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2018 DIGILAW 104 (KER)

P. N. Prem Kumar v. Sree Narayanan Bhaktha Paripalana Yogam, SNBP

2018-01-30

P.N.RAVINDRAN, R.NARAYANA PISHARADI

body2018
ORDER : R. Narayana Pisharadi, J. This appeal is filed by the plaintiff in the suit O.S.No.864 of 2013 on the file of the Sub Court, Thrissur challenging the judgment of that court dismissing the suit filed by him. 2. The appellant is a member of the Sreenarayana Bhaktha Paripalana Yogam (hereinafter referred to as the 'Yogam'). He filed the suit claiming an amount of Rs.1,25,000,00/- from the Yogam. The case of the appellant/plaintiff in the suit is that he gave the aforesaid amount to the Yogam as a loan and that the Secretary and the President of the Yogam executed Ext.A1 document agreeing to repay the amount with interest at the rate of 12% per annum. He filed the suit when the Yogam refused to repay the amount inspite of the demand made by him for return of the money. 3. There are two defendants in the suit. The first defendant is the Yogam represented by its President and the second defendant is also the Yogam represented by its Secretary. They filed written statement in the suit denying any financial transaction between the plaintiff and the Yogam and also denying execution of any document by them in favour of the plaintiff. They alleged that the former office - bearers of the Yogam had forged documents and falsified the accounts of the Yogam to help the plaintiff. 4. The lower court framed necessary issues in the suit. During the trial of the suit, PW1 and PW2 were examined and Exts.A1 and A2 documents were marked on the side of the plaintiff. DW1 was examined and Exts.B1 to B30 documents were marked on the side of the defendants. After appreciating the evidence adduced by the parties, the lower court found that the plaintiff failed to prove his plea that he had advanced loan to the Yogam and therefore, dismissed the suit. Aggrieved by the dismissal of the suit, the plaintiff has preferred this appeal. 5. When the appeal came up for hearing before this court, the dispute between the parties was referred to mediation. During the course of mediation, the parties have reached a settlement and they have executed a memorandum of settlement dated 21.11.2017. Aggrieved by the dismissal of the suit, the plaintiff has preferred this appeal. 5. When the appeal came up for hearing before this court, the dispute between the parties was referred to mediation. During the course of mediation, the parties have reached a settlement and they have executed a memorandum of settlement dated 21.11.2017. As per the settlement arrived at between the parties, respondents 1 and 2 in the appeal (the defendants in the suit) have agreed that an amount of Rs.1,58,000,00/- would be paid to the appellant in full and final settlement of the claim. The memorandum of settlement is signed by the appellant/plaintiff and also the present President and Secretary of the Yogam and it also bears the seal of the Yogam. 6. Meanwhile, an application was filed as I.A.No.1317 of 2017 on 12.07.2017 by five members of the Yogam (hereinafter referred to as `the petitioners') to implead them as respondents in the appeal. On 27.11.2017, these five persons have filed another application as I.A.No.2209 of 2017 with a prayer that the court may give notice to the members of the Yogam and afford them opportunity to participate in the settlement proceedings. 7. The first petitioner in I.A.Nos.1317 of 2017 and 2209 of 2017 has sworn to the affidavit filed along with these applications. The averments in these two affidavits are more or less the same and they are as follows: The petitioners are members of the Yogam. The present office - bearers of the Yogam have colluded with the appellant and they have taken steps to defeat the appeal against the interest of the Yogam. During the election held in October, 2016 a panel of 15 members was formed under the chairmanship of the appellant and the present President and Secretary were candidates of that panel who contested the election. In the general body meeting of the Yogam held on 09.10.2016, a decision was taken to give Rs.1,25,000,00/- to the appellant/plaintiff and to reinstate him as a member of the Yogam (he was earlier expelled from the Yogam on the allegations of forgery, cheating and financial misappropriation). The decision taken by the general body meeting of the Yogam to give Rs.1,25,000,00/- to the appellant is against the spirit of the judgment of the trial court in the suit. The decision taken by the general body meeting of the Yogam to give Rs.1,25,000,00/- to the appellant is against the spirit of the judgment of the trial court in the suit. The newly elected committee members have colluded with the appellant in taking such a decision with the intention to cause financial loss to the Yogam and to get unlawful enrichment for them. Every member of the Yogam has legal right to protect the interest of the Yogam and therefore, the petitioners are entitled to be impleaded as additional respondents in the appeal. The present office - bearers of the Yogam have arrived at a settlement with the appellant during the mediation. They have agreed to pay an amount of Rs.1,58,000,00/- to the appellant. The settlement arrived at between the appellant and the present office - bearers of the Yogam is illegal. The parties have colluded to reach the settlement which is detrimental to the interest of the Yogam. The settlement would result in huge financial loss to the Yogam. The settlement is not binding on the Yogam and its members. Notice to all the persons interested in the Yogam is a mandatory requirement under Order 23 Rule 3B of the Code of Civil Procedure. 8. We have heard learned Senior Counsel Sri. Krishnanunni who appeared for the petitioners and also learned Senior Counsel Sri. T.A. Shaji who appeared for the appellant and also the learned counsel for the respondents in the appeal. 9. Learned Senior Counsel Sri.Krishnanunni contended that the settlement/compromise arrived at between the parties to the appeal/suit involves payment of huge amount by the Yogam to the appellant and the settlement arrived at between the appellant and the present office - bearers of the Yogam is the result of collusion between them and therefore, the petitioners, who are members of the Yogam, are necessary parties to the appeal. Learned Senior Counsel also contended that as per the provision contained in Order 23 Rule 3B (2) of the Code of Civil Procedure, 1908 (hereinafter referred to as `the Code') the court has the duty to give notice to the members of the Yogam and to hear them before granting leave to the parties to enter into the compromise. 10. Per contra, the learned Senior Counsel Sri. 10. Per contra, the learned Senior Counsel Sri. T.A. Shaji submitted that the petitioners are not necessary or proper parties to the suit/appeal and and that the Yogam which is a party to the appeal/suit represents each and every member of the Yogam. Learned Senior Counsel further submitted that the members of the Yogam can have no independent right or interest which is against the right and interest of the Yogam and that the settlement of the dispute between the parties to the suit has been approved at the general body meeting of the Yogam. He further submitted that a few members of the Yogam, who constitute only a minority, cannot challenge the decision taken at the general body meeting of the Yogam. Learned counsel for the respondents in the appeal supported the aforesaid contentions. 11. We have considered the rival contentions raised by the learned counsel for all parties. The points that arise for consideration in the context of the contentions raised are: (i) whether the petitioners are necessary or proper parties to the appeal? (ii) Whether the court is bound to give notice to the members of the Yogam before it grants leave to the parties to enter into the settlement/compromise? 12. There is no dispute with regard to the fact that the Yogam is a society registered under the Travancore - Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 (hereinafter referred to as the 'Act'). There is also no dispute with regard to the fact that as per the memorandum of association of the Yogam, it can sue or be sued in the name of its President as well as the Secretary. 13. The suit is filed by one of the members of the Yogam for realisation of money from the Yogam. On the dismissal of the suit, he has filed the appeal against the Yogam showing the Yogam as the first and the second respondents. In the appeal, the first respondent is shown as the Yogam represented by its President and the second respondent is shown as the Yogam represented by its Secretary. This is the position as regards the suit also. 14. As noticed earlier, the Yogam is a society registered under the Act. In the appeal, the first respondent is shown as the Yogam represented by its President and the second respondent is shown as the Yogam represented by its Secretary. This is the position as regards the suit also. 14. As noticed earlier, the Yogam is a society registered under the Act. Section 9 of the Act provides that every society may sue or be sued in the name of the president, chairman, or principal, secretary, or trustees, as shall be determined by the rules and regulations of the society and in default of such determination, in the name of such person as shall be appointed by the governing body for the occasion. There is no dispute with regard to the fact that as per the memorandum of association of the Yogam, it can sue and be sued in the name of the President as well as the Secretary. The Yogam is a registered society which enjoys the status of a legal entity. The Yogam being a legal entity is capable of suing and being sued in its own name. As a legal entity capable of suing and being sued, the Yogam represents the cause of the members who constitute it. That being the position, it cannot be found that the petitioners are either necessary or proper parties to the appeal. In taking this view, we are fortified by the decisions in Sreekumaran v. Kadakavoor Devaswom (1989 KHC 84 : 1989 (1) KLT 341 ) and Sree Narayana Dharma Samajam v. Mohandas (2005 KHC 999: 2005 (3) KLT 438). 15. Order 1 Rule 10 (2) of the Code provides that the Court may, at any stage of the proceedings, either upon or without an application of either party, order that any person, whose presence may be necessary, in order to enable the Court to effectually and completely adjudicate upon and settle all the questions involved in the suit, be added. It is well settled law that the question of addition of parties is a matter of judicial discretion to be exercised taking into consideration the facts and circumstances of each case. 16. A necessary party is one without whom no order can be made effectively while a proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceedings. 16. A necessary party is one without whom no order can be made effectively while a proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceedings. The procedure under Order 1 Rule 10 of the Code shall always be adopted where it is really necessary for a complete adjudication of the questions involved in the suit. A person may be impleaded in the proceedings, though no relief may be claimed against him, if his presence is necessary for a complete and final adjudication of the questions involved therein. But, the provision under Order 1 Rule 10 of the Code cannot be resorted to where there is no need for adding new parties for effectually and completely adjudicating the questions involved in the suit. In the instant case, the Yogam is a party to the appeal. The Yogam represents all its members in the appeal/suit. The petitioners, being members of the Yogam, are not necessary parties to the proceedings. Their presence is not required for effectually and completely adjudicating the questions involved in the appeal. Therefore, they are also not proper parties to the appeal. 17. The next question to be considered is whether the Court is bound to give notice to the members of the Yogam as provided in Rule 3B(2) of Order 23 of the Code. The contention of the petitioners is that if the decree passed in a suit would bind any person who is not a party to such suit, then it will be a "representative suit" for the purpose of Order 23 Rule 3B of the Code, having regard to Clause (d) of the Explanation to that provision. It is submitted that as the decree in the appeal, to which the Yogam is a party would bind all members of the Yogam who are not parties to the appeal, then the appeal against the Yogam is to be considered as a representative action for the purpose of Clause (d) of the Explanation to Rule 3B (2) of Order 23 of the Code and consequently a compromise could be entered in the appeal, to which the Yogam is a party, only with the leave of the court granted after giving notice to all the members of the Yogam. On the other hand, the appellant and the respondents would contend that the suit instituted by the appellant was not a representative suit and for a suit to fall under Clause (d) of the Explanation to Rule 3B(2), it is necessary that the decree made in such suit should bind a person who is not a party to the suit and in the instant case, the Yogam is a party to the suit and the appeal and the Yogam represents all its members and therefore, it cannot be found that the members of the Yogam are not parties to the suit or the appeal. It is submitted that if the argument of the petitioners is accepted, it would mean that where a compromise is entered into in suits to which a company incorporated under the Companies Act or a society registered under a statute is a party, it would be necessary to treat them as representative suits and to issue notice to all the members thereof on the ground that the decree passed in such suits would bind the members of such company or society, who are not parties to the suit. Such a position would be untenable. 18. Rule 3B of Order 23 of the Code provides that no agreement or compromise shall be entered in a representative suit without the leave of the court. The said rule is extracted below : "3B. No agreement or compromise to be entered in a representative suit without leave of Court.- (1) No agreement or compromise in a representative suit shall be entered into without the leave of the Court expressly recorded in the proceedings; and any such agreement or compromise entered into without the leave of the Court so recorded shall be void. (2) Before granting such leave, the Court shall give notice in such manner as it may think fit to such persons as may appear to it to be interested in the suit. (2) Before granting such leave, the Court shall give notice in such manner as it may think fit to such persons as may appear to it to be interested in the suit. Explanation.- In this rule, "representative suit" means,- (a) a suit under section 91 or section 92, (b) a suit under rule 8 of Order I, (c) a suit in which the manager of an undivided Hindu family sues or is sued as representing the other members of the family, (d) any other suit in which the decree passed may, by virtue of the provisions of this Code or of any other law for the time being in force, bind any person who is not named as party to the suit." 19. A compromise of a suit is governed by Rule 3 of Order 23 of the Code. However, if the suit which is compromised, is a representative suit, two additional requirements of Rule 3B will also have to be complied with. They are : (i) compromise cannot be entered without the leave of the court expressly recorded in the proceedings; and (ii) before granting such leave, the court shall give notice to such persons as may appear to it to be interested in the suit. The Explanation to Rule 3B defines four categories of suits as "representative suits" for the purpose of the said rule : (a) suits under section 91 or section 92 of the Code; (b) suits under Order 1 Rule 8 of the Code; (c) suits in which the manager of an undivided Hindu Family sues or is sued as representing the other members of the family; and (d) suits in which the decree passed may bind any person who is not named as a party to the suit by virtue of the provisions of the Code of Civil Procedure or any other law for the time being in force. If a suit should answer the definition of a `representative suit' under clause (d) of the Explanation, two conditions should be satisfied - (i) the decree passed in the suit should bind the person who is not named as a party to the suit; and (ii) the decree should so bind a person who is not named as a party to the suit, by virtue of the provisions of the Code or any other law for the time being in force (See Hussainbhai Allarakhbhai Dariaya v. State of Gujarat, (2010) 8 SCC 759 ). 20. In the instant case, the petitioners are not parties to the appeal. But, they are members of the Yogam which is a party to the appeal. Therefore, the decree which may be passed in the appeal would bind the petitioners in their capacity as the members of the Yogam in view of the provisions contained in the Act. Therefore, the petitioners would contend that the requirements of Clause (d) of the Explanation to Order 23 Rule 3B(2) of the Code are satisfied and it has to be found that the suit is a representative suit. This contention cannot be accepted for the simple reason that the petitioners, who are members of the Yogam, are represented in the suit/appeal by the Yogam. In that sense, they are already parties to the suit/appeal. True, they are not in the party array in their individual names. But, they are in the party array being represented in the name of the Yogam. The suit is one instituted by a member of the Yogam for realisation money allegedly due from the Yogam. It cannot be considered as a representative action for the purpose of Clause (d) of the Explanation to Order 23 Rule 3B(2) of the Code because the decree that may be passed in the suit/appeal binds the petitioners not in their individual capacity but only in their capacity as members of the Yogam. 21. Even if it is assumed or accepted that the instant case is a representative action by virtue of Clause (d) of the Explanation to Rule 3B(2) of Order 23 of the Code, it does not automatically follow that the court is bound to give notice to all the members of the Yogam under Rule 3B(2). 21. Even if it is assumed or accepted that the instant case is a representative action by virtue of Clause (d) of the Explanation to Rule 3B(2) of Order 23 of the Code, it does not automatically follow that the court is bound to give notice to all the members of the Yogam under Rule 3B(2). A close scrutiny of the provision contained in sub - rule (2) of Rule 3B would indicate that notice has to be given by the court only to such persons as may appear to the court to be interested in the suit or the appeal. This takes us to the question whether the petitioners are persons who are interested in the suit/appeal. This in turn would lead to the question whether the petitioners, who are members of the Yogam, can have any separate interest in the affairs of the Yogam, which is different from the interest of the Yogam. 22. In the context of considering the status of a memeber of a co-operative society, in Daman Singh v. State of Punjab, AIR 1985 SC 973 , the Constitution Bench has held as follows: “Once a person becomes a Member of a cooperative society, he loses his individuality qua the society and he has no independent rights except those given to him by the statute and the bylaws. He must act and speak through the society or rather, the society alone can act and speak for him qua rights or duties of the society as a body.” 23. In Satyavart Sidhantalankar v. The Arya Samaj, AIR 1946 Bombay 516, it has been observed as follows: “Every member of a corporation or an incorporated company joins the same on the basis that prima facie the majority of its members is entitled to exercise its powers and control its operations generally. The same would be the position in the case of unincorporated associations of individuals whether the same be registered under the Societies Registration Act or not. The rule of the majority is the normal basis of these associations. The members of these associations do join these associations whether incorporated or unincorporated, whether registered or unregistered, knowing full well that the affairs of these associations would be conducted normally by the vote of the majority of the members thereof. The rule of the majority is the normal basis of these associations. The members of these associations do join these associations whether incorporated or unincorporated, whether registered or unregistered, knowing full well that the affairs of these associations would be conducted normally by the vote of the majority of the members thereof. In the absence of any specific rules and regulations governing the conduct of these affairs, this would be the normal presumption, and no member who joins any association would be heard to contend to the contrary.” 24. The internal affairs of a registered society are managed by a vote of the majority. Persons join societies and organisations with full knowledge that the majority of the members are entitled to exercise the powers and control the operations generally. The court would normally interfere with the internal affairs of a society or corporation only to prevent unfairness or oppression. The rule of supremacy of the majority is subject to only the following exceptions: (1) where the act complained of is ultra vires the soceity, (2) where the act complained of is a fraud on the minority, and (3) where there is absolute necessity to waive the rule in order that there may be no denial of justice. 25. The general body of a society is supreme. When the general body of the Yogam has taken a conscious decision to settle the dispute with the appellant by paying a certain amount in full and final settlement of the claim made by the appellant, some of the members, who constitute only a miniscule minority, cannot challenge that decision. The petitioners, who are members of the Yogam, are bound by the said decision. Merely because the terms and conditions of the settlement are not acceptable to the petitioners, it cannot be the basis not to abide by the decision of the overwhelming majority of the general body of the Yogam. In view of this position, it cannot be found that the members of the Yogam can have any interest which is contrary to the interest of the Yogam. It follows that it is not necessary to give notice to the members of the Yogam as provided under sub-rule (2) of Rule 3B of Order 23 of the Code. 26. In view of this position, it cannot be found that the members of the Yogam can have any interest which is contrary to the interest of the Yogam. It follows that it is not necessary to give notice to the members of the Yogam as provided under sub-rule (2) of Rule 3B of Order 23 of the Code. 26. Learned counsel for the petitioners cited the decision in Kerala Hindi Prachar Sabha v. Joseph : 2010 (4) KHC 591 : 2010 (4) KLT 584 in support of his contention that the court is bound to give notice to the members of the Yogam as provided under sub-rule (2) of Rule 3B of Order 23 of the Code. A careful reading of this decision would show that it does not support of the case of the petitioners. It was a proceedings instituted by some of the members of a society under Section 25 of the Act for removing the existing governing body and to appoint a fresh governing body. It was a case in which the trial court gave a public notice regarding the settlement and some of the members of the society responded to the notice and got impleaded in the proceedings. There is nothing in this decision which would indicate that in a suit for realisation of money instituted by a person against a society, not as a member of the society but in his individual capacity, notice has to be given to all members as provided under sub-rule (2) of Rule 3B of Order 23 of the Code, especially when the settlement/compromise in the suit has been approved by the general body of the society. 27. As per the settlement arrived at between the appellant and the respondents, the respondent Yogam has agreed to pay an amount of Rs.1,58,00,000/- to the appellant. The learned counsel for the respondent Yogam has produced the minutes of the annual general body meeting of the Yogam held on 29.10.2017. It would show that the decision taken by the general body meeting of the Yogam was to give Rs.1,18,40,000/- with interest at the rate of 12% per annum to the appellant in settlement of the dispute (page 57 of the minutes book). The period for which interest is to be paid is not mentioned in the decision taken by the Yogam. The period for which interest is to be paid is not mentioned in the decision taken by the Yogam. The general body of the Yogam has not taken any decision with regard to the exact amount to be paid to the appellant as per the settlement. The general body meeting of the Yogam has not taken any decision to pay Rs.1,58,00,000/- to the appellant. It may be true that the amount of Rs.1,58,00,000/- is lesser than the total amount of Rs.1,18,40,000/- and interest at the rate of 12% per annum thereon. However, we are of the view that the general body of the Yogam should know the exact amount the Yogam has to pay as per the settlement entered into with the appellant. Therefore, we deem it fit to give one month`s time to the respondents to get the exact terms of the settlement arrived at between the Yogam and the appellant approved by the general body meeting of the Yogam and to produce the minutes of such meeting before this court. 28. In the result, I.A.Nos.1317 of 2017 and 2209 of 2017 are dismissed. We grant one month`s time to the respondents to get the exact terms of the settlement/compromise entered into with the appellant approved by the general body meeting of the Yogam and to produce the minutes of such meeting before this court. In case of any default made by the respondents in this regard, the appeal shall be disposed of on merits after hearing. The appeal shall be posted after one month.