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South Indian Co-operative Insurance Society Ltd., Madras Vs. V. Bapi Raju - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtChennai High Court
Decided On
Case NumberLetters Patent Appeal No. 132 of 1954
Judge
Reported inAIR1955Mad694
ActsMadras Co-operative Societies Act, 1932 - Sections 51 and 51(1); Code of Civil Procedure (CPC) , 1908; Arbitration Act, 1940 - Sections 34, 39, 39(2) and 46
AppellantSouth Indian Co-operative Insurance Society Ltd., Madras
RespondentV. Bapi Raju
Appellant AdvocateK. Rajah Ayyar and ;K. Subba Rao, Advs.
Respondent AdvocateG. Balaparameswari Rao and ;M. Subramaniam, Advs.
DispositionAppeal dismissed
Cases ReferredHanuman Chamber of Commerce v. Jassaram Hiranand
Excerpt:
.....co-operative society - insurance being authorised business of co-operative society claim touches business of society - held, if claim arises out of ordinary business of registered society section 51 directly attracted and reference of such dispute has necessarily to be made to registrar under act. - - section 51 (1) would, in our opinion, clearly make disputes, including claims for debts or demands touching the business of the society made either by the society against its members, or by its members or persons claiming through them against the society, compulsorily referable to the registrar for decision, the only criterion being whether the dispute touched the business of the society. ' section 51 (1) (d) of the madras co-operative societies act in its statutory, and mandatory..........to the registrar for decision and excluding from such reference claims by members against the society.an explanation to a section in a statute has to be interpreted within the scope of what it purports to be that is; something which 'explains' the section. an explanation cannot have the effect of destroying the meaning of, or rendering nugatory, a section of law which it seeks to explain. an explanation must be interpreted as something which explains the section, and it may do so, by clarification of some doubt, or by way of an addition or subtraction, but never by way of depriving the section itself of meaning and common sense.we have ourselves found no difficulty at ail in interpreting section 51 and the explanation taken as a whole there can, in our view, be no doubt that in any.....
Judgment:

Mack, J.

1. This, is a Letters Patent Appeal admitted by a learned Bench of this court against C. M. A. No. 522 of 1952, against an order by Basheer Ahmed Sayeed J. dismissing an appeal against an order of the learned City Civil Judge Madras, refusing to stay O. S. No. 405 of 1952 under Section 34 of the Arbitration Act, 10 of 1940.

2. The facts are shortly these. Appellant and the defendant in the suit is the South India Co-operative Insurance Society. Ltd.. Madras. The suit was filed by the plaintiff respondent as a nominee of an insurance policy taken but with, this society by his late brother, Mr. Viyyanna, an advocate, who died on 10-4-1949. The policy was a double endowment policy No. 2190 dated 9-4-1935, under which a sum of Rs. 1,000 was payable if the assured died within a period of 15 years from the date of the policy. An enhanced sum of Rs. 2,000 would become payable if he survived this period.

The policy matured on 8-4-1950 and the last premium was payable on 9-1-1950. The Society claimed that it was liable to pay only Rs. 1,000, less arrears of premium for three months. Plain-tiff on various grounds sought to recover Rs. 2,000, or in the alternative, refund of the excess of premia paid over and above the sum of Rs. 1,000. One of the grounds set out in the plaint was that this double endowment policy was of the nature of a wagering contract.

3. The City Civil Judge dismissed an application by the defendant Society under Section 34 of the Arbitration Act for stay pending a resolution of the dispute by the Registrar of Co-operative Societies under the Madras Co-operative Societies Act, holding that the present dispute was one which did not touch the business of the society, Within the meaning of Section 51 of the Act, and furthermore, that as there were complicated questions of law involved in this claim he would be inclined to exercise his discretion, presumably under Section 34 of the Arbitration Act, arid retain the suit for disposal in the City Civil Court.

In appeal Basheer Ahmed Sayeed J. held, in our opinion, quite rightly, that this dispute was one which touched the business of the society. But as we understand his judgment, he found great difficulty in bringing this dispute within the scope of Section 51(1), in view of the Explanation to the section. He agreed with the difficulties found by the learned City Civil Judge in the explanation, which led him also to take this dispute out of the category of those touching the business of the Society.

4. It is necessary, in order to consider the difficulties attributed to the explanation; to set out the relevant portions of Section 51(1) of the Act: Section 51 (1): If any dispute touching the business of a registered society, other than 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

(d) between the society and any other registered 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.'

As we read the judgment of Basheer Ahmed Sayeed J. he would not have found the slightest difficulty in bringing this dispute within the scope of Section 51(1) and holding that it shall be referred to the Registrar for decision but for the explanation.

5. In our opinion there can be no doubt, inthe first place, that this claim by the nominee ofan insured person against this co-operative insurance society for payment of what is due undera policy is a dispute touching the business of thissociety. Section 51 (1) (b) specifically refers to disputes between persons claiming through a member past member or deceased member of the society.

We are unable to accept the view taken of this explanation that it brought only claims by the Society for debts or demands due to it from members, past members or their nominees and so on within the scope of a dispute compulsorily referable to the Registrar and excluded claims of a similar nature by the members against a society, which could not therefore be referred to the Registrar for decision under the Act, but which were enforceable only by action in a civil court. If the explanation were taken away altogether. Section 51 (1) would, in our opinion, clearly make disputes, including claims for debts or demands touching the business of the society made either by the society against its members, or by its members or persons claiming through them against the society, compulsorily referable to the Registrar for decision, the only criterion being whether the dispute touched the business of the society.

6. The view taken by the learned City Civil Judge, confirmed in appeal appears with respect to be erroneous in its attributing to the explanation a complete exclusion of claims by members for debts and demands against the society from the scope of disputes referable to the Registrar. An explanation to a section in a statute cannot have the effect of vivisecting it in this manner and depriving it of all meaning and of providing a one way traffic for the reference of claims by the society against members to the Registrar for decision and excluding from such reference claims by members against the Society.

An explanation to a section in a statute has to be Interpreted within the scope of what it purports to be that is; something which 'explains' the section. An explanation cannot have the effect of destroying the meaning of, or rendering nugatory, a section of law which it seeks to explain. An explanation must be interpreted as something which explains the section, and it may do so, by clarification of some doubt, or by way of an addition or subtraction, but never by way of depriving the section itself of meaning and common sense.

We have ourselves found no difficulty at ail in interpreting Section 51 and the explanation taken as a whole There can, in our view, be no doubt that in any dispute touching the business of a registered society, claims by members against the society, and by the society against members are referable compulsorily to the Registrar. The effect of the explanation is simply, as it appears to us, this, that when a claim by the society for any debt or demand is made due by it from members, their nominees, heirs and so on, it is a dispute touching the business of the society and no objection can be taken on the ground that such a claim, for any debt or demand does not touch the business of the society, the object being to stop the society suing in the ordinary courts to recover any claims by way of debts or demands due to it from members.

But the converse of the explanation does not follow; and claims by members of their nominees, heirs or legal representatives against the society are compulsorily referable to the Registrar only if they arise out of a dispute touching the business of the society. In other words, the right by members of the society to take to the ordinary courts any claim they make on the society which does not touch the business of the society is not taken away by the Act. Nor can the society oppose such an action in the ordinary civil courts unless it can satisfy the court that the dispute, between the member and itself touches the business of the society within the meaning of Section 51.

The intention of the legislature appears to be, while stopping the society from suing its members for any debts or demands due from them as members, to keep alive the right of suit by members against the society in dispute which a member may maintain does not touch the business of the society, as it is only in this way that serious abuses in the administration of co-operative societies can be checked and controlled.

7. The learned City Civil Judge was to some, extent guided in his conclusion by the reference in Maxwell's Interpretation of Statutes, 7th Edn. page 78, to a line of decisions arising out of the repealed Friendly Societies Act. 1829, which required a reference to arbitration of 'every matter in dispute' between a society and any of its members. This was held to be confined to disputes between members, as members, and a breach of covenant by a member to repay a sum borrowed from his society was, therefore, regarded as not falling within the arbitration clause, the dispute being with the member as debtor, not as member.

We are here interpreting the language of an enactment of the year 1932. We do not think we can obtain any assistance in English case law which interpreted a provision in an Act of 1829 where the language taken as a whole was quite different. In interpreting the language of statutes we should see in the first instance, before exploring the labryntbine mazes of ancient case law, whether the language of the section is sufficiently clear and unambiguous to permit a reasonable interpretation in consonance with the objects of the legislation. Any interpretation which destroys the effect of a section and rendering it nugatory, if not meaningless, should be avoided, unless the language of the section makes such an interpretation inescapable.

8. The mere fact that Section 51 appears in a separate chapter with the caption 'Arbitration' will not by itself bring the present dispute within the scope of the Arbitration Act. Such a dispute has to be referred compulsorily to the Registrar for decision under Section 51 (b) and the Registrar may on receipt of such reference, either decide the dispute himself or transfer it for disposal to any person invested by the State Government with powers in that behalf -- and we understand that there is in existence such a penal of empowered persons -- or subject to such rules as may be prescribed, refer it for disposal to an arbitrator or arbitrators.

In any event it is only when the Registrar decides to refer the matter for disposal to an arbitrator or arbitration proceedings as such can be held to have commenced. Nor does the Registrar when he decides a dispute do so as an arbitrator. We are here seeking to interpret an Act of the year 1932 which has been in existence for more than 20 years and in accordance with which claims by members against a society in disputes touching the business of the society have been referred to the Registrar for disposal. We have no hesitation in expressing our disagreement with respect, the view taken by the learned City Civil Judge and Basheer Ahmed Sayeed J. as regards the scope of the explanation to Section 51.

We hold that if the dispute touches the business of society, and in the present case there can be no doubt about this -- any claim made by a member or anyone claiming from him against the society out of such a dispute, is compulsorily referable to the Registrar for disposal, under Section 51 (1) (d).

9. It has next been seriously contended by Mr. Balaparameswari Rao that this letters patent appeal, though admitted by a learned Bench, is not maintainable on two grounds. The first ground is that under Section 39(2) of the Arbitration Act no second appeal shall lie from an order passed in appeal against an order staying or refusing to stay legal proceedings where there Is an arbitration agreement. This contention presumes the applicability of Sections 34 and 39(2) of the Arbitration Act to Section 51 of the Madras Co-operative Societies Act which provides a special machinery for the determination of disputes between cooperative societies and their members.

It is only necessary to refer to Section 46 of the Arbitration Act which makes the great bulk of its provisions including Sections 34 and 39 applicable to 'every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as If that other enactment were an arbitration agreement, except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder.' Section 51 (1) (d) of the Madras Co-operative Societies Act in its statutory, and mandatory direction that all disputes coming within the scope of Section 51 shall be referred to the Registrar for disposal is clearly inconsistent with Sections 34 and 39 of the Arbitration Act.

If authority is necessary, reference may be made to 'Nandkishore v. Bally Co-operative Credit Society Ltd. : AIR1943Cal255 , which clearly took the view that the provisions of the Arbitration Art would not apply to rules of arbitration provided in the Co-operative Societies Act which were inconsistent with them. There is also another ground on which this argument of maintainability becomes undermined, and that is the inapplicability of Section 34 of the Arbitration Act taken by itself to proceedings under Section 51 of the Madras Co-operative Societies Act.

The Society itself appears to us to have erred in law in asking for stay of this suit under Section 34 of the Arbitration Act which has no application. Section 34 clearly invests a civil Court With a discretion either to stay proceedings or to continue with the suit and it is under the statutory discretion derived from Section 34 that both the learned City Civil Judge and Basheer Ahmed Sayeed J. considered that in view of complicated matters of law they thought were involved, this dispute should be tried by a civil Court.

Section 34, however, is clearly inconsistent with Section 51 (1) (d) which lays down in mandatory terms that the type of dispute coming within the scope of Section 51 shall be referred to the Registrar for decision, giving no discretion in the matter whatsoever to a civil Court. The application for stay under Section 34 of the Arbitration Act itself made by the Society appears to be incompetent and not maintainable. Nor can this submission by the Society to the civil Court's jurisdiction which may be vested in the civil Court under Section 34 clothe it with any discretion to shut out reference of this dispute to the Registrar and take it upon itself to resolve the dispute as in an ordinary suit.

I have no hesitation in holding that the application under Section 34 itself was therefore non-maintainable. The learned City Civil Judge should have given his attention in the first instance to a finding as regards the maintainability of the suit itself under Section 51 of the Madras Cooperative Societies Act. He should now proceed to do so in the light of our observations as regards the scope of the explanation to Section 51.

10. A final contention as regards maintainability is that the order of Basheer Ahmed Sayeed J. is not appealable under Clause 15 of the Letters Patent. This is a matter which has been canvassed at great length in a Full Bench deicision, 'Rangaswami Chettiar and Co. v. Iswaramurthi Gounder,' : AIR1954Mad1053 (B), to which I was a party. I adhere to the view I took there that in view of the difficulty, if not impossibility, of deciding whether an order by a single Judge of this, Court would amount to a judgment under Clause 15 of the Letters Patent or not the only criterion that could be applied, pending amended legislation on the point, is whether a learned Bench of this Court has seen fit to admit the appeal on Its merits.

I took the view there that the appeal ability should ultimately depend on the order itself, and it would be an extremely difficult matter to separate into rigid categories judgments or orders which are or are not technically appealable. The result is rather an anomalous one, that the application, out of which this appeal arises, under Section 34 of the Arbitration Act has been rightly dismissed, not for the reasons given by the learned City Civil Judge but as not maintainable, and that the appeal itself has technically to be dismissed despite the fact that we have reversed the Important finding as regards the scope of Section 51 of the Madras Co-operative Societies Act. In the circumstances we direct the parties to bear their own costs throughout.

Krishnaswami Nayudu, J.

11. I have read the judgment of my learned brother and I agree that the appeal has to he dismissed, though, in substance, the appellant has succeeded and has established that the suit is not maintainable in a civil Court in view of the provisions of Section 51 of the Madras High Co-operative Societies Act.

12. The suit is to recover a sum of Rs. 1218-13-4 with interest and costs. The plaintiff's contention is that on a proper interpretation of the contract of insurance, the defendant-society must pay Rs. 2,000, after the expiry of 15 years from the date of the commencement of the policy that the alternative part of the contract relied upon by the Society, which provides that only Rs. 1000 are payable on death before the expiry of 15 years is void as a wagering contract, but the rest of the contract that the defendant should pay Rs. 2,000 after the expiry of 15 years is perfectly valid and binding on the defendant and the plaintiff is in any event entitled to a sum of Rs. 1000 and interest thereon amounting to Rs. 218-13-4.

In the alternative the plaintiff seeks to get a refund of the amounts actually paid to the defendant less Rs. 918-7-0 already paid by the defendant. The plaint further proceeds to state that the matter cannot be referred to the arbitration of the Registrar of Co-operative Societies and can be filed in this Court as wagering contracts are not part of the business of the defendant society and that there is no legal impediment for plaintiff's filing the suit in a civil Court and that the Registrar of Co-operative Societies expressed his opinion even before the plaintiff referred the matter to him for his arbitration.

13. The real point that requires to be decided is whether the dispute between the parties arising in the suit is a dispute touching the business of the society:

'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'

within the meaning of Section 51 (1) (b) of the Madras Co-operative Societies Act, 6 of 1932 and therefore it requires to be referred to the Registrar, the civil Court not having jurisdiction to decide the dispute. The suit pertains to a claim made under an insurance policy issued by the defendant, insurance being the authorised business of the defendant society and there could therefore be no difficulty in holding that the suit claim touches the business of the society.

It is, however, urged as pointed out In the plaint, that the terms of the contract of Insurance as to payment of only Rs. 1000 if the insured dies before the expiry of the 15 years period is in the nature of a wagering contract, since notwithstanding the receipt by the defendant-society of premiums exceeding Rs. 1000 the liability of the society would be only Rs. 1,000 and this is argued to be a term in the nature of a wager, and therefore should be relieved against.

This is one of the grounds on which the plaintiff supports his claim; but the fact that the validity of the contract or any particular term of the contract is one of the issues arising out of dispute cannot have the effect of making the dispute as one which does not touch the business of the society, that is, which has no manner of reference to the business of the society. Once the claim arises out of the ordinary business of a registered society, as in the present case oat of the policy of insurance issued by the society, insurance being a part at its business, the application of Section 51 is directly attracted, and the reference of such dispute has necessarily to be made to the Registrar under the Act.

14. The meaning of 'dispute touching the business of a registered society' has been the subject of consideration by a Pull Bench of our High Court in 'Madhavarao v. Surya Rao', : AIR1954Mad103 (C) where the words 'touching the business of a registered society' have been given a wide interpretation. The Full Bench observed at page 107

'The words touching the business of a society must be given their full import.... 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 dispute 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 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 ruled framed under the Act and the bye-laws made by the Corporation.'

15. Any business that is within the scope of the object of the society would constitute the business of the society and any claim, which has some relation or reference to the business of the society, must be treated as a dispute touching its business and unless the claim or the dispute is one which arises out of a business which is not included in the permitted, or authorised activities of the society, the civil Court can have no jurisdiction. I am in agreement with the view of my learned brother as to the scope of Section 51.

The view taken that the present dispute is not one which requires to be referred to the Registrar is vitiated by seeking to bring the present dispute within the Explanation of Section 51, ignoring the provisions of the section Itself. Once it is found that the dispute that arises in the suit is one that touches the business of the society, as we have held, Section 51 applies and there is no need to rely on the explanation. In order to ascertain whether the particular facts attracts the application of a provision in a statute, one has only to see whether the language of the section is applicable to the facts of the case. If the section has in addition an explanation, Courts have to see whether any assistance could be derived from the explanation.

An explanation is not intended as a substitute for the original section itself, but is is only to clarify or elucidate any ambiguity or doubt arising in the language of the section. Ordinarily, an explanation does not enlarge the scope of the original section, which it is supposed to explain. But the Explanation to Section 51 appears to enlarge the scope of the section itself in so far as a claim by a registered society for any debt or demand due to it from a member past member or others is concerned as it is placed in the same category as a dispute touching the business of the society notwithstanding that it may not have any relation or reference to the authorised business of the society.

However, it appears to me that the explanation to Section 51 cannot be considered to have been enacted with a view to merely explain and clarify the provision of the original section, but to add to the classes of disputes which may be referred to the Registrar. However, it is not necessary for our present purpose to express any opinion as to whether the subject of the explanation could not have been more appropriately included in the section as a sub-section or enacted as an additional provision.

It is sufficient to observe that the explanation could on no account be considered to limit, restrict or curtail the scope of the original section and it is therefore unnecessary to resort to the explanation before considering whether the original section itself is applicable. It appears to me that the judgment appealed against proceeded on the assumption that the explanation in this case was more in the nature of a proviso than an explanation, but even in respect of a proviso, where the language of the section is unambiguous and otherwise clear, it cannot have any bearing on the interpretation of the main section Itself so as to exclude from it implicitly what is clearly within the scope of its terms.

An explanation, however, is different from a proviso, as a proviso excludes limits or restricts, while an explanation clarifies or explains, the clarification being in respect of matters, which may not be explicit in the original section itself, but whose meaning is implicit. In this case there is no difficulty in holding that the dispute that arose in the suit is one which comes within the scope of the dispute touching the business of the society under Section 51 (1) (b) of the Act and that therefore it requires to be referred to the Registrar for his decision. The suit becomes therefore not maintainable.

16. The present appeal, however, has to fail as the same is not maintainable under Section 39(2) of the Arbitration Act of 1940 . A Bench of this Court in - 'Radhakrishnamurthi v. Ethirajulu Chetti and Co AIR 1945 Mad 181 (D), held that an appeal under Clause 15 of the Letters Patent against the judgment of a single Judge of the High Court setting aside an order of the City Civil Court under the provisions of Section 39 of the Arbitration Act, 1940, is barred by reason of Sub-section 2 of the section, though a contrary view was taken by the Lahore High Court in - 'Hanuman Chamber of Commerce v. Jassaram Hiranand AIR 1948 Lah 64 (E), where the view of our High Court is dissented from.

I would prefer to follow the ruling of our High Court as to the application of Section 39(2) to appeals under Clause 15 of the Letters Patent. The second appeal contemplated under Section 39(2) meaning a further appeal and not a second appeal under Section 100, C. P. Code.

17. I. A. No. 1841 of 1952, the petition by the Society before the City Civil Court, was filed under Section 34 of the dIndian Arbitration Act for stay of proceedings in the suit. Appeal A. A. O. No. 522 of 1952, which was heard by our learned brother, Basheer Ahmed Sayeed J. was one laid under Section 39(1)(v) of the Act and the present appeal is under Clause 15 of the Letters Patent, In view of the Bench decision, the appeal cannot be sustained. That will be sufficient to dispose of this appeal, and I do not therefore consider it necessary to express any opinion as to whether Section 34 of the Indian Arbitration Act is inconsistent with Section 51 (1) (d) of the Madras Co-operative Societies Act, or as to the application of the Arbitration Act to a reference under Section 51 of the Co-operative Societies Act.

In view of the fact that I. A. No. 1841 of of 1952 in the City Civil Court was expressly laid under Section 34 and the appeal against it A. A. O. No. 522 of 1952 being under Section 39(1)(v) of the Arbitration Act, the question as to the maintainability of the appeal is covered by the decision of our High Court.


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