IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:14.03.2011 Coram: THE HONOURABLE MR.JUSTICE G.RAJASURIA S.A.No.184 of 2006 and CMP No.3014 of 2006 The Special Officer 127, Nallakoundanpalayam Weavers Co-operative Production & Sales Society Limited Kavundapadi Pudur Kavundapadi Village, Bhavani Talukk Erode District. .. Appellant/Defendant 3 vs. 1. Marimuthu 2. Pattikannu 3. Rathinal 4. Rajammal 5. Ramachandran ..Plaintiff 1 to 5 and DD 1,2 6. The State of Tamil Nadu Rep. By its District Collector Erode, Erode District. 7. The Assistant Director Handloom & Textile Department 426, Bhavani Main Road Veerappanchatram Erode -4, Erode District. .. Respondents This second appeal is focussed as against the judgment and decree passed in A.S.No.90 of 2005 dated 30.12.2005 on the file of Sub Court, Bhavani Erode confirming the judgment and decree passed in O.S.No.691 of 2004, on the file of Principal District Munsif Court, Bhavani Erode dated 02.11.2004. For Appellant : Mr.V.Bharathidasan https://hcservices.ecourts.gov.in/hcservices/ For Respondents : Mr.N.Manokaran for R1 to R5 Mrs.R.Revathi, for R6 and R7 J U D G M E N T This second appeal is focussed by the third defendant in the original suit animadverting upon the judgement and decree dated 30.12.2005 passed in A.S.No.90 of 2005 by the Sub Court, Bhavani, confirming the judgment and decree of the Principal District Munsif Court, Bhavani in O.S.No.691 of 2004. The parties are referred to hereunder according to their litigative status and ranking before the trial Court. 2. A recapitulation and summation of the relevant facts absolutely necessary and germane for the disposal of this Second Appeal would run thus: (a) The plaintiffs filed the suit seeking the following reliefs: (i) To declare that the plaintiffs are entitled to collect all the terminal benefits amounts due to the death of the deceased Muthulakshmi, wife of Marimuthu from the defendants 2 and 3; (ii) To grant an order of mandatory injunction against the defendants 2 and 3 by means of directing the defendants 2 and 3 to pay all the terminal benefits amounts such as savings and group insurance amount etc due to the death of the deceased Muthulakshmi. (member number 298 of the third defendant's society) to the plaintiffs; and (iii) for costs. (Extracted as such) (b) D3 filed the written statement resisting the suit and the same has been adopted by D1 and D2. (c) Whereupon the trial Court framed the issues. (d) During trial, the first plaintiff-Marimuthu examined himself as P.W.1 and Exs.A1 to A11 were marked. On the side of the defendants, one Mr.S.Karuppannan was examined as D.W.1 and Exs.B1 to B9 were marked. (e) Ultimately the trial Court decreed the suit, as against which appeal was filed for nothing but to be dismissed by the appellate Court confirming the judgment and decree of the lower Court. 3. Being aggrieved by and dissatisfied with the judgments and decrees of both the Courts below, this Second Appeal has been filed on various grounds and also suggesting the following substantial questions https://hcservices.ecourts.gov.in/hcservices/ of law: "(1) Have not the courts below committed an error of law in decreeing the suit notwithstanding the statutory bar for filing a suit by any member, past or present and any one claiming through the member under the Tamil Nadu Co-operative Societies Act. (2) Have not the courts below committed an error of law in decreeing the suit in view of the deemed removal of member from the scheme as per Rule 10 and 8 of the Rules. (3) Have not the courts below committed an error of law in not dismissing the suit in view of Ex.B1 to B7 which clearly prove that the proper procedure has been followed in removing the deceased Muthulakshmi from the scheme as well as the membership. (4) Have not the courts below committed an error of law in not holding that in view of the factual position that the installment amount due under the scheme has not been paid by the deceased Muthulakshmi and even assuming that the communication of removal did not reach her the same will not entitle the respondents from getting the suit decree. (5) Have not the courts below committed an error of law in not holding that the burden of proof is on the respondents/plaintiffs to prove that the deceased Muthulakshmi has not received the communication of Ex.B2, B3 & B7. (6) Have not the courts below committed an error of law in not holding that all public actions of the authorities are presumed to be true unless the contrary is proved and therefore the suit is liable to be dismissed. (7) Has not the Lower Appellate court committed an error of law in not numbering the IA filed to re- open the case and giving an opportunity to the Appellant to argue the case before rendering judgment in the appeal." (extracted as such) 4. Whereupon my learned Predecessor framed the following substantial questions of law: https://hcservices.ecourts.gov.in/hcservices/ "(a) In the facts and circumstances of the case, whether the courts below are right in law in decreeing the suit in view of the deemed removal of the member from the Scheme as per Rules 10 and 8 of the Rules governing the scheme? (b) In the facts and circumstances of the case, whether the courts below are right in holding that in view of the fact that the instalment amount due under the scheme has not been paid by the deceased Muthulakshmi, the non-communication of the removal of the said Muthulakshmi from the scheme would make the legal representatives entitled to the terminal benefits?" (extracted as such) 5. Heard both sides. 6. The epitome and the long and short of the arguments of the learned counsel for the plaintiffs would run thus: (a) The records would speak that the deceased Muthulakshmi during her lifetime itself failed to avail the benefits under the Scheme namely, Co-operative Handloom Weavers Savings and Security Scheme, which would contemplate that she should obtain yarn and perform work and deliver the goods and then only she would be entitled for the Group Insurance Scheme. However, she failed to do the work. Whereupon she lost her right to claim any benefit under the Group Insurance Scheme. (b) A show cause notice was given to her as to why her name should not be removed from the membership of the Scheme and inasmuch as there was no response, the ultimate resolution was also passed removing her from the membership of the Group Insurance Scheme. After her death, her Legal representatives are having no right to claim any benefit under the Group Insurance Scheme. Both the Courts below misdirected themselves and virtually decreed the suit. (c) Rule 29 of the Rules relating to the Co-operative Handloom Weavers Savings and Security Scheme contemplates arbitration and even such arbitration was not resorted to by the plaintiffs. (d) Section 90 of the Tamil Nadu Co-operative Societies Act , 1983 read with the provisions as contained in chapter XVII of the Act, and more specifically Section 156, would operate as a bar for the filing of the suit. Both the Courts below simply ignored those provisions and decreed the suit warranting interference in the Second Appeal. 7. In a bid to torpedo and pulverise the arguments on the side of the defendant, the learned counsel for the plaintiffs would advance his arguments, which could pithily and precisely be set out thus: https://hcservices.ecourts.gov.in/hcservices/ (a) The dispute relating to Group Insurance Scheme can never be termed as a dispute within the meaning of Section 90 of the Tamil Nadu Co-operative Societies Act. Chapter XVII of the said Act also is having no application. Arbitration as per Rule 29 of the said Rules was not invoked specifically by the defendants before the lower Court and hence for the first time the said Rule cannot be invoked before this Court in Second Appeal. (b) There is nothing to indicate or exemplify that the alleged show cause notice was served on the deceased Muthulakshmi and the alleged final resolution was communicated to her. Hence in such a case, both the Courts below taking into account the pro et contra correctly decided the lis warranting no interference in the Second appeal. 8. Both the substantial questions of law are taken together for discussion as they are inter linked and inter woven with each another. 9. At the outset itself I would like to fumigate my mind with the decision of Hon'ble Apex Court reported in (2011) 1 SCC 673 [Vijay Kumar Talwar v. Commissioner of Income Tax, Delhi], certain excerpts from it would run thus: "19. It is manifest from a bare reading of the section that an appeal to the High Court from a decision of the Tribunal lies only when a substantial question of law is involved, and where the High Court comes to the conclusion that a substantial question of law arises from the said order, it is mandatory that such question(s) must be formulated. The expression "substantial question of law" is not defined in the act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements. 23. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread." 10. A mere poring over and perusal of those excerpts including the whole judgment would reveal that unless there is any perversity or illegality in the findings of the Courts below or that the Courts below failed to apply the correct law, the question of interference in the Second Appeal does not arise. https://hcservices.ecourts.gov.in/hcservices/ 11. At this juncture, I would liked to extract hereunder the relevant provisions under the Rules relating to the Co-operative Handloom Weavers Savings and Security Scheme "10. Removal of a Member from participating in the scheme: 1. The Board may remove a member from participation in the scheme on any of the following grounds:- a) If the subscriber stays away from work continuously for a period exceeding six months, or b)If the subscriber is in default in the payment of his subscription for a continuous period exceeding six months, or c)If he becomes disqualified to continue as a member of the society. 2. In considering any stoppage of work or default in payment of subscription, the Board shall give due allowance for period of unemployment or under employment for reasons beyond the control of the member such as shortage of raw material, curtailment of production and illness. 3. A subscriber aggrieved by an order of the Board under Sub-rule (1) may appeal to the Assistant Director within two months from the date of the order. The decision of the Assistant Director shall be final in the matter. 4. A subscriber shall cease to participate in the scheme. a) If he is removed from the membership of the society, b) If he withdraws his membership of the society, 5. A subscriber removed from participating in the scheme for any of the reasons mentioned in sub-rule (1) may apply afresh for admission only after a period of one year from the date of removal. The Board on receipt of application shall satisfy itself that the reasons which justified his removal do not exist any longer." 12. A bare perusal of it would clearly display and convey that the order contemplated under Rule 10 of the said Rules removing a member from participating in the Scheme is a quasi judicial order. The very fact that appeal is contemplated under Sub Rule 3 of the said Rule 10 would exemplify and demonstrate the same. 13. In this connection, I would like to refer to the decision of the Hon'ble Apex Court reported in (2011) 2 SCC 258 [Automotive Tyre Manufacturers Association v. Designated authority and others]; certain excerpts from it would run thus: "77. It is trite that rules of "natural justice" are https://hcservices.ecourts.gov.in/hcservices/ not embodied rules. The phrase "natural justice" is also not capable of a precise decision. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i.e. fair play in action. In A.K.Kraipak, it was observed that the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. 78. In Mohinder Singh Gill, upon consideration of several cases, Krishna Iyer,J. in his inimitable style observed thus : (SCC p.434, para 48) "48. Once we understand the soul of the rule as fair play in action – and it is so – we must hold that it extends to both the fields. After all, administrative power in a democratic set-up is not allergic to fairness in action and discretionary executive justice cannot degenerate into unilateral injustice. Nor is there ground to be frightened of delay, inconvenience and expense, if natural justice gains access. For fairness itself is a flexible, pragmatic and relative concept, not a rigid, ritualistic or sophisticated abstraction. It is not a bull in a china shop, nor a bee in one's bonnet. Its essence is good conscience in a given situation; nothing more – but nothing less. The 'exceptions' to the rules of natural justice are a misnomer or rather are but a shorthand form of expressing the idea that in those exclusionary cases nothing unfair can be inferred by not affording an opportunity to present or meet a case. Textbook excerpts and ratios from rulings can be heaped, but they all converge to the same point that audi alteram partem is the justice of the law, without, of course, making law lifeless, absurd, stultifying, self-defeating or plainly contrary to the common sense of the situation". "79. In Swadeshi Cotton Mills v. Union of India, R.S.Sarkaria, J., speaking for the majority in a three- Judge Bench, lucidly explained the meaning and scope of the concept of "natural justice". Referring to several decisions, His Lordship observed thus: (SCC p.666) "Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules. But there are two fundamental maxims of natural justice viz., (i) audi alteram partem, and (ii) nemo judex in re sua. The audi https://hcservices.ecourts.gov.in/hcservices/ alteram partem rule has many facets, two of them being (a) notice of the case to be met; and (b) opportunity to explain. This rule cannot be sacrificed at the altar of administrative convenience or celerity. The general principle — as distinguished from an absolute rule of uniform application — seems to be that where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre- decisional stage. Conversely, if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature, and no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative progress or frustrate the need for utmost promptitude. In short, this rule of fair play “must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands”. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise." (emphasis supplied by us) 83. The procedure prescribed in the 1995 Rules imposes a duty on the DA to afford to all the parties, who have filed objections and adduced evidence, a personal hearing before taking a final decision in the matter. Even written arguments are no substitute for an oral hearing A personal hearing enables the authority concerned to watch the demeanour of the witnesses, etc. and also clear up his doubts during the course of the arguments. Moreover, it was also observed in Gullapalli, if one https://hcservices.ecourts.gov.in/hcservices/ person hears and other decides, then personal hearing becomes an empty formality. 84.In the present case, admittedly, the entire material had been collected by the predecessor of the DA; he had allowed the interested parties and/or their representatives to present the relevant information before him in terms of Rule 6(6) but the final findings in the form of an order were recorded by the successor DA, who had no occasion to hear the appellants herein. In our opinion, the final order passed by the new DA offends the basic principle of natural justice. Thus, the impugned notification having been issued on the basis of the final findings of the DA, who failed to follow the principles of natural justice, cannot be sustained. It is quashed accordingly." It is therefore crystal clear that the defendant society before allegedly expelling the member Muthulakshmi ought to have issued show cause notice and after giving due opportunity to her to air her grievance, final order should have been passed and that order/resolution also should have been communicated so as to enable her to prefer appeal. The sub clause 2 of Rule 10 would contemplate that the authority concerned had the right to exempt or exonerate or even over look a member's default, if the said default was found to be beyond their control such as shortage of raw material, curtailment of production and illness. The learned counsel for the defendant would argue that the records bespeak that the deceased Muthulakshmi did not do business with the Society for continuous period of more than six months and that itself is sufficient. According to him, insisting that a show cause notice should have been given to her would lead to empty formality. However, he would hasten to add that in this case, the show cause notice also was given to her before passing the resolution expelling her. 14. The learned counsel for the plaintiffs would vehemently oppose such arguments on the ground that absolutely there is no shred or shrad, iota or pint of evidence to establish and prove that the deceased Muthulakshmi received the said show cause or that she received the alleged order removing her from the membership. Ex.B6-the resolution also does not indicate that any such show cause notice was issued to her and that the said Muthulakshmi failed to respond etc. Hence in this view of the matter, both the Courts on appreciation of facts applied the law correctly and decided the lis warranting no interference in the Second Appeal. 15. The learned counsel for the plaintiffs also cited the decision of this Court reported in (2010) 2 MLJ 79 [Special Officer, Rasipuram https://hcservices.ecourts.gov.in/hcservices/ Silk Handlooms Weaver Cooperative Production & Sales Society Limited vs. K.Raja], which would also buttress and fortify the contention of the plaintiffs. The learned counsel for the defendant would make a submission that the deceased Muthulakshmi who was the defaulter and had not performed work was not entitled to any benefit under the Scheme and in such a case, after her death, her legal representatives cannot simply challenge and impugn the steps taken by the Society in expelling Muthulakshmi during her lifetime itself. 16. I recollect the maxim: Jura naturae sunt immutabilia (Principles of natural justice cannot be dispensed with and should be adhered to) 17. Here if at all as claimed by the Society the show cause notice as well as the final order was served on the said Muthulakshmi, there should be some evidence to demonstrate and display the same, but no such evidence was produced before the Courts below. Hence, both the Courts below held that in stricto sensu the said Muthulakshmi was not expelled from the membership and after her death when her legal representatives are claiming the benefits, the Society would not be justified in turning down their claim. 18. Relating to arbitration clause is concerned, as contained in Section 29 of the Tamil Nadu Co-operative Societies Act, I would like to point out that even before filing of the written statement or atleast at the time of filing the written statement it should have been raised by the Society, but that was not done so. As such, much water has flown under the bridge and before the two Courts below, on merits the Society litigated. Now it is too late in the day on the part of the Society to place reliance on Rule 29 and raise a plea relating to arbitration. No doubt but for the Society's belated invocation of Rule 29, the matter could be held to be an arbitrable one, but that was not pressed into service at the appropriate time and at the appropriate stage. Hence, I could see no merit in the said contention. 19. Wherefore, the first substantial question of law is decided to the effect that in the facts and circumstances of the case, the courts below were right in law in decreeing the suit ignoring the alleged deemed removal of Muthulakshmi from the Scheme as per Rules 10 and 8 of the said Rules. 20. The second substantial question of law is decided to the effect that the courts below were right in holding that there were no evidence regarding valid expulsion of Muthulakshmi from membership in the scheme. https://hcservices.ecourts.gov.in/hcservices/ In the result, the Second Appeal is dismissed. However, there shall be no order as to costs. Consequently, connected miscellaneous petition is closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar Gms To 1. The Subordinate Judge, Bhavani, Erode 2. The Principal District Munsif Court, Bhavani Erode +1cc to Mr.N.Manokaran, Advocate Sr 18280 +1cc to Mr.V.Bharthidasan, Advocate Sr 18289 JP(CO) km/27.4. S.A.No.184 of 2006 https://hcservices.ecourts.gov.in/hcservices/