Holding

A dispute concerning the conditions of service of workmen employed by a cooperative society does not amount to a dispute touching the business of the society, and consequently notice under Section 79 is not required.

Summary

The Morinda Co‑op. Sugar Mills Workers Union filed a suit seeking a declaration that its members were entitled to a variable dearness allowance (VOA) under para 317(ii) of the Third Wage Board Report and an injunction restraining the mill from withdrawing the allowance. The mill contended that the suit was not maintainable because the Union had not served a notice under Section 79 of the Punjab Co‑operative Societies Act, 1961. The trial court held the notice mandatory, but the first appellate court reversed, holding that a dispute over service conditions does not "touch the business of the society" and therefore notice was not required. The High Court affirmed this view. On appeal, the Supreme Court examined the scope of "business of the society" under Sections 55 and 79 and, relying on earlier decisions, held that a dispute concerning the conditions of service of workmen is not a business dispute, so the notice requirement does not apply. The appeal was dismissed.

Issues considered

Whether a dispute relating to the conditions of service and payment of dearness allowance to workmen of a cooperative society constitutes a dispute touching the business of the society under Section 55 of the Punjab Co‑operative Societies Act, 1961.
Whether service of notice under Section 79 of the same Act is mandatory for such a suit.

Legislation cited

Code of Civil Procedure, 1908s. 100
Punjab Co-operative Societies Act, 1961s. 55, s. 79

Subjects

cooperative societydearness allowanceservice conditionsSection 55Section 79notice requirementbusiness of societyarbitrationlabour disputePunjab Co-operative Societies Act

Judgment

MORIN DA COOPERATIVE SUGAR MILLS LTD. A
V.

MORINDA COOP. SUGAR MILLS WORKERS UNION

JULY I2, 2006

[ARIJITPASAYAT ANDLOKESHWARSINGH PANTA,JJ.] B

Punjab Co-operative Societies Act, 1961-Sections 55 and 79-Suit
against Cooperative Society-In respect ofpayment of Dearness Allowance-
Notice u!s 79 not given-Trial Court held that notice was mandatory-First C
Appellate as well as High Court held that the subject matter of dispute
cannot be said to be touching business of society, hence notice not
mandatory-On appeal, Held: Subject matter of dispute i.e. service condition
of workmen cannot be said to be dispute touching business of the society-
Hence notice not required.
D
Respondent-Union filed a suit seeking declaration to the effect that
members of the Union were entitled to the benefit of variable dearness
allowance on the wages in addition to fixed allowance in accordance with para
317(ii) of the Third Wage Board Report. The stand of the appellant-defendant
was that the suit was not maintainable as notice u/s 79 of Punjab Co-operative
Societies Act, 1961 was not issued. Trial Court held that service of notice E
u/s 79 was mandatory.

First appellate court reversed the judgment of the trial court on the
ground that the subject matter of the suit cannot be said to be a dispute
touching the business of the society. Second appeal was dismissed by High F
Court upholding the order of First Appellate Court. Hence the present appeal.

Dismissing the appeal, the Court

HELD: I. A dispute relating to conditions of service of the workmen
employed by the society cannot be held to be a dispute touching the business
of the society. The conclusions of the First Appellate Court that the subject G
matter of the suit cannot be said to be a dispute touching the business of the
society as affirmed by the High Court do not suffer from any infirmity to
warrant interference. (478-D-E; 480-E]

473 H
474 SUPREME COURT REPORTS (2006) SUPP. 3 S.C.R.

A 2. The object of Section 55 of the Punjab Co-operative Societies Act,
1961 is clear. If any dispute touches the constitution, management or business
of any cooperative society arising between specified category of members has
to be referred to arbitration. Similarly no cooperative society or its officers
should be dragged to litigation before the Civil Court in respect of any act
B touching the business of such a society unless notice is required to be given
in writing as has been issued to the Registrar. (477-E-F(

O.N. Bhatnagar v. Smt. Rukibai Narsindas and Ors., AIR (1982) SC
1097; Deccan Merchants Co-operative Bank Ltd. v. Mis. Dalichand Jugraj
Jain, [1969) l SCR 887 and Co-operative Central Bank Ltd. and Ors. etc. v.
C Additional Industrial Tribunal, Andhra Pradesh, Hyderabad and Ors., etc.
(1969) 2 sec 43, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4488 of2004.

From the Judgment and Order dated 14.8.2003 of the High Court of
D Punjab and Haryana at Chandigarh in R.S.A. No. 2930/1999.
M.C. Dhingra for the Appellants.

O.P. Gogne, Mukesh Verma, Manish Shanker, Yash Pal Dhingra and
Vikram for the Respondent
E The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. Appellant calls in question legality of the judgment
rendered by a learned Single Judge of the Punjab and Haryana High Court
dismissing the appeal filed by the appellant under Section I 00 of the Code
F of Civil Procedure, 1908 (in short the 'Code'). The defendant - Morinda Co-
operation Society Workers' Union (hereinafter referred to as the 'Union') as
plaintiff filed a suit claiming dearness allowance on the wages plus fixed
allowance in accordance with para 317(ii) of the Third Wage Board Report.
The first appellate court reversed the judgment and decree of the trial court
holding that the subject matter of the suit cannot be said to be a dispute
G touching the business of the society. Accordingly the appeal was allowed.
Second Appeal was filed by the defendant (present appellant) contending
that the view of the trial court was justified and that of the first appellate court
was not justified.

H
The plaintiff - Union filed the suit seeking declaration to the effect that
the members of the plaintiff Union was entitled to the benefit of the Variable -
MORINDA co-or. SUGAR MILLS LTD. "- MORINDA CO-OP. SUGAR MILLS WORKERS UNION [rASA VAT, J.] 475

Dearness Allowance (for short the 'VOA') on the basic wages plus fixed A
allowance in accordance with para 317(ii) of the Third Wage Board Report
with a consequential relief for permanent injunction restraining the defendant
from withdrawing the payment of VOA from the fixed amount of Rs.150 which
was being paid to the members of the Union. Defendant took the stand that
since small notice under Section 79 of the Punjab Co-operative Societies Act, B
1961 (in short the 'Act') is required, the suit was not maintainable. The trial
court on the basis of the pleadings framed five issues which are as follows:

I. Whether the plaintiff is entitled to the declaration as prayed for?
2. Whether the plaintiff is entitled to the injunction as prayed for?
3. Whether the suit is not maintainable in the present form?
c
4. Whether the plaintiff has no locus standi to file the present suit?
5. Whether the suit is liable to be dismissed on the ground of non
service of notice under the Punjab Co-operative Societies Act?

The trial court held that the defendant has no right to withdraw the
D
VOA in accordance with the recommendations. Issues 1 and 2 were accordingly
answered. It was further held that defendant has no right to withdraw VOA
and if any clarification for withdrawal of VOA is required, opportunity of
hearing was required to be given to the plaintiff and it should have been
obtained from the Third Wage Board. The Issues I and 2 were accordingly E
answered. The suit was held to be maintainable as no defect on the form of
the suit was pointed out. But on issue No. 4 it was held that service of notice
was mandatory.

In the Second Appeal it was urged that the First Appellate Court lost
sight of the fact that expression "business of the society" used in Section F
79 would necessarily include financial involvements concerning payment of
salary and allowance to the plaintiff Union. It was further pointed out that
disputes of the nature raised touched the constitution, management or business
of the cooperatives societies and was required to be referred to "Arbitration"
under Section 55(1) of the Act. The High Court after analyzing the Bye law G
No.5 of the appellant, came to hold that the first appellate court was justified
in its conclusion. Accordingly the Second Appeal was dismissed.

Learned counsel for the appellant submitted that the object of the
society was to promote economic interest of its members and if the effect of
H
476 SUPREME COURT REPORTS [2006) SUPP. 3 S.C.R.

A costs involved in production of sugar was the subject matter of adjudication,
obviously notice under Section 79 of the Act was mandatorily necessary. It
was submitted that the expression "touching business of the society" is wide
enough to encompass all aspects which have effect on the economic interest
of the members and that is why trial court was justified in its view.

B Per contra learned counsel for the respondent submitted that the High
Court has analysed the legal position, the objects and has come to the right
conclusion by upholding the judgment and decree of the first appellate court.

Sections 55 and 79 of the Act read as follows :

C "55. Disputes which may be referred to arbitration-( I)
Notwithstanding anything contained in any law for the time being in
force, if any dispute touching the constitution, management or the
business of a cooperative society arises
(a) among members, past members and persons claiming through
D members, past members and deceased members ; or
(b) between a member, past member or person claiming through a
member, past member or deceased member and the society, its
committee or any officer, agent or employee of the society or
liquidator, past or present; or
E (c) between the society or its committee and past committee, any
officer, agent or employee, or any past officer, agent or past
employee or the nominee, heirs or legal representatives of any
deceased officer, deceased agent, or deceased employee of the
society; or
F (d) between the society and any other co-operative society, between
a society and liquidator of another society or between the
liquidator of one society and the liquidator of another society:
Such disputes shall be referred to the Registrar for decision and no
Court shall have jurisdiction to entertain any suit or other proceeding
G in respect of such dispute.
2. For the purposes of sub-section(!), the following be deemed to
be disputes touching the constitution, management or the
business of co-operative society, namely -

H (a) a claim by the society for any debt or demand due to it from
MORINDA CO-OP. SUGAR MILLS LTD.'· MORINDA CO-OP. SUGAR MILLS WORKERS UNION [PASAYAT, J.] 477

a member or the nominee, heirs or legal representatives of a A
deceased member, whether such debt or demand be admitted
or not:

(b) a claim by a society against the principal debtor where the
society has recovered from the surety any amount in respect
of any debt or demand due to it from the principal debtor as B
a result of the default of the principal debtor, whether such
debt or demand is admitted or not:

(c) any dispute arising in connection with the election of any
officer of the society.

3. If any question arises whether a dispute referred to the Registrar
c
under this Section is or not a dispute touching the constitution,
management or the business of a co-operative society, the decision
thereon of the Registrar shall be final and shall not be called in
question in any Court.
D
79. Notice necessary in suits.-No suit shall be instituted against
a co-operative society or any of its officers in respect of any act
touching the business of the society until the expiration of three
months next after notice in writing has been delivered to the
Registrar or left at his office stating the cause of action, the name,
description and place of residence of the plaintiff and the relief E
which he claims, and the plaint, shall contain a statement that
such notice has been so delivered or left."

The object of Section 55 of the Act is clear. If any dispute touches the
constitution, management or business of any cooperative society arising
betwetn specified category of members has to be referred to arbitration. F
Similarly no cooperative society or its officers should be dragged to litigation
before the Civil Court in respect of any act touching the business of such
a society unless notice required to be given in writing as has been issued to
the Registrar of the society. Bye law No. 5 of the Bye Laws of the Appellant,
so far as relevant, reads as follows:
G
"Objects

The objects of the Mills shall be to promote the economic interest
of its members and for this purpose to carry on the manufacture of

, . sugar, sugar products and other ancillary products and to make H
arrangements for their sale and also to take necessary steps and
478 SUPREME COURT REPORTS [2006) SUPP. 3 S.C.R.

A measure for the development of sugarcane and sugar beet. For the
purpose of attaining the aforesaid objects, it shall be competent for
the Mills :-

)()()()()()(

B "(d) To Purchase sugarcane of sugar beet preferably from grower
members and others and to sell the finished products so manufactured.

xxxxxx

G) To instal plant & Machinery for utilization of ancillary/bye
products and bury raw materials for the same and sell finished products
c in the course of the utilizing and marketing of the ancillary/bye
products.

xxxxxx

(p) To do such other things as are inciden!1l or conductive to the
D attainment of all or any of the above objects."

The emphasis made by learned counsel for the appellant is that when
the object is to promote the economic interest, any thing which has link with
the economic interest has to be, per force, taken as touching the business of
the society.
E
This Court in O.N. Bhatnagar v. Smt. Rukibai Narsindas and Ors., AIR
( 1982) SC I097 observed inter alia as follows:

"In the present case the society is a tenant co-partnership type
housing society formed with the object of providing residential
F accommodation to its co-partner tenant members. Now, the nature of
business which a society carries on has necessarily to be ascertained
from the object for which the society is constituted, and it logically
follows that whatever the society does in the normal course of its
activities such as by initiating proceedings for removing an act of
trespass by a stranger, from a flat allotted to one of its members,
G
cannot but be part of its business. It is as much the concern of the
society formed with the object ofproviding residential accommodation
to its members, which normally is its business, to ensure that the flats
are in occupation of its members, in accordance with the bye-laws
framed by it, rather than of a person in an unauthorized occupation,
H as it is the concern of the member, who lets it out to another under ..
MORINDA CO-OP. SUGAR MILLS LTD.'· MORINO A CO-OP. SUGAR MILLS WORKERS UNION [PASAYAT. J.] 479

an agreement of leave and licence and wants to secure possession of A
the premises for his own use after the termination of the licence. It
must, therefore, follow that a claim by the society together with such
member for ejectment of a person who was permitted to occupy
having become a nominal member thereof, upon revocation of licence,
is a dispute falling with the purview of Section 91 (I) of the Act."
B
(Italics for emphasis)

In Deccan Merchants Co-operative Bank Ltd v. Mis. Dalichand Jugraj
Jain, [ 1969] I SCR 887 it was held as follows :

"Five kinds of disputes are mentioned in sub-section: c
First, disputes touching the constitution of a society: secondly,
disputes touching election of the office bearers of a ~ociety: thirdly,
disputes touching the conduct of general meeting of a society: fourthly,
disputes touching the management of a society: and fifthly disputes
touching the business of a society. It is clear that the word " business" D
in this context does not mean affairs of a society because election of
office-bearers, conduct of general meetings and management of a
society would be treated as affairs of a society. In this sub-section the
word "business" has been used in a narrower sense and it means the
actual trading or commercial or other similar business activity of the E
society which the society is authorized to enter into under the Act
and the Rules and its bye-laws."

In Co-operative Central Bank Ltd and Ors_ etc. v. Additional Industrial
Tribunal, Andhra Pradesh, Hyderabad and Ors_ etc. [1969] 2 SCC 43 it was
held that alteration of the conditions of the service of the workman would not F
be covered by the expression "touching the business of the society". It was
held inter alia as follows :

"Applying these tests, we have no doubt at all that the dispute
covered by the first issue referr~d to the Industrial Tribunal in the
present cases could not possibly be referred to decision to the G
Registrar under Section 61 of the Act. The dispute related to alterations
of a number of conditions of service of the workmen which relief could
only be granted by an Industrial Tribunal dealing with an industrial
dispute. The Registrar, it is clear from the provisions of the_ Act, could
not possibly have granted the reliefs claimed under this issue because
of the limitations placed on his powers in the Act itself. It is true that H
480 SUPREME COURT REPORTS [2006) SUPP. 3 S.C.R.

A Section 61 by itself does not contain any clear indication that the
Registrar cannot entertain a dispute relating to alteration of conditions
of service of the employees of a registered society: but the meaning
given to the expression "touching the business of the society". In our
opinion, makes it very doubtful whether a dispute in respect of
alteration of conditions of service can be held to be covered this
B expression. Since the word "business" is equated with the actual
trading or commercial or other similar business activity of the society,
and since it has been held that it would be difficult to subscribe to
the proposition that whatever the society does or is necessarily
required to do for the purpose of can)'ing out its objects, such as
C laying down the conditions of service of its employees, can be said
to be a part of its business, it would appear that a dispute relating
to conditions of service of the ll'orkmen employed by the society
cannot be held to be a dispute touching the business of the society."

(Italics for emphasis)
D
When the factual background are tested in the background of principles
set out in O.N. Bhatnagar 's case (supra), Deccan Merchant's case (supra) and
Cooperative Central Bank's case (supra), the conclusions of the First
Appellate Court as affirmed by the High Court do not suffer from any infirmity
to warrant interference.
E
The appeal is dismissed. No costs.

K.K.T. Appeal dismissed.