SEKHARAN v. STATE OF KERALA — 1976 DIGILAW 3 (KER)

Judgment :- 1. The petitioner in this original petition is a person who entered into a contract with the 4th respondent - The Vaikom Service Co-operative Society Ltd., No. K. 349, Vaikom for the construction of a godown. As the petitioner did not complete the construction in time, the 4th respondent cancelled the contract and completed the construction through somebody else. Thereafter, for realising the damages suffered because of the petitioner's failure to complete the construction, the 4th respondent filed an arbitration before the 3rd respondent-Assistant Registrar of Co-operative Societies (General), Vaikom under S.69 of the Kerala Co-operative Societies Act, 1969, for short the Act, and R.67 of the Rules framed thereunder as A.R.C. No. 254 of 1974. The petitioner contested the matter. He filed an application before the 3rd respondent to try the objection that the 3rd respondent has no jurisdiction as a preliminary issue. The 3rd respondent by Ext. P-1 order dated 18 91974 held that he has jurisdiction in the matter. The petitioner questions the above order of the 3rd respondent in this original petition. The 4th respondent has filed a counter-affidavit. The questions that arise for consideration in this original petition are: (1) Whether the claim for damages against a contractor entrusted with the construction of a godown for a society, the objects of which include the maintenance and letting out of godowns for the storage of agricultural produce of its members will be a matter touching the business of the society and hence a dispute which can be referred to the Registrar for decision under S.69 (1)(f) of the Act and (2) Whether such a claim will be a claim in respect of any sum payable to the society and hence a dispute as defined under S.2(i) of the Act. 2. Shri S. Parameswaran, learned counsel for the petitioner, contends that the matter in issue is not a dispute as contemplated by S.2(i) of the Act and hence the 3rd respondent has gone wrong in holding that he has got jurisdiction in the matter. Shri Parameswaran also contends that the matter in issue is not, at any rate, a dispute touching the business of the society and hence the 3rd respondent has no jurisdiction under S.69 (I) (f) of the Act to entertain the application for arbitration. Shri Parameswaran also contends that the matter in issue is not, at any rate, a dispute touching the business of the society and hence the 3rd respondent has no jurisdiction under S.69 (I) (f) of the Act to entertain the application for arbitration. According to Shri Parameswaran, the 3rd respondent failed to note that an act might be for the purpose of the business of the Society, but still it will not be a matter touching its business. Shri Parameswaran points out that the deeming provisions in S.69(2) of the Act also will not confer the 3rd respondent with jurisdiction in the matter. Learned counsel then refers to Varghese v. Krishna Menon (1962 KLJ. 43) wherein Raghavan J. (as he then was) has said: "The section lays down that, if any dispute touching the business of a registered society arises among the members, the Registrar may decide it. The dispute need not directly arise out of the business of the society; it is enough that it should have reference or relation to or concern the business of the society. The word 'touching' was clearly not intended to restrict the meaning of the word to 'busisnes,' it was designed to enlarge its scope. In the instant case the dispute was admittedly between two members of the society and the dispute in some way concerned or related to the business of the society. Hence, it is to be held that the dispute between A and B was one touching the business of the society and that the Registrar has jurisdiction to decide the dispute." Learned counsel also refers to Coir Industrial Co-operative Society, Chingoli v. Govindan (1962 KLT. 400) wherein Raghavan J. (as he then was) drawing a distinction between a transaction'for the purpose of the business' and one 'touching the business of the Society' has held: "The expression'touching the business" of the Society occurring in S.60 should be given a wide meaning so as not to restrict the scope of the word 'business' but to enlarge it. That does not mean that every transaction that is intended or meant'for the purpose of the business' of the Society is a transaction 'touching its business'. It does not also mean that every dispute 'touching a transaction intended for the purpose of the business' of the Society necessarily 'touches its business'. That does not mean that every transaction that is intended or meant'for the purpose of the business' of the Society is a transaction 'touching its business'. It does not also mean that every dispute 'touching a transaction intended for the purpose of the business' of the Society necessarily 'touches its business'. A distinction should be made between a transaction 'for the purpose of the business' and one 'touching the business' of the Society. In other words, a line should be drawn as to where a transaction 'intended for the purpose of the business' commences 'touching the business of the Society'. Only such of those disputes which fall within the latter group, namely disputes touching the business of the Society, will fall within the scope of S.60 " Reference is then made to Sukumaran v. Nadarajan (1968 KLT. 260) wherein it has been held that a civil suit for declaration that certain members of the Executive Committee of a Co-operative society are disqualified on grounds of fraud and misappropriation is hit by S.60 of the Travancore-Cochin Co-operative Societies Act, 1952 which corresponds to S.69 of the Act. Learned counsel then refers to D. M. Co-operative Bank v. Dalichand (AIR. 1969 S.C.1320) wherein dealing within the question of a dispute 'touching the business of the society', the Supreme Court has said: "Although the nature of business which a society does can be ascertained from the objects of the society, it cannot be said that whatever the society does or is necessarily required to do for the purpose of carrying out its objects is part of its business. The word 'touching' is very wide and would include any matter which relates to or concerns the business of a society, but it is doubtful whether the word 'affects' should also be used in defining the scope of the word 'touching'. The question whether a dispute touching the assets of a society would be a dispute touching the business of the Society would depend on the nature of the society and the rules and bye-laws govern ing it. Ordinarily, if a society owns buildings and lets out parts of buildings which it does not require for its own purpose it cannot be said that letting out of those parts is a part of the business of the society. Ordinarily, if a society owns buildings and lets out parts of buildings which it does not require for its own purpose it cannot be said that letting out of those parts is a part of the business of the society. But it may be that it i; the business of a society to construct and buy houses and let them out to its members. In that case letting out property may be part of its business. Where the society is a co-operative Bank it cannot ordinarily be said to be engaged in business when it lets out properties owned by it. Therefore the dispute between a tenant and a member of the bank in a building which has subsequently been acquired by the bank cannot be said to be a dispute touching the business of the Bank." In support of his contention learned counsel refers to Sabharwal Brothers v. Smt. Guna Amrit Thadani (1972 All Indian Rent Control Journal 542) wherein Mitter J. speaking for the Court has said: "But it cannot be seen how letting by a member to another member would touch the business of the society which included inter alia the trade of buying, selling, hiring and letting land in accordance with co-operative principles. The letting of the flat by the member concerned was a transaction of the same nature as the society itself was empowered to enter into but such letting by itself did not concern the business of the society in the matter of its letting out flats. 'To touch' means 'to come in contact with' and it does not appear that there is a point of contact between a letting by the member concerned and the business of the society when the society was not itself the landlord of the flat. The two Acts namely the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, and the Maharashtra Co-operative Societies Act can be harmonised best by boding that in matters covered by the Rent Act, its provisions rather than the provisions of the Co-operative Act, should apply." Reference is also made to Madhava Rao v. Surya Rao (A.I.R.1954 Madras 103) wherein a Full Bench of the Madras High Court dealing with the question 'touching the business of a society' has said: "The words 'touching the business of a society' must be given their full import, bearing in mind the object of the legislation. Taking the dictionary meaning of the word 'touching' it indicates that the dispute need not directly arise out of the business of the society, but that it is enough that it should have reference or relation to or concern the business of the society. The word 'touching' was clearly not intended to restrict the meaning of the word business; it was designed to enlarge its scope. Similarly, the word 'business' in S.51 is not used in a narrow sense. It is no doubt true that some sections of the Act refer to the 'affairs of the society' while others refer to the business of the society. But the words 'affair' and 'business' have been used as interchangeable terms in the Act and are not intended to denote different concepts. The business has to be that of the Society i. e. the corporate activity of the society and what the permissible corporate activities of the society are, have to be gathered from the sections of the Act, the rules framed under the Act and the bye-laws made by the corporation which are intra vires the Act. For, the power of the corporation is derived from these three sources, and so long as its activity is within those powers, it cannot be questioned as being invalid." Learned counsel then refers to Hira Nand v. Anjuman Bank (A.I.R.1935 Lahore 631) wherein the Lahore High Court dealing with the object behind arbitration under the Act has held: "The matter is not altogether free from difficulty and I am fully aware that the policy of the Co-operative Societies Act is to save the persons concerned from protracted, expensive and sometimes ruinous litigation of the Civil Courts. At the same time these special enactments should be strictly construed and the rights of the subject to have recourse to the Courts of justice provided by the Crown, should not be unnecessarily surrounded with restrictions." Reference is then made to A.R. Rathi v. Pushkar Co-operative Sale and Supply Union Ltd (AIR. 1959 Raj. 272) wherein Nigam J. C. has held that a dispute between the Committee of a Co-operative Society and its officers cannot be the subject matter of an arbitration by the Registrar. Learned counsel also refers to K. D. P. P. P. V. Sahakari Sangh v. Shivappa (AIR. 1959 Raj. 272) wherein Nigam J. C. has held that a dispute between the Committee of a Co-operative Society and its officers cannot be the subject matter of an arbitration by the Registrar. Learned counsel also refers to K. D. P. P. P. V. Sahakari Sangh v. Shivappa (AIR. 973 Mysore 68) wherein Narayana Pai C. J. has said: that a dispute between a society and its past employee about his dismissal is not a dispute 'touching the constitution, management or business of the society' within the meaning of S.70 of the Mysore Co-operative Societies Act, 1959. Learned counsel also points out that the dispute that can be referred to the Registrar under S.69 of the Act must be a dispute capable of being resolved by the Registrar. According to the learned counsel, a claim for damages is not one which is capable of being resolved by the Registrar and hence for that reason also the Registrar cannot have jurisdiction to decide the dispute in question and the findings to the contrary contained in Ext. P-2 order of the 3rd respondent cannot be sustained. 3. Shri Sankarasubban, learned counsel for the 4th respondent refers to S.2(i) of the Act and contends that in view of the inclusive definition, the matter referred to the 3rd respondent for arbitration is a dispute which the 3rd respondent can entertain under S.69(1)(f) of the Act. Hence, according to the learned counsel, Ext. P-2 order of the 3rd respondent holding that he has got jurisdiction in the matter is perfectly legal and valid. Learned counsel also points out that the decisions relied on by the learned counsel for the petitioner are not on statutes pari materia with the Kerala Act. Learned counsel then contends that in respect of money claims, even if it is not in respect of any matter touching the business of the society, it will be a dispute because of the definition in the Act. Learned counsel also refers to S.69(1)(f) of the Act and contends that the matter referred to the 3rd respondent will squarely fall under S.69(1)(f) of the Act. Learned counsel then refers to S.56 of the Travancore Co-operative Societies Act, 1112 and points out that the definition in the Kerala Act is wider than the definition in the above Travancore Act. Hence, according to the learned counsel, the decision Raman Achari v. Paramu Achari (1957 KLT. Learned counsel then refers to S.56 of the Travancore Co-operative Societies Act, 1112 and points out that the definition in the Kerala Act is wider than the definition in the above Travancore Act. Hence, according to the learned counsel, the decision Raman Achari v. Paramu Achari (1957 KLT. 362) cannot apply to the facts of this case. Learned counsel refers to bye-law No. 3 of Ext. P-3 bye-laws of the Society and contends that for storage of agricultural produce purchased from the members the Society can construct godowns. So, according to the learned counsel, going by the objects of the society as revealed by the bye-laws, the matter referred to for arbitration is one touching the business of the Society. Learned counsel further contends that the words 'touching the business of the society' have to be given a wide interpretation and they must include any matter which relates to or concerns the business of the society. According to the learned counsel, by no stretch of imagination it can be said that the 4th respondent was not having business transactions with the petitioner. Reference is then made to Co-operative Central Bank Ltd. V. Additional Industrial Tribunal, Andhra Pradesh, Hyderabad (AIR. 1970 S.C. 245) wherein construing the expression 'touching the business of the society' the Supreme Court said: "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 a dispute touching the business of the society." In this connection, reference is also made to National C. C. Federation v. Delhi Administration (AIR. 1971 Delhi 141) wherein Deshpande J. has said: "A business of a society must be found in the objects of the society for which it was formed" Learned counsel also refers to Haji Mammu Keys v. Tirurangadi P.C.C. Society (1963 KLT. 1971 Delhi 141) wherein Deshpande J. has said: "A business of a society must be found in the objects of the society for which it was formed" Learned counsel also refers to Haji Mammu Keys v. Tirurangadi P.C.C. Society (1963 KLT. 950) wherein M. S. Menon C. J. speaking for the Court has said: "One of the objects of the society is 'to rent or own godowns for the stocking of paddy or rice or foodgrains or other articles purchased.' Hence, it is not possible to say that the dispute is not between a person who is a member of the society or that it is not a dispute touching the business of the society. The dispute is a dispute between the society and the owner of a godown who happens to be a member of the society. The dispute has nothing to do with his membership of the society." Reference is then made to D. M. Co-operative Bank v. Dalichand (AIR. 1969 S.C.1320). Learned counsel points out that in the above decision the Supreme Court did not consider the effect of Explanation.11 to S.91 of the Maharashtra Co-operative Societies Act, 1961 and hence this decision cannot be made use of against the 4th respondent. Learned counsel then refers to Surathkal Cooperative Town Bank Ltd. v. Padmanabhayya (1968 (2) L. L. J. 313) wherein Narayana Pai J. of the Mysore High Court (as he then was) has said: "The essential tests to be applied in cases of this nature are that the dispute must arise between the persons mentioned in the section and the dispute must touch the constitution or business of the society. It it not correct to give a restricted or limited meaning to the expression'touching the business', in S.70 and that to do so would indeed result in defeating one of the essential purposes of the Mysore Co-operative Societies Act. One need not think that the business of the society is nothing more than the objects set out in its memorandum. The word 'touching' has a wider connotation than the expression 'directly related. or "directly arising out of." Reference is also made to K. Pokker v. K.P. Kunhikrishnan Nair (1968 KLR. 361) wherein Raman Nayar J. (as he then was) has said that the expression 'touching the business of the society' is of very wide import. The word 'touching' has a wider connotation than the expression 'directly related. or "directly arising out of." Reference is also made to K. Pokker v. K.P. Kunhikrishnan Nair (1968 KLR. 361) wherein Raman Nayar J. (as he then was) has said that the expression 'touching the business of the society' is of very wide import. Learned counsel points out that the matter referred to arbitration arose from the construction of a building for the purpose of the 'business of the society' and hence it cannot be said that it does not touch the business of the society. Learned counsel again points out that the definition contained in S.2(i) of the Act is an inclusive one and in any view of the matter the matter referred to for arbitration is a dispute as denned in the Act and hence Ext. P-2 order is perfectly valid. 4. Learned Government Pleader appearing for respondents 2 and 3 points out that the jurisdiction of civil courts is ousted when the litigation is one capable of being resolved by the Registrar under S.70 of the Act. Learned Government Pleader also points out that as the petitioner entered into a contract with the 4th respondent for the construction of a godown, the petitioner cannot deny that he is a person who had business transactions with the 4th respondent. Hence, according to the learned counsel, under S.69(1)(f) of the Act the 3rd respondent has got jurisdiction to decide the matter referred to him. Learned Government Pleader also has a contention that the petitioner has got a right of appeal under S.82 of the Act from the final order in the arbitration reference and hence the petitioner cannot question Ext: P-2 order deciding the preliminary objection in these proceedings. 5. Shri S. Paramasewaran, learned counsel for the petitioner, in his reply contends that it is not enough that the dispute is one which touches the business of the society. It must be one capable of being resolved by the Regie strar. According to the learned counsel, the word 'litigation' in S.2(i) of the Act will not take in a civil litigation. Learned counsel then refers to Dharam Chand v. Ladu Ram (AIR. 1956 Ajmer 63) wherein Sharama J. C. has said: "A statute or rule which purports to oust the jurisdiction of the civil Court must be very strictly construed. According to the learned counsel, the word 'litigation' in S.2(i) of the Act will not take in a civil litigation. Learned counsel then refers to Dharam Chand v. Ladu Ram (AIR. 1956 Ajmer 63) wherein Sharama J. C. has said: "A statute or rule which purports to oust the jurisdiction of the civil Court must be very strictly construed. R.18(a) and (b) must no doubt, be strictly construed and a dispute must lie within the four corners of R.18(a), before it can be referred to the Registrar. The Registrar must also act strictly within the scope of his authority under R.18(b)." Reference is also made to the Law Lexicon of British India by P. R. Aiyar in which on page 744 it is said: "Litigate To dispute or contend in form of law; to carry on a suit." "Litigation. A judicial controversy, a contest in a Court of law; a judicial proceeding for the purpose of enforcing a right." Learned counsel also refers to K.V. Service Co-operative Society v. Asst. Registrar (1973 KLT. 523) and points out that the real question in this case as well as in the above case is not whether the dispute is one touching the business of the society or its management or establishment but is whether it is a dispute within the competence of the Registrar to decide. 6. Shri Sankarasubban, learned counsel for the 4th respondent-society points out that it is only in cases where a dispute cannot be resolved in accordance with the contractual obligations or rights or in accordance with the law and the rules that the Registrar will not have power under S.69 of the Act. But this is a dispute which is capable of being resolved by the Registrar as the damages claimed from the petitioner is the loss sustained by the society to complete the construction by another contractor. 7. But this is a dispute which is capable of being resolved by the Registrar as the damages claimed from the petitioner is the loss sustained by the society to complete the construction by another contractor. 7. S.2(i) of the Kerala Co-operative Societies Act, 1969 reads: "'dispute' means any matter touching the business, constitution, establishments or management of a society Capable of being the subject of litigation and includes a claim in respect of any sum payable to or by a society, whether such claim be admitted or not." S. 69(1)(f) of the Act reads: "69 (1) Notwithstanding anything contained in any law for the time being in force, if a dispute arises (f) between the society and a person other than a member of the society who has been granted a loan by the society or with whom the society has or had business transactions or any person claiming through such a person;" Shri Sankarasubban is well-founded in bis contention that the decisions on the corresponding provisions in the Madras Co-operative Societies Act, 1961, the Travancore-Cochin Co-operative Societies Act, 1951 and the Travancore Cooperative Societies Act, 1112 will not apply. In none of the above enactments the word dispute is defined. Not only that S.56 of the Travancore Act, S.60 of the Travancore-Cochin Act and S.73 of the Madras Act which deal with the settlement of disputes by arbitration did not contain a provision similar to the one contained in S.69 (1) (f) of the Kerala Act. The definition contained in S.2 (i) of the Kerala Act is an inclusive definition. As per the definition a claim in respect of any sum payable to or by a society will also be a dispute irrespective of the fact whether it arises in a matter touching the business of the society or not. Under S.69 (1) (f) of the Act if the dispute is between the society and a person other than a member of the society with whom the society has or had business transaction, the Registrar has got the power to settle the same by arbitration. Then the only question is whether the dispute in question is one which is capable of being resolved by the Registrar. The damages claimed is the actual loss incurred by the society to complete the work by another contractor. Then the only question is whether the dispute in question is one which is capable of being resolved by the Registrar. The damages claimed is the actual loss incurred by the society to complete the work by another contractor. It cannot be said that this is a dispute which is not capable of being resolved by the Registrar in arbitration under the Act. What the 3rd respondent has said in Ext. P2 order is only that the matter in issue before him in the arbitration proceedings is a dispute which he has got jurisdiction to decide. There is no reason to interfere with Ext. P2. 8. The original petition is dismissed. There will be no order as to costs. Dismissed.