John Daniel vs Rubber Industrial Co-op. Society Ltd. and others

K.K. Mathew, J.—The petitioner is a member of an Industrial Co-operative Society, namely, the 1st respondent. The society was engaged in the manufacture and sale of rubber products. The society appointed the 2nd respondent as its sole agent for sale of rubber products. The 2nd respondent appointed the petitioner as its regional agent in Andhra Pradesh for a period of three years by Ex. P1. That was extended for a further period of 3 years by Ex. P2. The petitioner and his father executed a document to the 1st respondent in 1959. The petitioner alone executed another document in 1961 to the 1st respondent. In both these documents, the petitioner acknowledged his liability to account for his dealings as agent to the 1st respondent. The sub agency was terminated with effect from 1-8-1965 by Ex. P.3 proceedings of the 2nd respondent. Thereafter, the society, the 1st respondent, filed Ex. P-4 plaint before the Registrar of Co-operative Societies u/s 60 of the Travancore-Cochin Co-operative Societies Act for an amount alleged to be due to it from the petitioner as well as the 2nd respondent. The Coir Inspector, the 4th respondent, was appointed as the Arbitrator by the Registrar, and she passed an award. The petitioner filed a revision against it. The revisional authority set aside the award and remanded the case for further investigation. Thereafter Ex. P-7 award was passed. The petitioner again filed a revision from it and that was dismissed (Ex.P8.) The petitioner challenges the award. Counsel for the petitioner submits that the dispute in this case, although touching the business of the society, was not a dispute between the society and a member of the society qua member. Counsel said that it is not enough that the dispute should be at dispute between the society and a member, but that it must be a dispute between the society and a member qua member in order that section 60 may be attracted. Section 60 reads:

(1) If any dispute touching the business of a registered society (other than a dispute regarding disciplinary action taken by the society or its committee against a paid servant of the society) arises--

(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 servant of the society, or

(c) between the society or its committee and any past committee, any officer, agent or servant, or any past officer, past agent or past servant or the nominee, heirs or legal representatives of any deceased officer, deceased agent or deceased servant of the society, or

(d) between the society and any other registered society, such dispute shall be referred to

the Registrar for decision.

Explanation:- A claim by a registered society for any debt or demand due to it from a member, past member or the nominee, heir or legal representative of a deceased member, whether such debt or demand be admitted or not is a dispute touching the business of the society within the meaning of this sub-section.

x x x x

It was held by this Court in Haji Mammu Keye v. T. P. C. C. Society 1963 KLT 950, that section 51 of the Co-operative Societies Act (Madras) would only be attracted where the dispute is a dispute between a society and a member qua member. In that case, a member of the society in question there let on rent a godown belonging to him to the society and the rent fell into arrears. He filed a suit for the arrears of rent. The society contended that the suit was not maintainable and that a reference u/s 51 of the Madras Act was the proper remedy. The Court held that the contention of the society was not sustainable as the dispute was not a dispute between the society and a member qua member. This decision was followed in C. I. C. Society v. Ramaswami Achari 1965 KLT 840 by Vaidialingam J. There, a member of the Cooperative Society in question deposited money in the society, and he claimed to recover the amount deposited by a suit. The society contended that the suit was not maintainable and that the remedy was by an arbitration u/s 60. The learned Judge held that the dispute was not a dispute between the society and a member of the society qua member and that the suit was maintainable. Counsel submitted that no amount was due from the petitioner to the society in his capacity as a member, that if at all any amount was due, it was due only in his capacity as an agent or sub-agent as the case may be and therefore, the claim of the society was not amenable for adjudication u/s 60 of the Act.

On the other hand, counsel for the 1st respondent society relied on the decision in C. J. Joseph v. Registrar, Co-operative Societies, AIR 1957 T.C. 274 and said that the requirement that the amount must be due to the society from a member qua member is not warranted in view of the Explanation to the section. He contended that any dispute between a member of a society and the society touching the business of the society is a dispute amenable to adjudication u/s 60.

The question for consideration is whether the liability of the petitioner should be a liability in his capacity as member of the society in order that it may be adjudicated u/s 60. The decision which was relied upon in Haji Mammu Keye v. T. P. C. C. Society, 1963 KLT 950 for the conclusion that the liability must be a liability in his capacity as member of the society is the decision in Shyam Co-operative Housing Society Ltd. Vs. Ramibai Bhagwansing Advani and Others, . In that case, a member of Co-operative Society, a trust, lent money to the society and the suit was to recover the same. A Division Bench of the Court held that the suit was maintainable. Chagla C. J. speaking for the Court said that if the society had taken the loan from a stranger instead of from a member, a suit would have been maintainable by the stranger and that it made no difference that the amount was advanced by a member of the society, that the amount was due to it not in its capacity as member; and therefore, the dispute was not a dispute amenable to adjudication under the section. This decision was considered in the case of Malvan Co-operative Urban Bank Ltd. Vs. Kamalakar Narayan Zantye and Others, by another Division Bench of the Court and distinguished on the basis of the amendment of section 54 of the Bombay Co-operative Societies Act, 1925 by introducing the 2nd paragraph.

Mr. M. N. Sukumaran Nair, for the petitioner, submitted that the Explanation to section 60 is only an explanation as to the scope of the expression ''touching the business of the society''. He said that the Explanation is intended only to illuminate the words ''touching the business of the society'' and that it has nothing to do with the question whether the liability should be that of a member qua member.

The cases reported in Haji Mammu Keye v. T.P.C.C. Society 1963 KLT 950, and C. I. C. Society v. Ramaswamy Achari 1965 KLT 840 were cases where the society concerned were not creditors. In both these cases, it was the member who was the creditor. The explanation was not attracted to those cases. The Explanation will come into play only when a society is the creditor. In Krishna Ayyar v. Secretary, Urban Bank Ltd., AIR 1933 Mad 682 the Madras High Court considered this question with reference to the corresponding Explanation in the Madras Act, and the court held that a dispute between a person who was a member, a director and legal adviser of a Co-operative Bank, and the Co-operative Bank, arising out of matters relating to the legal practitioner''s acts as the Bank''s vakil was not a dispute within the Madras Co-operative Societies Act, (Act VI of 1932), Beasley C.J., observed:

I think it is clear that both under the Building Societies Act and the Friendly Societies Act in England which contain some what similar provisions as regards the settlement of disputes within the Society by the Registrar that, in order that such a dispute can be dealt with by the Registrar, it must be a dispute between the Society and a member in his capacity as member.

In The Vegetols Ltd. and Another Vs. The Wholesale Co-operative Stores Ltd. and Another, Rajamannar C.J., observed:

Reading clauses (a), (b), (c) and (d) and sub-section (1) of section 51, we think that by necessary intendment, the dispute should be between the society and member qua member......... For a claim to fall within section 51 it should be a claim by the society against a member as a member touching the business of the society. There may be liability of a member to the society which is not a liability incurred by the member as member. Such a liability will be outside the scope of section 51.

In Mishrimal Vs. District Co-operative Grower''s Association Ltd., the Court held that the refinement, that the claim must be by or from a member in his capacity as member is not warranted. Shirvastava J., said that the basis on which Manjeri S. Krishna Ayyar Vs. The Secretary, Urban Bank Ltd., Calicut and Another, proceeded was wrong as the Madras High Court followed the English cases which were based on section 22 of the Friendly Societies Act, the wording of which was entirely different.

The Supreme Court in Civil Appeal No. 358 of 1967 has considered the question with reference to section 91 of the Maharashtra Co-operative Societies Act, and their Lordships after reviewing the case-law adopted the view that the liability must be the liability of a member qua member in order that section 91 may be attracted. In other words, the view expressed by the Madras High Court in Manjeri S. Krishna Ayyar Vs. The Secretary, Urban Bank Ltd., Calicut and Another, and the Kerala High Court in Haji Mammu Keye v. T. P. C. C. Society 1963 KLT 950 was accepted as correct. The Court said :

In our opinion, the view expressed by the Madras, Bombay and Kerala High Courts is preferable to the view expressed by the Madhya Pradesh and the Nagpur High Courts.

In the light of this pronouncement by the Supreme Court, there can be no longer any doubt that the liability must be that of a member in his capacity as a member. The Explanation to the section does not dispense with the necessity that the liability must be the liability of a member in his capacity as member. In other words, the Explanation does not say that any debt due from a member to the society is a debt due from him qua member.

In this case, the petitioner was employed as an agent by the 2nd respondent and the debt is due, if at all, not in his capacity as a member of the society, but in his capacity as an agent or sub-agent. Section 60 of the Act was not therefore attracted.

No question of acquiescence or estoppel was raised in the counter-affidavit of the 1st respondent nor in the argument of counsel. So, I do not think it is necessary to deal with it. The other contention of the petitioner that the claim being one for an account, is not a claim for a debt or demand within the meaning of section 60 does not arise for consideration.

I quash Ex. P7 award passed by the Arbitrator and Ex. P8 order passed in revision. The writ petition is allowed. No costs.