Case: The Sugauli Sugar Works (Private) Ltd Vs. The Asstt. Registrar, Co-Operativesocieties

The appellant is a private limited company, incorporated under the Indian Companies Act, with its registered office at Calcutta. It carries on the business of manufacturing sugar in its factory at Sugauli in the district of Champaran, in Bihar. The first respondent is the Assistant Registrar, Cooperative Societies, Motihari Circle, Motihari, in the State of Bihar; the second respondent is the Union ofSocieties, and is registered under the Bihar and OrissaCooperative Societies Act(B. and O. Act VI of 1935) (to be referred to hereinafter as the Act); the third respondent is the State of Bihar.2. On August 14, 196l, respondent No 2 made a reference under S. 48 of the Act, against the appellant, claiming the sum of Rs. 1,20,809/odd, as commission and interest for supply of sugarcane during the crushing seasonThe said reference was registered by the first respondent as Award Case No. 101 of 1961, on August 17, 1961. Notice of the said reference was issued to the appellant. On September 26, 1961, the appellant took a preliminary objection to the jurisdiction of, the 1st respondent to entertain the reference and to adjudicate upon it, and prayed that the reference be rejected. The first respondent, following a decision of the Patna High Court, reported in Union of India v. Registrar, Cooperative Societies, Patna, ILR 40 Pat 7, overruled the appellants preliminary objection by his order dated September 29, 1961. Against that order, the appellant moved its application aforesaid before the High Court of Patna. The High Court, following its previous decision aforesaid, summarily dismissed the application. The appellant moved this Court and obtained special leave to appeal from the order of the High Court, dismissing his application. This court granted the special leave onThe appellant moved this Court for stay, which was finally heard on January 11, 1962, and the Court directed that the appeal be heard peremptorily on February 15, this year. That is how the matter comes before us for hearing of the main appeal.

Court's reasoning:
4. Before examining the provisions of the Act, as, it stands at present, it is necessary to set out the legislative history of the law on the subject. When themovement was set up in the beginning of this century, the law governing cooperative societies was enacted as TheCooperative Societies Act(II of1912), by the Indian Legislature. That Central Act continued in force in Bihar and Orissa until it was repealed by the Bihar Orissa Legislative Council by the Bihar and OrissaCooperative Societies Act(B. and O. Act VI of 1935), after obtaining the previous sanction of thes. (3) of S.of the Government of India Act. The Act of 1935 was enacted with a view to consolidate and amend the law relating tosocieties in the Province of Bihar and Orissa, as it then was. As it displaced theCooperative Societies Actof 1912, so far as the Province of Bihar and Orissa was concerned, S. 5 enacted that all references to theSocieties Act,1912, occurring in any enactment made by any authority in British India, and for the time being in force in the province, shall be construed as references to the new Act. Under S.7, a society, which has as its object the promotion of the common interests of its members in accordance with cooperative (principles, or a society established with the object of facilitating the operation of such a society, may be registered under the Act. On such registration, the Society becomes a body corporate with perpetual succession and a common seal, and with power to acquire and hold property, to enter into contracts, to institute a defend suits, etc. Under S. 15, a registered society shall receive deposits and loans from members andonly to such extent and under such conditions as may be prescribed. Under S.16, ordinarily a registered society shall not make a loan to any person other than a member, except with the general or special sanction of the Registrar, and subject to such restrictions as he may impose. Section 17 further provides for such prohibition and restrictions, in respect of the transaction of a registered society with persons other than members, as the Provincial Government may by rules prescribe. Section 48 makes it obligatory that any dispute touching the business of a registered society, among members, past members, persons claiming through members, past members or deceased members, and sureties of members, past members or deceased members, whether such sureties are members oror between them and the registered society, shall be referred to the Registrar. By virtue of Explanation (1) to the section, a claim by a registered society for any debt or demand due to it from a member or a past member or his heir or legal representative or from sureties, whether they are members orshall be a dispute within the meaning of the main section, even though such debt or demand is admitted and the only paint at issue is the ability to pay or the manner of enforcement of payment.5. It will thus be seen that the Act is limited in its operation to registered societies and their members in their dealings with one another. It is only in exceptional cases of borrowing by a registered society fromin accordance with the rules andprescribed by the competent authority, or in case of loan to a nonmember under the provisions of S. 16, that there could be dealings between registered societies andkeeping aside the case of sureties of members, who may bebut who also come within the purview of dealings between a society and its members.6. Such were the relevant provisions of the Act when it was amended by the BiharSocieties (Amendment) Act, 1942, and the BiharSocieties (Amendment) Act, 1944, enacted by the Governor of Bihar in exercise of the powers assumed to himself by the Proclamation dated November 3, 1939, issued by him under S. 93 of the Government of India Act, 1935. For our purposes, it is only necessary to notice some of the amendments made by the amending Act of 1944 (Bihar Act X of 1944), By S. 2, cl. (c) of S. 2 of the Act of 1935 was substituted in theseIt is not necessary to refer to the other consequential amendments made and the addition of a new chapter 7A, relating to the manner of recovery. The amendments effected by the amending Act of 1944 had been enacted by the Governor of Bihar in exercise of his special powers aforesaid. The provisions of those amendments wereas Act XVI of 1948 We would, therefore, refer hereinafter to the amendments in question as the amendments of 1948.8. As already indicated, a Division Bench of the Patna High Court has laid it down, in the case of ILR 40 Pat 7 that the Explanation to S. 48 (1) of the Act covers a claim by a register society for any debt or demand from aand that, therefore, the claim of a registered society against the railway company for compensation for short supply is a dispute within the ambit of S. 48 of the Act, and that, therefore the Assistant Registrar,Societies, had jurisdiction to determine the dispute under S. 48(2) of the Act. Relying upon that decision, the High Court dismissed the appellants petition under Arts. 226 and 227 of the Constitution, in limine. The appellant has questioned the correctness of that decision. The question, therefore, is whether the High Court has taken a correct view of the provisions of S. 48, the relevant portions of which are asFrom the provisions of the Act, set out above, it is manifest that the Act created a special tribunal, namely, the Registrar ofSocieties, to deal with certain disputes specified in S. 48 (1)(a). to (e), This special tribunal was created with a view to shortening litigation and providing speedy relief to registered societies and their members in their disputes inter se in respect of the business of the society. Before the amendments introduced by the Act of 1948., the disputes which could be entertained by the Registrar were disputes amongst members, past members or their heirs or their sureties or between a society and its officers, agents or servants, or between a society and other registered societies (without meaning to exhaust all the categories.) But, before the amendments, one who was not a member of society or was not claiming through a member or a past member or a deceased member, or was not a surety of a member or a deceased member, was not subject to the jurisdiction of the Registrar under S. 48. That is to say, any dispute between a society or its members, past members or deceased members or sureties of such members on the one hand andon the other was not within the purview of the section, so that the appellant company, which is not a registered society or a member of a registered society, could not have its claim, or a claim against it by a registered society, referred to the Registrar for decision, under this section. Such a dispute by a society or its members against ahad to be taken to the ordinary courts for decision.10. In our opinion, the contention raised on behalf of the appellant is correct By the amending Act of 1948, the aforesaid relevant and important amendments were introduced into the Act. The effect of these amendments is that a claim by a financing bank against ato whom the former may have made an advance in cash or kind, with the sanction of the Registrar under S. 16 (1), would be entertainable by the Registrar, on a reference. But that does not mean that a claim which is not of the description referred to in S. 16 (l), read with S. 2(c), by a registered society against anywho is not an agriculturist, is within the purview of S. 48 (1), read with the Explanation. The Explanation cannot be read as adding a new head to the categories (a) to (e) under S. 4 (1), of disputes which may be referred to the Registrar, Originally, the Explanation had, been added only to make it clear that even if a debt or a demand is admitted and the only point at issue is the ability to pay or the manner of enforcement of payment, the dispute would come within the purview of the main S. 48(1). The addition of the wordby the amending Act of 1948, to the first Explanation has not enlarged the scope of the main S. 48 (1) so as to make all kinds of disputes between a registered society and acognizable by the Registrar, thus excluding the jurisdiction of the ordinary courts.11. In the instant case, it is manifest that the dispute is between a registered society, the second respondent, and the appellant, ain respect of the claim for commission and interest thereon for supply of sugarcane, and the appellant alleges that it as aof a lakh and fifty thousand rupees for short and irregular supply of sugarcane against that respondent. These are matters which, in our view, are wholly beyond the purview of S. 48 of the Act, when it is remembered that the second respondent is not a financing bank and that the appellant is not an agriculturist to whom any advances in cash or kind had been made or could have been made so as to bring the appellant within the purview of S. 48(1(e) and consequentially of Explanation 1.The decision of the Patna High Court to the contrary is, therefore, not correct.