2010 (2) TMI 1265 - HC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction of the Co-operative Court.
2. Legality of the transfer fees.
3. Coercion and mistake in payment.
4. Applicability of Sections 23, 65, and 72 of the Indian Contract Act.
5. Validity of the contract and restitution.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Co-operative Court:
The Petitioners argued that the Co-operative Court lacked inherent jurisdiction to try the dispute as it related to a transaction prior to the Respondent becoming a member. However, the Court found this contention to be rightly negatived. The dispute was not only about the coercion practiced upon the Respondent before becoming a member but also included claims for amounts incurred by way of repair work after she became a member. The dispute was filed after the Respondent became a member, and as per the judgment in Ramagauri Keshvlal Virani Vs. Walkeshwar Triveni Co-operative Housing Society Ltd., the Co-operative Court had jurisdiction.

2. Legality of the Transfer Fees:
The Respondent challenged the payment of 3% of the consideration amount towards transfer fees, alleging it was an illegal demand paid under coercion. The transactions related to shares and premises in a Co-operative Society are governed by the Maharashtra Co-operative Societies Act, 1960, and the model bye-laws. Bye-law No.40(d)(vii) restricts the premium to Rs. 25,000/-. Any additional amount is illegal unless voluntarily donated. The demand for 3% of the consideration amount as transfer fees was illegal except if donated voluntarily.

3. Coercion and Mistake in Payment:
The Respondent alleged coercion in paying the transfer fees, claiming it was paid under the guise of a building repair fund. The Court examined whether the payment was made under coercion or mistake. The evidence showed extensive correspondence and meetings between the parties. The Respondent's letter dated 8th July 1992, paying Rs. 9.63 lakhs, was crucial. The Court found no coercion practiced upon the Respondent. The Respondent entered into the contract of her free will and paid the amount under an incorrect misleading description, knowing it was for transfer fees.

4. Applicability of Sections 23, 65, and 72 of the Indian Contract Act:
The Court analyzed the applicability of Sections 23, 65, and 72 of the Indian Contract Act. Section 23 renders any consideration forbidden by law void. Section 65 obligates a person who received an advantage under a void agreement to restore it. Section 72 mandates repayment of money paid by mistake or under coercion. The Court held that the payment made by the Respondent was under a void contract as it was forbidden by law (Section 23). The Respondent could not claim restitution under Sections 65 or 72 because the contract was void ab initio, and the payment was made with knowledge of its illegality.

5. Validity of the Contract and Restitution:
The Court found that the contract between the Respondent and the Society was void from the inception under Section 23 of the Indian Contract Act. The Respondent knowingly made an illegal payment, and thus the contract was not later discovered to be void. The Respondent could not claim restitution under Sections 65 or 72 of the Contract Act. The payment was illegal, and the Respondent had the option to refuse the illegal payment and apply for membership under Section 22 of the Maharashtra Co-operative Societies Act but chose not to do so.

Conclusion:
The judgments of the Learned Co-operative Court and the Learned Co-operative Appellate Court were set aside. The award passed under the judgment dated 10th September 2003 and confirmed in appeal under the judgment dated 28th October 2003 were set aside. Rule made absolute with costs of Rs. 10,000/-.