TMI Blog1953 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... the Madras Co-operative Societies Act (6 of 1932) and its bye-laws shall so far as the same are not inconsistent with the express provisions of the Madras Act, continue to be in force intil altered or rescinded. Vide Section 62. The Madras Act repealed the Co-operative Societies Act of 1912 (Central) in so far as it applied to this state. In the arguments before us, reference was made to the provisions of the Madras Act, and both sides proceeded on the basis that the question raised has to be determined by a proper interpretation of Section 51 of the Madras Act (hereinafter referred to as the Act ). This is mentioned at the outset for the reason, that bye-law 60 of the Bank was framed in accordance with the Central Act, and its scope must be deemed to have been enlarged by Section 51 of the Madras Act. 4. The general body of the bank at its meeting held on 28-7-1950 elected 11 members as Directors constitute the Board of Directors for the management of the Bank as required by bye-law 19. The term of the previous directors had expired, but they continued in office after the expiry of their term until the constitution of a new Board under bye-law 20. The petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel appearing for the 1st respondent, surya Rao, raised a preliminary objection on the ground that as no exception was taken by the petitioners, who were respondents before the Deputy Registrar regarding the exercise of jurisdiction by the Deputy Registrar and acquiesced in the exercise of jurisdiction by him, they were precluded from now raising the present contention. Reliance was placed upon a decision of this Court in -- 'Latchmanan Chettiar v. Corporation of Madras', AIR 1927 Mad 130 (FB) (A). We think, however, that this preliminary objection is not well founded. The decision relied on was not a case of initial want of jurisdiction. As pointed out by the Supreme Court in the decision, -- 'United Commercial Bank v. Their Workmen', (B), no amount of consent would cure the initial want of jurisdiction. It is not open to a person to confer jurisdiction by consent and no amount of acquiescence would confer jurisdiction upon a tribunal or a Court where such jurisdiction did not exist. The contention raised by the petitioners if well founded would go to the root of the matter, and it would be a case of total lack of jurisdiction, which cannot be cured by consent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h debt or demand be admitted or not, is a dispute touching the business of the society within the meaning of this sub-section. 9. To apply the section, two requisites must be fulfilled. The first is it must be a dispute- touching the business of a registered society the second is that it must be between the persons specified in Clauses (a) to (d). Section 43 of the Central Act of 1912 conferred the rule-making powers on the Provincial Government; Section 43(2)(1) empowered it to make a rule 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 so claiming and the committee or any officer shall be referred to the Registrar for decision. Provision was accordingly made by rules for the decision of disputes referred to in the clause. It may, however, be noted that the scope of this clause is narrower than the scope of Section 51 of the Act, for it does not provide for the decision of a dispute, for example, between a member and the society while the Madras Act does make such provision. This distinction would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple was enunciated by Lord Selbome, L. C. in -- 'Attorney General v. Great Eastern Railway Co.', (1880) 5 AC 473 at p 478 CO which was followed and applied in -- 'Peel v. London and North Western Railway', (1907) 1-Ch 5 (D) by Vaughan Williams, L. J., and recently in --'Attorney General v. Leeds Corporation', (1929) 2-Ch 291 (E). So long as the tribunals have acted within their jurisdiction, even when they committed an error of law, Courts have declined to interfere with such erroneous decisions. It is the duty of the Courts to quote Lord Loreburn, L. C. in -- 'Catt v. Wood', (1910) AC 404 at p 407, (F), To obey loyally the enactments which were made in order to prevent multitudinous litigation and to give effect to decisions (if they be honest and not open to a charge of misconduct) of those who are deciding rightly or wrongly within the jurisdiction which is confided to them by the laws of this country. It is, however, the right and the duty of a Court to see that these tribunals keep within their bounds and do not exceed their jurisdiction transgress the limits that have been imposed on them by the provisions of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there accused of another and graver charge and then and there expelled. This invasion of the respondent's rights most clearly transcends the class of irregularities and calls for the intervention of the Courts. 12. Other classes of cases in which the jurisdiction of the tribunals is negatived are where the tribunals do or try to do something which is 'ultra vires', something which they ought not to try at all, something which ought to be taken to the Courts. A rule of a society may be within its powers or beyond its powers. The determination of that question depends upon the construction of the constituent documents of the society, i. e. the rules and the Act under which the society is registered. So long as the rule is not 'ultra vires' and the determination of the dispute depended merely upon the construction of a rule or a section of the Act or a bye-law a wrong interpretation placed on them by the tribunal would not give jurisdiction to the Court to interfere. But if the question raised related to the 'ultra vires' nature of the rule or the bye law, a dispute of that nature is undoubtedly without the purview of the tribunal. Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-Ch 318 (K) which was a case under the Friendly societies Act, and the National Insurance Act. The legality of the rules of the society, it was held, could not properly be made the subject of arbitration under Section 63, National Insurance Act, and that it was not a matter of domestic administration. 14. The principle of these decisions was applied in India in the Calcutta High Court by Rankin C. J. in -- 'Ramendranath Mukherjee v. Balurghat Central Co-operative Bank', AIR 1932 Cal 317 (L) who considered the provisions of the Co-operative Societies Act (2 of 1912) and the rules made by the Bengal Government under Section 43 (2) (1) regarding the determination of disputes. The question arose in a suit by the plaintiff for a declaration that a certain resolution passed at the general meeting of the society registered under the Act of 1912 was 'ultra vires', and illegal, and for an injunction restraining the society from acting on it The plaintiff was the holder of 10 preference shares of ₹ 20 each. The effect of the resolution, the legality of which was questioned, was to take away all the preference shares compulsorily at par value and to vest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the expression dispute touching the business of the society , on the one side the contention being that it meant matters of internal administration, while the other side attempted to restrict the word business to anything that the society does or is entitled to do for the fulfilment of its object within the Act and its bye-laws, the learned Judges did not -- there was no necessity for them to do so -- define the scope of the expression. The resolution being one not warranted by the rules and the bye-laws of the society, the matter was within the principle of the decision in -- '1919 A. C. 548 (J)'. We may now proceed to consider the meaning of the expression dispute touching the business of a registered society . The words touching the business of a society must be given their full import. Here we should bear in mind that the object of the legislation, which brought into existence these corporations for a definite purpose, was not only to confer complete autonomy on them in matters of internal administration but as part and parcel of the same scheme to set up a forum to settle what may be generally referred to as their internal disputes finally and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med under the Act and the bye-laws made by the corporation. 15. The learned counsel for the petitioners restricted the meaning of the word business to all activity within the scope of the objects of the society, though he was willing to include matters necessary and incidental to carry out the objects of the society. On this assumption he contended that the election of directors by the general body was not within the scope of business so defined. In order to find out the business of the society, one cannot confine oneself to the objects enumerated in the bye-laws; one has also to examine the provisions of the Act and the rules and the bye-laws. All that is permitted to be done by the bye-laws, which are 'intra vires' the Act, by the provisions of the Act and by the rules must be deemed to be the business of the society. For example, taking the bye-laws of this bank along with the provisions of the Act and the rules, it would be seen that the objects of the bank as defined in bye-law 2 are (i) to borrow funds from members or others to be utilised for loans to members for useful purposes, (ii) to act as the agent for the joint purchase of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the will of the majority of the members present at the meeting. There are also other matters provided for under the bye-laws. It may be mentioned that the society even at the time of registration is required by Section 10 of the Act to file a copy of the proposed bye-laws, which however ' should not be contrary to the Act or to the rules, and the Registrar is given power to decide whether they are contrary to the provisions of the Act and the rules or not. Under Section 12 the Society is empowered to amend subsequently the bye-laws which, of course, have to be registered in the manner prescribed by the Act. It therefore follows that in order to determine the activities or the business of the corporation, one has to look into the provisions of the Act and the rules and the bye-laws framed by the society. All matters comprised in them or are incidental to or necessary for carrying out those matters must be deemed to be the business of the corporation. 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. 16. Apart from the decisions to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral body, which is the ultimate authority, is given the power to elect remove directors, though under bye-law 32, it can only be done in a meeting of the general body convened for the conduct of the business of the society. The activity, therefore, of the members assembled in a meeting is a corporate activity of the society. 17. It now remains to consider the decisions cited at the Bar as throwing light on the question under examination. The word business was the subject matter of consideration in some of the decisions. In -- 'G. I. P. Railway Employee Cooperative Bank v. Bhijaki Merwanji', AIR 1943 Bom 341 (O), Chagla J. (as he then was) expressed the opinion that the word business was a very wide term was not synonymous with the objects of the society, and that the expression touching the business of a society would mean affecting the business of a society or relating to the business of a society, and that it cannot be said that when a company employs or dismisses a servant, it does not do something which relates to its business. It is true that it is not one of the objects of the company to employ or dismiss servants; but it is something which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the rule made under Section 43, and that the jurisdiction of the civil Court was taken away. Though no reasons were given by the learned Judges in support of their conclusion, that the election of its officers was part of the business of the society, we think in view of what we stated above, that the decision is correct. This decision was pronounced in 1924 and the Madras Act was enacted in 1932. The Legislature must have been aware of this interpretation of the rule, and notwithstanding such knowledge nothing was stated in Section 51 of the Madras Act so as to take out such a dispute from its purview. 18. In -- 'Tanjore Co-operative Marketing Federation v. Krithivasan', (R), our learned brother Govinda Menon J. sitting as a single Judge, held that a suit by an ex-employee of a society to recover a security deposit made by him at the time when he was entertained by the society and for recovery of arrears of salary was not barred by Section 51 and that such a dispute did not relate to the business of the Society. According to the learned Judge to take security deposits was not business of the society which was to carry on some kind of co- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose out of a suit for recovery from a Co-operative Bank of a sum of ₹ 46 as dividend in respect of certain preference shares and for a declaration that a resolution of the managing committee and another resolution passed by the shareholders at a meeting were illegal and 'ultra vires'. The bank at its annual general meeting of the shareholders resolved to pay out of the profits available for distribution for the year a dividend to the preference shareholders. The plaintiff held certain preference shares, in the bank. When he demanded payment of the dividend in respect of his shares, the secretary refused to pay it on the ground that the major portion of the assets shown in the auditor's report was illusory and the real profits were not sufficient to meet the expenses of the society. The committee of management subsequently passed a resolution to that effect, and an extraordinary general meeting of the shareholders was called for in which the earlier resolution was rescinded. The plaintiff attacked also the constitution of the committee as illegal as according to him it was not in accordance with the bye laws of the Bank. The question was whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion whether a dispute between a member who acted as the legal adviser of the society and was called to account for certain sums received by him from the Bank while acting as its vakil was liable to be proceeded against under Section 51 of the Madras Cooperative Societies Act. It was held that as the matter did not relate to a dispute between him as a member and the Bank, it was taken out of the purview of Section 61 of the Act. 22. There remain three decisions of this Court, which have occasioned a reference to the Pull Bench. The first case is -- Savitri Bai v. Thotappa (Y), a decision of our learned Brother Govinda Menon J. sitting as a single Judge. The dispute there related to the dismissal of a person from the office of President of a Co-operative society. A suit was filed for a declaration that a resolution of the managing body removing the plaintiff from the presidentship of the society and appointing defendant 1 as president was illegal, unconstitutional and 'ultra vires'. The defence raised was that the suit was not maintainable in a civil Court as the subject matter of the suit was a matter of domestic concern relating to the business of the societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by a writ, which, as the learned Judges held, should have been for mandamus directing the Registrar of Co-operative Societies to proceed to decide the dispute. The bye-law of the society under which the power Was exercised of expelling the member was as follows : If a member deceives the society in any way, or if his general conduct is such as to render his removal necessary in the interests of the society, it shall be open to the general body to expel such member. A member expelled shall be paid money due to him from the society. A member who drives the society to Court to recover the money due from him shall, for that reason be expelled from membership. A member expelled shall be liable as provided in bye-law 3 for the debts due by the society as they stood on the date of his expulsion for a period of two years after such expulsion. 24. The learned Chief Justice held that there being provision in the bye-laws for the expulsion of a member, and having regard to the language of Section 51, the dispute was undoubtedly within the scope of Section 51. The learned Chief Justice, who delivered the judgment of the Court, observed : We fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovinda Menon and Panchapakesa Aiyar JJ. had again to consider the question of the expulsion of a member from a society. The dispute related to the Madura Mills Workers' Co-operative Stores Ltd. The Madura Labour Union was admitted under bye-law 5 of the society as a member of the society, and under bye-law 19, the executive management of the affairs of the society was vested in a Board of directors of not more than five, one of whom had to-be a nominee of the Madura Labour Union. Bye-law 20 provided for the election of the other directors. The Board of Directors was superseded under Section 43 of the Act by the Registrar, and he appointed a special officer to manage the affairs of the society. The Special Officer convened a general body meeting of the society, which was held on 18-3-1951, wherein certain amendments to the bye laws were made. One of the amendments to bye-law 5 and its effect were to make it no longer obligatory to have a nominee of the Madura Labour Union on the Board of Directors. By an amendment to bye-law 14, power was conferred on the general body to remove the nominee of the Madura Labour Union from the Board of Directors and resolutions were also passed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before Govinda Menon and panchapakesa Ayyar JJ. relating to the expulsion of the member, viz, the Madura Labour Union, was undoubtedly within bye law 35 and, therefore, exclusively triable by the Registrar under Section 51 of the Act. If the principles of natural justice were violated by the authority concerned in passing the resolution expelling the member, it would have been perfectly open to the Registrar to consider that aspect and give relief to the petitioner. It is one thing to say that the adjudication by a tribunal is vitiated by the non-observance of the principles of natural justice and a totally different thing to say that a general body has violated such principles. The violation of the principles by the general body is a matter, which could be rectified and considered by the Registrar acting under Section 51 of the Act, while an adjudication by a tribunal under such circumstances could be set aside by a Court. Instead of the learned Judges dissenting from the judgment of a Bench, if we may say so with respect, they could have adopted the course of referring it to a Pull Bench as was pointed out by the Full Bench in -- 'Seshmma v. Venkata Narasimhar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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