M.K.Indrajeet Sinhji Cotton P.Ltd. Vs. Narmada Cotto Coop.Spg.Mills Ltd. & Ors, on 26th April, 2016; Supreme Court of India: Judgement

data-matched-content-ui-type="image_card_sidebyside" data-matched-content-rows-num="1" data-matched-content-columns-num="4"

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No.766/2016
(arising out of SLP(C) No. 17535/2011)
M.K.INDRAJEET SINHJI COTTON P.LTD. …..Appellant (s)

VERSUS

NARMADA COTTO COOP.SPG.MILLS LD.& ORS …Respondent(s)

J U D G M E N T

S A BOBDE, J

Leave granted.

2. This appeal is preferred by a Company which has been refused
permission to continue the suit filed by it before the City Civil Court,
Ahmedabad by the Registrar of Co-operative Societies on the ground that the
suit is not tenable because notice of its institution required by Section
167 of the Gujarat Co-operative Societies Act, 1961 (hereinafter referred
to as the Co-operative Societies Act).
3. The appellant, a Private Limited Company entered into a lease
agreement dated 1-10-1998. Under the agreement it took on lease the mill
of the respondent Cooperative Society for a period of five years. Disputes
having arisen, the appellant filed a suit against the respondent society on
26-4-2000 before the City Civil Court at Ahmedabad. The appellant sought
recovery of Rs.2,51,89,606.79/- (Rupees Two Crores, Fifty One Lakhs, Eighty
Nine Thousand, Six Hundred Six and Paise Seven Nine only) with interest at
the rate of 21% per annum.
4. Within a year of filing the suit, the defendant Society, the
respondent herein, was wound up by an Order dated 19-4-2001 passed by the
Commissioner, Cottage and Village Industries, Gujarat. Since the suit had
been filed prior to the winding up order, the appellant was obliged to
apply for leave to continue the suit by virtue of Section 112 of the Co-
operative Societies Act. That Section reads as follows:-

data-matched-content-ui-type="image_card_sidebyside" data-matched-content-rows-num="1" data-matched-content-columns-num="4"

“112.Bar of suit in winding up and dissolution matters

“Save as expressly provided in this Act, no Civil Court shall take
cognizance of any matter connected with the winding up or dissolution of a
society under this Act; and when a winding up order has been made no suit
or other legal proceedings shall lie or be proceeded with against the
society or the liquidator, except by leave of the Registrar, and subject to
such terms as he may impose:

Provided that where the winding up order is cancelled, the provisions
of this section shall cease to operate so far as the liability of the
society and of the members thereof to be sued is concerned, but they shall
continue to apply to the person who acted as liquidator.”
(emphasis supplied)
5. The controversy is: whether the Registrar, while considering whether
leave should be granted can hold that the suit itself is not tenable for
want of notice. Initially the Registrar passed a non-speaking order dated 6-
6-2003 refusing permission to continue the suit. On 28-11-2005, however,
the Registrar passed a speaking order refusing permission to continue the
suit. It is this order that has given rise to the present controversy. The
main reason why the Registrar refused permission to continue the suit for
recovery of money against the respondents is that according to the
Registrar, Section 167 of the Co-operative Societies Act requires a
plaintiff to give notice to the Registrar stating the cause of action and
the relief which the plaintiff claims. Such a notice not having been given
by the appellant, the appellant is not entitled for leave to continue the
suit against the defendant. In other words, according to the Registrar,
the plaintiff’s suit is not tenable for want of notice under Section 167
and, therefore, leave to continue such a suit is liable to be refused under
Section 112 of the Co-operative Societies Act. Section 167 reads as under:
“167. Notice necessary in suits

Save as otherwise provided in this Act, no suit shall be instituted
against a society, or any of its officers, in respect of any act touching
the business of the society, until the expiration of two months next after
notice in writing has been delivered to the Registrar or left at his
office, stating the cause of action, the name, description and place of
residence of the plaintiff and the relief which he claims, and the plaint
shall contain a statement that such notice has been so delivered or left.”

6. In view of such refusal, the appellant’s suit became untenable. The
appellant, therefore, challenged the order of the Registrar refusing leave
before the learned Single Judge of the Gujarat High Court. The learned
Single Judge allowed the writ petition and quashed the Registrar’s Order.
The learned Single Judge held that the question whether a notice under
Section 167 was necessary in a given case could only be decided by a
competent civil court since such a decision required an inquiry and a
decision whether the suit was in respect of any act touching the business
of the society and generally whether Section 167 applied to such a suit.
The learned Single Judge also held that Section 112 of the Act casts a duty
on the Registrar to grant or refuse leave and only such an administrative
decision can be taken by the Registrar. Further, such a limited
administrative decision can be taken by the Registrar only on
considerations germane to the grant or refusal of the leave and not on
considerations which were within the jurisdiction of a competent city civil
court.
7. Aggrieved, the respondents preferred an appeal before a Division
Bench of the Gujarat High Court. The Division Bench has allowed the appeal
and thus upheld the order of the Registrar refusing leave to continue the
suit on the ground that the suit is not tenable by virtue of failure to
give notice under Section 167 of the Co-operative Societies Act. The
appellant is thus in appeal.
8. We have heard the learned counsel for the parties.
9. A decision regarding the correctness or otherwise of the view of the
Division Bench must be taken with regard to the relevant provisions of the
Co-operative Societies Act. It is also necessary to ask if the decision
that the suit is not tenable if notice is not given is judicial in nature.
Section 167 is preceded by Section 166 which bars the jurisdiction of
Courts in any matter concerned with the winding up and dissolution of the
Society, vide Section 166 (1)(c). The clear intention of the legislature is
to bar a civil court from entertaining any matter concerned with the
winding up and dissolution of the society. In order to give effect to this
provision, the legislature has enacted Section 167 which makes it mandatory
for a plaintiff who intends to institute a suit against a society or any of
its officers in respect of an act touching the business of the society to
give a clear notice of his intention to sue. The Section prohibits a
plaintiff from instituting a suit until the expiration of two months after
notice in writing has been delivered to the Registrar. There seems little
doubt that this Section imposes a mandatory requirement that if the
conditions prescribed by it exist, that is to say if the suit proposed to
be filed is against a society or any of its officers and is in respect of
any act touching the business of the society then it must be preceded by a
notice of two months. It is obvious that the question whether Section 167
is attracted to a particular suit or not depends upon an inquiry into the
nature of the suit, in particular whether it affects the business of the
society and the parties to the suit. Such a decision is obviously within
the jurisdiction and competence of the civil court where the suit is
instituted and must therefore be regarded as judicial.
10. The question that thus arises is whether a Registrar who is empowered
by Section 112 to decide the limited question whether leave should be
granted or refused to institute or to continue a suit against a society in
liquidation is competent to take into account whether a suit is tenable for
want of notice under Section 167 of the Co-operative Societies Act and on
that basis refuse permission to institute or continue a suit, if he finds
it untenable.
11. It is therefore necessary to examine the scope of the two provisions.
Section 112 bars a Civil Court from taking cognizance of any matter
connected with winding up of a society. It further confers the power on
the Registrar to grant or refuse leave to institute a suit against such
society or the liquidator where a winding up order has been made against
the society. We are concerned here with the nature and scope of the power
conferred on the Registrar. Such power is conferred on the Registrar to
consider whether a suit should be filed against a society which is under
liquidation. The obvious considerations that must be taken into account
are whether the suit would have the effect of dissipating the properties or
diverting the properties of the society in liquidation towards one creditor
i.e. the plaintiff instead of being equitably distributed amongst the whole
body of creditors as contemplated by the provisions for winding up of the
society. The Registrar is not concerned with the merits or the tenability
of the suit which is, in any case not before him, and indeed cannot be
because such a suit can only be tried and conclusively decided by a Civil
Court. Naturally it is the Civil Court which can alone decide whether the
suit is triable and tenable. It would thus be outside the scope of the
Registrar’s power to take into account the factor whether the suit is
tenable in law or not. The question of tenability being judicial is purely
within the jurisdiction and competence of the court where the suit is
pending. This must be left entirely to the Civil Court as intended by the
Legislature. There is no doubt that a question whether a suit is tenable
under Section 167 of the Co-operative Societies Act for want of notice
under the said provision is a question within the exclusive competence of a
Civil Court, as indeed all questions of tenability are. Thus, the
Registrar cannot look into the question whether the suit is tenable for
want of notice and decide the question directly or impliedly and thereby
decide whether leave to institute or continue a suit could be granted or
withheld.
12. In the present case the Registrar having refused leave to continue
the suit on the ground that the suit pending before the Court is not
preceded by a notice under Section 167 of the Act has acted without
jurisdiction; having taken into account a factor which he was not competent
to take into account and determine the grant of leave to proceed with the
suit. As a matter of law the decision to hold that the suit is not tenable
is a decision which conclusively determines the suit and being judicial can
be taken by the Civil Court alone. The Registrar cannot hold the suit to
be untenable even for the purpose of considering grant of leave. In other
words, the Registrar has no jurisdiction to hold that the suit is not
tenable.
13. We thus have no doubt that the order of the Registrar dated 28-11-
2005 refusing leave to the appellant on the ground that the notice under
Section 167 has not been issued therefore the suit is not tenable, is
liable to be set aside. It is not possible to agree with the view of the
Division Bench that the Registrar must be allowed to consider whether
notice has been given or not and, therefore, whether the suit is
maintainable or not because if such power is not conceded to the Registrar,
it would result in the civil court taking cognizance of a matter which it
would have no power to take cognizance of. This argument is completely
untenable where the question is one of leave to continue a suit as distinct
from leave to institute a suit. It is only in the latter case that this
reasoning would have any relevance. In any case, it is not the business of
the Registrar to consider the merits and in particular the tenability of a
pending suit and hold it to be untenable and thereupon refuse leave to
continue the suit. The Civil Court is perfectly competent to decide whether
the suit before it is tenable or not.
14. In the result, the appeal succeeds and is hereby allowed. The
Registrar shall decide the question of permission to continue the suit,
afresh.

………………………….J (S.A. BOBDE)

…………………………..J (AMITAVA ROY)

NEW DELHI,
26th April, 2016

data-matched-content-ui-type="image_card_sidebyside" data-matched-content-rows-num="4" data-matched-content-columns-num="4"

Read AlsoCase Brief – M.K.Indrajeet Sinhji Cotton P.Ltd. Vs. Narmada Cotto Coop.Spg.Mills Ltd. & Ors