under the Act of 1912, and having members with unlimited liability. The first part of the argument in that case is founded on general principles. It is pointed out that the effect of incorporating a number of persons into a body corporate is to make that body corporate a separate legal entity or persona, and the remarks of Justice Cave in In re Sheffield and South Yorkshire Permanent Building Society (1889) 22 Q.B.D. 470 to the following effect are quoted;

A corporation is a legal persona just as much as an individual; and, if a man trusts a corporation, he trusts that legal persona, and must look to its assets for payment: he can only call upon individual members to contribute in case the Act or charter has so provided.

4. Then the learned Judges say that this was conceded, but that the learned Government Pleader contended that the provisions of the Act are such as to take it out of the ordinary rule of law and for this reliance was placed upon Section 4, Sub-section (2). The learned Judges in considering this objection remark:

At Common Law the Crown could create a body corporate under its prerogative but the Crown had no power to create a corporation and at the same time to render its members liable for its debts.

5. This they support by the authority of Lord Justice Lindley in Rive v. Boyton (1891) 1 Ch. D. 501 of the creation of such a liability under statute. They quote one instance 6 Geo. 4, c. 91. They then proceed to point out that the Act of 7 and 8 Vic, c. 110, Section 25 is an important piece of legislation on the point. 'After providing for the existence of bodies corporate under the Act, it provides that 'such Company shall continue incorporate until it is dissolved....but not so as in any way to restrict the liability of any of the shareholders under any judgment...which shall be obtained against such Company or any members thereof in any action . . . but every member of the Company shall continue to be liable as if the said Company had not been incorporated' '. This provision as to the liability to execution against a member was omitted not only in the later Companies Act in England but in the Companies Act of India of 1882 and the later Companies Act of 1913. Then they proceed to remark that 'under the present Statute Law it is conceded that no execution can levy against individual members, and this state of affairs has been brought about not by any provision in any Statute relating to corporations but by the mere omission of any provision to the effect that a judgment-creditor or decree-holder may execute against a member of a body corporate'. They then say that the same principles apply to Societies incorporated under the Co-operative Societies Act and quote Lord Lindley in the 6th Edition of his book on Companies at page 1229. While speaking of an Industrial Provident Society spoken of as the Co-operative Societies in England, he states that

As in the case of Companies registered under the Companies Act, 1862, so in the case of Societies registered under the Act now in question, the members are not liable to have execution issued against them in respect of judgments obtained against the Society. The members can only be reached individually by the process of winding-up.

6. The learned Judges then proceed to consider Section 4 of the Co-operative Societies Act and again they quote Lord Lindley at p. 363 of his work on Companies in dealing with Companies with unlimited liability:

If the Company is not registered with limited liability the members are liable to the full amount of the Company's debts and engagements, whatever that may be. The liability, however, is a liability to contribute with others and such liability can only be enforced upon the winding up and no execution can proceed against a member.

7. They reject the argument of the learned Government Pleader on what he deemed to be the policy of the Act and say that the short answer to that is that the Act has provided a method and that method must be adopted by any creditor excepting the Crown in which case an exception appears to have been made in Section 44. After dealing with Rule 13, Sections 18 and 39 they point out that Section 44 is a complete answer to the whole argument. Section 44 allows the Government, in cases where there are sums due to it from a registered society or from an officer or member, or past member, to recover such sums, first from the ; property of the Society, secondly in the case of a Society of which the liability of the members is limited, from the members subject to the limit of their liability, and thirdly in the case of other Societies from the members. . They point out that this is an exception in favour of the Government and if indeed it is an exception in favour of the Crown then the rule to which it is an exception must be contrary to the exception, the rule being that a creditor cannot recover from the member of the Society. They then state that

It is common sense and a rule of Common Law that a judgment against one person (and a Co-operative Society is a legal persona) cannot be executed against another (see Lindley, p. 390). There is no method in the Civil Procedure Code by which the judgment could be executed against any other person than the Society.

8. They then point out that

Under the rules of the Supreme Court in England provision is made under Order 42, Rule 23 for execution where a party is entitled to execution against any of the shareholders of the Joint Stock Company in a judgment recorded against such Company.

9. This rule under the Judicature Act was in substitution for the method of proceeding by way of a writ of Scire Facias under which a judgment-creditor could pursue his remedy against a member of the Company where the Act incorporating the Company allowed him to do so, such as in the cases under 7 and 8 Vic, c. 110, Section 25. There is no similar provision in the Civil Procedure Code in India, and indeed there is no Statute which allows a decree-holder against a registered Society or other body corporate to pursue his remedy in execution against a member.

10. As noted above the matter was hardly discussed in Kuppu Govinda Chetty v. Secretary, Co-operative Central Bank, Conjeevaram 1932 M.W.N. 18. We have no hesitation in following the Full Bench decision in Harihar Prasad v. Bansi Missir I.L.R. (1931) Pat. 174, which has been brought to our notice by the learned Advocate for the appellant, since the other side is not represented. We find also that in Madras the Co-operative Societies Act, Section 4 has been amended subsequent to the judgment of the Patna High Court and probably as a result of it. We are not called upon to say whether the view that each member can be proceeded against individually before liquidation has been definitely negatived by the amendment though it may be argued that this follows by implication. The said amendment was not in force at the date of the execution petition and it is therefore unnecessary to discuss its exact scope. In the result the order of the Lower Court is confirmed and the appeal dismissed. No costs.


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