IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.BHAVADASAN TUESDAY, THE 25TH JANUARY 2011 / 5TH MAGHA 1932 SA.No. 597 of 1999(D) ------------------- AS.245/1996 OF SUB COURT, KASARAGOD OS.542/1993 OF MUNSIFF COURT, KASARAGOD .................. APPELLANTS – RESPONDENTS IN AS.245/96 & DEFENDANTS IN OS. 542/93. ----------------------------------------------------------------------------------------------------------- 1. THE PRESIDENT, KERALA STATE SMALL INDUSTRIES ASSOCIATION, KASARAGOD DISTRICT, P.O. VIDYANAGAR – 671 123, KASARAGOD. 2. THE PRESIDENT, KERALA STATE SMALL INDUSTRIES ASSOCIATION, ERNAKULAM. BY ADV. SRI.T.K.VIPINDAS RESPONDENT – APPELLANT IN AS.245/96 & PLAINTIFF IN OS. 542/93. --------------------------------------------------------------------------------------------------- M.C. MOHAMMADKUNHI, AGED 59 YEARS, MANAGER TENCO (PVT) LTD., COMPANY, SON OF MOIDINKUNHI, MUSLIM, P.W.D. CONTRACTOR, PERIYA, THEKKIL VILLAGE, KASARAGOD TALUK, P.O. TEKKIL. BY ADV. SRI. KODOTH SREEDHARAN THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 25/01/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Mn P. BHAVADASAN, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - S.A. No. 597 of 1999 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 25th day of January, 2011. JUDGMENT The defendants in O.S.542 of 1993 before the Munsiff's Court, Kasaragod, who suffered a decree at the hands of the lower appellate court, are the appellants. The parties and facts are hereinafter referred to as they are available before the trial court. 2. The short facts are as follows: The plaintiff claimed to be an active member of the Kasaragode unit of Kerala State Small Scale Industries Association, hereinafter referred to as KSSIA. He claimed to be one of the Vice Chairmans of the District unit of the Association. According to him, another Vice Chairman, with ulterior motive and without notice to the plaintiff, called a meeting of the Association. The said person achieved the object by having the membership of the plaintiff terminated. Since S.A. 597/1999. 2 there was an arbitration clause in the Articles of Association, arbitration proceedings were resorted to. The award passed by the Arbitrator was challenged before the Munsiff's Court, Kasaragode by filing O.P.11 of 1986. The award was set aside and that was challenged in C.M.A. 4 of 1989 before the Sub Court, Kasargod. The Sub Court remitted the proceedings to the Arbitrator for passing a fresh award. Since the Arbitrator did not pass the award within the stipulated time and the petition for extension of time was dismissed, there is no award in the eye of law and the proceedings became null and void. 3. The plaintiff was running a small industrial concern, namely, M/s. General Service Agency. After the formation of the Kasaragode unit of KSSIA, his membership got automatically transferred to the Kasaragode unit. The action of the defendants in terminating the membership is challenged as illegal and arbitrary. He therefore sought for appropriate reliefs. S.A. 597/1999. 3 4. The defendants resisted the suit. They pointed out that Tenco (P) Ltd., which is represented by the plaintiff, is a company and the plaintiff is not authorized to represent the company. They denied the other allegations in the plaint. According to them, the plaintiff held membership in the Kasaragode Unit which was transferred to Kannur Unit. He was the proprietor of M/s. General Service Agency, that was later converted into a company. Thereby the status of the firm changed and a fresh registration had to be obtained. There was nothing to indicate that the plaintiff was competent to represent the Company. On the basis of these contentions they prayed for a dismissal of the suit. 5. On the above pleadings, necessary issues were raised by the trial court. The evidence consists of the testimony of P.W.1 and documents marked as Exts.A1 to A11 from the side of the plaintiff. The defendants examined D.W.1. 6. The trial court, on a consideration of the materials before it, accepted the contentions taken by the S.A. 597/1999. 4 defendants in the suit that the plaintiff was not competent to represent Tenco (P) Ltd. and therefore he could not be a member of the Association. Accordingly, the suit was dismissed. 7. The plaintiff carried the matter in appeal as A.S.245 of 1996 before the Sub Court, Kasaragod. The lower appellate court heavily relied on the communication said to have been issued to the plaintiff addressing M/s. Tenco (P) Ltd. held that the plaintiff has been recognized as a member of the Association and proceedings taken to terminate his membership were illegal and contrary to the procedure established by law. Accordingly, the judgment and decree of the trial court were set aside and the suit was decreed as prayed for by the plaintiff. Hence this Second Appeal. 8. Notice is seen issued on the following questions of law: “(i) Whether the plaintiff is entitled to be recognized as a member of the Kerala State Small Industries Association as the plaintiff has not produced any document to show that his S.A. 597/1999. 5 application, if any, for Membership has been approved at any meeting of the Kasaragod District Unit of the Association? (ii) Whether lower appellate court is justified in treating the plaintiff as a member of the Association? (iii) In the facts and circumstances of the case, whether the plaintiff can assert continuation of his Membership on the ground that M/s.General Services Agencies was a member and therefore that Membership continues for his changed firm Tenco (Pvt) Ltd. Company, when both the firms are different in nature by legal incidents and status? (iv) Whether the view of the lower appellate court that the suit is not barred by limitation is legally correct? (v) Whether adverse inference is liable to be drawn against the plaintiff's contentions in view of the fact that he has failed to produce any documents said to be in his custody, relevant for proving his case? (vi) In view of the fact that the plaintiff has failed to show that Tenco (P) Ltd. Co. has become a member of the Association, is the lower S.A. 597/1999. 6 appellate court is justified in upholding the said contention and decreeing the suit by reversing the trial court's decree and judgment?” 9. Learned counsel appearing for the appellants pointed out that the lower appellate court has misdirected itself both on facts and in law. It is not correct to say that merely because Ext.A1 communication has been issued to the plaintiff, it automatically leads to the conclusion that Association has accepted his membership. Emphasis was laid on the fact that his membership at Kannur was as of Proprietor of M/s.General Service Agencies. When that concern was converted into Tenco (P) Ltd., a Company, a fresh registration had to be obtained. There is nothing to show that the plaintiff was competent to represent the Company. These vital aspects have been omitted to be noticed by the lower appellate court and that had resulted in miscarriage of justice. It was also contended on behalf of the appellant that the suit may not be maintainable in view of Section 19 of the Arbitration Act, 1940. S.A. 597/1999. 7 10. Learned counsel appearing for the respondent replied by stating that the plea based on Arbitration Act is not available for the simple reason that it was not raised at the first opportunity before the trial court. The said plea must be deemed to have been waived. Regarding the other contention, learned counsel for the respondent contended that Ext.A1 is sufficient to show that defendants had recognised him as a member of the Association and they cannot now turn around and say that he was not competent to represent Tenco (P) Ltd. According to him, there is no merit in the appeal and it is only to be dismissed. 11. It is not in dispute that there was an arbitration of the dispute between the plaintiff and the person by name Kakkillaya, who was then the Vice-Chairman of the Association. An award was initially passed. That was challenged before the Munsiff's court, Kasaragod. That court set aside the award. The order setting aside the award was challenged before the Sub Court, Kasaragod by filing C.M.A.4 of 1989. By order dated 31.7.989 the matter was remanded S.A. 597/1999. 8 to the Arbitrator for passing a fresh award within one month from the date of receipt of copy of the order. It seems that the Arbitrator failed to comply with the order and had applied for extension of time, which was not granted. Therefore, the arbitration proceedings is abated. 12. Learned counsel appearing for the appellants drew the attention of this court to Section 19 of the Arbitration Act, 1940, which reads as follows: “19. Power to supersede arbitration where award becomes void or is set aside.- Where an award has become void under sub-section (3) of Section 16 or has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred.” Learned counsel went on to contend that when there was no order superseding the arbitration agreement, it will be deemed to have been subsisting and then the suit is not maintainable. S.A. 597/1999. 9 13. The above contention has to fail on a short ground. Such a contention was never urged before the trial court and in view of Section 32 of the Arbitration Act, this contention cannot be entertained at the second appellate stage. Had this point been urged before the trial court, the trial court would have referred the matter for arbitration. Without agitating the matter before the trial court, it is not possible to accept the contention at this stage. 14. However, the second ground is well founded. It cannot be disputed that the plaintiff was a member of the Kannur Unit of the Association as proprietor of M/s. General Service Agencies, and that membership was transferred to the Kasargode Unit when the Association was formed in that Unit. Thereafter, the concern changed its character and became a Private Limited Company. Once the proprietory concern changes its character and became a Company, the status of the plaintiff changes. He can no longer represent the Company without being authorised as per law. It is true that going by Clause 10 of the Articles of Association of S.A. 597/1999. 10 KSSIA, Company can also become a member. But an application has to be made by an authorized person. There is nothing in the case on hand to show that the plaintiff was authorised to represent the Company before the Association. Merely because Ext.A1 letter is seen to have been issued to the plaintiff and shown as Muhammad Kunhi, M/s. Tenco Private Limited, that does not lead to a conclusion that the Association has accepted him as a member after the change of status of the concern. 15. Faced with the above situation, learned counsel appearing for the respondent contended that he may be given an opportunity to establish that he is competent to represent the Company in the Association. 16. As of now, there is nothing to show that the plaintiff is either the Director of the Company or he is authorised to represent the Company before the Association. However, it is felt that an opportunity should be given to the plaintiff to establish his case. S.A. 597/1999. 11 In the result, this appeal is allowed and the impugned judgment and decree are set aside and the matter is remanded to the trial court for fresh consideration after giving opportunity to the plaintiff to establish that he is the authorised person to represent the Company before the Association. If he produces such records, then the lower appellate court judgment will be restored. The parties shall appear before the trial court on 3.3.2011. The parties will be at liberty to adduce further evidence, if they so choose. The trial court shall dispose of the matter in accordance with law. P. BHAVADASAN, JUDGE sb.