SCA/15669/2005 1/37 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 15669 of 2005 For Approval and Signature: HONOURABLE MR.JUSTICE DN PATEL ========================================= = 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge? ========================================= = GUAJRAT STATE CO-OPERATIVE MARKETING FEDERATION LTD. - Petitioner(s) Versus SABARKANTHA DIST.CO-OPERATIVE PURCHASE & SALES UNION LTD. - Respondent(s) ========================================= = Appearance : MR SK JHAVERI for Petitioner(s) : 1, MR VB PATEL, SR. ADVOCATE, MR DG CHAUHAN and MS NAYANA M PATEL for Respondent(s) : 1, ===================================================================== CORAM : HONOURABLE MR.JUSTICE DN PATEL Date : 14/12/2005 ORAL JUDGMENT 1. The present petition has been preferred against the order passed by the Gujarat Cooperative Tribunal, Ahmedabad dated 21st July, 2005 in Appeal No. 618/2002 SCA/15669/2005 2/37 JUDGMENT whereby the order passed by the Board of Nominees, Ahmedabad dated 28/06/2002 in Summary Lavad Suit No. 731/2001 was quashed and set aside and remanded the matter to the Board of Nominees. 2. The facts of the case can be summarized as under : (i) The petitioner (original plaintiff) had filed Summary Lavad Suit bearing No. 371/2001 before the Board of Nominees, Ahmedabad for recovery of certain some of money against the respondent (original defendant) on the basis of agreement entered into between the petitioner and the respondent under Section 99(4) of Gujarat Cooperative Societies Act, 1961. The Respondent (original defendant) was the member of petitioner (original plaintiff) which is a federal Cooperative society. (ii) As per the provisions of Act, 1961, leave to defend was granted by the Board of Nominees on condition of deposit of Rs. One Crore by the respondent (original defendant) vide order dated 24/10/2001 below Exhibit – 11 in Summary Lavad Suit No. 371/2001 (Annexure – E to the memo of SCA/15669/2005 3/37 JUDGMENT the petition). (iii)Against this order of conditional leave to defend, respondent preferred a Revision Application before the Tribunal and Tribunal granted stay vide order dated 30/10/2001 against conditional order passed by the Board of Nominees (Annexure – F to the memo of the petition). The said order reads as under : Order “Heard learned Counsels. It is a summary suit and therefore, if award is passed, the Revision Application will become infructuous. Therefore, stay is granted up to 22/11/2001 only, against pronouncement of the final judgment on the board” date 30/10/2001.” Thus, aforesaid order was passed granting stay against conditional leave to defend. This stay was continued up to 14/06/2002. (iv) The said Revision Application which was preferred by the present respondent against conditional leave was dismissed for default for want of appearance vide order dated 14/06/2002. (v) The petitioner (original plaintiff) moved a pursis before the Board of Nominees to take up SCA/15669/2005 4/37 JUDGMENT the Lavad Suit on Board and for passing an award on 28/06/2002. (vi) The Board of Nominees, Ahmedabad took the matter on record on the very same day i.e. 28/06/2002 and passed award on 28/06/2002 itself, whereby the suit was decreed in favour of the petitioner (original plaintiff) (Annexure F to the memo of the petition). (vii)The respondent (original defendant) filed restoration application in Revision Application on 29/06/2002 as revision application was dismissed for default on 14-06-2002. The said restoration application was disposed of by the Tribunal vide order dated 4/6/2002 as infructuous because the decree was already passed by Board of Nominees dated 28/06/2002. (viii)As restoration application against imposing of condition was dismissed for default, the restoration application was disposed of in view of the decree passed by the Board of Nominees. The respondent preferred an appeal before the Gujarat State Cooperative Tribunal, Ahmedabad SCA/15669/2005 5/37 JUDGMENT against the order passed by Board of Nominees dated 28/06/2002 under Section 102 of the Act, 1961 mainly on the ground that Board of Nominees has no jurisdiction to entertain, try and decide the Summary Suit, that the procedure adopted by the Board of Nominees is a summary procedure which is not permissible looking to the facts of the case, that there are highly triable issues, and also on the ground that no opportunity of being heard was given to the respondent (original appellant) as envisaged under Section 101 (1) of the Act, 1961. The decree passed by Board of Nominees was also challenged on the ground that there is no liability of the respondent (original appellant) towards the petitioner (original plaintiff), also on the ground that the respondent (original defendant) was a agent and there were Taluka Sanghs who were liable to make the payment to the petitioner, also on the ground that the facts affecting the jurisdiction of the Board of Nominees having not been properly decided by the Board of Nominees, also on the ground that conditional leave order always merges with the final order passed by the Board of Nominees SCA/15669/2005 6/37 JUDGMENT therefore, all the contentions can be raised by the respondent (original appellant) at the appellate stage, including for the reason that there were several triable issues and therefore, there was no question of conducting the case with summary procedure and therefore, conditional order passed by the Board of Nominees was not warranted looking to the facts of the case and hence, the breach of conditional leave to defend effects not the whole case. On the contrary leave to defend order itself was illegal and on several other grounds appeal was preferred by the respondent before the Gujarat State Cooperative Tribunal. 3. Upon hearing learned Counsels for both the sides, the Tribunal granted stay against the impugned award passed by the Board of Nominees on condition to deposit Rs. Five lakhs. This stay was granted on 12/08/2002 and upon hearing both the sides, the Tribunal quashed and set aside the award passed by the Board of Nominees and remanded the matter to the Board of Nominees for its afresh decision on merits vide order dated 21/07/2005. This order has caused to the petitioner to prefer the present petition. SCA/15669/2005 7/37 JUDGMENT 4. I have heard learned Counsel for the petitioner. Initially contention about maintainability of Appeal before the Tribunal against the award passed in Summary Lavad Suit was raised by the petitioner, but subsequently not pressed by the petitioner. The learned Counsel for the petitioner has submitted that the order passed by Gujarat State Cooperative Tribunal is de hors the provisions of the Act, 1961 and de hors the facts of the case. It is submitted by the learned Counsel for the petitioner that the Tribunal has erred in coming to the conclusion that there were several triable issues. The Tribunal has also erred in opening a question of leave to defend and the condition attached therewith. It is submitted by the learned Counsel for the petitioner that conditional leave to defend was granted by the Board of Nominees on 30/10/2001 against which a Revision Application was preferred and the same was dismissed on 14/06/2002 and thereafter on 28/06/2002, the Board of Nominees has passed an award in favour of the petitioner (original plaintiff). Thus it was not warranted for the Tribunal to arrive at the conclusion that the leave to defend granting conditional leave was not a legal order passed by the Board of Nominees. Leave to defend order dated 30/10/2001 is a separate and distinct order, it SCA/15669/2005 8/37 JUDGMENT never emerges with the award passed by the Board of Nominees to leave to defend order as contended. No sooner did the Revision Application was dismissed i.e. On 14/06/2002 and therefore, the Board of Nominees passed an order on 28/06/2002. This aspect of the matter has not been appreciated by the Tribunal. It is also submitted by the learned Counsel for the petitioner that the respondent (original defendant) were liable to make the payment of dues as stated in the memo of Lavad Suit and as stated in the order passed by the Board of Nominees dated 30/10/2001. There is also resolution passed by the respondent, which has been referred in the order passed by the Board of Nominees (Annexure E to the memo of the petition). Thus, on the basis of the agreement, (Annexure B) and the resolution passed by the respondent (Annexure – E) and looking to the nature of transactions and the payments made by the respondent, there was a liability upon the respondent (original defendant) to make payment of a fixed sum as claimed in the Lavad Suit. There was no any uncertainty as to the liability of the respondent. This aspect of the matter has not been appreciated by the Tribunal and has committed an error, apparent on the face of the record, that there are several triable issues, that the condition attached with leave to defend has been opened by the Tribunal while passing impugned order SCA/15669/2005 9/37 JUDGMENT dated 21/07/2002. Learned Counsel appearing for the petitioner has also taken this Court to various sections of the Act especially Section 99 and the provisions of the Code of Civil Procedure and several judgments and pointed out that the order passed by the Tribunal is illegal and there are several errors apparent on the face of the record and order passed by the Tribunal dated 21/07/2005 in Appeal No. 618/2002 deserves to be quashed and set aside and the order passed by the Board of Nominees, Ahmedabad in Summary Lavad Suit No. 713/2001 dated 28/06/2002 may be restored. 5. I have heard learned Counsel for the respondent who has mainly submitted that the order passed by the Tribunal is true, legal and in consonance with the facts and the provisions of the Act, 1961. It is also submitted by the learned Counsel for the respondent that under the agreement (Annexure B colly, to the memo of the petition) there is no liability of the respondent (original defendant) to make the payment of chemical fertilizers which has been used and consumed by Taluka Sangas. The present respondent has not purchased any item from the petitioner (original plaintiff). It is also submitted by the learned Counsel for the respondent that there is no single clause in the agreement between the petitioner and SCA/15669/2005 10/37 JUDGMENT the respondent which imposes any liability upon the respondent for the payment of chemical fertilizers which are purchased by Taluka Sanghas. On the contrary looking to the various clause, the liability of the respondent (original defendant) was a very limited one and was only to the fact that the respondent was an agent for the sale of the chemical fertilizers from petitioner to Taluka Sanghs and as and when payment was received from Taluka Sanghs it was to be forwarded to the petitioner. In case of default by Taluka Sanghs, suit was required to be filed by the Respondent against the Taluka Sanghas as per the terms of the agreement. 6. Learned Counsel for the respondent has taken this Court to several clauses of the agreement and has pointed out at length that only liability of the respondent was like a Recovery agent for the items sold from the petitioner to Taluka Sanghs. If there is any recovery from Taluka Sanghs, the said amount cannot be retained by the respondent, it ought to be forwarded to the petitioner failing which some penal interest was to be followed from the respondent by the petitioner. At the most, there can be case of negligence on the part of the respondent in making a recovery from the purchaser – Taluka Sanghs. The respondent is not debtor of the SCA/15669/2005 11/37 JUDGMENT petitioner at all. The respondent is not purchaser of any chemical fertilizers. The main base of the suit filed by the petitioner before the Board of Nominees was to the liability of the respondent under the agreement, in fact looking to the agreement, nature of transactions, correspondence and the resolutions, there was no responsibility of the respondent of the payment of dues to the petitioner for the sale of chemical fertilizers. On the contrary this was a main triable issues and highly contentious issue before the Board of Nominees. Before imposing any liability upon the respondent, clauses of the agreement, correspondence and the resolutions (Annexure – E to the memo) deserves to be read and re-read at a great length. The main issue of the liability of the respondent was highly contentious issue. The liability is not admitted. The liability of the respondent is not admitted liability for default in payment by those who have purchased chemical fertilizers. This aspect of the matter has not been appreciated by the Board of Nominees on both levels viz. while passing leave to defend order dated 30/10/2001 and also order dated 28/06/2002. The liability of the respondent cannot be presumed by the Board of Nominees. Lavad case filed by the petitioner therefore, ought to have been dismissed summarily by the Board of Nominees. The conditional facts SCA/15669/2005 12/37 JUDGMENT referred in Section 99 of the Act, 1961 and especially under Sub-section (4) thereof were never present before the Board of Nominees and therefore, conditional leave to defend order was challenged in the Revision Application by the respondent. Initially stay was granted by the Tribunal but the said Revision Application was dismissed for default on 14/06/2002. On 28/06/2002, the petitioner moved a pursis for hearing of Lavad Case, suddenly without hearing the defendant i.e. the present respondent, on the very same day for the reasons best known to the petitioner, the Lavad Suit was finally decided on 28/06/2002 by the Board of Nominees, Ahmedabad. As per Section 101(1) of the Act, 1961, opportunity of being heard ought to have been afforded by the Board of Nominees to the respondent. Neither copy of the pursis was given on the same day nor respondent was heard on the same day, Board of Nominees finally decided Summary Lavad Suit ex-parte in favour of the petitioner (original plaintiff) and passed decree on the same day against the respondent. Learned Counsel appearing for the respondent has also pointed out that even if the condition is not fulfilled by the respondent as per leave to defend order, it was prime duty of the Board of Nominees to look into the facts of the case and evidence of the case and thereafter ought to have come to the SCA/15669/2005 13/37 JUDGMENT conclusion as to the liability of the respondent. But looking to the order passed by Board of Nominees dated 28/06/2002 nothing has been seen discussed in the award passed by the Board of Nominees. Therefore, the appeal was preferred before the Tribunal wherein all the points were raised by the respondent and pointed out that procedure adopted by the Board of Nominees was absolutely wrong and illegal. Similarly, procedure adopted by the Board of Nominees was not warranted looking to the facts of case and the contentious issues. Looking to the agreement there is no liability of the respondent (original defendant) for purchase of the chemical fertilizers. In fact the respondent was never purchaser of the chemical fertilizers. Respondent was a agent, even as per correspondence entered into between the parties and letters written by the petitioner (original plaintiff). Some of the letters are at (Anneuxre – B dated 28/10/1993, Annexure – C dated 6/1/1996, Annexure – D dated 05/05/2001 to the memo of the petition) makes the fact crystal clear that even as per petitioner (original plaintiff), the respondent (original defendant) was not a debtor of dues as alleged by the petitioner (original plaintiff). He was merely an agent of sale of chemical fertilizers from the petitioner to Taluka Sanghs. If Taluka Sanghs make the payment, it was to be forwarded to SCA/15669/2005 14/37 JUDGMENT the petitioner. In any case if there is no payment or default by Taluka Sanghs, as per the clause 11(10) of the agreement, the respondent (original defendant) was liable to file suits against the defaulters. In fact such suits have been filed by the respondent (original defendant) against such defaulted Taluka Sanghs. Even claims have been raised by the respondent before the Official Liquidator of the concerned Talukas Sanghas. Even the petitioner (original plaintiff)has also raised their claim before the Official Liquidator of Taluka Sanghas, whatever payment have been received from Official Liquidator has been forwarded by the respondent to the petitioner. It is also submitted by the learned Counsel for the respondent that the whole case cannot be tried summarily by the Board of Nominees. The conditions referred in Sub-section (4) of Section 99 of the Act, 1961 were not fulfilled, even if the case of the petitioner (original plaintiff) is taken at its highest pitch, maximum it can be said that the respondent was negligent in making recovery from Taluka Sanghs, but this conclusion also cannot be arrived at because the respondent has already filed suits against defaulters. There is much difference between the debtors and the Recovery Agent, the respondent is not at all defaulter of the petitioner looking to the nature of agreement. On the SCA/15669/2005 15/37 JUDGMENT contrary the respondent was entitled to claim commission for the sale of chemical fertilizers and if the purchaser is making payment the same was to be sent to the petitioner, thus, this aspect has been made in the order dated 21/07/2005 passed by the Tribunal and the matter has been remanded to the Board of Nominees for conducting Lavad Suit on its own merits and not summarily. The reasons given by the Tribunal for passing the impugned order are true, correct and in consonance with the agreement and correspondence as stated hereinabove. Therefore, said order may not be quashed by this Court in exercise of jurisdiction under Article 227 of Constitution of India. There are certain observations made by the Tribunal, on the basis of facts this factual findings of the Tribunal may not be disturbed by this Court as the matter has been remanded and stipulated time has been given by the Board of Nominees. The case ought to be allowed to be tried by the Board of Nominees on its own merits. Learned Counsel for the respondent has also taken this Court to several judgments which are referred hereinafter and has pointed out that interim order passed by the Board of Nominees dated 30/10/2001 whereby conditional leave to defend was granted is emerging with the final order and when the final order is not challenged the conditional leave to defend order can also SCA/15669/2005 16/37 JUDGMENT be challenged by the respondent. There are judgments which are cited by the learned Counsel for the respondent which touches aspect to the fact that whenever there is an error in arriving at correct facts which are known as “jurisdictional facts”, the said issue can be raised in an appeal and the appellate Court has all power, jurisdiction and authority to decide the same viz. Whether the “jurisdictional facts” were ever in existence, before the Board of Nominee, while adopting summary procedure in pending Lavad Case. Looking to the facts of the present case, the conditions referred in Sub-section (4) of Section 99 were not fulfilled. The case filed by the petitioner cannot be tried summarily and it requires a hearing on its own merits after laying down the evidence, the suit ought to have been decided. The order passed by the Tribunal is true, correct and may not be quashed by this Court. 7. Having heard the Counsels for both the sides, looking to the facts and circumstances of the case, keeping in mind the provisions of the Gujarat Cooperative Societies Act, 1961, the Gujarat Cooperative Rules, 1965, the provisions of Code of Civil Procedure, 1907, various judicial pronouncements and orders passed by the Board of Nominees, Ahmedabad dated 24/10/2001 and 28/6/2002, the SCA/15669/2005 17/37 JUDGMENT order dated 21/07/2005 in Appeal No. 618/2002 passed by Gujarat Cooperative Tribunal, I see no reason to entertain the present petition in exercise of jurisdiction under Article 227 of the Constitution of India at this stage (because, the case is remanded by the Tribunal to the Board of Nominees, Ahmedabad) especially for the following facts and reasons: (i) The present petitioner (original plaintiff) preferred Lavad Suit before the Board of Nominees against the respondent (original defendant) bearing Summary Lavad Case No. 731/2001. Thereafter, below Exhibit – 11 leave to defend order was passed vide order dated 24/10/2001. Conditional leave to defend was granted to the respondent and condition was to deposit Rs. One Crore. Against the said conditional leave to defend, a Revision Application was preferred before the Tribunal, initially Tribunal granted stay against conditional leave to defend vide order dated 30/10/2005. The Tribunal passed the following order : “Order SCA/15669/2005 18/37 JUDGMENT Heard the learned advocates. It is a summary suit and therefore if the award is passed the R.A. Will become infructions. Therefore stay is granted upto 22-11-2001 only against pronouncement of final judgment and award. Date : 30/10/2001.” (ii) This Revision Application No. 468/2001 was preferred against leave to defend order passed by the Board of Nominees, this was dismissed for default vide order dated 14/06/2002. Thus, the stay granted by the Tribunal was not operative on and from 14/06/2002. The present petitioner (original plaintiff) moved a pursis to take up the Lavad Suit on Board before the Board of Nominees, this pursis was moved on 28/06/2002. The Board of Nominees had taken the matter on Board on the very same day and passed an ex- parte award in favour of the present petitioner (original plaintiff) and this is how the suit was decreed on 28/06/2002 whereby it was ordered that the respondent (original defendant) has to make payment of Rs. 3,04,98,712. 85 paise with interest at the rate of 16 percent with effect from 09/05/2001 plus cost of the suit of Rs. 6000/- . Looking to the facts of the present case prima facie there was no hearing afforded SCA/15669/2005 19/37 JUDGMENT by the Board of Nominees to the respondent (original plaintiff). The pursis was moved on 28/06/2002 by the present petitioner (original plaintiff), the Board of Nominees has not taken any care even to see that such pursis has either been served upon the respondent. Even if the conditional leave to defend order is not fulfilled, there are certain obligations upon the Board of Nominees as per Section 99 (5) of the Act, 1961. Section 99 (5) of the Act, 1961 reads as under: “99. xxx... 1 to 4 xxx.... 5. (a) The defendant shall not be entitled to defend the dispute unless he obtains leave from the Registrar, his nominee, or as the case may be, the board of nominees, in such manner as may be prescribed. (b) The Registrar, his nominee or board of nominees may grant the leave under clause (a) on such conditions, as he thinks fit. (c) The Registrar, his nominee or board of nominees shall not refuse the leave to defend the dispute unless he is satisfied that the facts disclosed by the defendant do not indicate that he has substantials defence to raise or that the defence intended to be put by him is frivolous or vexatious. (d) Where the defendant fails to obtain such leave or fails to appear or defend the dispute in pursuance of such leave, the averments made in the SCA/15669/2005 20/37 JUDGMENT plaint and documents produced therewith shall be deemed to have been admitted by the defendant: Provided that the Registrar, his nominee or board of nominees in his discretion requires any fact so admitted to be proved otherwise than by such admission. (e) Where the conditions on which leave to defend is granted are not complied with by the defendant, the Registrar, his nominee or, as the case may be, board of nominees may pass an award against him, as if