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1992 DIGILAW 341 (KAR)

BOMMAPPA KALLAPPA GUDLEPPANAWAR v. BASAVANTAPPA KALLAPPA GUDLEPPANAWAR

1992-10-16

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K. SHIVASHANKAR BNHAT, J. ( 1 ) DEFENDANTS 2 to 4 are the appellants. 1st respondent herein filed a suit for partition, claiming his share in several properties. We are concerned only with the property described in plaint schedule 'b'. This was found to be the self acquired property of the 1st defendant. He had gifted it to defendants 2 to 4 and therefore plaintiff's right to a share was contested. According to the plaintiff, the gift was void in view of Section 33 of the Karnataka co-operative societies Act, 1959 ('the act' for short) and after the death of the 1st defendant, he became one of the heirs to the said property. Trial court negatived the plaintiffs claim in respect of this item of property. However the district court upheld the right of the plaintiff to succeed as one of the heirs of 1st defendant. Gift of the property by 1st defendant was held to be void under Section 33 of the act. In the year 1964,1st defendant obtained a loan from a co-operative society and in that connection, the property in question was subjected to a charge in favour of the society. In the year 1972, he obtained a further loan; without discharging the liabilities, 1st defendant gifted away the property to his grandchildren (defendants 2 to 4), on 19-6-1972. In the year 1973 present suit was filed. During the pendency of the suit, in the year 1974, 1st defendant died. Thereafter in April 1975, the loans were cleared and claim of the society stood discharged. Plaintiff contended that in the year 1972 when the 1st defendant purported to gift away the property, it was already subjected to a charge under Section 33 of the act and therefore, the gift was void having regard to the Provisions of Section 33. The only question to be considered is whether an alienation of a property which is charged with the loan advanced by the co-operative society to the owner of the property, is void altogether, or whether the alienation is voidable only at the instance of the said society. Section 33 (1) is as follows:"33. Charge on land owned by members or held as tenants by members borrowing loans from certain co-operative societies. Section 33 (1) is as follows:"33. Charge on land owned by members or held as tenants by members borrowing loans from certain co-operative societies. (1) notwithstanding anything contained in this act or in any other law for the time being in force, (i) any person who makes an application to a co-operative society of which he is a member for a loan shall, if he owns any land, or holds any land as a tenant makes a declaration in the prescribed form. (1) notwithstanding anything contained in this act or in any other law for the time being in force, (i) any person who makes an application to a co-operative society of which he is a member for a loan shall, if he owns any land, or holds any land as a tenant makes a declaration in the prescribed form. Such declaration shall state that the applicant thereby creates a charge on the land owned by him or on his interest in the land held by him as tenant and specified therein for the payment of the amount of the loan which the society may make to the member in pursuance of the application and for all future advances, if any, required by him which the society may make to the member as such member subject to such maximum as may be determined by the society together with interest on such amount of the loan and advances; (ii) a declaration made under clause (i) may be varied at any time by a member with the consent of the co-operative society in favour of which such charge is created; (iii) no member shall alienate the whole or any part of the land or any interest of his in the land specified in the declaration made under clause (i) or varied under clause (ii) until the whole amount borrowed by the member together with interest thereon is paid in full: provided that standing crops on any such land may be alienated with the previous permission in writing of the society: provided further that it shall be lawful for a member to mortgage such lands or any part thereof in favour of the state government or a land development bank: provided also that if a part of the amount borrowed by a member is paid, the co-operative society with the approval of the financing bank to which it may be indebted may, on an application from the member, release from the charge created by the declaration made under clause (i) or varied under clause (ii), such part of the land or of the interest in the land specified in the declaration as it may deem proper, with due regard to the security for the balance of the amount of loan outstanding from the member; (vi) any alienation made in contravention or the Provisions of clause (iii) shall be void; (v) subject to the prior claims of the government in respect of land revenue or any money recoverable as land revenue and the prior claims of any person in whose favour alienation of the land or interest in such land has been effected and duly registered before the date of the grant of the loan by the society, there shall be a first charge in favour of the society on the land or interest in the land specified in the declaration made under clause (i) or varied under clause (ii) for and to the extent of the dues owing by him on account of the loan. "mr. Goulay, the learned counsel for the appellants, contended that the alienation of a property which is already subjected to a charge in favour of a co-operative society, is not void for all purposes; the alienation is always subject to prior charge and the alienee takes the property subject to the said charge. The Provisions of Section 33 are for the benefit of the co-operative society which is the charge-holder, and only it can avoid the alienation; such an alienation need not be and is not void as against others. Any interpretation rendering the alienation altogether void, without limiting the operation of Section 33 and the invalidity of the alienation to the benefit of the society, will be an unreasonable burden cast on the rights of the property owner. The scope of the bar against alienation and the invalidity declared by Section 33 has to be read, by reading down its Provisions and making it on par with the language employed by Section 101-a of the Act, and Section 64 of the Code of Civil Procedure; Rule 39 of the Karnataka Co-Operative Societies Rules, 1960 was also referred in this context. Before considering the several decisions cited, it will be advantageous to find out the true meaning of Section 33 with reference to the object behind the relevant Provisions. Co-operative societies stand by themselves, as a class. They are not to be compared with other commercial institutions, like banks. They are not incorporated with any profit-motive. Basic idea is the projection of self-help amongst the members of the society. The act envisages different kinds of co-operative societies and credit-societies are one of them. Loans are advanced with convenient facilities for repayment; interest charged is comparatively lower than the interest charged by banks and other credit agencies. act provides for governmental interference in the management of the societies and advance of large sums by the governmental agencies and other financing banks, to the societies, to enable the latter to meet the requirements of their members. act also provides for a special forum to resolve any dispute between the societies and its members, etc. (vide Section 70 ). By recourse Section 70 and other Provisions, the society is able to recover the dues to it without undue delay; elaborate Provisions are found regarding execution of the awards, and sale of charged properties. act also provides for a special forum to resolve any dispute between the societies and its members, etc. (vide Section 70 ). By recourse Section 70 and other Provisions, the society is able to recover the dues to it without undue delay; elaborate Provisions are found regarding execution of the awards, and sale of charged properties. If a society has to recover any sum from a non-member, benefit of Section 70 would not be available to the society. Under Section 33, the persons seeking a loan from the society of which he is a member has to apply along with a declaration as to the immovable property held by him; he should state that he was creating a charge on the land (or on his interest in the land held by him), for the repayment of the loan; the charge would enure to the benefit of all future advances that may be made by the society, subject to the maximum as may be determined by the society. Declaration is to be in form 1. In the declaration itself the applicant should state the charge subject to the maximum of amount mentioned therein. Thus the procedure, as per Section 33 is that: (1) member has to apply for the loan. (2) the society would determine the maximum loan to which the member is entitled to. (3) member to furnish a declaration in form 1 creating a charge in respect of the loan received and to be received (subject to the maximum loan sanctioned); the charge is on his land or his interest in the land held by him otherwise as its owner. Above provision indicates that, the member need not obtain the maximum amount of loan immediately; when the maximum of loan to be granted is determined by the society, member may draw the loan as and when he requires. Clause (ii) of Section 33 (1) provides for varying the declaration with the consent of the society; this would enable a member to reduce the charge on his property or may unburden a part of his property from the charge. As per clause (iii), alienation of any part of the property subjected to the charge, is completely prohibited, until the a mount borrowed is cleared. As per clause (iii), alienation of any part of the property subjected to the charge, is completely prohibited, until the a mount borrowed is cleared. Though alienation is prohibited, the 2nd proviso provided for mortgaging the same property by the member in favour of the state government or a land development bank. This proviso introduced by act 39 of 1975, clearly brings out the mandatory nature of the bar against alienation. If inspitc of the charge, alienation can take place, because, the. Charge is not affected, this proviso would have been unnecessary because, mortgage could have been created subject to the charge. Because such a mortgage was impermissible, obviously this proviso was introduced in the year 1975. The third proviso also provides for the release of the property from the charge under certain circumstances. This indicates that the financing bank of the society has a say in the mailer of releasing the properly from the charge. The charge under seclion 33 is reflected in the revenue records as is clear from Section 33 (2 ). Apart from clause (iii), clause (iv) specifically declares that any alienation made in contravention of Provisions of clause (iii), as void. This declaration was also unnecessary if Mr. Goulay is correct in his contention that, the society in no way suffers by the alienation and the alienation is always subject to prior charge and that, at any rate, alienation at the most may not bind the society, but third parties cannot lake advantage of this provision. The act is intended for the benefit of a Section of the people who are members of the society. A person having obtained the benefit of a loan, if permitted to alienate his charged property, and the alienee is agreeable to discharge the loan, indirectly, the benefit of the loan would go to the alienee. Probably the act seeks to avoid such a situation, similarly, recovery from the member by recourse to Section 70 and other Provisions is easier, than recovering the charged amount from a third party to whom the property is alienated. The bar against alienation and the declaration that such an alienation is void, would prevent third parties from intervening between the society and its procedural rights to recover the loan advanced to its member for which the property is charged with. The bar against alienation and the declaration that such an alienation is void, would prevent third parties from intervening between the society and its procedural rights to recover the loan advanced to its member for which the property is charged with. The mandatory character of Section 33 and the width of its impact is further clear from Section 109. Section 109 (2) reads thus:"any member or past member or the nominee, heir or legal representative of a deceased member of a co-operative society who contravenes the Provisions of sections 32 or 33 by disposing of any property in respect of which the society is entitled to have a first charge under that Section or do any other act to the prejudice of such claim, shall be punishable with fine which may extend to five thousand rupees. "a contravention of Section 33 is made an offence. When the law makes contravention of its provision, an offence, it is imperative to read the said provision as a provision enacted in the interest of public. It is an indication that the said provision has an element of public policy behind it. A restrictive interpretation of Section 33 (l) (iii) and (iv) would make Section 109 (2) superflous. As per Section 111, prosecution for such an offence requires the sanction of the authority stated therein. But that by itself would not take away the basic idea underlying Section 109 (2 ). The need to obtain the sanction of the prescribed authority is only to prevent frivolous prosecutions and consequential harassments. Mr. Goulay contended that it was entirely unnecessary to impose such an onerous restriction on the proprietary rights of an owner and the Provisions of Section 33 should be read so as to dilute the burden. Reading down the language of a provision, is a well-known Rule of interpretation, provided, the situation so warrants. Here, the act governs the relationship between a society and its member. The particular provision is enacted to safeguard the interests of the lending society which cannot be compared with other kinds of money-lenders. In fact Section 33 (1) itself provides for taking away the charge from a part of property; if a proper case is made out, there is no reason why the society would not permit the alienation by varying the charge. In fact Section 33 (1) itself provides for taking away the charge from a part of property; if a proper case is made out, there is no reason why the society would not permit the alienation by varying the charge. A literal reading of the provision of Section 33 (l) (iii) and (iv), in no way results in any anomaly, absurdity or unwarranted hardship; and therefore it is unnecessary to invoke the principle stated in a few decisions, which require the court to read such a provision so as to avoid hardship, anomaly, absurdity, etc. The legislature was perfectly aware, of the different language that could be employed, in case, the voidability is to be only to the extent of the affected interest of the society. For example: Section 101-a reads as follows:"transfer of property made after issue of certificate void against co-operative society. any private transfer or delivery of, or encumbrance or charge on property made or created after the issue of the certificate of the registrar or any person authorised by him in this behalf under Section 101 shall be null and void as against the co-operative society on whose application the said certificate was issued. "section 64 of the Code of Civil Procedure reads thus:" private alienation of property after attachment to be void. where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment-debtor of any debt, dividend or other monies contrary to such attachment, shall be void as against all claims enforceable under the attachment. Explanation:for the purposes of this Section, claims enforceable under an attachment include claims for the rateable distribution of assets. "if the idea was to confine the right to the society, language of Section 33 (1) (iv) would have been "any alienation made in contravention of the Provisions of clause (iii) shall be void as against all the claims enforceable under the charge created under clause (i) ". Words underlined could have been enacted, as found in Section 64 CPC, or similar words as in Section 101-a would have found a place in Section 33 (l) (iv ). We may also refer to Rule 39 of the rules under the act which is also quite clear in this regard. Chitty on contracts, page 14 was referred by Mr. Words underlined could have been enacted, as found in Section 64 CPC, or similar words as in Section 101-a would have found a place in Section 33 (l) (iv ). We may also refer to Rule 39 of the rules under the act which is also quite clear in this regard. Chitty on contracts, page 14 was referred by Mr. Goulay wherein it is stated,"usually a void contract is void as against both parties; neither can recover from the other under the contract. But exceptionally a contract may be void against only one of the parties to it. " (emphasis supplied) above sentence would not advance the case of Mr. Goulay. There may be, and in fact, there are, several cases where contract may become void at the instance of one of parties; in those cases, normally it is stated that contract is stated to be voidable in fact, even though the term used is "void". At page 869, it is stated," similarly statutes which prohibit certain contracts often impliedly recognise, for example, by punishing only one of the parties, that the parties are not equally at fault, and therefore on this true construction only one of the parties to-the contract is prevented from suing upon it. "this statement is in the context of the rights inter se of the parties to a contract and the circumstances under which one of them may sue to have the contract nullified. In fact, williston on contracts at page 5003, at foot note quotes a passage which is as follows:"court take judicial cognizance of the fact that legislatures use the word "void" in statutes in the sense of utterly void so as to be incapable of ratification, and in the sense of voidable by those alone whose rights are infringed without express discrimination, so that resort must be had to settled rules for the interpretation of statutes in each case to determine in which sense the legislature intended to use it. One of these rules is that an act declared to be void by statute which is malum in se or against public policy is utterly void and incapable of ratification, but an act or contract so declared void, which is neither wrong in itself nor against public policy, but which has been declared void for the protection or benefit of a certain party, or class of parties, is voidable only and is capable of ratification by the acts or silence of the beneficiary or beneficiaries. "in every case, therefore, court has to examine the purpose of the particular bar against a transaction, to find out whether the term 'void' really means 'void' or 'voidable', in the context of the statute in question. The passage referred from the stroud's judicial dictionary, similarly, would not take the case of the appellants further. Williston on contracts at page 5006 (section 1764) says,"but in determining what validity, if any, a forbidden contract has, it is often important to consider how far and for what reason the prohibited transaction is wrongful, since the courts will endeavour so to deal with the transaction as to give effect to the fundamental purpose of the legislature and to a wise public policy". Section 33 of the act prohibits the alienation and declares the said transaction void, so that the societies incorporated under the act could function smoothly and the objectives to be achieved by the beneficial Provisions of the act could be maintained with greater safeguards. Mr. Goulay cited a few more decisions, all of which were decided under Section 64 of the cpc; hence it is unnecessary to refer to them. A few citations were in support of the proposition that law should be interpreted to promote the object of the act and to avoid injustice, absurdity or anamoly. We don't think it necessary to refer to them here, in view of the reasons given already touching this aspect. For the reasons stated above we don't find any merit in this appeal. It is dismissed accordingly; parties to bear their respective costs throughout. --- *** --- .