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TMI Blog1953 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ive 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the same are not inconsistent with the express provisions of the Madras Act, continue to be in force intil altered or rescinded.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 The Madras Act repealed the Co-operative Societies Act of 1912 (Central) in so far as it applied to this state.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, ten in number and respondent 5 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjection 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 or acquiescence. The objection, therefore, must be overruled. 7. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst 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 become important when the decisions interpreting the rules made under the provisions of the Central Act have to be considered. 10. It is common ground that the present case fulfils the second of the two requirements laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 the rules and the bye-laws. In the adjudication of disputes such tribunals should not ignore the principles of natural justice and should not be guilty of legal misconduct for example, before expelling a corporator from the society, it is an elementary principle of law, that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. Similarly, a resolution passed by a society may be beyond the powers of the body. In such a case also, the tribunal would have no jurisdiction. These principles are deducible from the decisions of the Courts in England of which a clear example is the decision -- 'Heard v. Pickthorne', (1913) 3-KB 299 (I) which was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 them in the society. It was a mixed society in which the members were partly individuals and partly societies. The object of the resolution was to convert the society into what was styled a "pure type" society i. e., a society from which individuals were eliminated, other societies alone being allowed to continue as members. The objection raised was that the suit was incompe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression. 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 without interference by the ordinary Courts of the land. The word "touching" does not present much difficulty, as its dictionary meaning is "in reference or relation to, respecting, regarding or concerning" thus indicating that the disputes 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 intende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 domestic and other requirements of its members, and (iii) generally to encourage thrift, self help and co-operation among members. Societies are permitted to be registered under Section 4 of the Act (which is exactly the same as Section 4 of Central Act 2 of 1912) if the object 19 the promotion of the economic interests of its members in accordance with co-operative principles, of if it is a society established with the object of facilitating the operations of such a society. The society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 referred to presently, on a plain reading of the provisions, it will be seen that bye-law 32 treats the election of directors by the members at a corporate meeting of the general body as part of the business of the society. A dispute relating therefore to election would undoubtedly be a dispute concerning or relating to the business of the society. It may be asked whether the election of the directors by exercise of the vote of the individual members can be said to be a corporate activity of the society, or whether it should be deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it does in the ordinary course of business, and whatever is done in the ordinary course Of business certainly relates to or affects the business. The learned Judge followed in this respect a decision of this Court in -- 'P. Dasaratha Rao v. C. Subbarao', AIR 1923 Mad 481 (P), where Krishnan and Venkatasubba Rao JJ. expressed the view that the expression "touching the business of a society" need not be confined to a dispute regarding the internal management of the affairs of a society or disputes in regard to the principles which would regulate the conduct of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke 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-operative business. Reference was made in that judgment to a decision of one of us in -- 'Narayana Nair v. Secretary T. U. C. S. Ltd.', AIR 1948 Mad 272 (S), as supporting the learned Judge's conclusion, but it may be remarked that the decision in -- 'AIR 1948 Mad 272 (S)', was a case, which was directly within the exception in Section 51, that a dispute regarding the disciplinary action taken by a society or its committee against a paid servant is not within the scope of the section, and it does not in any manner help in construing the expression "touching the business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dispute was barred under Rule 22. The payment of the dividend was, no doubt, as pointed out by the learned Judge, a matter touching the business of the society. But the payment of the dividend was merely a consequential relief, which the plaintiff asked for in the suit, the principal relief he wanted being a declaration that the constitution of the Board itself was illegal, that they had no authority to call for an extraordinary general meeting & that, therefore, the resolution passed at the extraordinary general meeting was 'ultra vires'. The duties of the Board were set out in byelaw 31 and the matter was not covered by the bye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 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 society and, therefore, barred under Section 51, Co-operative Societies Act and the bye-laws of the society. The learned trial Judge overruled the preliminary objection, as he was of opinion, that the dispute was not one touching the business of the society. The matter was brought up in revision to the High Court. It was heard and disposed of by our learned brother Govinda Menon J. He considered all the relevant decisions bearing upon the question, and 'at page 427' adverted to the contentions raised on behalf of the plaintiff, that the expression "touching the business" should be limited to such matters as transactions regarding the buying and the selling of comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fail to see how a dispute raised by one of the members of the society against an action of the society taken at a meeting of the general body of the society in the exercise of a power conferred by one of the society's bye-laws cannot be said to be a dispute touching the business of the society. On the day when the resolution was passed expelling the petitioner from membership admittedly this matter of expulsion was one of the items of business on the agenda of the meeting. We do not think it extravagant to hold that the expulsion of an undesirable member is also a part of the business of the society. If so any dispute relating to such an expulsion would be a dispute touching the business of the society." We respectfully agree with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51, 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 under bye-law 35, which is in the same terms as the bye law quoted in the unreported judgment of the learned Chief Justice and Viswanatha Sastri J. already referred to. In the petition for the writ of mandamus, the petitioners, the Madura Labour Union, attacked the validity of the resolutions passed at the meeting on 18-3-1951 and the amendments made to the constitution and also the resolution expelling the Union from membership. It was held by the learned Judges that the expulsion of the Madura Labour Union by a resolution passed at the meeting on 18-3-1851 was illegal as the Union was not given an opportunity of explaining and defending itself, and the principles of natural justice were not observed, and the maxim 'audi alteram partem' was violated. The point raised was whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 Narasimharao', AIR 1940 Mad 356 at p. 362 (Z), Leach C. J. observed as follows: "The Division Bench is the final Court of Appeal in an Indian High Court, unless the case is referred to a Full Bench, and one Division Bench should regard itself bound by the decision of another Division Bench on a question of law. In England, where there is the Court of Appeal, Divisional Courts follow the decisions of other Divisional courts on the grounds of judicial comity ...... If a Division Bench does not accept as correct the decision on a question of law of another Division Bench the only right and proper course to adopt is to refer the matter to a Full Bench, for which the rules of this Court provide. If this course is not adopted, the Courts subordinate to the High Court are left without guidance. Apart from the impropriety of an appellate Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X
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