Judgment:
K.J. Joseph, J.
1. The plaintiff in O.S. No. 812 of 1987, on the file of the Subordinate Judge's Court, Ernakulam, is the appellant. The appeal is against the judgment and decree passed by the court below dismissing the suit on a finding on issue No. 3 raised in the case, therein the court below found that the suit is barred under Sections 69 and 100 of the Kerala Co-operative Societies Act, 1969, and the jurisdiction of the civil court in respect of the suit claim is ousted. C.R.P. No. 2214 of 1990 is also filed by the appellant herein as the revision petitioner against the above finding on issue No. 3 in the above suit by the trial court and prays for setting aside the above finding as illegal and unjust. Both the above cases arise out of a common judgment in the above suit and arguments were also addressed in common by counsel on both sides and hence the appeal and the revision are disposed of by this common judgment.
2. The plaintiff is a bank incorporated under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. The first defendant is a co-operative society governed by the provisions of the Kerala Cooperative Societies Act and the Rules framed thereunder. The second defendant is a public limited company engaged in the manufacturing of tyres, etc. The first defendant was given credit facilities by the plaintiff bank. One of the facilities offered by the bank to the first defendant society is the inland clean usance bills discounting with the usance period of 45 to 90 days. The bank has agreed to discount the bills and hundis drawn by the first defendant, the rubber marketing society, in favour of the second defendant, M/s. Premier Tyres Ltd., Kalamassery, in respect of the rubber supplied to them. The various hundis and bills drawn by the first defendant on the second defendant are discounted by the plaintiff bank and the amounts disbursed to the society on production of the hundis and bills by the first defendant on the basis of the acceptance of the same by the second defendant. Even though the period of 45 to 90 days' time is fixed for clearance of the hundis and payment of the amounts by the second defendant, the clearance and payments were considerably delayed and for the delayed payments, the parties have agreed to pay the consequential and overdue interest to the plaintiff bank at the rates mutually agreed upon by them. The suit plaint is for recovery of such overdue interest for the delayed payments made by the defendants.
3. While disputing the liability in respect of such claim, the defendants have raised the contention that the above suit itself is not maintainable in the light of Sections 69 and 100 of the Kerala Co-operative Societies Act, wherein the jurisdiction of the civil court is ousted in respect of any claim coming under Section 69 of the Kerala Co-operative Societies Act. According to the defendants, the suit transaction and claim is in respect of a dispute touching the business of the society and hence the civil court has no jurisdiction to entertain or to try the above suit since the same is barred under Section 100 of the Kerala Co-operative Societies Act, wherein the jurisdiction of the civil or revenue court is barred in respect of any matter for which provisions are made under the Act. The defendants contend that the said claim is one covered under Section 69 of the Act and hence arbitration alone is possible to recover the money, if any, due in respect of the suit transaction. The question of jurisdiction is raised as issue No. 3 by the trial court. Accepting the above contention raised , by the defendants, the trial court dismissed the suit after finding on issue No. 3 that the suit is barred under Sections 69 and 100 of the Kerala Cooperative Societies Act, without considering the other issues raised in the case on the merits. The appeal and revision are, therefore, filed by the defeated plaintiff against the dismissal of the suit and against the finding on issue No. 3.
4. Section 69 of the Kerala Co-operative Societies Act reads as follows:
'69. (1) Notwithstanding anything contained in any law for the time being in force, if a dispute arises . . .
(f) between the society and a person other than a member of the society who has been granted a loan by the society or with whom the society has or had business transactions or any person claiming through such a person ; or ...
(h) between the society and a creditor of the society.'
5. The word 'dispute' has been defined under Section 2(i) of the Act which means any matter touching the business, constitution, establishment or management of a society capable of being the subject of litigation and includes a claim in respect of any sum payable to or by a society, whether such claim be admitted or not.'
6. Therefore, the disputes contemplated under Section 69 of the Act are:
(i) dispute touching the business of the society ;
(ii) dispute touching the constitution of the society ;
(iii) dispute touching the establishment of the society ;
(iv) dispute touching the management of the society ;
(v) dispute specified under the deeming provisions contained in Section 69(2) of the Act.
7. As far as this case is concerned, the relevant clause pressed into service by the defendants/respondents herein is the dispute referred to at No. 1 above, viz., a dispute touching the business of the society. In order to attract Section 69 of the Act, there should be a dispute between the society and a person with whom the society has or had business transactions touching the business of the society or a dispute between the society and a creditor of the society touching the business of the society.
8. In this 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 society, which the society is authorised to enter into under the Act, Rules and its bye-laws. In this case, the first defendant society is a rubber marketing society governed by the provisions of the Kerala Co-operative Societies Act, and the rules framed thereunder. Marketing and sale of rubber and rubber products are the main objects of the said society. The objects which the first respondent/first defendant herein relied on to prove their case, according to its bye-laws produced in this appeal are extracted below :
'Objects.--The objects of the Federation are primarily to arrange for the marketing and sale of rubber, processed rubber, manufactured rubber goods and to undertake processing of rubber and manufacture of rubber products, to supervise, co-ordinate and facilitate the working of affiliated societies, to assist in the promotion, organisation and development of co-operative movement among rubber growers and with that end in view ;
(i) to arrange for the marketing and sale of rubber belonging to affiliated societies, either on commission or on outright basis ;
(ii) to establish sales depots within its jurisdiction and elsewhere ;'
9. Admittedly, there is no such business between the plaintiff bank and the first defendant co-operative society. The plaintiff is a bank incorporated under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and doing mainly commercial transactions with its customers. They are offering many facilities to their customers for facilitating their business. One of the facilities offered by the bank to the first defendant society is the bills discounting facility provided under the Bills Marketing Scheme of the Reserve Bank of India; To avail of such a facility, it is admitted by the parties that an agreement is executed between the plaintiff and the first defendant. As per the above agreement, the hundis drawn by the first defendant on the second defendant and accepted by the second defendant, will be discounted by the plaintiff bank on production of the same by the first defendant society and 45 to 90 days' time was granted to the second defendant to clear those hundis already discounted by the plaintiff bank. Payment for overdue interest to the bank also is agreed upon by the parties for the delayed payments. The suit claim is for realisation of such delayed payments by the second defendants in respect of hundis drawn by the first defendant and got discounted from the plaintiff bank by the first defendant society. Such a bill discounting facility is given to the first defendant society and the second defendant's liability arises only under the provisions of the Negotiable Instruments Act being the acceptor of the bill of exchange. Therefore, the only question to be considered in this case is whether the plaint claim based on an agreement between the parties to pay overdue interest for the delayed payments for the amounts covered in respect of the discounted bills and hundis, is a dispute touching the business of the defendant society. On the pleadings in the case and also on the basis of the approved bye-laws of the society, allowed to be produced in this appeal, it is clear that the said transaction is not one touching the business of the first defendant co-operative society. The first defendant society is not entitled to carry on any banking business also under its bye-laws. It is not part of the business of the society to negotiate the hundis drawn on third parties with the bank and get them discounted by the bank and enjoy the benefits of the discounted hundis. Such transaction undertaken by the society cannot be considered as a business of the society. It is a privilege given by the plaintiff bank to one of its customers to enjoy the facility. Activities which are intended only to foster the interest of the society and which do not arise out of the business activities as such may be treated as for the purpose of the business and not as one touching the business of the society. Disputes arising from such a bill discounting facility given by the bank to the first defendant society cannot be considered as a dispute touching the business of the society, even though such a facility offered by the bank may promote the business of the society. The society is not authorised to undertake any such business activities under its bye-laws. This most important aspect of the bye-laws was not even considered by the court below while passing the impugned judgment. Merely because the first defendant is a co-operative society governed by the provisions of the Kerala Co-operative Societies Act and Rules or the claim arises out of the credit facilities offered by the bank to the first defendant society, the jurisdiction of the civil court is not ousted. Under Section 100 of the Kerala Co-operative Societies Act, the jurisdiction of the civil or revenue court is ousted only in respect of a dispute touching the business of the society and not otherwise. Obtaining credit or a bill discounting facility from a commercial bank is not a matter touching the business of the society, even though such a concession offered by the bank and accepted by the society may facilitate the business of the co-operative society. The finding of the court below contrary to the above, is, therefore, clearly illegal and unsustainable.
10. The Supreme Court had occasion to consider the scope and ambit of the expression 'dispute touching the business of the society' occurring in the Maharashtra Co-operative Societies Act, 1961 (Act 32 of 1961) wherein the Supreme Court in the decision in Deccan Merchants Co-operative Bank Ltd. v. Dalichand Jugraj Jain, AIR 1969 SC 1320, has held that (at page 1325) :
' It is clear that the word 'business' in this context does not mean affairs of the society because election of office-bearers, conduct of general meetings and management of the society would be treated as the affairs of the society.'
11. The learned judge also found that 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 society which the society is authorised to enter into under the Act and the rules and its bye-laws. The Supreme Court again found that the question arises whether a dispute touching the assets of the society would be a dispute touching the business of the society and held (at page 1326):
'This would depend on the nature of the society and the rules and bye-laws governing it. Ordinarily, if a society owns buildings and lets out parts of buildings which it does not require for its own purpose it cannot be said that letting out of those parts is a part of the business of the society. But it may be that it is the business of a society to construct and buy houses and let them out to its members. In that case letting out property may be part of its business. In this case, the society is a cooperative bank and ordinarily a co-operative bank cannot be said to be engaged in business when it lets out properties owned by it. Therefore, it seems to us that the present dispute between a tenant and a member of the bank in a building which has subsequently been acquired by the bank cannot be said to be a dispute touching the business of the bank, and the appeal should fail on this short ground.'
12. In the decision in Varkey v. Director of Industries [1978] ILR 2 Ker 143, a society entered into an agreement for lease of a building with the landlord for the purpose of its doing business. A dispute arose between the society and the landlord in respect of the tenancy of the above building.
13. Referring to the above, fact, this court held that it is not a part of the business of the society to take the building on rent, although for the purpose of business, the society may have incidentally to take on lease the premises. But in entering into a transaction of lease for the said purpose, the society is not transacting any business or entering into a business transaction with the petitioner and hence it was held that it is not a claim coming under Section 69 of the Act. Again in respect of a suit filed by a co-operative bank for specific performance of an agreement to grant a lease of a shop building and considering the question whether the said Section is hit by Section 69(1)(f) and 100 of the Act, a Full Bench of this court in the decision in Meeran Unni v. Kottayam District Co-operative Bank [1985] KLT 384 [FB], held that construction of buildings and letting out the same to tenants do not fall under any of the objects mentioned in it. The society is engaged in the business of banking and its objects relate principally to banking with a view to develop the co-operative movement. There is a residuary object to do such other work as will be conducive or incidental to the objects of the society and generally, to promote the cause of co-operation. On a perusal of the bye-laws, it is clear that the construction of buildings and letting out the same to tenants do not form part of the business of the society. Therefore, the plaintiff is entitled to a decree for specific performance of the agreement for the grant of a lease of a shop room. Again this court in Angadipuram Service Co-operative Bank v. K. Ahammed Kunhi [1976] KLT 275, held that a contractor who enters into an agreement with the bank to take delivery of rationed goods from the Food Corporation of India and transport them to the godown of the bank for agreed rates cannot be said to be an agent of the bank and hence the suit filed by him for return of the security amount is not hit by Section 69 read with Section 100 of the Kerala Cooperative Societies Act. Interpreting the scope of the expression 'touching the business of the society', this court in the decision in Mukundan v. Cannanore Co-operative House Construction Society [1992] 2 KLT 677, has held that the word 'touching', being one of wide import, it takes within its ambit every dispute which arises out of, or has a direct relation or reference to, or bearing upon, the business of the society. But activities which are intended only to foster the interest of the society and which do not arise out of the business activities as such, may be treated as for the purpose of the business and not touching the business of the society.
14. In the light of the above decisions we have no hesitation to hold that the suit filed by the appellant bank against the respondents in respect of the plaint transaction is not a dispute touching the business of the society and the same is, therrefore, not hit by Sections 69 and 100 of the Kerala Co-operative Societies Act. The contrary finding entered into by the lower court is clearly illegal and unsustainable.
15. Learned counsel appearing on behalf of the appellant also brought to our notice that the first respondent society itself has already instituted another suit against the second defendant, Premier Tyres, for part of the suit claim as O. S. No. 312 of 1991 and the same is also pending trial before the trial court, without relying on the provisions contained in Sections 69 and 100 of the Kerala Co-operative Societies Act.
16. For the reasons stated above, the appeal is allowed with costs throughout and the judgment and decree passed by the court below in O. S. No. 812 of 1987 and the finding on issue No. 3 by the court below are hereby set aside and the case is remanded to the lower court to consider the other issues raised in the case on the merits after giving sufficient opportunity to the parties to adduce evidence on all other issues. It is also open to the first defendant to file a fresh application under Order VIII-A, Rule-8 of the Code of Civil Procedure, if they so desire for deciding the dispute between the first and second defendants and it is open to the trial court to pass appropriate orders therein, in case any such application is filed. The parties are directed to appear before the lower court on October 12, 1993.
17. The appeal and the revision are allowed.