Dharni Dhar Bhalla v. Distt. Coop. Bank Ltd.

A.N Grover, J.— This is an appeal by special leave from a judgment of the Allahabad High Court. The facts may be briefly stated: The appellant was the treasurer of Government Treasury at Lakhimpur, District Kheri, in the State of Uttar Pradesh and the respondent as a body incorporated under Section 18 of the U.P Cooperative Societies Act, 1912 (Act 2 of 1912), hereinafter called the Act, carried on the business of banking at that place. According to the bye-laws of the Bank an Honorary Treasurer was elected who held the office for a year. A sum of Rs 10,000 was kept deposited with the Treasurer for disbursement on the Bank's account. When the appellant was re-elected as Honorary Treasurer in 1946 he represented that he did not have sufficient time to carry out the responsibilities of the post himself and he could act through his nominee only. It is stated that with the concurrence of the authorities of the Bank and with their knowledge one Mool Chand was nominated to act on his behalf. It appears that a good deal of money was embezzled from the Bank and on December 12, 1952 the Managing Director lodged a report with the police. After investigation Mool Chand and Hazari Lal the Manager of the Bank were challaned. The Managing Director reported the matter to the Deputy Registrar, Cooperative Societies, U.P A meeting of the Board of Directors was called for December 18, 1952 which was attended by the Deputy Registrar Shri Pant. According to the appellant Shri Pant stated at the meeting of the Board of Directors that the appellant being a Treasurer was liable to make good the loss and in case some difficulty was felt the matter might be referred to him according to the provisions of Rule 15 of the U.P Cooperative Societies Rules, 1936 and he would pass a decree in favour of the respondent on the following day. A claim was filed with Shri Pant the same afternoon and the summons served on the appellant in the evening on the same date. It was alleged that on the following day in spite of the appellant having submitted to Shri Pant that a copy of the claim had not been served on him with the summons and that the time was too short to enter upon the defence Shri Pant made an award in the sum of Rs 1,04,319-7-4 against the appellant.

2. The appellant filed a suit on January 8, 1953 for a declaration that the award, dated December 19, 1952 made by Shri Pant the Deputy Registrar, Cooperative Societies was ultra vires and therefore void. This suit was decreed by the trial court on August 24, 1957. When the matter came before the High Court on appeal filed by the respondent a division bench referred the question of the validity of Rule 115 of the Rules which had been canvassed to a larger bench. The full bench upheld the validity of the aforesaid Rules. The division bench by an order, dated January 18, 1966 allowed the appeal and set aside the decree passed by the first court. The result was that the appellant's suit was dismissed.

3. Counsel for the appellant sought to raise a number of points before us but the controversy was confined to two matters only and it was agreed that no other question required determination. The first point was that the Deputy Registrar had gathered information relating to the alleged embezzlement behind the back of the appellant and had based the award on that information apart from other evidence. The second was that there had been a complete failure to afford a proper opportunity to the appellant to defend himself and properly present his case.

4. The learned Trial Judge believed the evidence of Shri K.M Ali who was the officiating Deputy Commissioner at the material time and who presided over the meeting of the Directors of the respondent Bank on December 18, 1952. Shri Ali who appeared as PW 1 has stated that Shri Pant had remarked at the meeting when the question of embezzlement was taken up that it was the appellant who was responsible for the reimbursement of money as he was the Treasurer and if the matter was referred to him he would was a decree against the appellant on the following day. The trial Judge was of the opinion that there was no reason to disbelieve Shri Ali and it was observed that his evidence had been given in a frank manner and there was a ring of truth in his statement. The conclusion at which the trial judge, arrived was that the evidence of Shri Ali supported by the probabilities of the case proved that Shri Pant had given expression to his prejudice against the appellant in the meeting of the Directors on December 18, 1952 and that he could not have acted in an impartial manner while giving the award against the appellant. It was further found on a consideration of the evidence that Shri Pant violated the fundamental principles of natural justice by not allowing the appellant an opportunity of being heard. It was admitted before the trial judge that the summons for hearing was served on the appellant on the evening of December 18, 1952. The hearing was scheduled to commence on the morning of December 19, 1952. The appellant had filed a reply before the Deputy Registrar Shri Pant which showed that he had protested that the time allowed to him to answer the claim was much too short. The trial Judge was of the opinion that the time given to the appellant, in the circumstances, was not sufficient to enable him to examine his evidence and properly cross-examine the witnesses against him.

5. The High Court did not agree with the trial Judge that Shri Pant had made use of any prejudicial knowledge while making the award. It was found that Shri Pant did not render himself incapable of functioning as an arbitrator as he had not contravened any of the Rules or bye-laws. Nor did the High Court agree with the other finding of the trial Judge that fair opportunity was not allowed to the appellant to defend himself.

6. On a perusal of the statement of Shri Ali and Shri Pant we are satisfied that the trial Judge was right is his appreciation of evidence. It is also noteworthy that the trial Judge had recorded the remarks about the impression created in the witness-box by Shri Ali. The Courts have always attached importance to the observations made by the trial judge particularly when they are based on the demeanour of a witness and the manner in which he has given the evidence. The post haste manner in which the award for such a large amount was given shows that Shri Pant had either made up his mind to pass a decree against the appellant even though the view formed by him might not have been actuated by mala fides. At any rate even if it be assumed that Shri Pant had not acted on any information which he had gathered at the meeting held on December 19, 1952 and had not made any such commitment, as has been alleged by the appellant, that he would pass a decree immediately in favour of the respondent, there is no doubt that the appellant was not given a proper opportunity to defend his case. According to the statement of Shri Pant when the appellant came to him on the evening of December 18, 1952 after the summons had been served on him the appellant enquired from him as to the nature of the suit and asked for a copy of the plaint.

As Shri Pant had only one copy with him he allowed him to have a look at it for about 15 minutes. The appellant was further told that he could make a copy if he so desired. This is an extraordinary way of conducting any proceedings which essentially were of a judical nature. When such a large amount was involved and there were allegations of embezzlement against the appellant or his nominee Mool Chand, Shri Pant was duty bound to have furnished a copy of the plaint to the appellant and to have given him a reasonable time for submitting his written statement and also for examining such evidence as he wanted to examine. Shri Pant finished everything on the following day and it is impossible to believe that any one could have produced any defence in that short period. It is not possible to accept that any proper or reasonable opportunity was afforded to the appellant to present his case. It has not been contended and indeed could not be urged that the civil court did not have the jurisdiction to entertain the suit in the above circumstances. It is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred. Such exclusion must either be explicit, or clearly implied and further even if the jurisdiction is so excluded the civil court ran examine cases where the provisions of the statute have not been complied with or the statutory tribunal has not acted in conformity with fundamental principles of judicial procedure. See Secretary of State. Represented by the Collector of South Arcot v. Mask & Company AIR 1940 PC 105. The suit was therefore rightly decreed by the trial court.

7. The appeal is allowed with costs and the decree of the High Court is set aside. The suit filed by the appellant shall stand decreed. It will be open, however, to the appropriate authority under the Act to take, fresh proceedings relating to the amount in respect of which award was given by Shri Pant. Counsel for the appellant agrees that a proper award may be given afresh on the merits by the competent authority in accordance with law and that the appellant will not raise any objection relating to the validity of the Rules or the bye-laws framed under the Act or to the reference made thereunder.