Case: M.K.Indrajeet Sinhji Cotton P.Ltd Vs. Narmada Cotto Coop.Spg.Mills Ld

3. The appellant, a Private Limited Company entered into a lease agreement dated 1-10-1998. Under the agreement it took on lease the mill of the respondent Cooperative Society for a period of five years. Disputes having arisen, the appellant filed a suit against the respondent society on 26-4-2000 before the City Civil Court at Ahmedabad. The appellant sought recovery of Rs.2,51,89,606.79/- (Rupees Two Crores, Fifty One Lakhs, Eighty Nine Thousand, Six Hundred Six and Paise Seven Nine only) with interest at the rate of 21% per annum.4. Within a year of filing the suit, the defendant Society, the respondent herein, was wound up by an Order dated 19-4-2001 passed by the Commissioner, Cottage and Village Industries, Gujarat. Since the suit had been filed prior to the winding up order, the appellant was obliged to apply for leave to continue the suit by virtue of Section 112 of the Co-operative Societies Act. That Section reads asof suit in winding up and dissolution mattersas expressly provided in this Act, no Civil Court shall take cognizance of any matter connected with the winding up or dissolution of a society under this Act; and when a winding up order has been made no suit or other legal proceedings shall lie or be proceeded with against the society or the liquidator, except by leave of the Registrar, and subject to such terms as he may impose:Provided that where the winding up order is cancelled, the provisions of this section shall cease to operate so far as the liability of the society and of the members thereof to be sued is concerned, but they shall continue to apply to the person who acted assupplied)5. The controversy is: whether the Registrar, while considering whether leave should be granted can hold that the suit itself is not tenable for want of notice. Initially the Registrar passed a non-speaking order dated 6-6-2003 refusing permission to continue the suit. On 28-11-2005, however, the Registrar passed a speaking order refusing permission to continue the suit. It is this order that has given rise to the present controversy. The main reason why the Registrar refused permission to continue the suit for recovery of money against the respondents is that according to the Registrar, Section 167 of the Co-operative Societies Act requires a plaintiff to give notice to the Registrar stating the cause of action and the relief which the plaintiff claims. Such a notice not having been given by the appellant, the appellant is not entitled for leave to continue the suit against the defendant. In other words, according to the Registrar, the plaintiffs suit is not tenable for want of notice under Section 167 and, therefore, leave to continue such a suit is liable to be refused under Section 112 of the Co-operative Societies Act. Section 167 reads asNotice necessary in suitsSave as otherwise provided in this Act, no suit shall be instituted against a society, or any of its officers, in respect of any act touching the business of the society, until the expiration of two months next after notice in writing has been delivered to the Registrar or left at his office, stating the cause of action, the name, description and place of residence of the plaintiff and the relief which he claims, and the plaint shall contain a statement that such notice has been so delivered or left.In view of such refusal, the appellants suit became untenable. The appellant, therefore, challenged the order of the Registrar refusing leave before the learned Single Judge of the Gujarat High Court. The learned Single Judge allowed the writ petition and quashed the Registrars Order. The learned Single Judge held that the question whether a notice under Section 167 was necessary in a given case could only be decided by a competent civil court since such a decision required an inquiry and a decision whether the suit was in respect of any act touching the business of the society and generally whether Section 167 applied to such a suit. The learned Single Judge also held that Section 112 of the Act casts a duty on the Registrar to grant or refuse leave and only such an administrative decision can be taken by the Registrar. Further, such a limited administrative decision can be taken by the Registrar only on considerations germane to the grant or refusal of the leave and not on considerations which were within the jurisdiction of a competent city civil court.7. Aggrieved, the respondents preferred an appeal before a Division Bench of the Gujarat High Court. The Division Bench has allowed the appeal and thus upheld the order of the Registrar refusing leave to continue the suit on the ground that the suit is not tenable by virtue of failure to give notice under Section 167 of the Co-operative Societies Act. The appellant is thus in appeal.

Court's reasoning:
12. In the present case the Registrar having refused leave to continue the suit on the ground that the suit pending before the Court is not preceded by a notice under Section 167 of the Act has acted without jurisdiction; having taken into account a factor which he was not competent to take into account and determine the grant of leave to proceed with the suit. As a matter of law the decision to hold that the suit is not tenable is a decision which conclusively determines the suit and being judicial can be taken by the Civil Court alone. The Registrar cannot hold the suit to be untenable even for the purpose of considering grant of leave. In other words, the Registrar has no jurisdiction to hold that the suit is not tenable.13. We thus have no doubt that the order of the Registrar dated 28-11-2005 refusing leave to the appellant on the ground that the notice under Section 167 has not been issued therefore the suit is not tenable, is liable to be set aside. It is not possible to agree with the view of the Division Bench that the Registrar must be allowed to consider whether notice has been given or not and, therefore, whether the suit is maintainable or not because if such power is not conceded to the Registrar, it would result in the civil court taking cognizance of a matter which it would have no power to take cognizance of. This argument is completely untenable where the question is one of leave to continue a suit as distinct from leave to institute a suit. It is only in the latter case that this reasoning would have any relevance. In any case, it is not the business of the Registrar to consider the merits and in particular the tenability of a pending suit and hold it to be untenable and thereupon refuse leave to continue the suit. The Civil Court is perfectly competent to decide whether the suit before it is tenable or not.