Full Judgment Text
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CASE NO.:
Appeal (civil) 4488 of 2004
PETITIONER:
Morinda Cooperative Sugar Mills Ltd.
RESPONDENT:
Morinda Coop. Sugar Mills Workers Union
DATE OF JUDGMENT: 12/07/2006
BENCH:
ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
ARIJIT PASAYAT, J.
Appellant calls in question legality of the judgment
rendered by a learned Single Judge of the Punjab and Haryana
High Court dismissing the appeal filed by the appellant under
Section 100 of the Code of Civil Procedure, 1908 (in short the
’Code’). The defendant\026Morinda Co-operation Society Workers’
Union (hereinafter referred to as the ’Union’) as plaintiff filed a
suit claiming dearness allowance on the wages plus fixed
allowance in accordance with para 317 (ii) of the Third Wage
Board Report. The first appellate court reversed the judgment
and decree of the trial court, holding that the subject matter of
the suit cannot be said to be a dispute touching the business
of the society. Accordingly the appeal was allowed. Second
Appeal was filed by the defendant (present appellant)
contending that the view of the trial court was justified and
that of the first appellate court was not justified.
The plaintiff \026Union filed the suit seeking declaration to
the effect that the members of the plaintiff \026 Union was
entitled to the benefit of the Variable Dearness Allowance (for
short the ’VDA’) on the basic wages plus fixed allowance in
accordance with para 317(ii) of the Third Wage Board Report
with a consequential relief for permanent injunction
restraining the defendant from withdrawing the payment of
VDA from the fixed amount of Rs.150 which was being paid to
the members of the Union. Defendant took the stand that
since small notice under Section 79 of the Punjab Co-operative
Societies Act, 1961 (in short the ’Act’) is required, the suit was
not maintainable. The trial court on the basis of the pleadings
framed five issues which are as follows:
1. Whether the plaintiff is entitled to the declaration as
prayed for?
2. Whether the plaintiff is entitled to the injunction as
prayed for?
3. Whether the suit is not maintainable in the present
form?
4. Whether the plaintiff has no locus standi to file the
present suit?
5. Whether the suit is liable to be dismissed on the
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ground of non service of notice under the Punjab Co-
operative Societies Act?
The trial court held that the defendant has no right to
withdraw the VDA in accordance with the recommendations.
Issues 1 and 2 were accordingly answered. It was further held
that defendant has no right to withdraw VDA and if any
clarification for withdrawal of VDA is required, opportunity of
hearing was required to be given to the plaintiff and it should
have been obtained from the Third Wage Board. The Issues 1
and 2 were accordingly answered. The suit was held to be
maintainable as no defect on the form of the suit was pointed
out. But on issue No. 4 it was held that service of notice was
mandatory.
In the Second Appeal it was urged that the First
Appellate Court lost sight of the fact that expression "business
of the society" used in Section 79 would necessarily include
financial involvements concerning payment of salary and
allowance to the plaintiff\026Union. It was further pointed out
that disputes of the nature raised touched the constitution,
management or business of the cooperatives societies and was
required to be referred to "Arbitration" under Section 55(1) of
the Act. The High Court after analyzing the Bye law No.5 of
the appellant, came to hold that the first appellate court was
justified in its conclusion. Accordingly the Second Appeal was
dismissed.
Learned counsel for the appellant submitted that the
object of the society was to promote economic interest of its
members and if the effect of costs involved in production of
sugar was the subject matter of adjudication, obviously notice
under Section 79 of the Act was mandatorily necessary. It was
submitted that the expression "touching business of the
society" is wide enough to encompass all aspects which have
effect on the economic interest of the members and that is why
trial court was justified in its view.
Per contra learned counsel for the respondent submitted
that the High Court has analysed the legal position, the
objects and has come to the right conclusion by upholding the
judgment and decree of the first appellate court.
Sections 55 and 79 of the Act read as follows :
"55. Disputes which may be referred to
arbitration \026 (1) Notwithstanding anything
contained in any law for the time being in force, if
any dispute touching the constitution,
management or the business of a cooperative
society arises \026
(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 employee of the society or
liquidator, past or present; or
(c) between the society or its committee and
past committee, any officer, agent or
employee, or any past officer, agent or
past employee or the nominee, heirs or
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legal representatives of any deceased
officer, deceased agent, or deceased
employee of the society; or
(d) between the society and any other co-
operative society, between a society and
liquidator of another society or between
the liquidator of one society and the
liquidator of another society:
Such disputes shall be referred to the Registrar
for decision and no Court shall have jurisdiction
to entertain any suit or other proceeding in
respect of such dispute.
2. For the purposes of sub-section (1), the
following be deemed to be disputes touching
the constitution, management or the
business of co-operative society, namely \026
(a) a claim by the society for any debt or
demand due to it from a member or the
nominee, heirs or legal representatives of a
deceased member, whether such debt or
demand be admitted or not:
(b) a claim by a society against the
principal debtor where the society has
recovered from the surety any amount in
respect of any debt or demand due to it from
the principal debtor as a result of the default
of the principal debtor, whether such debt or
demand is admitted or not:
(c) any dispute arising in connection with
the election of any officer of the society.
3. If any question arises whether a dispute
referred to the Registrar under this Section is or
not a dispute touching the constitution,
management or the business of a co-operative
society, the decision thereon of the Registrar
shall be final and shall not be called in question
in any Court.
79. Notice necessary in suits \026 No suit shall be
instituted against a co-operative society or any of its
officers in respect of any act touching the business
of the society until the expiration of three months
next after notice in writing has been delivered to the
Registrar or left at his office stating the cause of
action, the name, description and place of residence
of the plaintiff and the relief which he claims, and
the plaint, shall contain a statement that such
notice has been so delivered or left."
The object of Section 55 of the Act is clear. If any dispute
touches the constitution, management or business of any
cooperative society arising between specified category of
members has to be referred to arbitration. Similarly no
cooperative society or its officers should be dragged to
litigation before the Civil Court in respect of any act touching
the business of such a society unless notice required to be
given in writing as has been issued to the Registrar of the
society. Bye law No. 5 of the Bye Laws of the Appellant, so far
as relevant, reads as follows:
"Objects
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The objects of the Mills shall be to
promote the economic interest of its members
and for this purpose to carry on the manufacture
of sugar, sugar products and other ancillary
products and to make arrangements for their sale
and also to take necessary steps and measure for
the development of sugarcane and sugar beet.
For the purpose of attaining the aforesaid objects,
it shall be competent for the Mills :-
xxx xxx
"(d) To Purchase sugarcane of
sugar beet preferably from grower
members and others and to sell the
finished products so manufactured.
xxx xxx
(j) To instal plant & Machinery for
utilization of ancillary/bye products and
bury raw materials for the same and sell
finished products in the course of the
utilizing and marketing of the
ancillary/bye products.
xxx xxx
(p) To do such other things as are
incidental or conductive to the
attainment of all or any of the above
objects."
The emphasis made by learned counsel for the appellant
is that when the object is to promote the economic interest,
any thing which has link with the economic interest has to be,
per force, taken as touching the business of the society.
This Court in O.N. Bhatnagar v. Smt. Rukibai Narsindas
and Others (AIR 1982 SC 1097) observed inter alia as follows:
"In the present case the society is a tenant co-
partnership type housing society formed with the
object of providing residential accommodation to its
co-partner tenant members. Now, the nature of
business which a society carries on has necessarily
to be ascertained from the object for which the
society is constituted, and it logically follows that
whatever the society does in the normal course of
its activities such as by initiating proceedings for
removing an act of trespass by a stranger, from a
flat allotted to one of its members, cannot but be
part of its business. It is as much the concern of
the society formed with the object of providing
residential accommodation to its members, which
normally is its business, to ensure that the flats are
in occupation of its members, in accordance with
the bye-laws framed by it, rather than of a person in
an unauthorized occupation, as it is the concern of
the member, who lets it out to another under an
agreement of leave and licence and wants to secure
possession of the premises for his own use after the
termination of the licence. It must, therefore, follow
that a claim by the society together with such
member for ejectment of a person who was
permitted to occupy having become a nominal
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member thereof, upon revocation of licence, is a
dispute falling with the purview of Section 91(1) of
the Act."
(Underlined for emphasis)
In Deccan Merchants Co-operative Bank Ltd. v. M/s.
Dalichand Jugraj Jain (1969 (1) SCR 887) it was held as
follows :
"Five kinds of disputes are mentioned in sub-
section:
First, disputes touching the constitution of
a society: secondly, disputes touching election
of the office bearers of a society: thirdly,
disputes touching the conduct of general
meeting of a society: fourthly, disputes
touching the management of a society: and
fifthly disputes touching the business of a
society. It is clear that the word " business" in
this context does not mean affairs of a society
because election of office-bearers, conduct of
general meetings and management of a society
would be treated as affairs of a society. In this
sub-section the word "business" has been used
in a narrower sense and it means the actual
trading or commercial or other similar
business activity of the society which the
society is authorized to enter into under the
Act and the Rules and its bye-laws."
In Co-operative Central Bank Ltd. and others etc. v.
Additional Industrial Tribunal, Andhra Pradesh, Hyderabad
and others etc. [1969 (2) SCC 43] it was held that alteration of
the conditions of the service of the workman would not be
covered by the expression "touching the business of the
society". It was held inter alia as follows :
"Applying these tests, we have no doubt at all
that the dispute covered by the first issue referred
to the Industrial Tribunal in the present cases
could not possibly be referred to decision to the
Registrar under Section 61 of the Act. The dispute
related to alterations of a number of conditions of
service of the workmen which relief could only be
granted by an Industrial Tribunal dealing with an
industrial dispute. The Registrar, it is clear from
the provisions of the Act, could not possibly have
granted the reliefs claimed under this issue
because of the limitations placed on his powers in
the Act itself. It is true that Section 61 by itself
does not contain any clear indication that the
Registrar cannot entertain a dispute relating to
alteration of conditions of service of the employees
of a registered society: but the meaning given to
the expression "touching the business of the
society". In our opinion, makes it very doubtful
whether a dispute in respect of alteration of
conditions of service can be held to be covered
this expression. Since the word "business" is
equated with the actual trading or commercial or
other similar business activity of the society, and
since it has been held that it would be difficult to
subscribe to the proposition that whatever the
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society does or is necessarily required to do for the
purpose of carrying out its objects, such as laying
down the conditions of service of its employees,
can be sad to be a part of its business, it would
appear that a dispute relating to conditions of
service of the workmen employed by the society
cannot be held to be a dispute touching the
business of the society."
(Underlined for emphasis)
When the factual background are tested in the
background of principles set out in O.N. Bhatnagar’s case
(supra), Deccan Merchant’s case (supra) and Cooperative
Central Bank’s case (supra), the conclusions of the First
Appellate Court as affirmed by the High Court do not suffer
from any infirmity to warrant interference.
The appeal is dismissed. No costs.