the Sugauli Sugar Works (Private) Ltd. v. the Asstt. Registrar, Co-Operative Societies

Judgment

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 100 of 1962. Appeal by special leave from the judgment andordilr dated October 30, 1961, of the Patna High Court in M.J.C. No. 954 of 1961. A. N. Sinha, A. K. Nag and P. ](. Mulche1jee, for appellant .. 0. K. D~phf£!ry, Soliciwr General of India and S. P. Varma, for respondent No. 2. L. K . .fh'J and S. P, Varma, for respondent No. 3. 1962. March 14. The Judgment of the Court was delivered by SINHA, C. J.-This appeal, by special leave, is directed again~t the order of a Division Bench of the Patna High Court, dated October 30, 1961, dismissing in limine the appellant's petition dated October 24, 1961, under Arts. 226 and 227 of the Constitution, being Miscellaneous Judicial Case No. 954 of 1961, for a writ of Prohibition directing the first respondent not to· proceed with the A ward Case No. IOI of 1961, and a writ of Certiomri for quash- · ing the order of the said respondent, dat~d September · 29, l!l6 I. The appellant is a private limited compa.ny, incorporated under the Indian Companies Act, with its registered offlce · at Oajcuttq.

H T1i1 Sug"uli Sug'" JJ'o1ks (Prival1}-l1d. ·. Tiu Asstt. R1gistf'tar Co-optrative 5o.;ittits. Sinh• C.J. Tilt Sug1uli Suga' Works ".Privak; l.1d. Tltt A uJI. Btgistrar. f~llt" SuriltuJ. Si1ha C.J. carries on the business of manufacturing sugar in its factory at Sugauli in the district of Champ>iran, in Bihar. The fir8t respondent is tho Assistant Registrar, Co operative Societies, :\Totihari Circle, ~lot!httri, in the Stat.c of Bihar; the sncond respon. dent is the Union of Co-operative Societies, and is registered unc;!er the Ribar and Orissa Co-operative Societies Act ( B. & O. Act VI of I !135) (to he referred to hereinaftl•r a~ the Act); the third respondent is the State of Bihar. On August 14, 1961, respondent No. 2 made a reference under s.48 of the Act, against the appellant, claiming the sum of Rs. I,~0,809;'- odd, as commission and interest for supply of sug11rcane during the crushing season I 9ii\J-fi0.

The said reference W'.!B registered by the first respondent as Award Caso Xo. IOI of l9fH, on August 17, 1961. ~ otice of the said reference was issued to tho appellant. On Septcmbor 26, 19fil, the 1Lppellant took a pr .. liminary objoetion to the jurisdiction of the first respondent. to entert1iin the reference and to adjudicate upon it, and prayed that the reference be reject erl. The fir8t respondent, following a decision nf the P:itna High Court, reported in Union of hulia v. Rertistmr, Co-operative Sor.ieries, Pril.na ('), overrule<! the appellant'~ preliminary objection by his order ll<ttcd Sept.,mber 29, 19 •l. Against that order, the appellant movod its application aforesai<1 before the High Court of Patna., The High Court, following its previous d'oeision aforesaid, sumruarily dismissed tho application. The appellant moved this Court aud obtained special leave to appeal from the order of the High Court, dismis~ing his application.

This Court granted the special kave on December 4, 19til. The appellant movecl this Cuurt for stay, which was finally heard on ,Jn,nuu.ry I I, I !Hi2, and the Court directed that the appr"tl be h1~ar<l peremptorily on February Iii, this year. That is Jiow tho (1) (1961) 1.L.R. 40 Patna 7. :1 S.C.R. SCJPRIDM:ID CJCJRr RIDPOR. TS matter comes before 'us for hearing of the main appeal. The only question for determination in this appeal is whether under the provisions of the Act, the first respondent had jurisdiction to hear and determine the dispute referred to him at the instance of the second respondent. The answer to the question raised in this appeal must depend upon the interpretation of the provisions of the Aot. Before examining the provisions of the Act, as it stands at present, it is necessary to set out the legislative history of the law on the subject.

When the co-opocative movement was set up in the beginning of this century, the law governing cooperative societies was enacted as The Co-operative Societies Act (II of 1912), by the Indian Legislature. That Central Act continued in force in Bihar and Orissa until it was repealed by the Bihar and Orissa Legislative Council by the Bihar & Orissa Co-operative Societies Act (B. & 0. Act VI of 1935), after obtaining the previous sanction of the Governor-General, under sub-s. 3 of s. 80-A of the Government of India Act. The Act of l 035 was enacted with a view to consolidate and amend the law relating to cooperative societies in tLc Province of Bihar and Orissa, as it then was.

As it displaced the Co-operative Societies Act of 1912, so far as the Province of Bihar and Orissa was concerned, s.5 enacted that all references to the Co-operative Societies Act, 1912, occurring in any enactment made by any authority in British India, and for the time being in :force in the Province, shall be construed as references to the new Act. Under s. 7, a society, which has as its object the promo· tion of tho common interest.a of its members in accordance with co-operative principles, or a society established with the object of facilitating j;he o:peration of sqch a society, ma.y be re~istered The 8ugouli Sugar Works( Private) Ltd. The A••lt. Registrar c Co"Optrative Socitties. Sinha C.J. T ht Su!}<Juli Sugar lfvrA1 (1'1i.~ai1) !.td. Tiu A uCt ntjiJt1 ·Jr, Cu-vp1ralil'f ~·n:ir.fitl. under the Act.

On .such registration, the Society h~c·om"~ n ho<ly rorporntc with perpetual "1wces;;ion ancl a commo11 ~Pal, llll!] with power t11 ae(juirn and hold property, to enter into ""ntracb, to institute> an.d clcfend suits, etc. under s. 15, a registered socioty shall rcceh·o deposits and Joano from members and non-members onlv to such extent and under such conditions as may be prcscribc<l. Under s. 16, ordinarily a registered society shall not make a loan to any IJ('rso11 other than a member, except with the general or spl'cial sanction of the Registrar, and su bjcct to sud1 re8tl'ictions as he may impose. Section l 'i further provides for such prohibitions and restrictio11s, in ·r<'~pect of the transactions of a registered society with persons other than members, as the Provincial GovernmP.nt ma.v by rules prescribe.

Section 48 makes it obligatory that any dispute toud1ing the business of a rt•gistered society, among mcmhPrA, past members, pcrRons claiming through membern, past members or deceased momhers and sureties of membern, past members or deceased membcers. whether such sureties are mombcrs, or non-members, or between them and t.he re"isterecl society, shall be rcforrecl to tho gcgistra:'. . By virt.ue of Ex:planation (I) to the section, a claim hy 11 rcgistcre<l sooiety for any debt or demand clue to it from a mt•mber or a past member or his h•Jir or leg,iJ rqiresentativc, or from Rurntics, whether they are memhers or non-mem· bers, shall be a dispnk wit.hin tho meaning of the main section, c\·en though such debt or <leman<l is admitted and the onl.v point at issue is the ability tn pay or the manner of onforecment of payment. It. will thus he seen that the Act is limited in its operation to regist.c,,nl sor>ict.ies and their memht'rs in thnir <lralini;>i with one m10thor.

Jt is only in exceptional casps of borrowing SOJ by a registered society from non-members, in accordance with the rules and · bye-laws prescribed by the comp)tont authority, or in case of loan to a non-member under the provisions of s. 16, that there could be dealings between registered societies and non-members, keeping aside the cases of sureties of members, who may be nonmembers, but who also come within the purview of dealings between a society and its members. Such were the relevant provisions of the Act when it was amended by the Bihar Co-operative Societies (Amendment) Act, 1942, and the Bihar Co-operative Societies (Amendment) Act, 194!, enacted by the Governor of Bihar in exercise of the powers assumed to himself by the Proclamation dated November 3, 1939, issued by him under s. 93 of the Government of India Act, 1935. For our purposes, it is only necessary to notice some of the amendments made by the amending Act of l 944 (Bihar Act X of 19H). By s. 2, cl. (c) of s.

2 of the Act of 1935 was substituted in these terms : "(c) 'financing bank' means a registered society the main object of which is to make advances in cash or kind to other registered societies or to agriculturists who are. not members of registered societies or to both such societies and agriculturists." Bys. 3, s. 16 of the Act of 1935 was amended by adding su b-s. (3) to s. 16, as under : "(3) Where the Registrar has accorded sanction to a financing bank under the provis~ons _of sub-section (l), a registered society whwh 1s a member of such financing bank may, subject to the terms of the sanction and such other terms and conditions as may be prescribed by the R.egistrar, act as agent for the fi';lancing bank and as such agent carry out, with or without any eomillission, al\ or The Sugauli SuglV IV or ks( Private( Ltd . The Asstl, Registr.1r, Co--operative Societie1. Sinha C.J. Thi Sug01'1i Su1cr w.,qp,;,.,,) Lid. ·rne A•Jtt. R1gi.1tto1 Co-opertltiot Societies:

Si,1ha C.J. any transactions oonnected with loans or advances made or to he made by the financing bank." A consequential change was made in s. 23 of tho Act of rn:J5, by inserting s. 2:J.A, so as to make a debt or an outstanding demand to a rocristorod society from a non-member a first charg; on the property of the non-member. The most import.ant amendment .was made bys. r., in s. 48 of the main Act as follows : "6. In sub-section (I) of section 48 of the said Act- (a) after clause (d), the word "shall be inserted and theroafter the following clause shall he inserted, namely :- "(e) between a financing bank authorised under the provisions of sub-soetiou (I) of section 16 and a porson who is not. a member of a registered society;" and (b) in E~planation (1), after the words "from a mcmher," t.he word "non-member" shall be inserted and after tho words "of a deceased member" t.he words "or non-member" shall be inserted . .

It is not necessary to refer to the other consequential amendment3' made and the addition of a now chapter 7 A, relating to the manner of recovery. The amendments effected by the amending Act of 1944. had been enact~d by the Governor of Bihar in exorcise of his spodal powers aforesaid. The pro· visions of those amendmentR were re-enacted as Act XVf of 1948. We would, therefore refer hereinafter to the amendments in q1wst.ion as the amendment.~ of I !l48. As already indicated, 1t Division Bench oft.hi· Patna High Court bas laid it down, in the ease of SU Union of India v Registrar, Co-operative Societies. Patna (') that the Explanation to s. 48( l) of the Act covers a claim by a registered society for any debt or demand from a non-member, and that, therefore, the claim of a registered society against the railway company for compensation for short supply is a dispute within the ambit of s.

48 of the Act, and that, therefore, the AsBistant Registrar, Co-operative Societies, had jurisdiction to determine · the dispute under s. 48{2) of the Act. Relying upon that decisi:on, the High Court dismissed the appellant's petition under arts. 226 and 227 of the Constitution, in limine. The appellant has questioned the correctness of that decision. The question, therefore, is whether the High Court has taken a correct view of the provisions of s. 48, the relevant portions of which are as follows: "48 ( 1)

If any dispute touching the business of a registered society ... arises- ( a) amongst members .. past members, persons claiming through members, past 'members or deceased members, and sureties of members, past members or deceased members whether such sureties are members or non-members; or (b) between a member, past member, persons claiming thrflugh a member, past member or deceased member or sureties of members, past members or decea·sed members, whether such sureties are members or nonmembers, and the society, its managing committee ·or any officer, agent or servant of the society; or (c) ....................... . (d) ....................... . ( e) between a financing bank authorised under the provisions of sub-section (1) of \!) (1961) I.L.R. 40Pat. 7. The Sueauli Sugar Works (Private) Ltd, The Ass tt. Registrar Co-operative Societies. Sinha C.J. J96Z 7h1 Suga"H S11gar lfor1·.t(Pri1 1olt) I.Id. Tht Asltl. ll1gis11~'• Jo.op1raJit't Socittits. 1'-Jinha c .. J. 812 SUPRR\IE COURT REPORTS [1962]

SUPP. section 16 and a person who is not a member of a registered Hociety ; 811ch disputes sh!i-ll be referrrcl to tho Regis· trar. Explanation I -A claim by a ro2ister<>d society for any debt or demand due to it from a member, non-membor, past member or the nominee, heir or legal representative of a deceased member or non-member or from sureties of members, past members or deceased members, whethersuch surctie~ aro members or non-members, shall be a dispute touching tho business of the society within the meaning of this sub-section even in case such debt or demand is admitted and the only point at issue is the ability to pay or tho manner of enforcement of payment . (H) Save as expressly provided in this section, a decision, of the H.cgist.rar under this seotion, anrl subject to the orders of the Registrar on appeal of review, 11 dec:ision given in a <lisput<J tramferred or referred under clause (b) or (c) of suh·sect.ion (2), 8hall ho final."

From tho provisions of tlw Act, set out above, it is manifest that the act created a special trihmial, namely, the registrar of Co-operative Societies, to deal with certain disputes spec:ifie<l in· s. 48(1)(a) to (e). This special tribun:il WUH createcl with a view to shortening litigation and providing spe<'dy relief to registerod societies and t.heir mrmbers in thoir disputes int.er sc in respect of tho busine~s of the society. Befor.., tho amendments introducer! by the Act of 1!148, the dispute~ which could be entertained by the Registrar were disputos amongst 3s.d.R. scf PREME <.Jou.RT REPORTS members, past members or their heirs or their sure· ties, or between a society and other registered . The Sugauli Su;ar societies (without meaning to exhaust all the cate. Work•(Private} Ltd. gories.)

But, before the amendments, one who was ·rh, Asst1~ 0 R•gistrar, not a member of a society or was not claiming Co..,,p1ra1ive soc;.1;,.. through a member or a past member or a deceased member, or was not a surety of a member or a deceased member, was not subject to the jurisdiction of the Registrar under s. 48. That is to say, any dispute between a society or its members, past members or deceased members or surities of such members on the one hand and non·members on the other, was not within the purview of the section so that the appellant company, which is not a re. gistered society, or a member of a registered society, could not have its claim, or a claim against it by a registered society, referred to the Registrar for decision, under this section. Such a dispute by a society or its members against a non·member had to b3 taken to the ordinary courts for decision. In our opinion, the contention raised on behalf of the appellant is correct.

By the amending Act of 1948, the aforesaid relevant and important amendments were introduced into the Act. The effect of these amendments is that a claim by a financing bank against a non·member to whom the former may have made an advance in cash or kind with the sanction of the Registrar s. 16(1), would be entertainable by the Registrar, on a reference. But that does not mean that a claim which is not of the description referred to in s. 16( 1 ), read with s. 2(c), by a registered sodety against any. non.member,. who is not an agriculturist, is within the purview of s. 48( I). read with the Explanation. The Explanation cannot be read as adding a new head to the categories (a) to (.e) under s. 48 ( l ), of disputes which may be referred to the · Registrar. Originally, the Exp Jana ti on had been added only to make it clear that even if a debt or Sinha C. J. Ile Su~auli Sugai TYorks (Priv7tt) lid. Tho ~.ull. RegiJtrttr, c~µ,atiVt Socielier. Sinlia CJ.

814 ·suPitIDrlE COURT REPoRTS cioo21 SUPP. a demnn<l is admitted and the only point at issue is the ability to pay or the manner of enforcement of P'.1-Yment., ·the di~1mt-0 would come within the purview of the mam s. 48(1 ). The addition of the word 'non-member'; by the amending Act of 1948, to the first Explanation has not t>nlarged the scope of the main s. 48( I) so as to make all kinds of disputes between a registered society and a non-mt>mber cognizable by the Hegistra.r. thue excluding the jurisdiction of the ordinary courts. In the instant case, it is manifest that the disput-0 is between a registered society, the second respondent, and the appellant, a non·member, in respect of the claim for commiBBion a.nd interest the~e­ on for supply of sugarcane, and the appellant alleges that it has a counter-claim of a lakh and fifty thousand rupees for short and irregular supply of sugarcane against that respondent.

These are matters which, in our view, are wholly beyond the purview of s. 48 of the Act, when it is remembered that the second respondent is not a financing bank and that the appellant is not an agriculturist to whom any advances in ca.~h or kin<l had been made or could have been made so as to. bring the appal· !ant within the purview of s.48 (I) (e), and consequentially of Explanation I. The decision of the Patna High Court to the contrary is, therefore, not correct. In the result, the appeal is allowed with costs, and it is directed that the Hegistrar should not entertain the reference, and should not adjudicate upon the disputo, and not make an award. The main contesting parties must be left to their remedies in the ordinary oourts. Appe.al allowed.