072-NLR-NLR-V-71-KALUTARA-CO-OPERATIVE-DISTILLERIES-SOCIETY-LTD.-Appellant-and-S.-D.-J.-B.-ARS.pdf

A dispute between a registered co-operative society and one of its membersas to whether the member has acted in breach of the rules of the Society must,assuming that the dispute does not arise upon a transaction involving ordinarycontractual or delictual rights and obligations, be decided by the Registrarin the exercise of his supervisory functions, or by arbitrators appointed by him.Section 53 of the Co-operative Societies Ordinance debars the ordinary Courtsfrom exercising jurisdiction over such a dispute.
Plaintiff was a member and shareholder of a registered co-operative society,one of the objects of which was to carry on the business of an Arrack DistillingPlant for the economic advancement of its members. When a General Meetingof the Society was about to be held for the purpose of suspending the member-ship of the plaintiff on the ground that he had contravened certain rules of theSociety in regard to the mode of supply of toddy to the distillery by members,the plaintiff instituted the present action for declaratory relief. He prayed alsofor an interim injunction restraining the defendant Society from moving,discussing or passing certain resolutions concerning the dispute which hadarisen.
Held, that the dispute between the plaintiff and the Society touched thebusiness of the Society within the meaning of section 53 of the Co-operativeSocieties Ordinance and that the District Court had no jurisdiction to entertainthe action and the application for interim injunction. There is no justificationfor confining Section 53 to disputes in terms of rupees and cents.
WIJAYAT1LAKE, J.—Kaiutara Co-operative Distilleries Society Ltd.S25
v. ArsaktUaratne
Appeal from an order of the District Court, Kaiutara.
E. R. 8. R. Coomaraswamy, with Hannan Ismail, for the defendant-appellant.
T. Andradi, with N. S. A. OoonetiUeke, for the plaintiff-respondent.
Cur. adv. vult.
September 27, 1968. Wuayatilake, J.—
In this case the plaintiff who is a founder member and shareholder ofthe defendant Society has sued the said Society, for declaratory relief inregard to certain action taken by the Society consequent on a disputewhich had arisen between him and the Society.
The plaintiff also prayed for an interim injunction restraining thedefendant Society, its members, officers and the Committee, frommoving, discussing or passing certain resolutions in regard to the disputewhich had arisen till the final determination of this action.
The application for an injunction came up for inquiry before theAdditional District Judge, Kaiutara on 7.11.66. when the followingissues were framed on objection being taken by Mr. N. E. Weerasooria,Queen’s Counsel appearing for the defence that the Court had nojurisdiction to enteriain this application :
Has this Court the jurisdiction to entertain this application in viewof the provision of the Co-operative Societies Ordinance whichexcludes the jurisdiction of the Courts ?
Are the matters and disputes which the plaintiff has sought tohave determined in this action excluded from the jurisdiction ofthese Courts ?
Are the alleged disputes in regard to the business of the Society ?
If so, should the same be referred to the Registrar of Co-operativeSocieties ?
6. Has the Registrar of Co-operative Societies exclusive jurisdictionto deal with and decide the disputes raised in this case ?
This objection was overruled and the present appeal is from thisorder.
The plaintiff avers that he has been a member and shareholder of thisSociety from 13.6.48. Among the objects of the Society was the found-ing of an Arrack Distilling Plant for the economic advancement of themembers and the plaintiff as a member and owner of coconut trees wasentitled to supply toddy to the said distillery on a contract basis and he.had done so from the inception up to the end of 1965. The plaintiff also
326 WIJAYATIX.AKE, J.—Kalutara Co-operative Distilleries Society Ltd.
v. Arsakularatne
avers that he is entitled to the profits of such distillery. He alleges thaton various occasions he had ques.ioned the irregularities and unfairpractices in the said distillery and it9 management. He further statesthat in view of the exposures made by him of these malpractices and thepolitical rivalry of the managing committee, the President, two vice-presidents, the secretary, the treasurer and certain other members werehostile and prejudiced against him. He states that when an inquiry waspending, in regard to certain malpractices' in the managing committeeon a complaint made by another member, at which he was the chiefwitness, the defendant Society had informed him that the managing com-mittee proposed to hold an inquiry into certain allegations made againsthim by one W. D. Michael, that he had done his (the plaintiff’s) contract.It may be noted that according to the conditions in the agreement (D/C)between the plaintiff and the defendant company it is strict1 y prohibitedto supply toddy from trees only from an outsider and it is a gross violationof all regulations besides an insult to the Society for members to getoutsiders to supply toddy from trees assigned to them. The plaintiff alsohad bound himself to get his I cence cancelled by the Excise Departmentand not to claim any damages when the committee or a sub-committeeappointed by a committee finds him guilty after an inquiry, for breach ofthose conditions. He further bound himself to accept the punishmentinflicted and not claim any damages if he is found guilty of violat ng theseconditions.
When the plaintiff was informed of the inquiry due to be held he hadwritten to the Society to send him a true copy of the letter ent by W. D.Michael alleging that he did his contract. In reply the Society had senthim copies of letters from W. D. Michael and a copy of a letter from theplaintiff’s tapper Lionel and the plaintiff has been informed that theinquiry would be held on 9.1.66 and requesting him to be present. Byhis letter of 7.1.66 the plaintiff has requested the Society to inform himimmediately under what section of the Co-operative Societies Ordinanceand by-laws of the Society the committee has requested him to appear on9.1.66 for an inquiry in connection with the complaint made by a non-member, an outsider. Thereupon on 15.1.66 the Society had written tothe plaintiff that as he had failed to offer an explanation the committeehad to accept the evidence of the complainants and the committee hadheld that he had committed an offence under by-law 12 (4) of the Societyand the committee has decided to call for an explanation as to why hismembership should not be suspended and why he should not be expelled,and his explanation, if any, should be forwarded in writing before 25.1.66.The committee by its letter of 10.3.66 had informed the Assistant Com-missioner of Co-operative Development, Kalutara, in regard to the situa-tion which had arisen. In the last paragraph it is set out that in terms ofby-'aw 12 (4) the committee has decided to suspend the membersh'p ofthe plaintiff Thereafter by its letter of 22.3.66 the Society has informedthe plaintiff that his disregard of the decision of the committee will resultin his membership being suspended. This letter sets out 7 charges. Theplaintiff by his letter of 23.3.66 has purported to reply to these charges.
WIJAYATILAKE, J.—KaltUara Co-operative Distilleries Society Ltd.327
v. Arsakularatne
Inter alia he states that he is not prepared to appear before the committeeand offers an explanation as this committee which has also receivedallegations 1 parallel' to those that are made against him has alreadydecided on the charges. Thereafter on 4.4.66 the committee has purportedto suspend his membership and report to the . Assistant Commissionerof Co-operative Development. After this it would appear that the 17thAnnual General Meeting of this Society was due to be held on 11.5.66and item 7 in the agenda was for the approval of the suspension ofmembership of the plaintiff by the committee as per by-law 7 (6).
In the context of what has transpired in the transactions of this Societyin regard to the matter in dispute the principal question which has nowarisen is whether the District Court has jurisdiction to entertain thisApplication notwithstanding the provisions of the Co-operative SocietiesOrdinance. The learned Additional District Judge has answered thisquestion in the affirmative.
Section 53 of the Co-operative Societies Ordinance provides for thesettlement of disputes inter alia between a member and the Society or itscommittee touching the business of a registered Society. It categoricallyprovides that such disputes shall be referred to the Registrar for decision.When it is so referred the Registrar may decide the dispute himselfor refer it for disposal to an arbitrator or arbitrators, and any partyaggrieved by the award of the arbitrator or arbitrators may appeal tothe Registrar therefrom. The decision of the Registrar shall be final andshall not be called in question in any Civil Court. The award of thearbitrator or arbitrators if no appeal is preferred to the Registrar or ifany such appeal is abandoned or withdrawn shall be final and shall notbe called in question in any Civil Court. Section 54 provides for theMinister to make rules as may be necessary for the purpose of carryingout or giving effect to the principles and provisions of this Ordinance.The by-laws of the defendant Society are at (P/F). The objects are setout. at clause 2 which point to the promotion of the economic conditionsof the members of the Society. Clause 7 (vi) provides that membershipwill terminate on a member being expelled from the Society by a 2/3rdmajority at a meeting attended by half the number of members of theSociety. Clause 12 provides inter alia that a member could be expelledfrom the Society for any action done, which could be held to be dishonestor adverse to' the objects of the Society or to the interests of the Co-operative movement by a committee so appointed by a general meeting.By-law 29 provides that the committee shall exercise all powers of theSociety in terms of the by-laws and decisions taken at general meetingsexcept in regard to such matters reserved for a general meeting. By-law29 (xx) has vested the committee with powers generally to carry on thebusiness of the Society. By-law 43 provides for the Registrar to beinformed of any dispute arising from these by-laws or any disputeconcerning the business of the Society.
328 WIJAYATILAKE, J.—Kaluiara Co-operative Distilleries Society Ltd.
v. Arsakularatne
The learned Additional District Judge has taken the view that theexpulsion of a member does not touch the business of the Society. H®appears to have come to this conclusion on the basis that the entirety ofSection 53 contemplates a dispute in terms of rupees and cents. Nodoubt this section provides that a claim by the registered Society for anydebt, demand or damage due to it from a member whether past or presentshall be deemed to be a dispute touching the business of the Societywithin the meaning of this section. The District Judge appears to havetreated this clause as a definition of the words “ any dispute touching thebusiness of a registered Socitey ”. In my view the words “ shall bedeemed to be a dispute touching the business of the Society ”, in theaforesaid clause clearly point to the fact that this clause merely sets outthat such a claim too shall be recognised as a dispute within the meaningof Section 53. The District Judge has sought to distinguish the case ofKarunatilleke v. Abeywira1. It is correct that the matter in issue wasdifferent but the judgment of the Divisional Bench has sought to interpretand clarify the purport of this section. In the circumstanoes, the judg-ment of H. N. G. Fernando {then S.P. J.) although it may not be bindingon this Court merits very careful scrutiny and consideration. In thatcase the Registrar of Co-operative Societies appointed an arbitrator todetermine a claim made by a Co-operative Society against its Manageron the basis that he was liable to account for goods or the value of goodsshown by the books of the Society said to have been under his control asmanager. It was held that the claim involved the exercise of judicialpower. The following passage in the judgment is apposite : “ An ‘ officer ’of a Co-operative Society is not necessarily in a contractual relationshipwith the Society. The duties and responsibilities of the Chairman or thePresident or Secretary of a Society may be such as not to involve con-tractual rights or obligations on either side. But if in addition an officerhas custody or control of goods or funds of the Society, or has powerto negotiate contracts on behalf of the Society, then contractual relation-ships, such as that between principal and agent, can exist between aSociety and its manager. In this way, disputes can arise as to the dueperformance of contractual rights and obligations …… The liability
of the manager arises at least upon an implied contract in the nature ofagency. The dispute concerning the existence of this liability and theduty to perform it is an ordinary civil dispute within the traditionaljurisdiction of the Courts ”. This passage sets out the ratio decidendiin that case. But before H. N. G. Fernando (S.P.J.) reaches his deoisionhe considers the objects which were plainly intended to be achieved by theformer Section 45 of the Ordinance before the amending Act No. 21 of1949. I might state that so far as the instant dispute is concerned thisamendment is of little import but the observations would well applyto our present Section 53. As for disputes between a Society and itsmembers in regard to the rules governing relations between a Societyand its members, as to whether a Society or a member had acted in
breach of the rulesthe judgment puts it beyond doubt that it was
* (1966) 68 N. L. R. 603. o
WIJAYATTLAKE, J.—Kalutara Co-operative Distilleries Society Ltd.329
v. A rsakularatne
dearly the intention of the Legislature that such disputes should be finallydecided by the Registrar; in the exercise of his supervisory functions,or by arbitrators appointed by him. Disputed claims by a Society' against its members, tn their'capacity as such, were also in contemplation,although it is arguable whether section 45 applied also to other claimsagainst members, not arising by reason of their membership of a Society,but arising instead upon transactions involving ordinary contractualrights and obligations, or else arising in delict. Except in regard to claimsof this nature the judgment holds that there is no doubt that the deter-mination by the Registrar or an arbitrator of a dispute affecting any ofthe matters aforementioned does not involve the exercise of the judicialpower of the State.
At this stage it would be well to examine the agreement to supply toddywhich is the subject of the instant dispute. The plaintiff is a party to itas a member, his membership number being 114. The second party isthe Administrative Secretary of the defendant Society for and on behalfof the said Society. Under Clause 12 of this agreement both parties bindthemselves to settle any dispute arising out of these conditions or agree-ment in accordance with section 45 of the Co-operative Societies Ordinance.The conditions strictly prohibit the supply of toddy from trees only froman outsider and those who break these conditions do so only on their res-ponsibility and it is a gross violation of all regulations besides an insult tothe Society for members to get outsiders to supply toddy from trees assignedto them. The first party further binds himself to get his licence cancelledby the Excise Department and not to claim any damages when thecommittee or a sub-committee appointed by the committee finds himguilty after an inquiry in regard to a breach of these conditions. Inmy opinion, having regard to the judgment of the Divisional Bench, it isquite clear that the instant dispute is one which touches the business ofthe Society within the meaning of section 53 and it therefore falls withinthe purview of the Registrar. The dispute which has arisen would there-fore not involve the exercise of the judicial power of the State. Mr.Coomaraswamy also relied on the judgment of Gunasekara J., in Sanmugamv. BadvUa Co-operative Stores Union Ltd.1—with Gratiaen J. agreeing—where it was held that section 45 (1) (before the amending Act) ousts thejurisdiction of the ordinary Courts over a dispute between a registeredco-operative Society and any other officer of the Society when the disputetouches the business of the Society. The case of Hendrick Appuhamy v.John Appuhamy *-waa under the Paddy Lands Act No. 1 of 1958. SansoniG.J. in the course of his judgment refers to the case of Wilkinson v. Bark-ing Corporation8 where Asquith L. J. said—“ It is undoubtedly good lawthat where a statute creates a right and, in plain language, gives a specifioremedy or appoints a specifio tribunal for its enforcement, a party seekingto enforce the right must resort to that remedy or that tribunal and notto others. ” See also the case of Pasmore v. OsuxddttmsUe U. D. C.*Sansoni C. J. further observed that if the landlord of every paddy field
(1962) 64 N. L. R. 16.* (1948) 1 K. B. 721.
(1966) 69 N. L. B. 29.4 (1898) A. C. 387.
330 WIJAYATILAKE, J.—Kalutara Co-operative Distilleries Society Ltd.
v. Arsakularatnc
were to continue to enjoy rights he had prior to this Act, and thatincludes the right to ask for a decree of ejectment against every tenant,this Act may well be torn up! Iam inclined to make a similar observationin this case. However, Mr. Andradi has strenuously submitted that theinstant action being one for declaratory relief the jurisdiction of theCourts has not been ousted by Section 53 even on the assumption thatthe dispute in question touches the business of a registered Society. Hehas relied on a series of judgments of which I might refer to the case ofFemandopuUe v. Per era Appuhamy1 where it was held that Section 56(a) (ii) of the Debt Conciliation Ordinance could not prevent a proceedingheld before the Debt Conciliation Board from being declared by a Courtof Law as invalid for want of jurisdiction. It may be noted that Naga-lingam J. observed that Section 5.6 does not say that the validity of theproceedings before the Board cannot be canvassed in a Court of Law.What it does say is that a Court ca,nnot entertain an action in respect ofthe validity of any procedure before the Board, which is .entirely a diff-erent matter. In the case of Aziz v. Thondam'in 2 it was held that wherethe rules of a Trade Union or a Club provide for a right of appeal to adomestic tribunal, but the composition and powers are not defined, it isopen to a member or office bearer, who has been wrongly expelled, toinvoke the aid, in the first instance, of a Court of Law. Basnayake C.J.observed that the right of a citizen to invoke the aid of a Court is one thatcannot be taken away by rules of any association or body of persons. Itis so fundamental that it cannot be taken away by the Legislature itself.I might mention that in that case although an appeal was provided to adomestic tribunal its compositon was not defined and existed only inname. The instant case can be clearly distinguished. Mr. Andradirelies very strongly on the well-known case of Cooper v. Wilson 3 where itwas held that where a statutory body is alleged to have acted withoutjurisdiction, its decision can properly be questioned in an action for adeclaration that the decision is null and void. In that case the Watch■ Committee purported to dismiss the appeal of a Sergeant in the LiverpoolPolice Force from the Chief Constable’s sentence of dismissal. This casetoo can be clearly distinguished as in the instant case the procedureadopted was quite different, and the matter in dispute had not even comeup for cons deration before the Registrar. Mr. Andradi has furthersubmitted that in the case of Cooper v. Wilson the appellant was notlimited to the right of appeal to • he Secretary of State given by the PoliceAppeals Act 1927 and therefore the appellant was entitled to the declara-tion claimed. Here again when we refer to the instant dispute it would-appear that the plaintiff’s prayer for declaratory relief is in any eventpremature as the stage for an appeal to the Registrar had not arisen.The significance of ' may ’ as against ‘ shall ’ in Section 53 also meritsconsideration. See Zamir, page 89.
• (1950) 52 N. L. R. 204.
* (1937) 2 K. B. 300.
* (1959) 61 N. L. R. 217.
WIJAYATILAXE, J.—Kalutara Co-operative Distilleries Society Ltd.
v. Araakularalne
331
Mr. Andradi has further submitted that a body which has to performa duty in the nature of judicial duty is disqualified from performing it ifit has a bias or if it has so conducted itself as to create in the mind ofa reasonable man a suspicion that it may have such a bias. He hasaccordingly invoked the principles of natural justice and prayed for theintervention of the Courts to prevent any injustice to his client. Inregard to this particular transaction he has referred to the alleged hastyand reckless action taken by the committee to suspend him when it hadno power to do so and thereafter the irregular steps taken to get coveringsanction at a General Meeting for the order of suspension by the com-mittee. He further submits that the Assistant Registrar had a hand inpreparing the charges framed against him. In my opinion it is evidentthat all these matters in dispute touch the business of the Society withinthe meaniog of Section 53 and therefore it was the Registrar who had thejurisdiction to inquire into them. I am inclined to take the view that thecommittee has the power to suspend a member pending action at a GeneralMeeting by virtue of by-law 29 (xx). Mr. Andradi has also mentionedthat when his client called for an authenticated copy of the allegationsmade against him for the first time this request was ignored. However,on a perusal of the correspondence it is apparent that the plaintiff wasnot in any way prejudiced by the absence of a certified copy as such ashe had received a communication and refused to shew cause and treatedthe committee with contempt. This is obviously an afterthought oflittle consequence. The Additional District Judge in concluding hisjudgment has referred to Zamir on “ The Declaratory Judgment ” andhe refers to the observations of Denning L.J. at page 164 that the Courtswill alwajs be prepared to examine the decision of a domestic tribunalto see that the tribunal has observed the law. I might mention that in theinstant case, in view of the statutory provision at Section 53, the present.action is premature. One has only to read through the chapters ofZamir Where under different heads he discusses the various facets of thejudgment in Cooper v. Wilson to realise the essence of the principles setout therein. If one reads his observations critically it would appear thatthey can be cited in support of the appellant's submissions too with equalforce. See Zamir at pages 31, 89, 98 and 232.
In a welfare State such as Ceylon the Co-operative Societies Ordinancehas been enacted by the Legislature with a view to promoting inter ciliaparticular industries for the benefit of the public and special machineryhas been provided for the settlement of disputes touching the business ofRegistered Societies for the smooth working of such Societies and there-fore a dispute such as the instant one, in my opinion, does not at thepresent stage involve the exercise of the Judicial power of the State.As Mr. Coomaraswamy posed the question if these are not matters thatcan be settled by a domestic committee what are the matters which canbe settled by such committees ? In my view as I have already observedthere is no justification whatever for confining Section 53 to disputes interms of rupees and cents. ,
332DE KRETSER, J.—Superintendent, Afulana Estate, Makandura
v. Diddenipota
I would accordingly hold that the District Court had no jurisdictionto entertain this Action and Application for an interim injunction. I setaside the order of the Additional District Judge. The Appellant shall beentitled to tfce costs of appeal and the costs of inquiry.
Samerawickrame, J.—I agree.
Appeal allowed„