Kamal Krishna Mukherjee vs Rampada Ghose

S.R. Das Gupta, J.—This is an appeal against an order of the Additional Subordinate Judge of Burdwan affirming the order passed by the second munsif, Burdwan.

The question involved in this appeal is whether or not an award made pursuant to the provisions of the Bengal Co-operative Societies Act, 1940, was made without jurisdiction. The matter arises in this way: Towards the end of December, 1948, Ajhapur Union co-operative society was formed to function in three villages, namely, Nabagram, Maina and Masunda. The Appellant before us was the secretary of the said society. The object of the society inter alia was to supply commodities to the members in these villages. It is said that in January, 1949, the society intended to extend its area of operation to three other villages, namely, Sanchra, Mohanpur and Mirapara and, in fact, had been supplying to the people of those villages the commodities belonging to the society. Under Article 58 of the bye-laws of the society steps had to be taken before a society could extend its operation to villages other than those over which the said society was originally functioning. But no steps was taken by this society in accordance with the said provisions. Thereafter disputes arose between the society and the Appellant. The Appellant''s case was that the sale proceeds of the cloths sold to the said villagers of Sanchra, Mohanpur and Mirapara were not entered as receipts in the cash book but kept with the secretary. The society claimed the sums which were received by him as alleged by the society. The total amount claimed by the society against the Appellant was a sum of Rs. 714-7-6 and it consisted of two different sums namely, Rs. 346-8-3 being the cash sale-proceeds of cloths sold to the villages Sanchra, Mohanpur and Rs. 367-15-3 being the cash amount alleged to have been received by the secretary in respect of other accounts. The Appellant disputed the claim of the society and his contention was that he was not liable for any of those sums. The said dispute between the society and the Appellant was thereupon referred to the Registrar for arbitration under the provisions of Section 86 of the Bengal Co-operative Societies Act. I shall deal with the material provisions of the said Act in greater details hereafter. The dispute between the parties before us centres round the construction and effect of the said provisions. The Registrar upon receipt of the said reference from the society appointed an inspector to decide the said disputes. This the Registrar was entitled to do u/s 87 of the said Act. The arbitrator made his award and under the said award the Appellant was required to pay a sum of Rs. 446-13-6 which was the difference between the sum of Rs. 714-7-8 claimed by the society and the sum belonging to the Appellant which was lying in deposit with the society. The Appellant being aggrieved by the said award preferred an appeal to the Registrar, but the said appeal was dismissed. Thereupon he made an application in accordance with the provisions of the said Act to the Government which was also refused. Thereafter the Respondent applied for execution of the said award. Objection was raised by the Appellant to the said execution and the main ground taken was that the award was made without jurisdiction. The learned munsif overruled the said objection. An appeal was preferred to the court of the Additional Subordinate Judge of Burdwan and the learned Subordinate Judge dismissed the said appeal and affirmed the decision of the munsif. Against the said order of the learned Subordinate Judge the present appeal has been preferred to this Court.

As I indicated before, the only ground taken before us by the Appellant was that the award was made without jurisdiction. Mr. Chakravarty appearing for the Appellant referred us to the various provisions of the Bengal Co-operative Societies Act in support of his said contention. In order to appreciate the contentions of Mr. Chakravarty it would be necessary to refer to the following provisions of the said Act. Section 86 of the Bengal Co-operative Societies Act reads as follows:

Any dispute touching the business of a co-operative Society (other than a dispute regarding disciplinary action taken by a society or its managing committee against a paid servant of the society) or of the liquidator of a society shall be referred to the Registrar if the parties thereto are among the following, namely,-

(a) the society, its managing committee, any past or present officer, agent or servant or the liquidator of the society; or

(b) a member, past member or person claiming through a member, past member or deceased member of the society; or

(c) a surety of a member, past member or deceased member of the society whether such surety^is or is not a member of the society; or

(d) any other co-operative society or the liquidator of such society 4.

Section 87 of the said Act runs as follows:

(1) On receipt of a reference u/s 86 the Registrar shall, subject to the rules,-

(a) decide the dispute himself; or

(b) transfer it for disposal to any person authorised by the Provincial Government to exercise the powers of the Registrar in this behalf; or

(c) refer it for disposal to one or more arbitrators to be appointed by the Registrar.

(2) Subject to the rules, the Registrar may withdraw any reference transferred or referred under Sub-section (1) andmay deal with it himself in themanner provided in such rules.

Section 127 provides as follows:

(1) Where, as the result of an audit u/s 76 or on inspection u/s 82 or Section 83, or an inquiry u/s 84 a report made in the course of the winding up of a co-operative society, it appears to the Registrar that any past or present officer has, at any time after the commencement of this Act and within a period of four years prior to the date of such audit, inspection, inquiry or report, as the case may be-

(a) intentionally made or authorised any payment which is contrary to the provisions of this Act or to the rules or by-laws; or

(b) by reason of his culpable negligence in respect of any prescribed matter involved the society in any loss or deficiency; or

(c) failed to bring into account any sum which ought to have been brought into account; or

(d) misappropriated or fraudulently retained any property of the society; the Registrar may inquire into the conduct of such officer.

(2) Upon such inquiry, after giving such officer an opportunity to be heard and, in the case of a payment made contrary to the provisions of this Act or the rules or by-laws, after affording such officer an opportunity to recover the amount of such payment from the payee and credit it to the funds of the society, the Registrar may, subject to the rules, by an order in writing require such officer to pay such sum to the assets of the society by way of compensation in respecpt of such payment or loss or sum, or to restore such property as the Registrar thinks fit, and to pay such sum as the Registrar may fix to meet the cost of the proceedings under this section.

(3) This section shall apply notwithstanding that such officer may by his act or omission have incurred criminal liability under this Act or any other law for the time being in force.

The other provisions to which I need refer at present are items 7 and 10 of the Fourth Schedule of the said Act.

Items 7 reads as follows:

Serial No. and order By whom the appeal may Period of limitation. appealable. be preferred; and autho- rity to which appeal lies. 7. Any order, decision By any person aggrieved; One month from the date or award of the (a) if passed by the on which the order, Registrar or an Registrar to the Pro- decision or award was arbitrator under vincial Government; or communicated to the Section 87 or 88. * * * * person aggrieved. 10. An order passed By any person aggrieved Three months from the u/s 127 to the District Judge. date on which the order or Section 129. was communicated to the person aggrieved.

Mr. Chakravarty contended before us that the present dispute which has been decided in accordance with the provisions of Section 86 of the Bengal Co-operative Societies Act, does not come within the said section. He contended, in the first place, that the dispute in question is not a dispute touching the business of a co-operative society. His ground for that contention was that the area within which the society could operate consisted only of the three villages Nabagram, Maina and Masunda. The society could not without taking steps u/s 58 of the by-laws of the society extend its area of operation and could not sell its commodities to the people of the villages Sanchra, Mohanpur and Mirapara and if the society had done that then it acted beyond its jurisdiction. Consequently, Mr. Chakravarty urged, a dispute arising out of a transaction done in those villages would not be a dispute touching the business of the co-operative society as the co-operative society could not do any business in any place other than the three villages already mentioned. In the second place Mr. Chakravarty contended that Section 86 of the Co-operative Societies Act does not cover the present dispute because of the specific provisions made in Section 127 of the said Act. Mr. Chakravarty''s contention was that in a case of misappropriation it is for the Registrar to act u/s 127 of the said Act and if the Registrar thinks fit he can make an inquiry and after giving an opportunity to the officer concerned to be heard make an order directing compensation to be paid by such officer, and this being a case of misappropriation it comes within the purview of the said Section 127 of the Act. According to Mr. Chakravarty there being a specific provision (i.e., Section 127) dealing with the case of misappropriation Section 86 of the Act has no application to such a case. In this case, Mr. Chakravarty contended, the case of the society in effect was that his client had misappropriated money belonging to the society.

We are unable to accept the contentions of Mr. Chakravarty. I shall first deal with his second contention, namely, that in view of the specific provisions of Section 127 of the Act Section 86 has no application to a case where there is a charge of misappropriation against an officer. As I have understood the main contention of Mr. Chakravarty on this part of the case was that if Section 86 is held to apply to a case of misappropriation, then the provisions of Section 127 would be redundant and there would be no reason for having such provision enacted in the said Act. In our opinion, Section 86 deals inter alia with a case where there is a dispute between the society and its officer. A provision has been made in the said section for reference of such disputes to the arbitration of the Registrar. The Registrar can, if he is referred to, authorise, u/s 87 of the said Act, any person mentioned therein to adjudicate upon the said dispute. If any decision is made by a person, other than the Registrar, then the aggrieved party has a right to prefer an appeal to the Registrar and if he does not succeed he can apply to the Government. Section 127, on the other hand, gives power to the Registrar, if it appears to him as a result of an audit or inspection or an inquiry that an officer has misappropriated or fraudulently retained any property of the society, to call upon such officer to show cause, and after an opportunity has been given to the said officer to say what he has to say, direct him to pay the sum which he has misappropriated by way of compensation to the society. The power that is given u/s 127 is a power given to the Registrar to act if he considers it necessary to do so but that provision by no means takes away the ordinary right of the society to ask for account from its officer and to claim refund of the amount which would be payable on such account; in other words, the ordinary right of the society against its own officer is not taken away by the said Section 127. There are similar provisions in the Indian Companies Act whereby the liquidator of a company can take steps against an officer of the company in cases of misappropriation or defalcation but because of those provisions the company is not prevented from making an application against the said officers for refund of the sums misappropriated by them. Similarly although under this Act the Registrar has got power of superintendence over the affairs of the society and can direct an officer of the society, who in his opinion has misappropriated the money of the society, to refund the sum he has so misappropriated, it cannot be said that because there is such a provision the ordinary right of a society to ask for account and for a refund of the money belonging to the society from one of its officers is taken away. In this connection it should be remembered that u/s 133 of the Bengal Co-operative Societies Act, 1940, no civil or revenue court shall have any jurisdiction in respect of any dispute required u/s 86 to be referred to the Registrar; in other words, by virtue of the said provision the ordinary right of the society to institute proceedings in a civil court against one of its officers, for accounts and refund of the monies misappropriated by him, is taken away. The result of the said provision is that the society can in such a case proceed u/s 86 and the said section provides machinery by which such dispute between the society and its officer will be determined. Mr. Chakravarty contended before us that in such a case the only remedy left to the society was to ask the Registrar to move into the matter u/s 127 of the Act. But the obvious answer to that contention seems to be that if the Registrar does not choose to move into the matter, the society has no remedy whatsoever and it cannot get refund of the stems due from its officer. We should remember that u/s 127 of the Act, it is for the Registrar to decide whether or not he should proceed against the officer concerned and make an order under the said section. The society cannot ask the Registrar, as a matter of right, to take action against an officer. In other words, it cannot force the hands of the Registrar. If then the Registrar refuses to move into the matter, the society according to the argument, of Mr. Chakravarty will have no remedy against its officer. We are not prepared to hold that such a result was in the contemplation of the legislature. In our opinion there is no conflict between the provisions of Section 86 and Section 127 of the Societies Act. The true effect of the two sections is this u/s 86 if there is a dispute between the society and one of its officers the same will be referred to the arbitration of the Registrar. Section 127, on the other hand, empowers the Registrar to call upon the officer to explain his conduct and if not satisfied with such explanation to order him to refund the money, whether or not there is a dispute between the society and its member. Thus, if for instance the society claims a certain sum of money from one of its officers and the officer disputes his liability to pay the same such a dispute shall be referred u/s 86 of the said Act to the arbitration of the Registrar. On the other hand, u/s 127 of the Act the Registrar, if satisfied on perusal of the papers, report or on making inquiry, that steps should be taken against an officer who, according to him, had defalcated funds of the society may of his own accord, even though the society may not move into the matter, ask for explanation from the said officer and make an order directing him to pay the amount. In our opinion, Section 86 gives right to the society to refer its dispute with its member to the arbitration of the Registrar while Section 127 empowers the Registrar himself to proceed against the officer. We are unable to accept the contention of Mr. Chakravarty on this point.

With regard to the other ground urged by Mr. Chakravarty, namely, that this is not a dispute touching the business of the co-operative society, the same, in our opinion, cannot also be accepted. As I have indicated this contention is based on the ground that the society could not in law sell its goods to the villages Sanchra, Mohanpur and Mirapara and that being so, any dispute arising out of the sales made to those villagers cannot be said to be a dispute touching the business of the co-operative society. In our opinion, the question as to whether or not the society could legally sell its goods to those villages has no bearing on the issue as to whether or not a dispute relating to the sale-proceeds of those goods would be a dispute touching the business of the society. In our opinion, it would still be a dispute touching the business of the society. My Lord put if to Mr. Chakravarty, in the course of his argument, that if that were not so then to whose business would the said dispute relate and Mr. Chakravarty could not give satisfactory answer to the said question. In my opinion, although it may be that the society cannot legally sell its goods to villagers outside its area, the dispute which has arisen relating to the sale-proceeds of those goods would still be a dispute touching the business of the co-operative society. It relates to the business of the said society; it relates to the sale-proceeds of the commodities belonging to the society I fail to see how in these circumstances it can be contended that the said dispute does not touch the business of the co-operative society.

In my opinion, this contention of Mr. Chakravarty must also be overruled.

Before concluding my judgment I ought to refer to one other matter. It appears from the award itself which has been placed before us that the arbitrator did not come to a definite finding that the Appellant has been guilty of misappropriation. He has proceeded on the footing that he being the secretary the responsibility of the cash, till the same was made over to the business manager, rested with him and it was immaterial whether or how much credit-sales were yet unrealised; in other words, the arbitrator did not hold that the Appellant had misappropriated the sums in question. We want to make it clear that the decision which we have given in this appeal does not imply that the Appellant has been guilty of misappropriation. There is, as I have said, no finding by the arbitrator of misappropriation and we also do not find that the Appellant has been guilty of such misappropriation. In our opinion, the facts of this case do not show that he has been guilty of any moral turpitude.

We, therefore, hold that the contention of the Appellant, namely, that the arbitrator had no jurisdiction to make the award, must fail. The appeal is, therefore, dismissed but in view of the special circumstances of this case we direct that each parly will pay its own costs throughout.

We further direct that no interests will be allowed on the amount awarded by the arbitrator. Mr. Chakravarty on behalf of his client prayed that his client may be allowed to pay the said amount in easy instalments. We direct that the Appellant will be at liberty to pay the sum awarded by the arbitrator in any instalments he likes within one year from date, and the decree will not be executed before the end of one year from to-day.

No order is necessary on the application filed in court on May 25, 1953.

Mallick, J.

I agree.