Afzal Hossain vs Kaigarey Co-Operative Society

S.R. Das Gupta, J.—This is an appeal against the decision of the Additional Subordinate Judge, Birbhum, reversing the decision of the Munsif, second court, Rampurhat. The Plaintiff is the Appellant before us. The suit was instituted for a declaration that certain award made by the Registrar was without jurisdiction.

The Plaintiff was a member of a Co-operative Society, being Kaigarey Co-operative Society. That society was formed under the Co-operative Societies Act. On December 19, 1927 the Plaintiff executed a karbarndma (agreement enabling him to take loan on mortgage of his properties) in favour of the Society entitling him to take a loan up to a sum of Rs. 300 on mortgage of his properties. Pursuant to the said karbarnama he took a loan of Rs. 230. At that time the Co-operative Societies Act of 1912 was in force. Section 43 of that Act allowed rules to be framed for deciding disputes and by virtue of Rule 22 any dispute touching the business of a registered society between the members of the society could be referred in writing to the Registrar for arbitration. In the year 1933 the Society referred the dispute, that is, the claim against the Appellant to the Registrar under the said rules. On December 30, 1934 an award was made by the Registrar for Rs. 477-10-9. Such an award under the provisions of the Co-operative Societies Act of 1912 was executable as a decree of the civil court. The Society, however, did not execute it within the period of limitation with the result that the said award became unforceable in law. Thereafter the Bengal Co-operative Societies Act of 1940 came into force. Section 126 of the new Act provides that:

Notwithstanding anything contained in Chapter IX, the Registrar or such other person as may be prescribed may, on his own motion or on the written requisition of a co-operative society or financing bank for the recovery of any loan due by a defaulting member, after due inquiry, make an award directing payment by such member of the amount found to be due.

In the new Act there are provisions which correspond to the provisions of Rule 22 of the old Act. Those are Section 86 and 87. Those sections are included in Ch. IX of the Act of 1940. u/s 86 any dispute touching the business of a co-operative society and its members may be referred to the Registrar. u/s 87 the Registrar, on receipt of, such a reference, shall decide the dispute himself or transfer it for disposal to any person authorised by the Provincial Government for that purpose or refer it for disposal to any or more arbitrators to be appointed by the Registrar. These provisions, as I have already said, correspond to the provisions of Rule 22 of the old Act. There is further provision in the new Act which is contained in Section 88 and which, was not in the old Act or in the rules made thereunder Section 88 provides that:

Where a dispute involves property pledged as collateral security, the person deciding the dispute may issue an award, which shall have the same force and effect as a final mortgage decree of a civil court having jurisdiction to make such a decree.

After this new Act came into force and on December 10, 1942 the Society made another application to the Registrar u/s 126 of the new Act for decision of the said dispute between the Society and the Plaintiff. On February 11, 1943 the Registrar made an award. I should have mentioned that an award made under the new Act is enforceable under the Public Demands Recovery Act, 1913. The Society thereafter made an application for a certificate under the Public Demands Recovery Act and notice was served u/s 7 of the said Act on the Appellant. Objection was filed by the Appellant in the said proceedings and the ground of his objection was that tire award was passed without jurisdiction and was a nullity. On January 31, 1947 the Certificate Officer over-ruled the objection. Thereupon on February 1, 1947 the present suit was filed by the Appellant u/s 34 of the Public Demands Recovery Act. The main contention of the Plaintiff in the suit was that the subsequent award was a nullity having been passed without jurisdiction.

The learned Munsif decreed the suit but on appeal the learned Additional Subordinate Judge, Birbhum, set aside the said decision of the learned Munsif and dismissed the suit. It is against the order of the Additional Subordinate Judge that present appeal has been filed.

Mr. Sen Gupta, appearing on behalf of the Appellant, contended before us that in view of the previous award which had already been made by the Registrar of the Co-operative Societies, the Registrar had no jurisdiction to make the present award. As against that contention Mr. Mazumdar, appearing on behalf of the Respondent, strenuously urged before us that the Registrar had jurisdiction and the award made was perfectly valid award. He contended that so long as the debt remained in existence and had not been merged in a decree, the Registrar is competent to make a fresh award although there was a previous award. He referred us to Section 126 of the new Act which, as I have indicated, provides that the Registrar may, on his own motion or on the written requisition of a co-operative society or financing bank for the recovery of any loan due by a defaulting member after due inquiry, make an award. Mr. Mazumdar contended that what has to be seen in order to determine whether or not the Registrar was competent to make a second award u/s 126 was whether or not there was a loan due by a defaulting member to the Society. In this case he contended that although an award has already been made in respect of the loan the said award had the force of a decree but the debt still remained and had not been merged in the decree or in the award. Therefore, he contended that there was still a loan due by the defaulting member to the Society and under the provisions of Section 126 of the Act the Registrar could make a fresh award.

In support of the said contention he referred us to a passage in Sir Rashbehary Ghose''s book on "Law of Mortgage" (5th edition, 1922, vol. I, p. 503) wherein it has been said that,

...there seems to be a mistaken idea that when judgment is recovered on a debt secured by a mortgage, the security is extinguished and that the original debt is gone and a fresh debt is created with different consequences. This notion, however, is based on a misapprehension of the observations of Lord Bramwell In Re European Central Railway Company, Ex parte Oriental Finance Corporation (1876) 4 Ch. Div. 33 which can only lend support to it, if they are detached from the context. A careful examination of the judgment will show that the remarks of the learned Judge are applicable only to a personal action on the covenant against the mortgagor and not to an action to realise the security (1).

On the strength of this observation and on the authority of the decision in the case of Lutchmiput Singh Bahadur v. Land Mortgage Bank of India ILR (1887) Cal. 464 the learned advocate contended before us that the debt was not extinguished by the decree or by the award and if the debt was not extinguished Section 126 still remained enforceable and can be empowered by the Society at any time it likes.

I am unable to accept the contention of the learned advocate for the Respondent and in my view, the submission of Mr. Sen Gupta should be accepted. Apart from the question as to whether or not the loan still exists and has not been merged in the award or in the decree the main difficulty in the way of the Respondent is that there is already an award passed under the Co-operative Societies Act of 1912. Section 4(2) of the new Act, that is Bengal Act of 1940, provides that

All appointments, rules and orders made, all notifications and notices issued, all transactions entered into and all suits and other proceedings instituted under the Co-operative Societies Act, 1912, shall be deemed, so far as may be, to have been respectively made, issued, entered into or instituted under this Act.

Applying the provisions of the said section it seems to me that any award which may have been made under Act of 1912 shall be deemed to have been made under this Act. If that be so, this award has to be treated as if it were made under the provisions of Act of 1940. Then the question is,-can a second award be made covering the same subject matter after an award had already been made in respect of the same. iMr. Mazumdar''s argument, if pushed to its logical consequence, will lead to absurd results, namely, that the Registrar can make as many awards as he likes and the society will be entitled to make as many applications u/s 126 as it pleases the society. In my opinion, such a contention can never be accepted. Mr. Mazumdar urged before us that so long as the debt remains in existence there is nothing to prevent the Registrar from making a second award in respect of the same subject matter. In my view, once an award has been made over a certain dispute the arbitrator or the person who makes the award becomes functus officio. He can no longer make another award in respect of the same subject matter and if he does so such an award must be held to be a nullity as having been made without jurisdiction. This seems to me to be a fundamental principle of the law of arbitration.

Mr. Mazumdar contends before us that there is no provision in the Co-operative Societies Act of 1940 which forbids making of a second award and if there is no such provision then the Registrar is competent to make as many awards as he likes. In support of that proposition he referred us to a decision of the Patna High Court in the case of Dwarka Prasad Vs. Traders Go-operative Bank Ltd., . It must be conceded that the facts of that case were more or less the same as the facts of the present case and their Lordships held that in spite of an existing award the Registrar was competent to make another award, the claim of the holder of the award having been barred by limitation. Mr. Mazumdar contends that as there was no bar for making a second award, a second award can be made by the Registrar. We are unable to accept that contention. As the observations, on which Mr. Mazumdar relied, made in the Patna case, it appears that what their Lordships said was that there may be cases conceivable when it would be advisable for the Registrar to make a second award and their Lordships said, as for example where uncertified payments have been made which the Registrar might be entitled to take into account which the civil court could not and there is nothing to prevent the Registrar in such circumstances making a second award even if the dispute be substantially the same dispute. If their Lordships had intended to lay down the proposition that if after the original award was made a fresh dispute arose which was not covered by the original award then I see no reason to disagree with such a proposition. But if on the other hand their Lordships intended to hold that even after an award has been made on a particular subject matter the Registrar is free to make a second award on the same subject matter and for the matter of that as many awards as he likes I very respectfully disagree with the said view. In my opinion the person called upon or empowered to decide a dispute and to make an award becomes functus officio after he makes it and has no jurisdiction to make the second award on the same subject matter. The right which is given to the Registrar to make an award given under the Act, in my opinion, comes to an end as soon as he makes the first award and he cannot once again invoke the provisions of the Act for the purpose of making a second award. In this view of the matter, I hold that having already made an award the Registrar could not make a second award on the same subject matter. In answer to the contention of Mr. Mazumdar namely that the Act does not forbid making of a second award, I can only mention that there is also nothing in the Indian Arbitration Act to show that after an award has been made the arbitrator cannot make a second award but it cannot be disputed that under the said Act, the arbitrator, once he has made an award, cannot proceed to make a second award over the same subject matter. If he does, such an award must be set aside on the ground that the arbitrator had no jurisdiction over the matter and must be held to be a nullity. In our view, therefore, the award in question is a nullity and was made without jurisdiction.

Having come to the aforesaid conclusion it becomes unnecessary for me to go into the question as to whether or not the debt still subsists and or has been merged in the decree or in the award. I should, however, mention that in this case no decree has yet been passed. The award is enforceable as a decree no doubt but that does not mean that it is a decree and the principles to which reference has been made by the learned advocate for the Respondent, in my opinion, are inapplicable to such a case. In any event it is doubtful whether those principles can be resorted to for the present purposes. Having regard to the view I have already taken in this matter I need not say further on this aspect of this case.

Before concluding my judgment I ought to deal with the case of Chatra Co-operative Society Ltd. v. Satkari Mukherjee (1946) 51 C.W.N. 280 cited by Mr. Mazumdar. In my opinion that case is no authority on the question which is now before us in this appeal. What happened in that case was that a decree was obtained by the Society and in spite of that decree the Society proceeded to obtain an award. Chakravartti J., as he then was, held on the definition of the word "dispute" that there is nothing to prevent the Registrar from making an award on such reference. His Lordship, was not called upon to decide the question which is now before us; in other words, his Lordship had not had to consider the question as to whether or not after one award had already been made a second award could still be made. That question was not before his Lordship in that case. In my opinion, this case cited by Mr. Mazumdar is clearly distinguishable from the present case.

In the result, therefore, this appeal succeeds. The order of the learned Subordinate Judge, Birbhum, is set aside and the order of the Munsif, second court, Rampurhat, dated May 25, 1948, is restored.

The Appellant is entitled to the costs of this appeal and of the courts below-hearing fee in this Court being assessed at three gold mohurs.

Mallick, J.

I agree. Facts relevant to dispose of this appeal have been set out in the judgment of my Lord and I need not recapitulate them. The question to be decided is whether a second award is permissible u/s 126 of the Bengal Co-operative Credit Society''s Act, 1940, for the recovery of a loan in respect to which an award has already been passed.

Mr. Sen Gupta appearing in support of the appeal contends that after an award has been passed in respect to a loan advanced by the Society u/s 126 of the Act no second award cap be made for the recovery of the same loan and that the second award must be held to have been passed without jurisdiction. Mr. Majumdar, learned Government Pleader, on the other hand appearing on behalf of the Co-operative Credit Society contends that the second award is perfectly valid in law and the appropriate authority under the Bengal Act had full jurisdiction to make a second award for recovery of the same loan by a defaulting member even if such a loan has been covered by a previous award. Mr. Majumdar''s argument is that the doctrine of merger cannot be applied and it cannot be said that the loan has merged in the award. He claims that even after the award the loan is still subsisting and if the loan is still subsisting there is nothing to prevent the Co-operative Society from applying for and obtaining a second award u/s 126. Section 11 of the CPC being admittedly inapplicable in this case, there is no legal bar to having a second award for the recovery of the same loan by the Co-operative Society. He strongly relied on the observations made in the case of Dwarka Prasad Vs. Traders Go-operative Bank Ltd., . The observations were made on the corresponding Bihar Act which is more or less similar to the Bengal Act. Meredith J. made the following observation in that case,

There is nothing in the Act anywhere providing that the Registrar shall not have jurisdiction to make two awards with reference to the same dispute and it seems to me that cases may conceivably arise when it would be advisable for the Registrar to make a second award; as for example, where uncertified payments have been made which the Registrar might be entitled to take into account though the Civil Court could not.

In the same case Fazl Ali J. made the following observation:

The word "debt" must include decretal debt, it appears to me that there is nothing to prevent the Registrar from dealing u/s 48 with a dispute between the parties as to a decretal debt * * * * *Therefore, even where a previous award has been given, if there is still a dispute as to the judgment debtor''s ability to pay or the manner of enforcement of payment, the Registrar is competent to deal with the matter.

After stating that Section 11 of the CPC does not apply the learned Judge opined as follows:

Therefore, in my opinion it cannot be said that if the Registrar has already made an award in respect of a debt he can in no case make a second or subsequent award introspect of the same debt.

As already stated the said observations were made with reference to a case under Bihar Co-operative Act. The Bengal and Bihar Acts are more or less similar. The observations above referred to amount to no more than this that it is conceivable that even after an award has been made there might be dispute subsisting between the parties wherein under certain circumstances the Registrar shall have jurisdiction to pass a second award. It does not say that the identical question or the identical dispute can he referred over and over again to the Registrar and the Registrar would be competent in law to pass a series of awards in respect of and for the recovery of the same loan.

Chapter IX of the Bengal Act deals with the settlement of disputes. Section 86 provides for reference of any dispute touching the business of the Society to be adjudicated by the Registrar or a person appointed by him. u/s 87 the Registrar thereupon shall decide the dispute and make an award. Section 88 provides that if the dispute involves property pledged as collateral security the award shall have the same force and effect as a final mortgage decree. Section 126 on which the present application is made is included in Ch. XII and not Ch, IX. The said Section 126 provides that notwithstanding anything contained in Ch. IX the Registrar is competent to make either on his own motion or on the requisition by a Co-operative Society, an award for the recovery of any loan due by the defaulting member. u/s 130 any sum payable to the Co-operative Society under an award under this Act shall be recoverable under the Public Demands Recovery Act. The award passed under this Act is appealable u/s 134 and subject to appeal the award will be final. Section 133(3) provides that no order, decision or award under this Act shall be liable to challenge, set aside, modified, revised or declared void in any court except for jurisdiction.

Having regard to the provisions of relevant sections of the Act as set out above we have got to construe whether under the Act a second award is permissible for the recovery of a loan already covered by an award. As I understand the Act the whole scheme is that for recovery of a loan the Society must obtain an award from the Registrar who will adjudicate on the liability and quantum of loan. The award thus made is enforceable either as final mortgage decree in which case further proceedings to recover the loan covered by the award must take place in the civil court. Other awards, i.e., pure money awards are recoverable through the machinery of the Public Demands Recovery Act. The Registrar is not meant to enable the Society to actually recover the loan by passing an award. For that the machinery provided by the Act is the civil court or certificate proceedings under the Public Demands Recovery Act. On a reference the Registrar or the person appointed by him adjudicates the liability and quantum of loan payable and passes an award and on the award being passed which is final, the Registrar becomes functus officio and has nothing further to do. The remaining proceedings for recovery of the loan as stated before is in effect the discharge of the award and such proceedings under the Act must take place elsewhere.

It is important to remember that once an award is passed it becomes final. The person making the award is not competent to modify or alter it. The only authority competent to alter or modify an award is the appellate authority set up by the Act. But subject to the result of the appeal) the award is final. Hence it is absurd to suggest that there can be a series of awards or final orders for payment in respect to the same loan, each one of which must be enforceable. This is visible and palpable nonsense. To give the word "loan" in Section 126 a very wide meaning as suggested by the learned Government Pleader so as to include a "loan" which is already covered by an award, would lead to palpably absurd result as indicated above. On the other hand to give a restricted meaning to the word "loan" in the section so as to include a loan which is already covered by an award leads to sensible result. On construction, therefore, I am bound to hold that u/s 126 of the Act no second award is permissible for the recovery of the same loan which is already covered by an award. I agree with my Lord that the appeal should be allowed. Needless to say that I agree with all the observations made by my Lord in his judgment.