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K.N. Shibi, Palakkad & Another v/s Vaniyamkulam Panchayath Vanitha Sahakarana Sangham, Represented by Its Secretary & Others

    W.A. No. 1404 of 2018 In WPC. No. 10875 of 2015

    Decided On, 19 July 2018

    At, High Court of Kerala


    For the Petitioners: P.P. Jacob, Advocate. For the Respondents: R1, C.E. Unnikrishnan, Advocate, R2 & R3, K.R. Deepa, Senior Government Pleader.

Judgment Text

Chitambaresh, J.

1. Is it by sheer coincidence that conflicting judgments were pronounced on the same day (21.03.2016) in Hyrunnisa v. Koothali Service Co-operative Bank Ltd. [2016(3) KLT 255] and Vaniamkulam Panchayath Vanitha Sahakarana Sangham Ltd. v. Kerala Co-operative Tribunal and others [2016(2) KHC 741] ? The learned single Judge has in his inimitable style posed the issue thus in the latter case:

'Can the spouse of an employee be sued by the society under S. 69 of the Kerala Co-operative Societies Act ('

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;the Act') on the premise that he or she has indemnified the other partner, the employee, for what is said to be the misappropriation committed by the said employee?'

2. The first respondent society has filed A.R.C.No.1/2013 on the file of the third respondent Joint Registrar claiming a sum of Rs. 56,66,343/- from the appellants (who are wife and husband) with interest thereon. The third respondent was so moved since it is a monetary dispute as envisaged under Section 69(1)(h) of the Act on account of an alleged defalcation by the first appellant. The allegation is that the first appellant was working as a collection agent on contract basis and had embezzled funds of the society revealed by the audit reports. The second appellant is roped in on the ground that he had executed Ext.P1 indemnity bond undertaking to pay the amounts defalcated to the society within a period of three months. Both the appellants are alleged to be signatories to Ext.P1 indemnity bond where under the property belonging to the second appellant has also been offered as security.

3. The first appellant has seriously challenged the audit reports itself on the basis of which the monetary claim is laid and it is submitted that she intends to pursue it in the hierarchy of the department itself. A preliminary objection was also raised by the second appellant as regards the maintainability of the arbitration case against him on the ground that he was not an employee of the society. The preliminary objection was overruled by Ext.P6 order of the Joint Registrar which was however upset in appeal by Ext.P7 judgment of the Kerala Co-operative Tribunal. The learned single Judge has by the impugned judgment in Vaniamkulam's case (supra) set aside Ext.P7 judgment thereby restoring Ext.P6 order and hence this writ appeal.

4. We heard Mr.P.P.Jacob, Advocate on behalf of the appellants, Mr.C.E.Unnikrishnan, Advocate on behalf of the first respondent society and Mrs.K.R.Deepa, Senior Government Pleader at length.

5. That this is a monetary dispute between the first respondent society and the first appellant who was a collection agent is evident from Ext.P5 plaint in A.R.C.No.1/2013 wherein a sum of Rs. 56,66,343/- is claimed. Any monetary dispute between the society and an agent falls under Section 69(1)(c) of the Act and only the third respondent has the jurisdiction under Section 69(1)(h) of the Act. The alleged defalcation of money 'touches' the business of the society and the monetary claim is undoubtedly a 'dispute' as defined under Section 2(i) of the Act. There is no escape from this conclusion even if the term 'business' is construed in a narrower sense [see D.M.Co-op. Bank v. Dalichand (AIR 1969 SC 1320)]. The shortfall in amounts was allegedly detected during the annual audit of the society and it cannot therefore be said that the monetary claim does not touch the business activity at all.

6. The further question is as to whether the arbitration case would lie against the second appellant merely for the reason that he has allegedly executed Ext.P1 indemnity bond in favour of the society. It may at once be noticed that the second appellant has allegedly shouldered the responsibility to pay the amount if any due by the first appellant to the society as found ultimately. Of course the appellants have a contention that Ext.P1 indemnity bond is vitiated by coercion which is an aspect to be considered in the arbitration case only and not at the threshold. The society cannot be put to the predicament of obtaining an award against the first appellant and later filing a suit against the second appellant for enforcing Ext.P1 indemnity bond. The junction of the second appellant in the arbitration case as a co-obligant or a guarantor with co-extensive liability cannot be faulted as he is a necessary and proper party.

7. It will not be out of place to state that an arbitration case will lie against the surety in respect of a loan even if he is not a member of the society in view of the explicit provision contained in Section 69(1)(g) of the Act. An arbitration case should lie against the indemnifier also applying the same logic when his liability is co-extensive with the agent who is sued under Section 69(1)(c) of the Act. Multitude of litigations arising out of the same cause of action has to be deprecated and the very object of Section 69 of the Act is to curtail lengthy procedures. It can at best be said that a singular claim against the indemnifier alone is not possible under Section 69 of the Act and that the society has to approach the civil court for enforcement. We concur with the dictum in Vaniamkulam's case (supra) and overrule the decisions in Hyrunnisa's case (supra) and P.V. John's case [1991 (1) KLT 7] on the above point.

The writ appeal is dismissed. No costs.