Gujarat High Court
Banaskantha District Oil Seeds Growers ... vs M/S on 17 July, 1996
Author: C.L. Soni
Bench: C.L. Soni
BANASKANTHA DISTRICT OIL SEEDS GROWERS CO.UNION....Appellant(s)V/SM/S KRISHNA OIL MILLS....Respondent(s) C/SA/5/2012 CAV JUDGEMNT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SECOND APPEAL No. 5 of 2012 With CIVIL APPLICATION No.11363 of 2012 In SECOND APPEAL No. 5 of 2012 FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE C.L. SONI Sd/-
========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
No 2 To be referred to the Reporter or not ?
Yes 3 Whether their Lordships wish to see the fair copy of the judgment ?
No 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 ?
No 5 Whether it is to be circulated to the civil judge ?
No ========================================= BANASKANTHA DISTRICT OIL SEEDS GROWERS CO.UNION Versus M/S KRISHNA OIL MILLS ========================================= Appearance :
MR DIPEN DESAI for Appellant MR NAVIN PAHWA for MR TUSHAR SHETH for Respondent ========================================= CORAM :
HONOURABLE MR.JUSTICE C.L. SONI Date :09/01/2013 CAV JUDGMENT
1. This appeal under Section 100 of the Code of Civil Procedure is filed by the original defendant against whom the respondent- original plaintiff had filed Special Civil Suit No.169 of 2001 (old Special Civil Suit No.136 of 1996) for recovery of Rs.4,34,229/-.
2. The case of the plaintiff in its suit is that the plaintiff is in the business of purchasing and selling castor oil, that the defendant is Co-operative Union dealing in purchasing, selling and exporting castor oil, that the defendant purchased castor oil from the plaintiff between the period from 14.7.1993 to 29.10.1993, however the defendant did not provide H form on such purchase for 45 bills to the plaintiff though the plaintiff made repeated requests to the defendant to send such H form. It is further case of the plaintiff that because of non sending of H form by the defendant, the plaintiff became liable to pay 5% as sales tax and 1% as turnover tax on the bills under which the defendant purchased oil from the plaintiff. The plaintiff discharged such liability by paying Rs.4,78,489/- as sales tax and interest thereon of Rs.2,76,392/- as well as Rs.95,697/- being turnover tax with interest thereon of Rs.62,140/- to the Sales Tax Department. Thus, the plaintiff suffered loss of Rs.4,34,229/- because of non-issuance of H form by the defendant. The plaintiff had issued legal notice dated 17.7.1996 to the defendant to pay up the said amount but since the defendant did not pay the said amount, the suit is filed for recovery of the suit amount.
3. The suit of the plaintiff was resisted by the defendant by filing written statement at Exh.13 stating that the suit was liable to be rejected because of non-issuance of the notice under Section 167 of the Gujarat Co-operative Societies Act, 1961 (hereinafter referred to as the Act ). It is also stated that there was no agreement between the parties for sending of H form and the plaintiff was required to send debit note for payment of the sales tax at Palanpur and therefore, the Court was not competent to hear the suit of the plaintiff. Other contentions have also been taken as regards filing of the suit by the unregistered partnership firm as also the bar of filing of the suit under Section 96 of the Act. The defendant also denied the liability of payment of sales tax dues paid by the plaintiff by stating that it was absolute liability of the plaintiff.
4. On the basis of the pleadings, learned Trial Judge framed many issues, two of which were, as to whether the suit of the plaintiff was liable to be rejected because of non-issuance of the notice under Section 167 of the Act and whether the suit was barred under Section 96 of the Act .
5. On appreciation of the evidence, learned Trial Judge came to the conclusion that the plaintiff had to bear burden of paying sales tax and turnover tax on account of non-issuance of H form by the defendant and the plaintiff has thus become entitled to recover the said amount with interest as claimed in the suit. As regards the contention about non-issuance of the notice under Section 167 of the Act is concerned, learned Trial Judge came to the conclusion that when the plaintiff alleged that the defendant had done business outside and beyond its objects, it was for the defendant to produce its memorandum (bylaws), which the defendant had not produced.
Learned Trial Judge further observed that in the present case, the business of the defendant is to purchase and sell oil but as per the oral evidence, the main object of the defendant is to purchase oil from its members and to get appropriate price of the same for them by selling oil in the market. The defendant has not produced its memorandum to show its objects, as per which the defendant was entitled to purchase oil from the outsider. Under these circumstances, it can be said that the defendant has done business beyond its objects. As regards contention that the suit is barred under Section 96 of the Act, learned Trial Judge came to the conclusion that the parties referred in the said provision, do not include any person, like the plaintiff, who is not the member of the society and therefore, the suit is maintainable. Learned Trial Judge thus allowed the suit and passed decree of Rs.4,34,229/- with interest at the rate of 6% per annum from the date of filing of the suit, to be recovered from the defendant.
6. Being aggrieved by the above judgment and decree, the defendant filed Regular Civil Appeal No. 63 of 2006. Learned Appellate Judge on independent appreciation of th evidence, concurred with the findings and reasoning given by the learned Trial Judge and dismissed the appeal by judgment and decree dated 20.9.2011. It is this judgment and decree of the learned first Appellate Judge which is under challenge before this Court in this Appeal.
7. This appeal was admitted vide order dated 9.2.2012 on the following substantial questions of law:-
(1)Whether the Courts below were justified in holding that the suit was not barred under the provisions of section 166 of the Gujarat Cooperative Societies Act, 1961?
Whether in the facts and circumstances of the case, the suit was maintainable in the absence of any notice under section 167 of the Gujarat Cooperative Societies Act, 1961?
8. Pending the appeal, the plaintiff filed Civil Application No.11363 of 2012 seeking direction to permit the plaintiff to withdraw the amount deposited by the defendant as per the condition imposed by the Court while granting interim order of stay. When the said Civil Application was taken up for hearing, learned advocates for the parties requested to take up the Second Appeal for final hearing on the ground that the Court in this appeal is required to decide only the maintainability of the suit and it would be in the interest of both the parties to put an end to the litigation at the earliest. This Court, therefore, with the consent of the parties took up this Second Appeal for final disposal on the above substantial questions of law and heard learned advocates for the parties.
9. Learned advocate Mr. Dipen Desai appearing for the appellant submitted that the plaintiff itself has come forward with a case in the suit that the business of the defendant Society is of purchase and sale of castor oil and once the plaintiff raised dispute of non-payment of money by the defendant in respect of the transaction of sale of oil by the plaintiff to the defendant, notice under Section 167 of the Act was required to be mandatorily served before filing the suit against the defendant. He submitted that the defendant has taken a specific plea in the written statement about non-maintainability of the suit of the plaintiff because of non-service of the notice under Section 167 of the Act and once it is found that no such notice was served before institution of the suit, the suit of the plaintiff was required to be dismissed. Mr. Desai submitted that when it is proved by oral evidence of the witness of the defendant that the business of the defendant is to purchase and sell castor oil and once the dispute has arisen in respect of the transaction of such purchase and sale of the castor oil between the parties, even if the bylaws of the defendant Society was not produced on record, the suit of the plaintiff could not have been entertained. Mr. Desai submitted that as per the oral evidence of the witness of the defendant, the defendant is not only engaged in purchasing oil from its members but also deals in purchasing oil from non-members and such purchase of oil from non-member could be said to be touching the business of the society. He pointed out that phrase Touching the Business of the Society has been well explained and interpreted by this Court in various judgments as also by the Hon ble Supreme Court and in the facts of the present case, once it is established that the defendant Society is in the business of purchase and sale of oil and since the dispute between the parties has arisen out of the transaction of purchase and sale of the oil from the plaintiff, such dispute could be said to be touching the business of the society and therefore, the mandatory provision of Section 167 of the Act was required to be complied with. He, therefore, submitted that the Courts below have committed material error in holding that the suit of the plaintiff is maintainable even in absence of notice under Section 167 of the Act. Mr. Desai submitted that Courts below have committed serious error in holding that the suit is maintainable on the ground that the bylaws of the defendant have not been produced on record to show the objects of the Society. Mr. Desai submitted that once there was no dispute about the business of the defendant Society, even if the bylaws were not produced on record, purchase of oil from the plaintiff could be said to be touching the business of the society and therefore, the Courts below have committed serious error in allowing the suit of the plaintiff. Mr. Desai then submitted that the dispute since concerning the business of the society, the same was required to be referred to the Registrar or his Nominee or Board of Nominee for decision. He submitted that as per the provisions of Section 166 of the Act, Civil Court has got no jurisdiction to decide the dispute which is required to be referred to the Registrar or his Nominee or Board of Nominee for decision. He submitted that the dispute raised in the suit was directly in connection with the business of the society and such dispute could only be decided by the Registrar or his Nominee and the Civil Court has no jurisdiction to decide such dispute. He thus submitted that the suit of the plaintiff by virtue of this provision was barred and the Courts below were not justified in entertaining, deciding and allowing the suit of the plaintiff.
9.1. Learned advocate Mr. Desai in support of his submission, has relied on following authorities:-
(1) In the case of (Shri) M.G. Patel & Co. Vs. (Shri) Alka Co-operative Housing Society Ltd. reported in 1981 GLH 311, (2) In the case of Anjar Municipality Vs. Anjar Taluka Co-operative and Another reported 1993(2) GLH 351, (3) In the case of Kotecha Brothers Vs. Bileshwar Khand Udyog reported in 2001(4) GLR 3350, (4) In the case of Sterling Centre Premises Owners Co-operative Societies Ltd. Vs. Nanubhai R. Shah Prop. Of Dash Publicity reported in 2006(3) GLR 1853, (5) In the case of Sanwarmal Kejriwal Vs. Vishwa Cooperative Housing Society Ltd. reported in (1990)2 SCC 288.
10. As against the above arguments, learned advocate Mr. Navin Pahwa appearing with Mr. Tushar Sheth for the respondent submitted that when the Courts below have held that the defendant has not produced its bylaws so as to establish that the dispute arising from the transaction between the parties was touching the business of the Society, this Court while exercising the powers under Section 100 of the Code of Civil Procedure may not interfere with such finding recorded by the Courts below. He submitted that the jurisdiction of this Court under Section 100 of the Code of Civil Procedure is very limited to decide the question of law having substance. Mr. Pahwa submitted that this Court would not like to interfere with the judgments of the lower Courts even if the Courts below have committed error of law. Mr. Pahwa submitted that if there is no perversity in the reasoning recorded by the Courts below and if the Courts below have not taken into consideration irrelevant material while deciding the suit and if the decision of the Courts below is not contrary to the settled principles of law, this Court would not like to interfere with the judgments of the Courts below. Mr. Pahwa pointed out that when the defendant had taken up a plea of non maintainability of the suit because of non-service of notice under Section 167 of the Act, it was for the defendant to make good such plea by producing copy of the bylaws before the Courts below. He submitted that the bylaws are in the form of documentary evidence to establish the objects of the Society and oral evidence of the witness of the defendant could not take place the documentary evidence which was kept back from the Court by the defendant. Mr. Pahwa submitted that the plaintiff has never averred that the defendant has been doing the business of purchasing and selling oil as per the objects of the bylaws of the defendant. He submitted that when the plaintiff was to be non-suited on such ground of non-service of notice, the defendant could not have kept back the very vital document of bylaws, especially when the witness examined by the defendant was specifically asked in cross-examination about the existence of the bylaws and his readiness to produce the bylaws on record of the case. Mr. Pahwa submitted that to come to conclusion that the dispute arising out of the transaction between the parties whether touched the business of the society, the prime requirement was to first establish that the business of the defendant of purchase and sale of the oil was as per the objects of its bylaws. He submitted that even if the society had entered into business transaction for purchase and sale of the oil, that could never be taken as business of the society in accordance with the bylaws unless it was fully established by production of the bylaws that the society was authorized to do business of purchase and sale of the oil. Mr. Pahwa submitted that the defendant had full opportunities before the Courts below and also before this Court to produce copy of the bylaws by way of additional evidence but the defendant had deliberately kept back such documentary evidence from the Court and such defendant, therefore, is not entitled to raise a point of non-maintainability of the suit for non-issuance of the notice under Section 167 of the Act. He thus submitted that since both the Courts below have held that the defendant has failed to establish the objects of the society by non-production of the bylaws, this Court may not interfere with such finding and conclusion recorded by the Courts below.
10.1. Learned advocate Mr. Pahwa submitted that the suit was filed by non-member and the dispute referred in sub-section 166 of the Act, if raised by non-member, Civil Court will have jurisdiction to decide the suit and in the present case, the Civil Court has rightly entertained the suit filed by the plaintiff, who is non-member of the defendant. Mr. Pahwa thus urged to dismiss the appeal.
10.2. Learned advocate Mr. Pahwa, in support of his arguments, has relied on following judgments:-
(1) In the case of M/s. Dsr Steel (P) Ltd. Vs. State of Rajasthan reported in (2012)6 SCC 782, (2) In the case of Jogendra Ram Vs. Phullan Mian (D) By LRs. Reported in 2011 JX (SC) 939, (3) In the case of Municipal Committee, Hoshiarpur Vs. Punjab State Electricity Board reported in (2010)13 SCC 216, (4) In the case of Deccan Merchants Co-operative Bank Ltd. Vs. M/s.
Dalichand Jugraj Jain and others reported in AIR 1969 SC 1320, (5) In the case of Morinda Co-op. Sugar Mills Ltd. Vs. Morinda Co-op. Sugar Mills Workers Union reported in (2006)6 SCC 80.
11. Having heard learned advocates for the parties and having perused the judgment and decree passed by the Courts below with deposition of the witness of the defendant, it appears that the defendant who purchased oil from the plaintiff failed to provide H form to the plaintiff for the bills in respect of the purchase made by it from the plaintiff. The Courts below have recorded finding of fact that such non-issuance of H form by the defendant made the plaintiff to discharge liability of sales tax and turnover tax on the sale of oil by the defendant to the plaintiff. The Courts below have found that because of non-issuance of such H form, the defendant had to pay sales tax as also turnover tax with interest. The Courts below have thus held the defendant liable for the said amounts. The questions, however, raised before the Courts below, which are now formulated as substantial questions of law, are against the maintainability of the suit before the Civil Court. Law is well settled that when dispute raised in the civil suit is touching the business of the co-operative society, notice under Section 167 of the Act is required to be served to the defendant before filing of the suit. At this stage, reference to Section 167 as also Section 166 of the Act is required to be made. They read as under:-
166. Bar of jurisdiction of courts.- (1) Save as expressly provided in this Act, no Civil or Revenue Court shall have any jurisdiction in respect of-
(a) the registration of a society or its bye-laws, or the amendment of its bye-laws, or the dissolution of the committee of a society, or the management of the society on dissolution thereof; or
(b) any dispute required to be referred to the Registrar, or his nominee or board of nominee, for decision;
(c) any matter concerned with the winding up and dissolution of a society.
(2) While a society is being wound up, no suit or other legal proceeding relating to the business of such society shall be proceeded with or instituted against the society or any member thereof, or any matter touching the affairs of the society, except by leave of the Registrar, and subject to such terms as he may impose.
(3) All orders, decisions or awards passed in accordance with this Act or the rules, shall, subject to the provisions for appeal or revision in this Act be final; and no such order, decision or award shall be liable to be challenged, set aside, modified, revised or declared void in any Court upon the merits, or upon any other ground whatsoever except for want of jurisdiction.
167. Notice necessary in suits.- Save 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.
11.1. The provision of Section 167 of the Act is held mandatory and the Courts have also taken a view that even if the dispute touches the business of the society tangentially, it would come within ambit of Section 167 of the Act. However, to decide whether a particular transaction between the parties could be said to be touching the business of the society or not, it is first required to be known what is the business of the co-operative society and the business of the society could be known only from its bylaws. Once from the bylaws, it is known that the society is entitled to do a particular business, dispute in respect of transaction between the society and any person whether touches the business of the society or not could be then decided.
12. Under Section 8 of the Act, application for registration of the society has to be accompanied with the copy of the bylaws and the Registrar, on being satisfied that the society has complied with the provisions of the Act and the Rules, shall register the society and its bylaws. Thus, bylaws get statutory recognition from the statutory authority. Rule 5 of the Gujarat Co-operative Societies Rules, 1965 provides the matters to be mentioned in the bylaws and one of the matters is about objects of the society. Though the bylaws are considered to be contract between the society and the members and are meant for internal management of the society, still, for the purpose of ascertaining the business of the society, the bylaws are the only document which could be relied on to find out whether what society does is in accordance with its objects contained in the bylaws. Therefore, production of bylaws before a judicial forum to ascertain the business of the society is sine qua none and no oral evidence could be relied or referred to ascertain the business of the society.
13. In the present case, what is stated by the plaintiff in the plaint is that the defendant is doing business of purchasing, selling and exporting the oil. The plaintiff has not stated that such activity of the defendant is the business of the defendant in accordance with its objects. It appears that the plaintiff has made the above averments just to support its claim for money so that it can substantiate its case of supplying oil to the defendant. By such averments, the plaintiff could not be taken to have accepted that the activity of the defendant of purchase, sale and export of the oil is in consonance with its objects and therefore, by such averments, the defendant cannot be absolved from its obligation to prove that the activity of purchase, sale and export of oil was part of the business of the defendant, especially when the defendant has raised objection against the maintainability of the suit on the ground of non-service of the statutory notice under Section 167 of the Act. When the plaintiff is a non-member and when the defendant takes up plea of non-service of the notice under Section 167 of the Act, it was for the defendant to clearly prove that the transaction entered into between the parties was the business of the society and that could have been done only by production of the bylaws. The defendant could not have just remained content with adducing oral evidence by examining the Accountant. It is required to be noted that the witness has stated in his evidence that it is not correct that trading with non-member does not fall in the bylaws of the defendant but he simultaneously stated that such bylaws are not produced on record of the case. It is also required to be noted that the defendant had ample opportunity to produce bylaws not only before the Trial Court but before the first Appellate Court as also before this Court by resorting to Order 41 Rule 27 of the Code of Civil Procedure. However, for the reasons best known to the defendant, the defendant has kept back such document of bylaws from the scrutiny of the Court. The Court does not encourage such conduct on the part of the party to the proceedings especially when such party fully knows about the issues focused in the proceedings and about repercussion of non-production of such vital and star document. If such party deliberately kept back such document from the Court, the Court is not only entitled to draw adverse inference against such party but would also resist attempt of such party from adopting indirect mode to support its plea by oral evidence.
14. Both the Courts below have recorded that purchase and sale of the oil may be the business of the defendant but whether such business can be done with non-member or whether such business is in accordance with the objects of the society, could be known only from the bylaws. The Courts below have thus recorded finding of fact that the business done by the defendant with the plaintiff could be said to have been done beyond the objects of the society. Such being the finding of fact recorded by the Courts below, in my view, it is not open to this Court to interfere with the judgment and decree passed by the Courts below under Section 100 of the Code of Civil Procedure.
15. In view of the above, the judgments relied on by learned advocate Mr. Desai would be of no help to the case of the appellant because in all judgments relied on by learned advocate Mr. Desai, the Courts have held and explained what could be the meaning of explanation Touching the Business of Society . But, when very first foundation about the business of the society is not established by production of the bylaws, any dispute arising from the transaction between the parties could not be just held to be touching the business of the society so as to non-suit the plaintiff on account of non-service of the notice under Section 167 of the Act. In my view, when the defendant has kept back the bylaws from the scrutiny of the Court, the plea under Section 167 of the Act is not available to the defendant. Therefore, even if there is no notice issued by the plaintiff under Section 167 of the Act, the suit of the plaintiff remains maintainable. The Courts below, therefore, have rightly held that the suit of the plaintiff is maintainable.
16. In the case of Deccan Merchants Co-operative Bank Ltd. (supra) relied on by learned advocate Mr. Pahwa, Hon ble Supreme Court has observed in para 18 as under:-
18.
The question arises whether the dispute touching the 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.
17. In view of the above, the question as to whether the dispute touches the business of the society would depend upon the nature of the society and the Rules and bylaws governing it. Unless such bylaws are produced on record of the case by the party who raises plea against maintainability of the suit, the Court is justified in holding that the party has failed to substantiate such plea in absence of production of bylaws.
18. Then remains second substantial question of law as regards bar of jurisdiction of the Civil Court under Section 166 of the Act. Section 166 of the Act provides that the Civil Court shall have no jurisdiction in respect of any dispute required to be referred to the Registrar or his nominee or Board of Nominee for decision. This provision is required to be read with Section 96 of the Act. Section 96 of the Act makes the provision as to which kind of dispute is referable to the Registrar or Board of Nominee. It provides that dispute between the parties referred therein touches the constitution, management and business of the society, is required to be referred to the Registrar or Board of Nominee. The nature of the dispute raised by the plaintiff- the non-member is not covered by the said provision of Section 96 of the Act. Therefore, the Civil Court is competent to decide the dispute raised by the plaintiff. The Courts below, therefore, have rightly entertained the suit of the plaintiff being a non-member for the dispute raised by it in its suit.
19. Lastly, as rightly pointed out by Mr. Pahwa that the law is well settled that unless a question of substance is raised in the Second Appeal, Second Appeal in a routine manner is not required to be entertained. Question of substance would be not to find out whether appreciation of the evidence done by the Courts below is proper or not but if the Court deciding Second Appeal finds perversity in the findings recorded by the Courts below or conclusion reached by the Courts below is found contrary to the settled principles of law or if relevant material is ignored by the Courts below and irrelevant material is considered to decide the issue involved or if approach of the Courts below is so erroneous so as to come to the conclusion that finding arrived at is perverse, the Court will be justified in entertaining the Second Appeal.
20. I have already discussed above that the Courts below have rightly taken a view that the objects of the defendant- Society could not be established in absence of the bylaws. It is not the case of the appellant that the Courts below have not considered the relevant material on record or that finding arrived at by the Courts below is on misreading of the evidence available on record. It is also not pointed out that the view taken by the Courts below on non-production of the bylaws, is contrary to the settled principles of law for holding that the dispute in question was not touching the business of the society.
21. In light of the above, the substantial questions of law are thus answered accordingly. The appeal is, therefore, required to be dismissed. It is dismissed accordingly.
22. Since the Second Appeal is dismissed, no order is required to be passed on Civil Application and the same is disposed of accordingly.
Sd/-
(C.L. SONI, J.) omkar After pronouncement of the judgment, learned advocate for the respondent has requested to extend the interim relief for a period of 8 weeks from today.
Learned advocate Mr. Pahwa however stated that the respondent has in its application pointed out that though there was a condition to deposit the entire decretal amount, still the appellant has not fully complied with the condition and has not deposited the full amount. Therefore, learned advocate Mr. Pahwa raised strong objection against extension of any interim relief as prayed for by learned advocate for the appellant. Learned advocate for the appellant then stated that if any shortfall is there in deposit of the amount, the appellant shall see to it that the entire decretal amount is deposited within a period of one week from today.
On the above statement being made by learned advocate for the appellant and since the interim relief was already granted pending the appeal, it would be in the interest of justice to extend the interim relief for a further period of six weeks from today on condition that the amount remained to be deposited as per the condition imposed by this Court shall be deposited by the appellant within a period of one week from today.
Accordingly, the interim relief shall stand extended for a period of six weeks from today on condition that the appellant shall deposit the remaining amount within a period of one week from today.
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(C.L. SONI, J.) omkar Page 17 of 17