Sarjoo Prosad, C. J. - (1.) THIS application is for quashing a reference to Arbitration Tribunals appointed by the Respondent No. 2, the Registrar, Cooperative Societies.
(2.) THE petitioner Bhagwan Swaroop was a member of the managing Committee of the Commercial Cooperative Bank, Ajmer which is the first respondent to this application and was also the director of the said Bank. THE Bank was registered under the Cooperative Societies Act, 1912. One Shri Nandlal Sharma was the Manager of the Bank and it appears that he used to carry on the management and administration of the Bank under the control and supervision of the Directors and the Managing Committee. Under the Cooperative Societies Act the Registrar of Cooperative Societies the respondent No. 2 also exercised supervision and control and according to the rules of the Bank the accounts of the Bank had to be annually audited by the Cooperative department as also by its auditors. It appears that on 26th June, 1953 two cheques of Rs. 3000/- each were drawn by the petitioner and the Manager Shri Nandlal Sharma. THEre was also another cheque for Rs. 1500 - drawn on the same day by the petitioner and the respondent Dharamchand who happened to be the Secretary of the Bank. THE cheques for Rs. 3000/- each were cashed on the 8th July, 1955 on the State Cooperative Bank, Ajmer and the other cheque for Rs. 1500/- on the State Bank of India on the same day, but in the accounts of the Bank no credit was given for these amounts. It also appears that after cashing those cheques Shri Nandlal Sharma-disappeared. THEn an enquiry was instituted when it is alleged to have been discovered that several lacs of rupees belonging to the Commercial Bank had been embezzled. THE Registrar Cooperative Societies appointed one Kartar Singh as Administrator to take charge of the Bank. THE said Administrator then issued notice on the petitioner demanding payment of the sum of Rs. 6000/- which had been drawn from the State Cooperative Bank, Ajmer on 8th July, 1955 by means of the two cheques in question and also issued another notice for payment of the sum of Rs. 1500/- which was drawn from the State Bank of India oh account of the Commercial Cooperative Bank, Ajmer. The petitioner denied his liability for those payments. He alleged that in the ordinary course of routine duties as a Director he had signed those cheques and that he did not receive any payment of the amounts under the cheques in question. The amounts had been withdrawn by the Manager Shri Nandlal Sharma who was directly responsible for the administration of the Bank in question and therefore, the petitioner was under no liability to pay the amounts demanded. In view of this dispute between the Administrator of the Commercial Bank on the one hand and the petitioner and others responsible for drawing the cheques, in the other, the Administrator referred the matter to the Registrar of Cooperative Societies for appropriate action under R. 18 of the Rules framed by the Chief Commissioner of Ajmer Merwara under sec. 3 of the Cooperative Societies Act (No. II of 1912 ). In that reference the Administrator alleged that the amount paid under the said cheques was recoverable from the petitioner with interest and the various sums were specified. A similar claim was laid against Dharam Chand Secretary of the Bank on account of the cheque for Rs. 1500/ -. The Registrar of Cooperative Societies then appointed one Yad Ram Sharma as a sole arbitrator to decide the matter in dispute between the Administrator representing the Bank on the one hand and the petitioner and other members on the other. Against this the Respondent Dharamchand then presented a writ petition before the Judicial Commissioner of Ajmer praying for quashing the order of the Registrar appointing Shri Yad Ram Sharma as an arbitrator in the proceedings. In the course of that proceeding before the Judicial Commissioner of Ajmer there was a compromise between the parties and under the terms of the compromise, the Registrar was directed that instead of appointing a sole arbitrator as done by him earlier he should act under R. 18 (b) of the Rules and proceed to appoint a tribunal consisting of three arbitrators, one appointed by himself and two appointed by each of the parties concerned in the dispute. In pursuance of that compromise the Registrar proceeded to appoint tribunals of three persons. He nominated Shri Rajjanlal Saxena on his own behalf and he called upon the petitioner and the respondents Nos. 1, 4 and 5 to mention their own nominees. The Respondent No. 1 the Commercial Cooperative Bank through its Administrator again nominated Shri Yad Ram Sharma to represent it on the Tribunal. The petitioner nominated one Madansingh of Adarsh Nagar, Ajmer while the opposite party No 4 nominated one Shri Hazarilal and opposite party No. 5 one Shri Umraomal respectively. The petitioner and the respondents Nos. 4 and 5 could not agree upon any particular individual to represent them on the tribunal, therefore, the Registrar had to make his choice out of the persons nominated by them and he accordingly constituted two tribunals to decide the matters in dispute. The first tribunal consisted of Rajjanlal Saxena a nominee of the Registrar, Shri Yad Ram Sharma as the representative of the Administrator of the Bank and Shri Hazarilal as representing the petitioner and Dharamchand Respondent No. 4, while the other tribunal consisted of Rajjanlal, Yadram Sharma and Umraomal as representing the petitioner and respondent No. 5 Gulabchand. It is against this order of reference made by the Registrar Cooperative Societies to these tribunals that the present application is directed. Learned counsel for the petitioner has raised mainly three contentions before us He contends that there was no dispute in the present case within the meaning of Rule 18 of the Rules framed by the Chief Commissioner of Ajmer and the reference to arbitration was accordingly incompetent. His second contention is that in any case Yadram Sharma should not have been appointed an arbitrator because serious objections had been raised against his appointment in the earlier proceedings before the Judicial Commissioner of Ajmer and it was on that account that ultimately a compromise was arrived at directing the Registrar to constitute a fresh tribunal of three persons to decide the matter. Lastly it is contended that since the matter involves serious allegations of defalcation and misappropriation against the petitioner and others in regard to the funds of the Bank it is appropriate that the matter should not be decided by a private forum against whose orders there is only an appeal provided to the Registrar. The Registrar himself being interested in the proceedings it is desirable that a matter in dispute of such serious nature should not be heard by tribunals constituted by the Registrar but that it should be decided by the ordinary civil courts. Particularly it is argued that in view of the fact that there are already criminal proceedings pending against the petitioner it would be only fair to stay the proceedings before the tribunal or any civil proceedings that may be instituted against these parties until the criminal cases are decided. At the outset we may dispose of the first and the last contentions To understand the first contention, one has to examine the scope of Rule 18. The relevant portion of Rule 18 runs as follows - " (a) Any disputes concerning the business of a Co-operative Society between members or past members of the Society or person claiming through then or between a member or past member or person so claiming and the committee or any officer shall be referred to the Registrar. Reference may be made by the Committee or by the Society by resolution in general meeting or by any party to the dispute or if the dispute concerns a sum due from a member of the committee to the Society by any member of the Society. (b) The Registrar may either decide the dis pute himself, or appoint an arbitrator or refer the dispute to three arbitrators, of whom one shall be nominated by each of the parties and the third shall be nominated by the Registrar and shall act as Chairman. " We need not refer to the other clauses of the Rule except to clauses (i) and (j) wherein it is provided that : (i) Any party aggrieved by an award of an arbitrator may appeal to the Registrar in person or by agent within one month of the date of the award. (j) Except as provided in R. 25, no appeal shall lie against any other order of the Registrar passed in any matter dealt with in the Act or in the Rules framed thereunder ; but the Commissioner may at his discretion revise any order passed by the Registrar. No review application shall be entertained unless presented within one month from the date of communication of the Registrar's orders. " Now it is contended that clause (a) of Rule 18 has no application to the present case because the petitioner claims that he was a member of the managing committee of the Bank and a Director thereof and as such any dispute between an officer of the Bank and the Bank itself is beyond the scope of this Rule. He submits that the category of dispute contemplated by the Rule is only twofold : (i) as dispute between a member or a past member or a person claiming through them as against a member or past member or a person claiming through them; and (ii) as between a member or past member or a person claiming through them against the society or any officer of the society. Even so we do not see any reason why the dispute in the present case cannot fall under the second category. The fact that the petitioner is a Director of the Society or that Dharam Chand and Gulabchand were Secretary and Assistant Secretary respectively, does not mean that they had ceased to be members of the Society. They acquired these official capacities because of the fact that they were members of the Society and therefore, any dispute between the Bank and its officers could be equally referable to arbitration within the meaning of R. 18. In this connection the learned counsel for the petitioner sought to rely upon a decision of the Madras High Court in T. S. Narayan Ayyar vs. Co-operative Urban Bank, Ltd. (1 ). This was a decision given by a single Judge of that Court based upon the language of secs. 49 and 51 of the Madras Co-operative Societies Act (6 of 1932 ). The decision may be justified on the language of those sections but in our opinion it cannot be applied to the present case. The case more in point is a Division Bench judgment of the same High Court in (Pokkunuri) Dasaratha Row vs. (Chevuru) Suhba Rao Partulu, Secretary, Co-operative Stores, Ltd. (2 ). The decision turns on the interpretation of Sec. 43 (2) (f) of the Indian Co-operative Societies Act. There it was held that the words of sec. 43 of the Indian Co-operative Societies Act 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 includes within its scope a dispute arising out of any particular transaction. It was also held that - "a dispute between a member and the Committee or a dispute between member and an officer is admittedly within the purview of the section; so also is a dispute between a member who happens to be an officer on the one hand and the committee or an officer on the other. " Unfortunately, we find no reference to this decision in the earlier decision of King, J. on which the petitioner relies. Sec. 43 (2) (1) of the Indian Co-operative Societies Act (Act II of 1912) is substantially in the same terms as rule 18 with which we are at present concerned. In fact rule 18 itself has been framed under sec 43 of the Co-operative Societies Act. In sub-sec. (2) clause (1) of the section it is provided that - "any dispute touching the business of a society between members or past members of the society or persons claiming through a member or past member or between a member or past member or persons claiming and the committee or any officer shall be referred to the Registrar for decision or, if he so directs, to arbitration, and prescribe the mode of appointing an arbitrator or arbitrators and the procedure to be followed in proceedings before the Registrar or such arbitrator or arbitrators, and the enforcement of the decisions of the Registrar or the awards of arbitrators. " The substitution of the word "concerning" in rule 18 in place of the word "touching" does not make any appreciable difference. We are therefore, in respectful agreement with the observations made in the above Madras decision. We hold that the dispute in the present case clearly falls within the scope of rule 18 of the rules and such a dispute could be referred to arbitration by the Registrar as provided therein. So far as the point based upon the alleged charge of misappropriation or embezzlement is concerned we are not much impressed with the arguments of the learned counsel that the criminal case in any manner affects the present proceedings. The present case has started because the Administrator issued a notice upon the petitioner and the other officers to pay the amount due. The notice does not speak of any case of fraud or embezzlement. All that it requires is that in view of the fact that the cheques had been drawn by the petitioner and the other officers they were liable to pay the amount due which was never credited to the accounts of the Bank. In these circumstances any argument based on the ground that the subject matter of the enquiry in the criminal proceedings is identical to the enquiry in the present case does not directly arise. Even if the matters had been identical there was no reason why the present enquiry as to the liability of the petitioner for the payment of the amounts drawn under the cheques in question should have been stayed. The arbitrators in the present case are not to decide about the embezzlement or the amount but they have only to decide the liability for the payment of the money which it is said lies upon the petitioner and the other respondents concerned. The general liability as to embezzlement or misappropriation made by the Manager or any of the other officers of the Bank has nothing to do with the limited questions for investigation in the present case. The second contention of the petitioner, however, appears to have much force. Learned counsel, for the petitioner submits that Yad Ram Sharma was an employee of the Auditors M/s. B. D. Gardiya & Co. who had been auditing the Bank's accounts during the relevant period and who were responsible for giving some sort of a clearance certificate to the managing committee of the Bank had not pointed out the irregularities in the accounts or the omission to credit the various sums of money about which the allegation of embezzlement and misappropriation has been made ; It appears that in the criminal proceedings the said firm of auditors has been also impleaded as a party accused. Since Yad Ram Sharma was an employee of the auditors during the relevant period, the petitioner had filed an application before the Judicial Commissioner for preventing him from acting as an arbitrator in the proceedings but that matter was not decided in view of the settlement between the parties according to which the Registrar was directed to constitute a fresh tribunal consisting of three persons. We think that having regard to the allegations made in the petition about the association of Yad Ram Sharma with the firm of auditors in question it would not be desirable that this person should be associated with the tribunal enquiring into the dispute in the present case. The parties will not have the same confidence in him because partially he had the responsibility in the checking of the accounts of the Bank from year to year. On principles of natural justice, we, therefore, consider it proper that such a person should not be associated with the decision of the dispute. We think that the tribunals so constituted should not be allowed to function.
(3.) WE accordingly allow this application and direct that the tribunals so constituted and the respondent No. 2 the Registrar of the Cooperative Societies should be dissolved and should not be allowed to function and decide the matter in dispute under reference. It would be open to the Registrar to appoint fresh tribunals in which persons other than Yad Ram Sharma should be nominated by the present Liquidators of the Commercial Cooperative Bank Ltd. , Ajmer, to represent it on the tribunals, though there can be no objection to the other members of the tribunals being associated with the tribunals constituted afresh by the Registrar. We accordingly allow this application and set aside the order of the respondent No. 2 appointing the tribunals in question. It would be open to him as we have observed earlier to constitute fresh tribunals R. 18 (b) to decide the matter leaving out Shri Yad Ram Sharma as a member of the tribunal in question. Parties will bear their own costs of this application. .;