Analysis of Section 164 of the Maharashtra Co-operative Societies Act, 1960

An Exposition of Section 164 of the Maharashtra Co-operative Societies Act, 1960: The Imperative of Pre-Suit Notice

Introduction

The Maharashtra Co-operative Societies Act, 1960 (hereinafter "MCS Act") is a comprehensive legislation governing the formation, functioning, and regulation of co-operative societies within the State of Maharashtra. Among its various provisions designed to ensure orderly conduct and dispute resolution, Section 164 holds significant procedural importance. This section mandates a pre-suit notice to the Registrar of Co-operative Societies before initiating legal proceedings against a society or its officers concerning acts "touching the business of the society." This article endeavors to provide a scholarly analysis of Section 164, examining its statutory language, judicial interpretations of its key phrases, its mandatory nature, and the consequences of non-compliance, drawing upon relevant case law provided.

The Statutory Mandate: Section 164 of the MCS Act, 1960

Section 164 of the MCS Act, 1960, lays down a pre-condition for the institution of suits against co-operative societies or their officers. The provision, as quoted in Suprabhat Co-Operative Housing Society Ltd. v. Span Builders (2002 SCC ONLINE BOM 314, Bombay High Court), reads as follows:

“164. Notice necessary in suits. 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.”

The legislative intent behind this provision appears to be multi-fold: to provide an opportunity for the Registrar to examine the matter and potentially mediate or resolve the dispute before it reaches the courts, to protect societies from frivolous or vexatious litigation, and to ensure that the society and the Registrar are adequately informed of the impending legal action. The requirement for the plaint to aver the service of such notice underscores its procedural significance.

Judicial Interpretation of "Any Act Touching the Business of the Society"

The applicability of Section 164 hinges critically on the interpretation of the phrase "any act touching the business of the society." The judiciary has, through various pronouncements, delineated the scope of this expression.

In Suprabhat Co-Operative Housing Society Ltd. v. Span Builders (2002 SCC ONLINE BOM 314, Bombay High Court), the Bombay High Court held that a suit for recovery of dues arising from agreements for the construction of flats for a co-operative housing society "is clearly one which touches the business of the society." The Court noted that the objects of the society included constructing flats for its members, and therefore, agreements to facilitate this object fell within the society's business. The Court relied on the judgment of a Division Bench in C.F Marconi v. Madhav Co-Operative Housing Society Ltd. (1985 (2) BCR 357), where it was held that an agreement enabling a society to reconstruct a building for its members was a transaction touching its business.

Similarly, in Mohan Meakin Ltd. v. The Pravara Sahakari Sakhar Karkhana Ltd. (1987 Mh.L.J. 503), cited in Vardhman Developers Ltd. v. Borla Co-Operative Housing Society Ltd. And Ors. (2013 SCC ONLINE BOM 300, Bombay High Court) and Homi Nariman Bhiwandiwala v. The Zoroastrian Co-Operative Credit Bank Ltd. And Another (2001 SCC ONLINE BOM 25, Bombay High Court), the Bombay High Court held that a suit for an injunction against a co-operative society prohibiting it from manufacturing alcoholic products (a complementary product to its sugar manufacturing business, falling within its bye-laws) was an act touching the business of the society, thereby necessitating a notice under Section 164.

However, the courts have also clarified that not every legal action involving a co-operative society automatically falls under this rubric. A significant ruling in this regard is Samarth Co-Op.Consumers Central Stores Ltd v. Yeshwant Kashinath Chipkar (Bombay High Court, 1995). In this case, the Court held that a suit filed by a landlord against a co-operative society (tenant) for arrears of rent and ejectment under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Bombay Rent Act) does not attract the provisions of Section 164. The Court reasoned that where the society takes premises on lease for its own purpose, and it is not the object of the society to take premises and lease them out to third parties, disputes arising from such tenancy do not "touch the business of the society." The Court observed that such suits squarely fall under the special statute (Bombay Rent Act) and cannot be said to be covered by Section 91 or Section 164 of the MCS Act.

Thus, the determination of whether an act "touches the business of the society" requires a careful examination of the society's objects, bye-laws, and the specific nature of the transaction or dispute in question.

The Mandatory Nature of the Notice and Consequences of Non-Compliance

The language of Section 164 ("No suit shall be instituted...") strongly suggests its mandatory character. The judiciary has consistently affirmed this interpretation.

In Suprabhat Co-Operative Housing Society Ltd. v. Span Builders (2002 SCC ONLINE BOM 314, Bombay High Court), the Bombay High Court explicitly stated that Section 164 "lays down a mandatory principle." The failure to serve the prescribed notice was held to render the suit not maintainable. The Court set aside the trial judge's order, which had erroneously held that the dispute being of a civil nature, there was no bar to filing the suit without complying with Section 164.

The mandatory nature of such notice provisions has historical parallels. In Gurudev Developers v. Kurla Konkan Niwas Co-Op. Hsg. Society (1997 SCC ONLINE BOM 63, Bombay High Court), the Bombay High Court, while discussing Section 164, referred to Dharwar Urban Co-operative Bank Ltd. v. Ramchandra G. Alnavar (AIR 1937 Bom 231). The earlier case dealt with Section 70 of the erstwhile Bombay Co-operative Societies Act, 1925 (which was in pari materia with Section 164 of the MCS Act and Section 80 of the Code of Civil Procedure, 1908). It was held that the wording of the section was imperative, and non-issuance of the notice was a fatal defect.

The consequence of non-compliance with Section 164 can be severe, potentially leading to the rejection of the plaint. In Noor Mohd. Shami Shaikh And Another v. Maharashtra Housing And Development Board And Others (2013 SCC ONLINE BOM 1396, Bombay High Court), the Bombay High Court upheld the rejection of a plaint under Order VII, Rule 11(d) of the Code of Civil Procedure, 1908, inter alia, on the ground that the pre-suit statutory notice as mandatorily required under Section 164 of the MCS Act was not issued and served upon the Registrar of Co-operative Societies.

Several other cases, including Vardhman Developers Ltd. v. Borla Co-Operative Housing Society Ltd. And Ors. (2013 SCC ONLINE BOM 300, Bombay High Court) and Homi Nariman Bhiwandiwala v. The Zoroastrian Co-Operative Credit Bank Ltd. And Another (2001 SCC ONLINE BOM 25, Bombay High Court), have reiterated that the notice under Section 164 is mandatory and its absence renders the suit not maintainable if the subject matter touches the business of the society.

An interesting aspect regarding the timing of raising such an objection was discussed in Erandol Taluka Gramodyog, Utpadak Sahakari Society, Erandol v. M/S. Sunil Waste Corporation (Bombay High Court, 1970). The Court held that if a suit was instituted and a decree passed without the requisite notice under Section 164, and this defect was not challenged in an appeal against the decree, the point cannot be agitated in execution proceedings. While acknowledging the mandatory nature of the provision (citing Dharwar Urban Co-op. Bank Ltd.), the Court distinguished the situation, stating that the objection must be raised during the suit or appeal, not at the execution stage if the decree has become final.

It is pertinent to note that in Gurudev Developers v. Kurla Konkan Niwas Chs Ltd. (2013 SCC ONLINE BOM 300, Bombay High Court), one of the issues framed was "Do the defendants prove that the suit is not maintainable for want of notice under Section 164 of the Maharashtra Co-operative Societies Act, 1961?". The finding recorded was "No." The provided material does not elaborate on the specific reasons for this finding in that particular instance, which could be due to the plaintiff having indeed served the notice, or the court finding the specific act did not touch the business of the society, or some other factual determination. However, this does not detract from the general principle of the mandatory nature of the notice when the conditions of Section 164 are met.

Procedural Requirements and Implications

Section 164 is not merely a substantive bar but also imposes specific procedural requirements. The notice must be in writing and delivered to the Registrar or left at his office. It must contain:

  • The cause of action;
  • The name, description, and place of residence of the plaintiff; and
  • The relief which the plaintiff claims.

Furthermore, a waiting period of two months is prescribed from the date of delivery of the notice before a suit can be instituted. This period is intended to allow the Registrar and the society to consider the matter and potentially take remedial action or prepare a response.

Crucially, "the plaint shall contain a statement that such notice has been so delivered or left." This explicit requirement means that the plaintiff must plead compliance with Section 164 in the plaint itself. Failure to do so can expose the plaint to an application for rejection under Order VII, Rule 11(d) of the Code of Civil Procedure, 1908, which allows for rejection of a plaint where "the suit appears from the statement in the plaint to be barred by any law."

The provision is analogous in its procedural strictness to Section 80 of the Code of Civil Procedure, 1908, which mandates notice before suing the Government or public officers in respect of acts done in their official capacity. The comparison was noted in Gurudev Developers v. Kurla Konkan Niwas Co-Op. Hsg. Society (1997 SCC ONLINE BOM 63, Bombay High Court) referencing the Dharwar Urban Co-operative Bank Ltd. case.

Distinction from Other Statutory Bars and Remedies

It is important to distinguish Section 164 from other provisions that might affect jurisdiction or remedies, such as Section 163 of the MCS Act. In Sau.Varsha Ravindra Isai v. 4 Surekha Arun Dikshit (Bombay High Court, 2010), the Court considered Section 163, which bars the jurisdiction of Civil or Revenue Courts in respect of certain matters like registration, bye-laws, management, or disputes required to be referred to the Co-operative Court. The Court held that Section 163 would not bar a complaint before a District Consumer Forum because the remedy under the Consumer Protection Act, 1986, is an additional remedy, and a Consumer Forum is not a Civil or Revenue Court. While this case pertains to Section 163, it highlights the principle that special remedies under other statutes might operate independently. However, Section 164 specifically addresses "suits" in civil courts, and its applicability within that domain remains stringent, unless judicially carved out exceptions (like in the Samarth Co-Op. Consumers case for Rent Act matters) apply.

The comparison made in Bharati Sahkari Bank Ltd. v. The South Indian Bank Ltd. & Ors. (Debts Recovery Appellate Tribunal, 2004) between Section 164 of the MCS Act and Section 115 of the Multi-State Co-operative Societies Act, 2002 (which was stated to be in pari materia) indicates that similar notice requirements exist in other co-operative legal frameworks, underscoring a common legislative policy to provide a preliminary opportunity for resolution before formal litigation against co-operative entities.

Conclusion

Section 164 of the Maharashtra Co-operative Societies Act, 1960, serves as a critical procedural safeguard in litigation involving co-operative societies in Maharashtra. Its mandate for a two-month prior written notice to the Registrar for any suit concerning an "act touching the business of the society" is generally interpreted as mandatory by the courts. The judicial interpretation of what constitutes an "act touching the business of the society" is nuanced, requiring an assessment of the society's objects and the nature of the dispute, with established exceptions for certain types of litigation, such as specific landlord-tenant disputes under rent control legislation.

Non-compliance with Section 164 can lead to the non-maintainability of the suit and potential rejection of the plaint. Litigants intending to sue co-operative societies or their officers for matters falling within the ambit of this section must meticulously adhere to its requirements regarding the content of the notice, its service, the waiting period, and the necessary averments in the plaint. This provision reflects a legislative intent to encourage pre-litigation scrutiny and potential resolution of disputes involving co-operative societies, thereby protecting them from abrupt and potentially unwarranted legal actions, while also ensuring that genuine grievances can be pursued after due notice.

References