Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
PETITIONER:
THE SUGAULI SUGAR WORKS (PRIVATE) LTD.
Vs.
RESPONDENT:
THE ASSTT. REGISTRAR, CO-OPERATIVESOCIETIES
DATE OF JUDGMENT:
14/03/1962
BENCH:
SINHA, BHUVNESHWAR P.(CJ)
BENCH:
SINHA, BHUVNESHWAR P.(CJ)
SUBBARAO, K.
AYYANGAR, N. RAJAGOPALA
MUDHOLKAR, J.R.
AIYYAR, T.L. VENKATARAMA
CITATION:
1962 AIR 1367 1962 SCR Supl. (3) 804
CITATOR INFO :
F 1967 SC 389 (6)
ACT:
Co-operative Society-Reference-Jurisdiction of Registrar-If
can entertain claim by registered society against non-member
Bihar and Orissa Co-operative Societies Act, 1985 (B. & O. 6
of 1935), as amended by Bihar Co-operative Societies (Amend-
ment) Act, 1948 (Bihar 16 of 1948), ss.48 (1), 16(1) and
2(c).
HEADNOTE:
The point for determination in the appeal was whether the
Registrar of Co-operative Societies under the Bihar and
Orissa Co-operative Societies Act, 1935, as amended by Act
16 of 1948, had the jurisdiction under s. 48(1) of the Act
to hear and decide a reference made by a registered society
against a non-member. The appellant company, incorporated
under the Indian Companies Act, with its registered office
at Calcutta, manufactured sugar in Bihar. The second res-
pondent the Union of Co-operative Societies, registered
under the Co-operative Societies Act, made a reference under
s. 48 of the Act, against the appellant claiming the sum of
Rs. 1,20,809/- odd as commission and interest for supplying
sugarcane in 1959-60. The first respondent, the Assistant
Registrar of Go-operative Societies registered the reference
and issued notice to the appellant. The appellant took the
preliminary objection that the Assistant Registrar had no
jurisdiction under the Act to entertain the reference. That
objection was overruled by the Assistant Registrar relying,
on a decision of the High Court and the High Court upheld
that order by dismissing in limine the appellant’s petition
under Arts.226 and 227 of the Constitution.
Held, that the High Court had taken a wrong view of the law.
Although under s. 48 of the Act the claim by a financing
bank against a nonmember to whom it had made in advance
either in cash or kind, with the sanction of the Registrar
under s. 16(1), could be entertained by the Registrar, that
did not mean that a claim not of the kind referred to in
s.16(1), read
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
805
with s. 2(c), made by a registered society against a non-
member, who was not an agriculturist, was within the purview
of s. 48(1), read with the Explanation 1. The addition of
the word ‘non-member’ by the amending Act of 1948 to the
Explanation I, did not enlarge the scope of the main section
so as to make all kinds of dispute between a registered
society and a non-member cognizable by the Registrar.
Since in the present case, the second respondent was not a
financing bank nor was the appellant an agriculturist, 48(1)
(e) and, the Explanation 1 could have no application.Union
of India v. Registrar, Co-operative Societies, Patna, (1961)
I.L.R. 40 Pat. 7, overruled.
JUDGMENT:
CIVIL APPELLATE, JURISDICTION : Civil Appeal No. 100 of
1962.
Appeal by special leave from the judgment and order 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. K. Mukherjee, for appellant.
C. K. Daphtary Solicitor General of India and S.P. Varma,
for respondent No. 2.
L. K. Jha, and S. P. Varma for respondent
1962. March 14. ’The Judgment of the Court was delivered
by
SINHA C. J.-This appeal, by special leave, is directed
against 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 Award case No.
101 of 1961, and a writ of certiorari for quashing the order
of the said respondent, dated September 29, 1961. The
appellant is a private limited company, incorporated under
the under the Indian companies Act, with its registered
office at Calcutta. It
806
carries on the business of manufacturing sugar in its
factory at Sugauli in the district of Champaran, in Bihar.
The first respondent is the Assistant Registrar, Co-
operative Societies, Motihari Circle, Motihari, in the State
of Bihar; the second respondent is the Union of Co-operative
Societies, and is registered under the Bihar and Orissa Co-
operative Societies Act (B. & O. Act VI of 1935) (to be
referred to hereinafter as 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. 1,20,809/- odd, as commission and interest for supply of
sugarcane during the crushing season 1959-60. The said
reference was registered by the first respondent as Award
Case No. 101 of 1961, on August 17, 1961.. Notice of the
said reference was issued to the appellant. On September
26, 1961, the appellant took a preliminary objection to the
jurisdiction of the first respondent to entertain the
reference and to adjudicate upon it, and prayed that the
reference be rejected. The first respondent, following a
decision of the Patna High Court, reported in Union of India
v. Registrar, Co-operative Societies Patna (1), overruled
the appellant’s preliminary objection by his order dated
September 29, 1961. Against that order, the appellant moved
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
its application aforesaid before the High Court of Patna.
The High Court, following its previous decision aforesaid,
summarily dismissed the application. The appellant moved
this Court, and obtained special leave to appeal from the
order of the High Court, dismissing his application. This
Court granted the special leave on December 4, 1961. The
appellant moved this Court for stay, which was finally heard
on January 11 ,1962 and the Court directed that the appeal
be heard peremptorily on February 15, this year. That is
how the
(1) (1961) I.L.R. 40 Patna 7.
807
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 Act.
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-operative movement
was set up in the beginning of this century, the law
governing co. operative societies was enacted as The Co-
operative Societies Act (11 of 1912), by the Indian Legisla-
ture. 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. & O. Act VI of 1935), after obtaining the
previous sanction of the Governor-General, under sub-s. 3 of
a. 80-A of the Government of ’.India Act. The Act of 1935
was enacted with a view to consolidate and amend the law
relating to co-operative societies in the Province of Bihar
and Orissa, as it then was. As it displaced the Cooperative
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 promotion of the common interests of its
members in accordance with cooperative principles, or a
,society’ established with the object of facilitating the
operation of such a society, may be registered
808
under the Act. On such registration, the Society becomes a
body corporate with perpetual succession and’ a common
sea], and with power to acquire and hold property, to
enter into contracts, to institute and defend suits, etc.
Under s. 15, a registered society shall receive deposits and
loans from members and non-members only to such extent and
under such conditions as may be prescribed. Under a. 16,
ordinarily a registered society shall not make a loan to any
person other than a member, except with the, general or
special sanction of the Registrar and subject to such
restrictions as he may impose. Section 17 further provides
for such prohibitions and restrictions, in respect of the
transactions of registered society with persons other than
members, as the Provincial Government may by rules
prescribe. Section 48 makes it obligatory that any dispute
touching the business. of’ a registered society, among
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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
members, or nonmembers, or between them and the registered
society, shall he referred to the Registrar. By virtue of
Explanation (1) to the section, a claim by a registered
society for any debt or demand due to it from a member or a
past member or his heir or legal representative, or from
sureties. whether they are members or non-members, &hall be
a dispute within the meaning of the main section, even
though such debt or demand is admitted and the only point at
issue is the ability to pay or the manner of enforcement of
payment.
It will thus be seen that the Act is limited in its
operation to registered societies and their members in their
dealings with one another It is only in exceptional cases of
borrowing
809
by a registered society from nonmembers, in accordance with
the rules and bye-laws prescribed by the competent
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 tile Bihar Co-operative Societies (Amendment)
Act, 1942, and the Bihar Co-operative Societies (Amendment)
Act, 1944, enacted by the Governor of Bihar in exercise of
tile 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 1944 (-Bihar Act X of 1944). By a. 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 if; 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."
By s. 3, s. 16 of the Act of 1935 was amended by adding sub-
s. (3) to s. 16, as under:
"(3) Where the Registrar has accorded sanction
to a financing bank under the provisions of
sub-section (1), a registered society which is
a member of such financing bank may, subject
to tile terms of the sanction and such other
terms and conditions as may be prescribed by
the Registrar, act as agent for the financing
bank and as such agent carry out, with or
without any commission, all or
810
any transactions connected with loans or
advances made or to be made by the financing
bank."
A consequential change was made ’in s. 23 of the Act of
1935, by inserting a. 23-A, so as to make a debt or an
outstanding demand to a registered society from a non-member
a first charge on the property of the non-member. The most
important amendment was made by a. 6, in s. 48 of the main
Act as follows
"6. In sub-section (1) of section 48 of the
said Act-(&) after clause (d), the word "shall
be inserted and thereafter the following
clause shall be inserted, namely :-
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
"(e) between a financing bank authorised under
the provisions of sub-section (1) of section
16 and a person who is not a member of a
registered society;" and
(b) in Explanation (1), after the words
"from a member," the word "non-member" shall
be inserted. an(-] after the words "of a
deceased member" the words "or nonmember"
shall be inserted.
It is not necessary to refer to the other consequential
amendments made and the addition of a new chapter 7A,
relating to the manner of recovery. The amendments effected
by the amending Act of 1944 had been enacted by the Governor
of Bihar in exercise of his special powers aforesaid. The
provisions of those amendments were re-enacted as Act XVI of
1948. We would, therefore refer hereinafter to the
amendments in question as the amendments of 1948.
As already indicated. a Division Bench of the patna High
Court has laid it down in the case of
811
Union of India v. Registrar, Co-operative Societies. Patna
(1) that the Explanation to s. 48(1) 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 a. 48 of the
Act, and that, therefore, the Assistant Registrar, Co-
operative Societies had jurisdiction to determine the
dispute under s. 48(2) of the Act. Relying upon that
decision, 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 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 through a member, past member or
deceased member or sureties of members, past
members or deceased 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 (1)
(1961)I.L.R.40Pat.7.
812
section 16 and a person who is not a member of
a registered society ; such disputes shall be
referred to the Registrar.
... .................
Explanation 1--A claim by a registered society
for any debt or demand due to it from a
member, non-member, 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,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
whether such sureties are members or non-
members, shall be a dispute touching the
business of the society within the meaning of
this subsection even in case such debt or
demand s admitted and the only point at issue
is the ability to pay the manner of
enforcement of payment.
(9) Save as expressly provided in this
section, a decision of the Registrar under
this section, and subject to tile orders of
the Registrar on appeal of review, a decision
given in a dispute transferred or referred
under clause (b) or (c) of sub-section (2),
shall be final."
From the provisions of the Act, set out above, it is
manifest that the act created a special tribunal, namely,
the registrar of Co-operative Societies, to deal with
certain disputes specified in s. 48(1)(a) to (e). This
special tribunal was created with a view to shortening
litigation and providing speedy relief to registered
societies and their members in their disputes inter se in
respect of the business of the society. Before the
amendments introduced by the Act of 1948 the disputes which
could be, entertained by the Registrar were disputes amongst
813
members, past members or their heirs or their sureties, or
between a society and other registered societies (without
meaning to exhaust all the categories.) But, before the
amendments, one who was not a member of a society or was not
claiming 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 registered 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 be 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 nonmember 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 society against
any non-member, who is not an agriculturist, is within the
purview of s. 48(1). read with the Explanation. The
Explanation cannot be read as adding a new head to the
categories (a) to (e) under s. 48 (1), of disputes which may
be referred to the Registrar. Originally, the Explanation
had been added only to make it clear that even if a debt or
814
a demand is admitted and the only point at issue is the
ability to pay or the manner of enforcement of payment, the
dispute would come within the purview of the main s. 48(1).
The addition of the word non-member’; by the amending Act of
1948, to the first Explanation has not enlarged the scope of
the main s. 48(1) so as to make all kinds of disputes
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
between a registered society and a non-member cognizable by
the Registrar. thus excluding the jurisdiction of the
ordinary courts.
In the instant case, it is manifest that the dispute is
between a registered society, the second respondent, and the
appellant, a non-member, in respect of the claim for
commission and interest thereon for supply of sugarcane, and
the appellant alleges that it has a counterclaim 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 cash or kind had been
made or could have been made so as to bring the appellant
within the purview of s.48 (1) e), and consequentially of
Explanation 1. 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 Registrar should not entertain the
reference, and should not adjudicate upon the dispute, and
not make an award. The main contesting parties must be left
to their remedies in the ordinary courts.
Appeal Allowed.
815