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Shyam Co-Operative Housing Society Ltd. v. Ramibai Bhagwansing Advani And Others
Factual and Procedural Background
One Bhagwansingh Advani was the managing trustee of the Basantsingh Amil Dhramada (Charities) Trust, a public charitable trust and member of the defendant co-operative society. The trust advanced Rs. 4,00,000 to the defendant society. The plaintiffs, as current trustees of the trust, filed a suit to recover this sum from the defendant society. The defendants sought to stay the suit under Section 54 of the Bombay Co-operative Societies Act, contending that the dispute should be resolved through arbitration as prescribed by that section. The learned Judge below dismissed the defendants' motion to stay, leading to the present appeal.
Legal Issues Presented
- Whether the dispute between the plaintiffs (trustees of the trust) and the defendant co-operative society falls within the ambit of Section 54 of the Bombay Co-operative Societies Act, which mandates arbitration for disputes touching the business of the society between the society and its members.
- Whether the loan advanced by the trust, a member of the society, creates a dispute "as a member" or "quae a member" such that Section 54 applies.
Arguments of the Parties
Defendant's Arguments
- The dispute concerns the business of the society and is between the society and one of its members.
- Under Section 54 of the Bombay Co-operative Societies Act, such disputes must be adjudicated by arbitration, and therefore the suit should be stayed.
Plaintiffs' Arguments
- The learned Judge below held there was no dispute since the loan was admitted by the society.
- The defendants contend that although the loan was admitted, there is a dispute as to present liability to repay the loan.
- It was suggested that the dispute touches the business of the society because the society raised the loan in accordance with its objects and bye-laws.
- The defendants sought an opportunity to establish that the loan was advanced by the trust in its capacity as a member.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court examined the applicability of Section 54 of the Bombay Co-operative Societies Act, which requires arbitration for disputes touching the business of the society between the society and its members. The court emphasized that for Section 54 to apply, the dispute must be between the society and the member in their capacity as members ("quae a member"). It is not sufficient that the party is a member; the dispute must relate to rights or obligations arising from membership.
In this case, although the trust was a member and had advanced a loan to the society, the court found that the loan was not advanced by virtue of membership but rather as a separate transaction. There was no obligation on the society to raise loans only from members, nor on members to advance loans. The transaction was therefore not a dispute arising out of membership rights or obligations.
The court rejected the defendants’ contention that the dispute fell within Section 54, noting that unless the society’s constitution explicitly linked the loan to the trust’s membership capacity, no evidence could establish that the dispute was "as a member." Consequently, the suit was not subject to mandatory arbitration under Section 54.
Holding and Implications
DISMISSED
The appeal against the learned Judge's order dismissing the stay of the suit was dismissed with costs. The court held that Section 54 of the Bombay Co-operative Societies Act did not apply to this dispute because the loan advanced by the trust was not in its capacity as a member. The direct effect is that the plaintiffs may proceed with their suit in court. No broader precedent was established beyond the interpretation of the scope of Section 54 in relation to disputes involving loans advanced by members not qua membership.
Chagla, C.J:— One Bhagwansingh Advani was the managing trustee of a public charitable trust known as the Basantsingh Amil Dhramada (Charities) Trust. This trust was a member of the defendant co-operative society. The trust advanced a sum of Rs. 4,00,000 to the defendant society. The plaintiffs are the present trustees of the trust and they have filed the present suit to recover the sum of Rs. 4,00,000 from the defendant-society. A notice of motion was taken out by the defendants to stay the suit on the ground that under S. 54, Bombay Co-operative Societies Act the dispute could only be adjudicated upon by arbitration as provided by that section. The learned Judge below dismissed the notice of motion. It is from that order that this appeal has been preferred.
2. Now, the contention urged by Mr. Banaji is that within the meaning of S. 54 this is a dispute touching the business of the society between the society and its member. The learned Judge below has taken the view that there was no dispute at all inasmuch as the loan was admitted by the defendant society. In our opinion, with respect, that is not the correct view, because although the loan was admitted by the society, the contention of the society was that there was no present liability to return the loan and therefore in that sense there was a dispute between the society and the plaintiffs. It is also perhaps true, as suggested by Mr. Banaji, that the dispute is touching the business of the society. The learned Judge has taken the view that the objects of the society do not include taking of loans, but the objects of the society are various—buying, selling, hiring, letting, developing land in accordance with co-operative principles and also making and guaranteeing advances to members for building and purchasing property, and R. 3 of the bye-laws of this society provides for raising of funds in various ways, and one of the ways is by raising loans including debentures and loan stock. Therefore, it may be conceded that in order to carry out its objects the society raised this loan and persaaded one of its members to advance a sum of Rs. 4,00,000 to the society. But the question still remains whether on these facts S. 54 has any application.
3. Now, before a case can fall under S. 54, it is not sufficient that there should be a dispute touching the business of the society. What is further required is that the dispute must be between the society and its member, and proper emphasis has got to be laid upon the expression “member” used in this section. The dispute must be between the society and the member as a member or quae a member. It must be a dispute in which the member must be interested as a member. It must relate to a transaction in which the member must be interested as a member. It is not every dispute between a society and a member which falls within the ambit of S. 54. There may be many disputes between the society and its members in which the members are not concerned as members at all, and they are in the same position as strangers. Take this very case. The loan might have been raised from an outsider or from a stranger. The society in this case chose to take a loan from a member and the member chose to advance the loan to the society. That fact does not make it a dispute between the society and its member. There is no obligation upon the society to raise loans only from its members, nor is there any obligation upon its members to advance loans to the society. There are various matters where there might be a dispute between the society and the member where the member is interested or involved in the dispute as a member. In those cases S. 54 would have application. But where we have a case where a member advances a loan to the society which he is under no obligation to advance, it is merely a coincidence that he happens to be a member of the society. It is not by reason of his capacity or position as a member that the loan was advanced. This transaction has nothing whatever to do with the rights or obligations of the party which advanced the loan as a member of the co-operative society. Mr. Banaji says that he wants an opportunity to establish, by affidavit if necessary, that in this particular case the loan was advanced by the public charitable trust as a member. We fail to understand how it can ever be possible for the plaintiffs on the admitted facts to establish that position. Unless we find in the constitution of the society itself something which would indicate that this Public Charitable Trust was concerned as a member in advancing this loan, no volume of evidence adduced by the defendants can ever establish that fact.
4. We, therefore, agree with the view taken by the learned Judge below. The appeal fails and must be dismissed with costs.
A/M.K.S
Appeal dismissed.
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