MANU/MP/0022/1961

Equivalent Citation: AIR1961MP40, ILR[1960]MP632, 1960JLJ1100, 1960MPLJ1209

IN THE HIGH COURT OF MADHYA PRADESH

First Appeal No. 50 of 1957
Decided On: 21.07.1960
Appellants: Mishrimal
Vs.
Respondent: District Co-operative Grower's Association Ltd.
Hon'ble Judges/Coram:
T.C. Shrivastava and S.P. Bahrgava, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: A.D. Deoras, Adv.
For Respondents/Defendant: R.S. Dabir and V.S. Dabir, Advs.
Overruled / Reversed by:
Deccan Merchants Co-operative Bank Ltd. vs. Dalichand Jugraj Jain and Ors.,
MANU/SC/0214/1968
Case Note:
Trusts and Societies - Award - Section 43(2) of Co-operative Societies Act,
1912 - Rule 26 of Co-operative Societies Rules - Dispute regarding a sum
received by Plaintiff on the encashment of a hundi which was appropriated
by him towards, dues which he had to recover as commission agent -
Registrar gave an award and held Plaintiff (Appellant) liable - Award under
challenge in present appeal - Held, there was only one case where a non-
member may be a shareholder and that was of a member expelled under
byelaw No. 10 - Byelaws do not provide how the share held by such a
member should be dealt with - This appeared to be a lacuna in the byelaws
- Provision on the lines of Section 22 of the Act was necessary and the
omission does not affect the conclusion - Appellant himself deposed that he
did not know the difference between a shareholder and a member till the
award was announced - Even then he could not say what the difference
between the two is - P. W. 3 stated that there was no difference between
members and shareholders and notice of general meeting was given to all
shareholders - Both the classes were identical - This fact that the Appellant
held shares of the society confirmed the presumption that he, was a
member - In view of these findings, the award given by the Registrar was
within jurisdiction and binds the Appellant - Appeal dismissed.
JUDGMENT
T.C. Shrivastava, J.
This first appeal has been filed by the plaintiff against the decree of the Additional
District Judge, Balaghat, dismissing the suit.
On 31-7-1950, the Honorary Secretary of the defendant Co-operative Society made a

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reference to the Registrar that the plaintiff as a Treasurer of the Society had not
accounted for the moneys received by him as such. The plaintiff had admittedly a
sum of Rs. 3415-10-8 with him on behalf of the Society, but the dispute arose
regarding an item of Rs. 7397-8-0 received by him on the encashment of a hundi
which was appropriated by him towards, dues which he had to recover as
commission agent. The Registrar gave an award on 30-6-1951 holding that the
plaintiff (appellant) was liable to pay Rs. 10,462-15-6 to the defendant. The plaintiff
challenged the validity of the award.
The plaintiff admitted that his family firm Raotmal Mishrimal acted as a Treasurer
from 20-2-1948 till 31-7-1950, but he himself was neither the Treasurer nor a
member of the society. Accordingly the reference to the 'Registrar was not competent
and the award is without jurisdiction.
The defendant pleaded that the plaintiff himself was the Treasurer and was also a
member of the society. The reference was thus validly made under Rule 26 framed
under Section 43, Clause (1) of the Co-operative Societies Act, 1912 (hereinafter
called the Act).
The trial Court held that Rule 26 relied upon was wide enough to give jurisdiction to
the Registrar in all disputes touching the business of the society, even if one of the
contestants was a stranger. Accordingly, it held that the award was binding. It did
not decide the other points on which the parties had joined issues.
The decision of the question whether the dispute could be referred to the Registrar
depends upon the interpretation of Rule 26. That rule is as follows :
"Rule 26. Any dispute touching the business of a co-operative seciety.
(i) between members of past members or persons claiming through a
member or past member, 'or'
(ii) between a member or past member or persons so claiming 'and' the
committee or any officer,
shall be referred to the Registrar." We h a v e divided the different cl auses for
convenience. The power to frame this rule is derived from Section 43 of the Act, Sub-
section (2), Clause (1), in which identical language is used.
Shri R. S. Dabir for the respondent has contended that a dispute between a society
and its officers can be referred under this rule. The clause, which we have marked as
(ii) above, shows clearly that the parties to the dispute sought to- be referred must
be those which are joined by the' conjunction "and" underlined (here in ' ') by us in
that clause. "The Committee or any officer" fall on one side of the conjunction and
the plain meaning is that disputes between them inter se cannot be refer- red to the
Registrar. Thus, though a Treasurer may be an officer of the committee, a dispute
between him and the committee cannot be referred to the Registrar.
Likewise, the view of the trial Court that a dispute between the society and a stranger
can be referred to the Registrar is not justified. Under Clauses (i) and (ii) above, it is
necessary that one of the parties to the dispute must be a member, a past member or
a person claiming through them. Rule 26 does not apply to a stranger at all.
Reliance was placed by the trial Court on Kisanlal Kapurchand v. Co-operative Central

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Bank, Ltd. Seoni ILR (1945) Nag 677 : (AIR 1946 Nag 16). - In that case, the
Treasurer had executed security bonds which were sought to be enforced. In addition
to being a Treasurer, he was also a member. While discussing the implications of the
expression "the business of a co-operative society" their Lordships observed in the
penultimate paragraph of that decision :
".....the expression 'the business of a co-operative society' occurring in Rule
26 is not restricted to the dealings with the members of the society only but
that it includes business which the cooperative society is under the law
empowered to transact."
These observations have to be read in the light of the context. Obviously it was not
intended to widen the scope of Rule 26 by including disputes with strangers also.
"Member" as used in these observations only means dealing with a member qua
member and all that has been held is that Rule 26 is wide enough to cover a dispute
between the society and a member even though the claim does not arise against the
member qua member. In the 'last paragraph their Lordships observed :
"The plaintiffs as a joint family and in their corporate capacity were members
of the bank and although the liability arose in their capacity as treasurers
they cannot exonerate themselves from the liability by discarding their
character as members aS members of the society they were bound to fulfil
the obligation which they had undertaken as treasurers of the society and in
that sense the dispute can well be treated as a domestic dispute between the
members on the one side and the society on the other.''
The trial Court erroneously considered this observation as an additional argument for
supporting the conclusion. In fact, the capacity of one of the parties as a member of
the society was the deciding factor. We have no doubt that disputes with strangers
cannot be brought within the ambit of Rule 26.
That brings us to the scope of Rule 26 in disputes between the society and its
members. Shri A. D. Deoras for the appellant contends that the word "disputes"
should be restricted to disputes where the member holds the capacity of a member in
the matter leading to the dispute. On the other hand, Shri R. S. Dabir for the
respondent contends that the word 'dispute' in that rule covers all disputes between
the society and a member irrespective of the fact whether the member has incurred
the liability qua member or in any other capacity.
According to the plain meaning of Rule 26, it appears to us that the provision is
attracted only if the following two conditions are satisfied: (i) the dispute must be
touching the business of a cooperative society; and (ii) one of the parties concerned
should be a member etc. There are no words in Rule 26 or Section 43(2), Clause (1)
of the Act limiting the meaning of 'dispute' in any sense. This was the view taken in
Kisanlal Kapurchand's case ILR (1945) Nag 677: (AIR 1946 Nag 16) (supra).
The conclusion arrived at in that case is that once it is established that one of the
contestants is a member, it is not necessary to establish further that the capacity in
which the transaction leading to the dispute was entered into was that of a member.
Reliance was placed for this view on Mafizuddin v. Narayanganj Central Co-operative
Sale and Supply Society Ltd. AIR 1933 Gal 267. In that case, it was observed that
"The terms of Sub-rule (1) of Rule 22, do not confine the dispute to such as may be
referable to membership only".

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Shri A. D. Deoras points out that in the Calcutta case the decisions in Zamindara
Bank v. Suba AIR 1924 Lah 418 and Dasaratha Row v. Subba Row,
MANU/TN/0004/1923 : AIR 1923 Mad 481 were cited as authority for the view taken.
He contends that in these two cases the point has not been considered at all and the
Calcutta case, therefore, proceeded upon a wrong assumption. On these arguments,
Shri Deoras suggested to us that the view taken in Kisanlal Kapurchand's case ILR
(1945) Nag 677: (AIR 1946 Nag 16) (supra) requires re-consideration. In Zamindara
Bank's case AIR 1924 Lah 418 (supra) we do not find any discussion on the question
whether the dispute should arise between the society and a member qua member.
However, the dispute in that case was that certain documents purporting to have
been executed by the plaintiff in favour of the society were forged it was held that
such a dispute could be referred to the Registrar. In Dasradia Row's case,
MANU/TN/0004/1923 : AIR 1923 Mad 481 (supra) the dispute was between the co-
operative society and one of his members who was appointed as a director on the
purchasing committee and the liability arose on account of the purchases made by
the committee. The contention that the relevant clause referred only to disputes
regarding internal management of the affairs of the society was repelled and it was
held that disputes arising out of particular transactions were covered by the words
"touching the business of a society". The relevant observations were as follows:
"For the respondent it was argued that the dealings which the society had
with the petitioner were with him qua member and not qua director. This
argument, so far as it goes, seems to me correct. But I am prepared to go
further and hold that on a true construction of the words of the clause, a
dispute between a member who happens to be an officer on the one hand
and the committee or an officer on the other, does fall within the words of
the section."
It is thus correct to say that there is no direct decision in that case whether the
liability incurred by members in any other capacity can be referred to the Registrar.
The view taken in Kisanlal Kapur-chand's case ILR (1945) Nag 677: (AIR 1946 Nag
16) (supra) finds support in the decision in the Calcutta case and, in our opinion, the
fact that the cases relied upon by the Calcutta High Court did not directly decide the
point is not, by itself, a sufficient reason to reconsider the view taken in that case.
Shri Deoras has also referred to analogous provisions in Section 22 of the Friendly
Societies Act, 1875 (38 and 39 Victoria, 1875, Chapter 60), which is as follows:
"Every dispute between a member or person claiming through a member or
under the rules of a registered society, and the society or an officer thereof,
shall be decided in manner directed by the rules of the society..."
He relies upon the interpretation put upon this section in Morrison v. Glover (1849) 4
Ex. 430 and Prentice v. London (1875) 10 CP 679. In the first case, a member had
borrowed money from the society on mortgage of leasehold property agreeing to pay
rent reserved by the lease. He failed to pay the rent to the superior landlord and the
society sued for the breach of contract. It was held as follows:
"..... matters in difference between the Society and its members, in the
character of members, can alone be referred to arbitration; if we go one step
beyond that, then extraneous matters of any kind, which may happen to be
in dispute between the Society and any of its members, ought to be the
subject of a reference".

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In the second case, a member had transferred his share to the plaintiff who applied
for being recognized as a share-holder of the society. After the sale but before notice
of the transfer was given to the society, the society had forfeited the shares. It
therefore refused to recognize the transfer and to extend the benefit of the
membership to the plaintiff. It was held that such a dispute in which the society
denied the status of a member to the plaintiff was not within the scope of Section 22
of the Friendly Societies Act.
In both these cases, the difficulty was felt on account of the wide sweep of the
wordings in Section 22 of the Friendly Societies Act inasmuch as any dispute whether
connected with the business of the society or not could be brought within its ambit.
This was obviously beyond the scope of the Act and therefore a necessity was felt to
restrict! the application of that section to transactions by members qua members.
Rule 26, which we have to interpret does not raise this difficulty, as the words
"touching the business of a society" place the necessary restriction on its application.
The plain meaning of Rule 26 before us does not lead to an absurd situation as
Section 22 of the Friendly Societies Act does.
Further, if we accept the contention that the use of the word "member" in that rule
itself restricts the scope of the rule to transactions entered into by a member in the
capacity of a member, then the words "touching the business of a society" are
rendered wholly superfluous; for every act of a member qua member would touch the
business of the society. It is a well settled canon of interpretation that if an
enactment is susceptible to two interpretations, that interpretation should be rejected
which would render some of the words in the enactment superfluous.
We are, therefore, of the opinion that the decision in Kisanlal Kapurchand's case ILR
(1945) Nag 677: (AIR 1946 Nag 16) (supra), does not require reconsideration. We
hold that the Registrar has jurisdiction under Rule 26 to decide any dispute between
a society and its member, even though the transaction leading to the dispute has no
relation to the capacity of the member as such, provided that transaction touches the
business of the society.
It is next contended by the appellant that the agreement to work as a treasurer o£
the society (Ex. D-17) was with the joint family consisting of himself, his brother and
father, and therefore the society was not entitled to prefer any claim against him as a
treasurer. As P. W. 1, he has admitted that the family was joint and he was the
manager of the family. The agreement was executed on 20-2-1948. He admits that
there was a partition in the family in the year 1949 and he alone continued to work
as a treasurer of the defendant society till 31-7-1950 (paragraph 21 of his
statement). It is thus clear that at the material time he alone was working as
treasurer. Several applications made by him to the society further corroborate this
fact. The reference could thus be validly made against him.
Next, it has to be seen whether he was a member of the society. In paragraph 12 of
his deposition he has admitted that he held three shares of Rs. 5/- each and later
purchased twenty shares worth Rs. 5/- each from the society. The respondent has
filed a copy of the Register of members (Ex. D-6) in which the appellant is shown as
a member of the society. His name is entered as Seth Raotmal Mishrimal. It is well
known that amongst Marwaris, the name of the father comes first. We have no doubt
that this' entry relates to the appellant himself. Under Section 25 of the Act an entry
in the Register of Members is prima facie evidence that the person concerned was a
member of the society.

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Damodhar (P. W. 3), who is the secretary of the society, has stated that the appellant
had applied for being enrolled as a member and was admitted as such. The"
appellant has laid great stress on the fact that this witness admits the absence of a
resolution in the Minute Book of the Executive Committee for the years 1944 and
1945 admitting him to membership. However, the witness states that in 1947 a
resolution is entered in the proceedings according to which the General Committee
enrolled all the persons who had till then applied for membership including the
appellant.
Shri Deoras has drawn our attention to the definition of "member" in Clause (c) of
Section 2 of the Act. According to that definition, "member" includes a person joining
in the application for the registration of a society and a person admitted to
membership after registration in accordance with the bye-laws and any rules. The
bye-laws of the society are as contained in Ex. D-2. In these bye-laws the
qualifications for becoming a member are given in bye-law No. 6 and it is stated in
bye-law No. 9 that applications for membership shall be considered by the managing
committee. It is contended that as there was no resolution of the managing
committee, the appellant could not be considered to have been validly enrolled as a
member of the society.
In the first place, it may be noticed that the definition of "member" as occurring in
Section 2(c) of the Act is an inclusive definition and implies that the categories
specified in the definition are not exhaustive. Secondly, it appears to us from the
statement of Damodhar (P. W. 3) that the appellant had applied for membership and
his name was enrolled, although there was no formal resolution of the managing
committee. The matter was taken to the General Committee in 1947 and the
enrolment was ratified. Although according to the bye-laws the power of admitting
new members is given to the managing committee, we do not think that the general
body, which has plenary powers of management of the affairs of the society is
deprived of that power, which is nothing morel than in the nature of delegation.
A distinction has to be drawn between j cases where a power is derived by an inferior
local authority of a corporation under an enactment or rules framed thereunder and
cases where certain functions of the corporation are entrusted to it under bye-laws or
resolutions of the corporation itself. In the former case, the power is vested in the
inferior authority directly and the corporation cannot exercise it. In the latter case,
the power of the local authority is merely a delegation and the corporation itself is
not rendered incapable of exercising that power by the delegation. The question was
considered in Huth v. Clarke (1890) 25 QBD 391. Lord Coleridge, C. J. observed:
"The word 'delegation' implies that powers are committed to another person
or body which are as a rule always subject to resumption by the power
delegating."
Wills, J. further observed :
"Delegation, a s the word is generally used, does not imply a parting with
powers by the person who grants the delegation, but points rather to the
conferring of an authority to do things which otherwise that person would
have to do himselt ..... .... it is never used by legal writers, so far as I am
aware, as implying that the delegating person parts with the power in such a
manner as to denude himself of his rights." In that case, certain powers were
delegated by the executive committee of a corporation to a sub-committee

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 but were later exercised by the executive committee itself without depriving
the sub-committee of those powers. It was held that such exercise of the
powers by the executive committee was legal. Similarly, in the present case,
the exercise of the powers to admit members by the general body of the co-
operative society is valid, even though under the bye-laws that power has
been given to the managing committee. Accordingly, we hold that the
ratification by the general body lot the admission of the appellant as a
member was legal enough to confer on him the status of a member.
Shri Dabir submits that the word 'member' has been used in the Act as synonymous
with 'shareholders'. There is force in this contention as would appear from the
provisions in several sections of the Act. We would only refer to the -following :
Section 5 : This section refers to the liability of "members". In fact, every
share-holder is normally liable to the extent of his share. (It is not intended
that a sharp-holder, who is net a member, is not liable.)
Section 13 : Here a right of vote is discussed in the context of members and
not shareholders.
Sections 23 and 24: These sections refer to the liability of a past member
and of a deceased member. In fact, this liability extends to shareholders as
well.
Section 22: This section lays down how the share held by a deceased
member shall be dealt with. Such a share cannot vest in the legal
representatives or their nominees unless they are "qualified according to the
rules and byelaws for membership of the society". Power is given to the
society to transfer the shares to a member, if no nomination is made or if the
legal representative fails to nominate a qualified person within a month.
Section 42; This deals with winding and states the powers of a liquidator to
realize moneys from members. No mention is made of realizations being
made from shareholders. This can be explained only on the assumption that
every shareholder is a member.
These provisions are obviously intended to exclude non-members f ro m acquiring
shares.
In the byelaws also, members and shareholders are treated as co-extensive. Byelaw
No. 12, which provides for the liability of members, and byelaw No. 17, which deals
with the right of vote, do not refer to shareholders, but only to members. As pointed
out by Shri Deoras, there is only one case where a non-member may be a
shareholder and that is of a member expelled under byelaw No. 10. The byelaws do
not provide how the share held by such a member shall be dealt with. This appears
to be a lacuna in the byelaws. A provision on the lines of Section 22 of the Act was
necessary and the omission does not affect the conclusion.
The appellant himself deposes that he did not know the difference between a
shareholder and a member till the award was announced. Even then he could not say
what the difference between the two is. Damodhar (P. W. 3) states that there is no
difference between members and shareholders and notice of general meeting is given
to all shareholders. Reading the Act and the byelaws, we agree that both the classes
are identical. This fact that the appellant held shares of the society confirms the

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presumption that he, was a member.
In view of these findings, the award given by the Registrar was within jurisdiction
and binds the appellant. The appeal is dismissed with costs.

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