LexPENTAKOTA SRIRAKULU versus THE CO-OPERATIVE MARKETING SOCIETY LTD.
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PENTAKOTA SRIRAKULU A v. THE CO-OPERATIVE MARKETING SOCIETY LTD. August 28, 1964 ( P. B. GAJENDRAGADKAR, C.J., J.C. SHAH AND N. RAJAGOPALA B AYYANGAR JJ.) Co-operative Societies-Moneys earned by alleged illegal transactions- !tetention by n1en1bers of managen1e11t--Clai111-lf "a dispule touching tile business of the society"-Whether c/aini could be made-ProceedingJ whether under s. 51 or s. 49-,~fadra_\· Co~of)e,~ative Societies Act, 1932, (Mad. 6 of !93Z) ss. 49, 51. The appellant was the President of a Co-operative Marketing Society constitu~ed mainly for the purpose oi en~bling its members to obtain credit facilities and to arrange for the sale of agricultural products at rcasonahle prices. On complaints, an enquiry \vas i1~stiluted into the affairs of the ~ocicty by the Registrar of Co-operative Societies and as a resull, the com- mittee, 1hen in n1a.n.agement of rhe society v1as, after due notice to show cause and a hearing, superseded by the Registrar. A special officer was ctppointcd to take charge of the affairs of' the society and this officer fileJ a claim before lhe Regi~trar, inter alia, against the appcllanl. The main uem of the claim was commission stated to have been actually earned by the society on the sales effected by it of j<iggery belonging to its producer- members but which was not crcditt..~ to the society. It was alleged lhat while on paper the transactions entered into betv.·een the members of thr ~iety and the purchasers showed sales :lt the prices fixed by law, in reality, higher prices were charged. The society was entitled to charge commis- sion on the sales effected through it. As regards this it was stated that commission was earned on the entire price at which gur \\'as sold, and while the amount of commission payable on the basis of controlled pricca was credited to the society, the commission earned in respect of the extra price which its members obtained was, it was stated, not brought to the credit of the society in its accounts but appropriated by members of the management. On receipt of the claim, the Registrar appointed, under '- 51 (2) of the Madras Co-operative Societies Act, the Deputy Registrar of Co-operative Societies to act as an arbitrator to adjudicate the claim. lbereupon, the appellant file<! a pelition in rhe 1-ligh Court for the i5sue of a writ of prqhihition under Art. 226 of the Constitution, prohibiting the Deputy Registrar from dealing with the clain1 \vhich he was directed to try. The Single Judge allowed the petition. On appeal by the respondent the Di"ision Bench allowed the appc:il and dismi-.sed the v.-rit petition. On appeal by special leave, it \\'as contended hy the app·~l:ant, that ( l) the Registrar should have proceeded under s. 49 .-.nd not unllcr s. 51 of the Act, (2) the dispute about the rctcnlion of money hclonging to the Society by the ;io:.ellant v.·as not "a dispute touching. thr ln:sinc'is of the society", and (3) the transaction of sale \\'hich gave rise to !he commission a11eged to he improperly rclained \Vas illegal ?.nJ that therefore the socic1y could not, in Jaw, make a clain1 on the basio;; of s•.:ch an illegal transaction. HELD : (i) The case did not fall ucder s. 49 of the Act. Ifs. 49 did not apply, suhject to other ar.~umcnts ahcut the ille~Jlitv of the order of the P..cr,istrar. proceedin~s under s. 51 \I/,~'\ ncit o:ie:i tO objection. (1920]. Be.sides the factors that th~ claint v.·;1s one "ag.;iinst a person in manage- n1cnt (lf the ~ociety" and "fer the fr:ludulent rclcf"ltion of money or other D E F G H SlURAKULU v. MARKETiNG SOCIETY (Ayyangar /.) 187 A piiipilty of the society", there was also anO!hcr condition which had to be l&lilfied before s. 49 ( 1) could be attrilctedf' .. The facts g!Ving rise to the clilifge had to be disclosed in tbe course of an audit under a. 37 or om ellllllity under s. 38 or an inspection under a. 39 or on the windin&. up. of tbl! aociefy. [191 G•H] . · B Sundaram Iyer v. The Deputy Registrar of Co-operallve Socletle•, l.L.R. (1957) Mad. 371, referred to. Jii) The cl~im made before tbe ar~itrator waa "a dispute touching tbe bt!Siness of society" .. It could not be disputed that the sale of the produce belonging to the members of the soci~ty was part Of the business of tbe llOCllety, and then the charging of the commission would equally be the business of ¢.e SQCiety; and [192 G-H] · (iii) .. ))lo illegality iittach
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