Decided on March 16,1954

KHEM CHAND Respondents


- (1.) This is an appeal by a defendant and it arises under the following circumstances. The plaintiffs-respondents were expelled from membership of the District Co-operative Society Mandi through a resolution passed in the annual meeting held on 22-6-1952. Thereupon, they filed a suit in the Court of the Subordinate Judge, Mandi, seeking a declaration that the proceedings of the annual general meeting and their removal from membership were illegal and mala fide and further they still continued as members of the society. The suit was contested on various grounds; inter alia, the society contended that the suit was not maintainable in view of the provisions of Rule 18 framed under Section 43, Cooperative Societies Act. The preliminary objection was upheld by the Subordinate Judge, who dismissed the suit. In appeal, the learned District Judge came to the conclusion that Rule 18 did not apply to the facts of the case. Consequently, he reversed the order of the Subordinate Judge and remanded the case for decision on its merits. Hence, this appeal.
(2.) I have heard learned counsel for the parties at considerable length. The point for determination here is whether Rule 18 framed under Section 43, Co-operative Societies Act is a bar to the present suit? To answer this question, it is necessary to refer to the wording of Rule 18 (a), which has been quoted 'in extenso' by the learned District Judge. It is clear from the perusal thereof that certain kinds of disputes have to be referred to the Registrar in the manner contemplated therein. These disputes must, firstly, relate to the business of the co-operative society and, secondly, must be between present or past members of the society or persons claiming through them on one side and the committee on the other. We have, therefore, to see whether the dispute in the present case can reasonably be said to be one which concerns the business of the co-operative society. The dispute obviously is between certain members who have been expelled on one side and the society on the other. Thus, the second condition is satisfied. From the preamble of the Act, it is clear that the object of forming co-operative societies is to promote thrift and self-help among agriculturists, artisans and persons of limited means. Section 43 of the Act empowers the Provincial Government to frame rules to carry out the purposes of the Act, including rules for general meetings of the members, for procedure at such meetings and the powers to be exercised by such meetings for the withdrawal and expulsion of members etc. etc. As already stated, the plaintiffs feel aggrieved by the fact that at the annual meeting, they were expelled from the membership. Their contention is that the proceedings were illegal and they still continue to be the members of the society. Can this be said to be a dispute concerning the business of a co-operative society? Learned counsel for the appellant contends that this is so. He has made a reference to the provisions of Section 32 of the Government of Part 'C' States Act 1951 as well as to Articles 77, 118 and 120 of the Constitution in an attempt to show that the term "business" should be interpreted liberally and it would include proceedings at the meetings of the society and resolutions passed on such occasions.
(3.) I have also been referred to the following case law.. (a) 'Kisan Lal Ridhakarandas v. Co-operative Central Bank Ltd., Seoni', AIR 1946 Nag 16 (A). There, with reference to R 26 framed by the C. P. Government, it was held that: "The expression 'the business of a co-operative society' occurring in Rule 26 is not restricted to the dealings with the members of the society only but it includes business which the co-operative society is under the law empowered to transact. In the absence of any restriction on the scope of the meaning of the word 'business' used in that rule it must be understood in its natural and ordinary sense as covering any acts which are essential for the functioning of the corporate body. Hence, the safe deposit of the fund of a society being essential to enable the society to command resources to grant loans to its members at any time, the investment or deposit of its funds cannot be isolated from the general business of the cooperative society." (b) 'Zamindara Bank, "Sherpurkalan v. Suba', AIR 1924 Lah 418 (B). In that case the plaintiff sought a declaration that certain bonds alleged to have been executed by him in favour of the defendant Bank were forgeries. Their Lordships held : "By the substitutional remedy provided under Rule 18 in the shape of a reference to the Registrar in the matter of a dispute between a member and a society the common law remedy by an action in a Civil Court has by necessary implication been taken away. The object of the Act is to encourage thrift, self- help and co-operation among agriculturists, artisans and persons of limited means and it will be impossible to attain these objects if these people for the settlement of their disputes have necessarily to undergo all the troubles and worries of an expensive and protracted litigation" (c) 'Mafizuddin Ahmed v. Narayan Ganj Central Co-operative Sale and Supply Society Ltd.', AIR 1933 Cal 267 (C), in which--'AIR 1924 Lah 418 (B)' was followed and it was held that: "The terms of Sub-rule (1), Rule 22, do not confine the dispute to such as may be referable to membership only. Therefore a reference to arbitration under Rule 22(1) by a society on the one hand and its brokers on the other hand is not ultra vires." (d) 'Dhanpat v. Anjuman Datu', AIR 1935 Lah 947 (D). There, the decision was that : "In a dispute concerning the business of a Co operative Society, the only remedy open to the member is to appeal to arbitration; the jurisdiction of the Civil Courts to impugn the award is barred." (e) 'Gopi Nath v. Ram Nath', AIR 1925 All 356 (E). There, it was held by a Division Bench of that High Court that : "Having regard to the very wide form in which Section 43 and the rules made under it are couched, it should be held that the word 'business' was not intended to be confined to money business. The election of its officers is certainly a part of the business of the society and the intention of the Act was that this and any dispute of a similar character should be referred for the decision of the Registrar or the arbitrator appointed by him in accordance with the rules made under Section 43 and not to the Civil Court." (f) 'Dasaratha Row v. Subba Row', AIR 1923 Mad 481 (F). That was a Division Bench ruling. The decision was: "The words of Section 42 are very general and do not merely refer to a dispute regarding the internal management of the affairs of a society or disputes in regard to the principles which would regulate the conduct of business. But a dispute arising out of any particular transaction would not be outside the scope of the section. A dispute between a member and the committee or a dispute between a member and an officer is admittedly within the purview of the section. Also a dispute between a member who happens to be an officer on the one hand and the committee or an officer on the other, does fall within the words of the section." (g) 'Dacca Co-operative Industrial Union Ltd. v. Dacca Co-operative Sankhya Silpa Samity Ltd., No. 1', AIR 1938 Cal 327 (G). This was also a Division Bench ruling and it was held by the Division Bench, with reference to a corresponding rule in force in that province that : "The words 'concerning the business of a society' occurring in Section 43(2), Clause (1) and in Rule 22(1) cannot be limited to disputes concerning the internal management of the society. The principal business of a society being to finance its members, a dispute concerning the financial obligations of its members to the society would be a dispute concerning the business of the society.";

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