Scope of Section 69 of the Kerala Co-operative Societies Act, 1969

The Kerala High Court on 5 July 2011 in Raghavan Vs. State of Kerala, 2011 (3) KLT 500 : 2011 (3) KLJ 593, ILR 2011 (3) Ker. 650 : 2011 (3) KHC 369 held that “to attract section 69 of the Kerala Co-operative Societies Act, 1969 the dispute raised by the member of a society against that society should relate to the business, constitution, establishment or management of the society.

Justice P.N. Ravindran also held that there is no merit in the writ petition. The writ petition fails and is dismissed with the observation that the dismissal of this writ petition or the rejection of the arbitration case will not stand in the way of the petitioner from instituting a suit in the competent civil court seeking appropriate reliefs.

# Section 69 of the Kerala Co-operative Societies Act, 1969

While dismissing the instant case the Court held that the claim made by the petitioner does not relate to the business, constitution, establishment or management of the third respondent society. Therefore the mere fact that the claim made by the petitioner against the society is for payment of money or the fact that the petitioner is a member of the society will not confer on the Arbitrator the jurisdiction to entertain the petition.

The allegation in the petition is that the death of the petitioner’s wife was caused by a wrongful act, neglect or default on the part of the society and its office bearers.

In short the claim is one for compensation under section 1A of the Fatal Accidents Act. Such a claim falls outside the scope of section 69 of the Act.

The Joint Registrar of Co-operative Societies was therefore perfectly right in declining to entertain the petition.

#

Business of the Society

Reliance is placed on the decision of a learned single Judge of the Court in Sekharan v. State of Kerala and others, 1976 KLT 137 to contend that a claim for money by a member of a society against the society is a dispute as defined in the Act, irrespective of whether it relates to the business of the society or not.

In Sekharan v. State of Kerala and others (supra) the question considered was whether a claim for damages by a society against the contractor entrusted with the construction of a building for the society, the object of which included maintenance and letting out of godowns for storage of agricultural produce of its members is a dispute touching the business of the society and can be referred to the Registrar for decision under section 69(1)(f) of the Act.

After a survey of the statutory provisions and the case law on the point, the learned Judge held as follows:-

“7. ….. The definition contained in S.2(i) of the Kerala Act is an inclusive definition. As per the definition a claim in respect of any sum payable to or by a society will also be a dispute irrespective of the fact whether it arises in a matter touching the business of the society or not. Under S.69(1)(f) of the Act if the dispute is between the society and a person other than a member of the society with whom the society has or had business transaction, the Registrar has got the power to settle the same by arbitration. Then the only question is whether the dispute in question is one which is capable of being resolved by the Registrar. The damages claimed is the actual loss incurred by the society to complete the work by another contractor. It cannot be said that this is a dispute which is not capable of being resolved by the Registrar in arbitration under the Act.”

The learned counsel for the petitioner contended, relying on the aforesaid decision, that a claim in respect of any sum payable to or by a society will also be a dispute as defined in the Act irrespective of whether it touches the business of the society or not and therefore, the claim made by the petitioner is maintainable.

From a reading of the aforesaid decision it is evident that the business of the society, which was the plaintiff in the arbitration case before the Arbitrator, was to construct buildings and to let them out to its members for use as godowns to store manure and agricultural produce. That apart, the claim was made against a person with whom the society had a business transaction and was referable to section 69(1)(f) of the Act. Therefore, the dispute in that case was one touching the business of the society.

In K.C.Varkey v. The Director of Industries and Commerce, Trivandrum & Others, ILR 1978 (2) Kerala 143, a Division Bench of High Court considered the question whether the dispute between the owner of a building and the co-operative society to which the building had been let out on rent, is a dispute as defined in the Act.

The petitioner in that case had rented out a building to the Kerala State Handicrafts Apex Co-operative Society Limited, Ernakulam, as per a lease dead dated 27.10.1965. When the rent was kept in arrears the landlord moved the Rent Control Court for an order of eviction. While the proceedings were pending the society surrendered possession of the tenanted premises.

Thereafter the society filed a claim before the Director of Industries and Commerce in his capacity as Registrar of Industrial Co-operative Societies seeking to recover from the landlord the amount, which according to the society, was wrongfully retained by the landlord from out of the advance rent deposited by the society.

The Director of Industries and Commerce transferred the case to the Senior Co-operative Inspector attached to the District Industries Office, Ernakulam, after designating him as the Arbitrator to decide the case. The landlord raised a dispute before the Arbitrator regarding the maintainability of the claim petition.

He thereafter moved High Court for an order directing the Arbitrator to forbear from proceeding with the action initiated against the society. Though the society relied on the decision of the learned single Judge in Sekharan v. State of Kerala, (supra) the Division Bench distinguished the said case on the ground that the society involved in that case was engaged in the business of constructing and letting out godowns and therefore the dispute raised in that case related to the business of the society.

In K.C.Varkey v. The Director of Industries and Commerce, Trivandrum & Others, (supra) the Division Bench held as follows:-

“(3) … Clause (f) of Section 69(1) provides that if a dispute arises between a society and a person other than a member of the society who has been granted a loan by the society or with whom the society has or had business transactions or any person claiming through such a person, such dispute shall be referred to the Registrar for decision, and no court shall have jurisdiction to entertain any suit or other proceeding in respect of or such dispute. There is no case that the petitioner had been granted any loan by the society; but it is contended by the respondents that the petitioner will come within the description “a person, other than a member of the society with whom the society has or had business transactions”. The 3rd respondent co-operative society has been formed for the purpose of doing business in handicraft articles. It is no part of the business of the society to take buildings on rent, although for the purpose of its business the society may have incidentally to take on lease premises for its use. But in entering into a transaction of lease for the said purpose the society is not transacting business or entering into a business transaction with the petitioner.”

Later, a Full Bench of High Court in Meeran Unni v. Kottayam District Co-operative Bank, 1985 KLT 384, approved the decision of the Division Bench in K.C.Varkey v. The Director of Industries and Commerce, Trivandrum & others (supra).

The issue that arose before the Full Bench of this Court was whether a suit for specific performance of an agreement to lease out a shop building belonging to the Kottayam District Co- operative Bank to the plaintiff is barred under section 69(1)(f) and section 100 of the Act.

The Full Bench held that construction of buildings and letting them out to tenants does not fall under any of the objects of the society, that the society is engaged in the business of banking and therefore, section 69(1) of the Act has no application.

The Full Bench also held that as per section 100 of the Act, the jurisdiction of the civil court is barred only in respect of matters for which provision is made in the Act.

It was accordingly held that a suit for specific performance of an agreement entered into by the society to lease out a building belonging to it to a tenant is not barred under section 100 of the Act.

Recently in Muhammed Kunhi v. Kanhirode Weavers Co- operative Society Ltd., 2009 (2) KLT 819 a learned single Judge of High Court considered the question whether a dispute arising out of the construction of a building by a contractor for the use of the society is a dispute which falls outside the scope of section 69 (1) of the Act.

After a survey of the case law on the point and an analysis of the relevant statutory provisions, the learned Judge held that in order to attract section 69 of the Act, the dispute must necessarily relate to the business of the society or its constitution, establishment or management and that if the dispute does not relate to the business of the society or its constitution, establishment or management, it falls outside section 69(1) of the Act.

# Facts of the Case

The short question that arises for consideration in this writ petition is whether a petition seeking compensation from a co- operative society for the death of a member of that co-operative society due to an alleged act of negligence on the part of that co- operative society and its office bearers is maintainable before the Arbitrator under section 69 of the Kerala Co-operative Societies Act, 1969.

The petitioner is a member of the Balagram Service Co-operative Bank Ltd., a co-operative society registered under the Kerala Co-operative Societies Act, 1969. The house, where the petitioner is residing, is situate on the northern side of a building belonging to the bank, which was used to store fertilizer and other goods.

A compound wall separated the two properties. A portion of the said compound wall collapsed resulting in the death of the petitioner’s wife, who was also a member of the bank. A Crime was registered before Nedumkandom Police Station.

Long thereafter, the petitioner filed petition under section 69 of the Act, before the Joint Registrar (General) seeking payment of the sum of Rs.2,00,000/- as compensation from the bank.

In that petition it was inter alia alleged that the death of the petitioner’s wife was caused solely due to the negligent construction of the compound wall by the society.

The petitioner also alleged that the President and Secretary of the society, were not properly monitoring the construction work and therefore they are jointly and severally liable to compensate the petitioner.

The Joint Registrar (General) informed the petitioner’s counsel that the said petition was rejected as not maintainable on the ground that it does not arise out of a dispute as defined in the Act.

The petitioner filed an appeal before the Kerala Co-operative Tribunal but the Tribunal declined to receive the same and returned it stating that no appeal or revision will lie from a non-speaking order.

It is on these averments that the instant writ petition has been filed seeking a direction to the Joint Registrar of Co-operative Societies to entertain the arbitration case and to dispose it of on the merits.

It is contended that before the petition filed under section 69 of the Act was rejected, the petitioner was not put on notice or heard, that the rejection is by a non-speaking order and that the Arbitrator is competent to entertain the dispute raised by the petitioner.

Advocate Naveen Thomas appeared for the petitioner and advocates S. Abdul Salam and Anu Sivaraman, learned Special Government Pleader appeared for respondents.

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