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IN THE HIGH COURT OF ANDHRA PRADESH, AT HYDERABAD
BHIMASANKARAM, J.
Pentakota Sriramulu - Petitioner
Versus
The Deputy Registrar of Co-operative Societies, Visakhapatanam and others - Respondents
W.P. No. 643 of 1952
Decided on : 26-6-1957
CO-OPERATIVE SOCIETIES ACT - SECTION 51 - CLAIM FOR COMMISSION ON ILLEGAL SALES - JURISDICTION OF ARBITRATOR - INTERPRETATION OF 'BUSINESS' - LEGALITY OF TRANSACTIONS - ACCOUNTABILITY OF AGENT FOR ILLEGAL PROFITS - DISTINCTION BETWEEN VOID AND ILLEGAL CONTRACTS - APPLICABILITY OF SECTION 49 - WRIT ISSUED PROHIBITING ARBITRATOR FROM ENQUIRING INTO CLAIM.
Fact of the Case:
A co-operative society, Anakapally Co-operative Marketing Society Limited, was licensed as a commission agent under the Madras General Sales Tax Act. Due to the Gur Control Order, the society faced a sharp rise in the price level within the state. The members of the society adopted a device to sell jaggery at a higher price than the ceiling price fixed by the Gur Control Order. The society earned no commission on the extra price but only on the price that was lawfully payable. The Registrar of Co-operative Societies, Madras issued notices to the Committee under Section 38 of the Co-operative Societies Act and eventually the Committee was superseded on 15-12-1952 under Section 43 of the same Act. A Special Officer was appointed to take charge of the affairs of the Society. The Special Officer filed a claim before the Registrar which was registered as claim No. 1165/51. It was directed against the petitioner, who was the president of the Society and the Board of Directors, and also against the Secretary, all the other Directors, and four members of the Society. The claim sought to recover a sum of Rs. 13,765-12-5 from them. The petitioner challenged the jurisdiction of the Deputy Registrar to act as an arbitrator in the matter.
Finding of the Court:
1. The claim made by the Special Officer on behalf of the society against the petitioner and others on account of the commission supposed to have been realised by dealings in defiance of the Gur Control Order is not one that could be legally sustained in a Court of law. 2. The Deputy Registrar, who is now in seisin of this claim as arbitrator, is not the same Deputy Registrar who conducted the departmental enquiry under Section 38. Therefore, it cannot be said that the officer in question is already prejudiced against the petitioner. 3. The claim in the present case is not based upon misappropriation or fraudulent retention of any money or other property or breach of trust. Further, it is necessary in the present case to investigate into the extent of the actual liability. Even otherwise, when a claim has actually been made by the society or on behalf of the society, the matter clearly falls under Section 51.
Issues: 1. Whether the claim made by the Special Officer on behalf of the society against the petitioner and others on account of the commission supposed to have been realised by dealings in defiance of the Gur Control Order is one that could be legally sustained in a Court of law. 2. Whether the Deputy Registrar, who is now in seisin of this claim as arbitrator, is prejudiced against the petitioner. 3. Whether the claim in the present case falls under Section 49 or Section 51 of the Co-operative Societies Act.
Ratio Decidendi: 1. A co-operative society cannot be said to have conducted illegal business. A court should not attribute to the Legislature an intention to authorise a co-operative society to carry on a business in contravention of law or to reap the fruits of such a business. 2. An agent cannot be held accountable for the profits of a crime committed by him in the course of his dealings. 3. The claim in the present case is not based upon misappropriation or fraudulent retention of any money or other property or breach of trust. Further, it is necessary in the present case to investigate into the extent of the actual liability. Even otherwise, when a claim has actually been made by the society or on behalf of the society, the matter clearly falls under Section 51.
Final Decision: Writ issued prohibiting the Deputy Registrar from enquiring into the claim as prayed for.
ORDER
1. The petitioner was the president of the Anakapally Co-operative Marketing Society Limited, a society constituted mainly for the purpose of enabling its members to obtain credit facilities and to arrange for the sale of their agricultural produce at a reasonable price. Under the by-laws of the Society, its management was vested in a Committee. The petitioner was the president of the Committee as well as the society upto 8-11-1951 when he tendered his resignation. The society held a licence as a commission agent under the Madras General Sales Tax Act and was earning commission on the turnover of its sales. Under the by-laws, the business of the society extended to the sale of jaggery belonging to members as well as non-members. In October 1950, the Government of India promulgated what was called the Gur Control Order under which the maximum prices for the sale of jaggery in the different States of the Union were fixed at different levels. The price so fixed in the State of Madras—and Anakapally where the society was operating was then within the State of Madras—was lower than that fixed in some other states. Naturally, wholesale dealers from those states were prepared to make purchases in the State of Madras at prices in excess of the ceiling price fixed for sales within that State. The result was a sharp rise in the price level within the state beyond the point at which the maximum price was fixed. The members of the aforesaid Society, with which we are concerned, found that they could sell their commodity in the open market at a higher price than the ceiling price and the society was, therefore, practically earning no commission on jaggery sales. It is said that the society drew the attention of the officers of the Co-operative Department to this state of affairs But, according to the petitioner, no steps having been taken by the Government to keep the prices down to the level enjoined by the Gur Control Order, the members adopted a device which, while ensuring the society its commission, enabled them to avail themselves of the higher prices prevailing in the market contrary to the Gur Control Order. What was done was that when jaggery belonging to a member was sold by the society the owner would be present and there would be a private arrangement between him and the purchaser whereby a price over and above the price for which it was purported to be sold by the society would, in fact, be paid for it. The difference between the ceiling price and the agreed price would be paid directly—according to the petitioners averment in his affidavit in support of the petition—by the purchaser to the seller. The society earned no commission on the extra price but only on the price that was lawfully payable, which alone was recorded in its book as the price paid.
2. It is not necessary for the purpose of this case to determine the true facts relating to these transactions because the argument on behalf of the petitioner as well as the respondents proceeded on the assumption that the sales of jaggery with which I am concerned were conducted in violation of the Gur Control Order. It is only necessary to mention that consequent upon reports received by him concerning these improper activities on the part of the management of the Society, the Registrar of Co-operative Societies, Madras issued notices to the Committee under Section 38 of the Co-operative Societies Act and eventually the Committee was superseded on 15-12-1952 under Section 43 of the same Act. This was followed by the appointment of a Special Officer to take charge of the affairs of the Society. In this order of supersession the Registrar stated inter alia, that the society under the management of the Committee (also called the Board of Directors) had violated the provisions of the Gur Control Order, that it had actually collected commission from the excess amounts without bringing the same into the accounts and that duplicate accounts one open and the other secret—were m
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