The Sugauli Sugar Works (Private) Ltd.
Vs. The Asstt. Registrar, Co-Operative Societies  INSC 95 (14 March 1962)
14/03/1962 SINHA, BHUVNESHWAR P.(CJ) SINHA,
BHUVNESHWAR P.(CJ) SUBBARAO, K.
AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R.
AIYYAR, T.L. VENKATARAMA
CITATION: 1962 AIR 1367 1962 SCR Supl. (3)
CITATOR INFO :
F 1967 SC 389 (6)
of Registrar-If can entertain claim by registered society against non-member
Bihar and Orissa Co-operative Societies Act, 1985 (B. & O. 6 of 1935), as
amended by Bihar Co-operative Societies (Amendment) Act, 1948 (Bihar 16 of
1948), ss.48 (1), 16(1) and 2(c).
The point for determination in the appeal was
whether the Registrar of Co-operative Societies under the Bihar and Orissa
Co-operative Societies Act, 1935, as amended by Act 16 of 1948, had the
jurisdiction under s. 48(1) of the Act to hear and decide a reference made by a
registered society against a non-member. The appellant company, incorporated under
the Indian Companies Act, with its registered office at Calcutta, manufactured
sugar in Bihar. The second respondent the Union of Co-operative Societies,
registered under the Co-operative Societies Act, made a reference under s. 48
of the Act, against the appellant claiming the sum of Rs. 1,20,809/odd as
commission and interest for supplying sugarcane in 1959-60. The first
respondent, the Assistant Registrar of Go-operative Societies registered the
reference and issued notice to the appellant. The appellant took the
preliminary objection that the Assistant Registrar had no jurisdiction under
the Act to entertain the reference. That objection was overruled by the
Assistant Registrar relying, on a decision of the High Court and the High Court
upheld that order by dismissing in limine the appellant's petition under
Arts.226 and 227 of the Constitution.
Held, that the High Court had taken a wrong
view of the law.
Although under s. 48 of the Act the claim by
a financing bank against a nonmember to whom it had made in advance either in
cash or kind, with the sanction of the Registrar under s. 16(1), could be
entertained by the Registrar, that did not mean that a claim not of the kind
referred to in s.16(1), read 805 with s. 2(c), made by a registered society
against a nonmember, who was not an agriculturist, was within the purview of s.
48(1), read with the Explanation 1. The addition of the word `non-member' by
the amending Act of 1948 to the Explanation I, did not enlarge the scope of the
main section so as to make all kinds of dispute between a registered society
and a non-member cognizable by the Registrar.
Since in the present case, the second
respondent was not a financing bank nor was the appellant an agriculturist,
48(1) (e) and, the Explanation 1 could have no application. Union of India v.
Registrar, Co-operative Societies, Patna, (1961) I.L.R. 40 Pat. 7, overruled.
CIVIL APPELLATE, JURISDICTION : Civil Appeal
No. 100 of 1962.
Appeal by special leave from the judgment and
order dated October 30, 1961, of the Patna High Court in M.J.C. No. 954 of
A. N. Sinha, A. K. Nag and P. K. Mukherjee,
C. K. Daphtary Solicitor General of India and
S.P. Varma, for respondent No. 2.
L. K. Jha, and S. P. Varma for respondent
1962. March 14. 'The Judgment of the Court was delivered by SINHA C. J.-This
appeal, by special leave, is directed against the order of a Division Bench of
the Patna High Court, dated October 30, 1961, dismissing in limine the
appellant's petition dated October 24, 1961, under Arts. 226 and 227 of the
Constitution, being Miscellaneous Judicial Case No. 954 of 1961, for a writ of
Prohibition directing the first respondent not to proceed with the Award case
No. 101 of 1961, and a writ of certiorari for quashing the order of the said
respondent, dated September 29, 1961. The appellant is a private limited
company, incorporated under the under the Indian companies Act, with its
registered office at Calcutta. It 806 carries on the business of manufacturing
sugar in its factory at Sugauli in the district of Champaran, in Bihar.
The first respondent is the Assistant
Registrar, Cooperative Societies, Motihari Circle, Motihari, in the State of
Bihar; the second respondent is the Union of Co-operative Societies, and is
registered under the Bihar and Orissa Cooperative Societies Act (B. & O.
Act VI of 1935) (to be referred to hereinafter as the Act); the third
respondent is the State of Bihar.
On August 14, 1961, respondent No. 2 made a
reference under s.48 of the Act, against the appellant, claiming the sum of Rs.
1,20,809/odd, as commission and interest for supply of sugarcane during the
crushing season 1959-60. The said reference was registered by the first
respondent as Award Case No. 101 of 1961, on August 17, 1961.. Notice of the
said reference was issued to the appellant. On September 26, 1961, the
appellant took a preliminary objection to the jurisdiction of the first
respondent to entertain the reference and to adjudicate upon it, and prayed
that the reference be rejected. The first respondent, following a decision of
the Patna High Court, reported in Union of India v. Registrar, Co-operative
Societies Patna (1), overruled the appellant's preliminary objection by his
order dated September 29, 1961. Against that order, the appellant moved its
application aforesaid before the High Court of Patna.
The High Court, following its previous
decision aforesaid, summarily dismissed the application. The appellant moved
this Court, and obtained special leave to appeal from the order of the High
Court, dismissing his application. This Court granted the special leave on
December 4, 1961. The appellant moved this Court for stay, which was finally
heard on January 11 ,1962 and the Court directed that the appeal be heard
peremptorily on February 15, this year. That is how the (1) (1961) I.L.R. 40
807 matter comes before us for hearing of the
The only question for determination in this
appeal is whether under the provisions of the Act, the first respondent had
jurisdiction' to hear and determine the dispute referred to him at the instance
of the second respondent. The answer to the question raised in this appeal must
depend upon the interpretation of the provisions of the Act.
Before examining the provisions of the Act,
as it stands at present, it is necessary to set out the legislative history of
the law on the subject. When the Co-operative movement was set up in the
beginning of this century, the law governing co. operative societies was
enacted as The Cooperative Societies Act (11 of 1912), by the Indian Legislature.
That Central Act continued in force in Bihar and Orissa until it was repealed
by the Bihar and Orissa Legislative Council by the Bihar & Orissa
Co-operative Societies Act (B. & O. Act VI of 1935), after obtaining the
previous sanction of the Governor-General, under sub-s. 3 of a. 80-A of the
Government of '.India Act. The Act of 1935 was enacted with a view to
consolidate and amend the law relating to co-operative societies in the
Province of Bihar and Orissa, as it then was. As it displaced the Cooperative
Societies Act. of 1912, so far as the Province of Bihar and Orissa was
concerned, s.5 enacted that all references to the Co-operative Societies Act,
1912, occurring in any enactment made by any authority in 'British India, and
for the time being in force in the Province, shall be construed as references
to the new Act. Under s. 7, a society, which has as its object the promotion of
the common interests of its members in accordance with cooperative principles,
or a ,society' established with the object of facilitating the operation of
such a society, may be registered 808 under the Act. On such registration, the
Society becomes a body corporate with perpetual succession and' a common sea],
and with power to acquire and hold property, to enter into contracts, to
institute and defend suits, etc.
Under s. 15, a registered society shall
receive deposits and loans from members and non-members only to such extent and
under such conditions as may be prescribed. Under a. 16, ordinarily a
registered society shall not make a loan to any person other than a member,
except with the, general or special sanction of the Registrar and subject to such
restrictions as he may impose. Section 17 further provides for such
prohibitions and restrictions, in respect of the transactions of registered
society with persons other than members, as the Provincial Government may by
rules prescribe. Section 48 makes it obligatory that any dispute touching the
business. of' a registered society, among members, past members, persons
claiming through members, past members or deceased members and sureties of
members, past members or deceased members, whether such sureties are members,
or nonmembers, or between them and the registered society, shall he referred to
the Registrar. By virtue of Explanation (1) to the section, a claim by a
registered society for any debt or demand due to it from a member or a past
member or his heir or legal representative, or from sureties. whether they are
members or non-members, &hall be a dispute within the meaning of the main
section, even though such debt or demand is admitted and the only point at
issue is the ability to pay or the manner of enforcement of payment.
It will thus be seen that the Act is limited
in its operation to registered societies and their members in their dealings
with one another It is only in exceptional cases of borrowing 809 by a
registered society from nonmembers, in accordance with the rules and bye-laws
prescribed by the competent authority, or in case of loan to a non-member under
the provisions of s. 16, that there could be dealings between registered
societies and non-members, keeping aside the cases of sureties of members, who
may be nonmembers, but who also come within the purview of dealings between a
society and its members.
Such were the relevant provisions of the Act
when it was amended by tile Bihar Co-operative Societies (Amendment) Act, 1942,
and the Bihar Co-operative Societies (Amendment) Act, 1944, enacted by the
Governor of Bihar in exercise of tile powers assumed to himself by the
Proclamation dated November 3, 1939, issued by him under s. 93 of the
Government of. India Act, 1935. For our purposes, it is only necessary to
notice some of the amendments made by the amending Act of 1944 (-Bihar Act X of
1944). By a. 2, cl. (c) of s. 2 of the Act of 1935 was substituted in these
"(c) financing bank' means a registered
society the main object of which if; to make advances in cash or kind to other
registered societies or to agriculturists who are not members of registered
societies or to both such societies and agriculturists." By s. 3, s. 16 of
the Act of 1935 was amended by adding subs. (3) to s. 16, as under:
"(3) Where the Registrar has accorded
sanction to a financing bank under the provisions of sub-section (1), a
registered society which is a member of such financing bank may, subject to
tile terms of the sanction and such other terms and conditions as may be
prescribed by the Registrar, act as agent for the financing bank and as such
agent carry out, with or without any commission, all or 810 any transactions
connected with loans or advances made or to be made by the financing bank."
A consequential change was made 'in s. 23 of the Act of 1935, by inserting a.
23-A, so as to make a debt or an outstanding demand to a registered society
from a non-member a first charge on the property of the non-member. The most
important amendment was made by a. 6, in s. 48 of the main Act as follows
"6. In sub-section (1) of section 48 of the said Act-(&) after clause
(d), the word "shall be inserted and thereafter the following clause shall
be inserted, namely :"(e) between a financing bank authorised under the
provisions of sub-section (1) of section 16 and a person who is not a member of
a registered society;" and (b) in Explanation (1), after the words
"from a member," the word "non-member" shall be inserted.
an(-] after the words "of a deceased member" the words "or
nonmember" shall be inserted.
It is not necessary to refer to the other
consequential amendments made and the addition of a new chapter 7A, relating to
the manner of recovery. The amendments effected by the amending Act of 1944 had
been enacted by the Governor of Bihar in exercise of his special powers
aforesaid. The provisions of those amendments were re-enacted as Act XVI of
1948. We would, therefore refer hereinafter to the amendments in question as
the amendments of 1948.
As already indicated. a Division Bench of the
patna High Court has laid it down in the case of 811 Union of India v.
Registrar, Co-operative Societies. Patna (1) that the Explanation to s. 48(1)
of the Act covers a claim by a registered society for any debt or demand from a
non-member, and that, therefore, the claim of a registered society against the
railway company for compensation for short supply is a dispute within the ambit
of a. 48 of the Act, and that, therefore, the Assistant Registrar, Cooperative
Societies had jurisdiction to determine the dispute under s. 48(2) of the Act.
Relying upon that decision, the High Court dismissed the appellant's petition
under arts. 226 and 227 of the Constitution, in limine. The appellant has
questioned the correctness of that decision.
The question, therefore, .is whether the High
Court has taken correct view of the provisions of s. 48, the relevant portions
of which are as follows:
"48 (1) If any dispute touching the
business of a registered society ... arises(a) amongst members, past members persons
claiming through members, past members or deceased members, and sureties of
members, past members or deceased members whether such sureties are members or
non-members; or (b) between a member, past member, persons claiming through a
member, past member or deceased member or sureties of members, past members or
deceased members, whether such sureties are members or nonmembers, and the
society, its managing committee or any officer, agent or servant of the
society; or (c)........................
(e) between a financing bank authorised under
the provisions of sub-section (1) of (1) (1961)I.L.R.40Pat.7.
812 section 16 and a person who is not a
member of a registered society ; such disputes shall be referred to the
Explanation 1--A claim by a registered
society for any debt or demand due to it from a member, non-member, past member
or the nominee, heir or legal representative of a deceased member or non-member
or from sureties of members, past members or deceased members, whether such
sureties are members or nonmembers, shall be a dispute touching the business of
the society within the meaning of this subsection even in case such debt or
demand s admitted and the only point at issue is the ability to pay the manner
of enforcement of payment.
(9) Save as expressly provided in this
section, a decision of the Registrar under this section, and subject to tile
orders of the Registrar on appeal of review, a decision given in a dispute
transferred or referred under clause (b) or (c) of sub-section (2), shall be
final." From the provisions of the Act, set out above, it is manifest that
the act created a special tribunal, namely, the registrar of Co-operative
Societies, to deal with certain disputes specified in s. 48(1)(a) to (e). This
special tribunal was created with a view to shortening litigation and providing
speedy relief to registered societies and their members in their disputes inter
se in respect of the business of the society. Before the amendments introduced
by the Act of 1948 the disputes which could be, entertained by the Registrar
were disputes amongst 813 members, past members or their heirs or their
sureties, or between a society and other registered societies (without meaning
to exhaust all the categories.) But, before the amendments, one who was not a
member of a society or was not claiming through a member or a past member or a
deceased member, or was not a surety of a member or a deceased member, was not
subject to the jurisdiction of the Registrar under s. 48. That is to say, any
dispute between a society or its members, past members or deceased members or sureties
of such members on the one hand and non-members on the other, was not within
the purview of the section so that, the appellant company, which is not a
registered society, or a member of a registered society, could not have its
claim, or a claim against it by a registered society, referred to the Registrar
for decision, under this section, Such a dispute by a society or its members
against a non-member had to be taken to the ordinary courts for decision.
In our opinion, the contention raised on
behalf of the appellant is correct. By the amending Act of 1948, the aforesaid
relevant and important amendments Were introduced into the Act. The effect of
these amendments is that a claim by a financing bank against a nonmember to
whom the former may have made an advance in cash or kind with the sanction of
the Registrar s. 16(1), would be entertain able by the Registrar, on a
reference. But that does not mean that a claim which is not of the description
referred to in s. 16(1), read with s. 2(c), by a registered society against any
non-member, who is not an agriculturist, is within the purview of s. 48(1). read
with the Explanation. The Explanation cannot be read as adding a new head to
the categories (a) to (e) under s. 48 (1), of disputes which may be referred to
the Registrar. Originally, the Explanation had been added only to make it clear
that even if a debt or 814 a demand is admitted and the only point at issue is
the ability to pay or the manner of enforcement of payment, the dispute would
come within the purview of the main s. 48(1).
The addition of the word non-member'; by the
amending Act of 1948, to the first Explanation has not enlarged the scope of
the main s. 48(1) so as to make all kinds of disputes between a registered
society and a non-member cognizable by the Registrar. thus excluding the
jurisdiction of the ordinary courts.
In the instant case, it is manifest that the
dispute is between a registered society, the second respondent, and the
appellant, a non-member, in respect of the claim for commission and interest
thereon for supply of sugarcane, and the appellant alleges that it has a counterclaim
of a lakh and fifty thousand rupees for short and irregular supply of sugarcane
'against that respondent. These are matters which, in our view, are wholly
beyond the purview of s. 48 of the Act, when it is remembered that the second
respondent is not a financing bank and that the appellant is not an
agriculturist to whom any advances in cash or kind had been made or could have
been made so as to bring the appellant within the purview of s.48 (1) e), and
consequentially of Explanation 1. The decision of the Patna High Court to the
contrary is, therefore, not correct.
In the result, the appeal is allowed with
costs, and it is directed that the Registrar should not entertain the
reference, and should not adjudicate upon the dispute, and not make an award.
The main contesting parties must be left to their remedies in the ordinary