IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 31ST MARCH 2009 / 10TH CHAITHRA 1931 OP.No. 25422 of 2002(B) ----------------------- PETITIONER(S): --------------- M.MUHAMMED KUNHI, S/O. HASSANKUNHI HAJI, CONTRACTOR, CHITTARI, KANHANGAD. BY ADV. SRI.SIBY MATHEW SRI.A.A.MOHAMMED NAZIR RESPONDENT(S): --------------- 1. THE KANHIRODE WEAVERS CO-OPERATIVE (P&S) SOCIETY LTD., NO.LL.44, P.O.KANHIRODE, KANNUR, REPRESENTED BY ITS SECRETARY. 2. THE REGISTRAR OF INDUSTRIAL CO-OPERATIVE SOCIETIES, KANNUR. 3. STATE OF KERALA, REPRESENTED BY ITS SECRETARY (CO-OPERATION), SECRETARIAT, TRIVANDRUM. ADV. SMT.PREETHY KARUNAKARAN FOR R1 SRI.R.RAJESH KORMATH FOR R1 SRI.ANISH S.AMBADY FOR R1 SMT.BIJIMOL JOSE FOR R1 GOVERNMENT PLEADER SMT. SMITHA SUKUMAR. THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 31/03/2009, THE COURT ON THE SAME DAY, DELIVERED THE FOLLOWING: PETITIONER'S EXHIBITS: O.P.NO. 25422/2002. ------------------------------------------------------------------ EXT.P1 COPY OF AWARD DT. 17-7-2002 IN A.R.C.8/2001 PASSED BY R2. RESPONDENTS' EXHIBITS: -------------------------------------- EXT.R1(a) AGREEMENT DT. 30-11-1998. EXT.R1(b) SPECIAL CONDITIONS ATTACHED TO EXT.R1(a). EXT.R1(c) LETTER DT. 16-2-2001. EXT.R1(d) LETTER DT. 17-4-2001. [TRUE COPY] P.S TO JUDGE. S. Siri Jagan, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= O.P. No. 25422 of 2002 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 31st March, 2009. J U D G M E N T The petitioner is a contractor who entered into a contract with the 1st respondent Society for construction of a factory building on behalf of the society. The contract was fulfilled and the amounts due to the petitioner has been paid. Thereafter, the sales tax authorities raised a demand on the 1st respondent-society for payment of sales tax on the works contract entrusted with the petitioner, which the 1st respondent was statutorily bound to deduct from the bill amounts due to the petitioner and pay to the sales tax department. On account of the demand, the 1st respondent-society was forced to pay the same under threat of coercive recovery proceedings . Thereafter, the society demanded that money from the petitioner. Since the petitioner refused to pay the same, the society raised a dispute under Section 69 of the Kerala Co-operative Societies Act before the 2nd respondent, who, by Ext. P1 award, upheld the claim of the 1st respondent-society directing the petitioner to pay Rs. 97,741/- with interest at 12% p.a. from 6-9-2001 till realisation and Rs. 762/- as cost of the suit. The petitioner is challenging that award on the ground that the dispute raised by the 1st respondent before the 2nd respondent is not a dispute which could have been validly entertained by the 2nd respondent under Section 69 of the Kerala Co-operative Societies Act read with Section 2(i) thereof. According to the petitioner, under Section 69(1)(f), the dispute would lie before the 2nd respondent only if the petitioner was a person with whom the society had business transaction which the petitioner did not have. He further points out that under Section 2(i), the dispute is defined to mean a matter touching the business, constitution, establishments or management of a society and this dispute does not touch the business, constitution, establishment and management of the 1st respondent- O.P. No. 25422/2002 -: 2 :- society. He also relies on the decision of the Supreme Court in Deccan Merchants Co-operative Bank Ltd. v. M/s. Dalichand Jugraj Jain and others, AIR 1969 S C 1320 as also the decision of this Court in Trippunithura Handloom Weaving Co-operative Society v. Ratnakumar, 2001 (1) KLJ 651 = 2001(2) KLT S.N.41 (Case No. 46) in support of his contentions. The petitioner would further contend that even otherwise, the amount now demanded is not an amount due from the petitioner to the 1st respondent-society but is an amount due to the sales tax authorities. 2. In answer, relying on the objects of the society quoted in paragraph 2 of the counter affidavit, learned counsel for the 1st respondent-society would submit that it is the business of the society to construct buildings or acquire them on rent or otherwise for installation of power looms for which purpose only the contract has been given to the petitioner for construction. Therefore, according to the 1st respondent, the dispute would certainly lie before the Registrar. Regarding the second contention raised by the petitioner, counsel for the 1st respondent would submit that once the amount due by way of sales tax from the petitioner to the sales tax authorities is realised from the 1st respondent, the amount becomes due from the petitioner to the 1st respondent-society and therefore the contention of the petitioner is devoid of any merits. 3. I have considered the rival contentions in detail. 4. Section 69(1) (f) reads thus: “69. Disputes to be decided by Co-operative Arbitration Court and Registrar:- (1) Notwithstanding anything contained in any law for the time being in force, if a dispute arises, - xx xx xx (f) between the society and a person, other than a member of the society, who has been granted a loan by the society or with whom the society has or had business transactions or any person claiming through such a person; O.P. No. 25422/2002 -: 3 :- xx xx xx” Section 2(i) reads thus: 2(i) “dispute” means any matter touching the business, constitution, establishments or management of a society capable of being the subject of litigation and includes a claim in respect of any sum payable to or by a society, whether such claim be admitted or not:” In the decision of the Supreme Court in Deccan Merchants Co- operative Bank's case, in paragraphs 16 to 18, the Supreme Court has held thus: “16. The principal questions which arise on the interpretation of Section 91 are two: (1) what is the meaning of the expression “touching the business of the society?” and (2) what is the meaning of the expression “a person claiming through a member” which occurs in Section 91(1)(b)?” 17. The answer depends on the words used in the Act. Although number of cases have been cited to us on similar expressions contained in various other Acts, both Indian and English, in the first instance, it is advisable to restrict the enquiry to the terms of the enactment itself, because the legislatures have been changing the words and expanding the scope of references to arbitrators or to the Registrars step by step. The sentence, namely, “notwithstanding anything contained in any other law for the time being in force” clearly ousts the jurisdiction of Civil Courts if the dispute falls squarely within the ambit of Section 91(1). Five kinds of disputes are mentioned in sub-sec. (1): first, disputes touching the constitution of a society; secondly, disputes touching election of the office-bearers of a society; thirdly, disputes touching the conduct of general meetings of a society; fourthly, disputes touching the management of a society; and fifthly, disputes touching the business of a society. It is clear that the word “business” in this context does not mean affairs of a society because election of office-bearers, conduct of general meetings and management of a society would be treated as affairs of a society. In this sub-section the word “business” has been used in a narrower sense and it means the actual trading or commercial or other similar business activity of the society which the society is authorised to enter into under the Act and the Rules and its bye- laws. 18. The question arises whether the dispute touching the O.P. No. 25422/2002 -: 4 :- assets of a society would be a dispute touching the business of a society. This would depend on the nature of the society and the rules and bye-laws governing it. Ordinarily, if a society owns buildings and lets out parts of buildings which it does not require for its own purpose it cannot be said that letting out of those parts is a part of the business of the society. But it may be that it is the business of a society to construct and buy houses and let them out to its members. In that case, letting out property may be part of its business. In this case, the society is a co-operative bank and ordinarily a co-operative bank cannot be said to be engaged in business when it lets out properties owned by it. Therefore, it seems to us that the present dispute between a tenant and a member of the bank in a building which has subsequently been acquired by the Bank cannot be said to be a dispute touching the business of the Bank, and the appeal should fail on this short ground.” Again, in the decision of this Court in Trippunithura Handloom Weaving Co-operative Society's case, a learned Judge of this Court has, after referring to various decisions of this Court held thus: “Co-operative Societies Act, 1969 (Kerala) Ss.1(f) & 100 – Society formed to do the business of production and marketing of Handndloom clothes – Contract entered into with a builder for construction of a building for own use is not a business transaction – Suit is maintainable – Only if the society has or had 'business transaction' with another, the bar under S. 100 would be attracted. It is clear from the above provision that if the Society has or had 'business transaction' with the respondent herein, the bar under S.100 of the Kerala Co-operative Societies Act would be attracted. In other words, the question for consideration is whether the contract for construction of a building between plaintiff and defendant in the suit is a business transaction of the Society. Admittedly, the society was formed to do the business of production and marketing of Handloom cloths. Construction of a building, albeit for its own purpose, was not the object of the Society. Viewed from that angle, the dispute between the parties to the suit in question fell outside the purview of Ss. 69(1)(f) and 100 of the Kerala Co-operative Societies Act and in that perspective, the impugned order is perfectly sustainable.” (The short note from KLT is reproduced) In view of those decisions, I am of opinion that the petitioner's O.P. No. 25422/2002 -: 5 :- contention in that regard has to be upheld. In the decision in Trippunithura Handloom Weaving Co-operative Society's case, it has been specifically held that construction of a building albeit for its own purposes was not an object of the society and the dispute between the parties in respect of a contract for construction of a building fell outside the purview of Section 69(1)(f). In this case also, although as per the objects of the society they can construct shed or acquire them on rent or otherwise for installation of power looms, construction of buildings itself is not a business of the society. That being so, the said decision is squarely attracted to the facts of this case. In that view, the dispute between the petitioner and the 1st respondent falls outside the scope of Section 69(1)(f). Therefore, Ext. P1 award has been passed without jurisdiction by the 2nd respondent. Accordingly, the same is quashed. 5. That does not necessarily mean that it is the end of the road of the 1st respondent-society for realisation of the amount from the petitioner if it is actually due to them. I am inclined to permit the petitioner to file a suit and to direct the civil court to exclude the period during which the dispute was pending before the 2nd respondent and this original petition was pending before this Court. Of course, learned counsel for the petitioner would contend that only the period during which the dispute was pending before the 2nd respondent could be validly excluded from the period of limitation under Section 14 of the Limitation Act. The proceedings before this Court is an extension of the said dispute and therefore the 1st respondent is entitled to get exclusion of the entire period during which the dispute was pending before the 2nd respondent and this original petition was pending before this Court, for the purpose of calculation of limitation for filing the suit. Accordingly, I direct that if the 1st respondent files a suit for realisation of the amounts due from the petitioner, the 1st respondent O.P. No. 25422/2002 -: 6 :- would be entitled to exclude the period during which the dispute was pending before the 2nd respondent and this original petition was pending before this Court for the purpose of calculation of limitation period for filing such suit. In view of the fact that I have accepted the first contention of the petitioner, I am not going into the merits of the other contentions of the petitioner in this original petition and the same are left open to be agitated by the parties in the civil suit, if filed by the 1st respondent. The original petition is disposed of as above. Sd/- S. Siri Jagan, Judge. Tds/