(Prayer: Second Appeal is filed under Section 100 of C.P.C., praying against the judgment and decree in A.S.No.2 of 2005 on the file of the Principal Subordinate Judge, Villupuram dated 09.12.2005 in confirming the judgment and decree in O.S.No.350 of 2003 on the file of the I Additional District Munsif, Thirukoilur dated 25.07.2004.)
(The case has been heard through video conference)
1. This Second Appeal is filed by the plaintiffs, who lost their suit for recovery of money in the Courts below.
2. The Appellants herein are the plaintiffs and the respondents herein are the defendants in the suit. The parties are referred as per their ranking and status shown in the plaint, for the sake of convenience.
3. The plaint averment in short:
The plaintiffs 1 and 2 and the second defendant are the registered members of the first defendant Co-operative Sugar Mill. The second defendant had obtained seed loan of Rs.6077.61 from the second defendant on 02.04.1994. The second defendant through notice dated 18.11.2002 informed the plaintiffs that Rs.4715.62 from the first plaintiff and Rs.8215.66 from the second plaintiff is recovered, from the money payable to them for the supply of sugarcane to the first defendant, for the failure to repay the seed loan availed by the second defendant. The plaintiffs did not act as surety for the loan availed by the second defendant, but in the notice of the first defendant, it is stated that the money is recovered from them since they stood surety for the defaulted principle borrower namely the second defendant. Therefore, suit was laid for recovery of the said money from the second defendant on the ground that, the first defendant ought to have proceeded against the principle borrower namely the second defendant, who is a man of wealth owning 10 acres of cultivable land and a rice mill. Instead, without taking any steps to recover from the second defendant, who is the principal borrower, the first defendant had recovered the due from the plaintiffs alleging that they stood surety to the second defendant. The loan due of the year 1994, is barred by limitation. The time bar debt had been unlawfully recovered from the plaintiffs from the money payable to them for supply of sugarcane. Hence, the suit for recovery of Rs.4715.62 and Rs.8215.66 due to the plaintiffs 1 and 2 respectively, with interest.
4. Averment in the written statement of the first defendant:
The Civil Court lack jurisdiction to entertain suit against Co-operative Society under Sections 156 and 90 of the Co-operative Societies Act. The Act specifically bar the jurisdiction of the Civil Court. Therefore, the suit is not maintainable. On facts, the 2nd defendant borrowed sugarcane seed for Rs.6,240/- and executed an agreement and surety bond on 01.04.1994 agreeing to pay the money within one year with 18% interest. If not paid within one year, the interest at 21% chargeable. In the surety bond, the plaintiffs have stood as surety and agreed for deduction from the proceeds of the cane supply. Prior to recovery proceedings, several notices were sent to the principle borrower and the surety, namely the plaintiffs. Since they did not come forward to clear the debt, a sum of Rs.4715.62 and Rs.8215.66 was recovered from the plaintiffs on 20.05.2002, which the first defendant is lawfully entitled.
5. Averment in the written statement of the second defendant:
This defendant admits his borrowing from the first defendant and the surety stood by the plaintiffs for his borrowing. However, claims that the suit is barred by limitation and not maintainable on law and facts. When the plaintiffs showed him the notice of the first defendant, he paid the money to the plaintiffs and the plaintiffs alone are liable to settle the dues to the first defendant. As there was scarcity of water, he allowed the plaintiffs to cultivate sugarcane seeds borrowed from the first defendant and harvest and supply it to the first defendant. The plaintiffs did not supply the sugarcane to the first defendant as agreed. They neither repaid the loan arose for purchase of the sugarcane seed. Hence, the suit is liable to be dismissed.
6. The trial court framed the following issues:
1. Whether the suit is maintainable?
2. Whether the I plaintiff is entitled to the amount claimed?
3. Whether the II plaintiff is entitled to the amount claimed?
4. To what other reliefs?
7. Considering the evidence placed by the respective parties, the Trial Court dismissed the suit holding that, the principle borrower namely the second defendant admits the borrowing and the liability to repay. His contention that, he repaid the money to the plaintiffs on receipt of the notice and therefore, he is not liable without any proof. Moreover, the plaintiffs and the second defendants are admittedly members of the first defendant Society. The dispute is between the members and the Society regarding debt and demand. Such disputes between the members and the Society falls under Section 90 Explanation (i) of the Co-operative Societies Act. Under section 156 of the Act, These disputes are ousted from the jurisdiction of the Civil Court. Therefore, the suit is not maintainable. Having held so, the Trial Court recorded that in view of the finding in issue No.1, the other issues need not be gone it.
8. On Appeal before the Principal Sub-Court, Villupuram, the Appellate Court confirmed the dismissal of suit by the Trial Court.
9. In the Second Appeal against the concurrent finding of the Courts below, the Learned Counsel for the Appellant submitted that, the relief sought in the suit is recovery of money which is common law remedy. The provision in the special statute can oust the Civil Court jurisdiction only in respect of statutory remedy and not the common law remedy. The Courts below ought not to have dismissed the suit, instead ought to have moulded the relief by passing decree against the second defendant, who is the principal borrower.
Section 156 of the Co-operative Societies Act, is applicable only in case of award or decision or action taken under the Act by the Registrar or by a person authorised by him.
10. The present suit filed for recovery of money due to them on the supply of sugar cane, the value of which not paid by the first defendant, could be agitated only through Civil Court and the provisions of the Co-operative societies Act have no application. To get protection under the Act, the authorities under the Act should have passed an order or award for which they are empowered under the Act. In the instant case, no award or order was passed under the Act. So, no protection under Section 156 of Co-operative Society Act is available to the first defendant.
11. In support of the above said submissions, the Learned Counsel relied upon the following judgments:-
(i). Somasundaram Vs. Liyakat Ali and another reported in 1997(I) CTC 4.
(ii). Vazhapadi Textiles (P) Ltd., (formerly Durai Modern Spinning Mills (P) Ltd ) and another Vs. Durai and 5 others. reported in 1997(II) CTC 501.
12. Per contra, the Learned Counsel for the first defendant/Co-operative Sugar Mill, would submit that, it is a pure case of contract between the Society and its Member. The default in payment by the members has lead to recovery proceedings. The plaintiffs stood surety for the loan. They are liable for payment of due in terms of the bond executed by them. The terms of contract will prevail. When the Court had conclusively held that it lack jurisdiction, further discussion on the other issues is not warranted. Therefore, the Second Appeal deserves to be dismissed.
13. Court Finding:
The parties to the litigation, admit that the plaintiffs and the 2nd defendant are the registered members of the first defendant co-operative sugar mill. For purchase of sugar cane seed and fertilizers, loan upto Rs.6,240/- extended to the Second defendant by the First defendant. Ex.B.4 is the agreement dated 01.04.1994, which is the documentary proof for the said transaction. Though, the plaintiffs have pleaded that they did not execute any surety bond in respect of the loan availed by the second defendant, the examination of Ex.B.4 dated 01.04.1994 proves the contrary. The recital in Ex.B.4, reads, as below:
14. The plaintiffs and the second defendant are signatories to the above document. On the strength of the above clause in Ex.B-4, the first defendant had recovered the due from the plaintiffs. Therefore, the Courts below had held that, the suit is barred under Section 156 of the Tamil Nadu Co-operative Societies Act, since the recovery of due falls within the meaning of dispute as explained under Section 90 (1) (i) of the Tamil Nadu Co-operative Societies, Act.
15. The said reasoning is now questioned in the second appeal.
To answer the said question, the content of the agreement between the parties in the light of Section 90 of the Act has to be examined. If the default in payment and recovery falls within the scope of dispute as defined under Section 90 of the Co-operative Societies Act, then the remedy is available in the statute itself and the parties have to work out their remedy as per the statute i.e., Tamil Nadu Co-operative Societies Act by way of appeal or revision as provided under the said Act. Recourse to Civil Suit is barred. Contrarily, if the recovery of due from the money payable for sugarcane supply is an independent cause of action, it give rise to common law remedy and section 156 of the Act cannot prohibit the parties resorting to Civil Suit.
16. Ex.B.4 is an agreement executed by the plaintiffs and the second defendant in favour of the first defendant wherein, they have given an undertaking that they stand surety for the loan availed under the agreement. They also agreed for repayment of the loan or recovery from the proceeds of the cane supplied.
17. Ex.B.4 recital makes very clear that the transactions is for and by the members of the registered Society and the registered society. Therefore, non payment of the loan debt availed from the society by its member becomes a dispute touching upon the business of the Society. Under the Tamil Nadu Co-operative Societies Act, the decisions sub-under (2) to (4) of section 90 are appealable under Section 152 of the Act. Besides, on petition or suo moto, revision may also be entertained under Section 153 of the Act.
If any question whether the dispute referred for decision is a dispute under Section 90 of the Act, then under sub-section (4) of Section 90, the Registrar is empowered to decide such questions.
18. For convenience the relevant provisions are extracted below:-
Section 90: (1) If, any dispute touching the constitution of the board or the management or the business of the registered society (other than dispute regarding disciplinary action taken by the competent authority constituted under sub-section (3) of section 75 or the Registrar or the society or its board against a paid servant of the society ) arises :-
(b) between a member, past member or person claiming through a member, past member or deceased member and the society, its board or any officer, agent or servant of the society , or
Explanation:- For the purpose of this section,a dispute shall include -
(i) a claim by a registered society for any debt or demand due to it from a member, past member or the nominee, heir or legal representative of a deceased member whether such debt or demand be admitted or not. ( emphasis added)
(4) If a question arises, whether for the purposes of this section any person is or was a member of a registered society, or whether the dispute referred for decision is a dispute touching the constitution of the board, or the management or the business of the society, such question shall be decided by the Registrar.
Section 156 of the Co-operative Societies Act reads as below:-
“Bar of jurisdiction of civil court:- Notwithstanding anything contained in any other law for the time being in force no order or award passed, decision or action taken or direction issued under this Act by an arbitrator, a liquidator, the Registrar or an officer authorized or empowered by him, the Tribunal or the Government or any officer subordinate to them, shall be liable to be called in question in any court and no injunction shall be granted by any court in respect of anything which is done or intended to be done by order under this Act.”
19. Looking at the citations relied by the Appellant Counsel, (i) the first judgment, Somasundaram Vs. Liyakat Ali and another reported in (1997 (1) CTC 4) is in respect of a dispute regarding fixation of inter se seniority among the staff of a Co-operative Society. In the said context, this Court held that,
“A reading of section 156 makes it clear that to get protection under that Act, the Authorities under that Act must pass order or is award for which they are empowered under the Act. It is only those powers which they are asked to do under that Act and impounded from Civil Action, cannot be called in question in a civil suit. I asked learned counsel for the appellant whether the Registrar has got jurisdiction to decide the inter se seniority between the two employees. He was not in a position to show me the provision of law regarding the same. He brought to my notice various Rules framed under the Co-operative Societies Act. But they are not concerned with dispute as regards inter se seniority between two employees. The powers given to the Registrar are only of disciplinary character, where he can withhold promotion, etc. Admittedly, this is not a case of disciplinary proceedings. Once it is found that the Registrar was not acting under any provisions of the Act, he has to decide the inter se seniority only in accordance with law. It is a common law right. Hence, the bar under Section 156 of the Co-operative Societies Act has no application to the facts of this case. Further, if the inter se seniority can’t be decided under the Act, it cannot be said that any decision by the Registrar is also in good faith. The powers of the Registrar and the Authorities under the Act are provided in that statute, and they should exercise the powers in accordance with the same, and they cannot go beyond that. Any power exercised beyond the statute cannot be said to be in good faith. For that reason also, the power under Section 156 of the Act has no application.”
(ii). In the second judgment, Vazapadi Vazhapadi Textiles (P) Ltd (formerly Durai Modern Spinning Mills (P) Ltd ) and another Vs. Durai and 5 others reported in 1997(II) CTC 501. This Suit is for declaration in respect of a document purported to have executed by the second plaintiff as illegal and void. In the said context, this Court held that,
“21. The relief sought for in this suit is for declaration that the document dated 10.10.91 purported to have been executed by the plaintiff is illegal and void. The document had been extracted above. The recitals in the document is to the effect that the second plaintiff had admitted the mismanagement with regard to the management of the company and on expressing his inability to continue the management, thereafter surrendering the management as well as possession of the properties of the company to the second defendant. The relief claimed by the plaintiff in the suit is only a common law remedy, as there is no provision in the Companies Act to seek for such relief before the Company Law Board.”
20. In both the cases relied, the relief sought was ‘declaration’ and for which the statutes (Co-operative Societies Act in the former and Companies Act in the latter) had no authority to grant it.
21. The bedrock judgment on ouster of Civil Court jurisdiction is Dhulabhai And Others Vs. The State Of Madhya Pradesh case reported in 1969 SC 78. This judgment has laid down seven prepositions which excludes the Civil Court jurisdiction. Following Dhulabai, the Hon’ble Supreme Court in Raja Ram kumar Bhargava (dead) by LRsVs. Union of India reported in 1988 SC 752, held that,
“Generally speaking, the broad guiding considerations are that wherever a right, not pre-existing in common law, is created by a statute and t
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hat statute itself provided a machinery for the enforcement of the right, both the right and the remedy having been created unoflatu and a finality is intended to the result of the statutory proceedings, then, even in the absence of an exclusionary provision the civil courts’ jurisdiction is impliedly barred. If, however, a right pre-existing in common law is recognised by the statute and a new statutory remedy for its enforcement provided, without expressly excluding the civil courts’ jurisdiction, then both the common-law and the statutory remedies might become concurrent remedies leaving open and element of election to the persons of inherence.” 22. Applying the law and precedent discussed above to the facts of the case in hand, we find, the plaint though couched as if it is a suit for recovery of money to make it appear as common law remedy, the circumstances under which the cause of action arose indicates that as members of the registered Society, the parties have entered into agreement. When the money borrowed remained unpaid, adjudication under the Act has been initiated and the recovery proceedings has been successfully completed against the plaintiffs in terms of the contract. (Ex.P-5). 23. The parties aggrieved though had remedy under section 90 (4), 152 and 153 of the Act. Instead of, exploring the remedy in-build in the said statute, had wrongly approached the Civil Court, which had no jurisdiction to entertain the suit in view of Section 156 of the Co-operative Societies Act. 24. The Courts below having found lack of jurisdiction had rightly dismissed the suit and the Appeal. This Court finds no error in it to frame substantial question of law. 25. In the result, the Second Appeal is dismissed. No order as to costs. Consequently, connected Miscellaneous Petition is closed.