http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

CASE NO.: Appeal (civil)  4488 of 2004

PETITIONER: Morinda Cooperative Sugar Mills Ltd.             

RESPONDENT: Morinda Coop. Sugar Mills Workers Union  

DATE OF JUDGMENT: 12/07/2006

BENCH: ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

       Appellant calls in question legality of the judgment  rendered by a learned Single Judge of the Punjab and Haryana  High Court dismissing the appeal filed by the appellant under  Section 100 of the Code of Civil Procedure, 1908 (in short the  ’Code’). The defendant\026Morinda Co-operation Society Workers’  Union (hereinafter referred to as the ’Union’) as plaintiff filed a  suit claiming dearness allowance on the wages plus fixed  allowance in accordance with para 317 (ii) of the Third Wage  Board Report.  The first appellate court reversed the judgment  and decree of the trial court, holding that the subject matter of  the suit cannot be said to be a dispute touching the business  of the society.  Accordingly the appeal was allowed.  Second  Appeal was filed by the defendant (present appellant)  contending that the view of the trial court was justified and  that of the first appellate court was not justified.  

The plaintiff \026Union filed the suit seeking declaration to  the effect that the members of the plaintiff \026 Union was  entitled to the benefit of the Variable Dearness Allowance (for  short the ’VDA’) on the basic wages plus fixed allowance in  accordance with para 317(ii) of the Third Wage Board Report  with a consequential relief for permanent injunction  restraining the defendant from withdrawing the payment of  VDA from the fixed amount of Rs.150 which was being paid to  the members of the Union.  Defendant took the stand that  since small notice under Section 79 of the Punjab Co-operative  Societies Act, 1961 (in short the ’Act’) is required, the suit was  not maintainable.  The trial court on the basis of the pleadings  framed five issues which are as follows:

1.      Whether the plaintiff is entitled to the declaration as  prayed for? 2.      Whether the plaintiff is entitled to the injunction as  prayed for? 3.      Whether the suit is not maintainable in the present  form? 4.      Whether the plaintiff has no locus standi to file the  present suit? 5.      Whether the suit is liable to be dismissed on the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

ground of non service of notice under the Punjab Co- operative Societies Act?

       The trial court held that the defendant has no right to  withdraw the VDA in accordance with the recommendations.   Issues 1 and 2 were accordingly answered.  It was further held  that defendant has no right to withdraw VDA and if any  clarification for withdrawal of VDA is required, opportunity of  hearing was required to be given to the plaintiff and it should  have been obtained from the Third Wage Board.  The Issues 1  and 2 were accordingly answered.  The suit was held to be  maintainable as no defect on the form of the suit was pointed  out.  But on issue No. 4 it was held that service of notice was  mandatory.           In the Second Appeal it was urged that the First  Appellate Court lost sight of the fact that expression "business  of the society" used in Section 79 would necessarily include  financial involvements concerning payment of salary and  allowance to the plaintiff\026Union.  It was further pointed out  that disputes of the nature raised touched the constitution,  management or business of the cooperatives societies and was  required to be referred to "Arbitration" under Section 55(1) of  the Act.  The High Court after analyzing the Bye law No.5 of  the appellant, came to hold that the first appellate court was  justified in its conclusion.  Accordingly the Second Appeal was  dismissed.

       Learned counsel for the appellant submitted that the  object of the society was to promote economic interest of its  members and if the effect of costs involved in production of  sugar was the subject matter of adjudication, obviously notice  under Section 79 of the Act was mandatorily necessary. It was  submitted that the expression "touching business of the  society" is wide enough to encompass all aspects which have  effect on the economic interest of the members and that is why  trial court was justified in its view.

       Per contra learned counsel for the respondent submitted  that the High Court has analysed the legal position, the  objects and has come to the right conclusion by upholding the  judgment and decree of the first appellate court.

Sections 55 and 79 of the Act read as follows : "55. Disputes which may be referred to  arbitration \026 (1) Notwithstanding anything  contained in any law for the time being in force, if  any dispute touching the constitution,  management or the business of a cooperative  society arises \026

(a)     among members, past members and  persons claiming through members, past  members and deceased members ; or

(b)     between a member, past member or  person claiming through a member, past  member or deceased member and the  society, its committee or any officer,  agent or employee of the society or  liquidator, past or present; or (c)     between the society or its committee and  past committee, any officer, agent or  employee,  or any past officer, agent or  past employee or the nominee, heirs or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

legal representatives of any deceased  officer, deceased agent, or deceased  employee of the society; or  (d)     between the society and any other co- operative society, between a society and  liquidator of another society or between  the liquidator of one society and the  liquidator of another society:

Such disputes shall be referred to the Registrar  for decision and no Court shall have jurisdiction  to entertain any suit or other proceeding in  respect of such dispute.

2.      For the purposes of sub-section (1), the  following be deemed to be disputes touching  the constitution, management  or the  business of co-operative society, namely \026

(a)     a claim by the society for any debt or  demand due to it from a member or the  nominee, heirs or legal representatives of a  deceased member, whether such debt or  demand be admitted or not: (b)     a claim by a society against the  principal debtor where the society has  recovered from the surety any amount in  respect of any debt or demand due to it from  the principal debtor as a result of the default  of the principal debtor, whether such debt or  demand is admitted or not: (c)     any dispute arising in connection with  the  election of any officer of the society.

3.      If any question arises whether a dispute  referred to the Registrar under this Section is or  not a dispute touching the constitution,  management or the business of a co-operative  society, the decision thereon of the Registrar  shall be final and shall not be called in question  in any Court.

79.     Notice necessary in suits \026 No suit shall be  instituted against a co-operative society or any of its  officers in respect of any act touching the business  of the society until the expiration of three months  next after notice in writing has been delivered to the  Registrar or left at his office stating the cause of  action, the name, description and place of residence  of the plaintiff and the relief which he claims, and  the plaint, shall contain a statement that such  notice has been so delivered or left."   The object of Section 55 of the Act is clear.  If any dispute  touches the constitution, management or business of any  cooperative society arising between specified category of  members has to be referred to arbitration. Similarly no  cooperative society or its officers should be dragged to  litigation before the Civil Court in respect of any act touching  the business of such a society unless notice required to be  given in writing as has been issued to the Registrar of the  society.  Bye law No. 5 of the Bye Laws of the Appellant, so far  as relevant, reads as follows:                                  "Objects

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

               The objects of the Mills shall be to  promote the economic interest of its members  and for this purpose to carry on the manufacture  of sugar, sugar products and other ancillary  products and to make arrangements for their sale  and also to take necessary steps and measure for  the development of sugarcane and sugar beet.   For the purpose of attaining the aforesaid objects,  it shall be competent for the Mills :-                                 xxx    xxx

         "(d) To Purchase sugarcane of  sugar beet preferably  from grower  members and others and to sell the  finished products so manufactured.

                         xxx    xxx

       (j)   To instal plant & Machinery for  utilization of ancillary/bye products and  bury raw materials for the same and sell  finished products in the course of the  utilizing and marketing of the  ancillary/bye products.                  xxx    xxx

       (p)     To do such other things as are  incidental or conductive to the  attainment of all or any of the above  objects."                  The emphasis made by learned counsel for the appellant  is that when the object is to promote the economic interest,  any thing which has link with the economic interest has to be,  per force, taken as touching the business of the society.

       This Court in O.N. Bhatnagar v. Smt. Rukibai Narsindas  and Others  (AIR 1982 SC 1097) observed inter alia as follows:  

       "In the present case the society is a tenant co- partnership type housing society formed with the  object of providing residential accommodation to its  co-partner tenant members. Now, the nature of  business which a society carries on has necessarily  to be ascertained from the object for which the  society is constituted, and it logically follows that  whatever the society does in the normal course of  its activities such as by initiating proceedings for  removing an act of trespass by a stranger, from a  flat allotted to one of its members, cannot but be  part of its business.  It is as much the concern of  the society formed with the object of providing  residential accommodation to its members, which  normally is its business, to ensure that the flats are  in occupation of its members, in accordance with  the bye-laws framed by it, rather than of a person in  an unauthorized occupation, as it is  the concern of  the member, who lets it out to another under an  agreement of leave and licence and wants to secure  possession of the premises for his own use after the  termination of the licence.  It must, therefore, follow  that a claim by the society together with such  member for ejectment of a person who was  permitted to occupy having become a nominal

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

member thereof, upon revocation of licence, is a  dispute falling with the purview of Section 91(1) of  the  Act."                                                                  (Underlined for emphasis)

In Deccan Merchants Co-operative Bank Ltd. v. M/s.  Dalichand Jugraj Jain (1969 (1) SCR 887) it was held as  follows :

"Five kinds of disputes are mentioned in sub- section:  

First, disputes touching the constitution of  a society: secondly, disputes touching election  of the office bearers of a society: thirdly,  disputes touching the conduct of general  meeting of a society: fourthly, disputes  touching the management of a society: and  fifthly disputes touching the business of a  society.  It is clear that the word " business" in  this context does not mean affairs of a society  because election of office-bearers, conduct of  general meetings and management of a society  would be treated as affairs of a society.  In this  sub-section the word "business" has been used  in a narrower sense and it means the actual  trading or commercial or other similar  business activity of the society which the  society is authorized to enter into under the  Act and the Rules and its bye-laws."

       In Co-operative Central Bank Ltd. and others etc. v.  Additional Industrial Tribunal, Andhra Pradesh, Hyderabad  and others etc. [1969 (2) SCC 43]  it was held that alteration of  the conditions of the service of the workman would not be  covered by the expression "touching the business of the  society".  It was held inter alia as follows :

       "Applying these tests, we have no doubt at all  that the dispute covered by the first issue referred  to the Industrial Tribunal in the present cases  could not possibly be referred to decision to the  Registrar under Section 61 of the Act.  The dispute  related to alterations of a number of conditions of  service of the workmen which relief could only be  granted by an Industrial Tribunal dealing with an  industrial dispute.  The Registrar, it is clear from  the provisions of the Act, could not possibly have  granted the reliefs claimed under this issue  because of the limitations placed on his powers in  the Act itself.  It is true that Section 61 by itself  does not contain any clear indication that the  Registrar cannot entertain a dispute relating to  alteration of conditions of service of the employees  of a registered society: but the meaning given to  the expression "touching the business of the  society".  In our opinion, makes it very doubtful  whether a dispute in respect of alteration of  conditions of service can be held to be covered   this expression.  Since the word "business" is  equated with the actual trading or commercial  or  other similar business activity of the society, and  since it has been held that it would be difficult to  subscribe to the proposition that whatever the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

society does or is necessarily required to do for the  purpose of carrying out its objects, such as laying   down the conditions of service of its employees,  can be sad to be a part of its business, it would  appear that a dispute relating to conditions of  service of the workmen employed by the society  cannot be held to be a dispute touching the  business of the society."

                                               (Underlined for emphasis)

When the factual background are tested in the  background of principles set out  in O.N. Bhatnagar’s case  (supra), Deccan Merchant’s case (supra) and Cooperative  Central Bank’s case (supra), the conclusions of the First  Appellate Court as affirmed by the High Court do not suffer  from any infirmity to warrant interference.

       The appeal is dismissed.  No costs.