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Mohammad Husain Ansari v. Benaras State Carpet Weavers Co-operative Union Ltd. and
others, (Allahabad) : Law Finder Doc Id # 298110

1959 AIR (Allahabad) 733

ALLAHABAD HIGH COURT

Before :- S. S. Dhavan, J.

Civil Misc. Writ No 2652 of 1958. D/d. 14.4.1959.

Mohammad Husain Ansari - Petitioner.

Versus
Benaras State Carpet Weavers Co-operative Union Ltd. and others, - Opposite Parties.

For the Petitioner :- Man Singh and S.N. Dwivedi, Advocates.

For the Opposite Parties :- Standing Counsel.

Cases Referred :

Abdul Ghani v. Anjnman-i-Imdad Qarza Bahami Chak No. 127, A.I.R. 1942 Lahore 237.

Anjuman-i-Imdad Qarza Bahami Bagntlazan v. Mchr Din, A.I.R. 1937 Lahore 931.

Co-operative Society Thathi Musalian v. Aqil Husain Shah A.I.R. 1941 Lahore 355.

Ram Manohar Lohia v. Suptd., Central Prison. A.I.R. 1955 Allahabad 193.

Ripon Press and Sugar Mills Co. v. Gopal Cherti, A.I.R. 1932 PC I 9.

Smt. Ramditi v. Collector, Allahabad, A.I.R. 1954 Allahabad 646.

ORDER

This is a deplorable case in which the petitioner has suffered wrongful arrest in the process
of realisation of dues as arrears of land revenue, and illustrates the dangers of vesting the
Executive authorities with powers uncontrolled by any guiding principles or checks to arrest
any citizen for dues which, according to their erroneous interpretation of the law, are
considered to be recoverable as arrears of land revenue. The petitioner was arrested under
an order of the local Tehsildar and remained in custody for one day. On his furnishing
security the Tehsildar directed his release and he was given one week's time for payment of
the alleged dues. Almost immediately after his release he filed this petition impugning the
legality of the entire proceedings which led to his arrest. The facts of this case, as proved or
admitted by the parties, very briefly are these :

2. The petitioner was a share-holder of a Cooperative Society registered under the Co-
operative Societies Act 1912 under the name of the Banaras State Carpet Weavers' Co-
operative Union Ltd., Bhadohi, district Banaras. He acted as Managing Director for a short
interval of about eight months. On his resignation he was succeeded by a man called Habib
Ullah as Managing Director. According to the case of the petitioner, this Habib Ullah
mismanaged the affairs of the Society and was even arrested at one time for
embezzlement. The petitioner alleges that Habib Ullah owed a sum of Rs. 17,000/- to him
(the petitioner), but to evade his liability, he manufactured a false case against the
petitioner to the effect that he (the petitioner) owed a sum of Rs. 11,274/- to the Society. It
is not necessary to give a detailed account of the controversy between the petitioner and
Habib Ullah or between him and the Union as to whether any amount was due from him or
not.

This Court is only concerned with the legality or otherwise of the steps taken by the local
officials at the instance of the Union to recover the amount alleged to be due from him. At
first the matter was referred to arbitration by the Registrar of Co-operative Societies, Uttar
Pradesh. But, while the reference was pending, the Society went into liquidation and a
liquidator was appointed. He served a notice on the petitioner asking him to pay a sum of
Rs. 17,322-8-6. It is admitted by the State that this sum consists of Rs. 8,721-0-6 as
principal and the rest as interest calculated at 12 per cent per annum. The petitioner did not
appear before the liquidator. There is some controversy as to why he did not, the petitioner
alleging that he was not aware of the date fixed by the liquidator and the latter saying that
the petitioner deliberately stayed away.

But nothing turns upon this question. On 12-7-1957 the then liquidator Mool Chand Yadava,
held some kind of ex parte hearing and directed the recovery of the aforesaid amount from
the petitioner under Section 42(5) of the Co-operative Societies Act 1912. On 30-3-1958 his
successor Nirankar Lal passed an order directing that the amount in disputa should be
recovered from the petitioner as "contribution and costs of liquidation under Clauses (b) and
M) of Section 42(2) of the Co-operative Societies Act". He also sent a requisition to the
Registrar of Cooperative Societies requesting him to move the Collector, Varanasi to realise
this amount from the petitioner as arrears of land revenue under Section 42(4-A) of the
aforesaid Act. Thereupon the Assistant Registrar of the Co-operative Societies. Banaras set
in motion the machinery for the realisation of this amount as arrears of land revenue.

On 21-8-1958 the Tehsildar of Banaras issued a notice to the petitioner asking him to pay
the amount. On his failure to do so, he issued on 11-9-1958 a warrant of arrest. The
petitioner was arrested on 12-9-1958. On the next day he moved an application for
permission to furnish security and for two weeks' time. It is not stated whether he wanted
this time for payment or for seeking his legal remedies against the action taken against him.
However, on 13-9-1958 he was released on furnishing security, having spent one day in
custody. He has now come to this Court for relief and prays for the quashing of the entire
proceedings including the warrant of arrest on the simple ground that they are completely
unauthorised by law.

3. The petition was initially opposed by the State and a counter affidavit was filed. As this
Court was not satisfied with the vague and somewhat evasive character of the statements
contained in the counter affidavit, it directed the appearance in person of Mool Chand
Yadava the liquidator who passed the order dated 12-7-1957 and of Nirankar Lal, the
liquidator who subsequently made the request for the realisation of the disputed amount as
arrears of land revenue. Both these persons were examined on oath at some length by the
Court and their depositions are on the record. The Court also directed that the Deputy
Registrar, Co-operative Societies and the Tehsildar of Banaras should file affidavits and the
former was made a respondent in this petition under an order of the Court, in which it was
observed, inter alia, as follows :

"After hearing learned counsel for both the sides I am provisionally of the
view that the petitioner's arrest was illegal and he has been subjected to what
is known to the law of torts as wrongful confinement. The record does not
show who initiated the proceedings leading to the arrest of the petitioner.
Evidently there were some proceedings for the recovery of the sum
mentioned above as arrears of land revenue. There is a provision for the
recovery of certain types of dues in the same manner as arrears of land
revenue. Under Section 42 (4-A) of the Co-operative Societies Act 1912, the
Collector has the power to recover the dues as arrears of land revenue on a
requisition by the Registrar of the Co-operative Societies. This power is
confined to the recovery of any sum due as contribution to the assets of the
Society or as costs of liquidation.

But in the present case it appears that the petitioner was arrested for non-payment of a
sum which was neither due as contribution to the assets nor as costs of liquidation and
which he denied was due at all......

The Court is inclined to take a serious view of this case. As the result of an illegal arrest, a
citizen of the Republic was deprived of his personal freedom. Every single official who, by
his order or action, contributed to this illegal arrest is responsible and answerable to this
Court.

At present I am not even satisfied that the decision to arrest the petitioner was made bona
fide. He has alleged in paragraph 25 of his affidavit that he is a man of substance having
several houses of his own and has a good business of carpet making ....." He further says
that "these proceedings for his arrest have been started with a view to defame-him and
harass him in every manner." It is somewhat difficult to understand - and learned counsel
for the respondents gave no explanation in this matter - Why the liquidator or the Registrar,
as the case may be, whose primary duty under the Cooperative Societies Act is to collect
the assets of the Society in liquidation, should have preferred to exercise their option in
favour of the arrest and detention of the petitioner in preference to the attachment and sale
of his immovable property".
4. In the same order it was made clear "that the object of further proceedings is to fix the
responsibility for the illegal arrest of the petitioner on the guilty official or officials
individually":

5. Article 21 of the Constitution provides that no person shall be deprived of his life or
personal liberty except according to the procedure established by law. The sole question
before this Court is whether, on the material placed before it in her form of affidavits and
the depositions of the two liquidators, the respondents have established their case that the
arrest of the petitioner was lawful and according to procedure established by law. After a
perusal of all the affidavits and the relevant documents and after hearing the two liquidators
on oath I have come to the conclusion that the arrest of the petitioner was illegal and not
authorised by the Cooperative Societies Act 1912 or any other law. The only provision in
that Act which authorises the realisation of any amount due to a Co-operative Society is
Sub-Section (4-A) of Section 42 which is as follow :

"Any sum ordered under this Section to be recovered as a contribution to the

assets of the society or as costs of liquidation may be recovered on a
requisition being made in this behalf to the Collector by the Registrar of Co-
operative Societies, in the same manner as arrears of land revenue".

6. It must be noted, however, that the power under this Sub-Section does not extend to
every kind of dues payable to the society. It is limited to the recovery of two classes of dues
- (1) any amount as contribution to the assets of the society or (2) as costs of liquidation.
The phrase "contribution to the assets of the society" is referred to in Section 42(2)(b) of
the Act which says "A liquidator ......... shall have power to determine the contribution to be
made by the members and past members of the society respectively to the assets of the
society". Thus this phrase refers to the liability of the members of the society to contribute
to its assets in the event of the winding up of the society. The principle, of contribution by
present or past members to the assets of a society in winding up is well-known in Company
Law and has obviously been borrowed from it.

The members of a society with limited liability are liable to contribute, in the event of the
winding up of the society, to its assets subject to a maximum which is determined by the
limit of the member liability. In the present case, it was admitted that the petitioner
Mohammad Hussain Ansari was the holder of shares which were fully paid up and in respect
of which, therefore, there wax no question of his being called upon to contribute to the
assets of the society in the event of winding up.

7. The second class of dues recoverable as arrears of land revenue are "costs of liquidation".
If is admitted by the respondents that the amount sought to be recovered from the
petitioner does not fall under this class. Therefore, the controversy in this case is reduced to
a very simple question are the amounts sought to be recovered from the petitioner as
arrears of land revenue in the nature of contribution to be made by the petitioner as
member of the society to its assets during the winding up. If they are the proceedings
against the petitioner were authorised. If, on the other hand, they are not, the proceeding
were unauthorised and the official concerned usurped the powers to realise it as arrears of
land revenue and consequently the arrest of the petitioner was illegal.

8. The counter affidavit sworn by Mool Chand Yadava, the liquidator who made the order
directing the recovery of this amount from the petitioner, is conclusive on this point. In
paragraph 5 of his second counter affidavit dated 30-3-1959 he has stated,

"....... It is submitted that strictly speaking the amount due from the
petitioner was neither contribution to the assets of the union nor was it cost
of liquidation under clauses B and D of Section 42 of the Co-operative
Societies Act II of 1912." In his statement on oath made in Court to-day Mool
Chand Yadava confirmed his admission that the amount in dispute is neither
contribution to the assets of the society nor costs of liquidation. He also
admitted that the amount of Rs. 17,322-8-6 consists of two items - Rs.
8,721-0-6 claimed as principal and the rest as interest at the rate of 12 per
cent per annum. In his evidence before this Court today he was asked to
explain how he had calculated interest at this rate. He replied, "I fix this rate
according to general practice". On further questioned by the Court he
explained that by general practice he meant his own practise.

He admitted that he had neither asked for nor received any instructions from Government
or the Registrar about the rate of interest to be charged, and also admitted that he was not
aware of any other liquidator in the department who calculated interest at this rate. He
admitted that bye-law No. 40 of the respondent society provides that interest on moneys
borrowed from (by?) the society shall not exceed the rate of 7½ per cent per annum. He
also admitted that the amount directed to be realised from the petitioner included moneys
which were borrowed by him and on which interest was calculated by him at 12 per cent.
9. Nirankar Lal, the other liquidator who passed the order directing the recovery of this
amount as arrears of land revenue, was asked to explain how he bad concluded that the
amount in dispute was due from the petitioner as contribution to the assets of the society.
He replied, "During liquidation proceedings any amount due from any one is regarded by us
as contribution within the meaning of Section 42(2)(b) of the Act." When asked to explain
what he meant by the word "us" he replied, "I mean the liquidators and the Co-operative
Department in general".

10. From all this evidence it is clear that the amount in dispute is neither payable as
contribution to the assets of the society meant under Section 42(2)(b) nor as costs of
liquidation under Section 42(2)(b). In fact, almost half the amount is made up of interest
calculated by the liquidator at 12 per cent per annum. It is now admitted, though belatedly,
by the respondent that the amount in dispute cannot be classed either as contribution to the
assets of the society or as costs of liquidation. In the face of these facts, the foundation of
the power to recover this amount as arrears of land revenue disappears and the entire
proceedings taken against the petitioner must be condemned as illegal and in violation of
the constitutional guarantee under Article 21 of the Constitution.

11. In view of the admission of the respondents, it is perhaps not necessary for me to
consider the contentions of learned counsel for the respondent, made at an earlier stage of
the hearing that the amount in dispute comes within the category of the contribution to the
assets of the society. But as the argument was addressed at considerable length, it is
necessary to decide this point of law so that decision of this Court may serve as a precedent
in the future. Learned counsel contended that, under Section 42(2)(d) the liquidator has
power, "to determine by what persons and in what proportions the costs of the liquidation
are to be borne" and he has the further power under Class (e) of the same Section "to five
such direction in regard to the collection and distribution of the assets of the society as may
appear to Mm to be necessary for winding in the affairs of the society".

Bat this contention is negatived by the plain language of the section itself. To give direction
in regard to the collection and distribution of the assets of the society does not empower to
adjudicate upon disputes between the society and others. In the same section, power has
been given to the liquidator, under clause (b), "to investigate all claims against the society
and subject to the provisions of this Act, to decide questions of priority arising between
claimants", and again under clause (c), "to determine by what persons and in what
proportions the costs of the liquidation are to be borne".

Learned counsel for the respondents was not able to explain in spite of repeated questions
by the Court, why the same phraseology has not been used in clause (e) which only
authorises the liquidator to give "direction" in regard to the collection and distribution of the
assets of the society. Mr. S.N. Dwivedi, learned counsel for the petitioner, in his very able
argument before this Court, rightly pointed out that the difference in the phraseology of
clauses (b) and (c) on the one hand which do invest the liquidator with a quasi-judicial
power of investigation and clause (e) on the other which only gives him administrative
power, is significant and conclusive. In my view, clause (e) merely prescribes the
administrative procedure for the manner in which the collection and distribution of the
assets of the society in winding up may be made. But the Registrar or his department
cannot carve out for themselves an entirely new power under the guise of prescribing a
procedure for the exercise of an existing power.

12. I am fortified in my opinion by several judicial decisions. In Co-operative Society

Thathi Musalian v. Aqil Husain Shah A.I.R. 1941 Lahore 355, Beckett, J. held that the
directions given in Section 42(2)(e) are mainly administrative and that a liquidator has,, no
power under that provision to make an order having the force of a decree in respect of a
debt due to a society in liquidation. He further held that such a debt cannot be included in
contributions mentioned in Section 42(2)(b). In Abdul Ghani v. Anjnman-i-Imdad Qarza
Bahami Chak No. 127, A.I.R. 1942 Lahore 237, Tek Chand, J. held that the essentials
of a liquidator's jurisdiction under Section 42(2) are that the person concerned must be a
member or a past member, of the society and that he is jointly liable with other members to
contribute to the assets of the society to meet the losses which it has incurred.

If these, or any of these, conditions are satisfied the liquidator has authority to determine
the amount and his decision cannot be questioned in any Court. But if for instance, he
makes an assessment on a person who is not a member, or hid ceased to be a member for
over two years before the dissolution of the society or his liability to contribute had
otherwise been extinguished by operation of law, he has clearly acted in excess of his
jurisdiction and his order is a nullity and, therefore, incapable of execution.

The learned Judge further held that the word "contribution" in Section 42(2)(b) pre-
supposes an existing liability. Applying the principles laid clown in this case to the facts
before me. it is clear that the petitioner was not under any liability to contribute to the
assets of the society as his shares were admittedly fully paid up, In Anjuman-i-Imdad
Qarza Bahami Bagntlazan v. Mchr Din, A.I.R. 1937 Lahore 931. it was held that the
word "contribution" in Section 42(2)(b) of the Co-operative Society Act means a payment
by each or the member or his share in any common loss or liability of a society and does
not include a debt owed by an individual member of the society. Under Section 42(2)(b) of
the Act, the liquidator has therefore no jurisdiction to determine the liability of a person in
relation to a debt alleged to have been owed by him to the society. Lastly, it was held by
this Court (V. Bhargava, J.) in Smt. Ramditi v. Collector, Allahabad, A.I.R. 1954
Allahabad 646, that the amounts due by a debtor to the society can be treated as assets
of the society and not as contributions. The learned Judge further held that these amounts
can only be recovered by following the procedure laid down in clause (5) of Section 42 -
that is, by enforcing the orders of the liquidator as decrees of the Court, but they cannot be
realised as arrears of land revenue. Thus the weight of judicial authority against the legality
of the action of the respondents is conclusive and overwhelming.

13. In the circumstances, I hold that the petitioner has fully established his case for
protection of this Court. I direct the issue of a writ of certiorari quashing the entire
proceedings, including the warrant of the arrest of the petitioner for the recovery of the
amount in dispute from the petitioner as arrears of land revenue.

14. This Court, however, is concerned that such an illegal order, of arrest should have been
made without the authority of any law. It is even more gravely concerned that the officials
of the Cooperative Department should have assumed light-heartedly the existence of a
power which in fact does not exist and which they ought to have known did not exist. This
Court cannot but deplore the fact that throughout the proceedings in the present case there
has not been the slightest indication of any realisation by the officials of the Co-operative
Department that a citizen was wrongly deprived of his liberty under an illegal arrest
unauthorised by any known process of the law. If I may borrow the language of the Privy
Council in Ripon Press and Sugar Mills Co. v. Gopal Cherti, A.I.R. 1932 PC I (9), "it is
to be hoped that orders like that of" the liquidator Nirankar Lal, of the Deputy Registrar Sri
Ram Krishna Lal and of the Tehsildar Sri Jwala Prasad "will not in future be lightly made in
the course of similar instances.

15. Learned counsel for the petitioner has asked for heavy costs against the respondents.
He pointed out that the petitioner was the victim of an arrest which the authorities ought to
have known was completely illegal. As against this, learned Junior Standing Counsel for the
State has urged that the officials acted in good faith and in the exercise of what they
considered to be their duty under the law. In my view the circumstances of this case justify
the awarding of special costs. In England, any action resulting in the physical coercion or
restraint on a citizen, if proved to be illegal, entitles him to a cause of action against his
gaoler. I am not concerned with any remedy which the petitioner may have against the
respondents in respect of his illegal arrest.

But, in the present proceedings, the Court must take note of the fact that the respondents
began with a full justification of their action. Their initial affidavits were vague and evasive
as a result of which this Court had to pass orders calling for personal affidavits from the
officials concerned. The hearing of this case was unnecessarily prolonged and officials had to
be examined in Court. Throughout these proceedings the respondents gave no indication of
any feeling of regret even after realisation of the patent illegality of the arrest of the
petitioner. In the case of Ram Manohar Lohia v. Suptd., Central Prison. A.I.R. 1955
Allahabad 193, this Court awarded Rs. 500/- as costs to a petitioner who had suffered
illegal arrest under a statute which was declared unconstitutional.

In that case, however, the action of the State was under an Act passed by the legislature.
In the present case, the arrest of the petitioner was manifestly illegal and due to the grossly
exaggerated notion of the officials of the Co-operative Department of their powers under
the statute. In my view, the petitioner is entitled at least to the same costs as awarded to
Dr. Ram Manohar Lohia. I have taken into consideration the fact that the hearing of the
case was quite unnecessarily prolonged as a result of the attempt of the State to justify the
arrest.

16. I, therefore, direct the respondents to pay Rs. 500/- as costs to the petitioner.

Order accordingly.
This judgement ranked 1 in the hitlist.

Co-operative Central Bank, Mehkar, Ltd. v. Gangaram Keshao and others (Nagpur)(DB) :
Law Finder Doc Id # 319610

1953 AIR (Nagpur) 230 : 1952 ILR (Nagpur) 680 : 1952 NagLJ 271

NAGPUR HIGH COURT

(DB)

Before :- R. Kaushalendra Rao And Deo, JJ.

Second Appeal No. 175 of 1944. D/d. 26.10.1951.

Co-operative Central Bank, Mehkar, Ltd. - Appellant

Versus
Gangaram Keshao and others - Respondents

For the Appellant :- P.K. Tare, Advocate.

for Respondent No.3. :- K.G. Chendke, Advocate.

Cases Referred :

Co-operative Society, Mahalungi v. Babanrao, ILR (1951) Nag 309.

Harisa Rawajisa v. Yeoli Co-operative Society, 1941 Nag LR 412.

Jagdeo v. Co-operative Society, Mahalungi, Misc. Appeal No.86 of 1943 (Nag).

Shaikh Chand v. Amrita, S.A. No.130 of 1S45 (Nag).

Shankar Shamrao v. Anjani Co-operative Society, Misc. S.A. No.59 of 1948 (Nag).

JUDGMENT

In this plaintiff's second appeal the facts are: Defendant 3 Trimbak Narayan Kayande, had
executed a mortgage in favour of the Lonar Co-operative Credit Society No.2, registered
No.380, on 27-5-29. The Society having gone in liquidation, the liquidator passed a
contributory order. No.39 of 1931, dated 28-11-31 (Exhibit P.13). By that order the
mortgagor was directed to pay Rs. 6,510/13/6 due on the mortgage with interest. It was
further directed that 5 per cent, recoveries would be appropriated as the cost of liquidation
proceedings and the balance credited towards the mortgage liability. Similarly by
contributory order No.34 of 1931 dated 28-11-1931 (Ex.P-18) defendant 3 was directed to
pay Rs. 992/9/3 for certain unsecured debts due by him. In execution of these orders by
the civil Court the fields in suit were sold by auction and purchased by the plaintiff Bank.
The sales were duly confirmed and on the possession being resisted by defendants 1 and 2
plaintiff has instituted this suit on 13-10-1941 for possession and mesne profits.

2. Defendants 1 and 2 claimed to be in possession adversely to the mortgagor, but the

lower appellate Court found that the adverse possession had not ripened into title on the
date of the suit. That finding is not challenged before us. The next contention was that the
orders Exhibits P-13 and P-18 being without jurisdiction the execution proceedings and the
auction sales were null and void and passed no title to the plaintiff. This defence prevailed in
the lower appellate Court.

3. By the Central Provinces and Berar Cooperative Societies Amendment and Liquidators'
Orders Validation Act, 1945 (10 of 1945), Section 42(2), Co-operative Societies Act, was
amended by adding Clause (f) which empowers a liquidator

"to determine the debts secured or otherwise and liabilities, personal or joint,
payable by the members or past members or by the estates or nominees,
heirs or legal representatives of deceased members to the society, and to
make orders, as may be necessary, for payment and realisation of such debts
and liabilities."

By section 3 of Act 10 of 1945 the powers referred to in this clause (f)

"shall be deemed to have been conferred on a liquidator from the

commencement of the said Act and all orders purporting to have been passed
by him in exercise of that power prior to the coming into force of this Act and
all proceedings taken in pursuance of such orders shall be valid
notwithstanding any decree or order of the Civil Court to the contrary."

Clause (f) is thus retrospective in operation. The orders Ex.P-13 and Ex.P-18 were not
contributory orders falling under Section 42(2)(b) of the Act though they are so styled. The
member was not being asked to contribute his share of loss to the Society but was being
asked to pay up the debt owned by him to the Society. They are in substance orders under
Clause (f) and as such are valid orders. 'Shankar Shamrao v. Anjani Co-operative
Society', Misc. S.A. No.59 of 1948 (Nag) and - 'Jagdeo v. Co-operative Society,
Mahalungi', Misc. Appeal No.86 of 1943 (Nag) .

4. The learned counsel for the respondent, however, contends that the orders were un-
executable as there is no provision for execution of orders passed under Section 42(2)(f) of
the Act. Reliance is placed on - 'Shaikh Chand v. Amrita', S.A. No.130 of 1S45 (Nag).
This case has been explained in - 'Shankar Shamrao v. Anjani Co-operative Society,
(cit. sup.). Section 42(2)(f) itself provides that the liquidator has powers to make orders as
may be necessary for payment and realisation of such debts and liabilities. This includes the
power to apply to the civil Court to execute the order. Though section 42 itself provides in
sub-Section (5) that orders made under that section shall, on application, be enforced when
made by liquidator, by any civil Court having local jurisdiction in the same manner as a
decree of such Court, the decision relied upon proceeds on the footing that the 'only
provision' which authorizes a liquidator to send his order for execution to a civil Court is
Rule 43(g)(i). Sub-section (5) was evidently not brought to the notice of the learned Judge
deciding - 'Sheikh Chand v. Amrita '.

There is no provision that such orders will be executed in the manner prescribed by rules.
Consequently, in view of the clear provision made in the statute itself, absence of rules does
not invalidate the execution proceedings and auction sales held in favour of the plaintiff. See
- 'Shankar Shamrao v. Anjani Co-operative Society, (cit. sup.). The decision in - 'Co-
operative Society, Mahalungi v. Babanrao', ILR (1951) Nag 309, relied on by the
respondent is not in point. There the order in question was held to be one passed under
Section 42(2)(b). The case was held to be governed by the rule in - 'Harisa Rawajisa v.
Yeoli Co-operative Society', 1941 Nag LR 412, where the liquidator was not realising
any debt due from a member to the society but was asking him to contribute his share of
loss to the society.

In - 'ILR (1951) Nag 309, the order was being challenged by the sons of a member of the
Co-operative Society. The point for consideration was whether the amendment to Rule 43(f)
was retrospective in operation. The decision has no bearing on the question in the instant
case, whether an order held to be one under Section 42(2)(f) can be executed in the
absence of a provision in the rules about the execution of such an order. The question must
be answered in the affirmative in view of Section 42(5).

5. The result is that the orders Ex.P-13 and Ex.P-18 are not 'ultra vires' the liquidator and
the consequent execution proceedings and the sales are valid and confer title on the
plaintiff.

6. The decree of the lower appellate Court is hereby set aside and that of the trial Court
restored. The appeal is allowed with costs throughout.

Appeal allowed.

This judgement ranked 1 in the hitlist.

Dharam Pal v. Jagadhri Thatera Co-operative Society, (Punjab) : Law Finder Doc Id #
84093

1954 AIR (Punjab) 268 : 1955 ILR (Punjab) 496

PUNJAB HIGH COURT

Before :- Kapur, J.

Ex. Second Appeal No. 207 of 1953. D/d. 8.7.1954

Dharam Pal - Appellant

Versus
Jagadhri Thatera Co-operative Society - Respondent
For the Appellant :- Shamair Chand and P.C. Jain, Advocates.

For the Respondent :- K.S. Chachhi, Advocate.

Co-operative Societies Act, 1912, Section 42(2)(b), (3) - Co-operative Societies

Rules, Rule 26 - Principles of natural justice - Order of liquidator without notice to
parties - Validity - Notice sent contrary to law - In effectual.

[Para 8]

Cases referred :

1. Inder Singh v. Anjuman Imdad Quarza, Civil Revn. No. 691 of 1951 (Punj.)

2. Mahbub Hussain Shah v. Anjuman Imdad Qurza, AIR 1942 Lahore 129.

3. Abdul Ghani v. Anjuman-in-Imdad Qarza Bahami, Chak No. 127 RB AIR 1942 Lahore
237.

4. Bharat Bank Ltd., Delhi v. Employees of Bharat Bank Ltd., Delhi, AIR 1950 Supreme
Court 188.

5. Veerappa Pillai v. Raman Raman & Co. Ltd., AIR 1952 Supreme Court 192.

6. Parry & Co. Ltd., Dare House, Madras v. Commercial Employees, Association, Madras,
AIR 1952 Supreme Court 179.

JUDGMENT

Kapur, J. - This is a judgment-debtor's appeal against an appellate order of Additional

District Judge, J.N. Kapoor, dated 12.12.1952 confirming the order of the executing Court
dismissing the objections of the judgment-debtor.

2. The appellant was alleged to be a member of a Co-operative Society which went into
liquidation. His liability was determined by the liquidator under Section 42(2)(b), Co-
operative Societies Act, and it was finally confirmed by the Industrial Registrar, Co-
operative Societies.

3. When the liquidator took proceedings for recovery of money through a Civil Court the
judgment-debtor objected that he had never been given any notice by the liquidator before
his liability was determined, and the Courts below relying on a judgment of Falshaw, J. in
Inder Singh v. Anjuman Imdad Quarza, Civil Revn. No. 691 of 1951 (Punj.) have
held that notice by a liquidator was not necessary and that a notice given by the Assistant
Registrar is sufficient to make a member or a past member liable.

4. The objection of the present appellant was that he was not a member or a past member
within the meaning of the words as used in the Co-operative Societies Act and therefore no
liability could be imposed upon him.

5. Section 42, Co-operative Societies Act, deals with winding up and Section 42(2)(b) is as
follows :

"42(2)(b). A liquidator appointed under sub-section (1) shall have power (b)
to determine the contribution to be made by the members and past members
of the society respectively to the assets of the society."

Therefore the law imposes upon the liquidator the power to determine the liability of
members. Rule 26 made under Section 43 of the Act prescribes the rules for winding up and
Rules 26(d), (e) and (g) prescribe what the liquidator should do not they are as follows :

"(d) The liquidator shall proceed to determine the assets and liabilities of the
society as they stood at the time of the cancellation of its registration, and
shall determine the contribution to be made by the members and past
members respectively to the assets of the society. He shall also determine by
what persons and in what proportions the costs of the liquidation are to be
borne.
(e) The liquidator may issue a summons to any person whose attendance is
required either to give evidence or to produce documents. He may compel the
attendance of any person to whom a summons is issued and for that purpose
 issue a warrant for his arrest through the civil court exercising jurisdiction in
the area in which the society operates.
(g) He shall make an order noting the names of members and past members
of the society and the amount to be realised from each as contribution under
clause (b), sub-section (2) of Section 42, and as costs of liquidation under
clause (d) of the same sub-section. This order shall be submitted to the
Registrar for his approval, and he may modify it or refer it back to the
liquidator for further enquiry or other action."

And in rule (g) is given what orders he can make and it also prescribed that the order shall
be submitted to the Registrar for his approval, and he can modify it and refer it back for
further enquiry or other action, and it is this order which is to be sent to the Civil Court for
execution.

6. The appellant submits that the learned Judge has taken an erroneous view of the law
because the liquidator cannot determine the liability of a person without giving him notice
and he has relied on several judgments of the Lahore High Court, and I will quote only two
Bench decisions firstly Mahbub Hussain Shah v. Anjuman Imdad Qurza, AIR 1942
Lahore 129, which was followed by another Bench in Abdul Ghani v. Anjuman-in-
Imdad Qarza Bahami, Chak No. 127 RB AIR 1942 Lahore 237. In both these
judgments it was held that any determination by a liquidator without giving an opportunity
to the person whose liability is to be determined is a nullity as this is contrary to natural
justice and these two judgments have the weight of very high authority. By Rule 26(d) the
liquidator has to determine the contributions to be made by the members and past
members and by Rule (e) he is given the power to summon persons to give evidence or to
produce documents and then follow Rules (f) and (g). The latter entitles the liquidator to
make an order noting the names of members and past members and the amounts to be
realised from them.

The sequence indicates that the liquidator is by the rules empowered to summon evidence
and the object can be none other than to determine the liability of a member on the
evidence before him. Such evidence cannot be one-sided, for no quasi judicial tribunal can
act without hearing both sides. That appears to be the effect of Section 422(b) also.

7. The notice by the Registrar is not contemplated by the statute or the rules and the power
given to him is of a limited nature more in the nature of a revising authority who can
approve, modify or order further enquiry. The notice sent by him is therefore contrary to
law and is ineffectual.

8. For the respondents an unreported Single Bench judgment of this Court 'Civil Revision
No. 691 of 1951 (Punjab), decided by Falshaw, J., has been quoted, but it appears that the
judgments which have been quoted before me were not brought to the notice of the learned
Judge. Besides, the learned Judge was not very much impressed by the doctrine of natural
justice which is a cardinal principle of administration of justice in this country, and which
has been emphasised by the Supreme Court in Bharat Bank Ltd., Delhi v. Employees of
Bharat Bank Ltd., Delhi, AIR 1950 Supreme Court 188, at p. 204, (per Mahajan, J.)
and in Veerappa Pillai v. Raman Raman & Co. Ltd., AIR 1952 Supreme Court 192,
(Chandrasekhara Aiyar, J.) and in Parry & Co. Ltd., Dare House, Madras v. Commercial
Employees, Association, Madras, AIR 1952 Supreme Court 179.. I would therefore
respectfully differing from the opinion of the learned Judge prefer to follow the Bench
decisions of the Lahore High Court supported as they are by the statute and rules. As the
liquidator proceeded without hearing the parties his orders are a nullity and they cannot
therefore be executed. I would therefore allow this appeal, set aside the orders of the
Courts below and dismiss the application for execution. The appellant will have his costs in
this Court and in the Courts below.

Appeal allowed.
This judgement ranked 1 in the hitlist.

Co-operative Society, Patur No. 7 v. Vasant Balkrishna, (Nagpur) : Law Finder Doc Id #
963329

1946 AIR (Nagpur) 317

NAGPUR HIGH COURT

Before:- Bose, J.

Second Appeal No. 118 of 1942. D/d. 8.11.1945.

Co-operative Society, Patur No. 7 - Appellant

Versus

Vasant Balkrishna and Ors. - Respondents

For the Appellant:- K. B. Tare, Advocate.

For the Respondent:- S.N. Kherdekar, Advocate.

Cases Referred :

Harisa v. Yaoli Co-operative Society, 1941 N. L. J. 412.

Narayan v. Co-operative Central Bank, Malkapur, AIR 1938 Nag. 434 : I.L.R. (1938) Nag.
604 : 178 I. C. 293.

JUDGMENT

Bose, J. - The plaintiff is the Co-operative Society of Patur, now in liquidation. It sues
through its liquidator. The defendants are the heirs (widow and three sons) of one
Balkrishna who was a member of the Society. He died on 17th September 1938, after the
Society went into liquidation. (The date of the liquidation when the certificate was cancelled
and the liquidator appointed was 11th July 1938). As Balkrishna is dead, the liquidator is
suing his estate for Rs. 1500, which, according to the liquidator, is the contribution due from
him towards the debts of the Society. The suit is against the defendants as Balkrishna's
heirs as they are said to be in possession of his estate. The suit is contested on two
grounds: (1) that of limitation, and (2), that Balkrishna left no estate because he died in a
state of jointness with his sons and therefore they succeeded to the whole estate by
survivorship. The defence of limitation is easily disposed of. The suit was filed on 18th
September 1939 and it is admitted that it is within time if limitation runs from the date of
Balkriahna's death because there were some holidays just before the filing of the suit. What
is urged is that that is not the starting point of limitation, but 11th July 1938, the date of
liquidation. The limitation is created by Section 24 of the Cooperative Societies Act, 1912.
That provides that "the estate of a deceased member shall be liable for a period of one year
from the time of his decease etc." The starting point is therefore the date of the decease.

2. It was argued that that only applies before liquidation and that after liquidation the
starting point is the date of liquidation. I was referred to a decision of the Lahore High Court
under Section 23. I am not concerned here with Section 23 on the limitation point and will
confine myself to Section 24 because there is no ambiguity in the language employed. A
Division Bench of which I was a member held in I.L.R. (1938) Nag. 604 at p. 611 that a
member's liability to make good the debts of a Society does not arise till liquidation. It
follows from this that the liability which Section 24 imposes can never arise till liquidation,
though in computing the extent of the liability events prior to the liquidation may have to be
taken into consideration, should the death occur before that date. But in any case, as the
language is too clear to admit of dispute I can only conclude that "one year from the time of
his decease" means one year from the date of death and not from the date of liquidation. I
hold the suit is within time.
3. As regards the second point, I have not been able to find any authority which covers it. It
will therefore be necessary to go back to first principles. Among them, the following are, I
think, elementary. They are set out in AIR 1938 Nag. 434 : I.L.R. (1938) Nag. 604 :
178 I. C. 293, Narayan v. Co-operative Central Bank, Malkapur. The first is this (p.
609) :

"A. Co-operative Society being a statutory corporation is a legal person and

its debts are distinct from the liability of its members which members can
only be reached by creditors of the corporation in winding up proceedings."
4. The second is that (page 610) :
6. "A body corporate whose members can be made liable for its debts can
only be created by statute Therefore either the statute most itself define this
extraordinary liability or at the very least give the corporation the right to do
Section in its bye-laws."
5. The defendants here are sought to be made liable not for their own debts, not for any
liability which either they, or their father, in the case of three, and husband in the case of
one, incurred, but for the debts of this statutory body, the plaintiff. We must therefore see
to what extent the Co-operative Societies Act permits this. Section 42 (2) (b) empowers the
liquidator to make a contributory order against members and past members. All who are
members at the date of liquidation are liable in respect of everything. But in the case of a
past member his liability is limited to the debts as they existed at the date when he ceased
to be a member ; also, a limitation is imposed in his case. He is only liable for two years.
The object of course is to prevent members from escaping liability by deserting society, like
rats from a sinking ship, just as it is on the point of foundering. The term "past member" is
not defined in the Act but it cannot mean a "deceased member," because Section 24 deals
with that separately. Therefore, it must mean a person who is alive at all material times but
who has ceased to be a member of the' Society otherwise than by death. Now, death apart,
I do not know whether it is possible for a person to cease to be a member after liquidation
though I can conceive of such a possibility. For example R. 34A permits a member who is
not in debt to the Society, and who is not a surety for an unpaid debt, to withdraw after
giving one month's notice. It may happen that the Society goes into liquidation before the
month expires. A nice question will then arise as to whether a member can cease to be one
after liquidation. But whether that is possible or not there can be no doubt that in all normal
cases membership ceases before liquidation. But, in as much as no member can be called
upon to contribute to the debts of the Society until liquidation it follows that Section 23
applies to members who cease to be members before liquidation. Despite that they are
under the Act, made liable for the debts of the Society as they existed at the date when
they ceased to be members, provided the order is made within two years of that date.

6. In my judgment, a similar construction must be placed upon Section 24. Whether the
member dies before or after liquidation does not, I think, matter. His estate is liable for a
year after his death, bat only for the debts as they existed at the date of his death. That
brings me to the next point. Section 24 speaks of "the estate of a deceased member." What
exactly does that mean I can only construe it to mean that which passes, or at any rate, is
capable of passing, at death. I need not in this case decide whether it would exclude
coparcenary property which is subject to survivorship because the Hindu Women's Right to
Property Act, 1937, has made a radical change in the status of a Hindu coparcenary when a
member of it dies leaving a widow. The learned editor of Mayne's Hindu Law and Sir
Dinshaw Mulla are both of opinion in their respective books that the Act has made drastic
inroads upon the rule of survivorship. Section far as the dead husband's rights are
concerned, they no longer go to the others by survivorship but devolve on his widow by
inheritance. She occupies the same position and gets the same rights subject only to the
limitation that she gets a limited estate, as did her husband. His estate which reaches her
hands is accordingly liable to the same extent as it would have been had he been alive. See,
Mayne's Hindu Law, 10th Edn., pp. 348 and 719 to 722, and Mulla's Hindu Law, 9th Edn.,
pp. 26 and 26 (a). Accordingly the arguments addressed to me regarding survivorship are
beside the point. They overlook the fact, as did the Courts below, that the Hindu Women's
Right to Property Act, 1937, applies to this ease. The Act came into force on 14th April 1937
and Balkrishna died on 17th September 1938.

7. The next question is whether the suit lies at all. It was argued that it does not because
the jurisdiction of the Court is ousted on account of Section 42 (2) (b). But that section is
limited to " members" and " past members." It has no application to claim for contribution
against the heirs of a deceased member. The liquidator's only remedy there is by way of
suit. As I have shown, Section 24 makes the estate of a deceased member liable but, as I
have also shown, the liability cannot arise until liquidation. Section 42 gives the liquidator
power to determine the liabilities of members and past members, but not as regards the
estate of a deceased member. It follows the liability which the Act recognises must be
enforceable in the ordinary way in the Courts of the land, and Section 42 (2) confers power
on the liquidator to institute suits on behalf of the society. I agree with D. B. Brahma at p.
107 of his Co-operative Societies Act, (Edn. of 1940) that a civil suit is the proper remedy in
such a case. Reliance was placed by the respondents upon 1941 N. L. J. 412, Harisa v.
Yaoli Co-operative Society and it was argued that inasmuch as the suit is in the nature of
a contributory liability no decree can be made in it until the assets of the Society are
determined. This point was raised in the trial Court and was decided in the respondents'
favour. It was again raised in the lower appellate Court and met the same fate. I find from
the order sheets of the trial Court that the parties were afforded time to adduce evidence
other than the account book but did not avail themselves of this opportunity. The order
sheet of 18th July 1940 runs thus: "x x x Case for evidence of parties on 14th October
1940." On the 14th October 1940 the entry is "Parties close the case without evidence."
After this an amendment of the pleadings was allowed and a second opportunity was
afforded. The order sheet of 27th November 1940 states. "Case for evidence of parties on
11th February 1941." On 11th February 1941 the entry states "Parties close their cases
without examining any witnesses."

8. I agree with the lower Courts and with D. B. Brahma that the mere filing of copies of the
accounts is not enough. See, Brahma's Law of Co-operative Societies, page 26. Section 26
of the Act does not abrogate Section 34, Evidence Act. It merely obviates production of the
original books of accounts which would otherwise be necessary. The words "to the same
extent as the original entry itself is admissible" show that the copies stand on no higher
footing than the originals.

9. Now under Section 34, Evidence Act, entries in books of accounts are not admissible
unless books are regularly kept in the course of business. In some cases this can be gauged
by a glance at the originals, but when the originals are not produced it is impossible to tell
from a copy in what state the original is. For example the so-called "book" might turn out to
be only a set of loose papers gathered together in a loose leaf file and that would not come
within the purview of Section 26, Co-operative Societies Act any more than it would under
section 34 of the Evidence Act. No copies would disclose that to the Court. Therefore, it is
essential to produce evidence aliunde to prove that the books are regularly kept in the
course of business. Having done that the entries become evidence, but like all entries in
books of account they are not substantive evidence except as regards admissions against
the interests of the maker. They can only be used for corroboration. The reason is that no
admission in one's own favour is admissible in evidence, but in given circumstances such
admissions can be used to corroborate testimony in the witness box. The accounts of Co-
operative Societies form no exception to this rule. There is therefore no proof which the
Courts can accept regarding the assets and liabilities of the plaintiff Society.

10. It was pointed out in 1941 N. L. J. 412 that claims of this kind against third persons who
did not incur the debts, and who were not responsible for incurring them, must be strictly
proved; also that the liability to contribute cannot arise until the assets are determined. The'
assets cannot be determined until the accounts are settled; until it is known what the
Society has in the shape of buildings, furniture etc., how much cash it has in hand, what
debts are due to it from outsiders, who are debtors to the, Society and how many of them
are good debts which can be recovered, and what the liabilities of the Society are. It is only
when all this is known and a proper balance is struck between the two that it is possible to
determine whether the Society is in debt at all, and if Section to what extent. If it can pay of
its debts from existing assets no claim for contribution can be made. That is only a last
resort when all else fails. As there is no evidence which the Courts can accept regarding
this, I agree with the lower Courts that the plaintiff's claim must fail for the reason that it
has not proved that the Society is unable to meet its liabilities from its assets and until that
is done no claim can be made for contribution either against a member, a past member or
the estate of a deceased member.

11. I am unable to allow time at this stage for proof of these facts. That would involve a re-
trial de novo as I have shown that the plaintiff was afforded the chance in the trial Court.
The matter was brought to the plaintiff's notice there and he was, given time for adducing
further evidence. None was produced. I cannot allow a further chance in second appeal. The
appeal fails and is dismissed with costs.

Appeal Dismissed.
 Product S.No.723072561

This judgement ranked 1 in the hitlist.

Ishar Dass v. The State of Haryana, (P&H) : Law Finder Doc Id # 63362

1974 PLR 150 : 1973 PLJ 771 : 1975 AIR (Punjab) 29

PUNJAB AND HARYANA HIGH COURT

Before :- Rajendra Nath Mittal, J.

Civil Writ No. 1551 of 1973. D/d. 29.10.1973

Ishar Dass and another - Petitioners

Versus

The State of Haryana and others - Respondents

For the Petitioner :- Mr. Gobinder Singh, Advocate.

For the Respondent :- Mr. H.N. Mehtani, Mr. Saradara Singh, Advocates.

A. Punjab Co-operative Societies Act, 1961, Section 67-A - Validity - Whether

section 67-A of the 1961 Act is ultra vires Article 14 of the Constitution of India -
Held No.

[Para 7]

B. Punjab Co-operative Societies Act, 1961, Sections 58(1), 59(2)(b) and 67-A -
Scope - Section 59 does not exclude the jurisdiction of the liquidation to recover
the loan under section 67-A -For recovering loans specified in Section 67-A, the
Liquidator can proceed under that Section.

[Para 4]

C. Punjab Co-operative Societies Act, 1961, Sections 59(2) and 67-A - Proceedings
under - Sufficient guidance has been provided in the Act for the Liquidator in what
circumstances he has to proceed under section 59 or 67-A.

[Para 4]

Cases referred :

1. Shri Hari Chand v. Collector of Amritsar, AIR 1959 Punjab 19 (FB).

2. Northern India Caterers (Private) Ltd., v. state of Punjab, AIR 1967 Supreme Court 1581.

3. Mandadi Chennakesavareddy v. The Divisional Co-operative Officer Karimmagar, 1973

Cop L.J. 4.

JUDGMENT

R.N. Mittal, J. - This writ petition has been filed under Articles 226 and 227 of the
Constitution of India for quashing the notices, dated April 17, 1973 (copies Annexures 'A'
and 'B' to the petition) issued by the Assistant Registrar Co-operative Societies, respondent
No. 3.

2. The facts of the writ petition are that the petitioners are the members of the Metlan, Co-
operative Agricultural Service Society, Metlan tehsil and district Ambala (now under winding
up) (hereinafter referred to as 'the Society') which is registered under the Punjab Co-
operative Societies Act. 1961 (hereinafter referred to as 'the Act'). Respondent No. 3 who
directed the winding up o the Society appointed respondent No. 4 as its Liquidator under
sub-section (1) of section 58 of the Act. A few days before the notices, dated April 17, 1973,
(Copies Annexure 'A' and 'B') were issued to the petitioners, respondents Nos. 4 and 5 came
to their village and asked them to pay the loans which were alleged to be out standing in
their names in the records of the Society. The petitioners informed them that whatever loan
they had taken from the Society had been repaid from time to time and no amount was
then due to the Society from them. Respondents Nos. 4 and 5 moved an application under
section 67-A of the Act under which the amount could be recovered as arrears of the land
revenue. The Assistant Registrar sent the impugned notices dated April 17, 1973, to the
petitioners, and asked the petitioners to appear before him on April 27, 1973, to represent
their case. The case was adjourned on that date to May 3, 1973, and then to May 5, 1973.
On May 5, 1973, a preliminary objection was raised by the petitioners before respondent
No. 3 that as the Society was under winding up process, no action could be taken against
them for recovery of any debt except by following a procedure under section 59 of the Act
read with rules 58 and 59 of the Punjab Co-operative Societies Rules 1963 (hereinafter
referred to as 'the Rules'). They further stated that when a Society was under winding up
the loan due from any person could be recovered by the Liquidator, by an order passed
under clause (b) of sub-section (2) of section 59 of the Act. Respondent No. 3 over-ruled
the objections of the petitioners. Respondent No. 3 has no jurisdiction and power to issue
any notices to the petitioners in respect of the alleged loan. Section 67-A of the Act is
violative of Article 14 of the Constitution of India, 1950, as uncontrolled and unbridled
powers have been given to the Registrar under that section and no provision of appeal or
revision against an order passed under that section has been provided in the Act. The
petitioners have challenged the aforesaid notices marked as Anenxures 'A' and 'B' on the
ground that they are illegal, void and without jurisdiction. The respondents have contested
the petition.

3. The first contention of the learned counsel for the petitioners is that the winding up of the
Society has been ordered and a Liquidator has been appointed. He further submits that the
amount which is recoverable form the petitioners should be determined by the Liquidatory
under section 59 of the Act and the same can be recovered under section 64 of the Act.
According to him section 67-A has no applicability to the present case. It is, therefore,
argued by him that the notices issued under section 67-A are illegal and without jurisdiction.
In order to appreciate the arguments of the learned counsel for the writ-petitiners, it is
necessary to reproduce sub-sections (1) and (2) of section 58, sub-section (1) and clauses
(a) and (b) of sub-section (2) of section 59, section 64 and sub-sections (1) and (2) of
section 67-A of the Act, which are as follows :-

"58 (1) Where the Register has made an order under section 57 for the winding up of
a co-operative society, he may appoint a liquidator for the purpose and fix his
remuneration.

(2) A liquidator shall, on appointment, take into his custody or under his control all
the property, effects and actionable claims to which the society is or appears to be
entitled and shall take such steps as he may deem necessary or expedient, to
prevent loss or deterioration of, or damage to, such property, effects and claims. He
may carry on the business of the society so far as may be necessary with the
previous approval of the Registrar.

(3) * * *

(4) * * *

59. (1) Subject to any rules made in this behalf, the whole of the assets of a co-
operative society, in respect of which an order for winding up has been made, shall
vest in the liquidator appointed under section 58 from the date on which the order
takes effect and the liquidator shall have power to realise such assets by sale or
otherwise.

(2) Such liquidator shall also have power, subject to the control of the Registrar.

(a) to institute and defend suits and other legal proceedings on behalf of the co-
operative society by the name of his office :

(b) to determine from time to time the contribution (including debts due and costs of
liquidation) to be made or remaining to be made by the members or past members
or by the estates or nominees, heirs or legal representatives of deceased members
or by any officers or former officers, to the assets of the society.
 64. The orders of the liquidator under section 59 shall be executed according to the
Act and under the rules for the time being in force for the recovery of arrears of land
revenue.

67-A(1). Notwithstanding anything contained in section 55 or section 56 or section

63 a co-operative society, undertaking the financing of crops or seasonal agricultural
finance, may apply to the Registrar for the recovery of arrears of any sum advanced
by the society to any of its members on account of the financing of crops or seasonal
agricultural finance and shall attach with such application a statement of accounts in
respect of such arrears.

(2) On receiving an application under sub-section (1), the Registrar may, after
making such inquiries as he deems fit and after affording the member concerned an
opportunity of being heard, grant a certificate for the recovery of the amount stated
therein to be due as such arrears."

4. The Registrar passes an order of winding up a co-operative society under section 57 of

the Act and appoints a Liquidator for the purpose of winding up of the society under sub-
section (1) of section 58. Sub-section (2) of section 58 authorizes a Liquidator to take into
his custody or under his control all the property, effects and actionable claims to which the
society is or appears to be entitled and to take such steps as he may deem necessary to
prevent loss or deterioration or damage to such property, effects and claims. He is also
authorised to carry on business of the society so far as may be necessary. Clause (b) of
sub-section (2) of section 59 of the Act empowers the Liquidator to determine from time to
time the contribution (including debts due and costs of liquidation) to be made or remaining
to be made by the members or past members or by the estates or nominees, heirs or legal
representatives of deceased members or by any officers or former officers, to the assets of
the society. Rule 59 of the Rules says that an order passed by the Liquidator under clause
(b) of sub-section (2) of section 59 shall be submitted by him to the Registrar for approval.
It is further provided thereto that the Registrar may modify such order or refer it back to
the Liquidator for further inquiry or action. Section 63 relates to appeals. Sub-clause (j) of
section 68 provides that an appeal shall lie against any order made by the Liquidator of a
co-operative society in exercise of the powers conferred on him by section 59. Under section
69, a revision is maintainable against the order passed in appeal under section 68 of the
Act. Section 67-A deals with recovery of crop loans. It says that notwithstanding anything
contained in section 55 or section 56 or section 63, a co-operative society undertaking the
financing of crops or seasonal agricultural finance, may apply to the Registrar for the
recovery of arrears of any sum advanced by the society to any of its members on account of
the financing of crops of seasonal agricultural finance and shall attach with such application
a statement of accounts in respect of such arrears. Sub-section (2) of section 67-A provides
the procedure for determining the amount and granting a certificate for recovery of the
amount stated therein to be due as such arrears. No appeal has been provided against an
order passed under section 67-A of the Act. The contention of the learned counsel for the
writ-petitioners is that if the amount due is to be determined by the Liquidator under section
59 of the Act, then the order passed by him (the Liquidator), in the first instance, requires
approval of the Registrar under rule 59 of the Rules and thereafter if the party is aggrieved
form his order, he can goup in appeal whereas if the order is passed under section 67-A of
the Act, no remedy is available to the person against whom an order has been made.
According to the scheme of the Act, Chapter VIII (section 55 and 56) relates to settlement
of disputes. Chapter IX (sections 57 to 61) relates to winding up of co-operative societies
and Chapter X (sections 62 to 67-A) to execution of awards, decrees, orders and decisions.
It is not disputed by the learned counsel for the respondents that the Liquidator can
determine the contributions himself under section 59 of the Act. The word 'contribution' has
not been defined but according to clause (b) of sub-section (2) of section 59 of the Act, it
includes debts due and costs of Liquidation. If the word 'debts due' is read in the context of
the sub-section, it will be seen that it includes debts which are recoverable from its
members. Thus the word 'contribution' has a wide scope which includes the debts which are
recoverable from the members of society. A co-operative society remains into existence till
the Registrar cancels its registration under section 61 of the Act. A society under liquidation
can recover loans mentioned in section 67-A, namely, relating to the financing of crops,
seasonal agricultural finance or the purchase of milch cattle under that section. Thus there
are two remedies for such a society, namely, (1) the general remedy under section 59, and
(2) a specific remedy, for recovering the loans mentioned in section 67-A. If two remedies
of recovery are provided in the Act, one for all the debts and the other for ?specified debts,
then there is sufficient guidance for the officer concerned to know as to which provision of
the Act is to be applied for recovery of a particular debt. A sufficient guidance has been
provided in the Act for the Liquidator in what circumstances he has to proceed under
sections 59 or 67-A of the Act. Section 59 does not exclude the jurisdiction of the Liquidator
to recover the loan under section 67-A. No doubt, it has not been stated that section 67-A
over-rides section 59 of the Act but if the scheme of the sections is seen, it is abundantly
clear that for recovering loans specified in section 67-A, the Liquidator can proceed under
that section. In the circumstances, I do not find force in the contention of the learned
counsel for the writ petitioners and reject the same.

5. The second contention of the learned counsel for the writ-petitioners is that section 67-A
is ultra vires Article 14 of the Constitution as it does not lay any guiding principle as to in
what circumstances, section 55, 59 and 67-A of the Act are applicable. He also submits that
the remedy under section 67-A is very harsh as no appeal or revision has been provided for
an order passed under that section whereas remedies of appeal and revision have been
provided for orders passed under sections 55 and 59 of the Act. He further states that no
procedure has been prescribed for the Registrar under section 67-A of the Act to make the
enquiries.

6. There is a general presumption in favour of constitutionality of a statute. If any party

challenges the constitutionality of any provision, it is for him to show it as unconstitutional.
Under section 55, all disputes touching the constitution, management or the business of a
co-operative society, are referred to arbitration. Under clause (b) of sub-section (2) of
section 59, the Liquidator of a Society under Liquidation determines the contributions to be
made by the members or by the estates or nominees, heirs or legal representatives of the
deceased members Section 67-A specifically relates to certain types of loans mentioned
therein. The aforesaid provisions, as I have already observed, clearly show that sufficient
guidance has been provided as to in what circumstances which provision of the Act is to be
applied. It is a settled principle of interpretation of statutes that the various provisions of
the Act are to be reinterpreted harmoniously. In the present case, both the sections,
namely, section 59 and 67-A, can exist side by side. The legislature wanted that maximum
benefit of loans should be given to a large number of agriculturists. That can be done only if
the recovery of the loans is not delayed. The reasons for introducing section 67-A as given
in the statement of objects and reasons published in Haryana Government Gazette (Extra-
ordinary) dated February 13, 1971, is the speedy recovery of co-operative dues etc. The
loans mentioned in the section appear to be short-term loans and the loanee is required to
pay it within the prescribed period so that the same could be advanced again to the needy
persons. In case, a lengthy procedure is adopted to recover loans, the circulation of amount
remains limited to a few persons and the object of co-operative movement which has
become a vital movement stands frustrated. Under sub-section (2) of section 67-A, it has
been provided that the Registrar may, after making such enquiries as he deems fit and after
affording the member concerned an opportunity of being heard, grant a certificate for the
recovery of the amount stated therein to be due as such arrears. He has been given powers
to investigate into the matter under the said sub-section, which he has to do according to
the principles of natural justice. In case, he does not give an adequate opportunity to the
party concerned and thus commits breach of principles of natural justice, that certificate can
be quashed on that ground. It is not necessary that a long procedure should necessarily be
provided by the enactment for resolving disputes between the parties. It is also not
necessary for the Legislature that remedy of appeal should be given under the enactment. If
the Legislature in its wisdom thinks in a particular case that no appeal should be provided it
cannot be held that the legislation is bad. The remedy of appeal is a creation of statute and
is not an inherent right of a persons. Same discretion has to be given to the person who
acts under a particular enactment. For the exercise of discretion it is necessary that some
guidance should be provided. In my view, there is sufficient guidance provided for
application of section 67-A. The learned counsel for the petitioners has submitted that even
the provision of revision as given in section 69 is not applicable to the present case whereas
the learned counsel for the respondents state that the aforesaid section is applicable. This
matter may be resolved in some other fit case. Even if it may be assumed that the remedy
of revision has not been provided in the Act against the order of the Registrar under section
67-A, the section cannot be struck down on this ground. It has been observed in Shri Hari
Chand v. Collector of Amritsar, AIR 1959 Punjab 19 (FB), that it is in the nature of
things impossible that all laws should have universal application, and that the Legislature
has to be constantly engaged in devising laws to suit various classes of persons and to meet
differing circumstances. It is further observed that classification is, therefore, a necessary
part of legislation and does not as such imply any discrimination intended to be prohibited
by our Constitution. In that case, the constitutionality of section 35 of the Punjab State Aid
to Industries Act, 1935, was challenged. Under Section 25 of that Act, the ?loan could be
recovered by execution through the Civil Court after obtaining a declaration from the
authorities concerned. Section 35 of the said Act provided that notwithstanding anything
contained in sections 23, 24 and 25, any amount payable to the State Government under
and Act or by virtue of a contract entered into under that Act including interest and cost, if
any, may with the previous sanction of the State Government, be recoverable as arrears of
land revenue. While interpreting the said section, it was observed that the discretion given
to the State Government under section 35 of the said Act is wide but it is neither unguided
nor arbitrary. Section 35 was consequently held to be constitutional. The learned counsel for
the petitioners has mainly placed reliance on Northern India Caterers (Private) Ltd., v.
State of Punjab, AIR 1967 Supreme Court 1581, by which section 5 of the Punjab
Public Premises and Land (Eviction and Rent Recovery) Act, 1959, was struck down as
discriminatory and violative of Article 14. The provisions of that Act are different. Section 4
of that Act provides that if Collector is of opinion that any person is in unauthorized
occupation of any public premises and that he should be deviated, he shall issue a notice in
writing calling upon such person to show cause why an order of eviction should not be
passed. Section 5 provides that if after considering the cause and the evidence produced by
such person and after giving him reasonable opportunity of being heard, the Collector is
satisfied that the public premises are in unauthorised occupation, he may make an order of
eviction. The contention that was raised was that that Act discriminated between the
occupants of public premises and those of private property and also discriminated between
the former inter se, and, therefore, infringed their right of equality before law and equal
protection under Article 14 of the Constitution. No guidance has been provided in the
enactment as to when the authority had to proceed under section 5 and in what
circumstances it could institute a civil suit. The observations were made by their Lordships
of the Supreme Court in that context. A similar matter came up before the Andhra Pradesh
High Court in Mandadi Chennakesavareddy v. The Divisional Co-operative Officer
Karimmagar, 1973 Cop L.J. 4. In that case vires of section 71 of the Andhra Pradesh Co-
operative Societies Act, 1964, which is similar to section 67-A of the Act, were challenged.
That section says that notwithstanding anything in the Act or in any other law for the time
being in force and without prejudice to any other mode of recovery which is being taken or
may be taken the Registrar on the application made by a primary agricultural credit society
for the recovery of arrears of any sum advanced by it to any of its members for seasonal
agricultural operations or for medium term purposes, and on its furnishing a statement of
accounts in respect of the arrears and after making such enquiry as deems fit issue a
certificate for the recovery of the amount stood therein to be due as arrears. There was
another section in that Act which provided for a reference of any dispute to the Registrar. It
was observed by the learned Bench as follows :-

"If was not disputed that the Legislature can provide specially for the recovery of
certain specific debts separately for the general provisions made for such purpose.
Such a classification it was agreed is permissible. If two procedures are prescribed
for the recovery of two such classified debts, it is doubtful whether Article 14 would
apply to such case.

***

If the debtor disputes the claim, an enquiry is necessarily to be held. It may be that
the section leaves it to the discretion of the Registrar or the authorised authority to
hold such enquiry as he deems fit. What is clear is that he was to hold an enquiry
but the manner of such enquiry is left to the Registrar or the authorised person. It
does not however make the Registrar or the authority a dictator out of that
provision. He has to follow the requirement of a fair enquiry. That means the
defaulter would have an opportunity to cross-examine the witnesses produced by the
society and would have a right to adduce such evidence as he desires fit. After the
completion of such an enquiry the principles of natural justice further require that
the Registrar or the competent authority would pass a reasoned order."

7. The aforesaid observations are applicable to the present case. The learned Bench held
that Article 14 of the Constitution does not hit section 71 of that Act. In the circumstances
stated above, in my view, section 67-A of the Act, is not ultra vires Article 14 of the
Constitution of India.

8. For the reasons recorded above, this writ petition fails and the same is dismissed with
costs. Counsel's fee Rs. 100/-.

Petition dismissed.
This judgement ranked 2 in the hitlist.

Jamiatpur Dheru Co-op. Farming Society v. State of Punjab, (P&H) : Law Finder Doc Id #
62872

1984 R.R.R. 573 : 1983 PLJ 467 : 1983 RLR 106 : 1983(1) Land.L.R. 400

PUNJAB AND HARYANA HIGH COURT

Before :- A.S. Bains, J.

Civil Writ Petition No. 1484 of 1975. D/d. 26.10.1982.

Jamiatpur Dheru Co-operative Farming Society - Petitioner

Versus
State of Punjab - Respondent

For the Petitioner :- J.C. Verma, Advocate.

For the Respondents :- D.S. Walia, Advocate, for A.G. (Punjab).

For the Private-Respondent :- Suresh Amba, Advocate.

Punjab Co-operative Societies Act, Sections 68(2) and 59 - Order of liquidator -

Appeal against order of Liquidator lies to State Government - Held that, orders of
Liquidator to be approved by Registrar - Assistant Registrar not competent to hear
appeal against order of Liquidator.

[Para 1]

JUDGMENT

A.S. Bains, J. (Oral) - Mr.Verma, learned counsel for the petitioner says that the Assistant
Registrar (respondent No. 2) was not competent to hear to appeal against the order of the
liquidator. I find merit in this contention. The orders of the liquidator are to be approved by
the Registrar. Hence, the order of the liquidator is the order of the Registrar, Co-operative
Societies. Against the orders of the Registrar, the appeal lies to the State Government
under section 68(2) of the Punjab Co-operative Societies Act, 1961.

2. Accordingly, this petition is allowed, the impugned orders are quashed and it is directed
that the appeal already decided by the Assistant Registrar exercising the powers of the
Registrar shall be re-decided by the State-Government and the parties are directed to
appear before the State Government on 16th November, 1982.

Petition accepted.
 Product S.No.723072561

This judgement ranked 1 in the hitlist.

Major Singh and Sakinder Singh v. State of Punjab, (P&H) : Law Finder Doc Id # 62807

1984 R.R.R. 457 : 1976 PLJ 195

PUNJAB AND HARYANA HIGH COURT

Before :- Gurnam Singh, J.

Civil Writ No. 911 of 1973. D/d. 1.7.1975.

Major Singh and Sakinder Singh - Petitioners

Versus

State of Punjab - Respondents

For the Petitioner :- Mr. J.S. Mavi, Advocate.

For the Respondent No. 1 :- Mr. T.S. Grewal, Advocate.

For the Respondent No. 3 :- Mr. I.S. Sidhu, Advocate.

A. Punjab Co-operative Societies Act, Sections 68 and 59(2)(b) - Order passed by

liquidator has to be approved by the Registrar - Such order appealable under
section 68 of the Co-operative Societies Act - Deemed to be order of Registrar -
Appeal lies to government.

[Para 6]

B. Punjab Co-operative Societies Act, Section 59 - Liability of each member to pay

- Determination of - Quasi judicial in nature - It is incumbent on the Liquidator to
issue notices to the members to show cause why they should not be saddled with
the liability proposed.

[Para 3]

Cases referred :-

Tara Chand v. State of Haryana and others, 1972 P.L.R. 376.

Dharam Pal v. Jagadhhri Thatera Co-operative Society, AIR 1954 Punjab 268.

JUDGMENT

Gurnam Singh, J. - Dhandoli Kalan Co-operative Agricultural Service Society No. 3

(hereinafter referred to as Society) became defaulter and was brought under liquidation.
Shri Bhag Singh Ganger was appointed as a liquidator and he vide order dated 9.12.1972,
duly endorsed by Assistant Registrar, Co-operative Societies, Sangrur, on 14.12.1972
exercising the powers of Registrar, Co-operative Societies, Punjab, order Major Singh and
Sakinder Singh petitioners and Harminder Singh and Joginder Singh, respondents Nos. 4
and 5, respectively, to pay Rs. 6,82,825/- as debts and liquidation expenses as members
and Secretary towards the assets of the Society. Major Singh and Sakinder Singh petitioners
filed an appeal against the order dated 14.12.1972 before the State of Punjab through
Deputy Secretary, Co-operative Department, alleging the same to be illegal, without
jurisdiction, void and against the principles of natural justice and equity. Their main grounds
are that they were not given an opportunity to defend themselves before fixing the liability
against them and requiring them to make payment of the entire amount of Rs. 6,82,825/0
and that the order of declining to entertain the appeal was wrong because under law an
appeal against the order of the Registrar lies to the Government.

2. The Assistant Registrar, Co-operative Societies, Sangrur, respondent No. 2 filed his
affidavit stating that notices to both the petitioners, Sh. Harminder Singh respondent No. 4
and Joginder Singh, respondent No. 5 were issued by the liquidator under registered covers
on 16.11.1972, that Sikander Singh petitioner and respondent No. 4 refused to receive the
notices and that Shri Joginder Singh, respondent No. 5 accepted the service of the notice.
No comments were given regarding respondent No. 1 having declined to entertain the
appeal wrongly for lack of jurisdiction.

3. Sikander Singh petitioner in his affidavit stated that the petitioners were never a party to
the winding up process or in the liquidation proceedings and were never issued any notices
nor were given any opportunity to defend at any stage. Even if the replay filed by
respondent No. 2 be accepted as correct, it is not established that Major Singh petitioner
received any notice from the liquidator before the order, copy of which is annexure B, was
passed by him. The proceedings for determining liability of each member of the Society to
pay are quasi judicial in nature and therefore, it is incumbent upon the liquidator to issue
notices to the members of the Society to show cause as to why they should not be held
liable. In 1972 P.L.R. 376 Tara Chand and others v. The State of Haryana and
others, it has been held :-

"that since the liability to pay of each member has to be determined, the
proceedings for determination are quasi-judicial in nature and it is incumbent upon
the liquidator to issue a notice to the members to show cause why they should not
be saddled with the liability proposed. If the member does not object, the liability
can be fastened on him, but if he raises an objection that objection has to be gone
into and decided. It is not permissible to the liquidator to pass an order of
contribution against a member without issuing such a notice to him."

4. Earlier in AIR 1954 Punjab 268, Dharam Pal v. the Jagadhhri Thatera Co-
operative Society, it was held that a notice was necessary to be issued to a member
before determining his liability. Shri Bhag Singh, respondent No. 3, the liquidator has not
cared to file any return to the petition nor appealed personally in the Court and therefore,
the return filed by respondent No. 2 is of no help on this point.

5. Moreover, the order, copy of which is annexure B, of the liquidator, duly endorsed by the
Registrar is not a speaking order and does not give any indication that notices were issued
to the members before the order was passed. The order is also silent about the individual
liability of the members. Thus this order cannot be said to be a speaking order. It is
arbitrary to the core and cannot be upheld and is liable to be quashed.

6. The petitioners in paras Nos. 13 and 14 of the writ petition alleged that they filed an
appeal against the order dated 14.12.1972 before respondent No. 1 but he declined to
entertain the same and that the ruling cited as "1967 P.L.R. Note 59" was held to be not
applicable to the facts of the case. No comments were given regarding para No. 13 and para
No. 14 was denied for want of knowledge, by respondent No. 2. Respondent No. 2 in his
affidavit stated that powers under section 59 of the Co-operative Societies Act have been
delegated to the Assistant Registrar vide Punjab Government Notification dated 19.11.1969.
Bhag Singh Ganger, respondent No. 3, had acted as a liquidator in this case. Vide section
59(2) of the same Act the powers of the liquidator are subject to the control of the
Registrar. The order, copy which is annexure B, made by the liquidator has been approved
by the Assistant Registrar, Co-operative Societies, Sangrur, exercising the powers of
Registrar, Co-operative Societies, Sangrur. An order passed by a liquidator of a Co-
operative Society under clause (b) of sub-section (2) of section 59 of the Co-operative
Societies Act is required to be submitted by him to the Registrar for approval because the
latter is authorised to modify such order or refer it back to the liquidator for further enquiry
or action. In the instant case the order of the liquidator, copy of which is annexure B, was
approved by the Registrar. Such order is appealable under section 68 of the Co-operative
Societies Act. Since the order was approved by the Registrar, so it will be deemed to be his
order in the eyes of law and the appeals to the Government. Thus the order of the Deputy
Secretary, Co-operative Department, copy of which is annexure A, is liable to be set aside.

7. The result is that this petition is accepted with costs and the orders, copies of which are
annexure s A and B are quashed. The liquidator will, however, be at liberty to redetermine
the matter after notice to the members of the Society. Counsel fee is assessed as Rs. 100/-.

Petition accepted.