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Writ Petition No 396 of 1959, decided on 20th May 1960.

S. 43 (2) (l) and r. 18 of Rules framed under S. 43 (2) (1)‑Dispute concerning business of Co‑operative Society between members and Society- To be decided by Registrar or arbitrator appointed by Registrar- Civil Court's jurisdiction barred‑Question whether meeting held properly or improperly‑Pertains to ordinary functions of society -Covered by r. 18.

If a dispute concerns the business of a co‑operative society, then it must be decided by the Registrar or his nominee and it cannot be decided by a Civil Curt.

The question whether a certain meeting of a society was held properly or improperly is a question which arises out of one of the ordinary functions of a society and is, therefore, covered by rule 18.

Nur Husain v. Muhammad Sultan P L D 1.956 Lah. 893 ; Mubarak Din v. Registrar, Co‑operative Societies P L D 1957 LA. 1013 ; Lyallpur Co‑operative Transport Society v. Zamindara Transport Co. P L D 1958 Lah. 1026 and Lyalipur Co operative Transport Society v. Ahmad Saeed P L D 1958 Lah. 1031 ref.

S. 43 (2) (I) and r. 18‑Validity of meeting challenged‑One member may refer dispute to Registrar, joining of all not necessary.

, S. 43 (2) (l) and r. 18‑Decision by arbitrator on matter not referred‑Void.

Mahmud Ali and Ataullah Sajjad for Petitioner.

Ghulam Abbas Jafari and S. M. Rehman Ansari for Respondents

Dates of hearing : 11th and 12th May 1960.

.---‑The petitioner in this case Js the managing committee of the Co‑operative Metal Corporation Limited, Gujranwala, and a registered body under the Co‑operative Socie ties Act. Respondents Nos. 1 and 2 are the Registrar and an Assistant Registrar of the Co‑operative Societies while the remaining respondents, Nos. 3 to 14 are members of the petitioner Corporation. Of these, respondents Nos. 3 to 6 were expelled from membership at a meeting held on the 17th July 1956 while Nos. 7 to 12 were similarly expelled in a meeting held on the 6th of August 1956.

2. Respondent No. 13, Muhammad Shafi, is alleged by the petitioner to have been removed from membership on the 27th April 1956, as he did not take any interest in the affairs of the Corporation. After removal, he was paid back his share‑ money on the 2nd of July 1956. On the 1st of April 1957, he appealed to the Registrar against his expulsion, but the Registrar, by his order dated the 11th May 1957, communicated on the 18th May 1957, informed him that since you accept your expulsion from the society yourself, so you cannot now question it ".

3. Respondent No. 14, Ghulam Muhammad, was a member of the petitioner Corporation by virtue of his being a representa tive of the Popular Aluminum Factory, Gujranwala. Difference having arisen between the partners of the said factory, the matter was referred to arbitration. The arbitrators decided that Ghulam Muhammad's interest in the Popular Aluminum Factory should pass to Muhammad Sharif. Thereupon Muhammad Sharif joined the petitioner Corporation in order to represent the interests of the Popular Aluminum Factory. In other words, Ghulam Muhammad, respondent No. 14, had also ceased to be‑member of the petitioner Corporation.

4. On the 30th August 1956, an application for arbitration under rule 18 of the Co‑operative Societies Rules was made to the Registrar by twelve persons, including respondents Nos. 3 to 1 ' but excluding respondents Nos. 13 and 14, requesting adjudication on a number of points affecting the business of the petitioner Corporation. The matters which are of interest to us in the writ petition are the meeting of the 17th July 1956, expelling respondents Nos. 3 to 6, and the meeting of the 6th August 1956, expelling respondents Nos. 7 to 12. What has been expressly brought to our notice by the petitioner's counsel is (1) that Muhammad Rafi, respondent No. 3, although purporting to be one of the applicants, has not signed the application, and (2) that Muhammad Shafi and Ghulam Muhammad, respondents Nos. 13 and 14, are neither applicants nor signatories nor have they been mentioned in the application for any purpose.

5. This application was referred by the Registrar to the arbitration of Mr. Muhammad Yusuf, respondent No. 2, by his order dated the 31st January 1957, Mr. Muhammad Yusuf held that the two meetings in question were illegal, the main ground of his decision being that notice of the meetings had not been issued to all the members, and that, consequently, the expulsion of respondents Nos. 3 to 12 was void. Another ground on which he held the meetings to be illegal was that the quorum at each of the two meetings would be insufficient if respondents Nos. 13 and 14 were dropped from membership, and for that reason he found it necessary to examine the question whether they continued to be members of the Corporation. Although, therefore, the question of the their membership had not been directly referred to him for arbitration, Mr. Muhammad Yusuf also decided that respondents Nos. 13 and 14 had been illegally removed from membership.

6. In this writ petition it is contended, firstly, that the dispute could not be referred to the Registrar under rule 18 because it did not concern the business of the society ; secondly, that Muhammad Rafi, respondent No. 3, having not signed the application, his case could not be adjudicated upon by the arbitrator, and, thirdly, that Muhammad Shafi, respondent No. 13, and Ghulam Muhammad, respondent No. 14, being in no way concerned with the matters stated in the application for arbitra tion, the arbitrator could not come to a decision whether they were or were not members of the petitioner Corporation. Other matters in the petition have not been argued by Mr. Mahmud Ali who appeared for the petitioner. He agreed that if the subject -matter of the arbitration 'concerned the busin6ss of the society, then it was not for us to decide whether the decision of the arbi trator was right or wrong.

7. Rule 18 of the Punjab Government Rules framed under section 43 (1) of the Co‑operative Societies Act, 1912, is as follows :‑---

" 18.‑Disputes.

(a) Any dispute concerning the business of a co‑operative society between members or past members of the society or persons claiming through them or between a member or past member or persons so claiming and the committee or any officer, shall be referred to the Registrar. Reference may be made by the committee or by the society by resolution in general meeting or by any party to the dispute or if the dispute concerns a sum due from a member of the committee to the society, by any member of the society.

(b) The Registrar may either decide the dispute himself or appoint an arbitrator, or refer the dispute to three arbitrators, of whom one shall be nominated by each of the parties and the third shall be nominated by the Registrar and shall act as Chairman.

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(j) An arbitrator's award, if no appeal has been made within thirty days, or a decision of the Registrar originally or in appeal, shall not, as between the parties to the dispute, be liable to be called in question in any Civil or Revenue Court, and shall be in all respects final and conclusive, except on proof of the receipt of a corrupt gratification by the arbitrator.

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8. It is no longer in question that if a dispute concerns the business of a co‑operative society, then it must be decided by the Registrar or his nominee and it cannot be decided by a Civil Court. As to what constitutes the business of society is al matter which has received attention recently in several cases. In Nur Husain v. Muhammad Sultan (P L D 1956 Lah. 893), an election of the managing committee of the society was impeached in a suit largely on the ground that some of the defendants who had voted were not members of the society at all. In the High Court, when the case came up in revision, it was heard by Shabir Ahmad and Kaikaus, JJ., the judgment having been delivered by he latter. The learned Judges held that "while we do not intend to place any restricted interpretation on the word business ', we are unable to hold that the word includes questions relating to the status of a person. It may also be observed that in the present case the grounds of relief include that some of the defendants were not members at all and, therefore, not entitled to vote. Now, if a separate suit was brought for a declaration as to whether these persons are members or not members and a finding is given, then, if we hold that in connection with the validity of the election this matter could be gone into by the arbitrator, there would be a clash of jurisdiction between the arbitrator and the Civil Court and we do not presume that this clash was intended. We are of the opinion, therefore, that the jurisdiction of the Civil Courts in the present suit is not barred."

9. In Mubarak Din v. Registrar, Co‑operative Societies. (P L D 1957 Lah. 1013), a similar question came up before S. A. Rahman, C. J., and Muhammad Yaqub Ali, J. Here also the question was of election to the managing committee of a Co‑operative ,Society. It wag challenged before the Registrar who directed that pending the decision of the dispute by an arbitrator whom he had appointed, the person whose election had been challenged should not function as a member of the managing committee. This order of the Registrar was attacked in a writ petition, but the learned Judges, disagreeing with Nur Husain v. Muhammad Sultan, observed that they were " not inclined to accede to the broad proposition that all questions of status as members or office‑holders of a co‑operative society would be taken out of the purview of rule 18 on the ground that they related to questions of status " and held that the question before them was a question touching the business of the co‑operative society.

10. Subsequently, Kaikaus, J. had occasion to examine the question sitting with Masud Ahmad, J., in two other cases, namely, Lyallpur Co‑operative Transport Society v. Zamindara Transport Co. (P L D 1958 Lah. 1026) and Lyallpur Co‑operative Transport Society. v. Ahmad Saeed (P L D 1958 Lah. 1031). In the former case, the names of certain persons had been removed from the register of members and the question was whether they had been legally removed. In the suit which arose out of this dispute the plaintiff claimed that the defendants were not members of the society and, therefore, the reference by the Registrar wits incompetent, Kaikaus, J. held that the question whether legally a person could become a member at all is not a question relating to the business of a society. It would thus be seen that this case is of a different category from the other cases relating to societies. In the second case, the defendant, who was admittedly a member of a society, was expelled from membership on the ground that he had ceased to hold twenty‑five shares of the value of Rs. 100 each, and Kaikaus, J. held that this question surely arises out of the functions of the society and, therefore, relates to the business of the society.

11. It seems to us that the question whether a certain meeting of a society was held properly or improperly is a question which arises out of one of the ordinary functions of a society and is, therefore, covered by rule 18. For instance, rule 7 provides fore the holding of general meetings " for the disposal of necessary business including . . . . . the election of members of committee"; rule 8 provides for the appointment, suspension and removal of members in a general meeting ; rule 19 (c) says that " a member may be removed or expelled from ,the society in such way and for such cause only as may be prescribed by the bye‑laws ". The appointment, expulsion or removal of members in general meet ings and the holding of general meetings for this purpose are, therefore, a part of the business of a society, and if a dispute arises in these matters, it must be referred to arbitration under rule 18. Bearing in mind the co‑operative character of these societies and the objects for which they are constituted, it would clearly be the intention of the Act and the rules to have disputes among members decided speedily and inexpensively. We, therefore, hold that the application dated the 30th August 1956 (Annexure D ') to the Registrar was properly made and could be adjudicated upon only by him or his nominee.

12. As regards the objection that Muhammad Rafi, respon dent No. 3, although purporting to be an applicant was not a signatory. We are inclined to hold that it was not necessary for him even to join in the application, for such application could be made " by any party to the dispute ". 1f, therefore, even one C of the respondents affected by the meeting of the 17th July 1956, made an application questioning the legality of that meeting, the other respondents will also be affected by the decision.

13. As regards respondents Nos. 13 and 14, we do not see any justification for the inclusion of their separate cases in the application of respondents‑ Nos. 3 to 12. They were not affected by the meetings of the 17th July 1956, and the 6th August 1956, and their removal was consequently not in question. For the purposes of holding the two meetings to be illegal, it was enough to say that the members have not been all served, and there was no necessity for going into the cases of Muhammad Shafi and Ghulam Muhammad. The dispute referred to the arbitrator was a dispute between the applicants and the society in which respon dents Nos. 13 and 14 were not interested. The case of respondents Nos. 13 and 14 had not been referred to the arbitrator at all and any decision given by him in respect of these respondents would be beyond his jurisdiction.

14. We accept the petition to this extent only and direct that the decision of the arbitrator so far as it concerns respondents Nos. 13 and 14 should be set aside. There will be no order as to costs.

K. M. A. Petition accepted in part.

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