M.F. Farooqi vs U.P. Industrial Cooperative Association Ltd.

Satish Chandra, C.J.—This is a Plaintiff''s appeal. The suit was for a declaration that the Plaintiff''s services were illegally terminated by the U.P. Industrial Co-operative Association Ltd., Kanpur, the Defendant. The Plaintiff also claimed damages. He alleged that he was appointed as a clerk on April 8, 1958. He was subsequently promoted as noter and drafter and later on as Yarn Inspector. He was transferred to Business Section of the Co-operative Society in September 1965. He was a permanent employee but his services were terminated abruptly from 25th May 1966 in contravention of the relevant rules and provisions on the subject.

In defence it was pleaded that the Plaintiff was a temporary hand and his services could be determined at any time. Subsequently it was pleaded that the suit was barred by Section 111(c) of the U.P. Co-operative Societies Act, 1965. The trial court decreed the suit but on appeal the decree was reversed and it was held that the suit was barred by section 70 read with section 111 of the aforesaid Act.

Before the learned single Judge the Plaintiff challenged the finding that section 70 of the Act was applicable. On behalf of the Defendant-Respondent reliance was placed upon a single Judge decision in writ petition No. 3693 of 1968 The U.P. Industrial Co-operative Union Ltd. v. The First Additional Munsif, Gorakhpur, decided on 7th January 1970. In this decision it was held that a dispute relating to the validity of the termination of services could validly be settled u/s 70 of the U.P. Co-operative Societies Act and hence the jurisdiction of the Civil court for determining such a dispute was barred. No reasons were given. The earlier decision of the Supreme Court was not brought to the notice of the learned single Judge. The learned single Judge hearing this case felt that in view of the Supreme Court decision, the aforesaid decision of the learned single Judge required reconsideration. He accordingly referred the case to a larger Bench.

Section 111(c) of the Act states that save as expressly provided in this Act, no civil or revenue court shall have any jurisdiction in respect of any dispute required u/s 70 to be referred to the Registrar.

Section 70 of the Act relates to a dispute relating to the constitution, management or the business of a co-operative society. In Deccan Merchants Co-operative Bank Ltd. Vs. Dalichand Jugraj Jain and Others, , the Supreme Court observed as under: "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 authorised to enter into under the Act and the Rules and its bye-laws."

It was further observed:

It is difficult to subscribe to the proposition that whatever the society does or is necessarily required to do for the purpose of carrying out its objects can be said to be part of its business. We, however, agree that the word "touching" is very wide and would include any matter which relates to or concerns the business of a society, but we are doubtful whether the word "affects" should also be used in defining the scope of the word "touching".

This decision was approved and followed by the Supreme Court in Allahabad District Cooperative Limited Vs. Hanuman Dutt Tewari, . In this case it was further held after following its earlier decision in Co-operative Central Bank Ltd. and Others Vs. Additional Industrial Tribunal and Others, that the expression ''touching the business of the society'' makes it very doubtful whether a dispute in respect of alteration of conditions of service can be held to be covered by this expression. It was also held that 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 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 said 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 dispute touching the business of the society.

Learned Counsel for the Defendant Respondent submits (hat the aforesaid decisions of the Supreme Court are distinguishable. They interpreted and construed the phrase ''touching the business of the society'' according to the normal rules of construction. But in the present case u/s 70 of the Act the phrase ''dispute relating to the constitution, management or the business of a Co-operative Society'' has itself been defined by Sub-section (2) to section 70 of the Act. According to the learned Counsel the phrase ''touching'' has not the same significance or connotation as the words ''relating to''. This submission is not acceptable to us. In the earlier Supreme Court decision it was specifically held that the word ''touching'' is very wide and would include any matter which relates to or concerns the business of a society. Hence it must be held that the phrase ''relating'' has the same significance or meaning as the word ''touching''.

In the next place the learned Counsel invited our attention to Clause (d) of Sub-section (2) of section 70 of the Act which provides:

(2) For the purposes of Sub-section (1), the following shall be deemed to be included in dispute relating to the constitution, management or the business of a co-operative society, namely

(a) ...

(b) ...

(c) ...

(d) all matters relating to the objects of the society mentioned in the bye-laws as also those relating to the election of office-bearers.

According to the learned Counsel all matters relating to the objects of the society mentioned in the bye-laws will be deemed to be relating to the constitution, management or the business of a co-operative society. Learned Counsel invited our attention to Clauses (h) and (t) of bye-law 4 which lay down the objects of the Association. Clauses (h) and (t) read as under:

(h) to recruit, train and maintain suitable staff for discharging its obligation to Its constituents.

(t) to do all and such other things as may be incidental and conducive to the attainment of any or all of the aforesaid objects.

The dispute in the present case relates to the validity of the order of termination passed against the Plaintiff. The dispute is not in any manner related to recruitment, training and maintenance of suitable staff. To achieve this object the co-operative society may make rules or regulations relating to recruitment, training and maintenance of suitable staff but there is no dispute in regard to those rules or regulations. The dispute is about an individual action taken against one of its employees which, in our opinion, will not directly relate to the object mentioned in Clause (h). Similarly the residuary object mentioned in Clause (t) has no connection whatsoever with the dispute raised in the present suit, namely, the validity of the order of termination. We are hence unable to accept the submission that Clause (d) of Sub-section (2) of section 70 of the Act is in any manner attracted to the facts of the present case.

As held by the aforesaid Supreme Court decisions, the dispute regarding the validity of the termination of an employee''s service is not a dispute relating to the business of a co-operative society. Hence such a dispute is not covered by section 70 of the Act and cannot be referred to arbitration as provided thereunder. In this view, section 111 of the Act is also not attracted so as to bar the jurisdiction of the civil court. The suit was, in our opinion, maintainable.

Since the lower appellate court decided the appeal merely on the question of jurisdiction and dismissed the suit on the ground that it was not maintainable in the civil court, it is fit and proper that the matter may go back to the lower appellate court for decision of the suit in accordance with law.

In the result, the appeal succeeds and is allowed. The impugned judgment and decree of the lower appellate court is set aside and the matter is remanded to the lower appellate court for decision of the appeal in accordance with law. The parties may, however, bear their own costs in this Court. The costs in the courts below will abide the result.