027-NLR-NLR-V-63-V.-R.-MURUGESU-Appellant-and-THE-NORTHERS-DIVISION-AGRICULTURAL-PRODUCERS’-CO-.pdf
SINNETAMBY, J.—Mumgesu v. Northern Division Agricultural
Producers' Co-operative Union Ltd,
151
1960Present: Sinnetamby, J., and L. B. do Silva, J.R. MURUGESU, Appellant, and THE NORTHERN DIVISIONAGRICULTURAL PRODUCERS’ CO-OPERATIVE UNION LTD.,
Respondent
S. G. 620J56—D. G. Jaffna, 141
Co-operative society—Dispute between society and an officer of the society—Referenceto arbitration—Right of arbitrator to consider evidence other than that adducedby the parties—tl Misconduct" of arbitrator—Award of arbitrator—Incapa-city of a party to canvass its correctness—Co-operative Societies Ordinance, s. 45(5)—Co-operative Societies Rules, Rules 38 (8), 38(9), 38(13).
An award made by arbitrators appointed under section 45 of the Co-operativeSocieties Ordinance in respect of a dispute between a registered co-operativesociety and an officer of the society touching the business of the society cannotbe rendered invalid on the ground that the arbitrators took into account (afternotice to the party affected) a document which was not produced by eitherparty. Rule 38 (9) of the Co-operative Societies Rules does not compel anarbitrator to consider only such evidence as has been given, or such docu-ments as have been produced, by either party.
A party is not entitled, in view of the provisions of section 45 (5) of theCo-operative Societies Ordinance, to canvass the correctness of an arbitrator’saward. Questions involving the improper admission or rejection of evidenceby an arbitrator are matters which do not affect the validity of the award,and are outside the province of the District Judge who is called upon, underRule 38 113), to execute the award as a decree of Court.
_A.PPEAL from an order of the District Court, Jaffna.
S. J. V. Ghelvanayakam, Q.C., with C. Shanmuganayagam, forrespondent-appellant.
8. Nadesan, Q.C., with M. D. Jesuratnam, for petitioner-respondent.
November 29, 1960. Sinnetamby, J.—
The petitioner society, who is the respondent to this appeal, havingobtained an award in their favour, made by arbitrators appointed undersection 45 of the Co-operative Societies Ordinance, applied to the DistrictCourt for execution of the award as a decree of that Court, under Rule38 (13) of the Co-operative Societies Rules. Notice of this applicationwas served upon the appellant, against whom a dispute is alleged tohave arisen, and in consequence of which the matter was referred to
162
SINNETAMBY, J-—Murugesu v. Northern ZHviaion Agricultural
’Producers* Co-operative Union Ltd.
arbitration by the Registrar under section 46. The respondent-appellantappeared and objected to the issue of writ. After inquiry the learnedDistrict Judge allowed the issue of writ. The present appeal is againstthat decision and the argument proceeded on the following grounds :—
that the appellant was not an officer of the Society when the dispute
arose—at a later stage, learned counsel did not press thisobjection conceding that he was an officer of the society,
that the dispute did not touch the business of the society, and
that the arbitrators took into account a document which was not
produced by either party, and by so doing were guilty ofmisconduct, which rendered the award invalid.
In regard to the second of these matters, viz. the question as to whetherthe dispute touched the business of the society, the evidence disclosesthat at the relevant time the sole importer of onions into this countrywas the Director of Food Supplies. The petitioner society was formedin order to distribute seed onions among growers of onions and for thepurpose of so distributing seed onions they had in the course of theirbusiness to purchase the onions. That was a function which they mustnecessarily have performed in order to achieve the object for which thesociety was formed. The purchase of onions, therefore, was somethingwhich was part of their business. It is in evidence that the Directorof Food Supplies, as sole importer, granted a permit to the society toenable it to purchase onions from a society in South India, where therewere restrictions against the export of onions, this society being grantedpermission to sell a limited quantity to Ceylon. The appellant who wasthe Secretary of the society appears to have imported in his own namefrom time to time onions from South India under this permit; and, inregard to the matter in dispute between the parties, he imported theonions in the name of one K. M. Murugesu. The arbitrators held that
K.M. Murugesu was only a nominee of the appellant and that in pointof fact it was the appellant who imported the onions, got the documentsin his name, cleared the goods, and sold them to the public. It was thecase for the Co-operative society that in so doing he stipulated a higherfigure than was actually recoverable, and that he, thereby, made a secretprofit. It is this secret profit, which the society claimed.
The first question, therefore, that arises, apart from the questionas to whether the imports of onions was part of the business of thesociety, is whether this dispute was a dispute between the society and anofficer touching the business of the society. It has been held by thisCourt in Mohideenv. Lanka Matha Co-operative Stores Society Ltd. *, wherea dispute arose between the society and one who happened to be a member,that in order to make a dispute to fall ■within the ambit of Section 45 1
1 (1947) 48 N. L. R. 177.
SINNETAMBY, 3.—-Murugesu v. Northern Division Agricultural
Producers' Co-operative Union Ltd.
163
of the Co-operative Societies Ordinance, the dispute must be of such anature as would arise between the society and a member, qua member.In this case it is an officer and not a member, who is concerned. If thedispute is not between an officer in his capacity as an officer and thesociety, then that dispute was outside the scope of section 45. In thisparticular case, from the facts, it is clear that the appellant could nothave imported these onions in his own personal capacity. It is only inhis capacity as an official of the Society, viz. as the Secretary, that hewas in a position to indent for the onions under the permit granted tothe Society by the Director of Food Supplies. Applying, therefore, theprinciple enunciated in Mohideen v. Lanka Matha Co-operative StoresSociety Ltd. {supra) this clearly is the kind of dispute that is contemplatedby section 45. It is a dispute that arises between the Society and one ofits officers, qua officer, for that officer was not in a position to transactthis business except in his capacity as an officer of the Society. Therecan, therefore, be no doubt that the dispute in question was a dispute thatarose between the Society and one of its officers and also touched thebusiness of the Society.
The only matter which counsel really pressed was the third point onwhich he addressed us fully, namely that the arbitrators took intoconsideration a document which has been marked A2, in arriving at theirdecision. He relied partly on the provisions of section 38(9) of the ruleswhich is to the following effect:—
“ The Registrar or the arbitrator or arbitrators shall hear the evidenceof the parties to the dispute and their witnesses and upon that evidenceand after consideration of all documents produced by either partyshall give the decision or award as the case may be, in accordancewith justice, equity and good conscience. ”
This provision follows immediately after Section 38(8) which states thatthe Registrar or the arbitrators have the power to administer oaths,hear evidence and require production of books, etc. Obviously, Section38(9) merely states that in arriving at a decision the arbitrators or Regis-trar should proceed upon the. evidence given before them. It does notnecessarily follow that they must limit their findings to the evidencethat is produced by either party, and not consider any other evidence,which, but for this provision, they would legally have been entitled torely upon. In my opinion, Section 9 does not compel the arbitrators orRegistrar to consider only such evidence as has been given or documentsproduced by either party. This document A2 is something which theconsignee of goods had to sign at the Customs before taking deliveryof the goods consigned and it appears to be signed by the defendantMurugesu. The case for the Society was that it was Murugesu whoordered the goods, took delivery of the goods and eventually disposedof it. The arbitrators have found that Murugesu the appellant hadpersonally paid the bills that were drawn by the foreign consignors
154
SENHETAMBY, J.-—Murugtau v. Northern Division Agricultural
Producers' Co-operative Union Ltd.
through, the Indian Overseas Bank in respect of six bills, that he did solong after the onions had been removed from the Customs, and that theappellant had through a guarantor obtained release of the documents,and had paid a commission to the guarantor. The bills drawn by theforeign company were sent to Murugesu, that is, the appellant, personally.The final conclusion reached by the arbitrators was that if there was anyfinancier it was Murugesu the appellant and none other. At a certainstage of the proceedings after the case for the Society had been closedthe arbitrators thought it desirable to look into documents kept by theCustoms in regard to these consignments, particularly with a view tofinding out who removed the goods. They accordingly despatched atelegram to the Customs asking them to preserve the documents. Atthis stage the appellant who had taken part in the proceedings withdrewand took no further part. One cannot help making the observation thathis withdrawal at this stage was, perhaps, influenced by the fact thathe was aware of the contents of the document A2, which would haveproved conclusively that it was he who removed onions that wereconsigned under the permit, and that if confronted with the document A2he would have been obliged to admit it. We have no doubt that had hecontinued to participate in the arbitration proceedings, these documentswould have been put to him, and he would be asked to admit or denythem. Learned Counsel for the appellant, however, contended that theconduct of the arbitrators in themselves obtaining evidence, which wasnot submitted to them by either party, amounted to technical misconductand in support cited the case of Owen v. Nicholl 1. In that case a claimhad been referred to arbitration under the provisions of County CourtsAct of 1934 and the sole issue to be decided was whether the defendantwas in partnership with his son. It was contended that the arbitratorwas guilty of technical misconduct in introducing into the proceedingsknowledge he had acquired in other proceedings by consulting thebankruptcy file. The County Court Judge held that there was nomisconduct on the part of the arbitrator but the Court of Appeal reversedhis finding on the ground of technical misconduct. Lord Justice Tuckerin the course of his judgment made the following observations :—
“ it would be misconduct for an arbitrator to introduce into theproceedings evidence other than that adduced by the parties. ”
It would appear that the Registrar, who was appointed arbitrator, hadin his capacity as Registrar heard a bankruptcy case in which the sonwas involved, and had made use of his knowledge so acquired to putcertain questions to the father, who was one of the parties to the arbitra-tion proceedings. The Judge held that it was difficult for the Registrar
1 Wectdy Notes 1948 at page 138 also reported in 1948 1 A. E. R. page 707.
SINN ETAMBY, J.—Murugesu v. Northern Division Agricultural
Producers' Co-operative Union iAd..
155
not to allow his knowledge acquired in his capacity as Judge in thebankruptcy proceedings to influence him in the arbitration proceedings.The basis of the decision seems to be that it is wrong for an arbitratorto use knowledge which he had acquired earlier in other proceedings inrespect of one of the parties, even to the extent of questioning him inregard to matters which have not been placed by the other side for hisconsideration, as to do so would even unwittingly influence him in thedecision of the matters before him in the arbitration proceedings itself.The parties were given no opportunity by the arbitrator of commentingon the matters in respect of which the arbitrator had consulted thebankruptcy file, nor were they given an opportunity of leading otherevidence in regard to it.
In the present case, the facts are entirely different. The arbitratorsknew nothing of the contents of the document which they called for andthey had already come to some very definite findings in regard to theactivities of the appellant and the capacity in which he indented for theseonions. He had indented in his own name and they only wanted toascertain whether it was he who actually took delivery of the onions fromthe Customs. There was evidence that he had dealt with the onions quiteindependently of the documents. The document in question was a publicdocument, and would, in the ordinary course, have been put to theappellant had he continued to participate in the proceedings ; and hewould have had an opportunity of commenting on it or leading otherevidence. In any event, one cannot say that but for the document thearbitrators would not have come to the conclusions which they eventuallyreached.
I have dealt with this matter urged by learned Queen’s Counsel onbehalf of the appellant as it was dealt with fully in the course of theargument; but, it seems to me, that the appellant is not entitled havingregard to the provisions of Section 45(5) of the Co-operative SocietiesOrdinance to canvass the correctness of the arbitrator’s award. Therecent judgment of seven Judges of this Court brings it down quiteclearly that such matters are outside the province of the District Judgewho is called upon to execute the decree. Questions involving theimproper admission or rejection of evidence are matters which do notaffect the validity of the award and it seems to me that if an arbitratordoes not act judicially or acts in excess of jurisdiction the proper remedyis by way of an application for the issue of one or other of the prerogativewrits.
Appeal dismissed.
L. B. de Silva, J.—I agree.