Citation Codes

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Case Number

Letters Patent Appeal No. 71 of 1932.

Advocates

Messrs. T.R Venkatarama Sastri and P.S Narayanaswami Ayyar for the Appellant.
Mr. P. Govinda Menon and The Government Pleader for the Respondents.

Judges

Sir Owen Beasley
Kt., C.J
Bardswell, J.

Acts

Co-operative Societies Act (Act II of 1912) and the Act of 1932
S. 51 of the Madras Co-operative Societies Act
Act of 1912 by S. 43 (1) the Local Government
Act of 1912 or the Act of 1932 applies;
S. 51 (1) of Act of 1932
sub-section (1) of S. 51
Act of 1932 in S. 2 (e)

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This is a Letters Patent Appeal from an order of Burn, J., which had dismissed the appellant's petition for a writ of prohibition seeking to restrain the respondents from proceeding with the trial of Suit No. 179 of 1932-1933 before the Deputy Registrar of Co-operative Societies, Calicut.

The appellant is a legal practitioner and a member of the Calicut Co-operative Bank Ltd. He served as a director (Nov. 1919–Dec. 1929 and Oct. 1930–Jan. 1932), as legal adviser (Sept. 1922–Dec. 1929), and as vakil (July 1922–March 1932) of the Bank.

The Secretary of the Calicut Urban Bank Ltd. sued the appellant under S. 51 of the Madras Co-operative Societies Act (VI of 1932) claiming Rs. 6,017-7-1, made up of:

Rs. 1,007-1-0 for out-of-pocket expenses charged by the appellant;
Rs. 892-12-0 for extra fees charged without directors' sanction; and
Rs. 4,117-10-1 as the aggregate of amounts paid in by him to the Bank out of collections from the Bank's borrowers not entered in the cash book and for which he held no valid receipts.

A special sub-committee of the Committee of Depositors investigated the appellant's accounts (committee appointed 11 April 1932). Following the investigation, the Directors requested an audit by the Deputy Registrar; the acting Senior Inspector reported that items (a) and (b) were exorbitant and inadmissible. The appellant was called upon to pay the sum and declined, whereupon a reference under S. 51 was made and a decree sought.

The appellant moved for issuance of a writ of prohibition on grounds that the Registrar lacked jurisdiction because the matters complained of related to the appellant's conduct as vakil (conducting litigation on behalf of the Bank) and did not touch the business of the society. Burn, J. dismissed that petition. The present appeal challenges Burn, J.'s order.

Legal Issues Presented

Whether the Registrar of Co‑operative Societies had jurisdiction under S. 51 of the Madras Co‑operative Societies Act (VI of 1932) or under the rules made under the Co‑operative Societies Act (Act II of 1912) to decide the dispute between the Bank and the appellant.
Whether the dispute "touches the business of the society" within the meaning of the Acts when the acts complained of were performed by the appellant in his capacity as the society's vakil (counsel) rather than in his capacity as a member, director, or legal adviser/officer.
Whether the appellant, when acting as vakil and appearing for fees, was an "officer, agent or servant" of the society for the purposes of S. 51(1) of the Act of 1932.
Whether the Act of 1932 applies retrospectively to conduct occurring before its enactment.

Arguments of the Parties

Appellant's Arguments

The Act of 1932 is not retrospective and therefore cannot apply to matters that occurred before the new Act's passing.
The appellant was not engaged in the business of the society when acting as vakil.
The dispute was not between a member (or past member) and the committee or any officer and the society; rather it arose from acts done by the appellant as the society's vakil.
Even if the Act of 1932 applies, the appellant as the society's vakil was not an officer, agent or servant of the society.

Bank / Respondents' Contentions (as presented in the opinion)

The Bank made a reference to the Registrar under the Act of 1932, contending that the question comes within sub‑clause (b) or (c) of S. 51(1) (i.e., a dispute between a member and the society or between the society and an officer, agent or servant).
Alternatively, if the Act of 1932 did not apply, the Bank contended that the rules made under S. 43 of the 1912 Act would apply and permit referral to the Registrar.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court's analysis proceeds through several discrete steps, applying statutory definitions, bye‑laws, and reasoning by analogy to reach its conclusion:

Identification of roles under society law and bye‑laws:
- The court accepted that the legal adviser is an "Officer" as defined in S. 2 of the earlier Act and in the Act of 1932 (S. 2(e)), and that bye‑law 41(a) makes the legal adviser part of the Board of Directors (the Committee) so as to fall within the definition of an officer of the society.
Statement of statutory scheme:
- The court set out bye‑law 68 and S. 51(1) of the Act of 1932, noting S. 51(1) is broader than the 1912 Act and that the 1932 Act contains an explanation classifying a society's claim for a debt against a member as a dispute touching the business of the society.
Consideration of the nature of the complaint (vakil vs officer/member capacity):
- The court accepted that the appellant, when engaged as vakil to institute and prosecute proceedings to recover sums due to the society, was engaged in the society's business in the sense that it is society business to recover debts from its members.
- However, the critical inquiry was whether the dispute is one between the society and a member in his capacity as member/officer (a category that falls within S. 51/bye‑law referral) or whether it is a dispute arising out of the appellant's separate capacity as vakil (a vakil‑client relationship), in which case S. 51 would not apply.
Application of analogous authorities and principles:
- The court referred to English statutes and Halsbury's commentary on Building Societies and Friendly Societies to illustrate the principle that disputes between a society and a member that are not in the member's capacity as a member (for example, a claim against an officer for misappropriation) are not within the Registrar's statutory jurisdiction and are instead to be determined by ordinary legal methods.
Conclusion on agency/officer status when acting as vakil:
- The court held that in acting in litigation as the society's vakil the appellant was not the society's agent within S. 51; he occupied the position of vakil to his client and was engaged in that capacity for fees.
- The court noted that different considerations might arise where a vakil is employed whole‑time and paid a fixed salary, but this was not the present case.
Jurisdictional determination and final reasoning:
- Because the alleged wrongful acts arose from the appellant's capacity as vakil (a fee‑paid counsel), and not in his capacity as an officer, agent or member acting in that member/officer capacity, the Acts (both 1912 and 1932) did not apply to remove jurisdiction from ordinary courts to the Registrar.
- Consequently, the Registrar did not possess jurisdiction to adjudicate the dispute under the statutory provisions relied upon by the Bank.

The court expressly stated it was unnecessary to decide which Act would govern the dispute because it concluded that the dispute fell outside the scope of both the 1912 Act and the 1932 Act on the material facts.

Holding and Implications

Holding: The Letters Patent Appeal is allowed and an order is made directing the issue of the writ of prohibition sought by the appellant (i.e., the Registrar is prohibited from proceeding with the reference/suit); the appeal was allowed (N.R.R. — "Appeal allowed").

Consequences for the parties: The direct effect of the court's decision is that the respondents are restrained from proceeding before the Deputy Registrar in relation to Suit No. 179 of 1932‑1933 on the ground that the Registrar lacks statutory jurisdiction over the dispute as it arose from the appellant's capacity as vakil. As to costs, the court ordered that the appellant and the respondents shall each bear their own costs.

Broader implications: The opinion reasons that disputes arising out of a member's actions in a professional capacity as vakil (fee‑paid counsel) are not, simply by virtue of membership, brought within the internal machinery of the Registrar under the cited statutory provisions. The court did not purport to lay down a new broad precedent beyond the application to the facts; it concluded that, on these facts, neither the 1912 Act nor the 1932 Act applied to oust ordinary legal remedies. The opinion contains no explicit statement that it creates a binding new precedent beyond resolving the appeal before the court.

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Manjeri S. Krishna Ayyar Petitioner (Petitioner In C.M.P No. 4004 Of 1932 On The File Of The High Court.) v. The Secretary, Urban Bank Ltd., Calicut And Another S (S In Do).

This is a Letters Patent Appeal from an order of Burn, J., dismissing the appellant's petition for the issue by the High Court of a writ of prohibition prohibiting the respondents from proceeding with the trial of Suit No. 179 of 1932-1933 on the file of the Deputy Registrar of Co-operative Societies, Calicut.

The appellant who is a legal practitioner was and is a member of the Calicut Co-operative Bank Ltd. He was a director of the Bank from November 1919 to December 1929 and then again from October 1930 to January 1932. He was also the legal adviser of the Bank from September 1922 to December 1929 and he was also the vakil of the Bank from July 1922 to March 1932. The Secretary of the Calicut Urban Bank Ltd., filed a suit under S. 51 of the Madras Co-operative Societies Act (VI of 1932) against the appellant claiming a sum of Rs. 6017—7—1.

That amount is made up as follows:

(a) Out of pocket expenses charged by the appellant Rs. 1007-1-0 (b) Extra fees charged by him for which there is no sanction of the Directors Rs. 892-12-0 (c) Aggregate of amounts paid in by him to the Bank out of collections from the Bank's borrowers which are not found entered in the cash book of the Bank and for which the appellant holds no valid receipts Rs. 4117-10-1

The accounts of the appellant with the Bank as its vakil were the subject of an investigation by a special sub-committee of the Committee of Depositors appointed on the 11th April, 1932. As a result of this investigation, the Directors of the Bank requested the Deputy Registrar of Co-operative Societies, Calicut, to cause the accounts to be audited and accordingly the acting Senior Inspector of Co-operative Societies conducted audit and in his report he observed inter alia that items (a) and (b) were exorbitant and inadmissible. The appellant was accordingly called upon to pay the sum of Rs. 6017-7-1 to the Bank in default of which it was stated that a suit would be filed against him. He declined to pay and accordingly a reference was made under S. 51 of the Madras Co-operative Societies Act (VI of 1932) and a decree against him was asked for. The appellant raised the point that the Registrar had no jurisdiction to entertain this reference on the grounds that the matters complained of related to the conduct of the appellant in his capacity of vakil conducting litigation on behalf of the Bank and that the dispute did not touch the business of the society. He accordingly moved for the issue of writ of prohibition. Burn J., dismissed that petition holding that under both the Co-operative Societies Act (Act II of 1912) and the Act of 1932 there was a dispute between the petitioner and the society which fell to be decided by the Registrar on the ground that the appellant was a member, the legal adviser and a member of the Board of Directors of the society and was an “Officer” of the society, that the business concerning which the present dispute has arisen was business which came to him as legal adviser and that it was his position as legal adviser that made him a member of the Board of Directors. It is, in my opinion, not correct to say that the business of the society with which the present dispute is concerned came to the appellant as its legal adviser because it is the appellant's case—and this is conceded also by the Bank—that the dispute arises out of matters relating to the appellant's acts as the Bank's vakil; and it is important to keep in mind the distinction between the two capacities of Bank's legal adviser and Bank's vakil. In my opinion, Burn J., was right in holding that in the capacity of legal adviser to the Bank the appellant was an “Officer” of the society as defined by S. 2 of the Act which by clause (d) includes “a chairman, Secretary, Treasurer, member of committee, or other person empowered under the rules of the bye-laws to give directions in regard to the business of the society”. There is no committee in this society but there is a Board of Directors in whom the management of the affairs of the society is vested by bye-law No. 41 of the Bye-laws of the society and, this Board of Directors form the Committee as defined in S. 2 (b) of the Act of 1912. The same definition of officer appears in the Act of 1932 in S. 2 (e) except that two or three other persons are included. Bye-law 41 (a) of the Society says that “the affairs of the society shall be managed by a Board of Directors consisting of a President, a Vice-President, a Secretary, an Assistant Secretary, a legal adviser, a Treasurer, and not more than 6 other members. The members of the Board of Directors shall be elected once in two years by general assembly from among the members holding not less than five shares each. The Directors shall elect from among themselves the President, Vice-President, Secretary and Assistant Secretary, Treasurer and Legal adviser.” In my opinion, therefore, the legal adviser of the Bank is an “Officer” of the Bank. I must now consider the rules under both Acts. Under the Act of 1912 by S. 43 (1) the Local Government is empowered to make rules to carry out the purpose of the Act and by (2) such rules may (l) provide that any dispute touching the business of society between members or past members of the society or persons claiming through a member or past member or between a member or past member or persons so claiming and the committee or any officer shall be referred to the Registrar for decision etc.

Bye-law 68 of the Society is as follows:

“If any dispute arises touching the business of the society between members or past members of the society, or persons claiming through a member or past member or between a member or a past member or persons so claiming and the Board of Directors the party or parties concerned may refer the matter in writing to the Registrar. Similarly in the case of a dispute relating to a debt due to the society by a member or past member claiming through a member or past member a reference in writing may be made by either party to the Registrar.”

The decision of the Registrar or the arbitrator appointed by him is to be final. The Act of 1932 provides by S. 51 (1) that “if any dispute touching the business of a registered society, (other than a dispute regarding disciplinary action taken by the society or its committee against a paid servant of the society, arises (a) among members, past members and persons claiming through members, past members and deceased members or (b) between a member, past member or persons claiming through, a member, past member or deceased member and the society, its committee or any officer, agent or servant of the society or (c) between the society or its committee and any officer, agent or servant of the society or (d) between the society and any other registered society, such dispute shall be referred to the Registrar for decision. There is an explanation which reads as follows:—

“A claim by a registered society for any debt or demand due to it from a member, past member or the nominee heir or legal representative of a deceased member, whether such debt or demand be admitted or not, is a dispute touching the business of the society within the meaning of this sub-section.”

It will be seen that the S. 51 (1) of Act of 1932 is wider in its terms than the earlier Act. The Bank claims to make a reference to the Registrar under the later Act contending that this question comes within either sub-clause (b) or (c) to sub-section (1) of S. 51 or both. It is further contended that, if it should be held that the Act of 1932 does not apply to the case but that the procedure laid down by the Act of 1912 is to be followed, the rules made under S. 43 of that Act apply equally to this case.

It is contended on behalf of the appellant that the Act of 1932 is of no retrospective effect and that, as the matters complained of were matters which occurred before the passing of the new Act, the dispute with regard to them was not one which under the rules made under that Act could be referred to the Registrar for decision. It is argued (1) that the appellant was not engaged in the business of the society (2) that it is not a dispute between a member of the society and the committee or any officer and the society (3) that the acts complained of were not done by the appellant in his capacity as member of the society but as its Vakil and (4) that even if the Act of 1932 is of application, the appellant as the society's vakil was not an officer, agent or servant of the society. As before stated, no question arises here with regard to any acts of the appellant in his capacity of legal adviser but only as the Bank's vakil. It is quite true that he is a member of the society, that he was a director of the society, and that he was the legal adviser of the society. But does that in any way affect his position as vakil? It seems to me that this matter has got to be considered from the standpoint only of a vakil engaged in the society's legal business.

The fact that he may at the same time occupy the other positions already specified in the society, however irregular his conduct may be in occupying them, cannot in the least degree affect this question.

As regards the appellant's first contention, namely, that the appellant was not engaged in the business of the society, in my view, the appellant was. In the course of the society's business members of the society incur debts and it is the business of the society to recover from its members the sums of money owed by them to the society and if necessary to take legal proceedings for their recovery. The appellant as the vakil engaged by the society to do so was clearly engaged in the business of the society.

The next two contentions, namely, this is not a dispute between a member of the society and the committee or any officer and the society and that the acts complained of were not done by the appellant in his capacity as member of the society but as its vakil, may be considered together. This is a dispute between the society's vakil and the society and the acts complained of were done by the appellant in his capacity of the society's vakil. Had this been a dispute between the society and the appellant as its legal adviser, then under the Act of 1932 it might be a dispute between the society and one of its officers, namely, its legal adviser. But even assuming that this case is governed by the Act of 1932, in my view, the appellant was not an officer, agent or servant of the society and what he did was not done in his capacity as a member of the society at all. I think it is clear that both under the Building Societies Act and the Friendly Societies Act in England which contain somewhat similar provisions as regards the settlement of disputes within the society by the Registrar that in order that such a dispute can be dealt with by the Registrar it must be a dispute between the society and a member in his capacity as member. See Halsbury's Laws of England (Second Edition) Vol. 3 page 436 paragraph 829 which deals with Building Societies and Halsbury's Laws of England (First Edition) Vol. 15 page 177 paragraph 370 which deals with Friendly Societies where it is stated that disputes between a society and a member not in his capacity as member e.g, a claim by a society against one of its officers for misappropriation of funds are not disputes to which the Act applies and consequently they are determinable by ordinary legal methods. Viewed in this light, this dispute is not a dispute within the provisions of the Act 1912 and unless the appellant when acting as the society's vakil was doing so as an officer, agent or servant of the society, the Act of 1932 is also not of application. It is, however, contended that the appellant was the agent of the society as its vakil within the provisions of S. 51 of the Act of 1932. With this contention I am unable to agree. In acting in litigation as the society's vakil he was not the agent of the society but he occupied merely the position of a vakil to his client. Different considerations altogether may arise where the vakil is a wholetime vakil of a society or a company and receives as his remuneration a fixed salary. It may be stated here that the Registrar of Co-operative Societies is not anxious to clutch at a jurisdiction which he does not possess. The position he takes up here is that he desires only to know whether in such cases as this he does possess jurisdiction. In my view, he does not. Here the position is that of vakil and client, the vakil appearing in each case for a fee. Mr. T.R Venkatarama Sastri stated that the question before us is one of considerable importance to members of the Bar and put to us the question, “What is the position of a member of the Bar who is a member of a co-operative society and who is instructed by the society of which he is a member to engage in legal proceedings on their behalf?” It seems to me that the answer to this question must be that, merely because a legal practitioner is a member of a society, he is not prevented by any rule of professional etiquette from accepting instructions from the society of which he is a member. There can, in my view, be no impropriety in his doing so provided that his engagement is not directly due to his being a member. The Madras Bar Council have recently ruled that it is improper for a member of the Bar who is a director of a company or a society to appear for remuneration for that company or society in its legal business. This rule follows that of the English Bar. The appellant's conduct in legally advising the society and appearing as its vakil in both capacities for remuneration whilst being a director was without question most improper, but so far as the case before us is concerned, we have only to consider him in his capacity of vakil to the society. That being so, this dispute is not a dispute to which either the Act of 1912 or the Act of 1932 applies; and it is therefore unnecessary to consider the further question raised as to which Act this dispute falls to be decided under.

The result is that this Letters Patent Appeal is allowed and an order is made directing the issue of the writ of prohibition sought for by the appellant. With regard to costs, in my view, the proper order will be to direct the appellant and the respondents to bear their own costs. It is improbable that the Registrar of Co-operative societies would have thought that he had jurisdiction to deal with the matter if the appellant had not been also a director, the paid legal adviser of the society and at the same time its vakil.

Bardswell, J.—I agree.

N.R.R Appeal allowed.

Manjeri S. Krishna A... v. The Secretary, Urban...