Bombay High Court
Suprabhat Co-Operative Housing ... vs Span Builders And Anr. on 27 March, 2002
Equivalent citations: 2002(6)BOMCR257, (2003)2BOMLR521, 2002(3)MHLJ837, 2002 A I H C 3123, (2002) 3 MAH LJ 837, 2003 BOM LR 2 521, (2002) 6 BOM CR 257
Author: D.Y. Chandrachud
Bench: D.Y. Chandrachud
JUDGMENT D.Y. Chandrachud, J.
1. Rule, returnable forthwith. Respondents waive service. By consent taken up for hearing and final disposal.
2. By the impugned order dated 17th October, 2001, the learned Civil Judge Senior Division, Panvel, has dismissed the application filed on behalf of the applicants praying that the plaint be rejected under the provisions of Order 7, Rule 11(d) of the Code of Civil Procedure, 1908, on the ground that a notice prior to the institution of the suit, under Section 164 of the Maharashtra Cooperative Societies Act, 1960, had not been given. The first applicant, it is an admitted position and fact, is a Co-operative Housing Society duly registered under the Maharashtra Co-operative Societies Act, 1960. The first applicant is a Tenant Co-partnership Housing Society, (within the meaning of Rule 10 of the Maharashtra Co-operative Societies Rules, 1961). Tenant Co-partnership Housing Societies are housing societies which hold the land as well as the buildings either on leasehold or on a free-hold basis for the purpose of allotment to their members. In the present case, during 1995-96, various members of the first applicant-Society were allotted plots by City and Industrial Development Corporation ("CIDCO") and one of the conditions contained in the letter of allotment was that all the allottees of the plots from the particular scheme must form themselves into a Co-operative Housing Society. Accordingly, the first applicant was registered as a Co-operative Society under the class of a Tenant Co-partnership Housing Society. The objects of the Society, in so far as is material, include the following :
"The objects of the Society shall be as under ;
a) To buy or take on lease a plot or plots Nos.C-39 of Section 12 Kharghar admeasuring 7252 Sq. metres and to construct flats thereon for allotment to the members of the society for their authorised use."
As is not uncommon in such cases, the Society is empower to do all things necessary or expedient for the attainment of the objects of the Society specified in the bye-laws. -
3. The first respondent entered into two agreements with the applicants on 12th September, 1997 and on 30th December, 1998. By these two agreements, the first respondent was to carry out the construction of flats for and on behalf of the Co-operative Society. The first agreement related to 26 flats, while the second agreement related to the construction of 16 flats.
4. The respondents are the original plaintiffs who have instituted Special Civil Suit No. 28 of 2001 for the recovery of an amount of Rs. 11,97,117/-together with interest at the rate of 24% per annum. A perusal of the plaint would show that the respondents have averted to the two agreements dated 12th September, 1997 and 30th December, 1998 by which the contract for the construction of the flats was awarded to the respondents. The case of the respondents is that the bills which were raised by them upon the Society for the work of construction were kept pending and the payment of the bills was unduly delayed. The respondents then state that in the circumstances, it had become impossible for them to complete the contractual work and that they had in fact decided to abandon the contracts. The Architects of the applicants are stated to have certified that an amount of Rs. 5.67 lakhs was due and payable to the respondents. The respondents by a notice dated 30th November, 2000 called upon the applicants to pay an amount of Rs. 11,97,117/- in response whereto the applicant-defendants denied their liability to pay the aforesaid amount. According to the applicants, the construction contracts were terminated due to the non-compliance by the respondents of the terms and conditions thereof. At this stage, the merits of the dispute between the parties do not fall for consideration. The material averments have been extracted in order to shed light on the nature of the dispute.
5. An application was filed on behalf of the applicants under Order 7, Rule 11(d) of the Code of Civil Procedure, 1908 for the rejection of the plaint due to there being a non-compliance with the mandatory provisions of Section 164 of the Maharashtra Co-operative Societies Act, 1960. That application has been dismissed by the impugned order dated 17th October, 2001. The learned Trial Judge held that in the present case, there was no act on the part of the plaintiffs by which they were interfering with the constitution or management of the Society. The dispute which forms the subject matter of the suit was according to the Trial Court of a civil nature and the learned Trial Judge was of the view that there was no bar to the institution of the suit without complying with the provisions of Section 164 of the Act.
6. In order to appreciate the parameters of the controversy in the present case, it would be necessary to advert to the provisions of Section 164 of the Act which are as follows :
"164. Notice necessary in suits. 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."
7. Section 164 provides that no suit shall be instituted against a society, or any of its office bearers in respect of any act touching the business of the society, until after the expiration of two months after the stipulated notice has been delivered. The notice is to specify the cause of action and the other particulars which are set out in Section 164. The plaint is to then contain a statement that a notice was so delivered.
8. The expression "touching the business of the society", which is employed in Section 164 has also been used in Section 91 of the Act. Section 91, it would be material to note, falls in Chapter IX of the Act which is entitled "Statement of Disputes". Section 91 provides that notwithstanding anything contained in any other law for the time being in force any dispute touching the constitution, elections of the committee or its officers other than elections of committees of specified societies including its officers conduct of general meetings, managemant or business of a society shall be referred by any of the parties to the dispute to a Co-operative Court if the parties thereto are one or the other of the parties specified in Clauses (a) to (e) of the section. The expression "touching the business of the society" came up for consideration before the Supreme Court in Deccan Merchants v. Dalichand reported in 1970 Mh.LJ. 301 (SC) = 1970 BLR 418 The Supreme Court held that in the context of Section 91, the expression "touching the business of the society" would not mean the affairs of a society because election of office-bearers, conduct of general meetings and management of a society could be treated as affairs of a society. Therefore, the Court was of the view that the word "business" has been used in a narrower sense and it means the actual trading, 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. In the present case, the Court is concerned with the construction to be placed upon the meaning of the expression "touching the business of the society" not in the context of Section 91 but in Section 164. Nevertheless, the principle which has been laid down by the Supreme Court must illuminate the interpretation to be placed by this Court on the expression-"touching the business of the society". In that context, it would be necessary to advert to the following observations of the Supreme Court in Deccan Merchants (supra):
"The question arises whether the dispute touching the assets of a society would be a dispute touching the business of the 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 the 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 of 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."
9. The basic principle which has been formulated by the Supreme Court is that whether a particular dispute touches the business of the society would depend upon the nature of the society and the rules and bye-laws governing it. In the case before the Supreme Court, the society was a Co-operative Bank. The Supreme Court held that ordinarily, a Co-operative Bank cannot be said to be engaged in a transaction which touches the business of the Society when it lets out properties owned by it. Therefore, a dispute between a tenant of a member of the Bank in a building which had subsequently been acquired by the Bank was held not to touch the business of the Bank. The Supreme Court in the observation which has been extracted above, however, also considers a case where it is the business of a society to construct and buy houses and let them out to its members. The Supreme Court held that in such a case letting out of property is the business of the society. The distinction between the two types of cases has to be borne in mind. The distinction is premised in the nature of the society as evidenced by its objects and bye laws.
10. In the present case, the first applicant is a Co-operative Housing Society and has been registered as such under the Act. A housing society is defined by Section 2(16) to mean a society, the object of which is to provide its members with open plots for housing, dwelling houses or flats; or if open plots, the dwelling houses or flats are already acquired, to provide its members common amenities and services. The first applicant is a co-operative housing society and falls within the sub-classification of a Tenant Co-partnership Housing Society within the meaning of Rule 10 of the Rules. The objects of the first applicant inter alia include to buy or take on lease the plot bearing No.C-39 of Sector 12, Kharghar, admeasuring 7252 Sq. metres and to construct flats thereon for allotment to the members of the society for their authorised use. The construction contract which was entered into with the respondents was clearly in pursuance of the basic object of the applicants. The contractual relationship which was entered into between the applicants and the respondents was thus in furtherance of and towards implementing the basic object of the applicants as a Tenant Co-partnership Housing Society. The dispute which has arisen between the parties is in the performance of the contract which was thus entered into.
Therefore, having regard to the principle incorporated in Section 164 of the Act, the suit which has been instituted by the respondents is clearly one which touches the business of the society. The suit was in the circumstances, clearly not maintainable since it is an admitted position that no notice under Section 164 of the Act was served.
11. The learned Trial Judge was clearly in error in holding that since the dispute is of a civil nature, there was no bar to the filing of a suit without complying with the provisions of Section 164 of the Maharashtra Co-operative Societies Act, 1960. Section 164 in fact, deals with the filing of a civil suit and lays down a mandatory principle that where the suit touches the business of the society, it shall not be instituted unless a notice as prescribed has been issued and served. The view which has been taken by the learned Trial Judge is manifestly contrary to the law laid by the Supreme Court. My attention has also been drawn to the judgment of a Division Bench of this Court in C.F. Marconi v. Madhav Co-operative Housing Society Ltd., 1985(2) BCR 357. In that case, the main object of the Co-operative Society was to purchase and sell land and to buy and sell mainly for the benefit of its members. This Court held that in the background of such business, it would be idle to contend that the agreement which enabled the society to get possession of a part of the land for reconstructing a new building thereon for the benefit of the members would not be a transaction touching the business of the society. A suit for specific performance in that case was, therefore, held to arise from an act touching the business of the society. A similar view has been taken in two judgments of learned Single Judges of this Court in Gurudeo Developers v. Kurla Konkan Niwas Co-op. Hsg. Society, reported in 2000(3) Mh.LJ. 131 and in Homi Nariman Bhiwandiwala v. Zoroastrian Co-op. Credit Bank, 2001(3) BCR 352.
12. In the facts and circumstances, the view which has been taken by the learned Trial Judge is manifestly incorrect. The learned Trial Judge has thus, committed a material irregularity in the exercise of his jurisdiction, which would warrant the interference of this Court under Section 115 of the Code of Civil Procedure, 1908.
13. The impugned order of the learned Trial Judge dated 17th October 2001 is quashed and set aside. The application filed by the applicants, Exh-18 in Special Civil Suit No. 28 of 2001 shall in the circumstances, stand allowed. In pursuance of the provisions contained in Order 7, Rule 1 l(d) of the Code of Civil Procedure, 1908 , the plaint is liable to and is accordingly rejected for want of notice under Section 164 of the Maharashtra Co-operative Societies Act, 1960. It is needless to add that it would be open to the respondents to institute a fresh suit after due notice as required under Section 164 of the Maharashtra Co-operative Societies Act, 1960. The Civil Revision Application is accordingly allowed.
Parties to act on a copy of this order duly authenticated by the Sheristedar/P.S. of this Court.