1. The petitioner prays for the issue of a writ of certiorari or any other appropriate writ to quash the order of the Joint Registrar of Co-operative Societies in R.P. No. 24 of 1958 on his file, dated 11th June, 1959.
2. The facts giving rise to this petition are as follows. The petitioner's father and the petitioner were members of the Koohur Co-operative Credit Society, hereinafter referred to as the Society, the second respondent herein. The petitioners father had obtained loans from the Society and had offered securities of his properties for the repayment of the debt. It appears that the petitioner and his father had been making various instalments of payments towards the debts. A pass book had been issued by the Society making the credits and debits relating to the debts incurred. The Society had only one employee, who was functioning both as cashier and clerk. In the year 1956, it was discovered that the cashier-cum-clerk had misappropriated large sums of money and manipulated entries in the account books of the Society. There was an enquiry in the matter by the two Sub-Registrars and the account books were scrutinised. The extent of the misappropriation of the employee was about Rs. 13,000. He was duly prosecuted in a criminal Court and was convicted for the offence of misappropriation and sentenced to a term of 2 years rigorous imprisonment. The petitioner was one of the witnesses on the side of the prosecution to prove payments made to the employee in the course of the discharge of his duties.
3. The Society filed an arbitration reference under the Co-operative Societies Act before the Deputy Registrar, Tiruchirappalli, for the recovery of a sum of Rs. 1,188-33 nP. from the petitioner in his capacity as a member and legal representative of his deceased father, Chinnadorai Muthirayar. The Deputy Registrar took the reference on his file and transferred it to the Co-operative Sub-Registrar, Tiruchirapalli North for enquiry and disposal. The Sub-Registrar enquired into the matter and passed a combined mortgage award for Rs. 2,541-10-0 against the petitioner in respect of two claims, A.R.C. No. 401 of 1957-58 and A.R.C. No. 402 of 1957-58. The subject-matter of this Writ Petition relates only to A.R.C. No. 401 of 1957-1958. This was the reference in respect of Loan No. 1403 under which the petitioner's father had obtained a loan of Rs. 2,000 on 12th April, 1949. The petitioner's case was that he had repaid the entire loan, principal and interest, by making payments on various dates in unequal instalments except a balance of one rupee. The evidence on which the petitioner relied to prove the discharge pleaded by him consisted mainly of the pass book issued on behalf of the Society in his favour. The Sub-Registrar compared the entries of the pass book with the account books maintained on behalf of the Society and such comparison only disclosed great disparity between the two. The pass book was however rejected as not constituting proper evidence, not on the ground that the entries therein were not genuine, but on the ground that it was signed only by the ex-clerk of the Society who had under the bye-laws of the Society no authority to receive money on behalf of the Society and bind the Society. The Sub-Registrar in holding against the petitioner observed thus:
According to the bye-laws of the Society the pass book should have been got signed by the Secretary or officer authorised by the Panchayat. The entries in the pass book which are not supported by relative authenticated receipts and signed by the ex-clerk not authorised under the bye-laws or by resolution of the Panchayat cannot be recognised for the purpose of clearance of this loan. I therefore hold that the defendant is liable.
4. The petitioner preferred a revision petition before the Joint Registrar of Cooperative Societies, Madras. The revising authority affirmed the decision of the Sub-Registrar. Dealing with the evidentiary value of the pass-book he observed thus:
The attestation in the pass book is under the signature of the clerk of the Society who is not a responsible officer under the bye-laws of the Society and it is therefore difficult to admit the accuracy of all the entries in the pass-book.
It is obvious that the decision of the revising authority was considerably influenced by its view that the entries in the pass book do not afford any cogent evidence in support of the plea of discharge of the petitioner.
5. The pass-book cannot be straightaway rejected merely on the ground that it was. signed not by the Secretary or by ' responsible officer' but only by the ex-clerk of the Society. It is true that the bye-laws should be strictly applied and neither a member nor the Society can be permitted to take up a position contrary to the terms of the bye-laws. It seems to me that the rejection of the pass-book by the Subordinate Tribunals, the Sub-Registrar and the Joint Registrar of Co-operative Societies is wholly arbitrary without due consideration of the general principles of law governing the relationship of the parties alongside the bye-laws governing them.
Entries in the pass-book to the credit of the customer are, when the book is delivered to him,. prima facie evidence against the banker; when the book is returned by the customer without objection entries to his debit are prima facie evidence against him. (Halsbury's Laws of England, Vol. 2, page-209).
The dismissed clerk of the Society who was also functioning as the cashier, was held out by the Society as a person competent to receive payments from members. He had ostensible authority to receive payments and the question is whether the receipt by him would bind the Society. It cannot be gainsaid that the clerk was held out as the agent of the Society to act on its behalf in the matter of the daily routine of receipt of money from the members. Section 237 of the Indian Contract Act is therefore properly applicable. It reads:
When an agent has without authority, done, acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agents authority.
Cockburn, C.J., observed in Edmunds v. Buschell L.R. 1 Q.B. 97:
It is a well-established principle that if a person employs another as an agent in a character which involves a particular authority, he cannot by a secret reservation divest him of that authority.
Persons dealing with incorporated companies or societies are bound to take notice of disabilities imposed on the Corporation by the memorandum or other document of its constitution. They run a great risk in not acquainting themselves with such disabilities. But nevertheless they are entitled to assume that directors or other persons exercising authority on behalf of the company or corporation are duly functioning and performing their duties in accordance with the internal regulations of the institution. The award proceedings now sought to be quashed do not show that the authorities bore in mind these principles of law. It must be pointed out that the bye-laws do not actually prohibit receipt of money on behalf of the Society by any person other than the President or the Secretary of the Society. There is thus a manifest error of law apparent on the face of the record vitiating the award. It is not necessary for me to go into the details of the accounting between the Society and the petitioner, as I am of opinion that the matter should be dealt with afresh by the Sub-Registrar of Co-operative Societies having due regard to the entries in the pass-book and to the question whether the acts of the ex-clerk would bind the Society by reason of the conduct of the parties and the other circumstances.
6. The Writ Petition is allowed and the rule nisi is made absolute. There will be no order as to costs.